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Kudlow Says US Has ‘Always Had A Security Concern’ On ZTE, Trump Reversal Was At Chinese Leader’s Request

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National Economic Council Director Larry Kudlow

WASHINGTON, May 17, 2018 –President Donald Trump’s calls to reverse a Commerce Department order banning the Chinese telecommunications equipment firm ZTE from exporting American products came in response to a request from Chinese president Xi Jinping, National Economic Council Director Larry Kudlow said Thursday.

“I think the president is responding to a request from President Xi to take another look at it,” Kudlow said while speaking to reporters outside the White House.

Trump trades ‘America First’ for ‘Too many jobs in China lost’

ZTE became an issue in US-China relations last month after the Commerce Department’s Bureau of Industry and Security issued an order denying ZTE the ability to export American-made products for seven years.

But it is now unclear whether any of those actions will stick. As has become his habit since taking office, Trump upended the proverbial table Sunday with a tweet announcing that “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast.”

Trump added that too many jobs in China had been lost and that he’d instructed the Commerce Department to “get it done!”

The weekend tweet was a dramatic reversal for Trump, who’d convinced voters to put him in the White House with promises that he’d crack down on alleged trade abuses by China, which he said was working to steal American jobs.

Describing China’s actions as”rape,” Trump promised voters that if elected, he’d label the world’s most populous country a currency manipulator “on day one” of his administration.

Kudlow dismissed the possibility that Trump’s change of heart toward China was linked to a $500 million investment made by Chinese state-owned company in support of an Indonesia-based development featuring a Trump hotel, golf courses, and residences.

A report on the investment came just one day after Trump’s tweet, leading some observers to suggest that Trump, who has not divested from his hotel, golf, and real estate empire, might be in violation of the Emoluments Clause of the United States Constitution.

“Oh for heaven’s sakes,” he said, exasperated at being asked to respond to the allegation. “I’m not even going to respond to that.”

Commerce department leveled the export ban Xi asked Trump to reverse after ZTE execs lied and obstructed justice

In March, ZTE executives agreed to settle the sanctions violations by paying a $1.19 billion fine and accepting a suspended seven-year export ban to automatically take effect if it was found that the company violated any aspect of the settlement agreement or committed any more violations of American Export Administration Regulations.

Because two of the major components in most mobile phones — Google’s Android operating system and radio chips made by San Diego, California-based Qualcomm — are made in the United States,  an export ban is a potential death sentence for the company.

But the Commerce Department imposed the ban after investigators discovered that company executives had made false statements and obstructed justice during negotiations to settle charges against the Shenzen, China-based company, formally known as the Zhongxing Telecommunications Equipment Corporation, for violating sanctions by selling telecom equipment to Iran and North Korea.

Chinese telecom gear has long inspired security fears in US

Chinese telecom equipment makers like ZTE and Huawei have also long been considered security risks by the American defense and intelligence establishments, which fear that the Chinese government-owned companies insert backdoor that could be used for espionage into their equipment.

As a result, the Pentagon recently banned the sale of Huawei and ZTE phones in the subsidized retail stores located on military bases known as Post Exchanges, and the Federal Communications Commission issued an order prohibiting Universal Service Fund dollars from being spent on gear from either manufacturer.

While Kudlow said the government has “always had a security concern” when it comes to ZTE, when asked by BroadbandBreakfast whether Trump would support reversing the FCC ban, he replied: “I can’t comment on that.”

He also wouldn’t say if security concerns would factor into a decision on whether or not the export ban gets reversed.

“I would just say that Secretary Ross is reviewing some of the remedies and penalties,” he said. “That’s as far as I can go right now.”

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Andrew Feinberg covers the White House, Capitol Hill, and anything else you can think of for BeltwayBreakfast.com and BroadbandBreakfast.com. Andrew has reported on policy and politics in the nation's capital since 2007, and his writing has appeared in publications like The Hill, Politico, Communications Daily, Silicon Angle, and Washington Business Journal. He has also appeared on both daytime and prime radio and television news programs on NPR, Sirius-XM, CNN, MSNBC, ABC (Australia), Al Jazeera, NBC Digital, Voice of America, TV Rain (Russia) and CBS News. Andrew wishes he could say he lives in Washington, DC with his dog, but unfortunately, he lives in a no-dogs building in suburban Maryland.

China First?

Donald Trump Declares Another Emergency, Bans Huawei from U.S. Commerce for Trading With Iran

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WASHINGTON, May 15, 2019 – Exactly three months after invoking the National Emergencies Act to fund his wall along the U.S.-Mexico border, President Donald Trump is using emergency powers to enable the Department of Commerce to ban U.S. telecommunications equipment manufacturers from selling chips to the Chinese state-owned equipment manufacturer Huawei.

