* Ministers to discuss Commission trade investigation
* EU companies currently vulnerable to retaliation
* Brussels meeting coincides with China trade minister visit
By Sebastian Moffett and Robin Emmott
BRUSSELS, May 31 EU trade ministers meet on
Thursday to discuss possible action against Chinese companies
accused of trading unfairly, including asking the European
Commission to start an investigation into China's subsidies.
Many European companies would like protection from Chinese
imports sold onto the EU market at what they consider
artificially low prices. But they fear that, if they start their
own industry complaints, they will be vulnerable to retaliation
from the Chinese government, which could hamper their business
in an increasingly important market.
With domestic demand stagnating, many European countries are
increasingly dependent on exports for growth. Highlighting the
sensitive nature of trade relations with Beijing, EU Trade
Commissioner Karel De Gucht will receive China's Minister of
Commerce Chen Deming in Brussels just hours after the meeting of
EU trade ministers.
Diplomats said the idea of giving a strong political mandate
to the Commission for an investigation appeared to be gaining
"This is something that a lot of member states support,"
said an EU diplomat with close knowledge of the issue. "But it
hasn't been discussed widely so the meeting will give a real
sense of the appetite for this."
The European Commission, which handles trade issues for the
27-nation European Union, would like to take action against
China's top telecoms gear makers Huawei and ZTE Corp
, according to several EU diplomats. The EU executive
thinks they receive illegal state subsidies to undercut rivals
in Europe - an accusation the two companies deny.
Though the Commission has the authority to launch its own
investigation, diplomats and officials say political support
from member states would give the move more legitimacy at a time
of delicate relations with China.
"A political mandate would mean a great deal," said one EU
official who declined to be named.
De Gucht said in May that the Commission might in the future
launch cases on its own initiative, so that no foreign
government could blame a European company for launching a case.
He said the aim was to get round companies' fear of retaliation
in countries, such as China, that practice "state capitalism" -
close government control of privately-owned business.
EU trade with China is booming and bilateral commerce is
expected to reach a record high of 500 billion euros ($620
billion) this year. China is the EU's second biggest trading
partner after the United States. The bloc is China's biggest.
In the past year or two, the EU has been more active in
fighting what it sees as unfair trade practices, challenging
Chinese subsidies to makers of glossy paper and looking into
complaints over cheap credit to Chinese firms.
The case against Huawei and ZTE was raised at a meeting in
May of the EU trade policy committee, according to one EU
diplomat. The accusation is that their low prices hurt European
equipment suppliers such as Alcatel-Lucent and
Still, some trade analysts question the effectiveness of a
new role for the Commission. One problem is that in sectors with
just a few dominant players, it would be easy to guess what
companies might benefit from the Commission's action.
Moreover, a confrontational relationship with China might
hurt the long-term prospects of European companies in a
promising future market, while defence against Chinese companies
in Europe might not boost European businesses much.
"The problems that European companies are facing are not
problems of the European market," said Fredrik Erixon, director
of the European Centre for International Political Economy, a
Brussels-based think-tank. "The problems facing European firms
are predominantly inside China."
That is why an investigation is a tactic to be used
sparingly. Germany, which accounts for nearly half of EU exports
to China, has been reluctant to give the Commission a free hand
in using the tactic.
Analysts say that, with Huawei and ZTE, Germany has an
interest because a part-German firm, Nokia-Siemens,
"If the Commission does launch a case it would be expected
to provide evidence," said one EU diplomat. "People would want
to see that the political and strategic implications of this are
fully bottomed out."