Europe is struggling to meet China’s trade challenge

Brussels – China’s economic recession against the EU over Lithuania’s visit to Taiwan has provoked divisions in the EU and raised new doubts about its ability to protect its huge market from Beijing’s pressure.

China has been effective in recent weeks Prevented Lithuanian companies from its market According to US and European officials, it began to put pressure on European and American companies with Lithuanian suppliers at the risk of severing or severing those ties.

Chinese pressure came after Taiwan opened a representative office in the name of the island in the Lithuanian capital in November, calling Beijing the move as the “greatest pioneer” and promising retaliation. Most Taiwanese offices abroad use the name Taipei, the capital of Taiwan.

Lithium prices are rising as demand for the main ingredient in electric car batteries continues to rise, amid widespread impulses to move away from oil and gas. But the extraction of the metal is time consuming and harmful to the environment, and plans to produce more have provoked protests. Photo: STR / Getty Images, Oliver Bunic / AFP / Getty Images

China’s economic activities, which have never been officially announced, have enabled Beijing to avoid growing EU moves to protect its market from China’s economic behavior. The European Union has authority over the trade policy of member countries.

Since 2019, the group has announced policies aimed at helping its companies compete with Chinese competitors and gaining influence for European companies in China.

Nevertheless, European capitals’ response to China’s pressure on Lithuania has been muted. Some ambassadors have criticized the Baltic decision to challenge Beijing on Taiwan. A politically relevant issue To President Xi Jinping. Others sought to avoid escalating the conflict with China.

There have been US officials In a loud voice condemning China’s pressure tactics.

On Tuesday, Lithuanian President Kidanas Nousada said the government had made a mistake in allowing the Taiwanese office to carry the island’s name. Last year, Lithuania, a US ally in the North Atlantic Treaty Organization, became the first country to leave the 17 + 1 group, a forum for political and economic relations between China and many, mainly smaller, European countries.

“I think it’s wrong to open a Taiwanese office, but the name is not associated with me,” he said. Nousada told the Lithuanian radio station.

“Now we have to deal with the consequences of the extraordinary actions being taken against Lithuania, and we must be very active and signal very clearly to the EU that this is an attack, a kind of pressure. EU countries,” he said.

Lithuanian officials have raised the issue at a high level, including a summit of meeting leaders in December. On Tuesday evening, European Commission President Ursula von der Leyen discussed the situation with the Prime Minister of Lithuania. Ms. von der Leyen later said in a tweet that she fully supported Lithuania in “resolving the current trade annoyance with China.”

Beijing considers Taiwan a part of China and has promised to seize control of the island of Democratic Sovereignty with a population of 24 million.

In early December, Lithuania stopped being added to the country list of Chinese customs officials, officials say, effectively preventing its companies from doing business there. Lithuanian diplomats left China in mid-December after being ordered to hand over their diplomatic documents.

EU attempts to mediate have so far failed. The federation has warned that Beijing could be sent to the World Trade Organization, although any action there could take years.

“Now if the supply chains of other member states contain goods of Lithuanian descent, we begin to hear complaints about their export restrictions,” EU Trade President Valdis Dombrovsky said in a recent interview. “We know the WTO challenges will take time, so we’ll see what other ways to deal with the situation.”

On Monday, US Secretary of State Anthony Blinken discussed China’s actions against Lithuania with colleagues from nine Eastern European countries. In late December, the State Department said US companies with suppliers from Lithuania began to suffer from China’s “increasing political pressure and economic pressure.”

China’s steps are a real test for this group. Officials hoped to increase their economic influence with Beijing.

In October 2020, the Commission introduced a screening mechanism for foreign investment. In its first year, 8% of the 265 transactions recommended for in-depth screening came from China.

The Commission tightens the rules to prevent companies receiving foreign subsidies, loans, tax loans or other forms of government assistance from obtaining EU companies or competing with them for certain EU agreements. It is also close to agreeing to an international procurement tool that would allow European companies to lock up companies from countries that exempt them from government contracts.

The Commission also proposes a tool to counter the EU’s use of economic sanctions to allow countries to impose tariffs or prevent exports.

Despite officials acknowledging Chinese pressure, the EU, despite economic ties, is earning 1 1 billion a day, equivalent to $ 1.13 billion in trade and the largest European investment in China.

Lithuanian officials have raised the issue at a high level, including a summit of meeting leaders in December.

Nevertheless, EU and Lithuanian officials say some of the camp’s major member states, including France and Germany, which have deep economic ties with China, have sought to avoid escalating tensions with Beijing. In his first call with President Xi, the new German Chancellor Olaf Scholes last month promised to pursue deeper economic ties.

Lithuanian ambassadors say the response from some European capitals is seen as a bilateral issue that requires compromise.

Alicia Garcia-Herrero, a senior colleague of the European economic think tank Brooklyn, warns that Beijing could increase pressure if the EU now fails to pay its collective economic weight as one of China’s largest export markets.

In the end, he said, the EU’s authority over trade policy would be eroded if it failed to protect its smaller members.

The EU “can at least say that Lithuanian exports are European exports and that any action against Lithuanian exports is an act against European exports,” Ms Garcia-Herrero said. “Nothing like that was talked about.”

Write to Lawrence Norman at [email protected]

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