Linas Jegelevičius
Lithuanian and Chinese officials are talking about defrosting diplomatic relations, but a political spring will not come before the Lithuanian parliamentary elections to be held in October next year, analysts say.
Lithuania’s Foreign Minister Gabrielius Landsbergis said last week that he “would not like to describe the scope (of the talks) right now”, but talks, according to him, are “definitely taking place”.
However, the minister did not say when the possible return of ambassadors to both countries could be expected any time soon.
BNN reminds that China downgraded its diplomatic representation in Lithuania in 2021 and imposed trade restrictions after Lithuania following the spat over Taiwan, which opened a Representative Office in Vilnius, not a Taipei Mission like in the most other countries, in 2021.
“Damage from the rift is big – Lithuanian business has suffered.
Our authorities are talking about the potential of trade with Taiwan and the other countries in the region, but it will never outweigh the vast possibilities in the enormous Chinese market. By the way, now, many Lithuanian exporters sell their products in the Indo-Asia-Pacific region much cheaper to make up the losses from their departure from China,” Sigitas Besagirskas, former President of the Vilnius Association of Industry and Business (VAIB), told BNN.
The mill of rumours that Lithuania may be giving in to China’s pressure over Taiwan was revved up earlier this month, after Landsbergis did not express wish to meet Taiwan’s Foreign Minister Joseph Wu visiting Lithuania.
“There are certain rules for diplomatic cooperation between states or entities. Our cooperation with Taiwan respects the rules. It is not Lithuania’s stance; it is the stance of Western countries not to have government-level contact with Taiwan. This rule doesn’t apply to parliaments. Whether it is the parliament speaker or ordinary MPs, they have more freedom,” the minister said then.
Beijing considers the self-ruling island to be part of China.
However, judging from the official statistics, the trade war with China, which has been going on for almost two years now, has been fizzling out recently. In the first half of 2023, exports of Lithuanian goods have already grown 400 % compared to the volume in 2022 – from 11.8 million euros to 40.7 million euros.
According to information from the State Data Agency, Lithuania’s chief statistician, Lithuania exported goods worth 208.1 million euros to China in 2019 and 243.9 million euros in 2020.
As a result of the quarrel between Vilnius and Beijing over Taiwan, exports of Lithuanian goods to China
slimmed to 170.8 million euros in 2021 and to 45.2 million euros in 2022.
Before the spat, in 2021, a massive 1.57 billion-euros worth of goods came from China, 1.17 billion euros – in 2020 and 928.7 million euros – in 2019.
According to Tadas Povilauskas, chief economist at SEB Bank, the growth in exports is “deceptive”.
“If you look at the change over two years, there is still a significant decline. But the upturn in exports is a sign that some Lithuanian goods are returning to China and that their exports are no longer being viewed so categorically,” he told LRT.lt.
Vidmantas Janulevičius, president of the Lithuanian Confederation of Industrialists, has also said that, recently, exports to China are edging upwards.
“If companies used to ship (to China) through intermediaries, now, they ship directly. We expect that the restrictions will continue to decrease as Lithuanian companies export to China,” he said.
Agreeing, S. Besagirskas says that it is intermediaries that are pocketing significantly from the goods rerouting and a change will most likely come when G. Landsbergis is out as the minister.
“For Chinese, all is about trust, and we lost it. I am convinced we can expect a reset in our relations only after the parliamentary elections in Lithuania next year,” S. Besagirskas emphasised to BNN.
Amid the upping trade numbers, Lithuania’s Foreign Ministry downplays the importance of reentering the China market.
“At present, Lithuania does not implement any specific export promotion measures for the Chinese market. Foreign markets with increased risks may be attractive for Lithuanian companies, but it should be stressed that it is always advisable to assess the potential risks – political, economic, regulatory and other,” the ministry told LRT.lt in early November.
According to the ministry, the export of Lithuanian products to EU countries in the first half of 2023 totalled some 7.89 billion euros, which makes up 65 % of the total exports of Lithuanian-origin goods. Exports to the United States totalled 886.03 million euros, or 7.4 % of total Lithuanian exports.
BNN reminds that in the wake of the trade chill between Lithuania and China, Vilnius appealed to Brussels, asking the European Council to step in and teach Beijing a lesson.
As a result, in late October, the European Council announced it adopted a regulation to help the EU and its member states
protect themselves from economic coercion by third countries.
Economic coercion is defined as a situation where a third country attempts to pressure the EU or a Member State into making a particular choice by applying or threatening to apply, measures affecting trade or investment against the EU or a member state.
The Council said dialogue would be the main means in such situations. However, when it was not possible, and as a last resort, the EU could use countermeasures, such as the imposition of trade restrictions, even increased customs duties, import or export licences, restrictions on trade in services or access to foreign direct investment or public procurement.
In summer, Lithuania passed its Indo-Pacific Strategy, which aims to improve economic ties with Taiwan and increase cooperation with Indo-Pacific partners but aimed to bypass China.
Amid the peak of the rift in 2021, Lithuania left China’s 17+1 diplomatic initiative and urged other EU member states that are part of the format to follow suit. Estonia and Latvia followed into Lithuania’s footsteps.
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