Stuck Between a Router and a Hard Place

Photographer: Simon Dawson/Bloomberg

Visitors pass through the entrance to the Ericsson AB pavilion at the 2013 Mobile World Congress in Barcelona, Spain. Close

Visitors pass through the entrance to the Ericsson AB pavilion at the 2013 Mobile World... Read More

Close
Open
Photographer: Simon Dawson/Bloomberg

Visitors pass through the entrance to the Ericsson AB pavilion at the 2013 Mobile World Congress in Barcelona, Spain.

Sometimes, to protect yourself you have to protect your enemies.

Such is the case with European networking companies. They've taken the unusual approach of shielding their Chinese rivals, which have been accused of price manipulation.

The European Union is threatening to slap tariffs on Chinese networking equipment amid allegations that companies such as Huawei Technologies and ZTE may be using subsidies from the Chinese government to sell gear in Europe below the cost of making it.

Since such price manipulation would hurt companies such as Ericsson AB and Nokia Siemens Networks, you'd think the move by the EU would thrill European companies that would benefit from higher prices on Chinese technologies.

Think again.

As my Bloomberg News colleagues Adam Ewing, Amy Thomson and Daniele Lepido reported, Ericsson and Nokia have come out strongly against the proposed tariffs and are now defending some of their bitterest rivals.

The reason? Fear of retaliation.

China, the most Internet-connected country on the planet, is currently evaluating bids for the rollout of high-speed fourth-generation mobile networks and Western companies want a piece of the action. If Europe cracks down on Chinese firms, China might well do the same, crimping sales for European firms. U.S. technology companies have expressed similar concerns about restrictions that would make it harder for government agencies to buy Chinese technologies.

The European Commission has not been shy about punishing Chinese firms for business practices it deems anticompetitive, as Jonathan Stearns reported from Brussels.

In 2011, the EC imposed fees on paper imported from China, and in March, it taxed some steel imports from China. Now, it's considering fees on bicycles and solar panels. The networking-equipment threat is unusual because it was apparently initiated without complaints from the European companies who would be most affected.

Huawei and ZTE deny any wrongdoing. ZTE spokesman Dai Shu called Europe's actions "kind of weird" since no specific rivals appear to have initiated the complaints.

Competitors have complained before publicly, though. Cisco Systems CEO John Chambers last year accused Huawei of failing to "play by the rules."

Whether the EC's latest actions are warranted or not, the response by the European companies shows just how important a market China is. If there are companies too big to fail, here's a country too big to tax.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.