The European Union has officially cited Chinese telecom equipment manufacturing firms ZTE and Huawei for violating anti-subsidy and anti-dumping guidelines.
In aid of protecting what he referred to as a "strategic" component of Europe's economy, none other than European Union Trade Commissioner Karel De Gucht himself has announced that he is prepared to launch a formal investigation into the activities of Huawei and ZTE that could be determined to be anti-competitive.
"Huawei and ZTE are dumping their products on the European market," De Gucht said in an exclusive interview with Reuters that was published on Saturday, May 18.
Whereas the EU is the most significant trading partner of China's, China is in turn second in trading importance to the EU ... after the U.S.
De Gucht will soon be coordinating with businesses in the U.S., as he intends to negotiate a symbiotic Transatlantic free trade pact with the country. These negotiations will likely be kicked-off in July.
"An investigation now into sales practices of Chinese telecoms equipment companies would open up a new front in a multibillion-euro trade offensive against a critical partner," Reuters reports.
According to Reuters, Huawei –– the second largest telecom equipment manufacturing company in the world –– and ZTE –– the fifth largest company –– have created "a distorted playing field [via cheap capital] and that is what this is about," in De Gucht's view.
Huawei, not surprisingly, says it has not violated any rules.
"In Europe and in all markets, Huawei always plays fair and we win business and trust from our customers through our innovative technology and quality service, rather than via pricing or subsidies," Huawei proclaimed through an emailed statement to Reuters.
Reuters further reports that China Daily said that Huawei's Western Europe president Tao Jingwen has blamed the problem on the company's rivals who he says are heaping what he called their own failures on Huawei.
"Some European companies have blamed Chinese companies for their losses, but sometimes they were caused by their own laziness," Tao said previous to De Gucht's own remarks having been published.
Although ZTE could not be reached by Reuters, it did note that the company "has also in the past denied benefiting from illegal state support."
On Wednesday, May 15, De Gucht's office said that the formal investigation into Huawei and ZTE (which were not specifically named at that time) was ready but on hold in order to allow for further negotiations with China that would hopefully lead to a more amicable resolution.
"We have already had three rounds of negotiations on that, but without any satisfactory outcome," De Gucht said.
"I think it is better for the whole world economy and trade that these two big trading partners come to an amicable solution on what is in fact a very strategic and crucial sector. But you need two to tango and we have the necessary resolve to go for it if necessary."
China, in turn, retaliated with a response, threatening the EU on Thursday, May 16.
"I don't want to elaborate on what could be the sanctions... Everybody knows. The Chinese know our procedures as well as we do. They are very well aware of what is in our toolbox," De Gucht said.
"European telecom equipment makers have not made any complaints for fear of Chinese reprisals," Reuters says. "Therefore if the EU makes the case, it does so for the first time on its own initiative, known as ex-officio."
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