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March 30, 2021

Shielding Corporate Interests, Europe Leaves NGOs Working in China by the Wayside

If ratified, the EU-China investment agreement will shield corporate interests from human rights concerns while effectively deserting European NGOs and foundations trying to work in China.

In late December 2020, at the end of a very turbulent year in Europe-China relations, and after more than seven years of often strenuous negotiations, the European Union (EU) and China agreed on the terms of a “Comprehensive Agreement on Investment” (CAI). The European Commission and heads of state and government inked the deal despite vocal warnings from experts across Europe to allow time for further deliberation. Notably, this occurred as Germany was set to relinquish its role as president of the Council of the European Union, adding an element of urgency to the proceedings.

Observers have hotly debated the extent to which the CAI really addresses so-called “level playing field” issues in the economic sphere, i.e. Chinese reciprocity for European market openness and rule-of-law guarantees. Certainly, China’s refusal to commit to basic labor rights standards enshrined in International Labor Organization conventions—a precondition for EU trade and investment agreements with other countries such as Vietnam—will no doubt attract further public criticism during the procedure to ratify the CAI in the European Parliament.

Debates over the CAI, however, thus far have ignored the implications for non-profits, entities making public rather than private interest investments. This includes organizations working on climate crisis mitigation and sustainable development, both areas in which the EU has pledged to strengthen cooperation with China and has signaled the importance of civil society actors. As the European Economic and Social Committee put it in 2017, “civil society should play a more prominent role in climate change negotiations.” The European Green Deal, the EU’s ambitious policy framework launched in 2019 to fulfill its obligations under the Paris Agreement and achieve climate neutrality by 2050, also relies on civil society participation. And philanthropy is playing an increasingly important role in implementing the UN’s sustainable development agenda.

The CAI should have been a great opportunity to uphold such commitments and improve safeguards for European civil society and philanthropic organizations investing sizeable amounts of money (and human effort) in China. Yet, the CAI annexes instead state:

China reserves the right to adopt or maintain the following measures:
Unless approved by the Chinese government: foreign investors and covered investments may not invest in non-profit organizations within the territory of China;
non-profit organizations established outside of China may not set up representative offices or branches in China.
To conduct activities temporarily in China, foreign non-profit organizations shall cooperate with domestic entities, and the term for such temporary activities shall not exceed one year.
The senior executives of non-profit organizations which have been approved to be established within the territory of China shall be Chinese citizens.

These reservations effectively exclude non-profit investments from the “level playing field” guarantees the CAI grants for-profit investments. Non-profits are also not covered by the CAI’s Artice 4, which protects against arbitrary discrimination through a “National Treatment” clause. They are also left out of Article 6, which forbids nationality requirements for the “Senior Management and Boards of Directors” of entities operating in the other party’s territory.

True, much of the above simply spells out the current dire reality for European NGOs under the Foreign NGO Law. But the reference to senior executives is new. Will Beijing codify this provision by amending the Foreign NGO Law, formally requiring the appointment of Chinese nationals as NGO chief representatives for all foreign NGOs? In any case, by accepting this clause, the EU preemptively condones another decisive step by the Chinese security apparatus to further constrain foreign non-profit actors working in the country.

Perhaps even more important are the immediate signals this sends to the non-profit sector: Europe—and especially the German government, as the leading force behind the conclusion of this agreement—is ready to sacrifice much-touted values and principles when it comes to improving the “investment climate” for carmakers or the chemical industry.

Brussels, ever searching for leverage to fulfill its ambition as a “normative power,” has long been aware of the CAI’s impact outside the realm of economics. Indeed, the EU’s own May 2013 Impact Assessment stressed the CAI’s potential in this regard: “Investment protection agreements can indirectly impact a large number of rights of actors (citizens, employees etc) other than investors. These rights include both civil and political rights, as well as social, economic and cultural rights.”

Per standard practice, the European Commission also held regular “Civil Society Dialogues” in the course of the CAI negotiations. Yet, the vast majority of participants were business lobby associations such as BusinessEurope, EuroCommerce, or the European Automobile Manufacturers Association.

It is no surprise, then, that the CAI subsection on “Investment and sustainable development,” replete with lofty references to international conventions, merely “encourag[es] the voluntary uptake of relevant practices by businesses” while affirming “the right of each Party to determine its sustainable development policies and priorities” and “establish its own levels of domestic labour and environmental protection.” Chinese officials will happily point to this clause the next time European activists raise concerns about labor conditions in Volkswagen’s or other companies’ factories in Xinjiang.

This all comes at a time when European NGOs hoping to work on international dialogue, sustainable development, poverty alleviation, or environmental protection in China are ever more constrained by public security officials’ oversight of their activities and the (ab)use of visa restrictions to sabotage foreign staff.

The simple—and sad—message conveyed to Europeans by this agreement is: If you want to invest money in China, you’d better do it for your own personal profit. This will afford you the legal protections stipulated in the CAI and the backing of the powerful European trade bureaucracy. If your investment is geared toward a public interest in supporting marginalized Chinese citizens, addressing climate change, or improving bilateral relations outside diplomatic channels, you will face miles of red tape deployed by a deeply distrustful Chinese security apparatus, and you’ll invest without any expectation of support from your own government.

Despite mounting calls for a more principled China policy, European leaders have for years insisted on keeping business and politics neatly separated, shielding corporate interests from human rights concerns. The events of the last few days, however, have turned this calculus on its head. After the EU and NATO allies levied largely symbolic sanctions against China for its treatment of ethnic minority Muslims in Xinjiang, Beijing launched a furious and disproportionate response, lashing out not only against independent researchers and think tanks (i.e., civil society actors) but also leading Members of the European Parliament from all major parties. Ironically, it is this furious response—not Europe’s normative commitments—that may now jeopardize the CAI’s ratification. Through its own actions, Beijing may eventually force Europe to go against long-protected corporate interests.

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Bertram Lang is a research associate at Goethe University Frankfurt. His academic interest includes China’s non-profit sector, EU-China relations, and the politics of anti-corruption. Lang has also...