Donald Trump Wants To Help Make A Controversial Chinese Company Great Again

For some reason, the President wants to help a Chinese company that has been accused of being a security risk by American intelligence services.

President Trump, who campaigned in no small part on his complaints about the American trade deficit with China and his (incorrect) claims that China is a currency manipulator, is now saying he wants to help a controversial Chinese telecommunications company regain access to American markets:

In a surprising overture to China, President Donald Trump says he would help a Chinese telecommunications company get “back into business,” saying too many jobs in China are at stake after the U.S. government cut off access to its American suppliers.

The U.S. Commerce Department last month blocked the ZTE Corp., a major supplier of telecom networks and smartphones based in southern China, from importing American components for seven years. The U.S. accused ZTE of misleading American regulators after it settled charges of violating sanctions against North Korea and Iran.

The dispute predates Trump’s arrival in the Oval Office and the Commerce sanction was issued amid worsening trade tensions between the U.S. and China.

Trump’s unexpected announcement Sunday comes as the two countries prepare for additional trade talks in Washington this week. Given past vows to stop the flow of U.S. jobs to China and what he’s called unfair trade practices, Trump’s seeming concern about Chinese jobs was something of a backflip.

“A reversal of the ZTE decision could temporarily tamp down trade tensions by allowing the Chinese to make concessions to the U.S. without losing face,” said Eswar Prasad, a professor of trade policy at Cornell University. “Trump may have recognized that backing off on ZTE clears the path for him to claim at least a partial victory in the US-China trade dispute based on the concessions the Chinese seem prepared to offer.”

(…)

“The President’s tweet underscores the importance of a free, fair, balanced, and mutually beneficial economic, trade and investment relationship between the United States and China,” said White House deputy press secretary Lindsay Walters in a prepared statement.

The White House deferred to the Commerce Department on any specific questions relating to sanctions.

In a later tweet, Trump suggested the U.S. and China were moving forward on trade negotiations, but it was not clear how the ZTE case would fit into the bigger picture.

“I’ve never seen a president step in and reverse an agency decision like this. It’s not clear, of course, if he’s planning to really reverse it or think of a solution in a larger context, but it is something that is just out of the norm,” said Amanda DeBusk, the chair of the international trade and government regulations practice at the firm Dechert LLP.

DeBusk, a former Commerce Department assistant secretary for export enforcement, said Trump’s announcement indicates “he is looking to accomplish his objectives on trade with China on a much larger level.”

The tactic caught experts on international relations off guard.

“At a minimum, the optics of the decision are terrible. Although the recent step to ban sales of American components to ZTE for seven years may have been going overboard, the manner in which this reversal is being made cheapens the value of the national security and legal foundations of executive branch actions,” said Scott Kennedy, of the Center for Strategic & International Studies. “It makes it appear as if the Trump administration is willing to trade protecting American national security for promoting some US agricultural exports and Chinese jobs.”

(…)

China on Monday welcomed Trump’s comments.

“We think highly of the U.S. statement regarding ZTE’s case,” said Lu Kang, a spokesman for China’s foreign ministry. “We are currently in close communication over details of the implementation.”

The foreign ministry said Vice Premier Liu He will visit the U.S. from Tuesday to Saturday for consultations with U.S. Treasury Secretary Steve Mnuchin.

Here are President Trump’s tweets on the issue:

As noted, the President’s unexplained reversal of a policy put in place by his own Administration just recently has also raised some criticism from Congressional Democrats such as Congressman Adam Schiff and Senator Chuck Schumer as well as Republican Senator Marco Rubio:

INSERT SCHIFF AND RUBIO AND SCHUMER TWEETS

As Congressman Schiff and Senator Rubio make clear, the issue with ZTE isn’t simply one of American jobs or international trade, although that certainly is part of the issue, but concerns national security as well, as has been noted for several years now. As far back as 2012, for example, The New York Times reported that the House Intelligence Committee had cited ZTE and Huawei reported that, another Chinese telecommunications company that has sought to make inroads into the American market in recent years, as potential security risks due to their ties to the Chinese government. In mid-April of this year, officials in the United Kingdom declared ZTE a security risk. This move came at roughly the same time that the Commerce Department imposed sanctions against the companies that both impacted their ability to sell their products in the American market and to access technology from American companies that were necessary for the operation of their devices. Finally, and most recently, the Pentagon issued an order barring American military bases from selling phones made by ZTE and Huawei, although the order fell short of banning the use of such devices on those bases:

U.S. service members will no longer be able to purchase ZTE and Huawei phones on military bases, according to a new Defense Department directive that cites security risks posed by the devices.

