EU braces for China telecoms trade fight

The European Union said Wednesday that it had enough evidence to begin an investigation into Chinese telecoms network suppliers over unfair subsidies and dumping products below market prices.

 The EU’s top trade official said he hoped China would be willing to negotiate to prevent the formal opening of a case, which could lead to punitive import duties being imposed.

“This decision will not be activated for the time being to allow for negotiations towards an amicable solution with the Chinese authorities,” EU trade commissioner Karel de Gucht said in a statement.

China exports telecoms network equipment worth about one billion euros each year to the EU. De Gucht did not mention any companies by name, but big Chinese players in the European market include Huawei and ZTE (ZTCOF).

Huawei said in a statement that it was “disappointed” by the EU warning.

“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.

EU action against unfair trade practices usually begins with an official complaint by one or more companies active in the industry. But in this case, the European Commission is opting to pursue action without referencing companies such as Ericsson (ERIC)or Alcatel Lucent (ALALF) to protect them against potential retaliation.

“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.

Related: Huawei won’t hang up on U.S. smartphone market

Much is at stake if trade relations deteriorate between the world’s second-biggest economy and Europe, which is looking to exports to help end a prolonged recession.

China is the EU’s second biggest trading partner behind the United States, and the EU is China’s biggest market. Trade in goods and services between the two totaled nearly 480 billion euros last year.

The biggest outstanding trade dispute concerns Chinese exports of solar panels, cells and wafers worth 21 billion euros per year. The EU launched an anti-dumping case last September after more than 20 local producers filed a formal complaint.

Related: Major Chinese solar company goes bankrupt

The European Commission will impose provisional duties on those imports at an average rate of 47% as early as next month, according to recent reports. A commission spokesman could not be reached for comment.

The U.S. Commerce Department imposed tariffs on Chinese-made solar panels last year after it found manufacturers were dumping their products on the American market.

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Provisional EU levies due June 6th

The EU is close to levying tariffs ranging from 37.3% to 67.9% on Chinese solar imports. After the US tariffs were imposed, Europe became the leading market for Chinese exports, and the EU threat may be a tipping point. Chong Quan, deputy international trade representative with the Chinese Minister of Commerce was quoted in China Daily saying that “If the EU insists on imposing duty orders on Chinese exports and severely hurts the interest of Chinese manufacturers, the Chinese government will not stand by. We have no choice but take any measure to protect the lawful rights of Chinese businesses.”

Provisional levies are expected to come into force in all EU countries by 6 June. However, there is a chance that a solution may be negotiated with the Chinese government, which may result in avoiding levies for up to five years.

China April 2013 Trade Figures better than expected

China’s trade growth accelerated in April, beating analyst expectations, a positive sign for the country’s fragile economic recovery.

Exports surged by 14.7% compared with a year earlier. That is up from 10% in March. Imports also rose by 16.8% up from 14.1%.

The data meant a trade surplus for China, reversing a surprise deficit in March.

However, some analysts raised questions about the accuracy of the data.

“I have no strong conviction whether the data reflect reality,” said Zhiwei Zhang, chief China economist at Nomura in Hong Kong.

China had a bigger-than-expected trade surplus in April of $18.2bn, after a surprise deficit of $884m in March.

U.S. presses China to stop growing trade secret theft

The U.S. Trade Representative’s office criticized China on Wednesday for failing to stop the growing theft of American trade secrets that are the lifeblood of U.S. economic might, in the latest sign of Washington’s frustration.

“Not only are repeated thefts occurring inside China, but also outside of China for the benefit of Chinese entities,” USTR said in its annual report on countries with the worst records of protecting U.S. intellectual property rights.

“The United States strongly urges the Chinese Government take serious steps to put an end to these activities and to deter further activity by rigorously investigating and prosecuting thefts of trade secrets by both cyber and conventional means,” the report said.

On Thursday, China’s Foreign Ministry restated its earlier dismissals of allegations that it was engaged in such theft and of cyber attacks.

“This is an old question, not a new one,” ministry spokeswoman Hua Chunying told a daily briefing in Beijing.

“Groundless accusations will not be helpful to resolve these issues, so parties concerned should make fewer accusations, sit down in a constructive spirit with all relevant parties to talk about these issues.”

U.S. corporate victims of trade-secret theft have included General Motors, Ford, DuPont, Dow Chemical, Motorola, Boeing and Cargill as well as lesser-known companies.

17 CASES OF CHINESE COMPANIES

While U.S. officials insisted the strategy was not aimed at any particular country, a White House report lists 17 cases of trade-secret theft by Chinese companies or individuals since 2010, far more than any other country.

Two senior Democrats recently urged USTR to use the annual intellectual property rights report to designate China as a “priority foreign country” because of trade secret theft.

That would initiate a process that could lead to sanctions on Chinese goods if U.S. concerns were not addressed.

The U.S. trade office stopped short of that action. But a senior U.S. trade official, speaking on condition he not be identified, said that remained an option, as did the possibility of bringing a case at the World Trade Organization.

“We remain resolved to use all the appropriate trade policy tools now and in the future to contribute to the administration-wide response to that problem,” the official said.

The USTR on Wednesday pinned the designation of “foreign priority country” on Ukraine, the sole country to be branded in this way, on grounds that it failed to protect U.S. copyrights.

The USTR report, meanwhile, accused the Chinese government of failing to take the issue seriously.

“Conditions are likely to deteriorate as long as those committing the thefts and those benefiting continue to operate with relative impunity, frequently entering into unfair competitive relationships with their victims.

“Too often, Chinese authorities view trade secrets cases as routine commercial disputes, rather than as serious violations of law,” the report said.