Republicans are siding with President Donald Trump in easing penalties on the Chinese telecom company ZTE. Negotiators in the Senate and the House of Representatives removed language from a must-pass defense bill that would have banned United States companies from selling parts or providing services to ZTE, which the Commerce Department says made illegal sales to Iran and North Korea in defiance of US sanctions.
Here’s the backstory: In March 2017, the Commerce Department hit ZTE with a $1.19 billion fine for its export violations to Iran and North Korea. Then in April of this year, Commerce banned all US companies from selling to ZTE for seven years. ZTE makes inexpensive smartphones and relies on parts made in the US, meaning the maneuver was essentially a death sentence for the company.
But in May, Trump tweeted that he wanted to find a way to get ZTE “back into business.” He lamented the number of Chinese jobs lost as a result of US actions.
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!
— Donald J. Trump (@realDonaldTrump) May 13, 2018
For a while, it looked like Congress was going to step in to stop Trump from easing up on ZTE. A bipartisan group of senators, including Marco Rubio (R-FL), Tom Cotton (R-AR), and Chris Van Hollen (D-MD) and Senate Minority Leader Chuck Schumer, sponsored a measure that would have reinstated penalties on ZTE and banned US government agencies from buying devices or services from ZTE and Huawei, another Chinese telecom company. The US intelligence community has also warned that Huawei and ZTE phones pose a national security risk to the US.
The Senate voted to pass the provision as part of the National Defense Authorization Act by an 85-10 vote in June, and that version of the legislation was sent off to be reconciled with a narrower House version of the bill. And apparently, the House version won out: ZTE can’t get US government contracts, nor can Huawei, but it can still do business with private companies in the US.
Sen. David Perdue (R-GA) in June warned that the congressional measure would “trample on the separation of powers” and hamstring Trump’s negotiation efforts with China. He released a statement on Friday after meeting with Trump about what he said was “short-sighted ZTE language” in the original Senate bill. “President Trump should not have his hands tied as he engages in major negotiations dealing with trade and the denuclearization of the Korean Peninsula,” he said.
The bill could become law by the end of this month.
Schumer slammed the decision in a statement on Friday. “By stripping the Senate’s tough ZTE sanctions provision from the defense bill, President Trump — and the congressional Republicans who acted at his behest — have once again made President Xi [Jinping] and the Chinese government the big winners and the American worker and our national security the big losers,” he said.
Rubio said he was surprised his fellow lawmakers had “caved.”
— Marco Rubio (@marcorubio) July 20, 2018
ZTE won’t be off the hook entirely: In June, Commerce struck another deal with the company that required it to pay a $1 billion fine, replace its leadership, put $400 million into an escrow account, and fund US compliance monitoring for 10 years in order to do business with US suppliers. But detractors say that’s not enough.
“Despite bipartisan support to put American national security before jobs in China, the Republican leadership refused to take any real, substantive action on ZTE. Instead, they joined President Trump in bowing to Beijing,” Van Hollen said. It’s weak and shameful.”
Rubio suggested that GOP leadership’s decision to soften the language on ZTE was connected to a deal to bolster the Committee on Foreign Investment in the US (CFIUS), a committee under the Treasury Department that reviews cross-border deals for security threats.
The National Defense Authorization Act contains language expanding CFIUS’s authority to intervene in and block transactions, including with Chinese companies. Trump has already blocked two US-China deals as president at CFIUS’s recommendation: Canyon Bridge Capital Partners’ proposed acquisition of Lattice Semiconductor in September, and the Broadcom-Qualcomm deal in March.