China erases entire country in ‘draconian’ trade ban

China has wiped out an entire country with a “draconian” trade ban. It’s been labelled “childish” but it doesn’t bode well for Australia.

China erases Lithuania in ‘draconian’ trade ban. PIC: Reuters

After two years of browbeating Australia produced no results, China has a new target for its economic outrage: little Lithuania.

At the weekend, Lithuanian exporters discovered something odd.

When it came to doing business with China, it was as if they no longer existed. China’s customs system was simply rejecting every attempt at contact.

Lithuania, a tiny Baltic nation of some 2.8 million people, was expecting a backlash.

It had, after all, voiced concern at alleged espionage by some of China’s leading international firms. And it had opened a representative office with Taiwan last month.

These were all moves likely to anger China. But provoke a complete trade ban?

“This is unprecedented,” says Perth USAsia Centre research director Dr Jeffrey Wilson. “Outside wartime conditions, full trade bans are extraordinarily rare – think North Korea, the US-Iran sanctions and so on. This delisting is – de facto – the most serious trade sanction the PRC can apply. It has never done this before.”

The PRC has massively escalated its trade coercion of Lithuania. By reportedly delisting LT from the PRC customs country list, it has effectively blocked all bilateral trade. This is unprecedented, and a grave threat to the integrity of the global trade system. An explainer /1 https://t.co/3MGXGyD56l

— Jeffrey Wilson (@JDWilson08) December 4, 2021

Australia thought it had it bad. But it hasn’t faced a complete trade blackout.

Thirteen high-value commodities, ranging from seafood and beef to coal and wine, have been barred entry to China. But not iron ore or gas.

In total, about one-quarter of Australia’s total exports go to China. For Lithuania, it’s about one per cent.

And that’s what’s so odd about this draconian move by Beijing. The international backlash against it is likely to be far more damaging to itself than any economic pain inflicted upon Lithuania’s capital Vilnius.

Hammers versus eggshells

“What it tells us is that China is not in a de-escalation mood after trying and failing with Australia,” Dr Wilson told news.com.au ton Monday. “They haven’t learnt any lessons from us. Instead, they’re going in even harder against Lithuania. And that bodes poorly for the rest of the world as global trade is a global problem.”

Lithuania is not the only other nation to face Beijing’s economic wrath. Others include Japan, the Philippines, Taiwan, South Korea, Norway, Canada and Mongolia.

“It’s not like this is the first time. It’s not the second time. It’s been nine times. It’s not like these reactions can be written-off as one-offs,” Dr Wilson says. “The point is, can China literally just cross a country off the global economic map and still be a member of the World Trade Organisation? Can the rest of the world just be cool with that? And can China just keep doing it?”

Cargo containers stacked at Yantian port in Shenzhen in China's southern Guangdong province in June 2021. Picture: AFP.

Norway had its salmon exports halted. The Philippines had its banana trade squashed. Taiwan’s pineapples have been turned back.

Even Australia, which has angered China over its calls for an investigation into the origins of Covid-19 and increasingly open support for Taiwan, hasn’t faced a complete trade blackout.

Chinese President Xi Jinping raising his glass of red wine that presumably isn’t Australian. Picture: GREG BAKER / AFP.

Lithuanian Foreign Minister Gabrielius Landsbergis said he would seek assistance from the European Commission this week over “unannounced sanctions”.

Its exports, including timber and furniture, are being held up at ports. The reason, he says, is Lithuania simply no longer exists on China’s electronic customs declaration system.

“This is kind of childish,” Dr Wilson says. “They’d basically already banned all trade with Lithuania anyway. So it’s kind of like deleting your exes’ number off your phone and blocking them. It’s purely to get a rise, and it has no substantive impact anyway.”

Foreign Minister of Lithuania Gabrielius Landsbergis called China childish. Picture: Jim WATSON / AFP.

Might makes it right?

China is the world’s second-largest economy and the world’s largest exporter. Beijing knows this gives it immense leverage.

Lithuania, however, has other ideas.

Less than 1 per cent of Lithuania’s exports go to China. Trade sanctions will have “no fundamental impact” on its economy, says Finance Minister Gintare Skaiste.

And Lithuania’s used to being bullied.

The tiny state’s Baltic ports have long been an object of desire for Russia and President Vladimir Putin. It’s been facing almost daily intimidation from its testy neighbour ever since seceding from the Soviet Union in 1990.

Carnegie Moscow analyst Denis Kishinevsky says Vilnius is sticking its neck out to win the support of the West.

“Vilnius now considers criticism of Beijing to be one of the most effective forms of defence against Moscow,” he says. “It combines the politics of values, anti-communism, the quest to keep Washington’s attention on the region, and the desire to grow beyond the narrow niche of Russia’s eternal critic.

“Finally, the United States is prepared to support Lithuania in its endeavours: the Baltic state could help to nudge older EU countries toward more anti-Chinese positions, as well as serve as an acid test to see how far Beijing is prepared to go in response to harsh criticism and cozying up to Taiwan.”

Vilnius is the only European country to host a Taiwanese representative office. It’s a foothold Beijing cannot bring itself to tolerate.

The name plaque at the Taiwanese Representative Office in Lithuania, Vilnius. Picture: PETRAS MALUKAS / AFP.

So it last month recalled its ambassador to Lithuania. It then downgraded relations to that of a simple charge d’affaires.

“In the short term, it is painful for any country when your contracts are cut,” foreign minister Landsbergis said. “But it is short term because markets adapt. Companies adapt.”

Of smoke and mirrors

Beijing has yet issued no official comment on the trade embargo. But the outspoken Communist Party-controlled Global Times denies any such embargo exists. Sort of.

“A Global Times investigation … found that Lithuanian products are still listed in official customs systems as of Sunday, contrary to what some media reports suggested,” an editorial reads.

“But in light of growing risks, Chinese traders and industry insiders are diversifying their import sources after reducing or halting trading with Lithuania to fend off potential risks posed by political tensions. Chinese officials have also said that Lithuania would pay a price for its mistake of challenging China’s sovereignty.”

“That’s the thing about doublespeak. It’s designed to be impossible to get your head around,” says Dr Wilson. “Lithuania is the ninth country it’s done this to, and every time it’s exactly like this. ‘Sanctions? How dare you accuse us of sanctions?’.”

At issue is Beijing’s trade conduct, its membership of a rules-based global trade system, and how other members react when “basic rules are so shamelessly ignored”.

“Time will tell,” Dr Wilson says, adding that Beijing’s behaviour does not bode well for the future of trade relations with Australia.

“China drew a lot of international criticism for what it did to Australia. And it didn’t achieve its goals as Australia didn’t back down,” he said this morning. “Some of us may have hoped Beijing might have learnt a lesson out of that, stopped doing it and sought to find a way to calm things down. But, no. Now they’ve gone and done something much more ridiculously illegal and infantile.”

Jamie Seidel is a freelance writer | @JamieSeidel