The EU has filed a complaint against China at the World Trade Organization over its de facto ban on exports from Lithuania in a dispute over Taiwan.
The move heightens tensions between two of the world’s largest economies, which are embroiled in disputes over steel and the treatment of China’s Uyghur Muslim minority.
Brussels said China has been blocking imports from Lithuania and other EU members if they have Lithuanian content in their products since December.
“These actions, which appear to be discriminatory and illegal under WTO rules, harm exporters both in Lithuania and elsewhere in the EU,” the European Commission said.
Valdis Dombrovskis, the Trade Commissioner, added: “After repeated failed attempts to resolve the issue bilaterally, we see no other way forward than to seek WTO dispute settlement consultations with China.
“The EU is determined to act together and act swiftly against WTO-infringing measures that threaten the integrity of our single market. At the same time, we are continuing our diplomatic efforts to defuse the situation.
The problems started after Vilnius allowed the opening of a representative office in Taiwan. Beijing considers the island part of its territory and acts against those who formally recognize its existence.
Other EU states host representative offices in Taipei, using the name of the Taiwanese capital, to avoid disputes with China. Beijing has stripped the Baltic country’s diplomats of their diplomatic status, scaring them away and blocking imports.
The commission said it had evidence that Beijing had refused to clear Lithuanian goods and rejected requests to import from the country. He also said China has pressured EU companies to remove Lithuanian parts from their supply chains, affecting companies such as Continental, the German tire company.
Taiwan has purchased many goods refused by China and has set up a $200 million investment fund for Lithuania. Trade with China was worth 300 million euros per year.
Taiwan has pledged its full support to Lithuania and the EU. “We strongly believe that any behavior that violates international standards will be condemned and corrected,” said Joanne Ou, spokesperson for the Foreign Ministry.
“China has pressured other countries with inappropriate economic and trade measures on several occasions, and such behavior has caused concern and antipathy,” she added. “We call on China to. . . immediately stop all economic coercion against Lithuania and other countries.
The EU has few legal tools to fight back. She has proposed, but has not yet approved, an anti-coercion instrument that would allow the commission to take urgent action such as an import ban.
Consultations at the WTO will last 60 days, after which the EU can request an arbitration panel that will take months to reach a verdict but could allow Brussels to impose retaliatory tariffs. If the decision goes against China, it can prevent the sanction by appealing. But the appeals cannot be heard because the United States has blocked the appointment of any member to the appellate body.
Support for Lithuania is grudgingly among several member states, who believe it has unnecessarily provoked China. Germany is particularly keen to preserve access to the lucrative Chinese market.
“There is a modus operandi on Taiwanese representations in the EU. Lithuania did not consult any member state before taking this decision and now demands unconditional solidarity from EU member states,” an EU diplomat said. He warned that the bloc should not allow relations with China to be guided by “ad hoc events”.