President Donald Trump's administration has informed members of Congress that it has reached an agreement that will allow Chinese telecommunications-equipment maker ZTE Corp. to remain in business, according to two people familiar with the matter.
U.S. Commerce Department officials informed lawmakers of the deal under which ZTE will pay a bigger fine than previously expected, hire American compliance officers and shake up its management team, according to the people, who spoke on condition of anonymity. Once ZTE complies, Commerce will lift an order under which the company had been cut off from U.S. suppliers and effectively unable to stay in business.
A deal on ZTE, which is facing bipartisan objections in Congress, has broad implication beyond the woes of the company. The U.S. and China are engaged in high-stakes talks on steel trade and intellectual property rights under the looming threat of punitive tariffs.
Trump said he was ordering a reconsideration of penalties against ZTE as a favor to the country's president, Xi Jinping, after the company estimated losses of at least $3.1 billion from the U.S. technology ban. Trump said he would "envision" a fine of $1.3 billion.
The plan is already drawing fire from ZTE critics in Congress, further inflaming tensions over trade policy in a week when Republicans blasted the administration for contemplating tariffs on auto imports.
"Yes they have a deal in mind. It is a great deal ... for #ZTE & China," Sen. Marco Rubio, a Florida Republican, tweeted Friday.
Senate Minority Leader Charles Schumer, D-N.Y., said "both parties in Congress should come together to stop this deal in its tracks."
The Senate on Thursday released a defense policy bill containing a provision requiring Trump, before making any ZTE deal, to certify with Congress that ZTE hasn't violated U.S. law for the past year and is cooperating with U.S. investigations.
"ZTE presents a national security threat to the United States -- and nothing in this reported deal addresses that fundamental fact. If President Trump won't put our security before Chinese jobs, Congress will act on a bipartisan basis to stop him," said Sen. Chris Van Hollen, D-Md., the author of the Senate provision.
It's unclear if Congress will be able to muster veto-proof majorities needed to block the president on ZTE, however.
Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross held a meeting with GOP senators on Wednesday laying out the ZTE proposal. Sources briefed on the meeting said lawmakers were told to give the administration room to negotiate the matter and asked to tone down public criticism of the deal.
After the briefing, John Cornyn of Texas, the No. 2 Republican in the Senate, expressed support for placing compliance officers at ZTE. "That would be pretty remarkable. Having somebody inside the company to observe what's going on would be very valuable," he told reporters.
Senate Foreign Relations Committee Chairman Bob Corker, R-Tenn., declined to comment on the idea.
On Thursday, the House passed its own defense policy bill with language banning the Pentagon from purchasing ZTE technology.
ZTE ran into trouble in 2016 for violating U.S. laws restricting the sale of American technology to Iran. An agreement in 2017 called for the company to pay as much as $1.2 billion and penalize the workers involved, in what was the largest criminal fine for the Justice Department in an export control or sanctions case.
In April, the Commerce Department said ZTE instead paid full bonuses to employees who engaged in the illegal conduct, failed to issue letters of reprimand, and lied about the practices to U.S. authorities. That led to the seven-year ban.
Ross plans to visit Beijing on June 2-4, and China has made saving ZTE one of its priorities. The Trump administration has pushed China to help cut the $376 billion trade surplus with the U.S, with Beijing so far making only vague commitments to buy more U.S. goods, including farm products and energy.
But a hasty compromise on ZTE may expose the administration to further criticism in Congress.
"The ZTE move was very surprising," said Nathan Sheets, chief economist at PGIM Fixed Income and former undersecretary for international affairs at the Treasury Department. "That's a pretty big concession to the Chinese. If we move down that road, it means we should be getting something back."
Information for this article was contributed by Gao Yuan , Edwin Chan and Andrew Mayeda of Bloomberg News.
Business on 05/26/2018
Print Headline: Trump's move to save ZTE opposed