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EU trade chief seeks backing to investigate China's Huawei, ZTE: diplomats

By Ethan Bilby

BRUSSELS (Reuters) - The European Union's trade chief will seek the backing of EU states to investigate Chinese telecoms equipment makers Huawei and ZTE, even without a complaint from European manufacturers, EU diplomats said on Tuesday.

The European Commission, the EU's executive body, has been collecting evidence to prepare a possible case against Huawei and ZTE over state subsidies it says allows the companies to undercut European firms.

EU trade investigations normally begin with a company complaint, but European manufacturers Ericsson, Alcatel-Lucent and Nokia Siemens Networks have refused to cooperate with the Commission because of fears that they could be shut out of the growing Chinese telecoms market in retaliation, people familiar with the matter say.

That leaves EU Trade Commissioner Karel De Gucht with the choice of letting the matter drop, or of pursuing an investigation at the Commission's own initiative.

De Gucht, who supports taking a tough stance with China on trade issues, will take the unusual step sounding out EU trade ministers on the issue at a meeting in Dublin this week, the diplomats said.

An internal EU report last year recommended that the EU should take action against Chinese telecoms equipment makers as their increasing dominance of mobile networks made them a threat to security as well as to homegrown companies.

EU countries are divided in their approach to Huawei, with Britain and the Netherlands embracing the Chinese firm as a major job provider, while others are more wary of Chinese inroads into the sensitive sector, which is the backbone for wireless devices used by consumers, offices, and even utilities.

De Gucht told Reuters in February there were "serious security concerns" involving mobile telecoms networks. He noted that the United States and Australia had effectively shut Huawei out of their markets.

EU member states are also concerned about national security issues. Last year, Germany excluded Huawei from supplying the infrastructure for a national academic research network.

Huawei denies receiving unfair subsidies and maintains that its advantages are due to low-cost manufacturing and innovation. It says it complies with international laws and maintains that its products are secure.

(Reporting by Ethan Bilby; Editing by David Brunnstrom)

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