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American Shipper

Trump tells Commerce to get ZTE back in business

Ross says China dependent on U.S. tech; the president indicates an enforcement case curbing exports to the Chinese telecom firm could be a bargaining chip in ongoing trade talks.

   As the Trump administration appears to be reconsidering its stance regarding Chinese telecom giant ZTE in the context of ongoing bilateral trade negotiations between the U.S. and China, Commerce Secretary Wilbur Ross said the recent prominence of the agency’s enforcement case against the company shows that China remains dependent on U.S. technology in several areas.
   The Commerce Department announced April 16 it had lifted the suspension of a denial of export privileges of U.S. firms to ZTE after U.S. officials found company employees made false statements to the Bureau of Industry and Security (BIS) in 2016 and 2017.
   ZTE in March 2017 agreed to a combined civil and criminal penalty and forfeiture of $1.19 billion after illegally shipping telecommunications equipment to Iran and North Korea, making false statements and obstructing justice through preventing disclosure to and affirmatively misleading the U.S. government.
   On Sunday, a day before the start of BIS’ Annual Conference on Export Controls and Policy in Washington, President Donald Trump tweeted that he and Chinese President Xi Jinping were “working together” to give “massive” ZTE “a way to get back into business, fast,” adding that the company had experienced large job losses and that the Commerce Department “has been instructed to get it done!”
   Speaking during the conference, Ross acknowledged ZTE was a “hot topic” in the news.
   “If nothing else, it proves two things: first, that China remains dependent on U.S. technology in a number of areas; and second, your diligence in enforcement can have a major international impact,” Ross said. “I am extremely proud of the work BIS does, and I’m sure the president is as well.”
   A Commerce spokesperson didn’t comment on how, specifically, the agency might be considering modifying its enforcement actions against ZTE.
   On Monday, Trump noted in another tweet that ZTE buys a “big percentage” of its individual parts from U.S. companies, which is “also reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi.”
   In separate Tuesday tweets, Sen. Marco Rubio, R-Fla., who introduced a bill last week that would penalize companies that transfer intellectual property (IP) and sensitive technology to China, was critical of Trump’s bargaining considerations regarding ZTE.
   “#China intends to dominate the key industries of the 21st Century not through out innovating us, but by stealing our intellectual property & exploiting our open economy while keeping their own closed,” Rubio tweeted. “Why are we helping them achieve this by making a terrible deal on ZTE?”
   Rubio said in another tweet that replacing sanctions with a fine as part of trade negotiations with China wouldn’t be a good deal, adding that the United States has leverage to “bring fairness” back to its bilateral relationship with China, which has several other tech firms that rely on U.S. chips. Rubio also said it was clear that Xi “personally intervened” on behalf of ZTE.
   As for the ongoing trade negotiations, triggered after Trump in March proposed Section 301 tariffs on imports from China valued at $50 billion to $60 billion annually, a delegation led by Chinese Vice Premier Liu He is expected to visit Washington in the next week or two to hash out trade disagreements with Trump administration officials.
   Ongoing talks can yield quick results if both parties make the effort, Chinese Ambassador to the U.S. Cui Tiankai told reporters after a trade event on Friday.
   “We don’t need a deadline,” he said. “We can come to an agreement very quickly, but it will require efforts by both sides.”
   Chinese trade officials will visit Washington to continue trade consultations “when the preparation is done,” Cui said after participating in a panel discussion at the Center for Strategic and International Studies (CSIS).
   Talks between Chinese officials and a U.S. group led by Ross, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin were ignited following a review by the Office of the U.S. Trade Representative that found unfair business practices by China.
   Among the U.S. requests are for China to reduce its $337 billion trade surplus with the United States by $200 billion by 2020 and to cut subsidies under its comprehensive “Made in China 2025” economic plan.
   Among China’s asks is for the United States to lift “restrictions [on] high-technology exports” to China.
   During the panel, Cui said that the United States’ and China’s trade imbalance shouldn’t continue, but also noted that China is “losing our edge in labor costs,” and several labor-intensive manufacturing companies are moving out of the country for this reason.
   William Cohen, CEO of The Cohen Group consultancy and former U.S. Defense Secretary, during the session said practices like forced technology transfer required of foreign investors into Chinese state-owned enterprises generate distrust among U.S. firms doing business in China.
   U.S. and other Western companies doing business in China complain that “rules are being either ignored or bent in order to give indigenous Chinese companies an advantage to now step up the ladder,” Cohen said. “I don’t blame the Chinese for that. … But just understand this is creating an unlevel playing field, which is why you’re getting the rejections that you are, which is why they have to be resolved diplomatically.”
   During the panel, Cui said China must protect IP, but added that there’s a balance to strike in the context of rights ownership and help with distribution.
   “If you have a new product, if you have a new technology, if not widely used in the market … you just keep it to yourself,” Cui said. “You have to spread it out; you have to enable more people to be aware to use it. So I think that there’s always a balance you have to achieve.”

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