ZTE Penalties Sought in Senate May Set Up Showdown With Trump

Republican senators pushing to keep stiff sanctions on China's ZTE Corp. dug in for a potential showdown with the White House as some of their colleagues said they'd try to negotiate a way out with President Donald Trump.

Sens. Tom Cotton, R-Ark., and Chris Van Hollen, D-Md., said Thursday there was no plan in the Senate to alter their amendment to a defence authorisation bill to restore restrictions on ZTE that were lifted by Trump. The annual defence policy bill may be voted on by the Senate in the coming days.

The Trump administration is counting on making changes to the ZTE language once the House and Senate begin negotiations to merge their versions of the defence bill. Though the White House hasn't publicly threatened to veto the legislation if the Senate's language is adopted, Sen. Lindsey Graham, R-S.C., is among the lawmakers hoping to find a compromise in a meeting with Trump next week.

"If it's going to get the bill vetoed, I want to fix it," Graham said of the ZTE provision. "The question is, can we find a compromise and put it on the defence bill?"

The wrangling over ZTE, China's second-largest telecom equipment maker, is a rare instance of Republicans joining with Democrats to defy Trump, whose trade policies have created friction within the party. While many GOP lawmakers have been critical of his imposition of tariffs on allies such as Canada and the European Union, they've stifled attempts to curtail Trump's authority. But cracking down on the Chinese company accused of violating sanctions against Iran and North Korea has drawn broad support, with members citing national security concerns.

ZTE's shares plummeted more than 40 percent in Hong Kong on Wednesday, the company's first day of trading after being suspended in mid-April when the Commerce Department blocked the company from buying technology from US suppliers. The US restrictions were put in place for the company's sanctions violation.

Trump announced in May, in the midst of trade negotiations with China, that as a personal favour to Chinese President Xi Jinping he was reconsidering the ZTE penalty, which had ground the company's operations to halt. Earlier this month, Commerce Secretary Wilbur Ross announced a deal that would involve ZTE paying a $1 billion (roughly  Rs. 6,700 crores) fine and allowing US compliance officers to monitor the company to help get ZTE back in business.

"We've articulated our desire to better educate members about the ZTE action by Commerce, and we expect to address it in conference," White House legislative liaison Marc Short said, referring to the House-Senate negotiations on the bill.

Sen. Bob Corker, R-Tenn., said that while anything can happen in the House-Senate conference, senators who support the sanctions on ZTE are "adamant " that the language in the Cotton-Van Hollen amendment is most appropriate.

"I talked to my colleagues on the Intelligence Committee and they are pretty dug in on this" he said.

House Speaker Paul Ryan, R-Wisc., on Thursday attempted to stay out of the fight, saying he's letting lawmakers decide whether to pass legislation that would reverse Trump's ZTE deal.

"I'm not going to micromanage the place," Ryan said at a news conference in Washington when asked if the final defence bill would include the ZTE block. "I'm going to leave that to our conferees."

ZTE became one focal point in a trade dispute between China and the US. An agreement allowing the company to reopen was seen as a key Chinese demand as the world's two largest economies try to avoid a trade war that could undermine global growth.

Meanwhile, the White House has said it's proceeding with plans to impose tariffs on at least $50 billion (roughly Rs. 3.4 lakh crores)  in Chinese imports, with a final list of targets due to be released on Friday.

© 2018 Bloomberg LP