Report: EU risks trade war with China after demanding greater telecom share

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Demands made by a European Union official for a greater share of the Chinese telecoms infrastructure market could trigger a full-scale trade war, according to a report in the Financial Times.

Chinese diplomats have registered their annoyance at what they believe are unreasonable requirements that EU equipment suppliers be granted a 30 per cent share of the Chinese telecoms market, according to the report, which cited unnamed officials and diplomats.

The proposal, said the diplomats, was made by EU's trade commissioner, Karel De Gucht, and would in return see the EU quietly dropping a highly contentious investigation into alleged state subsidies to Chinese companies like Huawei and ZTE.

However, the situation has been soured further by De Gucht insisting that Huawei and ZTE increase the price of their exports by 29 per cent as part of the overall agreement, reports the FT.

This war-of-words could reach a new level later this week when senior Chinese officials meet De Gucht in Brussels. "The Chinese clearly, as you can understand, are not going to go along with this," an unnamed European diplomat told the FT.

While acknowledging that De Gucht had outlined his views with the Chinese in December, an EU official--in an effort to defuse the spat--has suggested that these remarks had either been mistaken or misrepresented in Beijing. "The summary of the discussions put forward by the Chinese authorities is not accurate," the senior official told the FT, "but we are not commenting on the content because we are in a negotiating process."

The dispute centres on "solid evidence" gathered by the EU that China was providing illegal subsidies to companies such as Huawei and ZTE that allowed them to sell their infrastructure technology at prices below their European rivals.

However, the EU's ambassador to China, Markus Ederer, moved to calm the growing frustration on both sides by stating that the EU is not looking for a trade war. He indicated that Europe will address China's exports and investments through World Trade Organisation rulings, and will ask for additional negotiations with the Chinese leadership, according to China.org.

"The trade involved in anti-dumping cases is less than 1 per cent of China's total export volume," Ederer told China.org. "We also treat Chinese export and investment under the rules of the WTO."

For more:
- see this FT article (sub. req.)
- see this China.org article

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