The European Commission warned China on Wednesday (15 May) it was ready to launch an investigation into anti-competitive behaviour by producers of mobile telecommunications equipment, but stopped short of beginning proceedings.
EU Trade Commissioner Karel De Gucht said in a statement that he and fellow commissioners had agreed "in principle" to open an anti-dumping and anti-subsidy case, but would first seek to negotiate a solution with Chinese authorities.
"The clock is ticking. We have had an open-door policy for negotiations with our Chinese partners for approximately one year now and we hope that the Chinese authorities step forward and engage with us in a serious manner," De Gucht's spokesman told a news briefing.
Finger on the trigger
An EU source acknowledged that the announcement stopped short of action, but said: “We are putting our finger on the trigger, getting ready to fire, but leaving open the room for negotiation.”
De Gucht has to walk a delicate line as member states have mixed views about the benefits of pursuing an action.
EURACTIV understands that De Gucht met with German diplomats on Tuesday to discuss the issue. The largest EU member state has been tentative on proceeding with action against China, fearing the potential of retaliation on its export-dependent economy.
The European Union is China's most important trading partner, while for the EU, China is second only to the United States. Chinese exports of goods to the bloc were €290 billion last year, with €144 billion going the other way. The EU trade deficit in goods with China has dipped since a 2008 peak.
18 trade investigations
The EU has increased the its trade-related investigations.
Brussels has 31 ongoing trade investigations, 18 of them involving China. The largest involves imports of Chinese solar panels, cells and wafers valued at €21 billion. The EU is set to impose punitive duties in that case.
The proposed telecoms investigation would mark a new twist in the EU's trade defence against China because it would be launched by the European Commission itself and not in response to a complaint by industry.
Officials have indicated that, while European manufacturers such as Ericsson, Nokia Siemens Networks and Alcatel-Lucent have suffered as a result of cheap imports, they are not prepared to make a formal complaint for fear of reprisals.
The EU said that by launching a case on its own initiative – known as an ex-officio case – it would provide a degree of protection for EU companies.
"This possibility is particularly important as it offers a 'shield' when the risk of retaliation against European companies asking for trade defence instruments is high," the Commission said in a statement explaining its grievances.
Chinese telecoms operators will start awarding contracts for super-fast mobile networks this year, expected to give a big boost to Huawei, the world's number two producer, and ZTE, the world's fifth largest telecommunications equipment manufacturer.
New Chinese minister must negotiate
China exports network equipment, base stations and connections used by telecoms providers to transmit voice and data messages worth more than €1 billion a year to the European Union, giving them almost one-quarter of the market.
The investigation is not into end-user devices such as telephones and modems.
The Commission did not identify any of the Chinese producers or European manufacturers it believes are threatened.
A source dealing with trade issues in Brussels told EURACTIV that one of the challenges facing De Gucht was negotiating with Gao Hucheng, who became China's commerce minister in March.
“The kind of trade deal De Gucht needs can only be agreed at [Chinese] politburo level, which means Gao Hucheng is not in a position to deal at the appropriate level,” said the source, who asked not to be identified.