The EU-China Horizontal Agreement: What it Means for Trade and Relations

On December 30, 2020, the European Union (EU) and China signed a Comprehensive Agreement on Investment (CAI), also known as the EU-China Horizontal Agreement. The agreement is aimed at enhancing trade and investment relations between the two economic giants, and has significance for various sectors such as automotive, financial services, and telecommunications. In this article, we will discuss the key aspects of the EU-China Horizontal Agreement, its potential benefits and criticisms, as well as its implications for global trade and diplomacy.

Key Aspects of the Agreement

The EU-China Horizontal Agreement is a landmark treaty that aims to level the playing field for European businesses operating in China, and vice versa. The agreement covers several areas, including market access, state-owned enterprises (SOEs), sustainable development, and dispute resolution.

Under the market access provisions, China has committed to providing greater access to the EU market for its goods and services, and to removing certain investment restrictions. This includes opening up the automotive sector, which has been heavily protected in China, to European manufacturers. In return, the EU will gradually reduce tariffs on Chinese imports, although sensitive industries such as textiles and agriculture will be exempt from this reduction.

The agreement also addresses the issue of SOEs, which have been a major concern for European companies competing in China. China has agreed to greater transparency and nondiscrimination in the operations of its SOEs, which often benefit from preferential treatment. In addition, the agreement includes provisions for sustainable development, such as commitments to environmental protection, labor rights, and corporate social responsibility.

Finally, the EU-China Horizontal Agreement establishes a dispute settlement mechanism, which allows for the resolution of investment disputes through arbitration. This mechanism is designed to offer greater legal protection to European investors in China, who have often faced difficulties in resolving disputes through Chinese courts.

Potential Benefits and Criticisms

The EU-China Horizontal Agreement has several potential benefits for both parties. For the EU, it provides greater access to the Chinese market, which is a key destination for European exports. It also allows for greater protection of European investments in China, and addresses longstanding issues such as market access and SOEs. For China, the agreement offers greater access to the lucrative EU market, and could help to boost its economic growth.

However, the agreement has come under criticism from various groups. Some European politicians and human rights groups have criticized the agreement for failing to address human rights abuses in China, such as the treatment of the Uighur minority in Xinjiang. Others have raised concerns about the lack of transparency in the negotiations, and the potential impact of the agreement on European jobs and industries.

Implications for Global Trade and Diplomacy

The EU-China Horizontal Agreement has significant implications for global trade and diplomacy. It represents a major step towards closer economic cooperation between two of the world`s largest economies, and could help to set a new standard for investment and trade agreements. It also reflects a shift in the global balance of power, as China continues to rise as a major economic and political force.

However, the agreement could also have wider implications for global trade and diplomacy. It may lead to greater economic integration between the EU and China, and could influence other countries to follow suit. It could also result in a more fractured global trading system, as countries turn towards bilateral agreements rather than multilateral ones.


The EU-China Horizontal Agreement is a significant milestone in the relationship between China and the EU. While it has the potential to bring benefits to both parties, it has also been subject to criticism and raises wider implications for global trade and diplomacy. As the agreement moves towards ratification, it will be important for all stakeholders to consider its potential impact and work towards ensuring that it promotes sustainable and equitable trade and investment.