EU Tells China to Slow Telecom-Gear Exports or Face Duty Threat

The European Union warned China of possible tariffs on mobile-telecommunications equipment unless the government in Beijing curbs exports, the latest EU salvo against Chinese threats to manufacturers in Europe.

The European Commission said it was prepared to probe possible Chinese subsidies to telecom-network makers such as Huawei Technologies Co. and ZTE Corp. (000063) and the possible sale of the equipment in the EU below cost, a practice known as dumping. The inquiries would cover EU imports of more than 1 billion euros ($1.3 billion) a year and determine whether these shipments unfairly harmed European producers such as Ericsson AB. (ERICB)

“This decision will not be activated for the time being to allow for negotiations toward an amicable solution with the Chinese authorities,” John Clancy, trade spokesman at the commission, the 27-nation EU’s executive arm in Brussels, told reporters today. “The clock is ticking.”

The threat of European tariffs against China’s telecom-network manufacturers highlights the EU’s growing concerns about Chinese dominance of markets in Europe and its readiness to make imports more expensive in a bid to aid domestic competitors. The EU is the biggest export market for China, which is the bloc’s second-largest trading partner, after the U.S.

While China already faces more EU anti-dumping duties than any other country, the bloc over the past three years has pursued a new front in the battle to protect European industry from Chinese rivals by scrutinizing alleged trade-distorting government aid to them.

Anti-Subsidy Duties

In May 2011, the EU imposed anti-subsidy duties against China for the first time by targeting imports of paper with levies as high as 12 percent. In March this year, the bloc applied such levies against China for the second time by taxing imports of some steel with tariffs of up to 44.7 percent. In two separate investigations, the EU is threatening to slap anti-subsidy duties on bicycles and solar panels from China.

Unlike the subsidy probes to date and standard dumping investigations, the inquiries into possible Chinese subsidies to mobile-telecom network makers and any dumping by them in Europe would stem not from a complaint by European producers but from the commission’s own initiative.

“This possibility is particularly important as it offers a shield when the risk of retaliation against European companies asking for trade-defense instruments is high,” the commission said in a statement.

EU subsidy and dumping probes start with an announcement in the bloc’s Official Journal and can last as long as 13 months and 15 months, respectively. After nine months, the commission can impose provisional duties. Within a maximum of 15 months, EU governments must decide whether to apply “definitive” five-year levies.

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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