Trade Probe into China Telecoms May Be Imminent, EU Commission Warns

23 May 2013

The European Commission could soon find itself on a trade collision course with China regarding imports of mobile telecommunications networks and their essential elements, having announced last week that it is ready to open an investigation into alleged dumping and unfair subsidies should bilateral negotiations on the subject fail.

The Commission has said that it has been gathering evidence for the past year in advance of a possible probe. However, it will hold off on launching the anti-dumping and anti-subsidy investigation for the time being, EU Trade Commissioner Karel De Gucht explained in a statement last week, in order to "allow for negotiations towards an amicable solution with the Chinese authorities."

In an interview with Reuters on Friday, the EU trade chief specifically cited telecoms equipment makers Huawei and ZTE Corp - two of the world's largest producers in this field - as being among those that are allegedly dumping their products on the EU market. Europe accounts for 15 percent of the former's overseas business, according to Chinese statistics.

The probe, if launched, would deal with the hardware used in telecommunications networks across Europe, such as base stations, for instance. It would not deal with mobile phones, antennas, or other smaller products. Chinese exports of these telecommunications products to the EU are valued at just over €1 billion a year, according to European Commission estimates.

EU, China trade tensions on the rise

The news has ramped up tensions between the two trading partners, who are already in the midst of a heated row over the Commission's plan to impose anti-dumping duties on solar panel imports from China. (For more on the solar case, see related story, this issue) However, EU officials have been quick to quell any suggestions that Brussels and Beijing might be involved in a "trade war," noting that the solar and telecoms probes are separate processes.

Chinese officials, for their part, have cautioned that the proposed telecoms investigation could have serious effects on bilateral trade ties if the Commission indeed decides to move forward.

The Asian economic powerhouse "does not want to go into a trade war with the European Union," Commerce Ministry spokesman Shen Danyang told reporters last week, in comments reported by Agence France Presse. However, "any consequences caused must be borne by the party who provoked the friction."

No timeline for investigation launch, but clock is "ticking"

EU officials have not outlined what would be the deadline for launching an investigation, or if such a deadline is in place. De Gucht has said that he will revert back to the College of Commissioners "in due course," without specifying further details.

"The clock is ticking," EU Trade Spokesman John Clancy told reporters last week in response to questions regarding timeline. "We have had an open-door policy for negotiations with our Chinese partners for approximately one year, and we look forward, at this stage, that the Chinese authorities step forward and engage with us in terms of these specific negotiations in a serious manner, because this is currently a very serious situation that we are looking at."

"We are looking for an amicable solution" from the negotiations, Clancy said, without providing specific details of what such a solution might look like.

Ex-officio case

The investigation, if launched, would be under the European Commission's own initiative - a rare move, but one that allows for such a probe to occur without requiring an industry complaint to be filed first. This is only done in "exceptional cases," according to the Commission.

"The reason we have that [ex-officio] system available to us within the WTO framework is to provide [a] shield" for EU producers that could be at risk of retaliation for filing their own complaint, Clancy explained.

The Commission proposed changes to its trade defence rulebook last month that would, among other modifications, allow for ex-officio investigations in cases of likely retaliation that could target economic interests that the EU has in the exporting country.  (See Bridges Weekly, 18 April 2013) In its communication to the European Council and Parliament, the Commission cautioned that these threats "are indeed increasing."

The standards for the evidence required to launch an ex-officio case under these guidelines "has to be of the same standard as that for the initiation of an investigation following an application by the EU industry," the Commission said in its draft legislative proposal, among other guidelines. The legislative proposal must be approved by the Council and Parliament.

ICTSD reporting; "Exclusive: EU cites Chinese telecoms Huawei and ZTE for trade violations," REUTERS, 18 May 2013; "EU escalating telecom dispute to harm trade ties," XINHUA, 21 May 2013.

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