The European Union (EU) has warned Beijing with a large range of punitive actions and even a World Trade Organization (WTO) lawsuit if Lithuania’s accusations of trade blockade from China prove authentic, South China Morning Post reported on Nov. 9. 

Lithuania’s complaints about China’s unfair trade behavior

Lithuanian business figures have blamed Chinese customs officials for blocking goods from being exported to, or imported from China, to the Baltic economy.

Some Lithuanian exporters have pointed out that Chinese customs systems have prevented them from selecting Lithuania as a country of origin, meaning that neither documentation nor orders can be accomplished.

According to Vidmantas Janulevicius, president of the Lithuanian Confederation of Industrialists, on Tuesday, five trainloads of organic minerals departed Lithuania for China after the exporter was able to access the system correctly, but on Wednesday, the disruption restarted.

The trains, which have already traveled beyond Belarus, could be rejected on arrival, meaning millions of euros would be lost.

Moreover, Chinese goods ranging from electronics to steel products already prepaid by ten Lithuanian companies are now languishing in Chinese ports including Ningbo and Shanghai, incurring significant costs, Janulevicius added.

“Since last week, 80 percent of the goods have not been shipped, this problem is getting very serious,” he said.

What is the cause?

The case is retaliation from Beijing for Lithuania’s efforts to strengthen ties with Taiwan, which China considers a breakaway province.

Lithuania has recently hosted a “Taiwanese Representative Office” in its capital, which Beijing considers a violation of the EU’s one-China policy. Both Vilnius and Brussels deny the accusation.

EU’s warning to China

The EU confirmed that it was investigating Lithuania’s accusations, and if they are proven true, a powerful new trade weapon could be activated, and a WTO lawsuit would occur.

“If the information received were to be confirmed, the EU would also assess the compatibility of China’s action with its obligations under the World Trade Organization,” said Valdis Drombovskis, the EU’s trade chief, in a joint statement with its top diplomat, Josep Borrell.

Dombrovskis also proposed a powerful new trade weapon designed to handle economic coercion at a press conference in Brussels on Wednesday, saying that this weapon would target Beijing if the alleged trade blocks against Lithuania carried on. 

This could be considered as a case of interfering “in the legitimate sovereign choices” of the EU or one of its 27 member states “by applying or threatening to apply measures affecting trade or investment,” according to the Post

This anti-coercion instrument could kick targets out of lucrative EU sectors, despite being billed just as a “last resort” and a “deterrent.”

Accordingly, when coercion is concluded to be taking place, the EU may apply a wide range of punitive actions, including tariffs, suspension of market access through the use of quotas or trading licenses, and restricted access to public procurement programs and investment markets.

In detail, those found to be involved in coercion could no longer source goods governed by EU export control guidelines, be excluded from EU financial services or chemicals sectors, face sanitary or phytosanitary barriers to tapping the EU’s food markets, and have their intellectual property rights truncated.

Dombrovskis also confirmed that the proposed controversial EU-China investment deal had gained no progress, while sanctions remain on members of the European Parliament. Earlier this week, the EU extended its own sanctions on Chinese officials over rights abuses in Xinjiang for one more year.

What can the EU actually do?

In reality, the EU can hardly change the situation in the short run, according to SCMP. A WTO case, even a fast-track one, could take months, and the anti-coercion weapon could be even longer in the making. 

It must now be negotiated and approved by the European Council, consisting of the EU’s 27 member states and the European Parliament.

While there should be no problem with the parliament, which requested such a tool be developed, concerns could arise among the member states.

“The EU is facing geopolitical realities: the recent months and years have illustrated how trade policy is increasingly used as a political weapon. There is a gap in our toolbox that others can exploit,” said Bernd Lange, the top trade member in the parliament’s Socialist and Democratic grouping.

The tool “will fill that gap, starting today,” he added.

But some member states have raised concern as the European Commission could deploy the instrument without unanimous approval from EU member states. Sweden and the Czech Republic have urged the EU to ensure the tool stays within the rules of the WTO.

Meanwhile, the tool is strongly supported by the French government.

“We can see it very clearly today, the great powers are less and less hesitant to abuse their economic weight in order to seek to illegitimately influence the political decisions of their partners—including those of the EU and its members,” said France’s minister delegate for foreign trade, Franck Riester.“This is the case, for example, of China vis-à-vis Lithuania.”

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