Trump Caves on ZTE

The U.S. and China have agreed on the broad outline of a deal that would save China lying cheating telecom giant ZTE Corp.

The Wall Street Journal reports details are still being worked out, just like the “framework” that allowed the U.S. trade war with China to be paused. According  to people with knowledge of the matter in both countries the people said, if the ZTE agreement is completed, the Trump administration would remove the ban on U.S. companies selling components and software to ZTE. Instead, ZTE would be forced to make big changes in management, board seats and possibly pay significant fines, the anonymous sources said:

Beijing has also offered to remove tariffs on billions of dollars of U.S. farm products as part of the negotiations, although one person said the White House didn’t offer any quid pro quo. “The White House was meticulous in affirming that the case is a law enforcement matter and not a bargaining chip in negotiations,” the person said.

ZTE is the fourth-largest vendor of mobile phones in the U.S. The Commerce Department in April banned U.S. companies from selling to ZTE because it failed to comply with its agreement with the U.S. government after violating sanctions against trade with Iran and North Korea. The U.S. action threatened to put ZTE out of business and make it the first major casualty in the U.S.-China trade dispute.

[. . .]

President Donald Trump later tweeted that he and China’s President Xi Jinping were “working together to give massive Chinese phone company, ZTE, a way to get back into business, fast.”

That in turn prompted a backlash that the Trump administration had lost its will to punish ZTE for the violations.

On Monday, U.S. Treasury Secretary Steven Mnuchin told CNBC that “the intent was not to put the company out of business.” Mr. Mnuchin also defended Mr. Trump’s decision to keep ZTE alive.

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.

We should have seen this coming. During his interview with George Stephanopoulos on the May 2o, 2018 edition of ABC’s “This Week,” President Donald Trump’s Director of the National Economic Council, Larry Kudlow, was asked about ZTE:

STEPHANOPUOLOS: There’s also no mention in the communique of this Chinese telecom firm ZTE that the president tweeted about last week Sunday saying he wanted to find a way to get it back into business, despite the fact that it’s been subject to U.S. sanctions, because of its work with Iran and North Korea. A bipartisan consensus on Capitol Hill that would be a mistake. Where does that stand?

KUDLOW: President Xi asked President Trump to take another look at it. This may be part of the overall trade discussion, but it really is an enforcement action, it’s a legal enforcement action with the process being run by the Commerce Department, I guess the Justice Department as well.

Look, I don’t know how this is going to turn out. Again, Wilbur Ross is having to look at this.

Let me just say with as much clarity as possible, if any of the remedies are altered, they are still going to be very, very tough, including big fines, compliance measures, new management, new boards. The question is whether there are perhaps some small changes around the edges. I think President Trump is doing this because there’s some very good feeling between him and China.

Do not, please, do not expect ZTE to get off scot-free. It ain’t gonna happen.

And during an interview with Mike Wallace on the May 20, 20218 edition of “Fox News Sunday,” U.S. Treasury Secretary Mnuchin was also asked about ZTE:

WALLACE: Now, President Trump shocked a lot of people this week when he tweeted this. Let’s put it up on the screen. 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.

The Trump administration has banned U.S. companies from selling components to ZTE. And the president indicated that perhaps he would be willing to and that ban, which resulted in this exchange. Take a look.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: President Xi asked me to look at it, I said I would look at it, but anything we do with ZTE is always — it’s just a small component of the overall deal.

SEN. CHUCK SCHUMER (D), NEW YORK: President Trump bemoans too many jobs in China lost. What about American jobs?

(END VIDEO CLIP)

WALLACE: Now, the issue with ZTE is that they violated our sanctions for selling goods to Iran and North Korea. Is ZTE part of these trade talks and is President Trump willing to relax the ban on U.S. companies selling components to ZTE?

MNUCHIN: So, Chris, I don’t know why anybody is surprised about this so let me give you the facts. President Xi asked President Trump to look into this. That’s not a surprise.

President Trump often asks other leaders to look into things that are important to our companies. The president asked Secretary Ross to look into it, OK?

And that’s what Secretary Ross — this is an enforcement issue. It’s not a trade issue. We didn’t agree to any quid pro quo and Secretary Ross will make sure that the enforcement issue is in, but in a way that’s good for American companies and I’m not going to go through the discussions on the enforcement issue. That was completely independent of our trade negotiations.

WALLACE: But we just have the sound bite of President Trump saying it’s a small component of the overall deal. He seems to be linking ZTE with the trade talks.

MNUCHIN: Again, the president asked us to look into it as part of the delegation, and that’s what we did. I can assure you — and you know I’m very involved in all the sanctions issues myself — I can assure you that whatever changes we make to the enforcement issue on ZTE, we will be protecting American technology, American jobs and make sure that the secretary is comfortable with enforcement.

This is — but this is an enforcement issue and I can assure you the president wants us to be very tough on ZTE. And all he did was ask the secretary to look into this.

During an interview with Lou Dobbs, Gordon Chang was not pleased that we have averted or at least postponed the trade war with China. “But at what cost? This does not have the hallmark of a Trump deal. POTUS would have been more resolute: Chang was also critical of Secretary Mnuchin’s trade negotiation tactics with China:

Steve Mnuchin has an idea that you be nice to the Chinese, they will reciprocate. We’ve tried that for about two decades now. It doesn’t work.

Today President Donald Trump suggested ZTE be fined and its management changed:

Trump said ZTE may instead face a fine of up to $1.3 billion, new management and a new board of directors, though it was not clear whether he had the legal authority to impose new financial penalties.

Before Trump spoke, Republicans and Democrats in Congress were already taking action to prevent him from easing pressure on ZTE. The Senate Banking Committee voted 23-2 to make it harder for the president to modify penalties on Chinese telecommunications firms.

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