EU and China closer to resolving telecom dispute - report

It has been reported the EU is close to reaching an agreement with China to end a dispute between the trade partners over alleged illegal government subsidies to Chinese telecoms manufacturers.

The rift began in March 2013 amid the EU trade commissioner’s accusations that Chinese vendors Huawei and ZTE have an unfair competitive edge in the European market due to significant state subsidies from China. The subsidies from Chinese state banks are deemed against international trading laws by Brussels.

According to a news report by Reuters, the row could be settled by the end of the month. The EU trade commissioner Karel De Gucht is apparently ready to drop its investigation into the issue if China makes concessions from its side. These concessions could reportedly include China limiting the export credits it hands out to Huawei and ZTE.

The imports of Chinese telecom equipment to Europe totals about €1 billion a year, and European vendors such as Ericsson, Nokia Networks and Alcatel-Lucent face serious competition from their Asian counterparts. Huawei’s market share in Europe has risen swiftly, from somewhere around 2-3% in 2006 to about a quarter in 2014.

Under the new settlement, both China and EU would also agree to monitor the markets, China European companies’ market share in China and vice versa in Europe. Further, they would collaborate on industry research and efforts to standardise the telecoms market.

Reaching a solution is very important to both parties. The EU is China’s most important trade partner, whereas only the US is more prominent partner for Europe. If no deal is reached, the EU is likely to consider imposing punitive levies on Chinese telecoms equipment imports. The Prime Minister of China, Li Keqiang is meeting EU officials in Milan next week, and it has been said Commissioner De Gucht wants to resolve the issue before he leaves office at the end of this month.

The EU and China, as well as the US and China have been eyeing each other up suspiciously for many years. Even if a solution is reached now, it probably won’t mean the end of these kinds of disputes. The problems stem from the very different business environments, geopolitical issues and a whole lot of clashing interests and regulatory matters.