ZTE Back in Business Again: Trump's Circular Policy

ZTE Sanctions, no sanctions, sanctions, no sanctions. That's where we are today. How long that lasts is anyone's guess.

We have gone full circle on ZTE twice. Here's the latest: U.S. reaches deal to keep Chinese telecom ZTE in business.

The Trump administration told lawmakers the U.S. government has reached a deal to put Chinese telecommunications company ZTE Corp back in business, a senior congressional aide said on Friday.

ZTE was banned in April from buying U.S. technology components for seven years for breaking an agreement reached after it violated U.S. sanctions against Iran and North Korea. The Commerce Department decision would allow it to resume business with U.S. companies, including chipmaker Qualcomm Inc.

Rubio Blasts Deal

Schumer Joins Rubio

White House Chimes in on Schumer

Lost in the Mass Hysteria

Can we have a rational discussion, please?

I happen to have one to discuss. Here is a letter Donald Boudreaux at Cafe Hayek wrote to the Wall Street Journal regarding ZTE.​

ZTE Furor

The furor over Chinese telecom company ZTE is a maze of confusions. Those who seek U.S. restrictions on Americans’ dealings with this company weaken their case both by loading it with ‘everything-including-the-kitchen-sink’ accusations, and by poor economic analysis. An example is the case against ZTE offered by Congressman Dutch Ruppersberger (D-MD) and CNN’s Mike Rogers (“Trump Shouldn’t Give ZTE a Pass,” May 18).

Among the offenses they accuse ZTE of committing are ones that, if true, are serious and warrant a response. An example is ZTE’s alleged theft of intellectual property. But other alleged offenses are no offenses at all, at least not against Americans. The prime example here is ZTE’s receipt of subsidies from Beijing. By making telecom equipment less expensive for Americans to purchase, these subsidies help, not hurt, Americans as a whole.

Moreover, these subsidies hurt, not help, the Chinese people as a whole. They do so by directing resources in China away from their most-productive uses into less-productive uses. That the likes of Messrs. Ruppersberger and Rogers worry that Beijing’s use of subsidies will artificially strengthen the Chinese economically reveals these authors’ apparent, if wholly wrongheaded, belief that economies perform better when directed by government officials than by market forces.

Messrs. Ruppersberger’s and Rogers’s poor grasp of economics is further exposed when they leap from the observation that subsidies enable Chinese telecom firms to produce “far more equipment at cheaper prices than their foreign competitors” to the conclusion that these subsides will lead to “higher prices for U.S. consumers.” Hunh?? Beijing’s subsidies give Chinese telecom exports an artificial advantage in the U.S. market only by lowering the prices that Americans pay for telecom products. If Beijing’s subsidies artificially raise the prices of telecom products, you can be sure that American rivals of Chinese producers would be cheering rather than complaining.

Sincerely,

Donald J. Boudreaux

Real Gem

Boudreaux is Professor of Economics and Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center,

George Mason University, in Fairfax, VA.

It is refreshing and rare to see someone in academia who actually understands trade issues.

I advise those seeking correct opinions on how trade should work to tune into Cafe Hayek. Boudreaux writes an interesting letter to someone nearly every day.

By the way, this ZTE circular madness is not entirely Trump's doing. Congressional fearmongering played into this setup.

Mike "Mish" Shedlock

Comments (10)
No. 1-10
thimk
thimk

China Inc will eventually "flame out". They have deffered huge social and environmental costs based on a fiat ,debt based economy. Anyways China now has the impetus to make its own chips.

Tengen
Tengen

Trump should never have put himself in a position where Rubio could use his own words against him. Giving bootlickers like Marco and Schumer an opportunity for bipartisan grandstanding shows something is seriously wrong.

Tune in to our next episode of "As the World Turns" after the holiday to see how long this flip flop lasts.

Tengen
Tengen

If China flames out due to a fiat, debt based economy, I suspect the rest of us will too. The global economy has become a search for the leper with the most fingers.

They have made an enormous effort to deal with what was an environmental catastrophe, but a decade of planting huge numbers of trees (especially in Inner Mongolia) and going solar has helped.

The social costs are another matter. Moving hundreds of millions from rural China to the cities, plus an unprecedented gender imbalance could be their downfall. If the global economy tanks, a huge population sitting in cities with nothing to do, plus lots of angry men with no mates would be a toxic mix. Of course, we're not sitting pretty here in the US with our social climate either.

Oh, and the PRC government deserves a backlash for their Orwellian sesame credit system. Pure dystopia.

AWC
AWC

Boudreaux is dead nuts on the mark. Refreshing, indeed!

thimk
thimk

German support of the Iran nuke deal just cost them billions in Saudi trade cancellations. When it is all said and done it will be interesting to see how the trade patterns shift among countries.