- China imposed sanctions on 10 European Union politicians and four other entities in March.
- Beijing was retaliating for Western sanctions on Chinese officials accused of severe human rights abuses in Xinjiang.
- In response, the European Parliament last month paused the ratification of a new investment pact with China until Beijing lifted sanctions on the EU.
China made a "huge strategic blunder" when it retaliated against Europe by imposing sanctions on EU politicians, former top White House trade negotiator Clete Willems said.
Beijing's actions killed a major investment agreement between the European Union and China, and the deal is "off the table now," Willems told CNBC on Monday.
In March, China imposed sanctions on 10 European Union politicians and four other entities. They came as an immediate retaliation for sanctions the EU imposed on China for "arbitrary detentions" of members of an ethnic minority in China.
Xinjiang in northwestern China is home to a Muslim population known as the Uyghurs whom the United Nations and others have identified as a repressed ethnic group. Also in March, the United States, United Kingdom and Canada said China engages in "forced labour, mass detention in internment camps, forced sterilisations" and other abuses against Uyghurs.
China has repeatedly dismissed those claims as "lies and disinformation."
The European Parliament last month paused the ratification of a new investment pact with China until Beijing lifts sanctions on the EU.
"It does show that with China, it's overreaching and overreacting and not addressing legitimate issues like forced labor," Willems, a former deputy director of the National Economic Council, told CNBC's "Street Signs Asia." He is now a partner at law firm Akin Gump.
The EU-China Comprehensive Agreement on Investment had been in the works for seven years and was finally agreed by negotiators in December. It would have put EU companies on an equal footing in China and cement Beijing's status as a trusted trading partner. It would also have given each party's businesses greater access to the other's markets.
"The question that the U.S. always had with Europe though, is they are much more dependent on China as an export market — and so the question is how tough will they really be," Willems pointed out.
The EU parliament "demands that China lift the sanctions before dealing with [the investment accord]", it said in its resolution, which is not legally binding but is now the assembly's official position. "EU-China relations may not continue business as usual," the EU parliament said.
However, Willems said Europe needs to take a tougher stance on China.
"I think we've seen some positive signals, but I think the amount of pressure that the allies are (putting) on China to get them to change their practices … We've still a long way to go. And we need to see Europe continuing to be more muscular," he said.