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Pentagon Blocks Tougher U.S. Regulations on Huawei in Favor of ‘Balance’

Secretary of Defense Mark Esper speaks during a news conference at the Pentagon, January 14, 2020. (Joshua Roberts/Reuters)

The Pentagon has stymied attempts by the Commerce Department to tighten regulations on Chinese technology giant Huawei’s dealings with U.S. companies over concerns that the restrictions would disadvantage American firms, The Wall Street Journal reported Friday.

Defense Secretary Mark Esper all but confirmed the report while speaking to reporters Friday at the Center for Strategic and International Studies in Washington.

“We have to be conscious of sustaining those [technology] companies’ supply chains and those innovators,” Esper said. “That’s the balance we have to strike.”

The decision shows a split in thinking within the Trump administration over how to deal with Huawei’s influence. While the U.S. cracked down on the firm last year, charging it with fraud and intellectual-property theft, sources told the Journal that the DOJ is nervous about harming U.S. companies who still see Huawei as an important customer.

Following the news, Senator Tom Cotton (R., Ark.) slammed the move and vowed “to get to the bottom of this ill-considered decision.”

An official said that the administration has set an 18-month deadline to figure out how to support domestic production and boost competition with Huawei. The Defense Department remains concerned that the loss of revenue resulting from the Huawei restrictions might limit those firms’ investment in research and development, thus placing them at a disadvantage relative to their foreign competitors.

The conflict came to a head over an adjustment to a rule that allows foreign chips and electronics with less than 25 percent American-made parts to be shipped duty-free to Huawei. While the Commerce Department proposed a reduction in the rule to only ten percent, the DoD “nonconcurred.”

A Pentagon spokeswoman told the Journal that it is “aware of Commerce’s proposed rule change” but would not “prematurely discuss ongoing interagency collaboration.”

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