EU and China locked in stand-off on telecoms

  

EU trade officials are to meet their Chinese counterparts in Brussels tomorrow (1 February) in an attempt to resolve a trade spat after China rebuffed attempts by the European Commission to barter legal threats in return for access to the Chinese market.

The Commission declined to comment on a report by the Financial Times (30 January) indicating that Trade Comissioner Karel De Gucht asked for Chinese telecoms suppliers to lift prices and called for EU suppliers be given a 30% share of China’s telecoms market in return for dropping an EU investigation.

The Commission is investigating alleged subsidies to Huawei and ZTE – emanating from export credits given by Chinese banks – which the EU executive believes offer the Chinese companies preferential terms for investing into foreign markets.

De Gucht has threatened to open a formal investigation, carrying an implicit threat to slap tariffs on the Chinese companies. The case is unusual because no European company has initiated a complaint against either company, which is the usual origin of such probes.

“We hope that the consultation will help the two sides to solve the issue,” said Wang Xining, a counselor in China’s EU mission.

Huawei and ZTE have repeatedly denied receiving improper subsidies, and have offered to discuss the case directly with the Commission, claiming that the EU desire to deal with private corporate issues in trade talks indicates that the case is being used as a negotiating lever.

Chinese government sources also were displeased. “Only when the two sides respect market rules and the operation of the markets will there be a deal, otherwise all attempts will come to nothing,” said a diplomatic source.

EU trade spokesman John Clancy said: "At the request of the Chinese authorities, the European Commission [DG Trade] has been holding exploratory talks in good faith with their Chinese counterparts for more than 6 months already in a bid to find a solution.

"As is normal diplomatic practice, we do not comment on the content of such discussions until a formal conclusion of such talks is reached – which is not the case for the time-being."

Timeline: 
  • 1 Feb.: EU trade negotiators will meet in Brussels with Chinese counterparts
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