The EU has launched a lawsuit against China in the World Trade Organization over its de facto ban on Lithuanian exports in a dispute over Taiwan.
The move raises tensions between two of the world’s largest economies, which are embroiled in steel conflicts and attitudes toward China’s Muslim Uighur minority.
Brussels has said China has blocked imports from Lithuania and other EU member states since December if their products contain Lithuanian content.
“These actions, which appear to be discriminatory and illegal under WTO rules, are detrimental to exporters both in Lithuania and elsewhere in the EU,” the European Commission said.
Valdis Dombrovskis, Commissioner for Trade, said: “The EU is determined to act as one and to act swiftly against measures in breach of WTO rules that threaten the integrity of our single market. At the same time, we are making diplomatic efforts to de-escalate the situation. “
Dombrovskis told reporters that the EU would drop the case if China suspended its measures.
Gabrielius Landsbergis, Lithuania’s foreign minister, welcomed the move and the solidarity shown by other EU countries. “This step is a clear message to China that the EU will not tolerate politically motivated acts of economic coercion,” he said.
Landsbergis added that Lithuania wants to de-escalate the situation, but must protect both its own interests and those of its companies and foreign investors.
The problems began after Vilnius authorized the opening of a representative office in Taiwan. Beijing considers the island part of its territory and acts against those who officially acknowledge its existence.
Other EU countries are hosting representations in Taipei, using the name of the Taiwanese capital to avoid disputes with China. Beijing has revoked the diplomatic status of Baltic diplomats and blocked imports.
The commission said it had evidence that Beijing had refused to release Lithuanian goods through customs and had rejected applications for imports from the country. It also says China is pressuring EU companies to remove Lithuanian parts of their supply chains.
Taiwan buys many of the goods refused by China and sets up a $ 200 million investment fund for Lithuania. Lithuanian exports to China decreased by 91% in December 2021 compared to the previous year.
Taipei has vowed to give its full support to Lithuania and the EU. “We firmly believe that any behavior that violates international norms will be condemned and corrected,” said Joan Ou, a foreign ministry spokesman.
The EU has few legal instruments to respond to. He proposed an anti-coercion tool that would allow the commission to take urgent measures, such as a ban on imports. Dombrovskis called on the Member States and the European Parliament to approve the instrument as soon as possible.
WTO consultations will last 60 days, after which the EU may request a judicial commission, which will take months to reach a verdict, but may allow Brussels to impose retaliatory tariffs. If the decision is against China, it can prevent punishment by appeal. But the appeals could not be heard because the United States blocked the appointment of members of the appellate body.
Support for Lithuania is reluctant among several Member States, who believe that this has unnecessarily provoked China. Germany is particularly concerned about maintaining access to China’s lucrative market.
“There is a way for Taiwan’s EU missions to act. “Lithuania has not consulted any Member State before taking this decision and now requires unconditional solidarity from EU member states,” said an EU diplomat. He warned that the bloc should not allow relations with China to be led by “ad hoc events”.
Dombrovskis said he hoped the dispute would not harm wider co-operation on issues such as climate change. “We seek to deepen and strengthen our relations with China.”
Additional report by Emma Zhou in Beijing