Q&A: What’s Next, After Europe’s Deal With China?

The landmark deal's implications, for China, the EU and the U.S.

Jan 06, 2021
Finance

SMITH BRAIN TRUST  Seven years in the making, the recently completed Comprehensive Agreement on Investment aims to rebalance trade between the European Union and China.

President of the European Commission Ursula von der Leyen described the deal as “an important landmark in our relationship with China and for our values-based trade agenda. It will provide unprecedented access to the Chinese market for European investors, enabling our businesses to grow and create jobs. It will also commit China to ambitious principles on sustainability, transparency and non-discrimination.”

Chinese President Xi Jingping said the agreement promotes global trade and investment liberalization and will "strongly stimulate" a global post-pandemic economy recovery.

Maryland Smith Clinical Professor of Finance David Kass weighs in further on the implications, including for the United States and the incoming Biden administration.

Q: What benefits will the agreement bring to the Chinese and European economies?

Kass: The new deal will be good for European companies in certain sectors, such as autos and cloud computing. China has promised that its state-owned enterprises will not discriminate against European firms when buying and selling goods and services. It has also pledged to be more open about subsidies and says it will ban forced transfer of technology.

Q: What impact will the agreement have on China-U.S. relations?

Kass: The Biden administration is likely to work closely with the EU and jointly negotiate with China on international trade issues. The U.S will be much less confrontational with China and substantially improve its relationship with China.

Q: What impact will the agreement have on China's domestic reforms?

Kass: I would expect that the EU-China Investment agreement will have very little impact on China's domestic reforms.

Q: Recently, the United States and Europe have had disputes over digital taxes and in other areas. Will this dampen the prospects for the Transatlantic Trade and Investment Partnership?

Kass: It is in the joint interest of the United States and Europe to resolve disputes on digital taxes and other areas. This EU-China Investment Agreement will not dampen the prospects for the Transatlantic Trade and Investment Partnership.

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About the Expert(s)

David Kass

Dr. David Kass has published articles in corporate finance, industrial organization, and health economics. He currently teaches Advanced Financial Management and Business Finance, and is the Faculty Champion for the Sophomore Finance Fellows. Prior to joining the faculty of the Smith School in 2004, he held senior positions with the Federal Government (Federal Trade Commission, General Accounting Office, Department of Defense, and the Bureau of Economic Analysis). Dr. Kass has recently appeared on Bloomberg TV, CNBC, PBS Nightly Business Report, Maryland Public Television, Business News Network TV (Canada), FOX TV, Bloomberg Radio, Wharton Business Radio, KCBS Radio, American Public Media's Marketplace Radio, and WYPR Radio (Baltimore), and has been quoted on numerous occasions by The Wall Street Journal, Bloomberg News, The New York Times and The Washington Post, where he has primarily discussed Warren Buffett, Berkshire Hathaway, the economy, and the stock market. 

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