The European Union has submitted a complaint against China and a request for consultation at the World Trade Organization (WTO) office in Geneva. China stands accused of placing an unofficial embargo on Lithuanian exports, after the government permitted the opening of a Taiwanese representative office in the capital of Vilnius. The issue is that it was named “Taiwan Representative Office” – implying that Taiwan is an independent country – instead of Taipei representative office, indicating it represents Taipei, China.
Lithuania’s exports to China dropped by more than 90% in December compared to both the previous December and the prior month of November. But China has denied there is an embargo, telling EU officials that Chinese businesses have simply decided not to buy goods from countries that have “attacked China’s sovereignty”. The Lithuanian government is under pressure to reconsider renaming the office, following a domestic backlash, but the Chinese government has indicated this would not be sufficient to improve bilateral relations and the Taiwanese government said it had not received any request from Vilnius to change the name of the office. A Global Times editorial said that “it will take much more than just renaming the office” for Lithuania to mend its relationship with China. “Lithuania needs to make substantial adjustments to its overall China policy, rather than completely follow the U.S.’ agenda,” said the article.
Lithuania’s Foreign Minister Gabrielius Landsbergis said there was no intention to change the name. Taipei's Representative to Lithuania, Eric Huang, told the South China Morning Post that he would not wade into the row over the naming of the office, adding that strengthening economic and trade relations is more important.
Lithuania's President Gitanas Nauseda described the naming as a “mistake”, while businesses have been lobbying the government after losing access to the Chinese market, despite the fact that only a relatively small number of Lithuanian companies export to China. There has also been anger in some European capitals after China blocked goods from countries including France, Germany and Sweden that contained components made in Lithuania. “This situation showed us that we are quite resilient when it comes to the Russian hybrid war, but absolutely vulnerable to a Chinese version,” said Marius Laurinavičius, International Affairs Expert at the Vilnius Institute for Policy Analysis.
The EU’s request will be the initial formal step towards a WTO case that is likely to drag on for years. China has the right to accept or reject the consultation, designed to resolve grievances without the need for a lengthy dispute settlement procedure. In case the consultations are unsuccessful or fail to get under way, the EU would request that the WTO form a dispute panel of judges to hear the case. The WTO only deals with active cases, meaning if the coercive behavior was to stop months or years into a proceeding, the case would be dropped, with no recourse for Lithuanian businesses. At a testimony to the European Parliament, the EU’s Trade Enforcement Officer Denis Redonnet, described China’s treatment of Lithuania as a “a combination of disguised or silent coercion”. “A lot of what China does is in this unofficial zone and it denies anything officially. It’s very hard to hold them accountable and when you do, it’s years down the track and is cold comfort for the exporter,” said Bryan Mercurio, Professor of Trade Law at the Chinese University of Hong Kong, the South China Morning Post reports. China has downgraded its diplomatic relationship with Lithuania and pressed multinationals to sever ties with the country or face exclusion from its market.
However, the EU bringing a case against China before the WTO will anger the Chinese government and further complicate China-EU relations at a time when the ratification of the Comprehensive Agreement on Investment (CAI) is on hold due to allegations by the EU that China is violating the human rights of Uyghurs in Xinjiang. According to the EU, China's “illegal actions' include 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.
Premier Li Keqiang underlined the need for China and the European Union to uphold dialogue and cooperation, properly handle differences and strive toward the healthy and steady growth of bilateral ties. In a virtual meeting with Dutch Prime Minister Mark Rutte, Li said the Netherlands, a key member of the EU, should play a constructive role in promoting ties between Beijing and Brussels. The meeting came after Li extended a congratulatory message to the Dutch leader after his reelection earlier this month. This year marks the 50th anniversary of the establishment of diplomatic ties between China and the Netherlands.
This overview is based on reports by the China Daily, Global Times and South China Morning Post.