Report: EU's planned probe into Huawei, ZTE has weak support

The purported plan by the European Commission to launch an investigation into Chinese vendors Huawei and ZTE has run into resistance from European Union member countries over fears that European equipment manufacturers would be shut out of the strong growth market of China in retaliation, Reuters reported.

It was reported earlier this week that the EU's trade commissioner, Karel De Gucht, is seeking the backing of EU states to investigate the two Chinese network equipment over concerns that they were receiving state subsidies that enabled them to undercut rivals, as well as security concerns related to the two companies.

However, Reuters cited unnamed trade sources as saying that they fear European vendors Alcatel-Lucent, Ericsson and Nokia Siemens Networks would be shut out of China in response, which would also explain why the EC has not received a complaint from the companies.

Swedish Trade Minister Ewa Bjorling told Reuters that a majority of her counterparts indicated that they did not support the launch of an investigation. "Not all member states spoke out, but of those that spoke, a majority was for our position," she said.

Reuters quoted an unnamed trade diplomat as saying that only four member states out of the 27 spoke in favour of an investigation, and did not include Germany, the EU's biggest economy.

This is not the first time the EC has raised the possibility of launching an investigation into Chinese vendors, amid hesitancy by European companies and EU member states. While it's clear that the issue remains an ongoing concern for some EU diplomats, support from the EU states will be required to impose punitive duties for subsidies or dumping.

Meanwhile Huawei, which along with ZTE denies it has received unfair subsidies, is continuing to expand its operations in Europe and, unlike its rivals, recruit new staff. Bloomberg reported that the company said it will hire 5,500 people in Europe in the next four to five years, bringing its workforce in the region to 13,000.

Bloomberg noted that rival manufacturers are going in the opposite direction and slashing their workforces. For example, Alcatel-Lucent said it would cut 5,500 jobs, and Ericsson, the world's largest maker of mobile networks, announced it would eliminate 1,550 positions in Sweden. Nokia Siemens also announced plans in late 2011 to slash as many as 17,000 jobs in an effort to reorient the company toward mobile broadband.

For more:
- see this Reuters article
- see this Bloomberg article

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