ZTE Could Face Fresh $1.3 Billion Fine, Trump Says

ZTE Could Face Fresh $1.3 Billion Fine, Trump Says
  • US President Donald Trump said it was a favour to China
  • Fine could replace crippling sanctions imposed on ZTE last month
  • ZTE could also face a management shakeup and strict new rules

US President Donald Trump said Tuesday that as a favour to China his administration was considering a fresh set of penalties on embattled Chinese company ZTE to replace crippling sanctions imposed last month that threatened to put the firm out of business.

ZTE could face a new fine of as much as $1.3 billion (roughly Rs. 8,900 crores) as well as a management shakeup and strict new rules, Trump told reporters at the White House, although no deal has been finalised.

"As a favour to the president, I am absolutely taking a look at it," he said, referring to Chinese President Xi Jinping.

Reports of a compromise on ZTE sparked an immediate negative reaction on Capitol Hill, where top Republican and Democrat senators denounced it and one vowed to block it.

ZTE was fined $1.2 billion (roughly Rs. 8,200 crores) in March 2017, but last month Washington banned the sale of crucial US components to the company after finding it had lied multiple times and failed to take actions against employees responsible for sanctions violations on Iran and North Korea.

Trump said the harsh sanctions on ZTE hurt US firms that supply components to make cell phones.

"When I looked at it, I said, you know, they can pay a big price without necessarily damaging all of these American companies," he said.

"What I envision is a very large fine of more than $1 billion. It could be $1.3 billion. I envision new management, new board and very, very strict security rules."

The reprieve for ZTE came just after Washington and Beijing on Saturday called a halt to a spiralling trade dispute sparked by US accusations of China's unfair trade practices and the alleged theft of US technology, suspending plans to impose tariffs on as much as $150 billion (roughly Rs. 10.2 lakh crores) in Chinese imports.

In a series of tweets, top Republican Senator Marco Rubio of Florida, who chairs a key subcommittee on foreign relations, denounced the move, vowing lawmakers would work on "veto-proof legislation" to stop the deal.

Xi 'has played' Trump
The outlines of the deal for ZTE, first reported in The Wall Street Journal, amounted to exactly the same sort of punishment that had proved ineffective last year, Rubio said.

"Now we are offering the same deal of a fine & employee discipline?" Rubio wrote.

In another tweet, Rubio said the Trump administration had "surrendered" to China.

"Making changes to their board & a fine won't stop them from spying & stealing from us."

Senate Minority Leader Chuck Schumer, Democrat of New York, said the proposed arrangement would "do nothing to protect American national or economic security and are simply a diversion from the fact that we have lost."

Schumer said in a statement the White House and Treasury Secretary Steven Mnuchin had been duped by China.

"President Xi has played President Trump and Secretary Mnuchin."

Trump also faced accusations of quid-pro-quo after pledging to soften sanctions on ZTE just days after AFP reported a Chinese state firm would pour cash into a Trump-tied real estate venture in Indonesia.

Lawmakers were incensed by Trump's offer last week to rescue the company and Chinese jobs, which came via Twitter in the midst of the trade talks with Beijing. The president angrily denied back-pedalling.

"This affair is a screaming violation of the US Constitution's emoluments clause, which flatly prohibits the acceptance of gifts and benefits from governments in the absence of congressional consent," Robert Weissman, president of Public Citizen, a consumer advocacy organisation frequently sceptical of free trade agreements.

"In this case, there's nothing hypothetical about how the emolument - the loan - might affect the president's actions. It's almost inconceivable that it didn't," Weissman said in a statement.

In testimony before the Senate on Tuesday, Treasury Secretary Steven Mnuchin said the administration's primary goal was safeguarding US interests and denied any quid pro quo.

"The objective was not to put ZTE out of business. The objective was to make sure they abide by our sanctions programs," said Mnuchin said.

"I can assure you anything that they consider will take into account the very important national security issues and those will be addressed."

Mnuchin defended the Trump's trade policy, saying he has been "more aggressive than any previous president ever," and is not looking for "short-term gains" but to "create a level playing field and make sure US technology is protected."


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Further reading: Telecom, Mobiles, ZTE, US, Donald Trump, ZTE Ban, China
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