ZTE Ceases Operations Due To US Ban, Despite Trump Pledge

Minnie Murray
May 15, 2018

"The gap remains wide", Ross said, but he added he remained hopeful the strong personal relationship between Trump and Xi would "facilitate an agreement, just as it seems to be doing with regard to North Korea". She is the chair of the global trade and government regulations practice at the firm Dechert, LLP.

Separately, Chinese state TV reported on Tuesday that Chinese Vice President Qishan Wang said that the United States and China should increase communication and solve differences through negotiations. China's Commerce Ministry has pledged to immediately. The Trump administration said ZTE had broken its agreement to punish employees who violated United States sanctions against North Korea and Iran.

The case dates to before Trump took office in January 2007 but the Commerce Department's decision came amid worsening trade tensions between the USA and China centered on technology-related intellectual property.

Trade analysts say it is highly unusual for a president to intercede in a case brought by the Commerce Department and to mix regulatory sanctions with trade negotiations.

Cargill's comments come as the US Ambassador to China, Terry Branstad, said the US and China are still "very far apart" on resolving trade frictions. "President Trump expects [Commerce Secretary Wilbur] Ross to exercise his independent judgment, consistent with applicable laws and regulations, to resolve the regulatory action involving ZTE quickly based on its facts".

But in a surprise move, Mr Trump has said he wants to help Chinese telecoms company ZTE Corp get "back into business", as too many jobs in China are at risk.

But he offered an olive branch in calling on USA officials to revisit penalties for Chinese company ZTE Corp. for flouting US sanctions on trade with Iran and North Korea. China, for its part, has stated that it is willing to buy more American goods and services to help reduce the trade deficit. Last month, the U.S. Commerce Department banned it from buying U.S. technology or components for seven years after it misled regulators by failing to discipline employees involved in illegal exports and instead paid them bonuses.

More than 120 industry and business representatives from the United States and China will have an opportunity to testify before the interagency Section 301 Committee on the potential impact of the tariff plan over the next three days, according to the USTR's Office.

"It's a way to unlock negotiations", said Wendy Cutler, a former US trade negotiator specializing in Asia and now vice president at the Asia Society Policy Institute.

"I've never seen a president step in and reverse an agency decision like this".

Trump now appears, at least for the moment, to be walking back from that tougher stance and seeking a quicker resolution of trade conflicts with the Chinese.

The widening trade dispute between the world's two biggest economies has taken a toll on both sides. "The U.S. government shooting down the No. 2 telecommunications supplier in China at this sensitive time - it didn't look good".

According to data from the IDC marketing-insight firm, ZTE sources more than 40 percent of its components from the USA, creating a multibillion-dollar revenue stream for suppliers like Qualcomm and Intel. ZTE has asked the department to suspend the seven-year ban on doing business with USA technology exporters.

The Trump administration threatened ZTE's existence as a business last month, when the Commerce Department ordered the seven-year halt in USA shipments of computer microchips and software at the heart of most of ZTE's gear.

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