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Intervention by Sharon Hom at Exchange of Views on “Comprehensive Agreement on Investment” (CAI) between EU and China Convened by the European Parliament Subcommittee on Human Rights

2021年02月25日

I. Introduction

Let me first express my appreciation for this opportunity to contribute to the exchange of views on an important investment agreement.

My organization, Human Rights in China, is one of the 35 civil society organizations that has endorsed the Joint Appeal on the Inclusion of Enforceable Human Rights Clauses in the EU-China CAI that was transmitted on January 13, 2021 to EU officials and members of the European Parliament. That appeal urged members of the European Parliament and other responsible European institutions to implement a set of minimum conditions prior to ratification of the CAI, including the ratification by China of core human rights conventions, such as the International Covenant on Civil and Political Rights (ICCPR)[1] and the inclusion of strong and enforceable human rights clauses in the CAI.[2]

II. The importance of due diligence and transparency

Without strong human rights clauses, safeguards, and monitoring and enforcement mechanisms, the conclusion of an investment agreement in the context of the dire human rights situation in China—that is, on the Mainland and in Hong Kong—presents predictable

risks for the rule of law and for the process of an independent judiciary, along with a whole range of other serious human rights risks. And these include risks for EU companies and their employees, and investment advisers who have been given clearance to travel to China. So, an agreement without human rights clauses or obligations in effect provides a blank check for an authoritarian regime and, frankly, leaves the companies to their own devices to address, ignore, or be complicit in human rights violations.

An agreement without human rights clauses or obligations in effect provides a blank check for an authoritarian regime and, frankly, leaves the companies to their own devices to address, ignore, or be complicit in human rights violations.

The lack of a robust and rigorous human rights impact assessment (HRIA) and full due diligence here means that the CAI is not only a bad deal, it’s a dangerous one.  At a minimum, a human rights impact assessment that is based upon updated and detailed empirical information can identify and assess the legal and political risks and mitigation measures so that more responsible, accountable, and informed choices can be made.

So, this is also important in the context of the Pew survey conducted in October 2020[3] on the views toward China from 14 countries (advanced economies) around the world, including many EU member states. In particular, following the outbreak of COVID-19, the unfavorable views of China among citizens in these 14 countries have had a drastic increase, in the neighborhood of 75 to 80%, compared to a few years earlier.

The lack of a robust and rigorous human rights impact assessment (HRIA) and full due diligence here means that the CAI is not only a bad deal, it’s a dangerous one.

Transparency and inclusive participation in the final stage of negotiation of the CAI is critical, so that non-state actors and EU citizens will understand the risks that will come with the anticipated benefits, which are being promoted by the CAI’s proponents.

As best practices for risk assessment underscore, assessment of risks and identification of potential mitigation measures must be implemented iteratively. In other words, it’s not a one-off step, so that it can address new and shifting challenges. And this is critical in light of the ongoing dramatic legal, political, and social developments in China—in particular, the severe deterioration of rights protections and rule of law—since the Sustainability Impact Assessment (the SIA) was completed at the end of 2017.[4]  (The report came out in 2018 but the actual work was done in 2017). And since 2017 and 2018, the rights situation in China has drawn widespread international attention, including in a joint statement on the human rights situation in Xinjiang and in Hong Kong that was delivered by Germany on behalf of 39 Countries to the UN General Assembly in October 2020.[5]

But despite the widespread international concern and condemnation, the genocidal targeting of the ethnic Uyghurs in East Turkestan (officially the Xinjiang Uyghur Autonomous Region, XUAR), the gutting of fundamental rights and freedoms in Hong Kong and the on-going cultural and religious repression in Tibet continue. Today, there was an announcement of the death of another Tibetan in detention. Today, there will also be a launch of a book by the nuns of the Drapchi prison who tell the stories of their experience being terribly tortured—as a powerful reminder not to forget those who have disappeared and died in the black holes of detention and torture.[6] As the High Representative for the EU Josep Borrell stated this week, particularly regarding Hong Kong, “the situation keeps deteriorating,” and this has an impact on the EU’s broader relationship with China.[7]

