US lifts ban on ZTE following latest China trade talks

US lifts ban on ZTE following latest China trade talks

08/06/18

Anthea Ow, Content Producer

The US is to relax its punitive measures against Chinese telecoms giant ZTE, removing a ban on the company from buying US parts.

US Commerce Secretary Wilbur Ross announced yesterday that the Trump Administration has agreed to lift the ban, imposed in April and which was set to last for seven years.

The Washington Post reports that the move is part of a deal that includes a US$1 billion penalty and the installation of a new in-house compliance team in ZTE, staffed by US experts.

The ban was imposed on ZTE for violating the terms of a 2017 settlement agreement to pay US$1.19 billion in fines and punish employees involved in illegal shipments of telecommunications equipment to Iran and North Korea.  By preventing ZTE from buying the US components it relies on to make smart phones and other devices, the ban was crippling for its key businesses.

CNBC reported Yin Yimin, Chairman of ZTE, describing the US ban as causing “huge losses for the company” and that it had been forced to pay a “disastrous price”.

Ross said that the US$1 billion penalty was “the strictest and largest settlement fine that has ever been brought by the Commerce Department against any violator of export controls.”

Last month, President Trump surprised the world – and many in the Commerce Department – when he tweeted that he would help ZTE to “get back into business, fast,” to save “jobs in China.”

He instructed the Commerce Department to “get it done.”

Yesterday’s announcement appears to make good on the promise, which was widely interpreted as an olive branch to Beijing. It may be working; following the lifting of the ZTE ban, which is reported to have been a key discussion point in recent trade negotiations, China has adopted a more conciliatory tone towards the US. According to the South China Morning Post, the Chinese Ministry of Commerce refrained from repeating earlier warnings that China would abandon its earlier promises to buy more American goods if Washington implemented tariffs.

Nonetheless, the Commerce Department’s lenience on ZTE has been criticised for not addressing US concerns with technology and trade with China.  Senator Mark Warner told CNBC yesterday that an “overwhelming majority” of the Senate was united against the deal and would “absolutely” try to block the agreement.

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