US should not politi­cize eco­nomic com­pe­ti­tion

China Daily (Hong Kong) - - COMMENT -

The de­nial or­der the United States Com­merce Depart­ment ac­ti­vated against ZTE on Mon­day may prove fa­tal to the Chi­nese telecom­mu­ni­ca­tions com­pany. But the im­pact of the de­ci­sion may go be­yond the fate of an in­di­vid­ual com­pany in the con­text of the on­go­ing trade spat and eco­nomic com­pe­ti­tion be­tween the US and China.

The ZTE case in it­self is hardly com­plex. The com­pany ad­mit­ted vi­o­lat­ing US sanc­tions against Iran and the Demo­cratic Peo­ple’s Repub­lic of Korea in March 2017 by ship­ping telecom­mu­ni­ca­tions equip­ment to them.

Aside from agree­ing to pay $1.19 bil­lion in fines and to pun­ish the em­ploy­ees in­volved, it ac­cepted a seven-year sus­pended de­nial of ex­port priv­i­leges, which was to be ac­ti­vated if there was any new vi­o­la­tion or breach of the agree­ment.

The US Com­merce Depart­ment has now ac­ti­vated that de­nial or­der pro­hibit­ing US com­pa­nies from sell­ing, ex­port­ing or re-ex­port­ing com­po­nents, soft­ware and tech­nol­ogy to ZTE, as it claims the Chi­nese com­pany broke the agree­ment by not dis­ci­plin­ing its em­ploy­ees as agreed.

Con­sid­er­ing the com­pany’s heavy reliance on US prod­ucts and tech­nolo­gies, the oth­er­wise ro­bust ZTE now faces an ex­is­ten­tial cri­sis. Many of its sup­pli­ers, in­clud­ing those in the US, will also suf­fer.

An­nounc­ing the de­ci­sion, the US Com­merce Depart­ment stated it is “a reg­u­la­tory ac­tion” “un­re­lated to any on­go­ing trade-re­lated ac­tions”. It is to be hoped that this is in­deed the case. If this is Wash­ing­ton’s re­ply to Bei­jing’s re­cent pledge of greater openness, it can­not but worsen trade re­la­tions and press Bei­jing to roll back what it was ready to of­fer.

While the over­all re­sponse at home among in­dus­try in­sid­ers is the be­lief that the de­ci­sion has been timed to en­hance the US’ po­si­tion at the bar­gain­ing ta­ble in their trade dis­pute, there is also a con­sen­sus that Chi­nese com­pa­nies need to de­velop their own core tech­nolo­gies rather than rely on US sup­pli­ers. And there is an as­sump­tion that the de­ci­sion is re­lated to the ri­valry be­tween the two coun­tries now that China is com­pet­ing in the high-tech field rather than just low-end man­u­fac­tur­ing.

China’s Min­istry of Com­merce is right to raise con­cerns that the ZTE move is symp­to­matic of Chi­nese com­pa­nies not com­pet­ing in a fair and equitable le­gal and pol­icy en­vi­ron­ment, as the ac­tion comes when the US has been in­creas­ing the pres­sure on Chi­nese telecom­mu­ni­ca­tions com­pa­nies as part of its re­stric­tions on Chi­nese in­vest­ment and ac­qui­si­tions in high-tech sec­tors.

It is un­der­stand­able that the US seeks to main­tain its ad­van­tages, but eco­nomic is­sues should not be politi­cized as a means to curb com­pe­ti­tion. This should be about the con­duct of ZTE, it should not be ex­ploited to den­i­grate other Chi­nese com­pa­nies.

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