Finally, it’s important that there is serious exercise of due diligence, including a human rights impact assessment to ensure that the CAI, in its final iteration, will be consistent with the principles and goals of the then-new China strategy, the EU-China Strategy, that was launched in 2016. (2016-2021).[8]  (The CAI is included as one of the 47 elements of the strategy, and that was a priority.) Unfortunately, there hasn’t been enough progress made on the rule of law and human rights elements of the EU-China Strategy. For example:

  • The EU expects China to assume responsibilities in line with the benefits from a rules-based international order.
  • The promotion of human rights will continue to be a core part of the EU’s engagement with China. The EU will hold China to account for its human rights record.
  • The EU should support the continued implementation of the “one country, two systems” principle in Hong Kong and Macau.

I do not need to go through the other 45 or 6. Clearly, this is bringing coals to Newcastle—to this human rights subcommittee.

It is important that following the Sustainability Impact Assessment of 2018, the European Court of Auditors (ECA) prepared an assessment of the EU’s response to China’s state-driven investment strategy that came out in 2020,[9] in which it provided an overview of China’s strategy, the responses by EU institutions and individual member states, and the risks that China’s strategy presents for the EU. The challenges and risks that were identified had been discussed, I understand, with the Commission and with the European External Action Service (EEAS), and their views are represented in the report.

Perhaps there is no more vivid and devasting example of the deadly consequences of the suppression of information and targeting of whistleblowers than the COVID-19 global pandemic.

Several high-level conclusions are relevant for our discussion today. One is that the ECA—which, as you know, is a group of external independent auditors—highlights the challenges posed by different regulatory environments, that is, China and the EU, and the problem of transparency and, most important—something that I would like to underscore today—access to information. The ECA notes that it had difficulty in obtaining timely and complete data to gain an overview of the Chinese investment strategy in the EU and to better inform EU policy-making. Further, it found that “no formalised comprehensive analysis of the risks and opportunities for the EU had been conducted.”

Because the scope of the research period for the ECA assessment was completed prior to the outbreak of COVID-19, the ECA does not take into account any policy developments or other changes that occurred in response to the pandemic. But perhaps there is no more vivid and devasting example of the deadly consequences of the suppression of information and targeting of whistleblowers than the COVID-19 global pandemic.

Now, when 112 million people around the world have been infected; nearly two and a half million people have died; more than a year after the outbreak in Wuhan; and even after the WHO team recently completed its investigation in China, the Chinese government continues to withhold crucial information that can provide insight into the cause and the initial spread of the virus in, actually, we understand now, not 2020, but 2019.[10]

Due diligence requires a rigorous human rights impact assessment and human rights clauses, which are necessary to protect the interests of the EU, EU citizens, and EU companies against the predictable risks that undermine the EU’s core values and principles that promote sustainable progress.

So, this is extremely critical, aside from the impact on the right to health, sustainable development, and access to information. Needless to say, for markets to function properly, you need complete, accurate, and comprehensive data. Otherwise, this kind of misinformation, or information suppression, contributes to market distortions.

So, due diligence requires a rigorous human rights impact assessment and human rights clauses, which are necessary to protect the interests of the EU, EU citizens, and EU companies against the predictable risks that undermine the EU’s core values and principles that promote sustainable progress.

III. Legal and Political Risks

I want to briefly touch on some specific legal and political risks that illustrate why a systematic, comprehensive due diligence assessment, including a human rights risk assessment, must be made. The law, the legal framework, in China really reflects a systematic securitization of the whole environment in the mainland and in Hong Kong. And this legal system is being weaponized to exert comprehensive ideological, political, and social control.  The key laws which need to be examined include the National Security Law of 2015 of the People’s Republic of China, which was then extended to cyberspace via the Cybersecurity Law of 2017 [11] and a whole regime of implementing regulations, and then to Hong Kong via the promulgation of the National Security Law for Hong Kong in 2020.[12]

This “all-encompassing national security framework” has turned, according to one prominent legal scholar, “all interests of the political system, sovereignty integrity, economic development, food security, cybersecurity, religion, cultural exchange, environmental protection, outer space, into a life-or-death question regardless of their gravity.”[13] Under this framework, national security is clearly viewed by the Chinese Party-state as an existential question where it must control all these aspects.

