A few months ago, European Commission President Ursula von der Leyen offered a masterclass in bad PR when she lamented how “Global markets are now flooded with cheaper Chinese electric cars.” Announcing that the EU would launch a probe into subsidies on Chinese electric vehicles (EVs), she said they kept prices “artificially low” and came across like the worst kind of technocrat. Lost in the details of free market orthodoxy, she appeared unable to see the woods from the trees and came out saying cheap cars that are better for the environment are bad.
Last week, the EU appeared to be making the opposite mistake. In suspending its World Trade Organization (WTO) case against China’s de facto embargo on Lithuanian exports, it looked as though it had abandoned its technocratic principles and acted politically to ease tensions with China. China had acted in response to Lithuania allowing Taiwan to use the name “Taiwan” on its representative trade office in Vilnius because it suggested Taiwan was a sovereign state. The EU’s decision to suspend its pushback looked even worse because China had just suspended visa access to Lithuanians while having offered visa-free access to citizens of France and Germany (among others) in December.
And yet, despite appearances, they’re probably right this time.
The WTO dispute was always “more of a consolation gesture to Lithuania” than a serious practical challenge to China’s informal embargo, according to Matej Hulicka, an intern at China Observers in Central and Eastern Europe. He notes that as with the previous WTO dispute between Japan, the U.S., the EU and China over rare earths, any outcome would likely have taken years to reach. Back then, it took two years for the WTO to rule against China. This time, with a year already passed, the case that it could have a tangible effect on exports has been disappearing. China has already begun to release the handbrake on Lithuanian exports. It imported $14.2 million in Lithuanian products in December 2023, a 271 percent increase compared to December 2021, when the dispute began.
This does not mean trade has returned to levels previously seen. The December 2020 import figure was three times higher than now and “There’s a huge trust issue, not just from the government but from the business as well,” Lithuania’s foreign minister told Bloomberg in an interview in November.
But at this point any complaint would be over a vague principle, rather than having a chance of recouping a significant economic loss. This is for two reasons. First, it’s likely that the trade discrepancy between now and pre-2021 would remain regardless of any ruling, because as is often the case with its approach to sanctions, this embargo was informal, which makes it harder to target. And second, in terms of financial impact, Lithuania quickly offset the loss of trade with China via increased exports to the Indo-Pacific region.
For some, the symbology would still justify continuing the dispute. But anyone considering that should look at the words of the Lithuanian Foreign Ministry. Speaking to Baltic News Service, it said that the European Commission represents Lithuania and the EU in the process and therefore “takes and interprets decisions on its own initiative within the framework of its competencies.”
Alone, that might not rule out quiet dissatisfaction with the EU’s decisions. But the words of its foreign minister are, helpfully, more specific.
“For almost two years, we had suffered trade restrictions and economic pressure, but now the situation is better,” the minister said. “Unfortunately, a new front has opened. We call it diplomatic coercion … Lithuania can’t act in Beijing because China has unilaterally lowered the level of diplomatic relations with our country, thus restricting travel and all diplomatic operations between the two countries,” he added.
So, according to Lithuania’s government, the WTO dispute at this point would be entering a battle in the wrong location. The terrain of the “punishment” dished out to it for its support of Taiwan has moved from economic to diplomatic. That means not only would the WTO dispute be mainly a symbolic battle, it would be a symbol pointing in the wrong direction.
Effectively, the EU made its point at the WTO. Continuing now wouldn’t add to that, it would be pouring resources into a battle that’s already finished.
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