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China: Attack on Continental - Beijing's Lithuanian dispute has arrived in Germany

2021-12-20T13:42:02.650Z


China: Attack on Continental - Beijing's Lithuanian dispute has arrived in Germany Created: 12/20/2021, 02:28 PM From: China.Table Continental AG is drawn into the dispute between China and Lithuania (symbol image) © IMAGO / localpic The major auto supplier Continental has got caught in the crossfire of a conflict between the EU and China. It was triggered by a dispute between Lithuania and Be


China: Attack on Continental - Beijing's Lithuanian dispute has arrived in Germany

Created: 12/20/2021, 02:28 PM

From: China.Table

Continental AG is drawn into the dispute between China and Lithuania (symbol image) © IMAGO / localpic

The major auto supplier Continental has got caught in the crossfire of a conflict between the EU and China.

It was triggered by a dispute between Lithuania and Beijing over a Taiwan office in Vilnius.

  • China is threatening Continental and another German company with an import ban for products with components from Lithuania.

  • The EU must formulate an appropriate response, and the German government meets for a crisis meeting in Robert Habeck's Ministry of Economic Affairs.

  • This article is available to 

    IPPEN.MEDIA

     as part of a cooperation with the 

    China.Table Professional Briefing

     -

    China.Table

    first published it 

     on December 20, 2021.

Berlin - What began as a farce about a Baltic state has turned into a tangible trade conflict between Germany and China. The automotive supplier Continental and at least one other German company will soon no longer be allowed to import parts into China * that contain intermediate products from Lithuania.

China.Table

learned

this

from industry

circles

. Even if the actors are still trying to exude calm, business and politics are frantically wrestling behind the scenes for the appropriate reaction. After all, it is the first time that Beijing has drawn the German automotive industry so directly into a trade dispute. The conflict was triggered by the establishment of a Taiwan office in Vilnius *.

A crisis meeting is to take place at the

beginning

of the

week in Robert Habeck's Ministry of Economics, as

China.Table learned

from districts of the capital. Associations and chambers are also currently looking for the right wording to criticize China without putting themselves too much in the line of fire. A number of letters and pronouncements can be expected here over the course of the week. Currently, neither Continental nor the governments are officially commenting on the reports. VW informed the

China.Table

that they are observing the situation very closely.

The Association of the Automotive Industry (VDA) complained about the increasing intermingling of politics and business.

"Intergovernmental differences should be resolved diplomatically and not be carried out at the back of business," said a spokeswoman for the VDA.

The association advocates international cooperation and rule-based, free trade.

"Basically, every trade and investment agreement can prevent foreclosure and conflict."

China: Increasing pressure on Lower Saxony, the SPD - and the traffic lights

The attack on a large German auto supplier is now forcing the new federal government to take a stance on China. So here, too, there is no grace period for the traffic light coalition in terms of foreign policy. A delivery ban for a large company like Continental is already the test case for dealing with a massive conflict. Because a car essentially consists of parts from suppliers. Anyone who meets a large supplier meets the entire vehicle industry. Even if Conti only manufactures a small part of its range in Lithuania *, a shortage of these parts could upset the already broken supply chains even more.

The choice of Conti is not only obvious in terms of trade, but also geopolitically for China. The company's headquarters are in Hanover. Stephan Weil from the SPD rules in Lower Saxony. He's already under pressure because VW boss Herbert Diess brought the reduction of 30,000 jobs at the home location into play *. In the coming year, Weil will have to stand for state elections. Although the state of Lower Saxony only holds twelve percent of VW, the state government traditionally has some influence over the group. If China now starts with Conti, it could also be an attempt to influence the SPD.

Ex-Chancellor Gerhard Schröder * belongs to the Lower Saxony SPD, as does ex-Vice Chancellor Sigmar Gabriel.

According to the Chinese view of party structures, these are grandees of their organization who should have considerable influence on Chancellor Olaf Scholz *.

If the SPD in Lower Saxony is put under pressure, that could influence the incumbent Chancellor, that could be the calculation.

From the Berlin perspective, however, the opposite effect is at least as possible: External pressure could weld the federal government together.

With Annalena Baerbock and Robert Habeck, Scholz, who are advocates of “dialogue and hardship” in the key departments, sit at the cabinet table across from them.

Dispute between China and Lithuania: the European Union is helpless

In theory, the EU * would now play a key role in resolving the conflict. The federal government has declared that it wants to coordinate its policy better with Brussels and its partners at European level. But the EU Commission is helpless: A mechanism to react to economic coercive measures is being set up, but is far from finished.

The situation is becoming increasingly complicated with the pressure on EU companies, said the Vice President of the European Commission *, Valdis Dombrovskis, responsible for trade.

His remark came at an event organized by the European Council on Foreign Relations, a think tank.

The topic was the planned trade instrument against economic coercion - exactly the instrument that would be useful now, but is still missing.

