Bipartisan Senate Vote to Punish ZTE Heightens Pressure on Trump

(Bloomberg) -- The U.S. Senate passed legislation on Monday evening that would restore penalties on the Chinese telecom giant ZTE Corp., complicating President Donald Trump’s efforts to ease sanctions on the company.

The bipartisan measure, part of a defense bill, passed 85-10 and came two days before Trump was to host Republican members of Congress to discuss ways that would allow ZTE to get back into business.

The Senate legislation must be reconciled with the version of the National Defense Authorization Act passed by the U.S. House last month. That offers the White House an opportunity to get the provision removed but makes the meeting, planned for Wednesday, even more crucial to keep in place a reprieve that the U.S. Commerce Department granted to ZTE earlier this month.

Earlier Monday, Senate Majority Whip John Cornyn of Texas confirmed Wednesday’s meeting with Trump, which may include other Republicans such as Senator Lindsey Graham of South Carolina.

The Trump administration wants legislators to modify the Senate language on ZTE in the defense bill, once the House and Senate begin work to merge their versions of the legislation. Lawmakers hope to wrap up negotiations by the end of July.

“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 last week.

“We think we can fix it in conference,” Short added, referring to the process when differences in House and Senate bills are reconciled.

Senator Chris Van Hollen, a Democrat from Maryland and co-sponsor of legislation that would block the ZTE deal, said he hasn’t been invited to the White House gathering Wednesday. “They made it a partisan meeting even though it is a bipartisan issue,” he said.

Rare Instance

The wrangling over ZTE, China’s second-largest telecom equipment maker, is a rare instance of Republicans joining with Democrats to defy Trump.

“This is the first time Congress has really stood up to him on a trade issue, and it’s clear they are angry,” said Bill Reinsch, a senior adviser at the Center for Strategic and International Studies in Washington. “There will be a lot of congressional resistance to weakening the ZTE amendment, but I would not be surprised to see a compromise.”

Commerce this month struck the deal with ZTE that would allow the company to get back in business after it pays a record fine and agrees to management changes. The agreement was made after the U.S. in April blocked ZTE’s access to U.S. suppliers, saying it had broken a sanctions settlement and then lied about the violations. The company announced it was shutting down just weeks after the ban took effect.

The agreement was seen as a key Chinese demand as the world’s two largest economies try to avoid a trade war and negotiate the denuclearization of North Korea. After a personal plea from Chinese President Xi Jinping to help the company get back into business, Trump last month instructed Commerce to find a solution to save ZTE.

Commerce Secretary Wilbur Ross and Treasury Secretary Steven Mnuchin in recent weeks have tried to persuade lawmakers of the administration’s approach to ZTE, but legislators said the deal failed to address their national-security concerns.

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