- Damir Sagolj/Reuters
- The Trump administration has reached a deal to ease sanctions on the Chinese tech giant ZTE, Commerce Secretary Wilbur Ross said Thursday.
- ZTE will be forced to pay a $1 billion fine, make changes to its executive team, and allow a US compliance team to oversee activities.
- The ZTE deal comes after weeks of tense negotiations between the Trump administration and the Chinese government.
- Both Republicans and Democrats criticized Trump’s willingness to make a deal on ZTE.
The US has reached an agreement to lift sanctions on the Chinese telecom equipment maker ZTE, Commerce Secretary Wilbur Ross said Thursday.
“At about 6 a.m. this morning, we executed a definitive agreement with ZTE,” Ross told CNBC. “And that brings to a conclusion this phase of the development with them.”
The deal will force ZTE to pay a $1 billion fine and place $400 million in escrow in the event the company violates sanctions again. In addition to the monetary damages, ZTE will be forced to make changes to its management and submit to closer examinations by a US compliance team.
“We think this settlement, which brought the company, a $17 billion company, to its knees – more or less put them out of business, now they’re accepting having the compliance team come in, whole new management, whole new board – should serve as a very strong deterrent not only for them but for other potential for bad actors,” Ross said.
The deal ends a tense period of negotiations between the US and Chinese governments over the telecom equipment maker.
The US originally placed sanctions on ZTE for selling goods with US parts into Iran and North Korea, a violation of sanctions against those countries. But after the Commerce Department determined that ZTE did not abide by those sanctions, the company was hit with an even harsher penalty: It was not allowed to buy US parts.
Given ZTE’s reliance on US-made parts, the sanctions effectively crippled the company and forced major operations to cease.
Though some Trump administration officials attempted to frame the ZTE sanctions as a separate national security issue, the president himself appeared to pull the discussions into the broader talks over trade.
The Trump administration’s deal-making process on ZTE has been roundly criticized by lawmakers of both parties. They raised national security concerns about ZTE, a view shared by US intelligence agencies and other countries.
Senate Majority Leader Chuck Schumer once again blasted the ZTE in a statement Thursday.
“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,” Schumer said. “It’s up to Congress now to act to reverse the deal.”
Other Democratic lawmakers also pointed blasted the Trump administration for the deal given the concerns over ZTE’s security risk.
“This idea of ’embedding a compliance team’ at ZTE is a nice talking point, but unless the Trump Administration plans to open an FBI counter-intel field office inside the company, Beijing is about to get one heck of a deal on a backdoor into US telecom networks,” Sen. Mark Warner, the top Democrat on the Senate Intelligence Committee, tweeted.
Rep. Adam Schiff, the highest ranking Democrats on the House Intelligence Committee, also took to Twitter to slam the move.
“The President just caved on a deal with ZTE, a Chinese company that our intelligence professionals say poses a national security threat,” Schiff said. “Is the President so desperate for a deal – any deal – that he is willing to put Chinese jobs ahead of our national security?”
Even members of Trump’s own party took a dim view of the ZTE trade-off. Sen. Marco Rubio, who has been a critic of the ZTE talks from the start, chastised the president on Twitter.
“This ‘deal’ with #ZTE may keep them from selling to Iran and North Korea. That’s good,” Rubio said. “But it will do nothing to keep us safe from corporate & national security espionage. That is dangerous. Now Congress will need to act to keep America safe from #China.”
In May, phones made by ZTE were banned by the Pentagon for sale on military bases because of security concerns.