There is "intensive contact" with the Chinese authorities, said Dombrovskis.

EU: options for resistance limited

In addition, talks will be held with the Lithuanians and also with representatives from other EU countries, said Dombrovskis. The “Anti-Coercion Instrument” (ACI) is currently at the top of the agenda because of the dispute in Lithuania. Making progress with this instrument is also an important item on the agenda of the French EU Council Presidency, emphasized France's Vice Minister for Foreign Trade, Franck Riester. The example of Lithuania shows very clearly that the EU must defend itself, said Riester. "We therefore support the Commission's proposal."

In the current situation, the options are very limited, admitted the EU Commissioner. All that remains is to go to the World Trade Organization - and that "takes a lot of time". The ACI aims to accelerate this. Dombrovskis left open which register Brussels would hypothetically pull for the Lithuania-China case, ACI would already be in force. The application of the trading instrument must be specifically checked on a case-by-case basis. The EU is currently trying to react with all possible means, said the EU Vice-Commission President. Also through diplomatic channels. The general development of EU-China relations is worrying, said the Latvian. This, and also developments with other third countries such as Russia, therefore underline the need for an effective EU instrument against economic coercive measures:"That's why we have to equip ourselves better." 

BDI: rule-based world trade "broken"

Baltic states are already used to economic coercion, said Lithuania's Foreign Minister Gabrielius Landsbergis at the same event.

Russia also uses such methods.

As far as China is concerned, however, one is faced with an entirely new phenomenon.

What the People's Republic is dissatisfied with and the measures it is taking as a result are not in a reasonable relationship to one another, Landsbergis said.

The German economy is also providing tailwind for the creation of robust trading instruments. Five years ago he would have been against such a trading instrument, said Wolfgang Niedermark from the Federation of German Industries (BDI). But the rule-based order in world trade is "broken", according to Niedermark. "The unpleasant truth is: We have to live with it now."

Because of the EU's inability to act, it is now up to Berlin to formulate a reaction. Much is at stake. Conti is an important partner of the German car manufacturers. Import restrictions for important parts can disrupt production, which is threatened by new disruptions because of Omikron. Continental maintains supply relationships with half the vehicle industry. In the short term, automakers can get many of the parts they need from other sources. The suppliers themselves usually maintain capacities for the same part at different locations. The car companies in turn obtain identical parts from several suppliers in many cases. On the other hand, there are enough examples of how the production lines of the big names in the industry came to a standstill after small delivery failures.

Conti's showcase location Kaunas became a point of contention with China

Continental is best known to the public as a tire manufacturer, but has developed into one of the largest automotive suppliers in the world *.

With a turnover of 37 billion euros, the company is - depending on how it is counted - the world's third largest automotive supplier after Bosch and Toyota partner Denso.

Although tires are still part of the range, Conti is now primarily known in the industry for electronics, which are important for intelligent cars.

The automotive supplier has invested specifically in Lithuania in this area since 2018, and production has been running since 2019. It was only this summer that the company announced that it wanted to expand the location in Kaunas again. So far, the company has invested 90 million euros in the plant. Now another 95 million are to be added. This increases the number of employees from 1,000 to 1,500. The company produces electronic parts for cars and driver assistance systems there.

At the beginning of the project, nobody at Conti could have suspected that the factory in Kaunas would become a game in global politics. Lithuania recently allowed the establishment of a "Taiwan Office" under that name in Vilnius. It opened on November 18th. The stumbling block is the name. The Taiwanese government also has a contact office in Berlin. However, it is officially called "Taipei Representation" and thus maintains the appearance that only a city is represented here, not a state.

Lithuania is now also somewhat shocked at how hard and comprehensively China has reacted to the Taiwan office *.

"That shows the willingness to go far in order to influence the political course of countries," says Landsbergis.

Lithuania believed it was not overly dependent on China because of its low Asian trade.

But now it turns out that the Conti jobs in Kaunas are already within reach of Beijing.

By Finn Mayer-Kuckuk and Amelie Richter

Finn Mayer-Kuckuk has been

 editor

-in-

chief of the China.Table briefing format

since May 2021 

.

Before that, he was the capital correspondent for the Federal Press Conference in Berlin and China correspondent for the Handelsblatt and the DuMont Group, among others.

Among other things, he reports on the interaction between the Chinese and German economies, digitization and IT, as well as China trends in the German capital.

Amelie Richter

has been working as editor for the China.Table Professional Briefing since January 2021, with a focus on the EU's relations with China.

Richter previously reported for the German Press Agency from Sydney, Mexico City, Strasbourg, Brussels and Paris.

She lives in France.

This article appeared on

December

20

 in the China.Table Professional Briefing newsletter - as part of a cooperation, it is now also available to readers of the IPPEN.MEDIA portals.

* Merkur.de is an offer from IPPEN.MEDIA.

China.Table Logo © China.Table Professional Briefing

Source: merkur

All news articles on 2021-12-20

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