“Huawei and ZTE devices may pose an unacceptable risk to Department’s personnel, information and mission,” Pentagon spokesman Major Dave Eastburn said in a statement. “In light of this information, it was not prudent for the Department’s exchanges to continue selling them to DoD personnel.”

The Pentagon declined to provide the technical details of potential threats.

The order to halt the sale of Huawei and ZTE phones and remove them from the military exchanges was given last Friday, the Pentagon said. Mobile Internet modems and other wireless products are also included in the ban. The order was reported earlier by Stars and Stripes and the Wall Street Journal Wednesday.

Ostensibly, the action by the Commerce Department was based on evidence that ZTE and Huawei had both violated American sanctions regarding business dealings with North Korea, but this announcement by the Defense Department raises the question of whether there may be more to the underlying actions. Specifically, there have been unspecified allegations from several sources that cybersecurity experts and American intelligence agencies are concerned that the companies could represent national security threats to the extent that they may contain backdoors or other security threats that could be exploited by the Chinese government. Indeed, the fact that the Pentagon has taken the somewhat unusual step of banning the sale of ZTE and Huawei products from being sold on base would seem to be a strong indication that there is, at the least, a reason to be concerned about the advisability of giving these companies access to the American market.

The oddest thing about the President’s tweet, of course, is his reference to helping the Chinese save jobs in China. This is, of course, the same President who has spent the better part of the past three years as a both a candidate and as President accusing the Chinese of adversely impacting the American economy due to the size of the trade deficit with China and accusing the Chinese government of being a currency manipulator, and promising he would label China as such when he became President. As it turned out, of course, the President’s claims about China being a currency manipulator are largely unfounded and he has never proceeded down this path despite his campaign promises. As for the trade issue,

Although it’s hard to tell for sure, it appears that the Chinese are insisting on some solution to the sanctions imposed against one the nation’s major companies as part of ongoing trade negotiations between the U.S. and China routed in the tit-for-tat trade sanctions that have been imposed by the two companies over the past several months. If this were just a simple matter of the issue of ZTE doing business in North Korea, then perhaps it makes sense for the United States to give up some ground with regard to these sanctions directed at the company. However, as Senator Rubio and Congressman Schiff noted, there are also apparently some national security issues involved here that the President’s tweet doesn’t address at all. Indeed, taken in context with those warnings, the President’s tweets make no sense whatsoever.

Update: President Trump tweeted about the ZTE issue this afternoon:

Of course none of this answers the security issues noted above.

FILED UNDER: Asia, Donald Trump, Economics and Business, International Trade, Politicians, US Politics, ,
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. Mu says:

    Only a matter of time until a lucrative consulting deal or an unusual credit to Cohen or Kushner will show up.

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  2. Mark Ivey says:

    Did ZTE buy an apartment in Trump Tower or a Trump Condo??

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  3. Mister Bluster says:

    REPUBLICAN President Pork Chop Pud sez: Too many jobs in China lost.

    Hurricane kills American Citizens in Puerto Rico. Trump throws paper towels at the survivors and says that “they want everything done for them”.
    40,000 homes and businesses still out of electric service a year later and The President of the United States is collaborating with Communist China to help Chinese Citizens to get back to work.

    How do you spell BACK STABBING TRAITOR?…..TRUMP!!!

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  4. MattBernius says:

    Its worth noting that ZTE violated sanctions with *both* Iran and North Korea. Let us not forget that the current tough talk on the administration is that it will not tolerate foreign companies doing business with Iran now that we are exiting the joint framework. So we already see the administration signalling that there talk may not be as tough as originally thought.

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  5. Argon says:

    Trump got kicked in the Iowa and Wisconsin, so of course he folded.

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  6. Kathy says:

    I wonder about the national security issues. Aren’t a lot of other telecom electronics made in China? Doesn’t Foxcon make iPhones in China? Sure, they’re a Taiwanese company. But with the factory in China, who can tell how much the government dictates to them.

