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EU challenges China at WTO over Lithuania trade embargo and tech patents

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The EU has escalated two trade disputes with China by asking the World Trade Organization to convene panels to rule on them, in the first cases the bloc has brought against Beijing for at least three years, officials in Brussels said.

The first dispute concerns an alleged trade embargo on imports from Lithuania, sparked by a dispute over Vilnius’s relations with Taiwan. The second is about the protection of EU holders of high-technology patents.

The move comes at a time of increasing tensions between China and the EU, which is under pressure from the US to take a tougher line in trading relations with Beijing.

“In both cases, the Chinese measures are highly damaging to European businesses. The removal of these measures is in both the economic and strategic interest of the EU,” the European Commission said.

“China’s discriminatory measures against Lithuania affect intra-EU trade and intra-EU supply chains and they impact the functioning of the EU internal market, including by forced market adjustments,” it added.

The commission said the measures had reduced Lithuanian exports to China, which were worth €220mn a year before they were imposed, by 80 per cent.

Since December 2021, China has applied discriminatory and coercive measures against exports from Lithuania and against exports of EU products containing Lithuanian content, the commission added. The dispute began after Vilnius permitted a Taiwan representative office to open. Beijing considers Taiwan part of its territory and acts against those who recognise its existence formally.

The commission said Chinese customs authorities have rejected Lithuanian imports and formalised complete import bans on its alcohol, beef, dairy, logs, and peat shipped from Lithuania. “When asked for further explanations, China failed to prove that these bans were justified,” it said.

An EU official said the Chinese restrictions had a “chilling effect”, deterring businesses from using Lithuanian products in their supply chain.

The patent case involves judgments known as “anti-suit injunctions” by China’s supreme court which prevent companies protecting their patents by securing licensing deals in foreign courts, even within the EU.

“Chinese manufacturers requested these anti-suit injunctions to pressure patent right holders to grant them cheaper access to European technology,” the commission statement said.

Businesses including Sweden’s Ericsson, Finland’s Nokia and Japan’s Sharp have lost billions of euros in revenues, the commission has previously said.

Violation of anti-suit injunctions leads to fines of up to €130,000 a day, it added.

The WTO Dispute Settlement Body could establish the panel in December or January. Panel proceedings can last up to one and a half years, after which either party could appeal against the verdict.

China has a good record of complying with WTO judgments, EU officials said.

Brussels is also close to agreeing a new anti-coercion law that would allow it to take unilateral measures without going to the WTO when it judges that a trade partner is trying to change behaviour through unfair practices, such as the Lithuania case.

China’s foreign ministry said: “China has been following WTO rules. China’s so-called coercion of Lithuania is groundless and distorts facts. I want to stress that the ins and outs of the fraught China-Lithuania relations are very clear.”

Additional reporting by Maiqi Ding in Beijing

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