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Congress strips ZTE penalty provision from must-pass defense bill

As a concession to the White House, Republicans take out measure to restore harsher penalties on the Chinese telecom giant.
A ZTE billboard on an office building in Shanghai on May 3, 2018.Johannes Eisele / AFP - Getty Images file

WASHINGTON — In a concession to the White House, Republicans in Congress weakened a provision to levy harsh penalties on Chinese telecom giant ZTE from the must-pass annual defense bill on Friday.

Democrats quickly criticized Republicans for caving in to president Donald Trump, who has been supportive of the Chinese company that is considered a national security threat.

The move was made during negotiations between the House and the Senate on their separately passed defense authorization bills.

“By stripping the Senate’s tough ZTE sanctions provision from the defense bill, President Trump — and the Congressional Republicans who acted at his behest — have once again made President Xi and the Chinese Government the big winners and the American worker and our national security the big losers,” Senate Democratic Leader Chuck Schumer said in a statement.

The criticism is bipartisan. Sen. Marco Rubio, R-Fla., who co-sponsored the legislation that cracks down on ZTE in the Senate said in a tweet that he’s disappointed.

The telecom company is considered by the intelligence community to be a mechanism for espionage by, in part, selling phones in the U.S. that can be tracked and enabled to steal intellectual property.

U.S. sanctions imposed on the telecommunications company in 2016 nearly put it out of business because it blocked ZTE from the U.S. market. But with the administration negotiating trade deals with China, Trump said this spring that ZTE should be saved.

The Commerce Department softened the penalty, imposing a $1 billion fine and demanding that ZTE allow the installation of U.S. compliance officers and forcing the company to change board members in exchange for being able to access the U.S. market.

Republicans and Democrats in the House and the Senate have said the punishment is a slap on the wrist.

House and Senate negotiators — made up of a majority of Republicans — decided to soften their provisions. They moved forward on a ban on government purchase of ZTE equipment and a ban of the government hiring contractors who use ZTE equipment.

But what the conferees decided not to include was a provision that would restore the more stringent penalties previously placed on the company.

The administration opposed this section because it would have overridden the Commerce Department’s penalties.

“There were some legitimate separation of powers concerns,” a committee aide told NBC News.

“President Trump promised the American people that he would confront China for its unfair trade practices and create jobs at home, but instead, he continues to give in, and give up countless concessions to adversarial foreign countries,” House Democratic Leader Nancy Pelosi said in a statement.

Sen. Tom Cotton, R-Ark., who co-sponsored the part of the provision that was stripped out along with Sens. Rubio and Chris Van Hollen, D-Md., says it’s unfortunate that the stronger version of ZTE wasn’t included.

“Although it’s regrettable the report doesn’t include all of the Senate bill’s language on ZTE, on the whole it is a good piece of legislation that will strengthen our military and take a tough line against our adversaries around the world.”

The U.S. slapped sanctions on ZTE in 2016, prohibiting the company from doing business in the U.S. for seven years, when it violated U.S. sanctions against Iran and North Korea. The Commerce Department placed additional sanctions on the company earlier this year after it failed to follow through with its reorganization plan and lied to the U.S. government about it.

Trump first raised concerns on Capitol Hill when he tweeted that he’s looking for a way for ZTE to “get back into business, fast” as his administration negotiates a larger trade deal, adding that the Commerce Department has been “instructed to get it done.”