May 24, 2022

Lithuanian companies bow to Chinese pressure –

Over the past month, China has used coercive trade measures against Lithuanian companies and international companies operating in the country. Companies themselves, however, are reluctant to speak out.

Since 2020, China has been pressuring Lithuanian businesses as Lithuania-Taiwan ties, including mutual aid during the pandemic, have grown closer. The situation worsened further with China’s imposition of trade barriers after Taiwan opened a representative office in Vilnius in November 2021.

Today, companies linked to Lithuania are beginning to feel the pressure from Beijing, but do not know where to turn.

“They are afraid to speak because China is a huge market for them”, President of the Confederation of Lithuanian Industrialists, Vidmantas Janulevičius, told EURACTIV.

The Chinese crackdown began with the revocation of Lithuanian grain export licenses to China. Then, from spring 2021, credit insurance became unavailable for trade between Lithuania and China, according to Janulevičius.

From September, some industrial goods that Lithuanian companies had prepaid were not delivered, creating a headache for the Lithuanian economy which imports five times more from China than it exports.

Lithuanian companies then began to encounter several administrative obstacles that made it impossible to export to China. The Chinese government denied that these were deliberate government policies.

For the Lithuanian economy, China could be a negligible partner, accounting for around 1% of exports and 3% of imports. However, the Chinese market is vital for many large international companies that trade with both China and Lithuania.

According to investigations by Reuters, German auto parts maker Continental has come under pressure from China over its production site in Lithuania.

Taiwan is trying to support Lithuanian companies that have lost market access to mainland China. However, it is more difficult to compensate the Lithuanian economy if companies from other parts of the world join the boycott, fearing for their access to the Chinese market.

“Some of our companies are starting to feel pressure from companies in other countries”, Eglė Radišauskienė from the Lithuanian Business Conference told EURACTIV.

It is difficult to establish how many companies in Lithuania are affected by this pressure, as companies are reluctant to speak out.

“Our members do not want to share their names”, said Ms. Radišauskienė.

Furthermore, Mr Janulevičius, who heads Lithuania’s largest business association, said that“no company agreed to give an interview despite the fact that we promised confidentiality”.

Hella, a German electronics company with a production site in Lithuania, declined to comment, as did SBA Group, a major furniture producer.

Furniture manufacturing is one of Lithuania’s largest industries, accounting for nearly 5% of exports in 2019. Lithuanian furniture producers are also among IKEA’s largest suppliers, as it expands its presence in the mainland China market.

IKEA declined to comment on whether it felt under pressure to cut imports from Lithuania.

“Although we do not discuss specifics, IKEA always adapts its operations to applicable business rules and optimal business solutions in each market”, IKEA told EURACTIV in emailed comments.

The Commission is preparing possible action

In response to pressure from China, the European Commission is currently gathering evidence with a view to taking the case to the World Trade Organization.

“According to the information we have received so far from the Lithuanian authorities, a pattern is already emerging and problems persist, which now also affect supply chains and therefore other EU member states”, said a Commission spokesperson.

Bringing a case to the WTO is a long process, and even if the WTO were to rule in its favour, compliance with the verdict is not guaranteed.

For the time being, the Commission has no other tools to react to the coercive actions of third countries. In December 2021, the Commission proposed the introduction of an anti-coercion tool that would make it easier for it to take countermeasures.

Mr Janulevičius, whose own business has blocked deliveries to China, called for supply chain differentiation and reducing dependence on the Chinese market.

He expressed hope that European countries and industries will remain united, saying Lithuania might not be the last to suffer from foreign economic coercion. ” This could be difficult for other countries in the future“, did he declare.

Friday, January 14, in Brest, EU foreign ministers pledged to support Lithuania in its trade dispute with China, without however announcing new measures.

The High Representative of the European Union for Foreign Affairs and EU Security Policy, Josep Borrell, said that an EU-China summit at the end of March would take stock of the“the state of our relations with China”.

In the meantime, the EU will stick to its plans for a possible WTO case, which could take years, EU diplomats say. The proposal for an anti-coercion instrument recently presented by the Commission is not expected to see the light of day soon due to the lengthy legislative processes.