ZTE gets a stay of execution

They chose wisely:

Congress will not push to reinstate a Trump administration ban against Chinese phone maker ZTE, which President Xi Jinping successfully lobbied President Trump to lift, reports Bloomberg, citing sources familiar with the matter.

Why it matters: Lawmakers’ initial effort to block Trump’s ZTE deal was the last obstacle the Chinese company — a repeat violator of U.S. sanctions and considered a national security threat by the Pentagon — faced before returning to business as usual.

The ban would have destroyed ZTE, a partly state-owned company that employs tens of thousands of Chinese, creating a huge political problem for Xi Jinping. The carefully constructed deal to save ZTE, a “personal favor” from Trump to Xi, was linked to China’s assistance in setting up the North Korea summit.

As David Goldman argued in June, the push to reinstate the ZTE ban was in effect a neo-conservative Senate coup against Trump’s foreign policy:

If the Senate passes the defense appropriation bill with the ZTE bomb, and Trump is unable to excise it by presidential veto or other means, Beijing will draw the conclusion that the president no longer is in control of US foreign policy. Instead, it will confront an adversary that does not want to achieve this or that particular policy objective, but rather wants to undermine the regime. Its first response will be to mobilize national resources to achieve independence in semiconductor production as quickly as possible, replacing its $220 billion a year in chip imports with domestic substitutes.

Goldman adds that “this will go down as the dumbest thing America ever did.” That may be a bit hyperbolic, but I agree that the prospect of the Senate blowing up the ZTE deal is unacceptable and I’m glad that cooler heads appear to have prevailed. Killing ZTE would be perceived as a direct attack on China, and I don’t think the US is remotely prepared for the consequences that would ensue.

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