WASHINGTON -- A month after President Donald Trump said he would allow US companies to resume selling to blacklisted Chinese telecommunications giant Huawei, his administration has done little to clarify what sales will be permitted.
The lack of clarity on what US firms can supply to the world's top producer of telecommunications equipment as long as it's on a so-called "entity list" is likely to cast a shadow over this week's US-China trade negotiations in Shanghai.
Trump had pledged to allow the sales as a goodwill gesture to President Xi Jinping when the two met last month and agreed to restart talks to try to resolve their year-long trade war. China, for its part, agreed to restart large-scale agricultural purchases.
US chipmakers cheered Trump's announcement, which administration officials clarified afterwards meant the government would issue export licenses in cases where there is no national security risk and where the items are "non-sensitive" and readily replaced by rivals.
But the department has yet to respond to any of a total of around 50 license requests from about 35 companies, sowing uncertainty in the industry and in Beijing.
"At this stage, there is mass confusion," said William Reinsch, a former Commerce official, adding that the plan for case-by-case decisions "maximizes the uncertainty."
The governments of the world's two largest economies have imposed billions of dollars of tariffs on each other's goods, slowing global growth and roiling markets.
US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer will meet with Chinese Vice Premier Liu He starting on Tuesday, the first face-to-face meeting since the two leaders met.
Many people close to the talks expect the topic of Huawei to dominate, along with the failure of Chinese agricultural purchases to meet expectations, taking time and attention away from the many deeper, longer term issues.
Trump hosted a meeting of seven technology CEOs last week to discuss Huawei and other topics, at which the executives expressed frustration at Commerce Secretary Wilbur Ross for not providing clear guidelines, Reuters reported.
"By making the meeting public, the US was trying to send a signal, 'we’re moving on Huawei, we need you to move on agriculture'," said Wendy Cutler, a former US trade negotiator and Vice President of the Asia Society Policy Institute.
PAR FOR THE COURSE
Many companies have halted sales to Huawei since the company was put on the entity list on May 16, while some have chosen to resume selling items made abroad. Some, including Intel Corp and Qualcomm, began pressing Commerce for carve-outs soon after.
Some companies have taken advantage of a narrow "temporary general license" provided by the Commerce Department which allows for transactions such as software updates for Huawei.
Last week, Intel and Xilinx Inc said they had applied for licenses to resume sales of some products to Huawei. The companies also said they had resumed sales of some products they had independently determined were not subject to the ban.
Secretary Ross has said responses to requests for licenses are coming in a matter of weeks.
"It's par for the course for this administration," said trade lawyer Doug Jacobson. "They are making up policy as they go along based on the president's direction."
The uncertainty continues to roil global industry.
Last month San Jose, California-based Broadcom forecast that the US-China trade tensions and the Huawei ban would knock $2 billion off its sales this year. CEO Hock Tan said there was no obvious substitution for Huawei, which accounted for about $900 million or 4 percent of its sales last year.
Fedex Corp last week said "unclear" Commerce department policy on Huawei "resulted in considerable complexity for our operations," to explain why it held back more than 100 Huawei packages, which is now under investigation by Chinese authorities.
The May blacklisting represented a significant escalation in Washington's campaign against Huawei, which it says steals US intellectual property and violates Iran sanctions.
CFO Meng Wanzhou was arrested in Canada on a US warrant on charges she misled global banks about Huawei's relationship with a company in Iran. Meng, who is also the Huawei CEO's daughter, maintains her innocence and is fighting extradition.
Washington has also launched a lobbying effort to convince US allies to keep Huawei out of next-generation 5G telecommunications infrastructure, citing concerns the company could spy on customers. Huawei has denied the allegations.
Judith Alison Lee, a trade attorney at Gibson Dunn, said her clients have received requests from Commerce for more information related to their license applications but no approvals so far.
"There is a real sense of uncertainty at the department about where the administration is going on Huawei," she said.
"Every day that goes by it creates more damage to Huawei and the Chinese, and that makes the trade talks that much more difficult."
source: news.abs-cbn.com
WASHINGTON/BEIJING - The diplomatic cable from Beijing arrived in Washington late on Friday night, with systematic edits to a nearly 150-page draft trade agreement that would blow up months of negotiations between the world's two largest economies, according to three US government sources and three private sector sources briefed on the talks.
The document was riddled with reversals by China that undermined core US demands, the sources told Reuters.
In each of the seven chapters of the draft trade deal, China had deleted its commitments to change laws to resolve core complaints that caused the United States to launch a trade war: theft of US intellectual property and trade secrets; forced technology transfers; competition policy; access to financial services; and currency manipulation.
US President Donald Trump responded in a tweet on Sunday vowing to raise tariffs on $200 billion worth of Chinese goods from 10 to 25 percent on Friday – timed to land in the middle of a scheduled visit by China's Vice Premier Liu He to Washington to continue trade talks.
