Senators on both sides of the aisle are urging President Donald Trump not to go easy on Chinese telecom company ZTE after friendly tweets over the past few days suggested he’s willing to lift sanctions on the firm.
A group of 32 Senate Democrats urged Trump Tuesday to maintain a seven-year ban on ZTE’s purchase of American-made components critical to the company’s production – a penalty put in place after the company sold products to Iran and North Korea and then failed to penalize officials as it had told the U.S. it would.
“America’s national security must not be used as a bargaining chip in trade negotiations,” the senators wrote in a letter.
But in a series of tweets, Trump suggested exactly that: ZTE’s status with the U.S. is, in fact, part of larger economic talks. Several outlets reported Tuesday that the U.S. is discussing lifting the ZTE penalties to avoid agricultural sanctions China is preparing to impose on the U.S.
Donald J. Trump @realDonaldTrump ZTE, the large Chinese phone company, buys a big percentage of individual parts from U.S. companies. This is also reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi. 1:06 PM - May 14, 2018 60.7K 25.4K people are talking about this
ZTE, the large Chinese phone company, buys a big percentage of individual parts from U.S. companies. This is also reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi.
Two days ago Trump raised alarms by saying he was explicitly trying to help ZTE get back into business with the U.S.
Donald J. Trump @realDonaldTrump President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done! 8:01 AM - May 13, 2018 82.6K 46.8K people are talking about this
President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!
Later Sunday, however, the White House walked back that directive to the Commerce Department, saying in a statement, “President Trump expects Secretary Ross to exercise his independent judgment, consistent with applicable laws and regulations, to resolve the regulatory action involving ZTE based on its facts.”
In addition to the 32 Senate Democrats who penned the letter, Republicans are also concerned that Trump is giving away too much.
Sen. Marco Rubio, R-Fla., who with Sen. Tom Cotton, R-Ark., has written a bill banning the U.S. government from contracting with ZTE or another China telecom, Huawei, used Trump’s preferred mode of communication to criticize Trump’s stated interest in easing penalties on ZTE.
Marco Rubio @marcorubio #China intends to dominate the key industries of the 21st Century not through out innovating us, but by stealing our intellectual property & exploiting our open economy while keeping their own closed. Why are we helping them achieve this by making a terrible deal on ZTE? 4:09 AM - May 15, 2018 3,973 2,563 people are talking about this
#China intends to dominate the key industries of the 21st Century not through out innovating us, but by stealing our intellectual property & exploiting our open economy while keeping their own closed. Why are we helping them achieve this by making a terrible deal on ZTE?
Later Tuesday, Rubio went a step farther, delivering an address on the Senate floor criticizing the Trump administration's apparent thaw towards ZTE. He said lifting ZTE penalties in exchange for China lifting agricultural sanctions would give the impression that farmers in the U.S. had done something wrong.
He also pointed a finger at someone in the Trump administration who is giving the president bad advice.
"I know that's not where his instincts are," Rubio said, referring to Trump. "But someone's getting to him, I don't know if it's from Treasury or where it is, and basically telling him that now's the time to cut a deal. It's the wrong time to cut a deal, and this would be a terrible deal."
Earlier this month, the Pentagon banned the two Chinese firms from selling products in retail stores on military bases, over fears that they might be using devices to steal U.S. intelligence and intellectual property.
Sen. Ron Wyden, D-Ore., wondered on Twitter Tuesday whether there was a connection between a Trump Organization project in Indonesia, which is anticipating a $500 million loan from the Chinese government, and Trump’s new warmth towards ZTE.
Ron Wyden @RonWyden Why is @realDonaldTrump personally protecting a Chinese tech company guilty of evading US sanctions on Iran? Maybe this: https://twitter.com/adamdavidson/status/996019355933663233 … 7:33 AM - May 14, 2018 36.4K 21K people are talking about this
Why is @realDonaldTrump personally protecting a Chinese tech company guilty of evading US sanctions on Iran? Maybe this: https://twitter.com/adamdavidson/status/996019355933663233 …
In an interview with ABC, Wyden stressed that the link between the ZTE softening and the Trump Organization deal was only “possible.” Despite concern from both sides of the aisle about possible concessions to ZTE, the issue did not come up during Trump’s meeting with Senate Republicans on Tuesday.
But Sen. Lindsey Graham, R-S.C., said he does want to get more information from the White House about the potential arrangement.
“I'm concerned about that. I'm glad that China's helping us but allowing them to have sort of an entree in our technological world like this bothers me,” Graham said.
The company needs to be punished, not used as a bargaining chip.
President Donald Trump has indicated, via Twitter, that he’s prepared to make an enormous concession to smooth trade talks with China, offering upfront to ease sanctions on ZTE Corp., the country’s second-largest telecom equipment maker. But ZTE is being punished for deliberately violating U.S. sanctions — twice. The company’s punishment needs to be enforced, not used as a bargaining chip. If Trump goes ahead anyway, he stands to have a very hard time making sure the U.S. gets its money’s worth.
The American case against ZTE isn’t in dispute. The company was singled out in 2016 for doing business with Iran in violation of U.S. sanctions. A $1.2 billion settlement last year was supposed to include internal punishment for the ZTE officials involved. Instead, according to the U.S. Commerce Department, the firm paid those executives bonuses. The U.S. then banned ZTE from buying irreplaceable U.S. components for seven years, effectively killing its business.
It is possible to conceive of different punishments for ZTE that would cause the company material pain without destroying its ability to operate. Commerce Secretary Wilbur Ross is said to be exploring such options.
Trump’s injudicious tweeting may have already diminished U.S. bargaining power. But it’s not too late to take ZTE off the table.
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at [email protected] .