Strategic Observations and Geopolitical Implications of the EU - China Comprehensive Agreement on Investment by Arne Elias Corneliussen

On 30 December 2020, EU and China concluded seven years of comprehensive investment-focused negotiations with the EU - China Comprehensive Agreement on Investment (CAI). CAI solidifies and deepens the investment range and potential across various industrial and business sectors between EU and China. This agreement portrays the importance China and EU regard each other with. In addition, CAI reflects a pragmatic and mature approach to improve and manage relations between the two largest economic powers - both approximately 15 trillion USD - on the Eurasian continent. CAI includes a state-to-state dispute resolution mechanism which meets the highest standards in any EU trade agreement, and a working group to follow up and manage sustainable development related issues including labor and climate.

CAI coincides with a myriad of global geopolitical inflection points. The final weeks of the Trump administration and the incoming Biden administration in the US on January 20. Many analysts and journalists claimed in recent years that in the future countries must choose between China or the US. CAI opens a new strategic narrative which indicates a clear EU stance against this zero-sum notion. Over the last four years EU politicians and state leaders observed how the US – China relationship deteriorated. The incoming Biden administration may approach China differently, however recent signs and statements indicate more tensions and strategic competition in US – China relations. 

On December 30, 2020, EU and the UK signed the EU-UK Trade and Cooperation Agreement sealing Brexit. Australia and China`s relationship also changed direction and deteriorated last year. In November 2020, 15 countries signed the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement launching the largest trading bloc in the world including among others Japan, China, South Korea, Indonesia and Australia. CAI emerged towards the end of 2020, a year which began with the Covid-19 pandemic – a global strategic shock - which transformed the world and human interaction.

CAI follows a natural continuation and strategic flow of deepening relations on the Eurasian continent. With China located on the eastern side of Eurasia and EU on the western side, these two economic powers share geography. However, while Eurasia′s population totals approximately 5,5 billion people, limited infrastructure connects Eurasia′s vast landscape. I travelled personally overland by train, bus and car from Shanghai - across China, Central Asia and the Caucasus - to Istanbul in the fall of 2017 to examine logistics clusters, infrastructure developments and geopolitical dynamics. I observed relatively limited infrastructure along this vast geographic landscape. However, I also witnessed how increasing infrastructure activity untap and transform trade, business, investment and human potential from China through Central Asia, Russia, the Middle East, the Caucasus and Europe.

China′s infrastructure investments across the Eurasian continent, embedded in its land-based One Belt strategy – part of its wider One Belt One Road strategy, removes some of the connectivity deficiencies currently hindering the vast potential on the Eurasian continent. The investment agreement reached between EU and China coincides with global geopolitical inflection points and increased land-based infrastructure investments connecting China and Europe. Consequently, CAI pillars the foundation of EU and China′s strategic investment architecture.