The stripping of binding legal language from the draft struck directly at the highest priority of US Trade Representative Robert Lighthizer - who views changes to Chinese laws as essential to verifying compliance after years of what US officials have called empty reform promises.
Lighthizer has pushed hard for an enforcement regime more like those used for punitive economic sanctions – such as those imposed on North Korea or Iran – than a typical trade deal.
"This undermines the core architecture of the deal," said a Washington-based source with knowledge of the talks.
"PROCESS OF NEGOTIATION"
Spokespeople for the White House, the US Trade Representative and the US Treasury Department did not immediately respond to requests for comment.
Chinese Foreign Ministry spokesman Geng Shuang told a briefing on Wednesday that working out disagreements over trade was a "process of negotiation" and that China was not "avoiding problems".
Geng referred specific questions on the trade talks to the Commerce Ministry, which did not respond immediately to faxed questions from Reuters.
Lighthizer and US Treasury Secretary Steven Mnuchin were taken aback at the extent of the changes in the draft. The two cabinet officials on Monday told reporters that Chinese backtracking had prompted Trump's tariff order but did not provide details on the depth and breadth of the revisions.
Liu last week told Lighthizer and Mnuchin that they needed to trust China to fulfill its pledges through administrative and regulatory changes, two of the sources said. Both Mnuchin and Lighthizer considered that unacceptable, given China's history of failing to fulfill reform pledges.
One private-sector source briefed on the talks said the last round of negotiations had gone very poorly because "China got greedy".
"China reneged on a dozen things, if not more ... The talks were so bad that the real surprise is that it took Trump until Sunday to blow up," the source said.
"After 20 years of having their way with the US, China still appears to be miscalculating with this administration."
FURTHER TALKS THIS WEEK
The rapid deterioration of negotiations rattled global stock markets, bonds and commodities this week. Until Sunday, markets had priced in the expectation that officials from the two countries were close to striking a deal.
Investors and analysts questioned whether Trump's tweet was a negotiating ploy to wring more concessions from China. The sources told Reuters the extent of the setbacks in the revised text were serious and that Trump's response was not merely a negotiating strategy.
Chinese negotiators said they couldn't touch the laws, said one of the government sources, calling the changes "major."
Changing any law in China requires a unique set of processes that can't be navigated quickly, said a Chinese official familiar with the talks. The official disputed the assertion that China was backtracking on its promises, adding that US demands were becoming more "harsh" and the path to a deal more "narrow" as the negotiations drag on.
Liu is set to arrive in Washington on Thursday for two days of talks that just last week were widely seen as pivotal – a possible last round before a historic trade deal. Now, US officials have little hope that Liu will come bearing any offer that can get talks back on track, said two of the sources.
To avert escalation, some of the sources said, Liu would have to scrap China's proposed text changes and agree to make new laws. China would also have to move further towards the US position on other sticking points, such as demands for curbs on Chinese industrial subsidies and a streamlined approval process for genetically engineered US crops.
The administration said the latest tariff escalation would take effect at 12:01 a.m. Friday (0401 GMT), hiking levees on Chinese products such as internet modems and routers, printed circuit boards, vacuum cleaners and furniture.
The Chinese reversal may give China hawks in the Trump administration, including Lighthizer, an opening to take a harder stance.
Mnuchin - who has been more open to a deal with improved market access, and at times clashed with Lighthizer – appeared in sync with Lighthizer in describing the changes to reporters on Monday, while still leaving open the possibility that new tariffs could be averted with a deal.
Trump's tweets left no room for backing down, and Lighthizer made it clear that, despite continuing talks, "come Friday, there will be tariffs in place."
(Additional reporting by Chris Prentice in NEW YORK, and Jing Xu and Ben Blanchard in BEIJING Editing by Simon Webb and Brian Thevenot)
source: news.abs-cbn.com
SHANGHAI - Chinese telecom giant ZTE faces a grim future after ceasing major operations due to a US ban on American sales of critical technology to the company, raising the stakes in a trade spat between the world's two largest economies.
The firm's fate has added a new source of tension to trade talks between the two countries after Chinese officials raised objections to the US ban during negotiations with their American counterparts in Beijing last week.
ZTE's fiber-optic networks depend on US components and its cheap smartphones sold en masse abroad are powered by US chips and the Android operating system.
Without access to such technology, the company has been forced to partially shut down. "Major operating activities of the company have ceased," ZTE said in a filing Wednesday.
Its dimming prospects could further sour discussions just as China's top economic official, Vice Premier Liu He, heads to Washington for another round of negotiations next week.
"The Trump administration has sent a clear signal to China through its attack on ZTE: compromise, make compromises" on trade, said Cheng Xiaohe, an international relations professor at Renmin University.
