Little Lithuania pokes China with Taiwan support and pays the price

With much of Russia's army massing next door in Belarus andfears of an attack on Ukraine,many Lithuanians could rightly be preoccupied with the thought that a terrible, new war in Europe could spill over into their country.

Except for months now,it's been China not Russia posing the greatest challenge to Lithuania's political and business decision makers as they've worked to resolve an unlikely confrontation that their government instigated.

The spat began over the naming of the new, de facto Taiwanese embassy in Lithuania'scapital, Vilnius.

China considers Taiwan to be an integral part of its territory, whereas Taiwanese leaders assert their independence as a self-governed island.Given the sensitivity, mostWestern nations have opted to use a less politically sensitive name to describe trade and political missions,such as "Taipei" office, referring to the capital city.

But not Lithuania.

"We see the threats and dangers which arise out of the expansionist policies of Communist China,"explained Mantas Adomnas,Lithuania's Deputy Foreign Minister, duringan interview in Vilnius.

"We wanted to curtail this and support democracy in Taiwan."

And so the name "Taiwan" ended up being featured prominently in the signs,lettering and the official title of the trade office when it opened in November.

At the same time,Lithuania also pulled out of a group known as "17 +1," established by China in 2012 to help open up Eastern Europe to Chinese businesses.

Lithuanian officials told CBC News they expected reprisals, but the scale of China's wrath caught them off guard.

Within days,Lithuania pulled its diplomats out of Beijingafter China downgraded its embassy.Virtually all of the country's exports to China from lumber to beer to high-tech lasers were cut off, up to $400 million US(over $500 million Cdn) of business in total.

WATCH | How supportfor Taiwan ended up costing Lithuania:

Support for Taiwan costs little Lithuania big Chinese business

3 years ago

Duration 5:49

After Lithuania made a show of support for Taiwan, China reacted by blocking the small Baltic countrys business. And the dispute threatens to pull in more of Europe.

'We have beenerased'

Unique, and perhaps even unprecedented, was the mechanism by which Chinese officials were able to throttle Lithuania's trade.

They simply removed the country's name from China's customs register.

"We have been erased," said Adomnas. "Anyone who tried to declare cargo coming from Lithuania would simply not find this country on the database."

The impact on Lithuanian businesses,many of which had laboured for years to open up markets in China,was immediate and devastating.

While total Lithuanian exports to China accounted for a modest $387 million USin 2019 under two per cent of its total exports China was nonetheless the Baltic nation's fastest growing foreign market.

"Our exports to China stopped," said sawmill owner Vladas Laurinaitis,64,who operates themodest, family run business near Lithuania's second city of Kaunas.

"We lost our [trading] partners,we lost everything."

Until November,Laurinaitis had 25 workers on the payroll cutting and shaping wood construction forms destined for Chinese builders.He had grown his China export business to roughly 10 million euros (over $14 million Cdn) a year.

And then in an instant, it was gone.

"[First],there was the financial crisis, then came the COVID crisis and now this political crisis," he told CBC News during a visit to his property.

Even then, the Chinese weren't quite done with their retribution.

Other European companies began complaining that their products, which used parts produced in Lithuania, were being blocked, too.

So far,it's unclear precisely how much broader European trade has been affected, but the Lithuanian national public broadcaster,LRT, quotes the German-Baltic Chamber of Commerce as suggesting the automobile manufacturing sector in Germany alone has already lost hundreds of millions of euros.

'Economic coercion'

Adomnas,the Lithuanian deputy minister,acknowledges many exporters in Germany and France were initially upset at Lithuania for dragging the whole trading block into its dispute,butin the weeks since, he saysthe EU has gone to bat for his country.

Last week,the EU filed a formal complaint with the World Trade Organization accusing China of "coercive" action against Lithuania.

"If Lithuanian companies are dropped and global supply chains are restructured, that means China acquires thisnuclear option in economic coercion,"Adomnas told CBC News.

"[China] could use it successfully against any country whatsoever."

