Republicans Bow to White House on Chinese Telecom Firm ZTE

Outside ZTE offices in Beijing. The Chinese telecom firm, which was found guilty of violating American sanctions on Iran and North Korea, has become a linchpin in trade negotiations between the United States and China.

WASHINGTON — Republican lawmakers backed away from a plan to reinstate stiff penalties on Chinese telecom firm ZTE, handing a win to President Trump, who had personally intervened to save the Beijing company.

Congressional leaders removed a provision, tucked into a military policy bill, that would have stopped the Trump administration from lifting penalties on ZTE. Rather than prevent the company from buying American technology, the bill will simply limit federal purchases of ZTE products, such as handsets.

The move drew swift criticism from lawmakers who had pushed for a tougher approach to ZTE, which was found guilty in 2016 of violating American sanctions on Iran and North Korea.

“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,” said Senator Chris Van Hollen, a Maryland Democrat. “It’s weak and shameful.”

Most Americans have never heard of ZTE but it has become a Ping-Pong ball in diplomatic and economic negotiations between the United States and China. The company’s future became an issue ahead of Mr. Trump’s summit with North Korea’s leader, which China was helping to facilitate.

In April, the government banned ZTE from buying American technology for seven years as punishment for failing to rectify issues related to its sanctions violation. The move threatened to put ZTE, which buys a large quantity of semiconductors from San Diego-based Qualcomm, out of business.

President Xi Jinping of China appealed personally to Mr. Trump to save the company and Mr. Trump obliged. The Commerce Department announced June 7 that it would lift the ban, in return for the Chinese company paying a $1 billion fine, replacing its board and senior leadership, and embedding a compliance team handpicked by the United States inside its company. Wilbur Ross, the secretary of commerce, said the penalty was the strictest ever levied by the agency’s Bureau of Industry and Security.

The legislation in Congress does contain text to expand the authority of the Committee on Foreign Investment in the United States, which reviews foreign deals for security threats. And it also bolsters the system the United States uses to monitor the technologies that are exported abroad. Republican congressional leaders confirmed on Thursday that the House and Senate had reached a deal on the investment provisions.

“This deal on #CFIUS is good news,” Senator Marco Rubio, a Florida Republican, wrote in a Twitter post on Friday. “The bad news? They had to cave on #ZTE in order to get it. So chances that a #China controlled telecomm will not just stay in business, but do so here inside the U.S. sadly just went up. #BadTradeoff.”

In recent months, the president and other members of the administration have met with congressional leaders to try to persuade them to temper their restrictions on ZTE. In May, Mr. Ross and Steven Mnuchin, the Treasury secretary, were both dispatched to Capitol Hill, where they tried to convince Republicans that punishing ZTE could hurt trade talks with the Chinese and the summit between Mr. Trump and North Korea’s Kim Jong-un. In June, Republican lawmakers returned to the White House for another meeting that touched on the company’s future.

One of the administration’s most vocal congressional defenders has been David Perdue, a Republican senator from Georgia. In early June, he said the Congressional provision would “trample on the separation of powers” and undercut the Trump administration’s ability to negotiate.

But a trade deal with the Chinese has proved elusive. The Trump administration has levied tough penalties on China, including tariffs on billions of dollars of products, in a bid to force China to open up its markets to American companies, reduce its trade surplus with the United States and stop what the White House labels intellectual property theft.

While China has offered to purchase more American products and lower some barriers to foreign companies, White House officials have so far rejected these offers as insufficient and pushed ahead with imposing tariffs on $34 billion of Chinese goods.

The president vowed in an interview with CNBC on Thursday to double down on the strategy, saying he was “ready” to expand the tariffs to cover the entirety of what China imports into the United States in an effort to convince the Chinese to bend.

In a statement Friday, Chuck Schumer, the Senate’s Democratic leader, said that the administration and Congressional Republicans had “once again made President Xi and the Chinese Government the big winners.”

Mr. Trump, Mr. Schumer said, “has once again broken his core promise to be tough on China simply to please the president of China — and he got nothing in return.”

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