Optical fiber war generates risk of crisis with China – 06/25/2023 – Panel SA

Three national manufacturers of optical fibers —Cablena, Prysmian and Furukawa— have denounced to the Brazilian government abuses of China’s policy of encouraging exports of the input to Brazil, which reinforces suspicions of dumping.

According to them, this occurred at least between July 2021 and June 2022 and occurred thanks to subsidies and financing in China, which led to a drop in imported prices to levels below those practiced internally —the so-called dumping.

Last week, the Midc (Ministry of Development, Industry and Commerce) instituted a preliminary procedure to verify the existence of subsidies from China in optical fibers. The process takes a minimum of six months.

In the document, the Department of Trade Defense (Decom) says that these alleged benefits generate distortion in the economy in the long term, requiring compensatory actions from local manufacturers.

This is already the second procedure opened by the Brazilian government in less than two weeks against China in optical fiber imports.

In mid-May, a generic investigation was opened into the allegation of dumping in optical fiber from China. This time, the procedure refers specifically to the subsidy policy, which is directly related to dumping, but will be dealt with separately.

If the practice of dumping is proven, there will be sanctions. However, they will not occur twice.

Market economy

Representatives from China and Brazil had a conversation via videoconference at the end of May.

The Chinese asked that the investigation not be opened, stating that, despite being state-owned, their companies follow free market rules and, therefore, can grant discounts or incentives to close deals – lower interest rates, for example.

Chinese diplomacy maintains that the Mdic’s investigation, if conducted in this way, will come to discuss China’s global status — until today not recognized as a free market country.

China opposes “the identification of state-owned enterprises and commercial banks as public bodies,” he told Mdic. Commercial banks, he argued, are companies that provide “financial services based on market conditions.”

A good part of private Chinese companies raises doubts in the private market, which, behind the scenes, considers them to be controlled by the Beijing government.

The Mdic replied that this was not the accusation made by the Brazilian companies, nor by Decom.

However, it replied that the Chinese government did not present elements that would definitively rule out the evidence to the contrary presented in the petition.

stimulus plan

Representatives from Brazil said they are only investigating the volume of subsidies granted by companies and banks within stimulus programs launched by China to develop its telecommunications industry. They claim that, for the case, it is irrelevant whether they are public or private.

According to the Mdic, Chinese fiber companies, such as ZTT and Fiberhome, registered the receipt of government subsidies.

One of them is the electricity tariff for the production of optical fibers in China. Its production is energy-intensive.

In addition, state-owned banks would have provided lower-interest loans, bond issues, and other avenues of financing.

In a counter-attack, China claims that the Brazilian production capacity of fiber optic cables would not reach 50% of the Brazilian market.

Under international rules, to make a claim of this size, the claimants must have a share of more than half of the market.

In the document, the Chinese government states that Prysmian would account for 30% of Brazilian production capacity, evidence that the Brazilian industry would be “highly dependent on imports”.

In addition, it contests the concept of “domestic industry” by stating that claimants Furukawa and Prysmian have branches in China. Therefore, they would be involved in the same investigation.

Regarding the incentive programs, he stated that they are only “guidelines and not mandatory”.

Finally, he added that the total number of users of telecommunications networks corresponded to 29.3 million in 2018, and jumped to 45.7 million in 2022, maintaining the pace of growth.

“The imposition of anti-dumping duties and compensatory measures would affect the well-being of the Brazilian population, mainly in less developed areas”, says China.

With Diego Felix