White House sending mixed messages on ZTE deal

President Trump’s top trade adviser says a BIS settlement with Chinese telecom firm ZTE was a “personal favor” to Beijing just days after Commerce Secretary Wilbur Ross said it had “nothing to do” with bilateral trade negotiations.    President Donald Trump and his administration appear to be having a tough time getting their story straight when it comes to a deal made last week between the Commerce Department’s Bureau of Industry and Security (BIS) and Chinese telecommunications equipment manufacturer ZTE Corp.
   Under the terms of the settlement agreement, ZTE will get a reprieve from a potentially crippling order prohibiting U.S. entities from exporting to the company in exchange for paying up to $1.4 billion in penalties and being subject to what Secretary of Commerce Wilbur Ross says are the “strictest compliance requirements ever.”
   Those requirements include the installation of a team of special compliance coordinators handpicked by BIS to monitor ZTE’s compliance with U.S. export control laws, as well as an entirely new board of directors, and the prospect of the reimposition of denial of export privileges if BIS discovers any additional violations during a 10-year probationary period.
   The settlement drew sharp criticism from lawmakers in Washington, who accused the president of essentially using an enforcement case as a bargaining chip in ongoing trade talks with China despite the company posing a clear threat to national security.
   In announcing the ZTE settlement, Ross said last week it was in no way related to negotiations between the Trump administration and Beijing, a seeming reversal of stance from a few weeks prior, when Trump himself said he was working with Chinese President Xi Jinping on a deal to keep ZTE in business that was “reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi.”
   “This is an enforcement action,” Ross said in an interview on the CNBC program “Squawk Box.” “It happens that I’ve been involved with the other negotiations with China, but that’s quite separate and apart from enforcement.
   “Every day, every week, practically, we’re bringing some sort of an enforcement action against China or some other country and this has nothing to do with negotiations such as the ones we’ve been embarked upon,” he added. “[The] purpose of enforcement [is to] punish bad actors and by getting rid of the whole management and board and fining them another $1.4 [billion] on top of the billion that we got from them a year ago, and yet keeping the ability to put them out of business, I think will serve as a very, very powerful deterrent to other bad actors.”
   Over the weekend, however, top White House trade adviser Peter Navarro appeared to reverse the administration’s stance once again, telling “Fox News Sunday” that Trump orchestrated the settlement with ZTE “as a personal favor to the president of China as a way of showing some goodwill for bigger efforts.”
   Navarro also noted that this is ZTE’s last chance after twice being found to have violated sanctions by doing business with North Korea and Iran and deliberately misleading U.S. investigators, something he and Ross agreed on.
   “I can tell you this, it’s going to be ‘three strikes you’re out’ on ZTE,” he said. “If they do one more additional thing, they will be shut down.”
   “If they do violate it again … whether it’s lying or sanctions or anything else … we still retain the power to shut them down again,” said Ross.
   Some members of Congress, meanwhile, like Sen. Chuck Schumer, D-N.Y., questioned why ZTE should get a second — pr third — chance in the first place.
   “There is absolutely no good reason that ZTE should get a second chance, but with this deal, the president has inexplicably thrown them a lifeline,” he said in a speech on the Senate floor. “Many believe ZTE could be a mechanism for spying on our military and lots of different economic parts of the United States. China has shown no reluctance to do that in the past, and we’re just rolling over for no reason and have gotten nothing in return.”