EU challenges China at WTO over trade curbs on Lithuania

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A view of different flags of the European Union Members during a debate on Poland's challenge to the supremacy of EU laws at the European Parliament, in Strasbourg

BRUSSELS -The European Union launched a challenge at the World Trade Organization on Thursday accusing China of discriminatory trade practices against Lithuania that it says threaten the integrity of the EU’s single market.

China has downgraded diplomatic ties with Lithuania and pressured multinationals to sever links with the Baltic nation of 2.8 million people after it allowed Taiwan to open a de facto embassy in Vilnius.

China, which said the dispute was political rather than economic and labelled Lithuania’s actions an attempt to “hijack” EU-Beijing relations, regards the self-governed island of Taiwan as its own territory.

The European Commission, which oversees EU trade policy, said in a statement that China’s actions were harming exporters in Lithuania and elsewhere in the 27-nation bloc.

The curbs include a refusal to clear Lithuanian goods through Chinese customs, rejection of import applications from Lithuania and pressure on EU firms to remove Lithuanian content from supply chains when exporting to China, the Commission said.

It said China’s customs statistics showed a 91% drop in trade from Lithuania to China in December as compared to the same month in 2020, with the most affected sectors being pharmaceuticals, lasers, electronics and food.

The EU executive said those actions appeared illegal under WTO rules and that attempts to resolve them bilaterally had failed.

“The EU is determined to act as one and act fast against measures…which threaten the integrity of our single market,” EU Trade Commissioner Valdis Dombrovskis said. Diplomatic efforts were also being pursued, he added.

China’s foreign ministry said Beijing acted in accordance with WTO rules.

WTO challenges start with a formal 60-day period of consultations between the parties. If they do not resolve the dispute, the EU can request that a WTO panel rule on the matter. The WTO typically take years to resolve disputes.

Dombrovskis told reporters the EU was trying to find an amicable solution during the consultation period.

The Lithuanian Foreign Ministry said it had produced “strong evidence of systematic violations of international trade rules” by China for the WTO challenge.

“Lithuania hopes China will agree to participate in the consultations with the EU and that they will be successful not only in resolving existing trade disruptions, but also in ensuring long-term sustainable solutions”, the ministry said in a statement.

Lithuanian officials are discussing whether to ask Taiwan to modify the Chinese translation of the name of its Representative Office, two sources told Reuters on Tuesday

Asked about this, Dombrovskis said: “There can be diplomatic solutions, and also from the EU side we are facilitating and trying to resolve this dispute amicably.”

Taiwan said it had not received a name-change request.

(Reporting by Philip Blenkinsop and Sudip Kar-Gupta; Additional reporting by Yew Lun Tian in Beijing, Francesco Guarascio and Benoit Van Overstraeten in Brussels and Andrius Sytas in Vilnius; editing by Raissa Kasolowsky and Mark Heinrich)