Trump Eyes ZTE Leadership Changes, 'Very Large Fine' as Alternative to Commerce Ban

Trump outlined a potential agreement that mirrored those outlined in reports even as he insisted to the White House journalist pool that “there is no deal yet.” The White House and the Chinese government are “discussing various deals” that could involve amending punishment away from the outright ban that Commerce instituted last month, Trump said. The company could instead appoint an entirely new board, agree to "very tight security rules" and pay a “very large fine” of around $1.3 billion. The review of the ZTE ban is a “favor” to Chinese President Xi Jinping but the sanctions are “really hurting American companies also,” Trump said. Senate Minority Leader Chuck Schumer, D-N.Y., blasted Trump, saying on the floor it would be a “slap on the wrist” for China. It's “exactly the kind of deal that Donald Trump, before he was President Trump, would call weak or the worst deal ever,” Schumer said.

Treasury Secretary Steven Mnuchin told the Senate Appropriations Financial Services Subcommittee Tuesday that Trump's push to re-examine the ZTE ban isn't “a function of backpedaling” on China policy. Mnuchin responded to Sen. Chris Coons, D-Del., who said the administration is “backpedaling to make it easier for a Chinese company to operate and compete with U.S. companies.” Trump's action “was not a quid-pro-quo or anything else,” Mnuchin said: “This was merely” Xi asking Trump “to look into this, which he's done. Any changes to this will fully support the mandate of making sure our sanctions and our technology are protected.” The objective of Commerce's ban “was not to put ZTE out of business,” Mnuchin said. “The objective was to make sure that they abide by our sanctions programs.”

The Senate Banking Committee approved 23-2 an amendment to the Foreign Investment Risk Review Modernization Act (S-2098) that would bar Trump from changing the Commerce ban on U.S. sales to ZTE sans certification to Congress that the company complied with U.S. laws. Senate Banking advanced S-2098 25-0. The bill would expand the purview of the Committee on Foreign Investment in the U.S., the broad executive branch group that reviews the national security implications of foreign takeovers of U.S.-located companies of all types, to include reviews of nonpassive foreign investment in a U.S. “critical technology company” or “critical infrastructure company.” The House Digital Commerce Subcommittee examined S-2098's House companion (HR-4311) in April (see 1804190059).

S-2098 may make it to the floor only as an amendment to the FY 2019 National Defense Authorization Act rather than as a stand-alone bill, Senate Banking ranking member Sherrod Brown, D-Ohio, told reporters. Majority Leader Mitch McConnell, R-Ky., “for some reason doesn't seem to want to give this floor time” on its own, Brown said. The House is to vote this week on its version of the FY 2019 NDAA (HR-5515), which includes provisions barring any U.S. government agency from using “risky” technology produced by Huawei or ZTE.

Senate Majority Whip John Cornyn, R-Texas, S-2098's lead sponsor, hailed Senate Banking's vote to advance that bill. “It's a very important piece of legislation” but is “only one piece of the China picture,” Cornyn said during Senate GOP leaders' Tuesday news conference: The federal government must consider how to deal with China “from a national security standpoint and from an economic standpoint.” ZTE is “a national security issue” and “I'm sure we will continue to have a conversation” on how to deal with it, Cornyn said. He pointed to the FCC national security NPRM (see 1804170038) as an example of federal action to curb Chinese telecom companies.