China has threatened trade with some countries after feuds, they’re calling ‘the firm’ for help

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Business is good at “the firm.” The eight-person team at the State Department is leading Washington’s efforts to ease the economic blowback for countries targeted by China. It emerged in the scramble to help Lithuania during a spat with China over Taiwan two years ago. Today, “the firm” is helping growing numbers of nations cope with what diplomats call economic coercion from Beijing.

Countries “knock on the door, they call”, Undersecretary of State Jose Fernandez told The Associated Press in a recent interview. “We run a consulting firm that does not have to advertise for clients, as they come.” Led by State Department senior adviser Melanie Hart, the group reviews vulnerabilities and develops responses for countries that are cut off or fear losing trade with global powerhouse China. Since the group’s launch with Lithuania, more than a dozen countries have approached the Biden administration for assistance, Fernandez said.

The effort comes as Washington is stepping up its campaign to push back at China’s global influence and tensions grow between the rivals. The Chinese Embassy in Washington took issue with the notion that Beijing is using economic pressure on other countries, calling it “completely unfounded.” The United States, it said, was the one bullying China economically by abusing export controls, treating Chinese companies unfairly and labelling Beijing as a perpetrator of economic coercion.

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Fernandez said that is a tactic China “is using over and over. They believe that intimidation works. That’s why we got into the act. The time had come to stop this thing.” For example, when a Norwegian committee in 2010 awarded the Nobel Peace Prize to a Chinese dissident, Beijing stopped buying salmon from the Nordic country. Two years later, China rejected banana imports from the Philippines over a territorial dispute in the South China Sea. In 2020, Beijing responded to Australia’s call for an investigation into the origin of the COVID-19 pandemic by raising tariffs on Australian barley and wines.

Then came Lithuania. In late 2021 and early 2022, Lithuanian businesses saw their cargo shipments to and from China stranded, and they were warned by major European businesses that Lithuanian-made auto parts would be barred from products for the Chinese market. That came after Lithuania allowed Taiwan’s de-facto embassy in Vilnius to bear the name Taiwan, instead of Taipei – Taiwan’s capital city – as preferred by Beijing. China considers the self-governed island to be part of Chinese territory and protested the use of Taiwan.

Instead of caving in, the northern European country asked for help. The US and its allies stepped up. American diplomats sought new markets for Lithuanian goods. The Export-Import Bank in Washington provided Vilnius with USD 600 million in export credit, and the Pentagon signed a procurement agreement with the country. And “the firm” kept at it. The State Department works as the first line of response and can coordinate with other US agencies to reach “every tool that the US government has”, according to a department official who asked not to be named to discuss details of the team.

While it takes years to reorient global supply chains to reduce reliance on countries such as China, the team tries to offer a quicker way to ease a crisis, the official said, comparing the team to ambulance services that “help you get past that scary emergency time.” For example, the US might try to work with partners to help a country quickly divert agricultural products to new markets, build more cold storage so products can reach farther markets or improve product quality to gain entry into more markets, the official said.

The assistance is confidential, the official said, declining to discuss the tools at the team’s disposal or name the countries that have sought help. Shay Wester, director of Asian economic affairs at the Asia Society Policy Institute, said it was “a significant and much-needed initiative.” “China’s growing use of economic coercion to pressure countries over political disputes is a significant challenge that requires a concerted response,” said Wester, who co-authored an April report on the issue.

The responses from other countries show that demand is high for this kind of support, Wester said. This month, Lithuania hosted a conference on resisting economic pressure, and Foreign Minister Gabrielius Landsbergis said the aim of that action “is to crush the victims by forcing reversal and public renunciation of its policies.” Liu Pengyu, the Chinese Embassy spokesman, said the problem with Lithuania was “a political not an economic one. They were caused by Lithuania’s acts in bad faith that hurt China’s interests, not China’s pressure on Lithuania.” Fernandez, who attended the conference, applauded Lithuania for standing up to China. “Lithuania gave us the opportunity to prove that there were alternatives to the coercion,” he said.