Can Taiwan offset China as a serious trade partner of Lithuania?


Call it a case of “enemy’s enemy is my friend” or “diplomatic opportunism or solidarity”, but Taiwan is now looking to offset China in becoming a serious trade partner of Lithuania. Lithuanian exports have allegedly been blocked by China owing to the European country allowing Taiwan to set up an embassy office on its land bearing the name of Taiwan and not Chinese Taipei, which has further ruffled feathers of the Chinese establishment.

While this is a serious case of coldness for China, it is not the only thing that has irked the CCP. In May 2021, Lithuania pulled out of the China and Central and Eastern European (CEE) 17+1 mechanism, a group founded in 2012 with an aim to expand cooperation between Beijing and the Central and Eastern European (CEE) member countries, with investments and trade for the development of the CEE region.

Lithuania has its reasons and fears to back out of this group. It is a clear case of David versus Goliath as a small nation with a nominal GDP is showing some audacity to stand up to a country of the size of China.

For starters, Lithuania felt that it was biased towards China’s interests when it came to trade and political matters. Secondly, Lithuania was vocal in its voice against the oppression of Uyghurs, and its growing relationship with Taiwan was also something that did not please China.

Finally, Lithuania was unhappy with China’s sanctions against some of the European politicians and academicians owing to political issues and differences. This is something that many European nations have voiced against.

Now, with the latest issue of Taiwan opening an embassy office in Lithuania, this was kind of a last straw for China which decided to pull the plug on trade relations with Lithuania. Starting with recalling its ambassador from Lithuania, downgrading diplomatic relations, allegedly barring all Lithuanian imports, and pressurizing other European nations to limit trade with Lithuania, China has upped its ante in setting precedence.

Dr Zsuzsa Anna Ferenczy, author of ‘Europe, China, and the Limits of Normative Power’ and the head of AssocNet spoke to India Today, explaining the possible reasons as to why Lithuania may have made a move towards Taiwan.

She said, “Tensions between the EU and China had been intensifying for years, with member states, including Lithuania, skeptical of China’s influence across the bloc, through high-profile acquisitions by Chinese SOEs and investment in Europe’s critical infrastructure, the lack of reciprocity in market access, and the ‘battle of narratives’ between democracy and authoritarianism.”

“Lithuania supported the EU in labeling China a ‘systemic rival’ in 2019, converging with other member states on the need to rethink the EU’s China policy. The pandemic has amplified these fears.”

“Lithuania decided to leave 17+1 and urged a 27+1 cooperation with China, to work with China on a European level. Since gaining its freedom from Soviet occupation, Lithuania has feared an aggressive Russia and the threat of military invasion. Its vulnerability to Russian aggression and China’s hostile behavior pushed Lithuania to turn towards democratic Taiwan and urge a values-based foreign policy.”

Matas Maldeikis, Member of Parliament in Lithuania and head of Parliamentary Group for Relations with Taiwan, spoke exclusively to India Today. He is at the centre of it all with a key responsibility to foster the promising start to a new partnership between Lithuania and Taiwan. He opines that Lithuania has little to lose and a lot to gain from siding with Taiwan.

“Chinese investments in Lithuania were minimal, trade with China makes only about one per cent of our international trade. Its markets never fully opened to our companies, and the 17+1 format never led to any tangible cooperation projects. And, frankly, the PRC has never had much of consideration or respect for Lithuania.”

“Besides, China is not a like-minded country. Its vision of human rights and the rule of law is, to put it mildly, very different from ours. The way China reacted to the Taiwanese representative office shows it clearly. It is difficult, even dangerous, to engage with a country which considers that it can control others according to its own ideological needs.”

HOW HAS TAIWAN TRIED TO HELP LITHUANIA?

Patriotism is a well-known trait of the people of Taiwan. Every time you meet them, knowingly or unknowingly the pride that they carry about their rich history and culture comes to the fore and the same is exhibited so well in their hospitality. Taiwan and Lithuania have been working on their relationship for quite some time now and the same has expedited to new levels ever since China and Lithuania had a public spat.

The latest incident was the blocking of 20,400 bottles of Lithuanian rum from entering China. This proved to be a decisive opportunity for Taiwan to jump into the ring and bail out the Lithuanian company, MV Group Production by buying the entire lot. The entire consignment was bought by the Taiwan Tobacco and Liquor Corp.

Ever since this incident, demand for Lithuanian products has skyrocketed in Taiwan, with more deals expected to be signed for products like Lithuanian kvass (a fermented cereal-based non-alcoholic or low alcoholic beverage), Lithuanian chocolates and more. The Washington Post recently reported that Lithuanians living in Taiwan were being treated as mini-celebrities owing to the recent closeness between the nations.

“It happens everywhere. I go to buy a lunch box and when they hear I am from Lithuania, everyone starts clapping,” he said.

