French and Swedish companies also face similar problems, as products made in Lithuania are part of the supply chain of these companies, said a representative of a European company who wanted to be anonymous.
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Representatives of the European Parliament, for their part, emphasize that officially the Beijing authorities pretend to know nothing about the situation. Despite attempts by the European Union’s envoy to China to side with Lithuania, China does not officially acknowledge that it has imposed an embargo on Lithuanian products. In this case, we have to talk about the Chinese state media, which warns that Chinese companies will not trade with countries that do not respect China’s sovereignty, citing Lithuania’s diplomatic relations with Taiwan.
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According to the Chinese media, “it recognizes all countries as equal, regardless of their size, but will not allow individual countries to take action against China through ‘rogue techniques’.”
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Jorg Vutke, head of the European Union’s chamber of commerce in China, called the situation an “unprecedented attempt to put pressure on Europe’s business environment”.
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“This complicates the already difficult supply chain situation affected by the Covid-19 pandemic,” said Vutke.
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Ammunition is missing
The solution that the European Union is currently proposing is to do ‘everything as usual’ – that is, for the Chamber of Commerce to decide, and what solutions the World Trade Organization (WTO) can offer. However, there is not enough ammunition in any of these cases.
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“What China is doing is a political step, the goal of which is more than clear: to threaten other EU member states from following Lithuania and not trying to improve relations with Taiwan,” said Audris Kubilius, the former prime minister of Lithuania and current member of the European Parliament. He added that Lithuania has political support from the European Union, but trade conflicts usually take a long time.
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EU Trade Commissioner Valdis Dombrovskis has also expressed support for Lithuania and called for an inquiry into China’s compliance with WTO rules. It should be noted that China is also bound by WTO rules, as China is also a member of that organization.
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However much he wants to help, Dombrovskis has limited resources. Trade between the European Union is subject to the usual trade defense instruments, such as anti-dumping measures. They do not cover the so-called gray area, from which China is also turning against Lithuania. The European Union also does not have a bilateral trade agreement with China that could ease tensions.
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The next best option is to launch the anti-coercion tool proposed by Dombrovskis in December. This instrument is specifically designed to prevent such geopolitically motivated trade tensions, and it allows the European Union to take action against infringers of trade rules through goods, services and intellectual property rights.
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However, it is necessary to wait for this instrument to work fully. And we will have to wait several years for the discussions needed to approve the use of this instrument by the European institutions to come to an end.
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