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US and China move closer to reviving ZTE

US and China move closer to reviving ZTE

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Photo by James Bareham / The Verge

The US and China are working toward a deal that would save ZTE, the Chinese phone maker that’s been on life support since being hit with an American trade ban last month. According to The Wall Street Journal, both countries have agreed to an outline of what a deal might look like that would save the company. Discussions are still ongoing, however, and it’s still not a sure thing that the issue will be resolved.

Under the current outline, the US would lift its trade ban on ZTE, enabling the company to buy US components and use US software again. In exchange, ZTE would reportedly make significant changes, including shaking up its management and board. It would likely also pay major fines.

Negotiations involve phone software and farm tariffs

That might not be all. China has also proposed removing tariffs on billions of dollars of US agricultural products as part of the deal, according to the report. This is where the negotiations get more complicated. Alongside the ZTE negotiations, the Trump administration is also in broader discussions with China to resolve trade disputes. ZTE can obviously be used as a bargaining chip, but it technically isn’t supposed to be one, since it’s an independent law enforcement matter related to ZTE violating sanctions.

A Journal source said that ZTE was being handled purely as a law enforcement issue, but reporting in Reuters and The Washington Post suggest that the delineation is less clear. It seems like, at least implicitly, other Chinese concessions may be somewhat related to ZTE or calming overall trade tensions. President Trump tweeted that the ZTE talks were “reflective of the larger trade deal” being negotiated with China. In a sign that troubles may be waning, today, China lowered tariffs on cars and car parts.

Even if the negotiations move forward, the Trump administration could find itself limited by Congress. While there hasn’t been substantial movement yet, there’s bipartisan support for blocking or limiting Trump’s ability to revive ZTE, which is seen as a national security risk.

ZTE found itself in this mess because it illegally shipped US equipment to Iran and North Korea. After doing that, it then failed to uphold a plea agreement that required it to fire some people responsible and not give bonuses to others. Somehow, it failed to meet those basic requirements, leading to the company being unable to function for the past month after the US decided to punish ZTE for not following through with its punishment.