The European Union has ended a long-running telecoms dispute with China, dropping a threat to levy punitive tariffs on Chinese telecoms exports.
Prompted by the meteoric rise of Chinese mobile telecommunications network equipment manufacturer Huawei in the European telecommunications market, the dispute was discussed during a Joint Committee meeting between the European Commission and the Chinese government.
“I am pleased that the EU and China have resolved the telecoms case,” said EU Trade Commissioner Karel De Gucht. “The EU pursues every opportunity to level out the playing field for our companies by engaging with our strategic partners including China. The concerns that have led us to launch the case last May can now be addressed in a systematic and regular dialogue between the two sides for the benefit of our industry.”
Europe feared its own telecommunications equipment providers such as Ericsson, Nokia Siemens Networks and Alcatel-Lucent, would suffer from the unmediated presence of Huawei, which is believed to have been heavily subsidised by the Chinese government.
Huawei’s market share in Europe grew from insignificant 2.5 per cent in 2006 to staggering 25 per cent in just eight years. According to an EU document cited by Reuters, such rise would unlikely have been achieved without state aid. Such state aid, however, is considered illegal by global trade rules.
Imports of Chinese telecoms equipment into the EU are worth about €1bn (£0.8bn).
The newly negotiated agreement will see an independent body tasked with monitoring of the Chinese and EU telecoms networks markets. European companies will be given access to the relevant Chinese standard setting body without discrimination, with the ultimate goal of companies bidding for publicly funded research and development projects.
Resolving the dispute marks the latest step in improving trade relations between EU and China which have been damaged by a series of rows including Chinese dumping of solar panels, steel and wine.
It is believed China, for which the EU is the largest trading partner, hopes to achieve a free-trade deal with the union. For EU, China is the second biggest business partner after the USA.
Huawei welcomed the EU's decision, saying in a statement it competed fairly in Europe. "We believe that an open competitive environment is ... a major benefit to consumers who gain access to more advanced and innovative services at competitive prices," the company said.
China exports network equipment, base stations and connections used by telecoms providers to transmit voice and data messages and Europe has become crucial to China after the United States and Australia effectively shut Huawei out of their markets over security concerns.
Shares in Ericsson and Alcatel-Lucent were down 0.8 per cent and 2.7 per cent respectively.
It is believed there had been a lot of pressure on De Gucht to reach an agreement as multiple industries including health care and water utilities in many EU countries, have become dependent on cheaper Chinese technology for their operations.
According to De Gucht, Beijing has agreed to discuss limiting export credits to Chinese companies, a step the EU hopes will bring state support for national champions in line with international rules.
Major economies abide by rules set down by the Paris-based Organisation for Economic Co-operation and Development that place limits on export credits. They include minimum interest rates and maximum repayment terms, as well as transparency about the credit process.
The anti-dumping and anti-subsidy investigation concerning Chinese mobile telecommunications equipment was launched in May 2013. On 27 March 2014, the Commission already repealed the part relating to the anti-dumping investigation, following today with anti-subsidy.