On December 30, 2020, the European Union and China concluded nearly decade-long discussions on a bilateral investment agreement. The agreement, known as the Comprehensive Agreement on Investment (CAI), will give European firms and investors greater access to the Chinese market and increase Chinese investments in European industries.
The full technical text for the CAI is currently being prepared and will be subject to approval by member states and the European Parliament. There are still significant concerns not only on the specifics of the agreement but also on the wider strategic move of adopting a bilateral approach in engaging China. The United States, for instance, has advocated for a multilateral instrument on investments with China, so that the world’s three largest economies can be better aligned on goals and values.
Europe’s New Course
The timing of the agreement, coming at the tail end of the turbulent Trump administration, was clearly rushed to ward off any impact that the warming of transatlantic relations under the new Biden administration may have on EU-China investment talks. The indications by the Biden administration that there will be no new trade deals until the U.S. makes major domestic investments leave many to see the EU as having few options but to forge bilateral ties with China without the transatlantic coordination of the past.
Many politicians on the continent see this as an opportunity for the EU to chart a course with China less dependent on the US and less tethered to the vagaries of who sits in the White House. Yet, there is also no consensus within different European Union institutions on how to embark on this new chapter in EU-China relations.
A Parliamentary Resolution on China
It was only on December 17, 2020, two weeks before the CAI was agreed to in principle, that the European Parliament adopted Resolution 2020/2913(RSP) to condemn China for “the government-led system of forced labour, in particular the exploitation of Uyghur, ethnic Kazakh and Kyrgyz, and other Muslim minority groups, in factories both within and outside of internment camps in Xinjiang, as well as the transfer of forced labourers to other Chinese administrative divisions, and the fact that well-known European brands and companies have been benefiting from the use of forced labour.”
Underpinning this censure is the quoted principle in the resolution that “the promotion of and respect for human rights, democracy and the rule of law should remain at the centre of the long-standing relationship between the EU and China.” While the resolution is unequivocal in EU’s commitment to upholding these values, the language of the CAI Agreement in Principle on human and labor rights is notably weaker than current international standards as embodied in the UN Guiding Principles on Business and Human Rights (UNGP).
Human Rights
References to human rights only appear twice in the CAI Agreement in Principle: once in the Preamble and the other in Section IV on investment and sustainable development, where the UN Guiding Principles on Business and Human Rights arises under the article on corporate social responsibility.
In the first sentence of the Preamble of the Agreement in Principle released on December 30, 2020, both the EU and China reaffirmed their commitment to the UN Charter as “having regard to the principles articulated in the Universal Declaration of Human Rights.” International human rights law requires states to respect, protect, and fulfill human rights within their territory or jurisdiction, reiterated in the first pillar of the UNGP on the state duty with respect to human rights and fundamental freedoms. This is a legal obligation, owing to their UN membership under the UN Charter and is an obligation that is significantly more concrete than merely having regard to the Universal Declaration on Human Rights (UDHR).
The solitary reference to the UDHR, and not to the International Bill of Human Rights, is a curious formulation. UNGP’s Guiding Principle 12 on the corporate responsibility to respect human rights is clear that the responsibility of business enterprises to respect human rights refers, at a minimum, to those rights expressed in the International Bill of Human Rights and the fundamental principles and rights at work of the International Labour Organization (ILO).
The International Bill of Human Rights is central in international human rights because it refers to the UDHR and the main instruments of its codification: International Covenant on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR) of 1966. The CAI Agreement in Principle, however, does not additionally refer to the two international covenants of the ICCPR or ICESCR, which would have better aligned the spirit of the agreement with international human rights standards. In doing so, the Preamble distances itself from the fact that China has yet to ratify the ICCPR, remaining the only permanent member of the UN Security Council not a party to the ICCPR.
Although China signed the ICCPR in October 1998, it has not ratified this core human rights treaty for more than twenty years. Despite a number of recommendations urging China to ratify the ICCPR coming out of the country’s Universal Periodic Review (UPR) — in addition to other formal and informal diplomatic channels and advocacy by Chinese legal scholars and international civil society — China’s ratification of the ICCPR has not yet been realized.
