As Reuters reported on October 8, the deal struck between Brussels and Beijing sets out a framework for China to address EU fears about subsidies to Huawei, China’s number two telecoms equipment maker, and its smaller rival ZTE.
Resolving the dispute marks the latest step in improving trade relations that were helped by a visit of China’s president Xi Jinping to Brussels in March, that Beijing hopes will eventually pave the way for a free-trade deal between the two.
“The EU and China have resolved the telecoms case,” the EU’s trade commissioner Karel De Gucht said in a statement.
“The investigation into mobile telecommunications networks from China will not be pursued,” De Gucht said of the formal threat of duties against China’s telecoms exports that he launched on May 15, 2013.
Europe is China’s most important trading partner and for the EU, China is second only to the US. But ties had been damaged by rows over goods ranging from steel and wine to solar panels as China seeks to make the kind of sophisticated products that compete directly with Europe.
Imports of Chinese telecoms equipment into the EU are worth € 1bn a year, bringing China into competition with European firms including Ericsson, the world’s biggest mobile telecom equipment maker, Nokia Siemens Networks and Alcatel-Lucent.
Huawei welcomed the EU’s decision, saying 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.
Shares in Ericsson and Alcatel-Lucent were down 0.8% and 2.7% respectively.
According to an EU document seen by Reuters, the European Commission says the swift rise of manufacturer Huawei in the European telecoms equipment market — to a 25% market share from 2.5% in 2006 — could only have been achieved with state aid that global trade rules say are illegal.
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 US and Australia effectively shut Huawei out of their markets over security fears.
But De Gucht was also under pressure from EU countries to resolve the issue because European industries ranging from healthcare to water utilities are becoming reliant on cheaper Chinese wireless technology.