BRUSSELS--The European Union and China are closing in on a
settlement covering three major trade disputes that have strained
relations between the two economic powers, people familiar with the
discussions said.
The deal, which could be announced during a visit by Chinese
President Xi Jinping to Brussels at the end of March, would defuse
the danger of a high-stakes trade war between Europe and China that
could have ensnared telecommunications equipment, wine, solar
panels, polysilicon and possibly other goods, the people said.
The settlement would end the threat of punitive import tariffs
by the EU on mobile telecommunications gear exported by the Chinese
firms Huawei Technologies Co. and ZTE Corp. In return, China would
ensure access for European equipment suppliers to the vast Chinese
market. Beijing would also drop the threat of punitive tariffs on
European wine and polysilicon, these people said.
"We will try to get an agreement by the end of the month," EU
trade commissioner Karel De Gucht said last week.
The telecommunications equipment dispute has been a test case
for a campaign by Mr. De Gucht to get Beijing to rein in subsidies
that it allegedly gives to favored industries and open up China's
domestic market to European companies.
Last year, Mr. De Gucht threatened to start an investigation
into unfair trade practices by Huawei and ZTE without first
receiving a complaint from one of the European companies affected,
the first time the EU has ever taken such a step.
But he put the investigation on hold while Beijing and Brussels
negotiated. One of Mr. De Gucht's goals was to ensure that Europe's
telecommunications equipment manufacturers-- Ericsson,
Alcatel-Lucent SA and Nokia Corp.--together secured more than 30%
of China's equipment supply market, according to a person familiar
with the discussions.
China's state-owned mobile phone companies are in the midst of
rolling out high-speed wireless networks across the country,
offering contracts worth billions of dollars to equipment
suppliers. Last year, China Mobile, with over 700 million
subscribers, gave 33% of the first round of its network upgrade,
worth more than $3 billion, to the three European firms, with each
getting 11% of the total.
In December, China Telecom, gave a significant chunk of its
upgrade contracts to the European companies. China Unicom, the
third major Chinese mobile phone company, is also expected to roll
out a high-speed service this year.
The settlement that could be announced at the end of the month
would ensure that European firms continue to get a significant
piece of Chinese equipment-supply contracts, people familiar with
the discussions said. The European companies would also be allowed
to participate in Chinese standard-setting bodies and bid on
Chinese government research and development projects, one person
said.
Brussels would then drop the threat of investigations that could
have resulted in big tariffs on equipment coming into the 28-nation
EU market. That threat has been particularly worrying for Huawei,
which has become one of Europe's leading equipment suppliers.
Last summer, the EU proposed to place steep tariffs on
Chinese-made solar panels, after complaints from European
manufacturers that the Chinese were selling solar equipment in
Europe at unfairly low prices. The proposal threatened to spiral
into a broader trade war in one of the world's most important
economic relationships.
The Chinese government soon after started an investigation into
wine exported from France, a move that analysts viewed as
retaliation against the French government, which supported the
solar-panel tariffs. China also announced an investigation into
European polysilicon, a key raw material for making solar panels.
The German firm Wacker Chemie AG is the main European manufacturer
of polysilicon.
And reports surfaced that China's auto industry had asked the
government to start an investigation into luxury car imports from
Europe, a move that would hit Germany's powerful auto industry.
"We don't want to see us lose this status as the biggest trading
partners because of individual cases which only count for a very
small percentage in two way trade," said Chinese Premier Li Keqiang
at a news conference in Beijing on Thursday.
Though Europe and China announced a settlement on the solar
panels case over the summer, partly due to pressure from the German
government, Beijing still hasn't dropped the wine and polysilicon
investigations.
The wine probe could be dropped, in exchange for European
wineries providing training to Chinese winemakers, one person
familiar with the deal said.
A person familiar the discussions said the settlement could
include a commitment by Wacker and others to export polysilicon to
China above a certain price.
Write to Matthew Dalton at Matthew.Dalton@wsj.com
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