Huawei, ZTE officially cited for European trade violations

European Union Trade Commissioner Karel De Gucht cited Huawei and ZTE for engaging in unfair trade practices, specifically naming the companies for the first time and saying that if negotiations with China fail to produce a resolution, the EU is ready to move against the telecom equipment vendors.

De Gucht told Reuters on Friday he is prepared to launch a formal investigation into the Chinese vendors' business practices, which have come under fire as they take market share from European infrastructure manufacturers. Earlier in the week he said that the European Commission was ready to "open an ex officio anti-dumping and an anti-subsidy investigation concerning imports of mobile telecommunications networks and their essential elements from China," but he did not name the companies at that time.

"Huawei and ZTE are dumping their products on the European market," De Gucht told Reuters.

Cheap capital for the Chinese vendors "creates a distorted playing field and that is what this is about," he said.

Huawei and ZTE, respectively the world's No. 2 and No. 5 telecom equipment makers, have consistently denied benefiting from illegal state support or breaking any trade 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," the company said in an email to Reuters.

Prior to coverage of De Gucht's latest remarks, Tao Jingwen, Huawei's top executive in Western Europe, indicated to the China Daily that Chinese telecom vendors are becoming the fall guys for the blunders of their Europe-based rivals. "Some European companies have blamed Chinese companies for their losses, but sometimes they were caused by their own laziness," said Tao.

Huawei began its European operation in 2002 and has some 7,000 employees in Europe, 70 percent of whom are local workers. Tao said the company expects to recruit another 4,000 local employees over the next two years and reduce its number of Chinese employees in the region.

Though the EU is hoping for positive results from further negotiations with China, De Gucht said three previous rounds have failed to produce a satisfactory outcome.

"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," he said.

The proposed EU inquiries would target annual imports of more $1.3 billion per a year, and Europe could ultimately impose tariffs on Chinese-made telecom equipment.

However, leading Europe-based vendors Ericsson (NASDAQ:ERIC), and Nokia Siemens Networks have reportedly urged restraint, fearing EU action at this point could fuel a telecom gear trade war right when they are hoping to score major contracts from China Mobile's TD-LTE equipment tender later this year.

Complicating matters, Ericsson, NSN and Huawei recently began working together to create interoperability among their OSS systems through their new OSSii initiative. The companies said the collaboration includes bilateral cross-licensing agreements and is open to other vendors that wish to join.

For more:
- see this Reuters article
- see this China Daily article

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