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Weapons of Mass Destruction (WMD)

European Union Rallies Behind Lithuania in Trade Fight with China

By Natalie Liu January 29, 2022

By filing a formal complaint against China at the World Trade Organization this week, the European Union is throwing its weight into support for member state Lithuania in what is being cast as a test of the EU's willingness to defend the interests of even its smallest members in the face of Chinese power and aggression.

The complaint, which seeks a ruling from the WTO, alleges that China has violated the trade body's rules by carrying out against Lithuania coercive actions that also interfered with the EU's all-member-inclusive single market and supply chain.

China's actions are widely seen as intending to punish the Baltic country of 2.8 million people for leaving the 17+1, a regional group Beijing established, and agreeing to host in its capital a Taiwanese representative office bearing the name "Taiwanese Representative Office in Lithuania" rather than "Taipei Representative Office," as such offices are titled elsewhere.

"Over the past weeks, the European Commission has built up evidence of ... a refusal to clear Lithuanian goods through customs, rejection of import applications from Lithuania, and pressuring EU companies operating out of other EU Member States to remove Lithuanian inputs from their supply chains when exporting to China," the EU said in a statement Thursday, adding that China's actions "appear to be discriminatory and illegal under WTO rules."

Before the announcement, a European Commission spokesperson in Brussels told VOA, "As we have consistently stressed, the EU will stand up against all types of political pressure and coercive measures applied against any Member State. We stand by Lithuania. Lithuanian exports are EU exports."

Jonathan Hackenbroich, a policy fellow at the European Council on Foreign Relations, told VOA that while some within the EU initially questioned the extent to which Lithuania had consulted other member states prior to announcing its decisions concerning China and Taiwan, those concerns paled compared with the seriousness of the threat China's actions posed to the political and economic integrity of the 27-member bloc.

If China's action is left unchallenged, EU member states and businesses will end up losing more of their freedom, Hackenbroich warned in a recent essay, Coercion With Chinese Characteristics: How Europe Should Respond to Interference in Its Internal Trade.

The essay states that while China's aggressive thinking and deeds "should be a source of great worry for European businesses and governments," the EU must urgently do more to promptly identify and effectively counter China's coercive methods against nations that defy its wishes.

"Look, everyone can understand this is a test," said Benjamin Haddad, senior director of the Europe Center at the Washington-based Atlantic Council. "This is a test of whether Europeans will break off their solidarity with one of their smaller members in exchange of economic interests."

Haddad told VOA that he wouldn't be surprised if the EU came up with strong measures in support of Lithuania. "Because I think there's just this feeling that Lithuania should not be left on its own."

Besides, doing so is consistent with the vision for Europe spelled out by French President Emmanuel Macron. France took over the six-month EU presidency Jan. 1. "If you talk about sovereignty, or if you talk about strategic autonomy, that means defending all of the EU members against external challenges and threats. Clearly we have China being aggressive against one of the smaller (EU) members."

French and EU policymakers are no doubt mindful of "a broader shift in European mindsets about China," Haddad said.

"Three years ago, the EU released a paper saying China is a trade partner, an economic competitor but also a systemic rival; I think now you see more and more of the systemic rival piece take precedence."

The battle between Beijing and Vilnius has been closely watched around the world. Analysts in Poland recently wrote that China's new, more aggressive tactics are also meant to intimidate other EU countries, mainly those in central Europe, "where the economic cooperation model with China is similar to Lithuania's."

That model involves only minor direct sales to China but significant indirect export through the supply chains of Western European companies. China is applying its punitive measures to products containing any Lithuanian-made content, in effect issuing what analysts describe as secondary sanctions that also harm businesses and industries from third countries, including other nations in the EU.

Lithuania's direct exports to China constitute only 1% of its total exports, but its industry and manufacturing are closely linked with German and other multinational corporations that Beijing is pressuring to stop sourcing from Lithuania.

Given Germany's status as an economic powerhouse in the EU, the reaction of the German businesses and government to China's pressure is considered crucial.

Observers noticed that the Federation of German Industries, or BDI, supported the EU's WTO filing, saying the union needs to take decisive measures.

New message from Berlin

Addressing an audience gathered at the Mercator Institute to discuss its China 2022 forecast, Tobias Lindner, a German deputy foreign minister, described the disagreements with China as touching "the core of European values and interests — not addressing this now will cost us dearly in the long run."

"We will continue to seek cooperation between China and the EU and Germany," Lindner said. "However, the partnership that we seek will be looked at strategically: Does it conform with our values? Is it in our interest?"

Lithuania's top economic official said her government hasn't ruled out a diplomatic solution, while also underscoring the EU's role going forward. "If the EU talks in one voice, then there is always a solution," Ausrine Armonaite told Politico.

"When it comes to a situation that Lithuania is in, today it's Lithuania; day after tomorrow it may be any other European countries," she said.

There are signs that mutual support and solidarity are taking root among EU nations as the bloc and member states individually face challenges from multiple directions.

"The fact that we're a member of the European Union, it means we have to defend other member states of the EU should they feel they're being coerced by third parties," Anze Logar, Slovenian foreign minister, told VOA in an interview last month.

In September, Slovenian Prime Minister Janez Jansa wrote a letter to fellow EU member states urging them to support Lithuania as the latter started to receive punitive blows from Beijing.

Asked whether Slovenia came under fire from Beijing because of the letter, Logar said it wouldn't have mattered.

"It's a matter of principle," he said. "If you're a member of a club, you have to defend your partners in this club, because we expect we'll be defended when somebody from outside attacks us, that other member states will come to our own defense."

Slovenia may need help from the EU club quite soon. Slovenian businesses reported their contracts were being canceled by China after Jansa described the tactics China deployed against Lithuania as "terrifying" and said his government is in talks with Taiwan to establish representative offices.

On Thursday, following the EU's WTO filing announcement, the U.S. Trade Representative's office announced that "the United States will request to join these @WTO consultations in solidarity with Lithuania and the European Union."

The State Department announced Friday that Undersecretary for Economic Growth, Energy, and the Environment Jose Fernandez will travel to Vilnius on Sunday, followed by a stop in Brussels.

Washington's "continuing strong support for Lithuania in the face of political pressure and economic coercion from the People's Republic of China" is on the agenda of discussions between Fernandez and his Lithuanian counterparts, the State Department said. Fernandez will also be discussing measures to counter economic coercion with EU officials in Brussels.

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