The timing of the EU's warning to China is a worry for Europe's vendors

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Like all highly competitive and innovative industries, the telecoms sector has had more than its fair share of battles and controversy. This week's escalation in the European Union's assault on Chinese vendors enters new territory still. The European Commission, intent on punishing what it believes to be anti-competitive activity in the form of illegal state subsidies for and dumping by China's equipment vendors, seems to be ignoring the very real fears held by Europe's own equipment vendors that they could be shut out of the lucrative Chinese market as part of retaliatory moves by China.

EU trade chief Karel De Gucht said in a statement this week that the European Commission has taken a decision in principle to "open an ex officio anti-dumping and an anti-subsidy investigation concerning imports of mobile telecommunications networks and their essential elements from China." The inquiries would cover EU imports of more than  €1 billion ($1.3 billion) a year and determine whether these shipments unfairly harmed European manufacturers.

The key term here is "ex officio," which means that the EC is acting on its own initiative and not on the basis of complaints from European companies. De Gucht also stressed that this approach gives some protection to companies, as it offers a "shield" when the risk of retaliation against European companies asking for trade defence instruments is high. Trade defence instruments, such as anti-dumping or anti-subsidy duties, are ways of protecting European production against international trade distortions. In other words, Chinese imports of telecoms equipment could be subject to tariffs that would make them more expensive in Europe.

In this instance, the very companies the EU is trying to protect are against such moves, and fear they could even suffer as a result. China is a huge telecoms market with three massive carriers, including the largest mobile operator in the world, China Mobile. What's more, China Mobile is on the brink of inviting tenders from vendors all over the world to help it roll out the next phase of its TD-LTE network. The deal is worth billions of dollars, and Europe's battle-scarred vendors are hoping to be able to be able to grab a fairly hefty slices, along with Huawei and ZTE. The timing could hardly be worse.

Indeed, both Ericsson and Nokia Siemens Networks have been vociferous in their opposition to the latest moves by the EU, and have called for the European Commission to back down from its position.

Ulf Pehrsson, head of government and industry relations at Ericsson, said the Swedish company does not believe in this type of unilateral measure. "Our policy is for open, free and unrestricted trade and global supply chains," he observed.

At the same time, Nokia Siemens Networks said it absolutely opposes any efforts to restrict free trade and erect trade barriers of any kind and has urged the European Commission to refrain from taking such steps. "We have made that position clear to the Commission both verbally and in writing," said Barry French, a spokesman at Nokia Siemens Networks.

Regulators have long been concerned about the impact on Europe of cheap imports from China, but pressing ahead in face of such huge resistance from its own companies--as well as member countries--seems to be an odd move. "It's kind of weird. There are no specific vendors who initiated these allegations," ZTE spokesman Dai Shu told Bloomberg.

No doubt the situation will evolve further in the coming weeks, and it is also possible that the situation will be resolved in an amicable way. No doubt Europe's vendors are hoping a solution will be reached before a trade war breaks out.--Anne