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China’s Spat With Lithuania Is a Test for the World’s Democracies

China’s push for global supremacy is playing out in the Taiwan Strait and the South China Sea, but also in the quieter coercion that Beijing practices every day. The latest target of this pressure is Lithuania, which is paying an economic price for snubbing China diplomatically. The case is a reminder that the democratic world must either unite against Chinese pressure or see countries picked off one by one.

Lithuania is no stranger to great power coercion. The country was swallowed up by Joseph Stalin in 1939, and conquered by Germany two years later. After then being “liberated” by the Red Army, it was held captive by the Soviet Union for nearly half a century. Lithuania finally reclaimed its independence in 1991, only to be threatened today by Vladimir Putin’s Russia — and by Xi Jinping’s China.

The dispute with China began earlier this year when Lithuania withdrew from the “17+1” bloc in Eastern Europe, a subgroup of the European Union that China often uses to divide and influence the EU as a whole. Lithuania then upgraded diplomatic relations with Taiwan, becoming the only European country to permit a Taiwanese representative office (short of a full embassy) on its soil.

Beijing furiously withdrew its ambassador from Vilnius and then halted, unofficially, all bilateral trade with Lithuania — the sort of embargo often reserved for wartime or dealings with the world’s worst regimes.

What’s more, Beijing has tried to make this punishment multilateral, pressuring EU businesses to cease importing Lithuanian goods. Just as the US has used the reach of the dollar to compel other countries to halt trade with Iran, China is using its market power to push other countries to choose between Vilnius and Beijing.

That’s not all. After China opted to downgrade bilateral diplomatic relations, jeopardizing the legal immunity of Lithuanian officials in China, Vilnius chose to shutter its embassy rather than risk becoming the next victim of China’s hostage diplomacy.

This dispute has revealed the emergence of a far more aggressive Chinese sanctions policy, as well as an intensifying global struggle over Taiwan. Beijing may be whittling down the number of countries that officially recognize the island, yet Taiwan has been expanding ties with the US, Japan, Australia and other democracies. One reason China is bringing down the hammer now may be that it fears Taipei has the diplomatic momentum.

The crucial question, though, is whether the world’s democracies will stand with one of their own. Lithuania isn’t the first to anger China and suffer the consequences: Australia, Canada, South Korea and Norway are among those that have found themselves in similar diplomatic rows with Beijing. China’s strategy for dividing its rivals involves singling out the more vulnerable states and using its vast market power — or simply its diplomatic ruthlessness — to coerce them.

Admittedly, the strategy hasn’t always worked. In late 2020, Australia responded to a raft of Chines sanctions by choosing Washington’s side in the new cold war. Two years before that, Chinese hostage-taking served mainly to alienate Canada. Lithuania, for its part, is not deeply dependent on trade with China. But its case is nonetheless sobering, because it exposes the democratic world’s inability to help its weaker members withstand Chinese pressure.

Criticism from the EU got Beijing to relax its most egregious sanction against Lithuania — its delisting by Chinese customs agencies. But China appears to be keeping in place other unofficial restrictions and can easily tighten the screws again. The EU is considering an anti-coercion instrument that would allow it to strike back with reciprocal sanctions in such cases, yet this is probably years from becoming a reality. So Lithuania and the EU find themselves appealing for help to a slow and toothless World Trade Organization.

This isn’t just a European problem. The US has been leading the charge on competition with China in part by calling for greater cooperation among the world’s democracies. Yet Washington has largely proved allergic to steps that could hurt its own economic interests. The countries that have suffered most for tangling with China, then, are smaller ones.

This isn’t good strategy. Yes, the EU needs stronger measures for deterring economic coercion of its members. Yet the larger democratic world needs better mechanisms for blunting that coercion and responding collectively. Think of this as an economic “Article 5” — the idea embodied in US defense pacts that an attack against one is an attack against all. Not least, the world’s democracies must deepen their economic integration so they are less vulnerable to Chinese pressure in the first place.

Competing effectively with China requires a measure of near-term economic pain. The democratic world can best meet that challenge by pulling together.

Source: Bloomberg

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