EU-China deal grinds into reverse after tit-for-tat sanctions

BRUSSELS (Reuters) - Fewer than three months after it was agreed, progress to pass an EU-China deal giving European companies better access to Chinese markets has sharply reversed after tit-for-tat sanctions.

FILE PHOTO: An attendant walks past EU and China flags ahead of the EU-China High-level Economic Dialogue at Diaoyutai State Guesthouse in Beijing, China June 25, 2018. REUTERS/Jason Lee

China blacklisted five members of the European Parliament and its sub-committee on human rights on Monday in response to Brussels’ sanctions against Chinese officials accusing them of human rights abuses in Xinjiang.

The parliament, whose approval the China comprehensive agreement on investment (CAI) requires, cancelled a Tuesday meeting to discuss the deal in protest.

The centre-left Socialists & Democrats, parliament’s second largest group, said the lifting of Chinese sanctions was a condition to enter talks on CAI.

“There has to be a solution of these sanctions before we come back to ordinary business on this,” said Bernd Lange, the German Social Democrat who chairs the parliament’s trade committee.

Lawmakers across the political spectrum had already raised concerns about forced labour in China, some saying it should ratify International Labour Organization conventions on this issue before the investment deal is passed.

Reinhard Buetikofer, the chair of the parliament’s China delegation who is among those sanctioned, said the accord had appeared set for approval in a year, during the French six-month EU presidency.

French President Emmanuel Macron supported Germany’s push for the EU-China deal at the end of last year, but may now look differently on the deal ahead of a potentially tough presidential election in April-May 2022, Buetikofer said.

“The fate of this deal is very much in question,” he said

France on Tuesday summoned China’s ambassador over “unacceptable” insults and Beijing’s sanctions.

Chinese Foreign Ministry spokeswoman Hua Chunying said China advocated cooperation and not confrontation.

“The European side cannot expect to, on the one hand, talk about cooperation and gain advantages while on the other hand harming China’s interests with sanctions,” she told a regular press briefing on Tuesday.

The investment accord was hailed last year as a means to secure better access for European companies to Chinese markets and redress unbalanced economic ties.

Increased doubts about it could push the EU more towards a firmer U.S. stance on China and accelerate an EU push to arm itself against what it sees as unfair trading practices.

These include planned laws to force greater reciprocity in public tenders, control state-owned companies in the EU market and potentially ban the import of goods produced from forced labour.

Hosuk Lee-Makiyama, director of Brussels-based trade think tank ECIPE, said Beijing was telling the EU to decide between proceeding with CAI and dropping its sanctions or face losing out on Chinese growth opportunities.

“China doesn’t have to open up. That’s the message. It’s presenting a clear choice,” he said.

Activists and U.N. rights experts say at least a million Muslim Uighurs are being detained in camps in the remote western region of Xinjiang. The activists and some Western politicians accuse China of using torture, forced labour and sterilisations.

China denies rights abuses in Xinjiang and says its camps provide vocational training and are needed to fight extremism.

Reporting by Philip Blenkinsop in Brussels, Gabriel Crossley in Beijing; Editing by Nick Macfie