Europe Struggles to Meet China’s Trade Challenge

BRUSSELS—China’s economic pushback against the European Union over Lithuania’s outreach to Taiwan has sparked divisions in the EU and raised fresh doubts about its ability to shield its giant market from Beijing’s pressure.

China in recent weeks has effectively blocked Lithuanian firms from its market and started pressing European and U.S. firms with Lithuanian suppliers to cut those ties or risk being frozen out, according to U.S. and European officials.

The Chinese pressure came after Taiwan in November opened a representative office under the island’s name in Lithuania’s capital, a move Beijing called an “egregious precedent” and vowed to retaliate. Most Taiwanese offices abroad use the name of Taiwan’s capital, Taipei.

Lithium prices are rising as demand for the key ingredient in electric car batteries grows, amid a broader push to move away from oil and gas. But extraction of the metal is time consuming and potentially harmful to the environment, and plans to produce more have prompted protests. Photo: STR/Getty Images, Oliver Bunic/AFP/Getty Images

China’s economic measures, which were never officially announced, show Beijing remains able to sidestep growing EU moves to defend its market from China’s economic behavior. The EU holds authority over member states’ trade policy.

Since 2019, the bloc has announced policies aimed at helping its companies compete with Chinese rivals and to gain leverage for European firms in China.

Yet the response from European capitals to China’s pressure on Lithuania has been muted. Some diplomats have been critical of the Baltic country’s decision to challenge Beijing over Taiwan, a politically charged issue for President

Xi Jinping.

Others have sought to avoid escalating the face-off with China.

U.S. officials have been louder in condemning China’s pressure tactics.

On Tuesday, Lithuanian President

Gitanas Nausėda

said the government had erred in allowing the Taiwanese office to carry the name of the island.  Last year, Lithuania, a U.S. ally in the North Atlantic Treaty Organization, also became the first country to quit the 17+1 grouping, a forum for political and economic ties between China and a number of, mainly smaller, European countries.

“I think it was not the opening of the Taiwanese office that was a mistake, but the name, which was not coordinated with me,” Mr. Nauseda told a Lithuanian radio station.

“Now we have to deal with the consequences, which are that unconventional measures have started to be taken against Lithuania, and we have to be very active and signal very clearly to the EU that this is an attack, a kind of pressure on one of the EU countries,” he said.

Lithuanian officials have…

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