So, the Party committee, a basic unit of the Party in any SOEs—for which more market access is being granted on both sides—what is its role? What should the EU be concerned about?

So, what are the risks to foreign investment in a country where the political control imperative of the Party is paramount—above its international treaty obligations, as seen clearly in the flaunting of these obligations with regard to Hong Kong?  Let me briefly illustrate with China’s commitment on SOEs. I may be raising issues already being addressed in a robust way in the ongoing negotiations, but these are not fully transparent to civil society.

As part of China’s commitments on fair competition, the CAI states that “China is to ensure that SOEs active in the market take decisions solely based on commercial considerations.” Leaving aside the question about China’s record on compliance with international treaty commitments, what does this mean in the context of the requirement that Party committees must be established in SOEs?[14] Just because they ensure that decisions are based solely on commercial considerations says nothing about what should be done about the elephant in the room.

With a membership of over 90 million members, the Chinese Communist Party is larger than the whole population of Germany. So, the Party committee, a basic unit of the Party in any SOEs—for which more market access is being granted on both sides—what is its role? What should the EU be concerned about?

The role of the Party within these different enterprises depends on what kind of enterprise—a Chinese company, a state-owned enterprise company, or a foreign company. But, according to the guidelines, businesses must build up Party organizations, and entrepreneurs should receive instruction to ensure they “identify politically, intellectually and emotionally” with the Party.[15] The specific roles and the obligations of the Party committees are set out in the constitution of the Communist Party of China.[16]

So, while the CAI negotiations are addressing decision-making in SOEs, the simple “commitment” does not adequately address the realities and influence of politicized decision-making, especially in specific sectors, like communications, technology, infrastructure, and even services. Joint ventures, especially those with state-owned partners, may face different pressures. In the context of the negotiations to lift restrictions on joint ventures, the requirement of Party committees needs further assessment attention.[17]

Other risks that need further examination are:

  • the provisions in the Cybersecurity law;[18] in particular, those that require data localization of all companies, that is, the local storage of data collected within China;
  • the privacy provisions in the Cybersecurity Law that include real name requirements, and the association with the credit scores incentivization scheme; and
  • health and privacy-related concerns highlighted by the massive blood and DNA collection practice in Xinjiang,[19] especially in light of specific references to the bio health sector in the CAI.

IV. Conclusion

The CAI must avoid being a tool to further legitimize an authoritarian regime. The Party-state in China has clearly rejected rule of law concepts as “Western,” not appropriate for China, and has aggressively promoted Chinese models of rule by law or govern by law, human rights with Chinese characteristics, the Chinese model of democracy, and its own development model (read “NOT rights-based”). As the UN Special Rapporteur on the elimination of extreme poverty pointed out, the Chinese model raises question of sustainable development.[20] So these very clear policy messages delivered without apology at international fora like the UN, including the Human Rights Council and the General Assembly, are at odds with the rule of law and other “commitments” made in the CAI.

A “constructive management of differences” must be premised on the recognition and the operationalized recognition of differences.

And under Xi Jinping’s leadership, the state’s role in the economy has become strong again, and the overarching supremacy of the Party is exerted over the economy under China’s form of state capitalism.  And China’s overseas footprint is as significantly expanded with implications for labour rights and human rights through China’s ambitious infrastructure investment projects, the Belt and Road Initiative, together with the state-led “Made in China 2025” industrial policy.

It’s possible, though, that EU engagement with a more assertive and economically influential China can be “principled, practical and pragmatic”—as envisioned in the EU-China Strategy—and that it can continue to be based upon a positive agenda of partnership, coupled with a “constructive management of differences.”[21]

But a “constructive management of differences” must be premised on the recognition and the operationalized recognition of differences. And a robust human rights assessment is the key tool to identify the risks posed by these differences and the mitigation measure that need to be developed in a transparent, inclusive, participatory process that includes all affected stakeholders.

A robust human rights assessment might also require the re-examination of what economist Paul Krugman has described as “zombie ideas”— ideas that should have been killed by contrary evidence, but, instead, keep shambling along, eating people’s brains.

