Skip to main content

CAI – looking beyond market openings

4 min read

The Comprehensive Agreement on Investment (CAI), agreed in the final hours of 2020, is now fully out of the woods since the details of market opening were published in mid-March. However, the complexity of this document both reflects the murky business environment foreign firms navigate in China, and the limits of what is on offer in terms of market opening. In a long-term perspective, the agreement’s real advances may lie in the enforcement and the level-playing-field pillars if they are properly implemented.

Merics EU-China Briefing

Meaningful openings limited to new energy vehicles (NEV), renewable energies and some services

With the details of the market-opening pillar now out, it is possible to see a few improvements the agreement would bring to the current trend in China for targeted opening up. First, the CAI’s ratchet clause means that any further opening up China offers will be automatically extended to EU firms. And for new energy vehicles (NEV), investments are only restricted by the utilization rate of the sector in the province and the completion of previous projects, although both restrictions are removed for investments over USD 1 billion. The value of that last commitment seems limited, considering that Tesla and its giant factory in Shanghai received similar treatment back in 2019.

In wind and solar renewables, on the top of a non-discriminatory commitment, the EU has obtained a new strong form of reciprocity that gives the possibility of capping Chinese firms’ involvement in each EU member state at the level of the market share of EU firms in China. In services, hospitals (which were already opened in 2014, on paper at least) and clinics are now open for foreign investors in eight of the largest Chinese cities, plus Hainan province. Besides, the “technological neutrality” commitment enables companies to provide services online that they offer unconstrained offline.

Contrary to expectations, cloud services remain restricted to a 50 percent equity cap. China has also committed to remove joint-venture obligations in various business services activities, such as leasing services, management consulting and various environmental services (sanitation and solid waste disposal, among others). All the opening up in services applies to all firms wherever they are based, but only EU firms benefit from the fairly independent and transparent dispute mechanisms provided by the agreement to enforce the new provisions.

Additional value beyond opening up market access – enforcement and level-playing-field commitments

The agreement’s main value-added on market access is not so much in opening up but in providing an enforcement mechanism for most of the opening up China carried out over the past few years. This offers an opportunity for tackling the multiple, murky ways in which China hinders opening up even as it formally carries it out. The substantial provisions for a level playing field, including participation in Chinese standard-setting bodies and non-discrimination in purchases from state-owned enterprises (SOEs), could also be considered as breakthroughs for EU firms to expand on the Chinese market. 

All these technical points could be swept away by mounting geopolitical tensions 

The current deterioration of Sino-European relations weighs significantly on the likelihood of the CAI being ratified. The Federation of German Industries acknowledged last week that “China's unyieldingly hardline stance in Hong Kong and Xinjiang clouds prospects for ratification of the CAI”. On top of that, the ambitious schedule put forward by the Commission aims at ratification in the first six months of 2022, under a French presidency of the Council. France will then be in the run-up to a presidential election in which President Macron will likely be eager not to be depicted as pro-globalization, pro-business and unconcerned about human rights.

Read more:


Popular posts from this blog

Menon meets Karzai, discusses security of Indians

Kabul/New Delhi/Washington, March 5 (IANS) India Friday said that the Feb 26 terror attack in Kabul will not deter it from helping rebuild Afghanistan as National Security Adviser Shivshankar Menon met Afghan President Hamid Karzai in Kabul to review the security of around 4,000 Indians working in that country. Menon, who arrived here Friday morning on a two-day visit, discussed with Karzai some proposals to bolster security of Indians engaged in a wide array of reconstruction activities, ranging from building roads, bridges and power stations to social sector projects. The Indian government is contemplating a slew of steps to secure Indians in Afghanistan, including setting up protected venues where the Indians working on various reconstruction projects will be based. Deploying dedicated security personnel at places where Indians work is also being considered. Menon also met his Afghan counterpart Rangin Dadfar Spanta and enquired about the progress in the probe into the Kabul atta

Iran is losing the game to regional actors in its strategic depth

Rethink before It’s Too Late Iran is losing the game to regional actors in its strategic depth –Afghanistan. By Houman Dolati It is no more a surprise to see Iran absent in Afghanistan affairs. Nowadays, the Bonn Conference and Iran’s contributions to Afghanistan look more like a fading memory. Iran, which had promised of loans and credit worth five-hundred million dollars for Afghanistan, and tried to serve a key role, more than many other countries, for reconstruction and stabilization of Afghanistan, is now trying to efface that memory, saying it is a wrong path, even for the international community. Iran’s empty seat in the Rome Conference was another step backward for Afghanistan’s influential neighbor. Many other countries were surprised with Iran’s absence. Finding out the vanity of its efforts to justify absence in Rome, Iran tried to start its

Pakistani firm whose chemicals were used to kill US troops seeks subsidy for Indiana plant

By Jennifer Griffin, Justin Fishel Published March 22, 2013   A Pakistani fertilizer maker whose chemicals have been used in 80 percent of the roadside bombs that have killed and maimed American troops in Afghanistan is now seeking U.S. taxpayer subsidies in order to open a factory in Indiana.  The request appears to be on hold pending further review, but the situation has stirred outrage in Congress, where some accuse the Pakistani government of halting efforts to clamp down on the bomb-making.  For the past seven years, the U.S. government has known that the raw material calcium ammonium nitrate, or CAN, is making its way across the border into Afghanistan where the Taliban use it to fuel their most deadly weapons, namely the improvised explosive device. IEDs have long been the number one killer of U.S. and coalition troops.  The material largely comes from Pakistani fertilizer maker the Fatima Group. But the Pakistani government has stymied attempts by the Pentagon to stop the