EU anti-dumping investigation provokes China retaliation fears

News that the EU is planning to launch a huge 'anti-dumping' trade case against China, alleging that Chinese mobile manufacturers benefit from illegal government subsidies, has provoked only anxious reticence and stony silence among European tech leaders.

On Friday the Financial Times reported that the EU was poised to launch one of its biggest ever trade cases, citing claims that the commission had painstakingly gathered evidence over months.

EU officials were told on Friday that there was ‘very solid evidence’ that Huawei and ZTE had been able to sell products below cost in the EU as a result of government subsidies, a strategy known as ‘dumping’.

It is thought that a case could be brought as early as next month, and might result in Chinese companies becoming subject to penalty charges when importing goods into the EU.

An email statement from Huawei, in reaction to media coverage, denied that the company benefited from illegal state subsidies. “Huawei also objects to the investigation that the European Commission is reportedly launching on the basis of these claims,” it said.

After the US, China is the EU’s largest trading partner, though the relationship is a tense one. In reaction to a report entitled 'China: Unbalanced Trade?', earlier this month, EC Trade Commissioner Karel De Guchtmany told the EU Parliament that "the list of issues we need to address with China grows longer".

""It is undeniable that many European companies are unwilling to come forward and make justified trade defence complaints due to fear of consequences for their business," he said.

However, the fear among EU analysts and industry leaders is that the Commission’s actions could provoke retaliation by the Chinese government.

Ulf Pehrsson, head of government and industry relations at Ericsson, the only European firm thus far to make any comment on the matter, in a clear attempt to distance his firm from the investigation, said that any case that could potentially lead to punitive import tariffs was the wrong way to proceed.

"Ericsson is a strong supporter of free trade and we don't believe in this type of unilateral measure," he said; adding that the EU faces the risk of initiating "a negative spiral" by targeting individual Chinese firms.

The case would be unique in that the Commission has never before initiated a case of its own volition, without first receiving a complaint from the industry. "The EU commission is acting on its own initiative here,” Pehrsson added. “Without having received a request for action from the industry."

It’s clear that Ericsson, with an eye on future lucrative contracts in fast-developing China, is uncomfortable with the direction the Commission has taken. Ericsson is supporting "global rules that apply for all industry players," Persson said, indicating the ongoing discussions between the U.S. and China regarding rules and guidelines for state supported export-credit financing.

"We would rather see the EU taking active steps to join these talks," Persson said.

Putting added pressure on an already strained trade relationship in the midst of Europe’s worst economic turbulence since WW2 might seem on the face of it to be a highly risky strategy. Is the EU simply poking a hornet’s nest, or do the Chinese, who are expected to do 500bn Euros of trade with Europe this year, have just as much to lose?

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31 May 2012, 7:46 a.m.

Hua Wei is a typical representative of the mass Chinese companies, staying with low price policy to defeat the competitors. In return is so labelled, by themselves. Actually Hua Wei should make it clear, if they like being so cheap. Or further, do they still have a kind of capability to win the market, not only killing the price?