General Electric (NYSE:GE)
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By Ted Mann
WASHINGTON -- A broad push by Trump administration hard-liners to stem the flow of high-tech exports to China -- even if doing so means limiting the market access of major U.S. companies -- hit a hurdle Tuesday: President Trump himself.
In a series of tweets, Mr. Trump denounced efforts promoted by some within the White House and Commerce Department to halt the export of controlled technologies -- including jet engines and semiconductors -- to China, out of concern the products could be pirated and used to undermine U.S. commercial advantage in those sectors.
"We don't want to make it impossible to do business with us," Mr. Trump tweeted. "That will only mean that orders will go to someplace else."
The tweets followed a Wall Street Journal report over the weekend that officials within the administration were pushing to halt shipments of jet engines co-produced by General Electric Co. to China. The engines were designed for the Comac 919, a new commercial airliner that China hopes will grow to rival offerings from Boeing Co. and Airbus SE.
Officials are also considering changes to what is known as the foreign direct product rule, aimed at limiting the use of U.S. technology in military and national-security functions. The changes would require semiconductor manufacturers to obtain export licenses to use U.S. equipment when producing chips for Huawei Technologies Co. of China, people familiar with the discussions said.
The proposals have triggered a vigorous debate within the Commerce Department and the White House, which had originally planned to address the matter during a cabinet meeting on Feb. 28. The meeting has been canceled, according to a person familiar with the discussions.
Until Tuesday, Mr. Trump hadn't weighed in on the matter. But in tweets and remarks before boarding Air Force One, he was dismissive of the proposals to limit those exports, and questioned what he called the use of "a fake term of national security" to justify new restrictions.
"I think people are getting carried away with it," Mr. Trump said on the tarmac at Joint Base Andrews, en route to a fundraiser in Los Angeles.
"I mean, things are put on my desk that have nothing to do with national security, including with chip makers and various others," Mr. Trump said. "So we're going to give it up, and what will happen? They'll make those chips in a different country or they'll make them in China or in someplace else."
Mr. Trump's intervention roiled an internal debate over how to handle China's rising technological capability. It was a blow to hard-liners in the administration, but good news for companies such as GE, which had privately argued in favor of continuing the engine shipments, according to people familiar with the discussions.
The Commerce Department didn't immediately respond to a request for comment on the status of proposals for imposing limits on exports to China.
While Mr. Trump's tweets seemed to preclude further action, the president has shifted his stance on issues before, including backing away from restrictions on vaping and alternating between hard-line and conciliatory positions on Chinese telecom company Huawei.
The White House press secretary didn't respond to a question about whether Mr. Trump had specifically ordered the Commerce Department to grant GE a new export license for the LEAP 1C engines that are supplied to the C919 program by CFM International, GE's joint venture with Safran SA of France.
GE has contended fears that the engines could be reverse-engineered were overblown because of the relative complexity of their materials and design, people familiar with the discussions said.
Officials who pushed to block the engine shipments did so in part because they hoped to cripple the development of the C919 passenger jet, the people familiar with the discussions said. The narrow-body airliner is scheduled to enter service in 2021.
But blocking the engine exports would have come as a shock to a major U.S. manufacturer that has invested for years in a global footprint, including in China. GE has received licenses from the Commerce Department since 2014 for the engine-export program. The Comac engines are a variant of the LEAP jet engine produced by CFM International, the GE-Safran joint venture. The variant used on the C919 accounts for a fraction of the total production of LEAP, which has been a commercial success for GE amid a surge in global orders for single-aisle airliners.
A GE spokeswoman declined to comment on the Trump tweets.
"GE has provided products and services in the global marketplace for decades," a GE spokeswoman said over the weekend, after the Journal reported on the proposal to halt engine shipments. "We aggressively protect and defend our intellectual property and work closely with the U.S. government to fulfill our responsibilities and shared security and economic interests."
John Neuffer, the chief executive of the Semiconductor Industry Association, praised Mr. Trump's comments in a written statement, saying "sales of non-sensitive, commercial products to China drive semiconductor research and innovation, which is critical to America's economic strength and national security."
At a panel discussion in Washington on how to limit U.S. exports to China sponsored by the Information Technology and Innovation Foundation, former Commerce Department official Kevin Wolf halted the discussion to read the tweets aloud.
There was laughter from the audience as Mr. Wolf read aloud a Trump tweet calling the proposed restrictions "ridiculous."
"That's the problem with the absence of a coherent policy and with all seriousness intended, uncertainty is death to trade," Mr. Wolf said. "This constant bouncing back and forth between what the policy or the objective is or...what national security does or doesn't mean actually in my view does more harm than good."
Before Tuesday, the people familiar with the discussions said, Mr. Trump hadn't weighed in on the trade matter. In his tweets Tuesday morning, the president suggested that he had told members of his cabinet that he had decreed that new restrictions on foreign sales wouldn't be imposed.
"I want to make it EASY to do business with the United States, not difficult," the president tweeted. "Everyone in my Administration is being so instructed, with no excuses... THE UNITED STATES IS OPEN FOR BUSINESS..."
--Katy Stech Ferek and Alex Leary contributed to this article.
Write to Ted Mann at email@example.com
(END) Dow Jones Newswires
February 18, 2020 18:50 ET (23:50 GMT)
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