From South Korea, Japan to Australia, and American companies, they have all experienced economic coercion by the Chinese Communist Party. The United States did not sit idly by. While successfully helping Lithuania combat economic coercion from the CCP, the U.S. State Department established a team aimed at assisting allies in countering China’s bullying behavior using economic and trade tactics.
In August 2016, South Korea officially announced the deployment of the THAAD system, prompting China to implement a ban on South Korean entities, artists, brands, and anything related to South Korea. Subsequently, for three years, major travel agencies in China were required to stop organizing group tours to South Korea. During the COVID-19 pandemic, Australia requested an investigation into the origins of the virus, leading China to ban the purchase of Australian coal, wine, beef, and other export products.
In 2021, after Lithuania agreed to establish a “Taiwan” (not Taipei) representative office, it also faced economic coercion from China. U.S. Trade Representative Tai spoke with the Lithuanian Foreign Minister, expressing U.S. support in the diplomatic dispute and solidarity in countering China’s “economic coercion.” Secretary of State Blinken also emphasized unwavering U.S. support for Lithuania.
According to a report by Bloomberg on April 28, the Lithuania incident led to a key outcome – the establishment of a team within the U.S. State Department to assist countries facing economic coercion from Beijing using economic and trade weapons during political disputes. An official responsible for the program stated that there has been strong demand for this type of assistance.
Jose Fernandez, the Deputy Secretary of State for Economic Growth and Environment, stated in an interview with Bloomberg, “Many countries have joined in, with many saying ‘we want the treatment Lithuania got.’” After experiencing economic coercion from China, Lithuania was included in a comprehensive package program involving trade financing, procurement agreements, and market access facilitated by the U.S.
Unnamed insiders revealed that since then, around a dozen countries in Asia, Africa, Latin America, and Europe have sought guidance from the U.S. on preparing for or mitigating the economic pressure from China.
Philippine Ambassador to the U.S. Jose Manuel Romualdez discussed U.S. assistance to the Philippines. He mentioned that Beijing is using its economic influence to attract or isolate countries. The U.S. State Department is providing advice on potential new export markets and other support for its agriculture sector to potentially deploy cold storage facilities in the Philippines to store agricultural products that China may boycott.
The eight-member State Department team, informally dubbed “the firm,” includes Melanie Hart, China Policy Coordinator in Fernandez’s office, leading operations similar to a consultancy firm.
One of the primary steps in the recommendations provided by the U.S. to their “clients” is the analysis of China’s trade vulnerabilities by the team’s economists. They then seek ways to help diversify the export markets of bullied countries away from China and publicly express support as needed. Insiders claim the team also conducts tabletop exercises to formulate responses to Beijing’s various actions.
Fernandez stated that the U.S. believes it’s time to stop playing out the “economic coercion” storyline that has been seen before.
In the case of Lithuania receiving timely assistance from the U.S., the Taiwan Trade Office in Lithuania uses “Taiwan” in its name instead of the Beijing-approved “Taipei,” prompting China to exert pressure on Lithuania in terms of trade, economy, and diplomacy.
Within months, China blocked trade with Lithuania, including removing Lithuania from its customs system, pressuring multinational companies in China to cease purchases from Lithuania, canceling trade credits, and revoking the official identification of Lithuania’s diplomat in Beijing.
Fernandez secured a $600 million trade credit from the Export-Import Bank of the United States, reached reciprocal procurement agreements with the Department of Defense, and improved market access for products like eggs to enter the U.S. market.
In January 2022, the U.S. also signed a complaint with the World Trade Organization against the European Union regarding the Lithuania incident.
Lithuania’s Foreign Minister Gabrielius Landsbergis, in an interview, expressed appreciation for the swift response from the U.S. and other G7 countries, stating it sent a strong signal of support.
“The biggest assistance is political because in most cases, this is a political issue,” he said. Landsbergis also issued a warning to other countries, saying, “I am 100% sure we are not the last case. If you have a reliance (on the Chinese market), you should know it can become a weapon, and it will most likely become a weapon one day.”
After facing economic coercion from China, on February 13, 2022, Lithuania’s National Radio and Television reported a significant increase in exports, growing by 20.5% year-on-year (excluding oil) despite the ongoing impact of the COVID-19 pandemic, geopolitical tensions, and Chinese pressure.