The European Union (EU) made a pact with China, softening its stand on the issue of state subsidies. These findings have been made in an analysis of the website Politico. EU. This analysis states that the EU took a more strict stance towards Britain than China in this matter. Analysts Sarah Annie Arup, Thibault Larger, and Jacob Henke Vella have said that under the agreement, China would be able to give companies more subsidies than the UK without transparency.
Analysts say they have studied the document of the EU-China investment agreement. Accordingly, the assistance of up to 4,50,000 Special Drawing Rights (SDR) to companies in China up to EUR 5,33,000 would not be considered a subsidy. In contrast, the EU-UK deal states that if assistance exceeds SDR 3,25,000, it will be considered a subsidy. Significantly, SDR is a unit of accounting calculation, which is used by the International Monetary Fund (IMF).
Analysts also consider it a win for China that the investment agreement with it does not mention the subsidy losses. Whereas on the basis of it, the affected party files its complaint with the dispute resolution institution. The agreement states that the dispute resolution measure can be used to raise the question of whether any party takes transparency in announcing subsidies. But through this, the matter of actual payment of subsidy will not be raised.
The EU-China agreement was agreed to in December. But it is yet to be approved by the European Parliament. The case of weak provisions protecting human rights may arise in the agreement in Parliament. Many experts say that the European Parliament may withhold its approval on this issue.
The EU says that it accepted the SDR limit of 450,000 SDRs in terms of subsidies because it is a common practice in trade agreements. The same is believed in its agreement with Japan and Mexico. The EU says that it will combat China's subsidy problem by going outside the investment deal through other measures. The EU's vision is to achieve the goal of better transparency under the Investment Agreement. It should not be used as a means of pulling China's subsidies into the dispute resolution mechanism.
The agreement provides that both parties will make public the subsidy given to particular services. Every year China and the EU will have to pay the amount they have given to financial services and sea transportation. The agreement provides for consultation between the two parties on the issue of subsidy. Whichever party would like to be consulted in this regard, they can ask for additional information. But analysts say this consultation is in the form of goodwill, not as a provision for dispute resolution.