The administration blamed Huawei’s alleged trade with Iran as a reason for the designation.

The President on Wednesday signed an Executive Order declaring a national emergency with respect to foreign espionage using U.S. communication networks and prohibiting “any acquisition, importation, transfer, installation, dealing in, or use of any information and communications technology or service” in which a foreign government holds an interest.

“The President has made it clear that this administration will do what it takes to keep America safe and prosperous, and to protect America from foreign adversaries who are actively and increasingly creating and exploiting vulnerabilities in information and communications technology infrastructure and services in the United States,” White House Press Secretary Sarah Huckabee Sanders said in a statement.

Shortly after the White House released the new Executive Order, the Commerce Department turned the authority granted it by Trump’s order into action with an announcement that the department’s Bureau of Industry and Security would add Huawei to its “entity list” of banned companies based on “information available to the Department that provides a reasonable basis to conclude that Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest.”

The Commerce Department statement blamed Huawei for engaging “in activities that are contrary to U.S. national security or foreign policy interest. This information includes the activities alleged in the Department of Justice’s public superseding indictment of Huawei, including alleged violations of the International Emergency Economic Powers Act, conspiracy to violate IEEPA by providing prohibited financial services to Iran, and obstruction of justice in connection with the investigation of those alleged violations of U.S. sanctions.”

“This action by the Commerce Department’s Bureau of Industry and Security, with the support of the President of the United States, places Huawei, a Chinese owned company that is the largest telecommunications equipment producer in the world, on the Entity List. This will prevent American technology from being used by foreign owned entities in ways that potentially undermine U.S. national security or foreign policy interests,” Commerce Secretary Wilbur Ross said in a statement Wednesday.

“President Trump has directed the Commerce Department to be vigilant in its protection of national security activities. Since the beginning of the Administration, the Department has added 190 persons or organizations to the Entity List, as well as instituted five investigations of the effect of imports on national security under Section 232 of the Trade Act of 1962.”

The Commerce Department’s action means that Americans will need a license from the department in order to sell or otherwise transfer technology to Huawei, which can be denied if the transfer would harm American interests.

Inclusion on the Entity List could be a massive blow to Huawei’s bottom line in favor of an American company like Qualcomm, as many mobile phones and other wireless devices require such chips.

The Commerce Department took a similar action with another Chinese manufacturer, ZTE, earlier this year, but rescinded the decision after Chinese President Xi Jinping made a personal request to President Trump to have the company removed from the Entity List.

Federal Communications Commission Chairman Ajit Pai also issued a statement in support of the action, saying that he “applaud[ed] the President for issuing this Executive Order to safeguard the communications supply chain.  Given the threats presented by certain foreign companies’ equipment and services, this is a significant step toward securing America’s networks.”

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China First?

Commerce Secretary Wilbur Ross Said Trump Hadn’t Made a Decision on Huawei’s Chief Financial Officer

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Commerce Secretary Wilbur Ross speaks with reporters outside the West Wing on December 12, 2018 (Twitter/@JenniferJJacobs)

WASHINGTON, December 12, 2018 — President Trump has not yet made a decision as to whether he would attempt to intervene to stop the Department of Justice from extraditing and prosecuting Huawei Chief Financial Officer Meng Wanzhou, Commerce Secretary Wilbur Ross said Wednesday in an interview with BroadbandBreakfast.com.

During a Tuesday interview with Reuters, Trump said he would be willing to intervene on Meng’s behalf if it is in the United States’ best interests.

Canadian authorities arrested Meng, the daughter of the electronics giant’s founder and one of the wealthiest women in China on December 1, following a request from the U.S. Department of Justice.  She is charged with fraud relating to alleged violations of U.S. sanctions against Iran.

Trump previously intervened to ease penalties the Commerce Department levied against Chinese telecommunications giant ZTE earlier this year after executives were discovered to have deceived American authorities about the extent to which the company violated sanctions against North Korea.

When asked if Trump’s apparent intention to once again negate consequences faced by a Chinese company for violating U.S. sanctions rendered the sanctions meaningless, Ross cautioned BeltwayBreakfast against drawing conclusions from a potential decision which the president has yet to make.

“Let’s see what he actually decides, let’s see where we go from there,” Ross said while speaking to reporters outside the West Wing.

Trump’s previous intervention, Ross noted, came in response to a request by Chinese President Xi Jinping.

“Last time, President Xi called him and asked him to do it as a personal favor, that doesn’t mean it’s a precedent for all time,” he said.

 

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