Trump Administration Reaches Agreement with China to Keep ZTE Alive

In this May 8, 2018, photo, a woman pass by a ZTE building in Beijing, China. President Donald Trump's weekend social media musings about China injected new uncertainty into the Washington's punishment of Chinese tech giant ZTE and planned trade talks between the two countries. (AP Photo/Ng Han Guan)
AP/Ng Han Guan

The Trump administration has agreed with China on a broad outline of a plan to save Chinese telecom giant ZTE, according to a Wall Street Journal report.

The plan would lift the ban on U.S. companies selling hardware and software to ZTE, a penalty imposed after the U.S. government found ZTE had not lived up to commitments it made after an earlier finding that the company had violated U.S. sanctions against Iran and North Korea. That ban had crippled the company and forced it to shut down operations.

Instead of the ban, the U.S. would require ZTE to make big changes in its management, board seats, and possibly pay significant fines, the Wall Street Journal reported. The WSJ cited “people with knowledge of the matter in both countries.”

In keeping with President Donald Trump’s approach to ongoing negotiations, the Wall Street Journal’s sources warned that “discussions are continuing and the agreement could still fall apart.”

China has also offered to lift tariffs on billions of dollars of U.S. farm products. The White House, however, insists that this is not a quid pro quo for lifting the ZTE penalty, as the the penalty is a law enforcement matter.

“The White House was meticulous in affirming that the case is a law enforcement matter and not a bargaining chip in negotiations,” a person in the White House told the Wall Street Journal.

Chinese president XI Jingping made a personal appeal to Donald Trump to lift the penalty, which threatened to force the company into bankruptcy within weeks. The Chinese trade negotiators made this a top priority both when U.S. officials visited China a few weeks ago and during meeetings in Washington, D.C. last week.

Treasury Secretary Steven Mnuchin told CNBC that there was nothing untoward about Xi’s appeal to President Trump, saying that it ‘not a surprise President Xi asked President Trump to look into ZTE.’

“That’s no different than the president calling up world leaders on behalf of American companies all of the time,” Mnuchin said.

A U.S. official told Breitbart News that U.S. officials had not anticipated that the penalty, which banned sales to ZTE for seven years, would be as disabling as they turned out to be.

“They did not realize this was a death sentence for ZTE when the sanctions were imposed,” this official said.

Secretary Mnuchin told CNBC that “the intent was not to put the company out of business.”

ZTE is China’s second largest telecom company and supplies equipment to many of the world’s largest telecom operators. It employs some seventy thousand people worldwide.  It is the fourth-largest supplier of mobile phones in the U.S., buying a significant amount of its components from U.S. companies.

President Trump has cited the sales by U.S. companies in defending his decision to relax the penalty.

Chinese Foreign Minister Wang Yi is due in Washington this week and will continue talks on ZTE, said officials involved in his trip. Commerce Secretary Wilbur Ross, who oversees the ZTE case, is scheduled to go to Beijing next week.

The agreement on ZTE follows the announcement over the weekend that the U.S. and China have agreed to a temporary “truce” in the brewing trade war between the two nations after China agreed to a framework that would open its markets to more U.S. products and provide protection for the intellectual property of U.S. companies.

 

.