Europe wants open, continual engagement following successful negotiations last year

The European Union and China are eyeing a bilateral investment protection agreement after they concluded in principle the Comprehensive Agreement on Investment, according to a senior EU official.

Negotiations for CAI concluded on Dec 30 and covers market access, fair competition and sustainable development regarding investment, but has left out investment protection for a separate agreement.

European Commission Executive Vice-President Valdis Dombrovskis said on Thursday that the EU is envisioning its next step of cooperation with China to work on an investment protection agreement after conclusion of the CAI.

"That's the next practical step," he said during a press conference on EU's new trade strategy.

China surpassed the United States as EU's largest trading partner for the first time last year, according to a report by EU's statistics agency Eurostat last week. Over the past year, EU-China's trade in goods reached $711 billion, compared to $673 billion between the EU and the US.

Dombrovskis, who is also European commissioner for trade, said that China's role in the global economy has increased substantially over the last decade. China was the only major economy to register positive growth of 2.3 percent during a pandemic-ravaged year.

"And China is on course to become the world's largest economy in the coming years. So clearly, engagement with China is very important in this regard," he said.

He added that the EU also hopes for China's constructive engagement on World Trade Organization reform. He said some issues such as level playing field, market access, role of state-owned enterprises and intellectual property rights have already been addressed in the bilateral investment deal.

In a statement welcoming new WTO Director-General Ngozi Okonjo-Iweala, China's Ministry of Commerce said that China will firmly uphold the multilateral trading system and actively participate in WTO reform. It will also support Okonjo-Iweala's role as the new WTO head to help the organization make greater contributions to improving the global governance system and enhance the well-being of people globally.

Zhang Xiangchen, vice-minister of commerce, said last July when he was China's permanent representative to the WTO that "it's a wrong move to target China's economic system in WTO reform".

Dombrovskis, who led the EU in talks with China on CAI, and Vice-Premier Liu He held calls in April and December to push forward the CAI.

The CAI was regarded a major achievement in China-EU relations last year, with President Xi Jinping joining German Chancellor Angela Merkel, European Council President Charles Michel and European Commission President Ursula von der Leyen in announcing the breakthrough on Dec 30.

Zhang Ming, the Chinese ambassador to the EU, told Portuguese media on Jan 29 that he believes major progress will be made toward the ratification of CAI during Portugal's presidency at the Council of the EU during the first half of the year.

The new EU trade strategy announced on Thursday focuses on an open, sustainable and assertive approach.

The European Commission said the strategy builds on the EU's openness to contribute to economic recovery through support for green and digital transformation, as well as a renewed focus on strengthening multilateralism and reforming global trade rules to ensure that they are fair and sustainable.

"Where necessary, the EU will take a more assertive stance in defending interests and values, including through new tools," it said.

"We are pursuing a course that is open, strategic and assertive, emphasizing the EU's ability to make its own choices and shape the world around it through leadership and engagement, reflecting our strategic interests and values," Dombrovskis said.

Iana Dreyer, founding editor of trade policy publication Borderlex wrote in a tweet that "the new strategy confirms the EU's shift toward a more defensive approach to trade policy focused on advancing its domestic policy agenda in a context of rising international tensions".

Timo Vuori, executive vice-president of the Finland Chamber of Commerce, said that EU trade policy should focus on multilateralism, openness, free and fair trade with practical approach.

"Strategy autonomy should not lead to nationalism, regionalism nor isolation. Value of global supply chains essential for EU trade," he wrote in a tweet on Thursday.