China anger at EU telecoms demands

31/01/2013 12:00 - 464 Views

They claimed that Karel De Gucht, the trade commissioner, requested that EU suppliers be given a 30 per cent share of China’s telecoms market in return for dropping a highly contentious EU investigation into alleged subsidies to Chinese companies.

Chinese diplomats privately complained about the EU’s demands this week with at least one EU capital, expressing frustration at what they believed were unreasonable – and possibly illegal - demands, officials and diplomats said.

Mr Gucht also insisted that the Chinese companies, Huawei Technologies and ZTE Corp, raise the price of their exports by 29 per cent as part of the agreement, these people said.

The row is expected to come to a head on Friday when top Chinese meet Mr De Gucht in Brussels. “The Chinese clearly, as you can understand, are not going to go along with this,” said a European diplomat.

Mr De Gucht declined to comment on Beijing’s concerns. A senior EU official acknowledged that the commissioner had outlined his views with the Chinese in December, but suggested Beijing had either mistaken or misrepresented the exchange.

“The summary of the discussions put forward by the Chinese authorities is not accurate,” the senior official said, “but we are not commenting on the content because we are in a negotiating process.”

A spokesman for the Chinese mission to the EU in Brussels said: “We hope that through consultation and negotiation that we could reach an agreement settling this issue without going to a trade war.”

The case centres on Brussels’ contention that Beijing has funnelled illegal export subsidies to Huawei and ZTE – particularly in the form of export credits – in order to fuel their growth in foreign markets.

In May, the commission told member states at a closed-door meeting that it had gathered “solid evidence” that China had given illegal subsidies to the companies, allowing them to sell their equipment at prices below their European competitors. Since then, the two governments have been locked in a high-stakes showdown.

Mr De Gucht, who has sought to crack down on Chinese subsidies, has ratcheted up the tension by repeatedly threatening to open a formal probe, which could result in tariffs against the Chinese companies.

The EU is currently carrying out its biggest ever anti-dumping investigation into Chinese solar panel exports, and is expected to make a formal decision about whether to impose temporary duties by the end of May.

The telecoms equipment case is even more inflammatory because of the lucrative and strategic nature of the industry, which stands to benefit as nations upgrade to new systems thatcan support a new generation of phones and digital devices.

It is also unique in that it is not being pursued based a formal complaint from a company or industry but by the commission itself. Mr De Gucht has argued that such “ex officio” cases are necessary because European companies have become too fearful of retaliation by Beijing to follow the EU’s typical trade defence procedures.

Huawei and ZTE have repeatedly denied receiving improper subsidies.

January 29, 2013 8:01 pm

By Joshua Chaffin

Source: ft.com