U.S. senators want ban on China's ZTE, despite Trump action

By Patricia Zengerle

WASHINGTON (Reuters) - Republican and Democratic U.S. senators said on Thursday they want the government to reinstate penalties on ZTE Corp, despite a Trump administration agreement paving the way for an end of a ban on the Chinese telecommunications company.

Republican Senators Marco Rubio, Tom Cotton and Roy Blunt and Democrats Chris Van Hollen, Mark Warner and Bill Nelson told leaders of the armed services committees of both the Senate and the House of Representatives that they strongly oppose the Commerce Department's deal with ZTE.

Many U.S. lawmakers, including some of Trump's fellow Republicans as well as Democrats, view ZTE as a national security threat, worrying that the use of its technology in the United States could make it easier for China to steal secrets.

Commerce on Wednesday said it signed an agreement with ZTE <000063.SZ>, China's No. 2 telecommunications maker, paving the way for it to resume operations after a nearly three-month ban on doing business with American suppliers.

The ban would be removed once the company deposits $400 million in an escrow account, Commerce said. The ban was imposed in April after ZTE broke an agreement it reached after pleading guilty in U.S. federal court last year for illegally shipping U.S. goods and technology to Iran, in violation of U.S. sanctions,

Leaders of U.S. intelligence agencies have said they are concerned that ZTE, Huawei Technologies Co Ltd [HWT.UL] and some other Chinese companies are beholden to the Chinese government or Community Party, raising the risk of espionage.

They pushed for the inclusion of legislation to reinstate the ZTE ban in the National Defense Authorization Act, or NDAA, a must-pass defence policy bill.

The Senate approved a version of the NDAA with that amendment. But because it is not in the House version of the bill, lawmakers from the Senate and House armed services committees are currently negotiating a compromise.

The fate of the ZTE amendment is not clear. Despite bipartisan support for the measure among members of Congress, Republicans control both the Senate and House and party leaders break from Trump's policies rarely.

Additionally, Representative Mac Thornberry, the chairman of the House Armed Services Committee, has said he does not want passage of the NDAA to be held up by the ZTE amendment, or anything that is not strictly a defence issue.

The House version of the defence bill would restrict government agencies from using equipment from ZTE or Huawei.

"We write to express our strong support for measures ... that would reinstate U.S. government penalties against ZTE, a Chinese state-directed telecommunications company, and modernize the Committee on Foreign Investment in the United States," the senators wrote in the letter, which was sent on Thursday.

(Reporting by Patricia Zengerle; Editing by Leslie Adler)