The EU-China Relationship in a Rules-Based Multilateral Investment System

Among the biggest economies and traders in the world, the EU and China are important trading partners. China is also a strategic foreign direct investment (FDI) destination for EU companies and Chinese companies are significant investors in the EU. The EU and China have traditionally supported multilateralism in international economic relations and sought to strengthen their bilateral economic ties by concluding ‘in principle’ the negotiations on the Comprehensive Agreement on Investment (CAI) on 30 December 2020.

With global challenges that have put increasing pressure on the multilateral trading system and political obstacles for the finalisation of the CAI’s conclusion, the EU trade policy is taking a new direction, focusing on the openness, sustainability and assertiveness in the enforcement of the existing trade rules. In particular, this trade policy is aligned with the objectives of the European Green Deal (EGD), which seeks to diminish EU’s carbon footprint and achieve climate neutrality in Europe by 2050. This new EU approach is particularly focused on introducing EU unilateral trade measures, such as the Carbon Border Adjustment Mechanism, with significant consequences for global supply chains, particularly in South-East Asia. At the same time, in the sphere of investment, the EU continues to pursue the establishment of a Multilateral Investment Court in its attempt to reform the global regime of international investment dispute settlement.

This project investigates these different EU external investment and trade policy approaches and their impact on EU relations with China; their effects on South-East Asia and bilateral relations with the countries in the region, in particular Thailand and Indonesia; as well as the ability of the EU to influence global governance in the fields of investment and trade.