The Lithuania-­China kerfuffle : Daily Current Affairs

Relevance: GS-2, International Relations

Key phrases: One China Policy, 17+1 dialogue, Xinjiang and Hong Kong issues, Sino­Russian partnership, global supply chains, inter-firm flow, inclusive growth, the ASEAN-Japan Economic Resilience Action Plan

Why in News?

  • In November 2021, Taiwan has opened its Representative Office in Lithuania.
  • It is for the first time that Taiwan was allowed to use its own name to open an office within the EU.
  • Following this, China has downgraded its diplomatic relations with Lithuania, calling it a violation of the “One China Policy”.
  • China has also unofficially boycotted products from Lithuania and for this Lithuania has so far not backtracked on its actions against China.
  • Taiwan, the U.S. and the EU have expressed their support to Lithuania.
  • In May 2021, Lithuania quit the 17+1 dialogue format (making it 16+1), which was initiated by China in 2012 as a multilateral forum for engagement with the countries of Central and Eastern Europe.

One China' Policy:

  • The One China policy is the diplomatic acknowledgement of China's position that there is only one Chinese government.
  • The One China policy recognizes the long-held position in Beijing that there is only one China, and that Taiwan is a part of that.
  • According to the One-China policy:
    • Any country wishing to establish diplomatic relations with Beijing must acknowledge there is only “One China” and sever all formal ties with Taiwan.
    • The One China policy is also different from the “One China principle”, which insists that both Taiwan and mainland China are inalienable parts of a single “China.”

Reasons for Lithuania Acting Against China:

  • Change of Government: Lithuania’s current wave of assertive moves against China to a certain extent have been attributed to the change of Government in 2020.
    • The new Government of Lithuania espouses a “values based” foreign policy based on democracy and freedom, and had explicitly offered support to the cause of Taiwan in 2020 itself.
  • Lithuania has also been one of the biggest critics of China within the EU on the Xinjiang and Hong Kong issues.
  • Lithuania has also in the past supported Taiwan’s pitch to become an observer at the World Health Organization in 2020 against China’s opposition in the wake of the COVID­19 pandemic.
  • Lithuania being one of the former constituent of the Soviet Union, growing Sino­Russian partnership against the West has also made Lithuania wary of China.

Impact of China’s countermeasures on Lithuania:

  • China amounts to only one percent of Lithuania’s exports and its imports from China are five times more.
  • The customs authorities in China have apparently stopped processing direct and indirect goods sourced products from Lithuania.
  • These indirect attacks by China are seen as trying to weaken European support to Lithuania, and cancel the country out from global supply chains.

Impact of China-Lithuania Tussle Globally:

  • This move is also supposedly designed to make Lithuania a gateway to Taiwan for accessing the EU market, especially given the current semiconductor supply shortages.
  • The European Commission has also warned of raising the Lithuania issue at the World Trade Organization by filing a complaint against China.
  • These developments have arisen in the backdrop of the countdown to the Beijing Winter Olympics.

Global Value Chains (GVCs):

  • Single finished products resulting from manufacturing and assembly in multiple countries, with each step in the process adding value to the end product.
  • Through GVCs, countries trade more than products; they trade know-how, and make things together. Imports of goods and services matter as much as exports to successful GVCs.
  • GVCs integrate the know-how of lead firms and suppliers of key components along stages of production and in multiple offshore locations. The international, inter-firm flow of know-how is the key distinguishing feature of GVCs.
  • How countries engage with GVCs determines how much they benefit from them.

Supply Chain Resilience Initiative (SCRI)

  • The SCRI aims to create a virtuous cycle of enhancing supply chain resilience with a view to eventually attaining strong, sustainable, balanced, and inclusive growth in the region.
  • Initially, SCRI will focus on sharing best practices on supply chain resilience and holding investment promotion events and buyer-seller matching events to provide opportunities for stakeholders to explore the possibility of diversification of their supply chains.
  • The SCRI aims to reduce dependence on China amid a likelihood of rechurning of supply chains in the Indo-Pacific region amid the Covid-19 pandemic.
  • It seeks to build upon the existing bilateral frameworks like the ASEAN-Japan Economic Resilience Action Plan and India-Japan Industrial Competitiveness Partnership and attract foreign direct investment in the region.

Sources: The Statement , Economic Times ,Hindustan Times , World Bank

Mains Question:

Q. Recently spat between China and Lithuania was in news.In this context discuss the importance of global supply chains for the resilience of steady supply of goods?