The EU’s dispute with South Korea shows why CAI is unacceptable

On 30 December 2020, EU leaders surprised much of the Western world with the announcement that after seven years of stalling and restarting talks it had agreed an EU-China Investment Agreement (CAI).

The EU Commission President Ursula Von-Der Leyen was quick to hail the agreement as a landmark in the EU’s relationship with China for a “values-based trade agenda” and the Commissioner for Trade, Valdis Dombrovskis, said the EU had secured “binding commitments on combating forced labour”.

So certain of CAI being a decisive win and not an own-goal for the EU, the Commission has continued in the face of substantial criticism from human rights NGOs to claim that China has conceded substantially on the issue of forced labour. Sabine Weyand, Director-General of the EU’s Trade Commission on a webinar last week doubled down, stating that the EU had ensured the inclusion of the same “strong” dispute settlement on sustainable development as the one currently in operation in the EU-South Korea Free Trade Agreement.

The EU Commission’s factsheet on CAI states that the EU managed to get from the Chinese Government “commitments to respect core ILO principles and to effectively implement the ratified ILO Conventions” as well as a “specific commitment on the ratification on ILO fundamental Conventions on forced labour”. However, the text of CAI at its most generous is ambiguous on the assurance of this commitment, stating only that China agreed “to make continued and sustained efforts to ratify the ILO fundamental conventions on forced labour.”

Movements towards selling this watered-down commitment to EU parliamentarians and Member States as an EU victory, have been made all the harder by a ruling last week of the EU-South Korea FTA disputes panel on this very issue.

The EU-South Korea FTA disputes panel was asked to address the question of whether South Korea had violated its commitment “to make continued and sustained efforts to ratify the ILO fundamental conventions” as part of a wider disagreement over South Korea’s labour laws, particularly when it comes to freedom of association.

A casual observer reading the EU’s press release on the matter might conclude that the dispute panel ruling reaffirmed the strength of this wording in forcing countries to abide by the ILO conventions. Yet a closer study of the details of the panel’s ruling finds quite the opposite.

On the question of whether “continued and sustained efforts to ratify” requires a timetable, the panel concluded that the wording ‘does not impose an obligation of result but of effort, and that it suggests the nature of on-going obligation without a specific target date or schedule’.

When it came to the issue of defining “sustained effort”, the panel concluded that this merely ‘is an obligation of ‘best endeavours’ which is ‘lower than a requirement to explore and mobilise all measures available at all times’.

As for defining “continued” the panel’s judgement concluded that the parties ‘should be afforded leeway to select specific ways to make continued and sustained efforts’ as ‘a snapshot of a particular period may not yield an accurate portrayal of the overall process’.

Rather than ruling in the EU’s favour, the panel in fact ruled that South Korea had lived up to its obligation to mark “continued and sustained efforts to ratify” despite clear evidence of continued poor labour practices and South Korea displaying little to no interest in establishing a timetable to ratify core ILO conventions.

What does this mean for CAI? In short it strips away yet another layer of deception, this time the lie that somehow China will be obligated to abide by or ratify core ILO conventions on forced labour as a result of the EU’s hard negotiating position.

The EU’s dispute with South Korea over its FTA demonstrates, that outside of a clear timetable, the Chinese Communist Party will have all the time and space in the world to come up with excuses, obfuscations, and outright denials, on why its treatment of Uyghurs, Hong Kongers, Tibetans, and other minorities has nothing to do with the EU and its observation of international labour standards.  

When it comes to CAI, the EU has yet again placed trade over upholding its values and protecting human rights. The only argument the Commission can now clutch onto in support of this one-sided investment treaty is that it will somehow be good for EU businesses, but like sand-slipping through their fingers, as each day passes, the economic evidence for this appears to recede. 

Sam Goodman, Hong Kong Watch’s Senior Policy Advisor