A spokespersonfor China's foreign minister denied any direct pressure is being put on the Baltic nation and instead blamed Lithuanianleaders for abandoning Europe's long standing "one China" policy a diplomatic acknowledgement of China's position that there is only one Chinese government.

"The problem between China and Lithuania is a problem caused by Lithuania's betrayal and damage to China's interests,"said Zhao Lijian in Beijing on Jan. 27.

"We urge Lithuania to correct its mistakes immediately."

Critical moment

The head of the Taiwanese mission in Lithuania,Eric Huang, met with a CBC News crew in the spacious 16th floor of a Vilnius high rise that offers a commanding view of the city's river and old town.

Huang,who previously served at the Taipei Economic and Cultural Office in Vancouver, told CBC News that he has personally been working for several years to set up the new trade mission and that China should not be allowed to dictate what it is called.

WATCH |Taiwanese official onmanaging global relationships with China:

China's global trade relations at critical crossroad: Taiwanese official

3 years ago

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Eric Huang, the head of the Taiwanese mission in Lithuania, discusses China's influence on world trade and what he says is a 'critical moment' for democracies in their relationship with China.

"We don't think the name is controversial maybe it is controversial for some other people, but not for Taiwan,"he said.

"I think it is also a very critical moment for the world to demonstrate especially for democracies to demonstrate solidarity."

Prior to the Russian military build up along its border with Ukraine, discussions about how to rein in China's growing international assertiveness especially towardTaiwan had been consuming Western governments,especiallythe United States.

The push began in earnest under former U.S.president Donald Trump but has continued under the current Democratic administration in Washington, D.C.

Chinese military aircraft now almost routinely fly into Taiwan airspace and the U.S.has countered by stationing some of its most heavily armed vessels in the region.

Recently,China's Ambassador to the United States warned of potential conflict between the two superpowers over the future of Taiwan.

Long time political watchers in the Baltics say Lithuania was motivated to take on China in part because of its own experience gaining independence from the crumbling Soviet Union thirty years ago.

It was the first former Soviet republic to defy Moscow and break away.

American reward

But Margarita eelgyt,Director of International Relations and Political Science at Vilnius University, says she also believes Lithuania's government was looking for a reward from the United States for following its broader agenda to contain China's political influence.

"For us, being a small country in the vicinity of Russia is a very bad scenario.So how do we become more attractive to the United States? Broaden our foreign policy and also be part of U.S. policy in the (Asian) region."

Senior U.S. trade officials have expressed their support for Lithuania, and Under Secretary for Economic Growth, Energy, and the Environment Jose Fernandez visited Vilnius this week.

Lithuania's foreign ministry says they've also received political backing from Canada, but Global Affairs Canada in Ottawa did not answer CBC News' question as to what precisely that entails.

In the meantime,Lithuanian businesses have been inundated with praise and money from Taiwan. Taiwan's government has said it will set up a $200 millionUS fund to help Lithuanian businesses grow and gain access to Taiwanese markets.

And thanks to viral social media coverage of the story in Taiwan, their consumers have also been introduced to a wide range of Lithuanian products.

'Nothing to lose' in China

Marius Horbaauskaswith Volfas Engelman brewery in Kaunassays he's been told that many people in Taiwan now have a special name for his beer.

"It's very touching," he said. "They call it 'freedom beer.' "

His brewery lost two million litres in annual sales when China turned off the taps,but he says sales to Taiwan are slowly starting to make up for it.

"We have nothing to lose any more in China we lost everything so we can only gain in Taiwan,"Horbaauskas told CBC News on a visit to the brewery.

Taiwan's state liquor corporation also bought up 20,000 bottles of Lithuanian rum when China refused to accept the shipments.

Taiwan's representatives have visited his brewery and Horbaauskas says they've offered to help him get his products onto store shelves back home.

He wouldn't say if he thought taking on China was a good call by the government,but he said he believes it illustrates Lithuania's character.

"It might seem funny to you,but Lithuania was a very big country in the Middle Ages and we still think like we are big.In fact, we're not, but helping each other,especially someone who is weaker,is something in our blood."