“In general, Taiwanese people are very friendly. This is unprecedented,” remarked a Lithuanian national living in Taiwan. This is the level of nationalistic patriotism being exhibited by Taiwanese citizens.

The closeness between the nations was also exhibited by Lithuania when the European nation donated around 250,000 COVID vaccines to Taiwan last year.

Taiwan has initially pledged to establish a $200 million investment fund dedicated to investing in Lithuania and to expand the trade deals between the two nations to offset the impact of China’s trade halt.

Reports indicate that Taiwan is willing to Invest in Lithuania for areas around semiconductors, advanced lasers, and other research activities. It is key to note that Taiwan has one of the most sophisticated semiconductor industries in the world. This fund will be sponsored by Taiwan’s National development fund. Taiwan is also looking to buy items from other consignments currently halted by Chinese authorities.

In addition to this, Taiwanese and Lithuanian ministers announced an extra $1 billion credit fund from Taiwan on January 11 over a virtual conference for bilateral business projects on top of its $200m investment fund for Lithuania’s strategic sectors.

Lithuanian MP Matas Maldeikis has high hopes for cooperation between the two countries. Maldeikis said, “Cooperation with Taiwan and Taiwanese investments in high technologies, like semiconductors and chips, lasers or biotechnology can help Lithuania not only to develop its industries but also build new, more sustainable supply chains for us and for the whole EU.”

Lithuania’s representative office is also set to be opened in Taiwan and is close to completion. But questions remain as to if Lithuania is doing this all on purpose knowing that it will infuriate China.

Zsuzsa feels that Lithuania very well knows the consequences of their actions and that it Is a mature understanding of the complexity of the global landscape and of its own vulnerability therein, as well as of the need to act to protect its democracy from undue influence.

She said, “I trust that Lithuania, a smaller EU member state with less economic weight and geopolitical influence, knew that China would react when it announced its departure from the 17+, it knew there would be consequences.”

“But Lithuania is not alone in how it feels about China, and knowing this also helped Vilnius to act, I believe. Lithuania shares its skepticism vis-à-vis China with its neighbors in Central Eastern Europe, in the EU, as well as in transatlantic cooperation.”

Matas Maldeikis feels Lithuania’s decisions are not necessarily made in reference to China’s reactions. He has been fielding a lot of questions on Lithuania’s decisions of late and he confidently brushes aside any concerns. “It’s quite amazing how many questions we receive that are dominated by China’s narrative, as if all our decisions were made in reference to China’s reaction. No, our decisions are determined by our national interest, our political and moral positions.”

“It’s not the first time China uses economic leverage to coerce other countries, and probably not the last. Does it mean all countries in the world should renounce their sovereignty and do only what pleases the CCP?”

Didi Kirsten Tatlow, co-author of the book, “China’s Quest for Foreign Technology: Beyond Espionage” and a popular journalist who covers China extensively spoke exclusively to India Today. She said, “Taiwan has suffered many diplomatic defeats in recent years at China’s hands, but won a rare victory when Lithuania agreed to tweak the name of its representative office in Vilnius.”

“Beijing is determined that its technologically-enabled totalitarian state beats Taiwan into submission, so much so that it is threatening to effectively re-start the Chinese Civil war by invading Taiwan, if it thinks necessary. China is afraid of a domino effect and wants Lithuania’s renaming move to fail,” she said.

HOW HAS CHINA REACTED TO THIS?

This is not the first time China has imposed sanctions on countries after a diplomatic fall out. More recently, China had blocked the import of coal, wine and other items from Australia owing to diplomatic issues. Now, China has termed Lithuania as “treacherous” and a supporter of Taiwanese separatism.

Talking about Lithuania’s relations with Taiwan, Lithuanian Prime Minister Ingrida Simonyte commented that Lithuania wanted a more intense economic, cultural, and scientific relationship with Taiwan and at the same time respected the CCP’s “One China” policy.

According to some industry reports, China is already pressurising European countries and multinational firms that have business interests in China to not do business with Lithuania and firms belonging to the country. More recently, news agency Reuters reported that China was pressuring German car parts giant, Continental to stop using components made in Lithuania. This may have spillover effects and ramifications in the supply chain economy across Europe.

Continental, one of the world’s largest car parts makers, has production facilities in Lithuania, making electronic parts such as controllers for vehicle doors and seats, and exports to clients globally including China. It is said that China was pressuring a dozen other companies across the automotive and agricultural sectors.

Lithuania’s direct trade with China is not a lot, but its export-based economy is home to hundreds of companies that make products such as furniture, lasers, food, and clothing for multinationals that sell to China. So, trade bans can have a considerable impact on Lithuania’s indirect economy.

Didi Kirsten tried explaining the reasons which have irked China into playing this out as a full-blown diplomatic war. “This is a fight over three (to be precise, six), letters, Taipei versus Taiwanese, and over one Chinese character ( / ).”

