N. Peter Kramer’s Weekly Column
As EU member state Lithuania sought to deepen diplomatic ties with Taiwan, Beijing made an example of the Baltic country by flexing its massive trade muscle and stopping imports of Lithuanian goods. China’s embargo is now hitting manufactured goods from other EU countries, such as France, Germany and Sweden, which are dependent on Lithuanian supply chains.
A day after Lithuania decided to recall its diplomats from Beijing, the 27 EU leaders meeting in Brussels devoted little time to the unprecedented spat. It lays bare how little room for manoeuvre the EU has to take action to defend its political principles. The EU’s solution is to turn to its usual mindset: let the trade department handle it, and see what the World Trade Organisation (WTO) can do about it.
In either case there is not much ammunition available. The EU can gather evidence to start a dispute against China at the WTO, but that process can take years; and, anyhow, the WTO’s highest court is still paralysed. The dispute is also likely to be appealed. And the EU trade department? The usual trade defense instruments such as safeguards or anti-dumping measures do not cover the grey economic zone in which China is targeting Lithuania.
In the meantime two German car factories based in China had parts stopped at Chinese ports in recent days because they were manufactured in Lithuania. French and Swedish firms are also reportedly facing similar problems because Lithuanian products form part of their supply chain.
Beijing is still officially denying knowledge of the situation and has not publicly acknowledged any ban on Lithuanian products. However, Chinese state media are warning that Chinese businesses will stop trading with countries which do not respect Chinese sovereignty , a barely veiled reference to Lithuania’s deepening ties with Taiwan. ‘China humiliates the EU’, an EU diplomat said.
It looks like the world’s biggest trade bloc, as the EU loves to call itself, is not more than a lame duck…
