ZTE offices in the rain

Republicans and Democrats band together to reverse ZTE deal

Image credit: REUTERS/Jason Lee

The US Senate is working to overturn a deal agreed between the White House and Chinese telecommunications giant ZTE, which allow the company to continue doing business with US companies.

ZTE and fellow telecommunications manufacturer Huawei have come under severe criticism in the US for suspected ties to the Chinese government, potentially enabling state surveillance of Huawei and ZTE phone users. In March 2017, ZTE pleaded guilty to illegally exporting US technology to Iran and North Korea in violation of trade sanctions and was slapped with a record-breaking $1.2bn (£900m) fine by the US department of commerce.

In April 2018, ZTE was found to have failed to fulfil the requirements necessary for it to continue working with US companies. The department of commerce subsequently placed a ban on exports to ZTE for seven years. ZTE relies on US manufacturers to produce components for a quarter of its recent phone models.

However, this ban was swiftly overturned by President Donald Trump, reportedly as a favour to Chinese President Xi Jinping. ZTE agreed to pay a total fine of $1.4bn (£1.05bn) and to change its management team in order to continue operating. Earlier this week, White House trade advisor Peter Navarro said that ZTE had one final chance to operate responsibly before the ban would be reapplied. This could lead the company to shut down if it is not able to source components from other supplies and redesign its models.

However, many US lawmakers are deeply unimpressed by the White House’s concessions to the company, which many believe is a national security risk that should not be allowed to resume trading with US companies.

A bipartisan group of US senators has put forward a renewed ban on trading with ZTE, Huawei and other Chinese telecommunications companies in an amendment to the 2019 National Defense Authorisation Act. The amendment will also prevent loans or subsidies being provided to these companies.

According to Republican Senator Tom Cotton, who co-authored the amendment, ZTE is a “repeat bad actor that should be put out of business”. He added, somewhat dramatically, that he believes that the death penalty would be an appropriate punishment for ZTE’s behaviour.

The amendment is due to be voted on in the Senate this week. If passed, it will then need to be combined with the House version of the bill. If the bill passes through Congress, it will fall into the tiny hands of the President himself, whose signature is required to pass it into law.

ZTE shares resumed trading today, with 40 per cent wiped off their value.

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