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Tensions between the EU and China and its impact on the European investment deal

Flags of the European Union (left) and China.

Nelson Ching Bloomberg | Getty Images

China has made a “huge strategic blunder” in retaliating against Europe by imposing sanctions on EU politicians, said former White House chief trade negotiator Clit Williams.

Beijing’s actions have killed a major investment agreement between the European Union and China, and the deal is “off the table,”

; Williams told CNBC on Monday.

In March, China imposed sanctions on 10 European Union politicians and four other organizations. They came as an immediate response to the EU’s sanctions on China for “arbitrary detentions” of members of China’s ethnic minority.

Xinjiang in northwestern China is home to a Muslim population known as Uighurs, which the United Nations and others have identified as a repressed ethnic group. Also in March, the United States, the United Kingdom and Canada said China was committed to “forced labor, mass detention in internment camps, forced sterilization” and other abuses against Uighurs.

China has repeatedly denied these allegations as “lies and misinformation.”

The European Parliament last month suspended ratification of a new investment pact with China until Beijing lifted sanctions against the EU.

“This shows that he is crossing with China and overreacting and not dealing with legitimate issues such as forced labor,” Williams, a former deputy director of the National Economic Council, told CNBC Street Signs Asia. He is now a partner in the law firm Akin Gump.

We still have a long way to go. And we need to see how Europe continues to be more muscular.

Clete Willems

Partner, Akin Gump

The comprehensive EU-China investment agreement has been in place for seven years and was finally negotiated by negotiators in December. This would put EU companies on an equal footing in China and strengthen Beijing’s status as a trusted trading partner. This would also give each country’s business more access to the other country’s markets.

“The question that the United States has always had with Europe is whether they are much more dependent on China as an export market – and so the question is how heavy they will actually be,” Williams said.

The European Parliament “demands that China lift sanctions before taking action [the investment accord]”, it says in its resolution, which is not legally binding, but is now the official position of the assembly.” EU-China relations may not continue to work as usual, “the EU parliament said.

However, Williams said Europe needs to take a tougher stance on China.

“I think we’ve seen some positive signals, but I think the degree of pressure the Allies are putting on China to change their practices … We still have a long way to go. And we need to see Europe continue to be more muscular, “he said.

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