CAI Does Not Protect European Companies from Unfair Competition

With the concessions and commitments China has made under the Comprehensive Agreement on Investment (CAI) on a level playing field, market access, labor and environmental protection, this agreement is expected to provide European companies with easier access to the Chinese market and improve the conditions of competition. However, we must be aware that the CAI does not protect European companies from unfair competition in and from China.

Although China has committed to prohibit forced technology transfers in terms of IPR protection, this commitment only protects European companies from the transfer requirements of the Chinese administration and does not regulate unfair competition by Chinese companies in the Chinese and European markets. The linchpin is the market-distorting state subsidies. The CAI only covers subsidies in the services sector, while the bulk of EU investment in China goes into manufacturing. However, Chinese subsidies cannot be examined there.

Also, within the services sector, the enforcement mechanism does not apply, as the provided dispute settlement between states does not apply to subsidies. Finally, the CAI allows both parties to take additional regulatory measures if necessary, but does not cover subsidies. Conclusion: State-subsidized Chinese companies can continue to operate undetected and unhindered in China and Europe and distort competition even under the CAI.   

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