Economist working for the Government of Canada

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QUESTION
 
1. You are a senior economist working for the Government of Canada and have been asked to
brief the minister of your choice on implications, if any, for Canada that may arise from China’s
restrictions on trade with Lithuania, which may be linked, but not limited, to sensitivities
surrounding the status of Taiwan.
2. Keeping in mind the following two course topics:
• (i) the correlation between economic growth and trade, and
• (ii) WTO rules governing trade restrictions,
develop a briefing note on possible effects on Canadian-Chinese relationships given the context of
China’s actions towards Lithuania. You may wish to note Canada’s position on the status of
Taiwan in your briefing note. Use the article posted below as a starting point and context.
Historical references and qualitative or quantitative data are always welcome in your briefing
note. Standard economic arguments must be used.
3. Your briefing note is “For Information Only”; however, ensure that it has a well-developed
“Key Considerations” section. Your briefing note should be specific to the mandate of the
department that you choose.
4. Article of Interest: https://www.cbc.ca/news/world/lithuania-taiwan-china-1.6334793
Lithuanian officials say China ‘erased’ country from customs register, effectively throttling
trade
Chris Brown · CBC News · Posted: Feb 02, 2022
With much of Russia’s army massing next door in Belarus and fears of an attack on Ukraine, many
Lithuanians could rightly be preoccupied with the thought that a terrible, new war in Europe could
spill over into their country.
Except for months now, it’s been China — not Russia — posing the greatest challenge to
Lithuania’s political and business decision makers as they’ve worked to resolve an unlikely
confrontation that their government instigated.
The spat began over the naming of the new, de facto Taiwanese embassy in Lithuania’s capital,
Vilnius.
International Economic Policy
and Institutions (ECON 319) Department of Economics Dr. A. Noce
Page 2 of 6
China considers Taiwan to be an integral part of its territory, whereas Taiwanese leaders assert their
independence as a self-governed island. Given the sensitivity, most Western nations have opted to
use a less politically sensitive name to describe trade and political missions, such as “Taipei” office,
referring to the capital city.
But not Lithuania.
“We see the threats and dangers which arise out of the expansionist policies of Communist
China,” explained Mantas Adomėnas, Lithuania’s Deputy Foreign Minister, during an interview in
Vilnius.
And so the name “Taiwan” ended up being featured prominently in the signs, lettering and the
official title of the trade office when it opened in November.
At the same time, Lithuania also pulled out of a group known as “17 +1,” established by China in
2012 to help open up Eastern Europe to Chinese businesses.
Lithuanian officials told CBC News they expected reprisals, but the scale of China’s wrath caught
them off guard.
Within days, Lithuania pulled its diplomats out of Beijing after China downgraded its
embassy. Virtually all of the country’s exports to China — from lumber to beer to high-tech lasers
— were cut off, up to $400 million US (over $500 million Cdn) of business in total.
‘We have been erased’
Unique, and perhaps even unprecedented, was the mechanism by which Chinese officials were able
to throttle Lithuania’s trade.
They simply removed the country’s name from China’s customs register.
“We have been erased,” said Adomėnas. “Anyone who tried to declare cargo coming from
Lithuania would simply not find this country on the database.”
The impact on Lithuanian businesses, many of which had laboured for years to open up markets in
China, was immediate and devastating.

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