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European Commission

MEMO

Brussels, 18 October 2013

EU investment negotiations with China and ASEAN

The Ministers of the Foreign Affairs Council (Trade) today adopted mandates which will allow the European Commission to negotiate investment agreements with China and the Association of South East Asian Nations (ASEAN) member countries (Brunei Darussalam, Myanmar/Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, and Vietnam).

EU investment negotiations with China

An EU-China investment agreement would be the EU's first ever stand-alone investment agreement since foreign direct investment became the exclusive competence of the EU under the Lisbon Treaty. It would streamline the existing bilateral investment protection agreements between China and 26 EU Member States into a single, coherent text.

The Council today gave its green light to start negotiations for an EU-China investment agreement on the basis of the negotiating directives proposed by the European Commission in May 2013 (IP/13/458). Europe hopes that the negotiations for an investment agreement with China can be launched at the EU-China Summit next month.

The main objectives of an agreement at EU level are to

  • reduce barriers to investing in China and, as a result, increasing bilateral investment flows

  • improve the protection of EU investments in China as well as Chinese investments in Europe,

  • improve legal certainty regarding treatment of EU investors in China,

  • improve access for European investments to the Chinese market – addressing important issues like mandatory joint ventures which European companies are currently facing when wanting to invest in China,

  • to eventually increase EU-China investment flows.

Trade flows between China and the EU are impressive, with goods and services worth well over €1 billion traded between both partners every day. However, the current level of bilateral investment is way below what could be expected from two of the most important economic blocks on the planet. Just 2.1% of overall EU Foreign Direct Investment (FDI) is in China. Although these figures are on the rise, this still represents less than 3% of both sides' total FDI outflows. By comparison, 30% of the EU's stocks are in the United States. Hence, there is huge potential to further develop bilateral investment ties.

Background

Following the entry into force of the Lisbon Treaty in 2009, the Commission Communication on the future European investment policy published in July 2010 identified the People’s Republic of China as a potential partner with whom the EU could pursue negotiations for a stand-alone investment agreement. At the 14th EU-China Summit held in February 2012, the EU and China agreed to move towards negotiations for an investment agreement covering “all issues of interest to both sides” and this willingness was confirmed at the 15th EU-China Summit in September 2012.

EU-ASEAN negotiations on investment

The Ministers of the Foreign Affairs Council (Trade) today also decided to modify the already existing negotiating directives for the EU-ASEAN negotiations towards a Free Trade Agreement (FTA) to include investment provisions after investment has become part of the EU’s common commercial policy following the entry into force of the Lisbon Treaty. The decision will allow the European Commission to complete the negotiating agendas of the already on-going negotiations for Free Trade Agreements with Malaysia, Vietnam and Thailand by including investment protection in those FTAs.

A similar modification had been made in September 2011 to the negotiating mandate to allow free trade agreement (FTA) negotiations with Singapore to cover investment protection on top of liberalisation of investments. In the meantime, FTA negotiations with Singapore were concluded in December 2012 and the Agreement was initialled on 20 September 2013 (IP/13/849). Investment negotiations with Singapore are on-going and will hopefully be concluded by the end of 2013.

The Council of Ministers is now authorising negotiations on investment protection with the remaining ASEAN countries, as and when the Council agrees to launch individual negotiations with ASEAN member countries.

Background

In April 2007 Council of Ministers authorised the Commission to start negotiations for a free trade agreement with the Association of South East Asian Nations (ASEAN) member countries (Brunei Darussalam, Myanmar/Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, and Vietnam) and adopted negotiating directives. In December 2009, the Council authorised the Commission to pursue negotiations towards Free Trade Agreements with individual ASEAN countries. Subsequently, negotiations with Singapore started in March 2010 (concluded in December 2012), with Malaysia in October 2010, with Vietnam in June 2012 and in Thailand in March 2013.

The EU is a major investor world-wide

The EU is the world's leading host of foreign direct investment, attracting investments worth €225 billion from the rest of the world in 2011 alone. By 2010 outward stocks of FDI amounted to €4.2 trillion (26.4% of the global FDI stock in FDI) while EU inward stocks accounted for €3 trillion (19.7% of the global total).

Those investments are secured via Bilateral Investment Treaties (BITs), concluded between individual EU Member States and non-EU countries. They establish the terms and conditions for investment by nationals and companies of one country in another and set up a legally binding level of protection in order to encourage investment flows between two countries. Amongst other things BITs grant investors fair, equitable and non-discriminatory treatment, protection from unlawful expropriation and direct recourse to international arbitration. EU countries are the main users of BITs globally, with a total number of about 1,200 bilateral treaties already concluded.

Since the entry into force of the Lisbon Treaty in 2009, investment is now part of the EU’s common commercial policy, an exclusive competence of the Union (Article 207 TFEU). As a consequence, the European Commission may legislate on investment. According to the Regulation on Bilateral Investment Agreements, adopted by the European Parliament and the Council on 12 December 2012 (IP/12/1362), bilateral Investment Agreements that currently offer investment protection to many European investors will be preserved until they are replaced by EU agreements.

For more information

The EU's investment policy:

http://ec.europa.eu/trade/policy/accessing-markets/investment/

Trade and investment relations with the People’s Republic with China:

http://ec.europa.eu/trade/policy/countries-and-regions/countries/china/

Press release (IP/13/458): Commission proposes to open negotiations for an investment agreement with China, 23 May 2013

Trade and investment relations with ASEAN:

http://ec.europa.eu/trade/policy/countries-and-regions/regions/asean/


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