Fundamental Rights at Work
On the corporate responsibility to respect human rights, UNGP Foundational Principle 12 also referenced the principles concerning fundamental rights set out in the ILO Declaration on Fundamental Principles and Rights at Work of 1998. Fundamental principles and rights at work refer to the eight ILO conventions concerning the four specific categories of labor rights: the abolition of child labor; elimination of discrimination in employment and occupation; freedom of association and collective bargaining; and the elimination of forced or compulsory labor.
Regarding labor protections, the CAI Agreement in Principle indicates the commitment that it has secured from China to work towards the ratification of the outstanding ILO fundamental Conventions and take “specific commitments in relation to the two ILO fundamental Conventions on forced labour that it has not ratified yet.” This commitment is important due to China’s non-ratification of the two ILO conventions on the elimination of forced or compulsory labor ― a longstanding, conspicuous sore point in China’s engagement with international human rights and labor bodies.
In recent years, China’s treatment of Uyghurs in the autonomous Xinjiang region has come under growing scrutiny and criticism by governments and international bodies. It was then of political necessity for the CAI Agreement in Principle to pre-empt criticisms of turning a blind eye to labor concerns in China, with particular regard to forced labor.
However, the language of this “win” is lacking in concrete commitments. A close reading of the section on China and fundamental labor reveals that the commitment is aspirational. It is not an immediate, hard legal obligation to ratify all ILO conventions on the fundamental rights at work. Under the CAI Agreement in Principle, Section IV, China commits to make efforts that are “continued and sustained” to pursue the eventual ratification of the ILO fundamental Conventions on forced labor. This is very far from an unambiguous guarantee of treaty ratification.
It is also not clear why the EU glossed over the other conspicuous Chinese absence on the ILO agenda on fundamental principles and rights at work: freedom of association and the right to collective bargaining. Known popularly as unionizing rights, they are considered paramount to ensure that labor participation is fair and just. They enable the building of more sustainable and equitable economies founded on core labor protection and act as an important oversight mechanism for labor abuses. China heavily restricts independent trade unions from taking hold. Instead, the government believes that representation through the state-backed All-China Federation of Trade Unions is sufficient for the purpose of unionizing.
Questions therefore remain on what the EU has secured in agreement from China concerning the freedom of association and the right to collective bargaining. It is likely there is no commitment that specifically addresses this important category of labor rights, since unionizing rights were not specifically raised by name in the CAI, unlike the elimination of forced labor as a fundamental right at work.
Under the CAI Agreement in Principle, the lauded commitment of China agreeing, for the first time, to “ambitious provisions on…forced labour and the ratification of the relevant ILO fundamental Conventions” only points to the general intent of China eventually becoming a party to the Conventions. In reality, this is no different in content from similar recommendations that routinely appear in other international settings urging China to ratify outstanding core human rights treaties. For instance, during China’s most recent UPR (Third Cycle) in November 2018, the U.K. delegation urged China to ratify the ILO Forced Labour Convention and its 2014 Protocol, along with recommendations of various phrasing from other governments that aimed at China’s ratification of the ICCPR.
Seen through this lens, the commitments under the CAI for China to make efforts towards the ratification of outstanding ILO conventions on the fundamental rights at work do not tread new ground. At the same time, it may not be wholly surprising if these efforts meet the same fate as China and the ICCPR.
Business and Corporate Social Responsibility
Upholding labor and human rights in investment agreements falls under the corporate responsibility to respect human rights under the second pillar of the UNGP. This is a longstanding issue for the international community, governments, and enterprises alike. International human rights as a field has advanced from the contentious debates nearly twenty years ago that saw the proposed Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights rejected by the UN Commission on Human Rights a year later.
Today, there are various international, regional, and national instruments, binding and non-binding, that recognize business enterprises have the responsibility to respect human rights. In a reversal of the earlier position that Norms on the Responsibility of Transnational Corporations and Other Business Enterprises with regard to Human Rights “has no legal standing,” the UN Human Rights Council adopted the UNGP in June 2011 and heralded “a new set of global guiding principles for business designed to ensure that companies do not violate human rights…[and] provide redress when infringements occur.”
