Sunday, August 19News That Matters

Senate Democrats Warn Trump Over Any Deal on China's ZTE


A ZTE service center in Hangzhou, China.

A ZTE service center in Hangzhou, China.


Photo:

china stringer network/Reuters

By

WASHINGTON—A trio of Senate Democrats on Tuesday urged President

Donald Trump

to reconsider providing any relief to China’s ZTE Corp., saying that any potential deal could undermine American national security and that the company’s fate should be handled separately from trade negotiations.

“Offering to trade American sanctions enforcement to promote jobs in China is plainly a bad deal for American workers and for the security of all Americans,” Senate Minority Leader

Chuck Schumer

of New York,

Sen. Ron Wyden

of Oregon and

Sen. Sherrod Brown

of Ohio wrote in a letter to Mr. Trump. National security “must not be used as a bargaining chip in trade negotiations,” the senators wrote.

The U.S. and China are closing in on a deal that would give ZTE a reprieve from crippling U.S. penalties in exchange for Beijing removing tariffs on billions of dollars of U.S. agricultural products, said people in both countries briefed on the deal.

ZTE is a Shenzen-based telecommunications-equipment producer that has been hamstrung by a U.S. ban on component sales to the firm. The U.S. Commerce Department directed companies to stop exporting to ZTE in mid-April, saying the Chinese firm violated the terms of a settlement resolving evasion of U.S. sanctions against Iran and North Korea. ZTE, which counts U.S. tech titans such as

Qualcomm
Inc.

and

Intel
Corp.

among its suppliers, recently said it was shutting down major business operations. The U.S. has accused equipment made by ZTE and its larger crosstown rival Huawei Technologies Co. of being a threat to America’s national security, an accusation that both companies have denied.

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On Sunday, Mr. Trump said in a tweet that he was working with Chinese President

Xi Jinping

to get ZTE “a way to get back into business, fast. Too many jobs in China lost.” He said the Commerce Department had been instructed to “get it done!”

Commerce Secretary

Wilbur Ross

said at the National Press Club on Monday that he is considering alternative punishments for ZTE, potentially opening the door to a reprieve for the telecommunications company. Mr. Ross said his department would consider the question of easing ZTE penalties “very, very promptly.”

The Democratic senators said Tuesday that they wanted to see the administration focus on combating Chinese practices they said have distorted the market.

“Beyond appearing to risk American national security, the statement suggests that the Administration is not serious about addressing the many economic challenges China presents,” the Democrats wrote. “The devastating effects of China’s trade policies are clear.”

Some Republicans have also raised objections to relaxing penalties on ZTE.

Sen. Marco Rubio (R., Fla.), citing a Wall Street Journal article on the potential pact, warned the administration on Twitter against making a “terrible deal” and said the U.S. is about to “get out negotiated by #China again.” He added: “Apparently ‘deal’ is we lift sanctions imposed on ZTE for helping Iran & N.Korea & they can resume spying & stealing our intellectual property. In return China removes tariffs on U.S. farmers who did no wrong.”

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Under the deal being discussed, the U.S. would relax last month’s order banning American companies from selling components to ZTE, which has long been viewed as a Chinese national champion for its effort to take a global lead in establishing 5G mobile internet networks. That Commerce Department ruling, based on allegations that ZTE didn’t comply with a previous settlement over illicit sales to Iran, would cripple not only the company but also other state-controlled Chinese firms including three large telecom carriers, Beijing officials have said. The Commerce Department said last month that it had agreed to give ZTE a chance to present more evidence in the case.

In return for the potential relief on ZTE, the people briefed on the deal say, China would agree to hold back tariffs on a variety of U.S. agricultural products it announced in early April as retaliation for U.S. tariffs on Chinese steel and aluminum exports. The U.S. products targeted include ginseng and pork.

Write to Kristina Peterson at kristina.peterson@wsj.com

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