President-elect Donald Trump has vowed to take a tough line on China and the possible EU move would reinforce for his team how the bloc will approach dealing with Beijing, according to people familiar with the matter. Officials from the outgoing administration of President Joe Biden are also urging Europe to keep pursuing the case. (Mark Schiefelbein/AP)
The European Union is debating whether to drop a sensitive trade investigation against China over alleged coercive activity targeting Lithuania, a prospect that’s frustrated officials in Washington, where the incoming Trump team sees it as capitulation to Beijing.
President-elect Donald Trump has vowed to take a tough line on China and the possible EU move would reinforce for his team how the bloc will approach dealing with Beijing, according to people familiar with the matter. Officials from the outgoing administration of President Joe Biden are also urging Europe to keep pursuing the case.
Trump, who will be inaugurated next week, has threatened the EU with tariffs and his team has criticized the bloc for being weak on China. The manner in which the EU handles the dispute will present an early test of how the world approaches trade under the new administration in Washington and the resilience of the transatlantic relationship.
No decision has been made on the next steps in this procedure, an EU official familiar with the case said. The EU will always stand by Lithuania and address any coercion and its effect on trade, the official added. The EU will continue to monitor developments concerning exports from Lithuania to China, and will continue to work closely with allies on matters of economic coercion, said the official. A spokesperson for the Trump transition team didn’t respond to a request for comment.
“The case is as strong today as the day it was filed,” the United States Trade Representative’s office said in a response to questions.
“It is very hard to understand why the commission, one year after suspending this dispute on China’s coercion, has still not resumed it.”
The EU filed a complaint against China at the World Trade Organization in 2022 as a result of trade restrictions Beijing imposed on Lithuania after the Baltic country opened a Taiwanese representative office in its capital. China, which considers Taiwan its territory, has repeatedly voiced opposition to countries engaging in official contact with the government in Taipei.
The commission, the EU’s executive arm, said at the time that China was using economic coercion against one of its member states - a claim that the US and 17 other countries supported as third parties in the case.
Lithuania’s foreign minister said the country had suffered from “economic coercion” and had been removed from China’s customs system. The EU criticized Beijing’s actions in December 2021 and brought the matter to the WTO a few weeks later. Lithuania said in 2023 that trade with China was “stabilizing” and that the customs restrictions had been lifted.
In January 2024, the EU decided to suspend the proceedings, setting off a year-long lobbying frenzy, with other capitals pushing Brussels not to give up for fear that it would set a bad precedent.
The logic was that the EU would have likely lost the case because the required evidence was no longer there, some of the people said, which would leave the EU looking weak. Suspending the case was tactical and a political decision on whether to resume it has yet to be taken, one of the people said. Commission President Ursula von der Leyen has the final word on the matter.
Talks between US officials and their European counterparts got heated at times, but in the end went nowhere, said the people, who spoke on the condition of anonymity. If Europe doesn’t resume the complaint by the end of next week, it will lapse. European officials have repeatedly pledged to work with the Trump team on China but have made that contingent on not being targeted by tariffs themselves.
The Biden administration is perplexed by Europe’s explanation that the evidence to continue the complaint was no longer strong enough, even though US officials say the facts haven’t changed, according to the people.
Economic Coercion
US officials - both in the current administration and in Trump’s orbit - said the takeaway for Beijing will be that it can get away with bullying an EU member state without repercussions. Some in Brussels, however, accused the Biden team of coercion for trying to keep the case alive, one of the people said.
“The EU’s actions may confirm the incoming administration’s conviction that the Europeans are feckless and lack resolve in standing up to China,” Aaron Friedberg, a professor of politics and international affairs at Princeton University, said in an interview. “It’s kind of like they went out to bat and then decided not to swing.”
But there’s even division among EU officials over whether the case should resume, with some arguing there’s little to gain from potentially losing, one of the people said. Member states are also split.
Lithuania wasn’t informed of the decision to suspend the WTO complaint last year and is frustrated with the commission, the people said. Another person said the EU is talking to Vilnius about next steps.
It’s unclear if Beijing did anything to sway the outcome but some officials suspect China applied pressure to get the commission to drop the case.
For the Biden team, dropping the case would represent a missed opportunity to advance the US and EU’s joint competition with China. And even if the case is lost, they say, it will prove that the WTO is not able to deal with fundamental challenges China poses to the international trading system.
The EU, on the other hand, believes the WTO instead needs to be reformed and has to work to solve disputes, one of the people said.
The EU has numerous cases at the WTO involving China and it has probed the second-largest economy in several areas including public tenders, the procurement of medical devices and electric vehicles, where the bloc applied tariffs last year despite immense pressure from Beijing.
“If the Europeans are really hoping the Chinese will let the pressure off, they’re kidding themselves,” Friedberg said. “I don’t see that the Europeans have a choice but to cooperate more closely with us on China.”
With assistance from Milda Seputyte.
