Export Ban on Chinese Telecom Company Could be Short-Lived

Published 16 May 2018 by SANDLER, TRAVIS & ROSENBERG, P.A.

Wednesday, May 16, 2018
Sandler, Travis & Rosenberg Trade Report

In an unusual move that elicited bipartisan criticism, President Trump said he is directing the Commerce Department to help a Chinese company recently hit with a seven-year export ban “get back into business, fast.” The DOC imposed the ban against Zhongxing Telecommunications Equipment Corporation April 16 after determining that ZTE had made false statements regarding the steps it took to discipline employees involved in a scheme to illicitly reexport controlled items to Iran. Commerce Secretary Wilbur Ross said the DOC will now consider “alternative remedies to the one that we had originally put forward.”

After the ban was imposed ZTE announced that it would cease major operations and subsequently asked the DOC to suspend the ban. That was also one of the requests China reportedly made of the U.S. during recent bilateral trade talks in Beijing.

In separate tweets Trump indicated that the ban would cause the loss of “too many jobs in China” and would also negatively affect the U.S. suppliers from which ZTE purchases a “big percentage of individual parts” for its products. He also indicated that easing the ban could be used as leverage in “the larger trade deal we are negotiating with China.” Those negotiations will continue this week when Vice Premier Liu He visits Washington.

According to press reports, however, any deal could be modest in nature. The White House is said to be pursuing an agreement that would ease the ZTE ban in return for China lowering import duties on U.S. farm goods that were increased in response to U.S. tariff increases on steel and aluminum. It does not appear that any of the demands on an extensive list the U.S. submitted to China a few weeks ago would be resolved by this agreement. On the other hand, a Politico article noted that Treasury Secretary Steve Mnuchin, “who has become Trump’s point person in the talks, may view a cumulative number of smaller deals that accomplish some of the bigger asks the U.S. laid out … as representing systemic reform.”

Trump’s reversal on ZTE was explained as “part of a very complex relationship the U.S. has with China” by a White House spokesman but was met with opposition by members of Congress on both sides of the aisle. Rep. Adam Schiff, D-Calif., said Trump “should care more about national security than Chinese jobs.” Senate Minority Leader Chuck Schumer, D-N.Y., said the U.S. should be “taking tough action against actors like ZTE” but that “before it’s even implemented, the president backs off.” Sen. Marco Rubio, R-Fla., said he hoped Trump’s decision does not signal the beginning of a trend. Responding via Twitter, Trump said, “Be cool, it will all work out!”

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