Lithuanian exporters still frozen out by Taiwan office row with Beijing

Many Lithuanian exporters continued to be frozen out of the Chinese market in the first three months of the year, with the European Union mapping out the next steps in its related WTO lawsuit against Beijing.

Latest Chinese customs records released on Wednesday showed first-quarter imports from Lithuania had plunged 76.6 per cent on year, suggesting that an unofficial embargo remains in place on goods from the tiny EU member state.

Chinese trade has dropped dramatically for Lithuania since it allowed self-ruled Taiwan to open a diplomatic office under its own name last November - worsening already fraught EU-Beijing relations.

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The reception desk at the Taiwanese Representative Office in Vilnius, capital of Lithuania. Photo: EPA-EFE alt=The reception desk at the Taiwanese Representative Office in Vilnius, capital of Lithuania. Photo: EPA-EFE>

Beijing, which sees Taiwan as a breakaway province not entitled to diplomatic representation, claims the naming of the "Taiwanese Representative Office" breaches its one-China principle, a charge denied by Lithuania and the European Union.

Lithuania's exports to mainland China suffered a steep drop in December as Beijing reacted with fury to the Baltic nation's support for Taipei, downgrading diplomatic ties and subsequently banning a range of imports.

Lithuanian exporters complained of a customs block, saying the country's details had been effectively wiped off the Chinese customs portal, leaving them unable to fulfil export orders.

The EU then launched its own probe and filed a World Trade Organization (WTO) case against Beijing in January, accusing it of economically coercing one of its smallest member states.

The following month, China officially banned Lithuanian beef, dairy, and alcohol products, claiming compliance issues and label tampering.

Initial consultations ahead of the WTO lawsuit were completed last month, but EU sources said the bloc remains dissatisfied with Beijing's response.

"The EU can confirm that WTO dispute settlement consultations with China were held mid-March in which the EU asked a number of questions on the measures taken by China. We are still examining the details of the answers by China and will on that basis decide on the next steps," said Miriam Garcia Ferrer, an EU trade spokeswoman.

March data, however, showed a slight uptick in Lithuanian shipments to mainland China: US$18 million worth of goods made it to Chinese ports, double the value of February's dramatically reduced exports, but less than half of that transported a year earlier.

Top of the list were copper-zinc alloys and lasers, with Chinese customs authorities permitting port entry to some of such goods if local manufacturers sought special import dispensation by post, according to Lithuanian business figures.

"Some very important equipment and machines for Chinese manufacturers are moving again to China directly, but only with a Chinese manufacturers' letter with an explanation [that the goods are vital to production]," said Vidmantas Janulevičius, president of the Lithuanian Confederation of Industrialists.

The Lithuania dispute was one of several grievances EU leaders raised with their Chinese counterparts at a testy summit earlier this month, which was otherwise dominated by Russia's invasion of Ukraine, and Beijing's perceived support for Moscow.

"China must stop its unjustified trade measures against Lithuania, which violate WTO rules and disrupt the EU's Internal Market. Until it does, we will pursue our case in front of the WTO," European Commission President Ursula von der Leyen said after the summit.

Ursula von der Leyen and European Council President Charles Michel talk to the press following an online EU-China summit, in Brussels on April 1. Photo: EPA-EFE alt=Ursula von der Leyen and European Council President Charles Michel talk to the press following an online EU-China summit, in Brussels on April 1. Photo: EPA-EFE>

The issue is expected to feature prominently at the next EU-China High-level Trade and Economic Dialogue, a biannual affair set to take place in June.

EU and US officials, meanwhile, meet in Brussels this week to discuss shared grievances with Beijing, in talks led by their respective No 2 diplomats, Stefano Sannino and Wendy Sherman.

This will be followed by a meeting in Paris in May of the Trade and Technology Council - a EU-US alliance aiming to counter Beijing's footprint.

Issues like export controls and supply chain solidarity will be discussed, but delegates may also break new ground on issues such as outbound investment screening for European companies in China, said Noah Barkin, a Berlin-based Europe-China analyst at Rhodium Group, an economic consultancy.

"[This is] an idea that senior officials in Biden's National Security Council and members of Congress are pushing in relation to China," Barkin wrote in his monthly newsletter. "A few months ago, this was being dismissed in European capitals as an extreme American idea. That may be changing."

"Confidence in transatlantic convergence on China is at an all-time high," he added.

European businesses frustrated by the plethora of political risks and Beijing's interminable zero-Covid strategy, have been talking with increased frequency about the need to reduce their dependence on the economic superpower.

"It is becoming increasingly clear that there is an urgent need to diversify our international ties in order to reduce vulnerabilities," said Wolfgang Niedermark, a member of the board at the German Federation of Industries.

"For the benefit of the people in China and in the interests of their international trade relations, the Chinese government should immediately seek an exit strategy from the zero-Covid policy."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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