In November of 2021, Lithuania allowed Taiwan to open up an embassy in its capital city, Vilnius. Despite pressure from China to terminate this agreement and prevent the embassy from being opened, Lithuania and Taiwan went ahead with the plans, disregarding the status quo when it comes to representative offices for Taiwan. This was the first time in a while that a state signaled its diplomatic commitment to recognizing the independence of Taiwan from China; most often representative offices for Taiwan are called “Taipei Economic and Cultural Offices” so as to keep them under the Chinese states’ umbrella authority.
As a result of Lithuania allowing Taiwan to open up the embassy, China has been preventing food imports from Lithuania from entering its borders in an effort to economically hurt Lithuania. As a major food exporter to China, the value of trade between the two countries has “dropped by 91%” since November of 2021. Beef imports alone have reportedly dropped from millions to hundreds of tons to China since last year. Lithuania has interpreted this as China attempting to intimidate it into changing the status and name of the embassy that Taiwan has set up. For context, China considers Taiwan to be part of its mainland domain, so acknowledgment of Taiwan as a sovereign nation does not go over well within China.
As a result of this international spat, the EU has taken up the claim with the World Trade Organization (WTO) on behalf of Lithuania, meaning that representatives from the EU and China to the WTO will attempt to negotiate a possible compromise.
The WTO is an international trade organization that was established to create solutions to trade disagreements between countries and develop and enforce a set of rules and norms for international trade. Each member country of the WTO is allowed designated representation if a trade dispute arises, however, one of the EU’s responsibilities is handling the trade issues of its member states within the WTO, which means that all EU members have the benefit of unified representation within the institution.
The WTO will move ahead with formal arbitration, or negotiations, based on the evidence collected on the claim that Lithuanian imports are not being received by China and that China is urging Lithunain leaders to change the name of the embassy to Taipei as opposed to Taiwan.
The Political Nature of the Claim
The formal complaint lodged against China was that Lithuanian businesses and exporters should not suffer the consequences of a diplomatic breakdown between China and Lithuania based on the choices of their respective governments. Nevertheless, Lithuanian citizens will most likely pay the price as will other countries that stand up to China in defense of Taiwanese self-determination
However, Lithuania is not on its own. Other EU nations have voiced their support for the claim seeing as China’s trade restrictions on Lithuania have the potential to disrupt the entire EU market. As an EU member state, it means solidarity from the union to Lithuania when it comes to trade disputes. It is likely that the complaint against China will continue even if the embassy does end up closing in the near future.
Alternatively, if China disrupts more European trade to create pressure on Taiwan as an independent country, the potential of trade disruption as a form of pressure will evolve based on this complaint to the WTO. This situation reflects how deeply economics has become intertwined with politics and how typical it has become for nations to leverage trade and economic profits to push their own political agendas.
Lithuania’s claim also puts the nation in an interesting position seeing as it is part of a faction of nations that consider both Russia and China as threats to their regions. For Lithuania, the choice to open the embassy and thus recognize Taiwan’s sovereignty in the face of China was undoubtedly a political act. Lithuania and other Baltic countries have recently stood up for Ukraine in the face of Russian aggression, proving they are willing to demonstrate their support and solidarity for both Ukraine’s and Taiwan’s sovereignty from their larger neighbors.
For China, Lithuania’s claim is considered to be part of a continuous effort by Western nations to antagonize and demonize the country based on its ascending status within the global context. As China gains more influence, it means it is more likely to come into conflict with countries benefiting from the current status quo of international liberalism. While one of the core tenants of international liberal theory is free trade between countries, this is not currently happening between Lithuania and China. The breakdown in diplomacy shows a lack of trust in an international liberal system.
Between the formation of democratic national coalitions such as AUKUS and the Quad, and continuing support for persecuted groups within China, Chinese economic growth has become more of a political topic. This is due to the influence that China now carries throughout the world through institutions like the World Health Organization(WHO) and its own projects like the Belt and Road initiative.
The World Trade Organization
This complaint has been one of many brought to the WTO between China and Western competitors. However, the difference, in this case, is the political origin of the economic dispute, as opposed to differences in economic policies like tariffs and intellectual property or goals like strengthening certain industries. Predominantly, the WTO comes to judgments in cases based on complaints between countries and sometimes compensation for claims based on unfair trade policies, for example. If China loses the case and does not remove the barriers to trade for Lithuania, then Lithuania is allowed to place similar ones on China. This tends to be the solution if the negotiations between the two countries fail and the WTO authorities side with the country filing the complaint.
This could create serious complications if the decision allows all of the EU to apply restrictions against China, however, it is unlikely to go to that extent. On the other hand, given the dicey political nature of this dispute, it may be difficult to generate an agreement that does not increase tensions between the EU and China. While Chinese officials say the embassy issue and trade restrictions are not connected, it is different from an economic policy that, for example, is intended to protect national industries from outside competition.
Given the political nature of this dispute, it may mean that the WTO is not as helpful an arbitrator as the scope of its mandate is only meant to cover decision and rulemaking at an international level for trade between countries. While the WTO may be able to authorize Lithunaina’s right to restrict trade in the same way China has, it does not solve the diplomatic problem and thus only worsens the tension between the two sides.
Ultimately, this means that more diplomacy, as opposed to antagonism, is needed to sustain relations between these two countries and others that find themselves in politically-charged trade wars. Given the global issues confronting the world such as COVID-19, global warming and pollution, and international security, an antagonistic attitude will ultimately mean less progress is made on those global issues, with the potential for full disintegration of relations being made very possible. Ultimately, as this situation has shown, politics is increasingly shaping economics and is part of an ongoing increase in tensions over differing views of the ideal world order.
Edited by Chelsea Bean