EU Poised for Anti-dumping Pobe of Chinese Firns

The European Commission may poised to strike against Chinese vendors and allegations that they receive illegal subsidies on the telecoms equipment they sell in Europe.

According to The Financial Times, the EC is preparing a major trade case accusing vendors like Huawei and ZTE of receiving state subsidies, illegal under international trade law, from their government. This practice then allows them to offer telecoms product below cost, disadvantaging European vendors like Ericsson, Alcatel-Lucent and Nokia Siemens, according to parties pushing for EC action.

Sources told the FT that the EC has been collecting evidence for months, and that it is in the process of finalizing a formal case which could be brought as early as June. If China was found guilty in the process, its vendors could punitive tariffs on their sales into the European Union. Although such a decision would take a long time to come, it could still hit suppliers at a critical phase in the telecoms buying cycle, particularly in terms of LTE and fiber roll-outs.

This case, if it is filed as expected, would be notable because it would be launched on the Commission's own initiative, rather than in response to a complaint by a vendor or trade body, as is more usual. Anti-dumping complaints against Chinese firms have been brought in the wireless space before, but have not resulted in action. Notably, in 2010, Belgian modem maker Option was engaged in an anti-dumping action against Huawei, but withdrew it when it formed a joint venture with the Chinese firm instead. However, early last year that baton was taken up by Germany's 4G Systems, a petition which may feed into the expected wider case.

No major wireless player has filed its own complaint, something the FT report attributes to possible fears of economic retaliation by China, one of the world's largest markets for wireless gear. This may prompt the EC's unilateral action. The Commission has been increasingly active in other sectors against Chinese government support for its businesses. In February, it filed a trade case over Chinese subsidies for steel manufacturers, and this month raised the duties on imports of glossy paper from the country. The EC has also joined with the US and Japan to file a formal World Trade Organization complaint regarding Chinese practices in rare earths.

Earlier this month, EU trade commissioner Karel De Gucht said the EU was planning new actions to counter subsidies and dumping by trading partners, such as China - the EU's second biggest trading partner after the US. De Gucht has in the past complained that China subsidizes "nearly everything".