EU telecom threat fuels trade tensions

Mobile devices are displayed at a ZTE Corp sales counter in Wuhan, Hubei province. ZTE said it does not receive any illegal subsidies for doing business in the European Union, which is threatening to impose punitive tariffs on Chinese telecom equipment makers. AFP

Commerce ministry reacts to possible investigation into Chinese companies

A threat by the European Union to investigate claims that Chinese telecom companies have been unfairly paid subsidies is further inflaming trade tensions between the two sides, already at odds over various industries, most notably solar panels.

Shen Danyang, a spokesman for the Ministry of Commerce, warned the EU on Thursday against taking measures that would benefit neither side, responding to the EU's threat of imposing tariffs on Chinese telecom giants Huawei Technologies Co Ltd and ZTE Corp.

"The China-EU cooperation in the telecom sector is win-win.

"The Chinese market is always open, and EU enterprises retain a larger share of the Chinese market than Chinese companies do in the EU," Shen said.

China and the EU have been in close dialogue to resolve the telecom dispute since the second half of 2012.

A high-level EC delegation recently visited Beijing and promised to discuss possible resolutions proposed by China, according to Shen.

"If the EU resorts to a trade investigation with no right to reply, we really doubt its sincerity in resolving trade disputes through negotiations," Shen said.

"If the EU insists on launching the trade investigation, it will force China to resolutely defend its legal interests in accordance with World Trade Organization rules and Chinese laws, and the consequences would have to be shouldered by the trade dispute initiator."

The EU said on Wednesday that it plans to levy duties on the Chinese telecom-gear makers because it claims they receive government subsidies and sell their equipment in the EU below cost.

Huawei, the world's second-largest telecom equipment maker by revenue, said in a statement: "Huawei is disappointed that the European Commission has taken the unprecedented step of deciding in principle to open the first ever ex-officio dumping and subsidy investigations."

The company said it always plays fair and wins business and trust through innovative technology and quality service, rather than via pricing or subsidies.

Dai Shu, a spokesman for ZTE, said his company has yet to receive any official letter from the EU and insisted it receives no illegal subsidies to do business in the region.