Saturday

21st May 2022

EU takes WTO action against China over 'bullying' Lithuania

  • EU Commission vice-president Valdis Dombrovskis announcing the action against China (Photo: European Commission)
Listen to article

The EU launched a case against China at the World Trade Organization (WTO) on Thursday (27 January) over its coercive practices against Lithuania and exporters from other member states.

"Let me me be clear, these measures are a threat to the integrity of the EU single market," commission vice-president Valdis Dombrovskis told reporters, and added: "these affect intra-EU trade and EU supply chains and negative impact on EU industry."

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The move signifies a further escalation between the two economic giants. It is also a politically symbolic move by the EU towards one of its smallest members, as the WTO dispute-settlement process could take years before it yields tangible results.

The EU's main trading partner, China, started blocking Lithuanian products and goods from other EU countries that contained Lithuanian components at its customs in December.

China's de facto ban on Lithuanian exports came after the EU member in July allowed Taiwan to open a representative office in Vilnius, under the country's name - instead of the capital, Taipei.

Beijing saw that as a challenge to its integrity, as it considers Taiwan part of its territory with no right to diplomatic recognition.

In response, China recalled its ambassador and downgraded ties with Lithuania, but has denied blocking Lithuanian goods.

Lithuania's move irked other EU members at the time, as it has been a diplomatic tradition to use the capital for Taiwan's representation, and Vilnius had not tipped off other member states of its decision.

However, the EU's launch of the WTO case is considered "a sign of solidarity", the German foreign ministry said on Thursday.

Lithuania's prime minister thanked the commission for taking action.

"Pressure, restrictions and threats are incompatible with WTO rules and values of the free world," Ingrida Šimonytė tweeted.

Evidence

Dombrovskis said EU officials worked hard on collecting the evidence on Chinese customs banning Lithuanian imports, mostly affecting pharmaceuticals, lasers, electronics and food.

The measures also include 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.

Dombrovskis said there has been a 90-percent drop in trade from Lithuania to China in December 2021 compared to December a year earlier. Chinese firms are also cancelling orders from Lithuanian companies.

"The EU is determined to act as one and act fast against measures in breach of WTO rules," the Latvian commission vice-president added.

The case will be the first major test at the new dispute-settlement mechanism at the WTO, as the organisation's appellate body is not functioning after the US administration under former president Donald Trump held up appointments.

Consultations at the WTO will last for 60 days, after which the EU can ask for an adjudication panel. That will take at least six months to reach a verdict, while the EU can impose retaliatory tariffs. China can appeal the decision by the panel.

The commission said it is also pursuing diplomatic efforts to de-escalate the situation - but bilateral consultations have so far not produced results.

"China always acts in accordance with WTO rules. […] The allegation that China coerced Lithuania is groundless and inconsistent with facts. The issue is between the two countries is a political one and not an economic one," the Chinese foreign ministry said on Thursday.

"The fraught relations are a result of Lithuania's action in bad faith that hurt Chinese interest, and not a matter of China exerting pressure on Lithuania. It is a bilateral issue between the two countries and not something between China and Europe," the spokesperson, Zhao Lijian, said, urging Lithuania to "correct its mistake".

"We hope the EU side will tell right from wrong, and stay vigilant of Lithiania's attempts to hold EU-China relations at hostage," he said.

Few tools

In the meantime, Dombrovskis urged EU capitals and the European Parliament to approve an anti-coercion instrument, proposed last December, that would allow the commission to take urgent measures such as an import bans.

Spanish socialist MEP Inmaculada Rodríguez-Piñero, who is responsible for trade relations with China, said she was glad that "the Commission flexes its muscles and takes a clear stance against the bullying of Lithuania and other countries by China".

The EU has few tools to act fast if one of its members is under such trade pressure.

China has been courting the EU during the Trump presidency, by portraying itself as another defender of multilateralism in contrast to Trump's "America First" policy.

However, last year the EU joined Washington, the UK and Canada in imposing sanctions on Chinese officials over accusations they are linked to the abuse of the Uyghur ethnic minority.

Beijing retaliated by sanctioning five MEPs, among others, which practically froze the ratification of the massive investment agreement between China and the EU, pushed by Germany, and agreed in December 2020.

"The parliament has been clear that it will not proceed with this ratification of this agreement in a situation where members of European Parliament are under China's sanctions," Dombrovskis said.

Opinion

Time to stop China's economic hostage-taking of Lithuania

Simply opening the Taiwanese Representative Office in Lithuania's capital, Vilnius, sparked a large-scale expansion of China's economic warfare against democracies. China's actions amount to a fundamental attack on the DNA of the European Union: the internal market.

US and Russia clash in ugly UN talks

The US and Russian envoys exchanged heated comments at a UN Security Council debate on Monday, which did little to de-escalate tensions.

Podcast

Ultraconservatives in Putin's shadow

Vladimir Putin's Ukraine war has threatened to be a public relations disaster for hard-right gatherings like the Conservative Political Action Conference — now meeting in Budapest and featuring Hungarian prime minister Viktor Orbán, who remains highly-cordial with the Kremlin.

Opinion

Will 'Putin's Nato' follow Warsaw Pact into obscurity?

Valdimir Putin's equivalent to Nato — the Collective Security Treaty Organization of Russia, Kazakhstan, Kyrgyz Republic, Armenia, Tajikistan, and Belarus — is convening in Moscow next week to give cover that Russia is not alone in its war against Ukraine.

News in Brief

  1. UK to send 'hundreds' of migrants to Rwanda each year
  2. Norwegian knife attacks were domestic dispute
  3. Sweden hits back at Turkey's 'disinformation' in Nato bid
  4. Germany's Schröder gives up one of two Russia jobs
  5. G7 countries pledge €18bn in financial aid for Ukraine
  6. Italian unions strike in protest over military aid for Ukraine
  7. Russia cuts gas supply to Finland
  8. Half of Gazprom's clients have opened rouble accounts

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic delegation visits Nordic Bridges in Canada
  2. Nordic Council of MinistersClear to proceed - green shipping corridors in the Nordic Region
  3. Nordic Council of MinistersNordic ministers agree on international climate commitments
  4. UNESDA - SOFT DRINKS EUROPEEfficient waste collection schemes, closed-loop recycling and access to recycled content are crucial to transition to a circular economy in Europe
  5. UiPathNo digital future for the EU without Intelligent Automation? Online briefing Link

Latest News

  1. What Europe still needs to do to save its bees
  2. Remembering Falcone: How Italy almost became a narco-state
  3. Economic worries and Hungary on the spot Next WEEK
  4. MEPs urge sanctioning the likes of ex-chancellor Schröder
  5. MEPs call for a more forceful EU response to Kremlin gas cut
  6. Catalan leader slams Pegasus use: 'Perhaps I'm still spied on'
  7. More EU teams needed to prosecute Ukraine war crimes
  8. French EU presidency struggling on asylum reforms

Join EUobserver

Support quality EU news

Join us