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ZTE could face fresh US$1.3b fine

23 May 2018

The outlines of the deal for ZTE, first reported in The Wall Street Journal, amounted to exactly the same sort of punishment that had proved ineffective previous year, Mr Rubio said.

Republican Senator Marco Rubio, who has been critical of Trump's moves toward ZTE, blasted his administration over the reported agreement for having "surrendered" to Beijing and pledged that Congress, led by Trump's fellow Republicans, would seek to block any deal with the company.

Critics from both the left and the right criticized the broad agreement, saying it did little to address underlying problems with China's economy while sacrificing leverage that Trump created over the past two months. But by allowing ZTE to return to business as usual, the United States is putting the trade war with China on hold. The bill passed the panel 25-0 and now advances to the full Senate for a vote. ZTE also agreed to pay a $1.2 billion fine.

Senator Marco Rubio, a Florida Republican who in recent days has been critical of how the Trump administration is handling trade issues with China, said that if the Journal story is true it means the US has "surrendered" to the Chinese on ZTE issues. The company ignored sanctions on US enemies; if China can buy/bribe their way out of penalties for that then it sets a precedent in which other foreign regimes can buy their way out of sanctions too. In all this, we do not know what part of Trump's dealings with Kim Jong Un are a side-scene, but as is evident, the twists and turns are theatrical. But ZTE's fate remained unclear.

Trump said he could "envision" a "very large fine" of up to $1.3 billion imposed on the company plus a requirement to appoint a new board of directors. Under the terms of the seven-year ban, ZTE would have been unable to import Snapdragon chips or license Android. That must be great news for ZTE, which would be allowed to use hardware and software from U.S. companies including Qualcomm and Google.

The ban crippled the manufacturing operations at ZTE, which announced it was suspending major operations.

'So no, I'm not satisfied, but we'll see what happens.

Treasury Secretary Steven Mnuchin said that the United States was not willing to revisit the penalties.

Mnuchin said the president's directive is not "a function of backpedaling", but rather is similar to other times world leaders have called on Trump to discuss business matters.

Treasury Secretary Steve Mnuchin appeared before a Senate subcommittee Tuesday during which he pledged that any changes to penalties on the Chinese telecom ZTE, which is publicly traded but whose largest shareholder is an enterprise owned by the state, would not affect American national security. "This was merely President Xi asking President Trump to look into this, which he's done. Any changes to this will fully support the mandate of making sure our sanctions and our technology are protected". It ignored US sanctions to do business with Iran and North Korea, then reached a settlement with the Commerce Department to pay a huge fine and discipline executives responsible for its sanctions-busting.

One next step will be dispatching Commerce Secretary Wilbur Ross to China to look at areas where there will be significant increases, including energy, liquefied natural gas, agriculture and manufacturing, Mr Mnuchin and Mr Kudlow said.

Mnuchin said any future decisions were in the hands of the Commerce Department given that ZTE is an enforcement case. That's an intangible victory for China too, in that it shows the United States will treat national security policy as a subject of trade negotiation.

He declined to comment on what alternative remedies Commerce may be considering.

"The president and Secretary Mnuchin, what they are doing sends a risky signal to businesses around the world that the United States is willing to forgive sanction violations or reduce penalties", Schumer said. "I am not going to publicly disclose what they are", Mr Mnuchin said. But it then went a step further to impose a seven-year ban on U.S. companies buying and selling ZTE products.

Correction: An earlier version of this article incorrectly referred to Senator Charles Schumer.

ZTE could face fresh US$1.3b fine