TRUMP BOWS TO CHINA ON CRITICAL TRADE ISSUE

…ZTE TELECOM in Shanghai, China

Trump is providing jobs, but they’re for workers in China

ZTE is the AT&T of mainland China.  Because of warnings from the US military, the US Defense Department, CIA and the FBI, they have warned that to use phones, equipment and software from ZTE could allow the Chinese to spy on Americans.

Because of this issue with the giant Chinese telecom company, and because of the US government’s recent trade restrictions, those restrictions bar US firms for seven years from exporting critical microchips and other parts to ZTE.  In addition, this same Chinese company has been accused of ignoring sanctions and of illegally shipping communication goods to North Korea and Iran.

The restrictions against ZTE include not shipping parts from US companies such as Qualcom, Intel, Corning, Sandisk and others. 

Last month, the US announced this punishment to ban US firms from supplying ZTE. This company is the fourth largest smartphone maker behind Apple, Samsung and LG.  It relies on microchips, glass and other parts from these American firms.  ZTE generally makes inexpensive smartphones, which have grown in popularity in recent years.

In addition to these restrictions, the Defense Department in April ordered American military exchanges to cease selling ZTE phones on US bases. And the Federal Communications Commission (FCC) recently moved toward prohibiting US Internet providers that receive federal funds from spending them on equipment made by companies such as ZTE, and Huawei, another major Chinese telecom player.

But it is now appearing that President Trump’s loud and stern bravado about his trade war is being shown to be nothing more than Trump noise.

Because of Trump’s trade war, and because he is counting on help from China in his summit meeting with North Korea’s Kim Jong Un in Singapore next month, Trump is now going to go against his own trade restrictions.

These US restrictions have basically stopped ZTE from shipping any products to their customer base, and this has caused them to stop manufacturing and that has caused major job losses at ZTE in China.

So, what does that cause our fearless leader do?

Per Trump’s latest tweet: “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast,” Trump tweeted. “Too many jobs in China lost. Commerce Department has been instructed to get it done!”

The comment marked a sharp shift in tone for a president who has long accused China of stealing US jobs. The Treasury and Commerce departments had been strongly aligned against ZTE as recently as several days ago in one of the toughest actions to date against a Chinese company.

With Trump’s tweet, some officials familiar with the ZTE issue now believe a compromise is possible. “A mini-deal is in sight,” said a person familiar with the matter. “China gets relief for ZTE, and in exchange agrees to return to the status quo for US agriculture,” easing tariffs and implementing other non-tariff remedies.  (FYI: China has been the largest purchaser of soy beans from the US.)

But the latest talks have not been amicable. Chinese President Xi Jinping has been irate about the sanctions on ZTE, and his top economic adviser, Liu.  Liu has told US negotiators that there is no chance of a deal without the United States removing the seven-year ban on ZTE.  This was per a person who spoke on condition of anonymity to discuss such a sensitive matter.

The administration is in contact with China on this issue, among others in the bilateral relationship. President Trump expects his Commerce Secretary Wilbur Ross to exercise his independent judgment, consistent with applicable laws and regulations, to resolve the regulatory action involving ZTE. 

In other words, Trump expects Ross to give China whatever they want for ZTE.

ZTE did not respond to multiple requests for comment.

Trump’s tweet on Sunday comes just before US officials had expected to meet with adviser Liu in Washington next week to discuss these strained trade ties.

A high-level Chinese delegation was in Washington last Friday and they raised the issue of whether the Trump administration could relax its stance on ZTE. The law firm Hogan Lovells, which has represented ZTE, has also been asking people close to the administration for ways to alter the US position.

Once again this was according to another veteran lobbyist who also spoke on condition of anonymity.

“This act appears to pull the rug out from under those in the administration trying to pressure China to restrain its industrial policies and better protect intellectual property,” said Scott Kennedy, an expert on business and China at the Center for Strategic and International Studies.

The US government initially penalized ZTE in 2017, requiring it to pay $1.19 billion to settle charges that it violated US sanctions in selling equipment to Iran and North Korea. As part of the settlement.  ZTE was also required to punish employees involved in the matter and tighten its internal monitoring.

But US officials said this year that ZTE didn’t discipline the employees involved in the violations. “This egregious behavior cannot be ignored,” Ross said last month, as the US announced its punishment to ban US firms from supplying ZTE.

“It was clear to me that there was a range of options between a hand-slap and ‘I destroy you as a company,’ and Secretary Ross decided to go with ‘I destroy you as a company,’” said Chris Johnson, a former CIA analyst and a senior adviser at the Center for Strategic and International Studies.

Ross was correct that his actions did stop the giant telecom company from functioning due to not receiving those products from the US manufacturers.

Now Donald Trump is more worried about those jobs being lost in China, than the US jobs that have been lost to China for years

“This whiplash-like approach to the Commerce Department’s exercise of such far-reaching authority is unusual and unwise, particularly if it wasn’t the product of careful interagency discussion and analysis weighing all the pros and cons,” said David Laufman, a former Justice Department official responsible for the criminal enforcement of US export control and sanctions laws.

Several weeks ago, as tensions between the White House and Beijing escalated, both sides promised to impose increasingly severe trade restrictions on the other, spooking financial markets amid fears of Trump’s trade war.

Chinese leaders have tried to resist Trump’s demands, but recently did a 180° turn and have since shown a willingness to negotiate. The economies of both countries are totally  linked, as China relies on US consumers to buy many of its products, and the United States relies on Chinese producers for a range of goods.

Trump has repeatedly cited his “friendship” with Xi, though they’ve only met a few times, and he has said that the relationship will endure no matter what happens with the trade talks.

Hours after his initial tweet on Sunday, Trump issued a second remark on the matter on Twitter: “China and the United States are working well together on trade, but past negotiations have been so one sided in favor of China, for so many years, that it is hard for them to make a deal that benefits both countries. But be cool, it will all work out!”

As with what the president usually says, there’s only a 50-50 chance that what he has stated is the real truth.

Copyright G.Ater  2018