China Takes Lithuania as an
By Elisabeth Braw
Beijing has developed a reputation for blocking imports from
countries it wants to punish. Australian wine became a target last
year. Now China is punching back at Lithuania, which recently
allowed Taiwan to open a representative office in Vilnius. But here’s
the new twist: China is holding up not only Lithuanian imports, but
all imports that include Lithuanian parts. The effects are rippling
In 2020 Lithuania exported goods worth $350 million to China—an
increase over previous years but peanuts in overall trade. Lithuania
has long imported far more from China than vice versa; last year,
about four times as much. So Lithuania’s government perhaps
calculated that the country’s economy could handle whatever
retaliation China inflicted for the gesture to Taiwan.
But the Lithuanians probably didn’t anticipate a Chinese attack on
global supply chains. “We now know of many cases where imports
from Lithuania and the EU are blocked in Chinese ports, and the
number is increasing every day,” Valdis Dombrovskis, the European
Union’s trade commissioner, told Germany’s Die Welt newspaper
shortly before Christmas. “Apparently the Chinese customs authority
doesn’t process goods from other EU member states if they contain,parts made in Lithuania.”
Chinese Foreign Ministry spokesman Zhao Lijian has denied that
Beijing is blocking imports containing Lithuanian components, but
goods are still stuck or severely delayed, with volumes growing
rapidly. German automotive suppliers have said their cargo is
languishing in Chinese ports.
China’s suspension of salmon imports from Norway after a Chinese
dissident was awarded the Nobel Peace Prize, and of Australian wine
after Canberra called for an investigation into the origins of Covid19, were serious but harmed only those countries. Targeting global
supply chains to punish a country is an extremely potent weapon. It’s
one that China—a power player in the global economy— can deploy
in ways that the Soviet Union never could.
The punishment “is putting multinational companies under pressure.
Now they’re trying to push the Lithuanian government to rename the
Taiwanese office,” Vidmantas Janulevicius, president of Lithuania’s
industrialists’ association and chairman of the solar-panel
manufacturer BOD Group, told me. The German-Baltic Chamber of
Commerce has warned Vilnius that German subsidiaries are at risk.
Mr. Dombrovskis says that if the port stoppages don’t end, the EU
will take the case to the World Trade Organization. But that won’t
accomplish much, judging from past WTO complaints against China.
Beijing will still be able to harm economies and companies all over
the world.Companies will plead with the offending country to accommodate
Beijing, as will governments whose home companies become
collateral damage. In Germany, Siemens CEO Roland Busch has
warned Foreign Minister Annalena Baerbock not to conduct
“confrontational foreign policy” with China. In the U.S., the Uyghur
Forced Labor Prevention Act, which would bar goods made with
forced labor in Xinjiang region from entering America, passed the
House last month. If it becomes law, U.S. companies should brace
If companies have to worry about being punished because a
government has done something that displeases another government,
they’ll see little choice but to limit their foreign operations. That
means reducing dependence on China, both as a manufacturing
location and an export market. That will cause revenues to drop, but
if even the German automotive industry can’t protect itself against
capricious revenge, Chinaheavy operations will simply be too risky.
China’s punishment of Lithuania is a wake-up call for companies and
countries alike. For years, Mark Zuckerberg made “companies over
countries” Facebook’s unofficial mantra. But when regimes use
companies as proxy targets, such Davos thinking looks passé—and
Suddenly borders matter more than they did 10 or even two years
ago. “Even simple screws are connected with China, because they’re
not manufactured in Europe anymore,” Mr. Janulevicius said. “It was
a mistake for Europe not to protect strategic sectors such assemiconductors. We need to produce locally or otherwise we’ll have
a situation like this many times over.” The U.S. made the same
mistake. Free-trading nations may soon have no choice but to bid a
partial farewell to globalization.
Ms. Braw is a fellow at the American Enterprise Institute.
Its trade retaliation over Taiwan is wreaking havoc with global supply