President Trump said late Friday he had allowed embattled Chinese telecommunications giant ZTE Corp. to remain open despite fierce bipartisan opposition on Capitol Hill, defying lawmakers who have warned that the huge technology company should be severely punished for breaking U.S. law.
Trump said on Twitter he was allowing it to “reopen with high level security guarantees, change of management and board,” a requirement that it must purchase U.S. parts, and a $1.3 billion fine.
Sensing such a move, top Democrats and at least one Republican on Friday said the White House's decision was tantamount to a bailout of a large Chinese company with little benefit for the United States.
The requirement that ZTE purchase U.S. parts could draw criticism on Capitol Hill, as the company relies on U.S. parts to make its products. In fact, it was the Commerce Department’s April penalty that banned ZTE from buying U.S. parts that effectively put it on the brink of closure.
The Obama administration and Trump administration have repeatedly punished ZTE for violating sanctions laws by selling products to Iran and North Korea and then lying to federal investigators.
After Commerce Secretary Wilbur Ross imposed the April penalty, Chinese leader Xi Jinping personally appealed to Trump to intervene and allow the company to continue operating, something Trump said he would do as a personal favor.
Trump has tried to pitch his intervention to help ZTE as a move that could help broker unrelated concessions from China on a broader trade agreement. This has drawn loud opposition from Republicans and Democrats on Capitol Hill, who have said ZTE poses a national security risk to the U.S. because its technology could be used to spy on Americans.
It could not be immediately learned whether the U.S. was getting anything in return. Ross is traveling to China next week for negotiations on a range of trade matters and the precise details regarding ZTE will likely be discussed.
In his Twitter messages, Trump blamed Democrats and the Obama administration for allowing ZTE to stay in business before he took office. But the Obama administration took multiple steps to punish the company in the lead up to Trump’s presidency, cracking down on ZTE through the Commerce Department and Justice Department.
Sen. Marco Rubio (R-Fla.) has led the GOP charge pushing against President Trump’s effort to release ZTE from strict prohibitions, and he criticized the administration again on Friday.
“Yes they have a deal in mind. It is a great deal ... for #ZTE & China,” Rubio wrote on Twitter. “#China crushes U.S. companies with no mercy & they use these telecomm companies to spy & steal from us. Many hoped this time would be different. Now congress will need to act.”
It’s unusual for a White House to advance a foreign policy decision that has virtually no congressional support, and so far few lawmakers have said helping ZTE is a good idea.
To block such a deal, Congress would probably need to pass a law with a veto-proof majority that prohibits the Commerce Department from rolling back penalties. Passing such a law could be difficult, but lawmakers could also pressure the administration by threatening to block any votes on Trump nominees or even unrelated trade agreements until they are satisfied.
The Senate’s pending National Defense Authorization Act contains a provision that would make it hard for the White House to roll back restrictions on ZTE without congressional approval. The White House could be forced to fight to have this provision stripped out if they want to consummate their deal with the Chinese.
“ZTE presents a national security threat to the United States — and nothing in this reported deal addresses that fundamental fact,” said Sen. Chris Van Hollen (D-Md.), the provision’s author. “If President Trump won’t put our security before Chinese jobs, Congress will act on a bipartisan basis to stop him.”
U.S. intelligence officials think ZTE poses a U.S. security threat because its products could be used for spying or cyberattacks. Earlier in May, the Pentagon ordered bases to stop selling phones made by ZTE and Huawei, another Chinese company.
And a number of Democrats and Republicans have said products from ZTE, which is partly owned by the Chinese government, could also be used to collect information on U.S. companies and steal intellectual property.
“If the administration goes through with this reported deal, President Trump would be helping make China great again,” Senate Minority Leader Charles E. Schumer (N.Y.) said Friday. “Simply a fine and changing board members would not protect America’s economic or national security, and would be a huge victory for President Xi, and a dramatic retreat by President Trump. Both parties in Congress should come together to stop this deal in its tracks.”
Some Chinese officials have said they would not follow through on other parts of the trade talks until U.S. officials reach an agreement to free ZTE. Trump has said helping ZTE would actually help American companies as well, as it would allow them to continue selling their products overseas.
Trump has advanced an adversarial trade agenda with numerous U.S. allies so far this year, threatening many of them with tariffs if they don’t take steps to allow more U.S. companies to freely sell goods overseas.
This has led to showdowns with Japan, Turkey, Mexico, Canada and members of the European Union. Trump has delivered many of his trade threats in a way that allows him to sidestep congressional intervention, a key element of his strategy because many Republicans oppose the protectionist policies he wants to impose.
His treatment of ZTE has been different, though, as he has used the prospect of helping the company as a carrot to lure Chinese leaders into broader discussions about trade. Trump wants Chinese officials to change their rules in a way that would allow more U.S. exports into China, though he hasn’t defined how this would work.
Many lawmakers support boosting exports to China, but numerous Democrats and Republicans have opposed including help for ZTE as part of any package.
“We urge you not to compromise lawful U.S. enforcement actions against serial and premeditated violators of U.S. law, such as ZTE,” numerous lawmakers, including Sen. John Cornyn (R-Tex.), wrote to top White House officials this week. “This is particularly critical when the violators are state-owned and -influenced, part and parcel of China’s policies and practices designed to strengthen its own national security innovation base, and essential tools of efforts to spread China’s influence in other countries that pose national security threats to the United States.”