Being Naïve or Putting Business First? The EU-China Comprehensive Agreement on Investment, Human Rights and the Hong Kong Situation, 19 January 2021

The European Union would like to believe that it is acting robustly and cohesively to promote human rights and democracy globally. The EU Action Plan on Human Rights and Democracy 2020-2024, confirmed by the Council a few months ago, reaffirms that respect ‘for human dignity, freedom, democracy, equality, the rule of law and respect for human rights will continue to underpin all aspects of the internal and external policies’ of the EU...

This (self-)perception as a force of good in terms of RBC [responsible business conduct] and human rights protection might however be less accurate than many within the EU think. Some details about the recent EU-China Comprehensive Agreement on Investment (CAI) seem to spoil this rosy picture. Commentators have questioned whether China’s promised commitments on sustainable development and labour rights really mean much in practice. I pursue this inquiry further from the perspective of RBC and the current human rights situation in Hong Kong...

By virtue of the UNGPs and other international standards such as the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, and the OECD Guidelines for Multinational Enterprises, all businesses – including those wishing to invest in China under the CAI – are expected to respect all internationally recognised human rights throughout their operations. This means that business enterprises should not cause, contribute to or be directly linked to adverse human rights impacts through their operations, products or services by their business relationships...

Will the CAI assist or hinder EU companies investing in China to meet their human rights responsibilities? Based on the information available so far, the CAI might become a trap for EU investors: while EU companies would be tempted to invest in manufacturing in China because of huge opportunities, they might be unable to do business there in line with international or EU standards related to RBC. The situation might become worse after the enactment of the mandatory HRDD legislation in the EU. European companies can expect to be sued in the EU and also face civil society campaigns for how they operate in China. Such campaigns need not be limited to address alleged human rights abuses in Xinjiang.

At the same time, it is arguable that CAI could enhance the leverage of the EU and its companies investing in China to improve the human rights situation in the country. This may, for example, facilitate peer learning and allow EU companies to build on existing RBC initiatives in China such as the Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains and push for mandatory ESG disclosure by all businesses operating in China. However, to achieve these objectives, the CAI would have to set time-bound measurable goals that could be verified by independent sources in an objective manner, rather than go by rhetorical commitments...

To conclude, human rights are costly business. The real commitment to promoting and upholding human rights is tested in situations when doing so may result in adverse consequences, economic or otherwise. The CAI provides a litmus test for the EU’s commitment to ‘walk the talk’ on promoting human rights in China.