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CWA # 678, 12 February 2022

NIAS Europe Monitor
Lithuania and China: Vilnius has become Beijing’s Achilles heel. Four reasons why 

  Ashwin Immanuel Dhanabalan 

China undermined the initial tremors of contention with Lithuania; now the issues have now spilled over to Europe with global consequences for China.

On 21 March 2021, Lithuania withdrew from the China-CEEC 17+1 group. It felt the grouping undermined the EU's role in the region. The withdrawal was partially driven by China's countermeasures over the bloc's accusations against Beijing's Xinjiang policy. 

According to China's Ministry of Commerce, China-Lithuania trade was USD 1.35 billion in 2019, placing China in 22 places for the export market and ten places for sourcing imports. According to Chinese experts, the Global Times reported: "The withdrawal of countries like Lithuania could also be the opportunity to improve China-CEEC cooperation mechanism." Back then, Beijing felt a small country like Lithuania withdrawing from the cooperation would have little to no impact on China's influence in the region. Yet, one sees a wave of anti-China positions across Europe in countries like Slovenia, Germany, France. One could see a similar sentiment in the US, UK, and Australia across the globe after its diplomatic debacle with Lithuania. 

Why is this happening now?
Since the French Parliament passed a resolution that officially recognized China's treatment of Uyghurs as genocide, the resolution formally recognized the violence perpetrated by China as crimes against humanity and genocide. The non-binding resolution also calls on the French government to protect the interests of the minority groups in China and to take and to take the necessary foreign policy measures toward the People's Republic of China. At the same time, the European Parliament also adopted a resolution on the violation of fundamental freedoms in Hong Kong, Kazakhstan, and Sudan. The Parliament condemned the deteriorating fundamental freedoms in Hong Kong as the government had imposed severe restrictions on various facets of human rights.

Lithuania's pullout from the China-CEEC 17+1 group did create an impact as Slovenia confirmed setting up trade offices with Taiwan on 18 January. Slovenian Prime Minister Janez Janša announced his support for Taiwan's "sovereign decision." He also commented on the Lithuanian issue and said that most EU member countries had representative offices with Taiwan. Thus, Lithuania could have one as well. However, unlike Lithuania, Slovenia will continue to be a part of the group led by Beijing. 

Lithuania has become China’s Achilles heel: Four reasons why
First, the EU launched an official dispute with China on behalf of Lithuania with the World Trade Organisation (WTO). The arbitration would have significant implications that can be seen in terms of economic and diplomatic contentions. China’s Foreign Ministry spokesperson Zhao Lijian said: "We also remind the EU to distinguish right from wrong and be alert of Lithuania's attempt to kidnap China-EU relations." He further denied the allegations of violations of WTO norms and clearly stated these issues were more political than economic. China warned the EU not to escalate the bilateral dispute with Kyiv because Beijing said it only practiced business preference on Lithuanian supplies. 
 
Second, a revival of the EU's anti-coercion instrument. EU's anti-coercion instrument has not been enacted yet, and it will not be implemented until an agreement is reached. The Lithuania-China issue is a prime example of how the EU can hold a larger country accountable for clamping down on smaller countries within the EU to safeguard their interests. Furthermore, China's weaponization of European value chains could lead to the EU and regional countries stepping up their Indo-Pacific strategy to secure their economic interests. 
 
Third, a shift in the EU's foreign policy of strategic economy. The recent tensions would affect the EU's push for a strategic economy, as it depended on closer economic ties with China. China was initially seen as a critical player in shifting its traditional dependence on the US. The EU had also hoped to play a crucial role between the US and China to bridge relations between the two countries in the case of diplomatic tensions. Under President Macron's EU Presidency, France had supported the idea of pushing for a strategic economy. Yet, with the recent debacle and the French Parliament's judgment on China's treatment of Uyghurs as genocide, it would make Paris reconsider its stand. 
 
Fourth, Europe versus China has taken a global turn with the EU approaching the WTO. Australia has requested to join the consultations regarding the trade dispute between the EU and China. Australian Trade Minister Dan Tehan said: "Australia has a substantial interest in the issues raised in the dispute brought by the European Union against China ... and will request to join these consultations." As Australia and China had their contentions in 2018 when Canberra banned Huawei, Canberra recently filed two cases with the WTO regarding China's import duties. 
 
On 26 January, the US House of Representatives passed the America Competes Act of 2022, which approved Washington to rename its Taiwan embassy. The bill also authorises the change from Taipei Economic and Cultural Representative Office to Taiwan Representative Office in the United States. The act cleared the speculations reported by Global Times on 22 January, which suggested that the US diplomats had pressured Lithuania to consider changing the name of the Taiwanese representative office in Vilnius. 

Thus, keeping in mind the events leading to the escalation and the recent issues, the EU is likely to take a stand against China on many matters. Lithuanian trade boycott, the genocide in the Xinjiang region, and the curb of fundamental violations in Hong Kong are the primary cause of discontentment between the two regions. But, with the Ukraine-Russia tensions, the issues would not escalate to a more considerable extent. Regarding the Anti-coercion strategy and the strategic autonomy, there will be a shift as the change will affect the EU's strategy and foreign policy. However, the US' adoption of the new Act and Australia's interest in the WTO litigation would back the EU's stand against China. 


About the author
Ashwin Immanuel Dhanabalan is a research scholar at the National Institute of Advanced Studies. As part of the Europe Studies at NIAS, his research in the program looks at regional politics, governments and governance. His research interests are also in Security and Conflict Resolution.
 

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