INSUBCONTINENT EXCLUSIVE:
In a remarkable development, President Trump has thrown an olive branch to controversial Chinese telecom firm ZTE .
The company, which
sells telcomnetwork equipment and consumer devices including smartphones, said on Wednesday that it would cease its main business operations
Department of Commerce announced a seven-year export restriction for the company, resulting in a ban on U.S
component makers selling to ZTE.
The company has been banned from selling equipment in the U.S., but shutting out supply chain partners like
Intel, Qualcomm and Google is potentially catastrophic
(The fact ZTE postponed its earnings tells you all you need to know.)
Reports suggested that the Chinese government was working on ZTE
behalf to find a compromise, and it looks like Chinese Premier Xi Jinping himself got in touch with the U.S
President, who said today in a tweet that is he &working[…]to give[…]ZTE a way back into business, fast.&
Somewhat bizarrely, Trump
cited a loss of jobs in China as a motivating factor.
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
Given that U.S
sanctions were imposed on ZTE due to threats to national security andits violation oftrade sanctions with Iran and North Korea, Trump desire
to give the company another chance in the U.S
is truly unexpected.
It also doesn&t align with recent events.
The Trump administration has used the premise of national security to block a
number of business deals that would see Chinese companies buying up American firms — including Alibaba proposed acquisition of MoneyGram
and Broadcom effort to buy Qualcomm.
Then, of course, the President is involved in an aggressive trade dispute with China, which, on the U.S
side, includedtariffs on about $60 billion of Chinese goods, the bulk of which were focused on the high-tech industry.
Granting a reprieve
to ZTE — a firm with over 70,000 employees, over $17 billion in annual revenue and close ties to the government — doesn&t fit with the
strategy to hurt China, but then Trump administration is hardly by the book and often times seemingly pragmatic
Well, the President Twitter account, at least.
Potentially, there may be pressure behind the scenes from U.S
suppliers who fear a loss of business as companies like Taiwan MediaTek plan to step up in a bid to work with ZTE in the event that it is
partners.
Even with Trump unexpected backing, ZTE is up against it to roll back the sanctions
There clearly a gap of thinking between the President and the rest of government.
Trump has frequently lashed out at the House and the
Senate, not to mention his own party, over differences of opinion and his frustration with politics
In this case, ZTE infringements are so major — trade violations and national security concerns — that it is hard to envisage the company
getting a pass, even with support from the White House.
To recap, here whatFBI Director Chris Wray told the Senate Intelligence Committee in
February:
&We&re deeply concerned about the risks of allowing a company or entity that is beholden to foreign governments that don&t share
our values to gain positions of power inside our telecommunications networks.&
AndCommerce Secretary Wilbur Ross speaking in Aprilabout the
violation of sanctions on Iran and North Korea, which ZTE pleaded guilty to:
&ZTE made false statements to the U.S
Government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made
false statements again during its probation
ZTE misled the Department of Commerce
Instead of reprimanding ZTE staff and senior management, ZTE rewarded them
This egregious behavior cannot be ignored.&
Just another day in Trump America.