The momentum generated by the UNGP led to it being incorporated into Chapter IV of the OECD Guidelines for Multinational Enterprises in 2011. Since 2013, the OECD Working Party on Responsible Business Conduct has worked with member countries to advance the OECD Guidelines for Multinational Enterprises. Although China is not an OECD member country, it signed a Medium-Term Vision Statement and a joint Programme of Work for 2015-2016 with the OECD. One of the most high-profile achievements to come out of this collaboration is the Chinese Due Diligence Guidelines for Responsible Minerals Supply Chains in December 2015 that promotes supply chain transparency for all minerals and helps Chinese companies to respect human rights and avoid contributing to conflicts.
At the regional level, the EU Commission is currently drafting a proposal for a directive on environmental and human rights due diligence and accountability. The proposed directive, due to be released this year, would establish minimum requirements for business enterprises with respect to potential adverse environmental and human rights impacts as an issue of legal compliance. If adopted, these requirements also would be applicable to business activities extraterritorially, reflecting the trend of several jurisdictions that have legislated mandatory human rights due diligence. These include laws like the U.K.’s Modern Slavery Act, the Netherland’s Child Labour Due Diligence Law and France’s Law on the Duty of Vigilance of Parent and Subcontracting Companies.
Discussions on the Draft Directive reflect this regulatory trend to advance beyond the voluntary and non-binding corporate social responsibility and legislate business responsibility as a concrete legal obligation. Yet the EU-China investment agreement does not reflect leadership of the EU in this area. This is best underscored by the language of the article on corporate social responsibility (CSR), which only calls on each party to “promote responsible business practices, including by encouraging the voluntary uptake of relevant practices by businesses” and inevitably reinforce outdated views that environmental, social, and governance (ESG) risks are marginal.
Missed Opportunity
The CAI Agreement in Principle heralds a new chapter in EU-China investment that would support high levels of environmental and labor rights’ protections. Parsing the specific commitment on labor, however, indicates that commitments are not legally bound and not more concrete than proclamations of the past. Worryingly, what the CAI has done by lauding such weak commitments as landmark achievements is that it lowers standards and expectations for China from what currently exists in business and human rights.
The ILO affirmed in its 1998 Declaration on Fundamental Principles and Rights at Work that all members to the ILO are bound to fully respect and promote them, even if members have not ratified the specific conventions associated with each fundamental labor right. Simply put, members, by the fact of their membership in the ILO, have an obligation “to respect, to promote and to realize, in good faith and in accordance with the [ILO] Constitution, the principles concerning the fundamental rights.”
This means that countries, like China, that have not yet ratified all eight ILO fundamental conventions must report, in principle, annually on impediments to ratification and any change in law and policy with the aim of their eventual ratifications. Under established follow-up procedures of the 1998 Declaration on Fundamental Principles and Rights at Work, these reports are reviewed by the ILO’s Governing Body. The ILO can also offer technical assistance to work towards ratification. When compared with the CAI Agreement in Principle, these formalized monitoring procedures of the ILO are already more detailed than the aspirational call for both parties to the CAI to “respect, promote and realize, in good faith and in accordance with the ILO Constitution” fundamental rights at work.
As the final and technical text for the CAI is still being finalized, it will be subject to approval by each member state of the EU and by the European Parliament. We are still some distance away from the agreement entering into force. Yet the Agreement in Principle of December 30, 2020 is not a harbinger of a new chapter in EU-China relations when it comes to the promotion of and respect for human rights and fundamental freedoms. The European Parliament, long marginalized in the foreign policy conducted by Brussels, should follow up on its earlier resolution on labor in China to constructively engage with China in the CAI negotiations by pushing for higher standards to advance fundamental rights at work.
As it stands now, there should be no illusion that the parties to the CAI concerned themselves with improving fundamental rights at work and human rights. Far from advancing the UNGP in China, the timing and the content of the CAI Agreement in Principle reveal more about how the EU sees the economic prospects for the continent post-Covid and the political uncertainties of transatlantic cooperation. Missing amid the continental angst is a concrete opportunity presented by EU-China negotiations on the CAI to meaningfully advance business and human rights in China.
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TNL Editor: Nicholas Haggerty, Bryan Chou (@thenewslensintl)
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