The EU on Monday agreed sanctions against four Chinese officials and one entity over their involvement in human rights abuses against the Muslim Uyghur minority. They were the first sanctions against China since the 1989 Tiananmen Square massacre.

China swiftly responded saying the EU’s decision was “based on nothing but lies and disinformation, disregards and distorts facts, grossly interferes in China's internal affairs, flagrantly breaches international law and basic norms governing international relations, and severely undermines China-EU relations.”

The tit-for-tat sanctions throw doubt on the future of an investment agreement between both sides reached as recently as December 2020 and which is yet to be ratified by the European Parliament, which was a target of the sanctions. Five MEPs and the subcommittee on human rights were included. The committee includes two Luxembourg members.

“Our voice counts,” said one of the two MEPs, Isabel Wiseler-Lima (CSV/EPP), saying that China’s reaction had shown the weight of the EU’s actions. However, she was cautious about the impact of the EU’s sanctions. “We won’t change the Chinese government. We have to be realistic.”

While admitting that she was sceptical of the investment agreement when it was first announced, she said it is “incredibly favourable towards the European Union.”

The EU and China in 2012 had agreed to start talks for the investment agreement that was eventually reached in December last year. Among other things, the agreement gives greater market access to EU investors, ensures fair treatment of EU companies as well as tackling technology transfer and intellectual property rules.

China also agreed on sustainable development provisions and the ratification of International Labour Organisation conventions against forced labour.

“If we refuse the agreement, we must be aware that we are losing influence,” said Wiseler-Lima, adding that these kinds of deals are a way for the EU to set international standards. “If we say we won’t work with China, we’ll get nowhere,” she said. “Even difficult relations are preferable to no relations at all.”

If the EU retreats, this could leave the floor open to China to redraw the international relations map, with a risk of eroding standards globally. “We mustn’t be intimidated,” the MEP said.

Wiseler-Lima, together with Charles Goerens (DP/Renew), is a member of the human rights subcommittee that was sanctioned by China. A third Luxembourg official was targeted as part of sanctions against the European Council’s political and security committee, which is composed of the member states’ ambassadors to Brussels.

Test of unity

Goerens said he makes a distinction between people named individually and those, like him, who are part of one of the entities sanctioned. “It’s an attack against the system,” he said, adding that the system would have to respond.

He called for the member states to give foreign policy chief Josep Borrell the power to speak in their name in response, and for the commission, parliament and council to step up. “It’s an interesting case for European foreign policy,” he said.

EU foreign policy has long been hampered by divisions between Brussels and national interests, as well as the unanimity principle. The sanctions by China could be a test of European unity, Goerens said, and also relations with the new US administration under president Joe Biden.

As long as the sanctions remain in place, however, he said he sees little room for the investment treaty to be added to the parliament’s agenda.

“We simply cannot accept the human rights abuses against the Uyghur population,” said Luxembourg MEP Marc Angel (LSAP/S&D). “It is for us important that the EU uses its tools and trade policy to improve human rights and the labour situation worldwide,” he said of the S&D group’s position.

“Europe needs to trade with China, but our values must come first,” he said, condemning the sanctions targeting EU citizens.

“It is crucial now to counter the commission’s narrative that this agreement will be a success and back on the agenda once the sanctions are dissolved,” said Tilly Metz (déi Gréng/Greens-EFA). “There are major issues concerning, for example, forced labour or collective bargaining that still need to be clarified.”

While China has committed to signing the ILO conventions, it has yet to actually do so.

“European companies must not continue to benefit from forced labour and must break off business relations with Chinese partners if they manufacture their products in forced labour camps,” Metz said.

The commission is preparing to present a first proposal on EU-wide due diligence standards for businesses, which would mean companies have to ensure human rights obligations are met along their supply chains.

“Member states in general but also Luxembourg should not tolerate China’s behaviour and not be intimidated,” Metz said. “Freedom of expression has long been restricted in China; this must not be exported to the EU.”

China Luxembourg ties

Foreign minister Jean Asselborn (LSAP) on 25 March invited China’s ambassador to Luxembourg, Yang Xiaorong, for talks to discuss the sanctions.

“The minister considers these measures, which directly target elected officials as well as individuals and organisations that have used their freedom of expression to denounce certain aspects of policies implemented in China that are contrary to human rights, to be highly regrettable,” an official statement said.

Asselborn “underscored the firm determination of the European Union and its Member States to defend human rights and to respond to serious human rights violations or abuses irrespective of where they are committed, including in Xinjiang,” the statement said further, adding that Luxembourg was willing to “continue the dialogue on human rights with the Chinese authorities.”

Luxembourg and China relations are close in several domains. The grand duchy was the second European country to officially endorse China’s Belt and Road Initiative in March 2019. It is also home to several Chinese banks and the largest global domicile of investment funds investing into mainland China.

Chinese investment company Legend Holdings holds a 90% stake in Banque Internationale à Luxembourg (BIL), while Henan Civil Aviation Development and Investment in 2014 completed the acquisition of a 35% stake in freight airline Cargolux. And Chinese investors in 2018 bought at 25.5% stake in utilities provider Encevo.

Luxembourg has signed a memorandum of understanding on space cooperation with China. Relations also extend into education, with the University of Luxembourg home to a Confucius Institute, a not-for-profit affiliated with China’s education ministry, aimed at promoting Chinese language and culture.