    And what if ZTE and Huawei move some operations to India, say, or some other country?

    I guess no one knew globalization and trade could be so covfefe.

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  7. Mister Bluster says:

    @Argon:..Trump got kicked in the Iowa and Wisconsin,..

    Nuts!

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  8. MarkedMan says:

    There is every reason to believe that Trump’s sudden reversal of his own administrationks policies might have been instigated by a bribe from th Chinese. Trump could, of course, make his finances public or divest himself as all modern presidents have done. The fact that he doesn’t lends very strong evidence that he is personally corrupt.

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  9. Not the IT Dept. says:

    Somebody’s getting paid off to make this happen. This is just too weird.

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  10. PJ says:

    @MattBernius:

    So we already see the administration signalling that there talk may not be as tough as originally thought.

    Well, if you bribe him, or someone close to him.

    Doubtful that European companies or countries would be able to do that as easily as companies or countries in Asia and the Middle East…

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  11. michael reynolds says:

    Clearly money changed hands as @Mu suggests above. Someone check Mark Cohen’s bank account, or the interest payments on Kushner’s white elephant 666. I’d put the odds of bribery at 90%+.

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  12. Andy says:

    I really don’t understand why people continue to interpret Trump’s tweets literally. It’s not like we don’t have any experience with how the man tweets.

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  13. michael reynolds says:

    @Andy:
    When every word is a lie one is left to try and parse the lies.

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  14. gVOR08 says:

    So Marco Rubio can see the truth and is willing to fearlessly speak it. Walking it back in 10, 9, …

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  15. Jen says:
  16. An Interested Party says:

    Can you imagine the reaction if Obama did something like this…articles of impeachment involving treason would be drawn up before the end of the week…the longer that Republicans associate themselves with this scumbag, the more that his stench gets smeared all over them…

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  17. James Pearce says:

    the President’s tweets make no sense whatsoever.

    Do they ever?

    @Andy:

    I really don’t understand why people continue to interpret Trump’s tweets literally. It’s not like we don’t have any experience with how the man tweets.

    The way it’s been explained to me is that he’s POTUS and, as such, his tweets are imbued with qualities that are quite separate from their, you know, quality.

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  18. CSK says:

    @Jen:

    We knew it had to be something like this, didn’t we?

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  19. Franklin says:

    The company I work for sells expensive software and optional assets to use with it. We are considering selling in China, but we’ve been instructed to tighten the shit out of the security. Because once a digital asset is in China, it becomes freeware. Personally I wouldn’t deal with their dishonesty.

    It’s such a marked change from working with their Japanese neighbors, who are incredibly honest and go out of their way to make sure they’ve paid you properly for each software license, etc.

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  20. Daryl and his other brother Darryl says:

    @Jen:
    This is a big deal…not sure if anyone is still reading this thread…but it’s worth another post, I think.

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  21. MarkedMan says:

    @Jen: Yeah, this is starting to blow up. This is what Talking Points Memo says about it:

    Now, the question I had was “is this just one more component of a huge development that Trump also just has one part of?” The answer seems pretty clearly to be no. The overall project has two backers: MNC corporation of Indonesia (huge diversified mega corp) and the Trump Organization (family company of American strongman). A corporate financial/promotional document for MNC says the company “is currently developing the MNC Lido City project; both theme park and smart city — in partnership with The Trump Hotel Collection (emphasis added)”

    So MNC actually says that it and Trump Org. are developing the theme park jointly. That sounds pretty tight. They actually refer to the whole project as a “Trump Community.” In other documents, they refer to the Trump Organization having licensing and management contracts for facilities in Lido City beyond the Trump buildings and residences.

    To be clear, these are phrases. We don’t know what the underlying contractual connections are or what the value of these various relationships and management contracts are. If experience is any guide, Trump tends to keep his investments limited and relies on the Trump brand to leverage upsides and revenues from management and licensing. But the press references to this project being “connected to” Trump seem to significantly understate the relationship.

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  22. Todd says:

    @Daryl and his other brother Darryl: In a normal administration, this would be a huge F’ing deal. In Trump world, this will probably be unlikely to break through the daily sh*t show that is our country at the moment. Trump is a corrupt criminal just doesn’t have shock value anymore. It’s built into the equation. 🙁

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