A laborer pushes a bicycle beside the ZTE Corp. stand ahead of the Mobile World Congress (MWC) in Barcelona, Spain. (Photographer: Pau Barrena/Bloomberg)

ZTE Ban Is Likely to Stay in Defense Bill, Republican Says

(Bloomberg) -- Any deal President Donald Trump strikes with China over ZTE Corp.’s ability to tap the U.S. market isn’t likely to apply to government agencies, according to a key Republican lawmaker.

House Armed Services Chairman Mac Thornberry said Tuesday that he doesn’t “see a growing movement in the House” to remove language in the defense authorization bill that would ban government agencies from using technology made by ZTE, China’s second-largest manufacturer of telecommunications gear.

ZTE became a flash point in U.S.-China relations after the administration crippled the company by cutting it off from U.S. suppliers for allegedly violating terms of a 2017 sanctions settlement, then lying about it. But in what appeared to be a step back from the crisis, Trump this week unexpectedly ordered the Commerce Department to help get the Shenzhen-based company back in business, saying “too many jobs in China lost.”

Regardless of an agreement that may be struck by the administration and Beijing, House lawmakers on both sides of the aisle want to prevent the company from getting information that the U.S. doesn’t want China to have, Thornberry said at Bloomberg Government event.

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“I confess I don’t fully understand the administration’s take on this at this point,” Thornberry said. “It is not a question to me of economics, it is a question of security.”

At a Senate Intelligence Committee hearing on Capitol Hill, Senator Mark Warner, the panel’s top Democrat, said Trump’s move on ZTE appears to be a “bargaining chip.” Fellow Democrat Ron Wyden said the president’s comments raise “extraordinary national security questions as well as economic policy concerns.”

During the hearing on confirming William Evanina as director of the National Counterintelligence and Security Center, Evanina was asked by Republican Senator Marco Rubio if he’d ever use a ZTE phone. Evanina said he wouldn’t.

Trump’s willingness to revisit penalties against ZTE shows that even national security considerations are up for negotiation as he seeks to forge a trade deal with China, White House economic adviser Larry Kudlow said Tuesday.

“You’ve got different channels here,” Kudlow said at an event in Washington Tuesday hosted by Axios. “There’s an economic channel, there’s a law enforcement channel, there’s a national security channel. In terms of the president’s point of view, I think he looks at them whole cloth.’’

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Kudlow said Trump views national security and trade as linked and was approaching the ZTE action in the broader context of U.S. relations with China, and Trump’s relationship with Chinese President Xi Jinping.

The House is scheduled to take up the defense authorization measure next week. The bill would also prohibit the Defense Department from renewing contracts with vendors that work with the Chinese company.

In addition, under the current draft of the legislation, the director of national intelligence, together with the secretaries of defense, state and homeland security, must report on the threat that ZTE poses to the U.S. Government agency chiefs would have as much as two years if needed to change vendors and update their supply chains.

©2018 Bloomberg L.P.

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