ZTE stall at CEBIT

Hit me, ZTE, one more time, warns White House trade advisor

Image credit: Dreamstime

White House trade advisor Peter Navarro has announced that Chinese telecommunications giant ZTE will be given a final chance to operate responsibly in the US.

Under these arrangements, ZTE will continue working with US companies. Due to its reliance on American-manufactured components, however, it could risk shutdown if it steps out of line once more.

ZTE, which is headquartered in Shenzhen, Guangdong province, is among the world’s largest telecommunications manufacturers and a major player in China’s smartphone market. The company - along with fellow telecomms giant Huawei - has come under criticism in the US for its alleged ties to the Chinese government, which could enable state surveillance of its smartphone users.

In March 2017, the company pleaded guilty to illegally selling US technology to Iran and North Korea, violating trade sanctions. ZTE was subsequently fined $1.2bn (£900m) by the US department of commerce in the largest such fine in US history.

In April 2018, the company was criticised for neglecting to reprimand the employees involved in the incident – a requirement for it to continue working with US companies – and even providing bonuses to 35 of the employees involved in the offence. Following its failure to comply, the department of commerce placed a seven-year ban on exports to ZTE.

In May, ZTE announced that it had suspended its main operating activities and was working to negotiate a reversal of the ban. Chinese President Xi Jinping reportedly made a personal appeal to President Trump to show some leniency with ZTE and Trump later announced in a tweet that he was working to get ZTE "back into business" in the US. The decision to lift the sanctions has attracted criticism from both Democrats and Republicans, with a coalition of lawmakers pushing legislation to overturn the agreement, citing a threat to national security posed by ZTE.

Last week, Wilbur Ross, the secretary of commerce, announced the terms of the deal: ZTE must pay a $1bn (£750m) fine and deposit $400m (£300m) as a suspended penalty before the export restrictions are lifted. It must also change its management team and submit to integration of a compliance team of within the company. ZTE agreed to the deal.

With at least a quarter of ZTE’s recent phone models using American components, the company will require a costly process of redesigning its products with parts sourced elsewhere if the ban comes back into effect. The strict ban has been characterised as a major blow in a trade dispute between the US and China, which some fear could bubble up into a trade war.

According to Navarro, the deal was a “personal favour” to Xi, which also helped to boost “goodwill” before Trump’s appearance at a summit in Singapore to discuss the future of the Korean Peninsula with Supreme Leader of North Korea, Kim Jong-Un.

Navarro commented on Fox that: “It’s going to be three strikes, you’re out […] if they do one more additional thing, they will be shut down.”

“The President did this as a personal favour to the President of China as a way of showing some goodwill for bigger efforts such as the one here in Singapore [regarding North Korea],” said Navarro, who added that ZTE was a “bad actor”.

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