The following article by Adam Taylor was posted on the Washington Post website May 16, 2018:
President Trump tweeted on May 13 that he has asked the Commerce Department to help Chinese technology company ZTE Corp ‘get back into business, fast.’ (Reuters)
When it comes to foreign policy, we often think of a country’s strength in terms of military might — especially in the United States. After all, the U.S. military budget is by far the largest on Earth. Last year, it was more than twice as big as that of China, the second-biggest military spender.
Of course, the United States also wields enormous economic influence, an asset that may be more powerful even than tanks and soldiers. The American economy is the largest in the world, and that preeminence allows the United States to exert control over many levers of power. The Trump administration, like others before it, knows this well.
This is why President Trump’s decision to suddenly rescue a Chinese telecom company facing ruinous U.S. trade restrictionsis so bewildering — and perhaps worrying. It may have implications not only for America’s growing economic faceoff with China (a huge subject in its own right) but also for U.S. foreign policy writ large.
Trump unexpectedly tweeted Sunday that he had instructed the Commerce Department to “give massive Chinese phone company, ZTE, a way to get back into business, fast.”
The United States fined ZTE $1.19 billion last year as part of a settlement after the company illegally shipped telecom gear to Iran and North Korea. Just last month, the Commerce Department banned U.S. firms from selling components to ZTE for seven years because it allegedly broke that deal. Cut off from U.S. suppliers, the Chinese firm was on the verge of collapse. Now Trump has come to the rescue, apparently worried about the ban’s impact on Chinese workers.
It’s not clear what prompted Trump’s decision. The Washington Post’s Damian Paletta, David J. Lynch and Josh Dawsey reported this week that the president appeared to have bypassed many U.S. trade officials. Advisers who favor a hard line on Chinese trade practices appear to have been sidelined, according to reports from Axios. Some observers have also noted that the decision came after reports that Chinese government-linked enterprises will provide $500 million to a project in Indonesia that features Trump-branded developments — that is, a project that will earn the president money.
A more mundane and probably more likely reason, however, is that Trump is seeking a “grand bargain” with China on trade issues, hoping to step back from a trade war. My colleague Josh Rogin reported that China included a demand titled “Appropriately handling the ZTE” case on a list of proposals that Beijing sent to the Trump administration after White House officials visited the Chinese capital last month.
Tellingly, the ZTE decision came just ahead of a Tuesday visit by China’s top economic official, Vice Premier Liu He, to Washington to meet with White House trade officials. Eager for a quick deal, Trump simply appears to have acquiesced to a key Chinese demand.
But threatening a trade war and then backing down is probably not the greatest negotiating move when dealing with Beijing. As Tufts University professor Dan Drezner wrote for The Post, doing so makes it look like Trump “blinked” in the face of President Xi Jinping’s reserve. But the ZTE decision could also cause problems for a far broader swath of U.S. foreign policy.
For one, the concerns about ZTE in the United States go beyond the simple trade concerns Trump referenced. On Tuesday, a top U.S. counterintelligence official told the Senate Intelligence Committee that the Chinese firm was thought to be a vehicle for Chinese government espionage. The Pentagon has even banned the sale of ZTE phones in stores on military bases, deeming them a security risk.
That concern has prompted some rare bipartisan agreement, with Sen. Marco Rubio (R-Fla.) and Rep. Adam B. Schiff (D-Calif.) among those who have voiced their opposition to easing up on ZTE.
Even on the merits of the trade argument alone, Trump’s decision seems glib. The original case against ZTE was logical and widely supported; launched under the Obama administration, it was nevertheless pushed along by future Trump administration officials such as then-Reps. Mike Pompeo and Ryan Zinke.
The decision to save ZTE could also complicate Washington’s attempts to apply economic punishments elsewhere. By withdrawing the restrictions on the Chinese company, Trump is setting an inconsistent standard for how Washington will respond to foreign firms that breach sanctions — at the same moment that it is trying persuade businesses in Europe and elsewhere to cease trading with Iran because of the recently reimposed U.S. sanctions there.
Deputy White House press secretary Raj Shah on May 14 said President Trump asked Commerce Secretary Wilbur Ross “to look into” ZTE sanctions. (Reuters)
It’s reasonable that European nations will now think that they can negotiate away any problems they have on Iran by reaching out directly to the president, whose quid pro quo style can overrule everything else. The same might be said for other countries currently under sanction, such as Russia, or nations about to enter into talks with the United States, such as North Korea. These assumptions may ultimately be wrong — Trump is nothing if not unpredictable — but the thought process is understandable. With the Trump administration, you might as well haggle.
In the longer term, foreign nations will surely wonder whether a world where the United States haphazardly deploys its economic might is really better than the alternatives. Bloomberg’s Leonid Bershidsky noted that Chinese technology companies will speed up their push to move their supply chains away from their reliance on U.S. components. “At this rate, Trump may be the last U.S. president able to exploit the country’s technological advantage in trade wars,” Bershidsky wrote.
Henry Farrell of George Washington University and Abraham Newman of Georgetown University push that idea further. Writing in The Post’s Monkey Cage blog, they wonder if a “combination of unpredictability and draconian measures may encourage targeted states and companies, and even U.S. allies, to ‘diversify’ away from the U.S.-led global financial system.” America’s hegemonic economic power could end up undoing itself if it’s not used wisely.