"Otherwise, we will kill you."
He added that the US is also investigating another Chinese tech giant, Huawei.
A telecom components buyer specializing in ZTE products said he had seen the effects of the production halt ripple into the market, with prices for available ZTE goods jumping 50 percent or more.
"They've stopped production of all products that have chips in them," said Zhao, the buyer, who declined to give his full name, adding that if production completely stopped for a year, "all ZTE's gear will become scrap."
MAJOR ALARMS
Beijing has closely followed the developments around ZTE, a company with 80,000 employees headquartered in southern China.
The ban on US sales to the firm arose from its skirting of US export controls by selling to banned countries like North Korea and Iran with employees documenting how to evade American oversight.
Those actions led to a $1.2 billion fine last year, with the current export ban imposed in April after ZTE allegedly failed to live up to its agreement, lying about the punishment of employees involved in the sanctions skirting.
In Beijing, officials see the ban as part and parcel of the Trump administration's hardline trade demands.
"This is ringing major alarms for China," Cheng said.
"If the trade problems aren't resolved, and a full-scale trade war erupts, these high-tech companies will bear the brunt of it."
The result is that Beijing has been galvanized to push harder to develop the technology the US is now denying to ZTE.
"China must rely on itself for core technologies," President Xi Jinping told scientists as he visited an IT firm last month, while officials confirmed they were raising a huge new fund to invest in computer chips.
ZTE said in the filing it is still "actively communicating" with the US side "to facilitate the modification or reversal" of the ban, and hopes to "forge a positive outcome".
On Sunday, the firm submitted a request to the US commerce department for a stay of the export ban, along with supplemental information.
In Wednesday's statement the firm said it still "maintains sufficient cash" and would continue to pay its debts. Trading of its Hong Kong and Shenzhen-listed shares has been halted since the US decision.
In a ZTE research and development center in Beijing, employees remained at work, with a warning posted on the wall of their office.
"Abide by the law, and strictly observe civic values," the employee regulation said.
source: news.abs-cbn.com
BEIJING - Senior US officials arrive in Beijing for trade talks with China starting Thursday, as both sides dampen expectations for a quick resolution to the heated dispute between the world's 2 largest economies.
At stake are tariffs on billions of dollars of US and Chinese goods, which, if imposed, could put a dent in humming global economic growth.
US President Donald Trump has threatened to levy new tariffs on $150 billion of Chinese imports while Beijing has so far shot back with a list of $50 billion in targeted US goods.
"It is not realistic to resolve all issues through only one round of negotiations, but we believe that, as long as the US is sincere to resolve the relevant issues, the negotiation will be a positive one," said Hua Chunying, a spokeswoman for China's foreign ministry, at a regular news briefing Wednesday.
The US delegation includes 7 senior officials: Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, US Trade Representative Robert Lighthizer, White House economic advisers Peter Navarro, Larry Kudlow, Everett Eissenstat and US Ambassador to China Terry Branstad.
Each member of the team is known to harbor strong views with varying degrees of hawkishness on the dispute -- from Navarro, author of "Death by China", to Mnuchin, a former Goldman Sachs executive who has publicly expressed optimism on resolving the spat.
"I'm always hoping but not always hopeful," Lighthizer said on Tuesday before departing for Beijing.
"It's a big, big challenge."
Meanwhile, Trump will be watching and possibly tweeting from Washington.
"Delegation heading to China to begin talks on the Massive Trade Deficit that has been created with our Country," he tweeted as the team prepared to leave.
"Very much like North Korea, this should have been fixed years ago, not now...Great Potential for USA!"
Leading the talks for China will be Liu He, President Xi's top economic adviser and a Vice Premier.
Liu will "exchange views with the US delegation on economic and trade issues of common concern to the US and China", China's official news agency Xinhua said Wednesday.
Liu visited Washington earlier this year for trade talks but few tangible results came out of the meetings.
TECH BATTLE
The immediate threat of tariffs obscures the larger competition in technology looming over the talks.
US officials are concerned about Beijing's 'Made in China 2025' industrial policy which they see as a Chinese plan to dominate key high tech industries.
Before boarding a plane for Beijing, US Commerce Secretary Ross called the policy "frightening".
Last month, Washington banned Chinese telecom and smartphone giant ZTE from purchasing crucial US components for 7 years -- threatening the company's survival -- as punishment for breaking US export controls.
The US has also reportedly opened a similar probe into another Chinese telecom major, Huawei, after restricting its operations in the country on national security grounds.
Washington's moves, perceived by Beijing as a way to contain China's strategic ambitions in hi-tech, have not gone unnoticed.
President Xi Jinping told scientists last week that the country must develop its own core technology.
"To tackle the next key problems in science and technology, we should abandon fantasies and rely on ourselves," Xi said.
source: news.abs-cbn.com
