The Chinese are not abiding by the terms of a 2014 pact with the European Union by failing to establish an independent commission to monitor telecommunications equipment markets, according to The Wall Street Journal, citing EU and industry officials.
The 2014 pact between China and the EU was supposed to be the remedy to accusations by Western officials that Beijing provided large subsidies to favored Chinese companies. EU officials cited the rapid rise of Chinese telecommunications company Huawei as evidence that Beijing favoritism was artificially pushing down prices, and making it harder for European companies like Ericsson and Nokia to compete.
The European Commission said that Huawei’s ability to control over 25 percent of Europe’s telecommunications market, which is up from 2.5 percent in 2006, could only have been achieved with state aid that is illegal by global trade rules. The agreement was that Brussels would drop any proposed import tariffs on equipment made by Chinese companies Huawei and ZTE, in exchange for a number of measures that Beijing agreed to impose to help European companies Ericsson and Nokia compete in China, while also containing the growth of foreign competition in the EU.
A major part of the agreement called for the creation of an independent commission to monitor telecommunications equipment markets to identify illegal activity and unfair trade practices, while also ensuring that Ericsson and Nokia had access to the Chinese market. According to The Wall Street Journal, two years after the pact was signed, the body has yet to be set up and China hasn’t provided funds for it.
An EU official told The Wall Street Journal that Beijing has rejected a demand by Brussels that panel members have no ties to the government, which could complicate efforts to reign in China’s ability to control market prices by subsidizing its own companies.
China denies accusations it’s “dumping” products on world markets, and claims providing superior products. Huawei says the quality of its equipment rivals or even exceeds that of European rivals. Kenneth Fredriksen, chief executive of Huawei’s Swedish subsidiary, told The Wall Street Journal that, “We’re not winning business on price anymore.”
While Chinese companies make inroads into the European market, EU company Ericsson’s market share for wireless-networking equipment in China fell to 6.9 percent last year from 26.5 percent in 2011, according to industry tracker IHS.
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