EU drops threat of telecoms tariffs

The European Union has ended a long-running telecoms row with China, the EU's trade chief said Monday, dropping a threat to levy punitive tariffs on Chinese telecoms exports and easing tensions between two of the world's top trading powers.

The deal struck between Brussels and Beijing sets out a framework for China to address EU concerns about subsidies to Huawei, China's No. 2 telecoms equipment maker, and its smaller rival ZTE.

In a statement, EU Trade Commissioner Karel De Gucht said: “The investigation into mobile telecommunications networks from China will not be pursued,” referring to last year's threat of duties against China's telecoms exports.

Europe is China's most important trading partner and for the EU's part, China comes second only to the United States.

But ties have 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 some 1 billion euros (US$1.3 billion) a year, bringing China into competition with European companies including Ericsson, the world's biggest mobile telecom equipment maker, Nokia Siemens Networks and Alcatel-Lucent.

Huawei welcomed the EU decision, saying in a statement that 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,” it said.

According to an EU document seen by reporters, the European Commission says the swift rise of Huawei in the European telecoms market — to a 25 percent market share from 2.5 percent in 2006 — could only have been achieved “with state aid” that global trade rules say is 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 concerns.

But De Gucht was also under pressure from EU countries to resolve the issue because European industries ranging from health care to water utilities are becoming reliant on cheaper Chinese wireless technology.

After more than a year of discussions, De Gucht and China's Minister of Commerce Gao Hucheng sealed the deal on Saturday, a day after Chinese Premier Li Keqiang met senior EU officials at a summit in Milan.

De Gucht said China had agreed to discuss limiting export credits to Chinese companies.

Major economies abide by rules set down by the Paris-based Organization for Economic Cooperation 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.

Both sides have also agreed to task an independent authority to monitor the market share of Chinese telecoms companies in Europe and European companies in China.

The EU and China will also cooperate on industrial research, agreeing to equal treatment of companies bidding for publicly funded research and development projects.