“But it’s also a fight over the Communist Party of China’s claim to control the political meaning of being Chinese in the world, because Taiwan offers a different way of being Chinese a democratic way rooted in an open society with a full range of the rights enshrined in the Universal Declaration of Human Rights. This is immensely threatening to Beijing and is the reason it feels it has to crush Taiwan internationally,” she said.

HOW HAVE THE EU AND OTHER COUNTRIES REACTED TO IT?

To start with, the European Commission has been keeping a close eye on the developments and was waiting to get a clear picture before taking the next steps. Once they arrive at a consensus, the EU opined that it might raise this issue to the World Trade Organization and build a case.

The commission said that it was in touch with the authorities in Lithuania and felt other countries in Europe could also be facing similar predicaments.

Owing to the impacts of the unofficial trade bans spilling over to other European countries, even countries like France and Germany have been looking to influence the EU to act against such acts committed by China at present and in the future. How this will play out remains to be seen as there are already reports coming in that Germany may soon comply with China and force Lithuania to toe the line.

Didi Kirsten feels a part of the blame must fall on EU, which perceived as weak and easily dividable. On EU’s role in all of this, she said, “It is notable that when US state governors go to Taiwan, China protests to them but there are no real consequences.”

“Part of the problem now is that China perceives the EU as weak and easily divided and is testing its resolve. This is another reason why it is important for Brussels and Berlin to support Vilnius.”

“If China’s attempts to essentially remove Lithuania from its world map (by blocking trade and pressuring its embassy to leave Beijing) intimidate the EU so much that they do not support Lithuania, it would be very bad for Europe and only leave it open to more pressure from China in future.”

“Brussels and Berlin should move quickly to set up the planned anti-economic coercion instrument and tell Beijing politely but firmly that Lithuania and the other 26 EU states have a sovereign right to form their own foreign policy based on their own values and interests.”

“Without this support, the pressure on Lithuania may become too large and it may have to capitulate. That would be very bad for Europe as it tries to deepen its strategic independence”

US Secretary of State Antony Blinken recently met his German counterpart Annalena Baerbock to discuss various matters. After the meeting, Blinken said that the US had immediate concerns about the government of China’s attempts to bully Lithuania.

He said that China had been actively coercing firms in USA and Europe to stop engaging with Lithuanian firms and that he was concerned that China was attempting to bully a nation like Lithuania that had a population fewer than three million people.

German Foreign Affairs Minister Annalena Baerbock said, “We as Europeans stand in solidarity at Lithuania’s side.”

Naturally, China has not taken a liking to this meeting and the comments of Blinken. China released a statement saying the US was using Lithuania to contain China.

Matas Maldeikis feels it’s a matter of time before other countries in EU jump ship. “Some countries are discussing the possibility to leave 17+1, polls show that in western Europe fewer respondents see China as a good partner. Many states are reconsidering their supply chains, and, although they maintain economic relations with the PRC, at the same time they try to diversify their supply chains and set up screening mechanisms to protect their economies.”

MOVING FORWARD

So, how will this play out?

It does seem to be a question that may provide a lot of interesting answers. Zsuzsa opines that it is highly unlikely that Lithuania will go back in time to undo all that it’s done.

She said, “I don’t see Lithuania undo what it has bravely undertaken, which set a precedent and an example to its neighbors and all EU member states, this would undermine its credibility, damage its international image and suggest that there is no value in pursuing a values-based foreign policy.”

“Finally, going back would also undermine democracy in general. It is therefore in the EU’s interest to support Lithuania as one of their own, as it experiences this difficult period and stand with it, to send a message to China that if goes against one democracy, it goes against all. This would raise the cost of bullying a democracy that Beijing would have to consider seriously.”

This may hold true if the Lithuanian government decides to listen to MPs like Dovil akalien who does not want the name of the Taiwanese office in Lithuania to change as it would mean that Lithuania would end up betraying Taiwan.

Zsuzsa also feels that in Lithuanian neighbours, Taiwan has a chance to add more to its team. She said, “It is important that Vilnius stays focused on delivering vis-à-vis Taiwan in terms of practical cooperation.”

“With Taiwan’s announcement of a 200 million investment in its high-tech sector, Lithuania should facilitate this. The importance of their bilateral cooperation goes beyond their own borders.”

“In fact, their cooperation sets a precedent for other countries to follow in Europe, in Lithuania’s immediate neighbourhood, namely for Estonia and Latvia who both face similar challenges, and in the entire CEE region. Taiwan should use this as a chance to increase its visibility in the region and think of Lithuania as an opportunity to improve its image across the EU.”

To cap it all, Lithuanian MP Matas Maldeikis summarised the situation thus: “The end of this story will depend on too many different factors. One thing is certain, given geopolitical, social, and economic changes in today’s world, nothing will ever be as before. And, until China is ruled by CCP, no democracy will have a good relationship with it.”





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