image

ZTE

ZTE

US Senate passes bill that could kill Donald Trump’s ZTE deal – but the president isn’t done yet

Trump’s plan to meet with lawmakers on Wednesday emerged on Monday afternoon, as the Senate was poised to pass a bill that would help nail ZTE’s coffin shut

PUBLISHED : Tuesday, 19 June, 2018, 5:02am
UPDATED : Tuesday, 19 June, 2018, 7:31am

The US Senate passed a US$716 billion defence policy bill on Monday that backs President Donald Trump’s call for a bigger, stronger military but would also repeal his deal to reopen Chinese telecoms company ZTE.

The Republican-controlled Senate voted 85-10 for the annual National Defense Authorization Act, or NDAA, which authorises US military spending but is generally used as a vehicle for a broad range of policy matters – in this case a block on US companies selling to ZTE, undoing Trump’s recent deal.

'Give ZTE the death sentence' say US senators

But the bill won’t become law yet; first it must be reconciled with one already passed by the House of Representatives, which does not feature the ZTE ban – and that provides Trump with an opportunity to make sure his deal stays alive.

Earlier on Monday, it emerged that Trump had planned a meeting of Republican lawmakers in which he intends to persuade them to remove the ZTE language during the reconciliation phase’s conference negotiations.

Trump’s meeting, planned for Wednesday, was confirmed on Monday by Senate Majority Whip John Cornyn of Texas and may include other Republicans such as Senator Lindsey Graham of South Carolina.

Hong Kong, Chinese stocks slide on ZTE slump, rate rise fears

That is where the White House hopes to apply some influence, and get the ZTE language removed. Lawmakers hope to wrap up conference 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, referring to the House-Senate negotiations on the bill.

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 Centre 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.”

ZTE is accused of violating trade laws by selling sensitive technologies to North Korea and Iran, and subsequently failing to follow through on remedies imposed by the Commerce Department.

As punishment, ZTE was banned from buying US products, including microchips from Qualcomm, effectively shuttering it. But after a personal plea from Chinese President Xi Jinping to help the company get back into business, Trump last month instructed the Commerce Department to find a solution to save ZTE.

ZTE shares slump 42 per cent as it moves to fire senior executives

The Commerce Department then worked out a deal to allow ZTE to return to the American market provided it changed its management, paid a US$1 billion fine, accepted US-chosen compliance officers and placed US$400 million into escrow in the event of further violations.

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 denuclearisation of North Korea. But it angered some US lawmakers, who see ZTE as a security threat – the same rationale used by Trump to impose tariffs on allies Canada, the EU and Mexico.

ZTE chairman vows no more compliance breaches after US deal, apologises to staff

The Senate bill faces an uphill struggle, and the final document – which must be signed off by Trump – is more likely to include a much less stringent provision, included in the House bill, that would bar the Defence Department from dealing with any entity using telecommunications equipment or services from ZTE or another Chinese company, Huawei.

The Senate version of the NDAA also seeks to strengthen the inter-agency Committee on Foreign Investment in the United States, which assesses deals to ensure they do not compromise national security.

The bill would allow The Committee on Foreign Investment in the United States (CFIUS) to expand the deals that can be reviewed, for example making reviews of many proposed transactions mandatory instead of voluntary and allowing CFIUS to review land purchases near sensitive military sites.

The Senate NDAA also includes an amendment prohibiting sales to Turkey of F-35 Joint Strike Fighter jets made by Lockheed Martin Corp unless Trump certifies Turkey is not threatening Nato, purchasing defence equipment from Russia or detaining US citizens.

Senators included the legislation because of the imprisonment of US pastor Andrew Brunson and the purchase of the S-400 air defence system from Russia.

Shipbuilders General Dynamics Corp and Huntington Ingalls Industries Inc could benefit from the bill’s authorisation of advance procurement of materials needed for the Virginia class nuclear submarines.

This year’s Senate bill was named after six-term Senator John McCain, the Armed Services Committee’s Republican chairman and Vietnam war prisoner of war, who has been absent from Washington all year as he undergoes treatment for brain cancer