U.S. lawmakers push back on Trump talk of helping China's ZTE

[May 16, 2018]  By Patricia Zengerle and Richard Cowan

WASHINGTON (Reuters) - U.S. lawmakers on Tuesday rejected any plan by President Donald Trump to ease restrictions on China's ZTE Corp <000063.SZ>, calling the telecommunications firm a security threat and vowing not to abandon legislation clamping down on the company.

Trump on Monday had defended his decision to revisit penalties on ZTE for flouting U.S. sanctions on trade with Iran, in part by saying it was reflective of the larger trade deal the United States is negotiating with China.

"I hope the administration does not move forward on this supposed deal I keep reading about," Republican Senator Marco Rubio said. Bilateral talks between the world's two biggest economies resume in Washington this week.

The Trump administration is considering an arrangement under which the ban on ZTE would be eased in exchange for elimination of new Chinese tariffs on certain U.S. farm products, including pork, fruits, nuts and ginseng, two people familiar with the proposal said. The potential arrangement was first reported by the Wall Street Journal.

"They are basically conducting an all-out assault to steal what we've already developed and use it as the baseline for their development so they can supplant us as the leader in the most important technologies of the 21st century," Rubio said at a Foreign Relations Committee hearing on Asia policy.

Trump had taken to Twitter on Sunday with a pledge to help the company, which has suspended its main operations, because the penalties had cost too many jobs in China. It was a departure for a president who often touts "America First" policies.

The Commerce Department in April found ZTE had violated a 2017 settlement created after the company violated sanctions on Iran and North Korea, and banned U.S. companies from providing exports to ZTE for seven years.

U.S. companies are estimated to provide 25 percent to 30 percent of components used in ZTE's equipment, which includes smartphones and gear to build telecommunications networks.

CYBERSNOOPING?

The suggestion outraged members of Congress who have been pressing for more restrictions on ZTE. Some U.S. lawmakers have alleged equipment made by ZTE and other Chinese companies could pose a cyber security threat.

A sign of ZTE Corp is pictured at its service centre in Hangzhou, Zhejiang province, China May 14, 2018. REUTERS/Stringer

"Who makes unilateral concessions on the eve of talks after you've spent all this time trying to say, correctly in my view, that the Chinese have ripped off our technology?" Senator Ron Wyden, the senior Democrat on the Senate Finance Committee, which oversees trade policy, told Reuters.

Wyden, who is also on the Intelligence Committee, was one of 32 Senate Democrats who signed a letter on Tuesday accusing Trump of putting China's interests ahead of U.S. jobs and national security.

The company has denied wrongdoing.

Republican Representative Mac Thornberry, chairman of the House Armed Services Committee, said at a Bloomberg event on Tuesday he did not expect lawmakers would seek to remove a ban on ZTE technology from a must-pass annual defense policy bill making its way through Congress.

"I confess I don’t fully understand the administration’s take on this at this point," Thornberry said. "It is not a question to me of economics, it is a question of security."

Another Republican, Senator John Kennedy, defended Trump, saying the president’s approach is part of a larger set of negotiations with China.

"He didn't get up one day and go, 'I think I'll change my mind on ZTE.' I think it’s part of a larger issue, and part of a larger set of negotiations," Kennedy told reporters.

(Additional reporting by Susan Cornwell and David Lawder; Editing by Chris Sanders and Meredith Mazzilli)

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