EU ducks telecom trade war with China

Playing hardball with China is a difficult and potentially dangerous game. This vast socialist state, albeit with distinct overtones of rampant capitalism, has faced down the European Union following accusations that Beijing was providing export credits and other illegal subsidies to vendors Huawei and ZTE.

This hasty body swerve by the EU, which came hours before China's premier Wen Jiabao was due to attend a summit with European leaders, saw the EU Trade Commissioner, Karel De Gucht, state that stronger evidence was needed of China's misdeeds before it could proceed with the case, according to the Financial Times.

Now, keeping a politician to his word can be a slippery issue--after all, George Stephanopoulos once said of U.S. President Bill Clinton that "the president has kept all the promises he intended to keep."

That sort of applies to Commissioner De Gucht when a few months back he was reported to have told European officials that his department had collected together "very solid evidence" that Huawei and ZTE had benefited from illegal subsidies.

So could the Commissioner's sudden need for even more solid evidence be little more than a diplomatic nod to the Chinese political elite during their time in Brussels? Or could he have been spoken to by the EU heavy mob and warned that this "local difficulty" was not to sully the big picture?

A senior EU official has reacted strongly to any suggestion that this investigation has been sidetracked, telling Reuters: "EU Commissioner Karel De Gucht continues actively to gather evidence so as to be ready to launch a case as required."

However, the case seems to be lacking basic support from the European firms supposedly damaged by this Chinese dumping activity. Ericsson and Nokia Siemens Networks are thought to be hesitant about backing the allegations made against Huawei and ZTE, which seriously weakens the EU's position.

When the wider picture is viewed – most notably that the Chinese government is a significant purchaser of the debt of eurozone governments and is also actively investing in Europe, then Commissioner De Gucht might just be told to continue to investigate the issue until it's quietly forgotten about.

Also, any suggestion that the recent confirmation of Telefónica securing a €915.5 million credit line with two Chinese banks is in anyway connected with the curtailment of De Gucht's enquiries remains nothing more than idle and scurrilous gossip (probably).--Paul