Chinese and European Union leaders agreed on Wednesday to make it easier for companies to operate in each other’s territory, a significant geopolitical victory for China at a time when criticisms of its human rights record and the management of pandemic have left it increasingly isolated.
But the historic pact faces political opposition in Europe and Washington that could end it, illustrating the difficulties of dealing with an authoritarian superpower that is both an economic rival and a profitable market.
A large faction of the European Parliament, which must ratify the agreement before it can enter into force, opposes the agreement, claiming that it does not do enough to prevent human rights abuses in China. In addition, an aide to President-elect Joseph R. Biden Jr. signaled that the new government is not satisfied with the deal.
German Chancellor Angela Merkel made the deal a priority because of its importance to German automakers and other manufacturers with large operations in China.
The pact loosens many of the restrictions imposed on European companies operating in China, including the requirement that they operate through joint ventures with Chinese partners and share sensitive technology.
The agreement also opens up China to European banks and contains provisions to reduce secret government subsidies. Foreign companies often complain that the Chinese government secretly subsidizes domestic companies to give them a competitive advantage.
The deal will “significantly improve the competitive environment for European companies in China,” said Hildegard Müller, president of the German Automobile Association, in a statement before the announcement. “This will provide new impetus for a global framework based on rules for trade and investment.”
China’s leader, Xi Jinping, has also made the deal a priority, allowing negotiators to make enough concessions to persuade Europeans to move on.
Wednesday’s announcement was preceded by a video call that included Xi and Ursula von der Leyen, the president of the European Commission, to reach an agreement in principle.
European officials said a breakthrough came in mid-December, when China, in a significant concession, agreed to make a stronger commitment to observe international standards on forced labor. China has also agreed to step up its efforts to combat climate change.
Valdis Dombrovskis, the European trade commissioner, said the deal was the “most ambitious” pact of its kind that China has ever agreed to.
“But the value of the deal goes beyond euros and cents, because it also anchors our value-based business agenda with one of our biggest trading partners,” said Dombrovskis in a statement on Wednesday.
Concluding the pact is now a diplomatic victory for China, which has seen its international position shaken by the treatment of the coronavirus pandemic and its repressions in Hong Kong and the predominantly Muslim province of Xinjiang.
These issues – and caution about China’s promises to really open up to foreign investment – became the focus of opposition to the deal when the final details were settled. For the Chinese, the agreement demonstrated that the country does not face significant diplomatic isolation in the treatment of human rights.
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China also seemed eager to reach an agreement before Biden took office in January, calculating that closer economic ties with Europeans could impede the new government’s efforts to come up with an allied strategy to challenge China’s trade practices and other policies. .
Biden, in a speech on Monday, said that on any issue important to the US-China relationship, the United States is “stronger and more effective when we are flanked by nations that share our vision for the future of the world. “
Currently, he said, there is “a huge vacuum” in the American leadership. “We will have to regain the confidence of a world that has started to find ways to work around us or without us.”
The White House also opposed the agreement, but it had little influence among Europeans to block it. The Trump administration has tried for months to isolate China and its companies – announcing new restrictions on those linked to the People’s Liberation Army this week – only to be repudiated by countries still willing to engage the Chinese.
The Europeans’ decision to ignore the objections from the Biden camp was an indication that relations with the United States will not automatically return to the relative goodwill that prevailed during the Obama administration.
President Trump’s tendency to burn bridges with longtime allies inspired Europe to largely ignore the United States while seeking trade deals with countries like Japan, Vietnam and Australia. European diplomats said this week that while they expect a more cooperative relationship with the Biden government, they cannot subordinate their interests to the US electoral cycle.
European Green Party members, among others, say the deal does not do enough to open China’s markets, to honor previous promises of trade and the environment, or to tackle human rights abuses, including forced labor and mass internment of people. Uighurs and other Muslims in the westernmost region of Xinjiang.
Opponents can gather enough votes to block ratification in the European Parliament.
Chinese and European Union negotiators have been working on a deal for almost seven years, but progress has accelerated suddenly after Biden defeated Trump in the elections.
Unlike Trump, who is generally hostile to Europe, Biden is expected to try to cooperate with the European Union to control Chinese ambitions, but these efforts could take many months to materialize.
United States law prohibits members of the new government from negotiating directly with foreign officials until Biden takes office on January 20. In an interview in early December, Biden said he planned to conduct a thorough review of the trade relationship with China and consult with allies in Asia and Europe to develop a coherent strategy before making changes to America’s terms of trade.
“I’m not going to make any immediate moves,” he said.
In the meantime, Biden’s advisers used public statements to warn European authorities against any hasty action and to try to persuade them of the advantages of waiting to coordinate with the new American government.
Mr. Biden’s choice as national security adviser, Jake Sullivan, I wrote on Twitter this month, that the new administration “would welcome early consultations with our European partners about our common concerns about China’s economic practices”.
Chinese officials have pushed to keep the deal going for the past few weeks, especially after opposition in Europe has spread to the public.
As the negotiations hit an obstacle last week, China’s Ministry of Commerce said in a statement that the deal would be “of great importance for the recovery of the global economy”. He said that both sides should be willing to “meet in half”, but that China would protect “its own security and development interests”.
Despite the provisions of the forced labor agreement, Chinese officials have repeatedly denied that the country practices the practice – in Xinjiang or elsewhere – despite evidence to the contrary. The vehemence of these denials raises questions about how China could honor commitments to protect workers’ rights.
“So-called forced labor in Xinjiang is a complete lie,” said a foreign ministry spokesman, Wang Wenbin, recently. “Those responsible for such despicable slanders must be condemned and held responsible.”
Ana swanson contributed reporting from Washington, Keith Bradsher from Beijing and Monika Pronczuk from Brussels.