US Counters China's 'Economic Coercion' Against Lithuania in Taiwan Dispute
By Henry Ridgwell February 04, 2022
A senior U.S. delegation visited Lithuania this week in a show of support for the Baltic state in its growing dispute with China involving Taiwan.
Beijing effectively blocked imports of Lithuanian goods last month after Taiwan was allowed to open a representative office in the capital, Vilnius. China claims Taiwan as part of its territory. The dispute has rapidly escalated into a trade tussle between the West and Beijing.
Jose W. Fernandez, undersecretary for economic growth, energy and the environment, met Lithuanian government ministers in a visit described by the U.S. State Department as showing "continuing strong support for Lithuania in the face of political pressure and economic coercion from the People's Republic of China." The two sides discussed the implementation of a $600 million agreement on boosting trade.
Lithuania welcomed the intervention. "We permanently feel U.S. strong political and practical support in our dispute with China over its systemic violations of international trade rules," the Ministry of Foreign Affairs said in a press release.
The dispute began in 2020 when Lithuania's new government pledged to support what it called "freedom fighters" in Taiwan and criticized Beijing's human rights record in Hong Kong and Tibet.
In May 2021, Lithuanian lawmakers approved a resolution that described China's treatment of its Uyghur minority as "genocide." China has rejected such accusations.
In November of last year, Taiwan officially opened the representative office in Vilnius. Its director, Eric Huang, said the goal was the "strengthening of [the] bilateral relationship comprehensively between Taiwan and Lithuania."
Lithuania said the opening did not affect its policy toward China or imply any official recognition of Taiwan as independent from Beijing. The move, however, stoked fury in Beijing.
"From the perspective of Beijing, it's crossing a line, a real red line on how they approach Taiwan. And this is what led later to Beijing downgrading its embassy in Lithuania," Grzegorz Stec of the Berlin-based Mercator Institute for China Studies said in a recent interview with VOA.
In December, China effectively blocked Lithuanian imports by delisting it as a country of origin, meaning goods can't clear Chinese customs, while pressing multinational businesses to sever ties with the Baltic country.
"And that works not only in some cases for goods that are produced in Lithuania but also goods that include in their supply chain components produced in Lithuania. Also, the European exports that have been transited through Lithuanian ports, they have also been affected," Stec said.
The European Union accuses China of threatening the integrity of its single market and has launched a challenge at the World Trade Organization.
"We are stepping forward to defend the EU's rights," EU Commission Executive Vice President Valdis Dombrovskis told reporters January 27.
"Since December 1, Chinese customs are banning Lithuanian imports from the Chinese market. ... Chinese companies are canceling orders from Lithuania. China is also cutting its exports to Lithuania. Moreover, China is putting pressure on international companies to abandon the use of Lithuanian components in their production," Dombrovskis said.
It likely will take years for the WTO challenge to be resolved. In the meantime, the EU is working on legal instruments to counter coercive practices.
"This could include really targeting or restricting access for companies from a specific country from the single market. Right now, we don't really have a clear instrument for doing that," Stec told VOA.
The Taiwan government has offered Lithuania a $1 billion credit program and a separate $200 million fund to boost trade. Lithuania has donated hundreds of thousands of COVID-19 vaccines to Taiwan.
The United States has also stepped in to make up the shortfall caused by China's blockade. The U.S. Export-Import Bank signed a $600 million export credit agreement with Lithuania, focusing on manufacturing, business services and renewable energy.
But it's not just about money, Stec said. "Symbolic involvement [by the U.S.] of course supports Lithuania by showing that it's not isolated in its moves. At the same time, it also makes it harder to unravel the situation because it once again puts it in the spotlight."
U.S. officials also held talks in Brussels on joint measures to tackle economic coercion.
China, meanwhile, accuses Lithuania of "betrayal."
"The issue between China and Lithuania is a bilateral issue between China and Lithuania, not between China and Europe. We urge Lithuania to correct its mistakes immediately, and not act as a pawn of Taiwan independence separatist and anti-China forces. We also remind the EU to distinguish right from wrong and be alert to Lithuania's attempts to hijack China-EU relations," Chinese Foreign Ministry spokesperson Zhao Lijian told reporters January 27.
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