Trade ministers from the European Union’s member states will next Friday (18 October) formally give the European Commission a mandate to negotiate an investment agreement with China.

The mandate, which passed through the member states’ working group on trade without comment on 2 October, would help to put the EU’s trade relationship with China on a positive footing after months of disputes over Chinese producers’ pricing of solar panels and telecommunications equipment.

Last month, Karel De Gucht, the European commissioner for trade, suggested that an investment agreement would open the way to far deeper liberalisation. “Over time, there will be a free-trade agreement between China and Europe. I am sure about that,” De Gucht said.

Accessing more areas

The negotiations would seek to open the many sectors of the Chinese economy that European companies say are closed off to them, or to which access is possible only with many conditions attached. The other track would look at the protection of investments.

At present, investment in both directions is relatively small, though growing. Just 2.1% of the EU’s foreign direct investment is in China, De Gucht told the European Parliament on Tuesday (8 October).

An investment agreement is seen as valuable for China principally as an assurance that the EU’s market will remain open in the long term.

Points of concern

De Gucht told Parliament that sustainable development and “a reference in support of internationally recognised standards of corporate social responsibility” would be among the points of particular concern for the EU.

The Commission has not indicated when it would hope to complete talks on what would be the first stand-alone investment agreement negotiated by the EU. It says that an estimate is difficult, because it is aiming for ambitious results. The Commission’s usual ambition is to complete free-trade agreements, which now include investment agreements, within two years.

Talks could receive the blessing of China’s leaders at the EU-China summit. De Gucht said that the summit will be held on 21 November, though the date has not yet been confirmed by China.

The EU and China will hold their first high-level trade and economic dialogue in more than two years on 24 October, a sign that both sides want to move beyond the rancour that characterised the dispute over the dumping of Chinese solar panels. The case was effectively settled in August, when Chinese producers agreed to a minimum sales price.

The EU’s member states gave the Commission the power to negotiate terms for investment protection in 2009, when they ratified the Lisbon treaty. Investment issues will now be normal elements of the EU’s free-trade talks.

Around 100 of the Commission’s trade officials had expected to spend the week in talks with US counterparts on a transatlantic free-trade deal. However, the week-long second round of negotiations was called off late last Friday (4 October) because of the shutdown of large parts of the US government caused by a dispute over the US budget. Once the shutdown is over, the talks will resume as a matter of priority, officials say.