Tuesday August 21st, 2018 1:47PM

White House defends allowing China's ZTE to buy US parts

By The Associated Press

WASHINGTON (AP) — The White House on Wednesday defended President Donald Trump's decision to allow Chinese telecom giant ZTE to resume buying component parts from the U.S. — a move the Republican-led Senate is working to reverse.

In a statement, White House spokesman Hogan Gidley pointed to "massive penalties" imposed on ZTE as part of what he described as "an historic enforcement action" by the Commerce Department.

The changes, Gidley said, "will ensure ZTE pays for its violations and gives our government complete oversight of their future activity without undue harm to American suppliers and their workers."

The deal announced last week with China allows ZTE Corp. to stay in business in exchange for paying a $1 billion penalty, replacing its top managers and agreeing to let U.S. regulators monitor its operations.

The fine comes on top of $892 million ZTE has already paid for breaking U.S. sanctions by selling equipment to North Korea and Iran. ZTE must also put $400 million in escrow — a sum that it would forfeit if it ever violated the agreement.

Trump has drawn fire from Congress for intervening in the case. The Senate has been working to try to reverse the deal by tucking a provision into a must-pass defense package, which includes pay raises for the troops.

The defense bill is expected to pass the Senate later this week, and senators are unlikely to remove the ZTE provision. But a showdown could come in the House, which already passed its version of the defense bill without it. The two bills will need to be merged.

In April, the Commerce Department barred ZTE from importing American components for seven years, having concluded that it deceived U.S. regulators after it settled charges last year of sanctions violations. Instead of disciplining all employees involved, the Commerce Department said, ZTE had paid some of them full bonuses and then lied about it.

The ban amounted to a death sentence for ZTE, which relies on U.S. parts and announced that it was halting operations. The ban also hurt American companies that supply ZTE.

The deal comes as China and the U.S. are engaged in trade talks. The two countries have threatened to impose tariffs on up to $200 billion worth of each other's products in a dispute over China's tactics to supplant U.S. technological supremacy, including demands that U.S. companies hand over trade secrets in exchange for access to the Chinese market.

Sen. Chris Van Hollen, D-Md., said on the Senate floor that the U.S backing away from stiffer sanctions will send the wrong message to sanction violators.

"We can't let them off the hook with a slap on the wrist," Van Hollen said.

Sen. Tom Cotton, R-Ark., said he did not see the penalties called for in the Senate bill as harmful to the Trump administration's strategy when it comes to China and North Korea. He acknowledged that the final settlement amounted to a tough series of actions. "But I and the senators in this chamber believe that the death penalty is the appropriate penalty," Cotton said.


Associated Press writers Lisa Mascaro and Kevin Freking contributed to this report.

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