ZTE to Pay $1 Billion Fine, Allow Closer U.S. Inspection to End Sanctions

Commerce Secretary Wilbur Ross, left, with Vice Premier Liu He of China on Sunday. The Chinese company ZTE has been at the center of a trade dispute between Washington and Beijing.
Andy Wong/Agence France-Presse — Getty Images

The United States announced a deal on Thursday to lift tough American sanctions on the Chinese telecommunications giant ZTE, a company that has been at the center of a dispute between China and the United States.

The Commerce Department said that ZTE had agreed to pay a $1 billion fine and allow the United States to more closely inspect the company by effectively having a handpicked compliance team embedded inside.

ZTE had been a bargaining chip in negotiations between the two countries, which have been striving to reach a trade deal that would prevent tit-for-tat tariffs from going into effect. It’s not clear how the latest agreement will impact those talks.

But the company’s fate has gotten caught up in a bigger web, including an upcoming summit between President Trump and North Korea’s leader and the success of an American telecom company, Qualcomm, which sells a large amount of semiconductors to ZTE and is awaiting Chinese approval of a deal to acquire a Dutch telecom firm that will help it build the next generation of wireless technology, known as 5G.

Mr. Trump softened his approach to ZTE several weeks ago after Chinese President Xi Jinping asked Mr. Trump to consider easing penalties on the company, which was headed toward collapse after American sanctions barred it from buying any American-made goods. That request came at a sensitive diplomatic moment for Mr. Trump, who is heading to Singapore next week to meet with North Korea’s leader, Kim Jong-un. Mr. Trump has made Mr. Xi his partner on North Korea while condemning China’s trade practices.

Mr. Trump has said the ZTE move is part of “the larger trade deal we are negotiating with China and my personal relationship with President Xi.”

The settlement with ZTE is likely to inflame lawmakers, including top Republicans, who have objected to helping a Chinese company that has been accused of posing a national security threat. Defense officials have long been concerned that the company’s products may be vulnerable to espionage or disruption. Major American wireless carriers have for years been effectively blocked from buying its network equipment.

The deal also puts the United States in an even more awkward position as it punishes allies like Canada, Mexico and the European Union with tariffs on steel and aluminum.

“I assure you with 100% confidence that #ZTE is a much greater national security threat than steel from Argentina or Europe,” Florida Senator Marco Rubio wrote on Twitter on Thursday. “#VeryBadDeal.”

“When it comes to China, despite his tough talk, this deal with ZTE proves the president just shoots blanks,” New York Senator Chuck Schumer, the Democratic leader, said in a statement. “There is absolutely no good reason that ZTE should get a second chance, and this decision marks a 180 degree turn away from the president’s promise to be tough on China. It’s up to Congress now to act to reverse the deal.”

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SOURCE: NY Times, Ana Swanson and Michael J. de la Merced