The European Union (EU) trade commissioner is calling on EU member states to provide enough support for an investigation into claims that Chinese vendors Huawei and ZTE are receiving illegal state subsidies, enabling them to undercut their European rivals.
Commissioner Karel De Gucht has taken this unorthodox approach due to ongoing concerns about the Chinese vendors. Ordinarily, investigations result from corporate complaints, but many European vendors such as Ericsson and Alcatel-Lucent are afraid of losing potential business in the lucrative Chinese market if they speak out against their Chinese rivals.
However, De Gucht has been unwilling to abandon the issue. The European Commission, which is the executive arm of the EU, stated its belief in December 2012 that Huawei and ZTE were charging up to 35% below its recognised fair trading prices for network equipment.
This prompted De Gucht to demand that the Chinese vendors raise prices on exports by 29%, as well as suggesting that European vendors should be granted at least a 30% share of the Chinese telecom market. Although the request caused outrage in China, De Gucht warned that an investigation would ensue if the conditions were not met; since this has not happend, he will raise the issue with EU trade ministers this week in an attempt to raise support for an investigation.
The EU is also conscious of security issues associated with the increasing global prevalence of Chinese vendors; similar concerns have been voiced by the US and Australia. However, it is by no means certain that EU member states will support De Gucht’s proposed investigation, as Huawei in particular has poured substantial investment into countries such as the Netherlands and the UK. By 2017, Huawei is aiming to double its UK workforce to roughly 1500, having stated in 2012 that it would invest £1.24 billion ($2 billion) into its UK operation across this period.
The Chinese vendors have denied receiving any state subsidies, claiming that being able to produce equipment cheaply provides them with a pricing advantage.