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EU warns China it is ready to launch telecoms dispute

By Ethan Bilby

BRUSSELS (Reuters) - The European Commission warned China on Wednesday it was ready to launch an investigation into anti-competitive behavior by producers of mobile telecommunications equipment, opening a new front in a trade offensive against a key partner.

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.

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 27-member bloc totaled 290 billion euros ($376 billion) last year, with 144 billion euros going the other way.

The EU trade deficit in goods with China has dipped since a 2008 peak, but the European Union has increased the number and scale of trade-related investigations into alleged anti-competitive behavior by China and Chinese competitors.

The EU has 31 ongoing trade investigations, 18 of them involving China. The largest to date is that into 21 billion euros of imports from China of solar panels, cells and wafers, for which it is set to impose punitive duties.

The proposed telecoms investigation would mark a new twist in the EU's trade defense 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 defense instruments is high," the Commission said in a statement explaining its decision.

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 equipment manufacturer.

China exports network equipment, base stations and connections used by telecoms providers to transmit voice and data messages worth more than 1 billion euros a year to the European Union, giving them almost a 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.

No one was immediately available for comment at Ericsson, the global leader, with some 35 percent of the mobile equipment market.

($1 = 0.7705 euros)

(Reporting by Ethan Bilby, additional reporting by Robin Emmott in Brussels, Simon Johnson in Stockholm; writing by Philip Blenkinsop; editing by Luke Baker and Mike Collett-White)

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