Six Colors
Six Colors

by Jason Snell & Dan Moren

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by Jason Snell

ZTE: Sanctions breaker, job creator?

The story of Chinese phone maker ZTE, which last month was banned from using American components or operating in America for seven years, was already strange. Despite international sanctions, ZTE sold electronics to Iran and North Korea. That was bad, so ZTE was punished, and in a settlement ZTE agreed to pay $1.19 billion in fines and would reprimand ZTE staff and executives who participated in the sales and cancel their bonuses. But ZTE was allowed to continue to sell technology in the United States.

In yet another example that it’s always the cover-up that gets you, it turns out that ZTE didn’t actually reprimand employees or cancel their bonuses. So the U.S. Commerce Department restored the punishments that had been suspended in the settlement. Given the importance of Qualcomm processors and Google services to its phone business, this left ZTE on the brink of collapse.

You probably already know what happened next: the President of the United States tweeted that “too many jobs in China [would be] lost” if ZTE went under, and instructed the Commerce Department to “get it done” regarding getting ZTE back in business.

Paul Mozur and Raymond Zhong in the New York Times:

The overture appeared to be off-key for an administration that has been reliably strident on what it has called unfair Chinese trade practices. Mr. Trump’s concern in his tweet about Chinese jobs — which echoed Beijing’s talking point on the issue — also runs counter to his vows to restore American jobs lost to China.

“Given his pressure on Beijing on trade, I don’t understand his concern for Chinese jobs” in the tweet, said Adam Segal, a technology and security expert at the Council on Foreign Relations. It “goes against the steady stream of security warnings about ZTE,” he added.

There’s a lot mixed up in this story—ongoing trade-war saber rattling between the U.S. and China, the invalidation by the President of the Iran nuclear deal that restores the sanctions that ZTE violated in selling technology to Iran, concerns over Chinese influence over technological and networking infrastructures that led to the rejection of the Broadcom-Qualcomm merger1, and even the posturing over the forthcoming summit with North Korean dictator Kim Jong-un.

Still, it’s quite a thing to wake up one morning and see a president who has repeatedly talked about a fear of American jobs being lost to China and was critical of the lifting of sanctions on Iran suddenly declare that Chinese jobs need to be saved at a company that not only ignored the sanctions on Iran, but violated its own settlement agreement in order to reward the employees who broke those sanctions.

  1. Qualcomm’s stock was up on report that its trading partner might survive. 
—Linked by Jason Snell

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