It might also require—and I am going out on the limb here—the re-examination of what Paul Krugman, the Nobel prize winning economist, has described as zombie ideas”—that is, ideas that should have been killed by contrary evidence, but, instead, keep shambling along, eating people’s brains.[22]

And perhaps one of those zombie ideas that we need to seriously stop at this point—because its viability and empirical validity are increasingly questioned in policy circles—is the idea, the hope that investment in economic liberalization will fuel political liberalization and an international rules-based compliance by China. I think it might be a zombie idea whose time is up.

The Commission position on the 2018 SIA noted that while the CAI may lack enforceable human rights clauses, it "might contain preambles reaffirming the attachment of parties to democracy and fundamental rights and recognising the importance of international security, human rights and the rule of law”; and that while it doesn’t compel anything, it does “provide interpretative guidance for the implementation of the agreement.”[23]

But really, what good is interpretative guidance when there are no substantive provisions to interpret or apply? So, therefore, it’s meaningless.

We urge the Subcommittee to consider adoption of an opinion that includes recommendations on postponing any parliamentary vote until a rigorous, updated human rights impact assessment has been conducted and enforceable human rights clauses are included.

 

 


[1] “Progress towards ratification” is a non-commitment without timeframes.

[2] “Joint Appeal on the Inclusion of Enforceable Human Rights Clauses in the EU-China Comprehensive Agreement on Investment,” January 13, 2021, https://www.hrichina.org/en/press-work/joint-statements/joint-appeal-inclusion-enforceable-human-rights-clauses-eu-china.

[3] Pew Research Center, “Unfavorable Views of China Reach Historic Highs in Many Countries,“ October 6, 2020, https://www.pewresearch.org/global/2020/10/06/unfavorable-views-of-china-reach-historic-highs-in-many-countries/.

[4] The 2018 SIA identified key rights including: the right to a remedy and fair trial, freedom of expression and association, forced labor, and rights of indigenous people/local populations, and rule of law. Since the mass crackdown on over 300 rights defense mainland lawyers in 2015, the Chinese government has continued its attacks on this key pillar of a rule of law and silenced even moderate civil society voices seeking reform “.  See HRIC web page “Lawyers,” Human Rights in China, frequently updated, https://www.hrichina.org/en/topic/lawyers?page=6.

[5] Joint Statement on the Human Rights Situation in Xinjiang and the Recent Developments in Hong Kong, delivered by Germany on behalf of 39 Countries, October 6, 2020, https://new-york-un.diplo.de/un-en/news-corner/201006-heusgen-china/2402648.

[6] International Campaign for Tibet and Gyaltsen Dolker, Tibet in Chains: The Stories of Nine Tibetan Nuns, 2021, https://savetibet.org/imprisoned-tibetan-nuns-tell-their-own-stories-in-new-book/.

[7] Borrell also referenced immediate measures to support civil society stepping up coordination with like-minded partners and engage in outreach to relevant authorities. He indicated there was Council discussion of further steps in case of “further deterioration, such as aggressive “reform” of electoral process or erosion of the independence of the judiciary. “Foreign Affairs Council: Press remarks by High Representative/Vice-President Josep Borrell,” European Union External Action Service, February 22, 2021, https://eeas.europa.eu/headquarters/headquarters-homepage/93618/foreign-affairs-council-press-remarks-high-representativevice-president-josep-borrell_en?u.

[8] “Joint Communication To The European Parliament And The Council: Elements for a new EU strategy on China,” European Commission High Representative of the Union for Foreign Affairs and Security Policy, June 22, 2016,  https://eeas.europa.eu/archives/docs/china/docs/joint_communication_to_the_european_parliament_and_the_council_-_elements_for_a_new_eu_strategy_on_china.pdf.

[9] See European Court of Auditors, The EU’s response to China’s state-driven investment strategy, 2020, Annex VII-Actions resulting from the EU Strategy Towards China, p. 64. The assessment focused specifically on how the EU institutions developed the EU-China Strategy, aligned this strategy to respond to challenges, and implement, monitor, report on and evaluate the strategy.

[10] “WHO Team Member: China Has Not Handed Over Vital Info on COVID-19 Outbreak,” Voice of America, February 13, 2021, https://www.voanews.com/covid-19-pandemic/who-team-member-china-has-not-handed-over-vital-info-covid-19-outbreak.

[11] Cybersecurity Law of the People’s Republic of China, unofficial English translation by Rogier Creemers, Paul Triolo, and Graham Webster, https://www.newamerica.org/cybersecurity-initiative/digichina/blog/translation-cybersecurity-law-peoples-republic-china/. The CSL established a comprehensive online ecosystem of Internet regulatory control that includes: implementation mechanisms, stakeholder controls, content controls and restriction, and technology requirements.

[12] The Law of the People's Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region, 2020, EN: https://www.gld.gov.hk/egazette/pdf/20202448e/egn2020244872.pdf; CH: https://www.elegislation.gov.hk/hk/A406; “Too Soon to Concede the Future: The Implementation of The National Security Law for Hong Kong--An HRIC White Paper,” Human Rights in China, October 16, 2020, https://www.hrichina.org/en/press-work/press-release/too-soon-concede-future-implementation-national-security-law-hong-kong-hric.

[13] Fu Hualing, “China's National Security Law: The Danger of an All-Encompassing National Security Framework,” China Rights Forum, August 31, 2015, https://www.hrichina.org/en/china-rights-forum/chinas-national-security-law-danger-all-encompassing-national-security-framework. Fu warned that “[i]n a system lacking political participation, judicial independence, press freedom, and a civil society, a powerful national security institution could become the bulwarks of an autocratic system. And with this, national security could become a pretext for acts of state brutality.”

[14] “Fact Sheet: Communist Party Groups in Foreign Companies in China,” China Business Review, May 31, 2018, https://www.chinabusinessreview.com/fact-sheet-communist-party-groups-in-foreign-companies-in-china/.

[15] 中共中央办公厅印发《关于加强新时代民营经济统战工作的意见》("Opinions on Strengthening the United Front Work of Private Economy in the New Era" issued by the General Office of the CPC Central Committee)

The Central People's Government of the People's Republic of China, September 15, 2020. See also, “China’s Communists to Private Business: You Heed Us, We’ll Help You,” The New York Times, September 17, 2020, https://www.nytimes.com/2020/09/17/business/china-communist-private-business.html.

[16] “Constitution Of The Communist Party Of China: Revised and adopted at the 19th National Congress of the Communist Party of China on October 24, 2017,” undated, http://www.xinhuanet.com//english/download/Constitution_of_the_Communist_Party_of_China.pdf.

[17] It is not always clear that the term “private companies” incorporates foreign-invested enterprises, and there are ongoing discussions and different views and assessments articulated in the legal community and, in particular, among the foreign law firms that advise foreign companies. But China’s Company Law does say that party organizations should be permitted in foreign-invested enterprises, for example, joint ventures.

[18] The primary focus of the CS law is to strengthen and consolidate the party-state’s control over cyberspace under a comprehensive policy of securitization.  The CSL stresses the concept of “Internet sovereignty,” contains broad prohibitions against the dissemination of information that would disrupt social or economic order—up to and including the possibility of shutting down the Internet in the name of public order. The law also contains other concerning provisions impacting rights, including privacy and access to information, including real-name identification requirements for Internet users and domestic storage of personal information and other important data gathered or produced by critical information infrastructure operators.

[19] See e.g., “China: Minority Region Collects DNA from Millions,” Human Rights Watch, December 13, 2017, https://www.hrw.org/news/2017/12/13/china-minority-region-collects-dna-millions.

[20] Report of the Special Rapporteur on extreme poverty and human rights on his mission to China (A/HRC/35/26/Add. 2), March 28, 2017, https://www.refworld.org/docid/593a92504.html.

[21] EU-China Strategy (2016-2021). See e.g., “Joint Communication To The European Parliament And The Council: Elements for a new EU strategy on China,” European Commission High Representative of the Union for Foreign Affairs and Security Policy, June 22, 2016, https://eeas.europa.eu/archives/docs/china/docs/joint_communication_to_the_european_parliament_and_the_council_-_elements_for_a_new_eu_strategy_on_china.pdf.

[22] Paul Krugman, Arguing with Zombies: Economics, Politics, and the Fight for a better Future, W. W. Norton & Company, January 28, 2020.

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