EXECUTIVE SUMMARY
The South China Sea is one of the most important trade pathways in the world. Every year, one-third of all maritime trade, representing five trillion dollars’ worth of goods, passes through its waters, with over a fifth involving US imports or exports[i]. Its strategic economic importance and its geographic location at the confluence of several spheres of influence have rendered it one of the world’s hotspots. Disputes over sovereignty and control pit the United States and its ASEAN allies against an increasingly assertive China. To protect its interests while avoiding conflict, the United States has several policy options it may take. The first is disengagement; the US could withdraw from the region to allow China more regional influence. The second is to publicly invalidate its historical claim and apply diplomatic pressure. The third is to pursue multilateral trade agreements to provide a bulwark against Chinese economic retaliation to ASEAN states. Pursuing these trade agreements would provide the United States with the most leverage while still avoiding the possibility of conflict.
BACKGROUND
While the South China Sea has been the subject of disputes of sovereignty for some time, the conflict began to intensify when China established its nine-dash line in 2012 outlining its territorial claims in the body of water. This line encompasses ninety percent of its area[ii] and overlaps with the Exclusive Economic Zones — the 200 miles surrounding a given country’s coast — of four ASEAN countries[iii], constituting a potential violation of sovereignty in addition to simple expansion. China’s claims also include nine out of forty-four land features within the water[iv]. In the time since asserting its nine-dash line, China has pushed to develop these islands as well as build new ones, creating over 3200 acres of land and claiming it as Chinese soil[v].
There are several explanations for China’s expansionist behavior here. The first is that China is a comparatively resource-poor country, with the exception of rare earth elements. While it has substantial amounts of coal, it has been an oil exporter since the 1980s and significantly decreased production in its main regions since 2000[vi]. China is even forced to condition foreign aid on access to natural resources and take risky investments with its state-owned banks to secure contracts[vii]. The South China Sea has deposits of oil and natural gas[viii], and as a result China has significant economic incentive to expand into this territory. The second explanation regards China’s ability to project power. Even as China has grown into one of the largest economic powers in the world, it still has few true alliances, even within its own region. Most ASEAN countries have strong military partnerships with the US, at least in part because of uncertainty regarding China’s commitment to a rules-based world order. In order to counter the perceived security threat within its own region, the South China Sea provides a unique opportunity to expand China’s defense apparatuses and military bases. The fact that China has built missile defense systems on seven artificial islands also supports this explanation[ix].
INTERNATIONAL REACTIONS
China’s aggressive stance has prompted reactions from ASEAN countries as well as the US. The most dramatic measure taken has come from the Philippines, the country on the forefront of the conflict, in the form of a request for international arbitration. The specific case argued whether reefs, permanently submerged rock formations, etc. were considered land under the UNCLOS treaty, a sea charter signed by China discussing laws for territorial claims[x]. The court ruled strongly in favor of the Philippines. However, since the ruling, the US has done comparatively little to use it to pressure either China or to support ASEAN countries, which critics argue reinforces a perception of US indecisiveness and emboldens Chinese aggression[xi].
The US has increased regional cooperation in other respects, though, to deter China’s further expansion. In the second term of the Obama administration, for example, the US negotiated the Enhanced Defense Cooperation Agreement with the Philippines, which allowed the US access to eight Philippine military bases, including two in the South China Sea[xii]. Shortly after, the US also created the Southeast Asia Maritime Security Initiative, a block of about $530 million to support maritime capacity-building in the region[xiii][xiv]. This defense cooperation led to the US and the Philippines conducting joint freedom of navigation patrols periodically, a bold measure. Singapore and Taiwan have also stepped up military cooperation with the US[xv], signaling a continued skepticism of China’s intentions.
There has also been significant division within the region how to respond, though. The most obvious example of this is the election of a new president in the Philippines who has sought to revamp the Philippines’ foreign policy in favor of an alliance with China. He expelled 100 US advisory special operations troops, and has also suspended the joint freedom of navigation patrols[xvi]. This has taken place in an environment characterized by a lack of certainty and cohesion; in 2012, for example, the ASEAN countries failed to even issue a joint statement condemning Chinese expansionism for fear of retaliation[xvii]. With no clear unified policy against China, that the Philippines would move in this way is logical. Japan has proved a strong ally, urging the Philippines to resume patrols[xviii] and donating equipment for maritime surveillance[xix].
POLICY OPTIONS
In the face of this situation, the US may pursue several possible policy options. Goals of these policies should include the defense of open shipping routes, avoiding escalation or war with China, maintaining regional alliances, and economizing US spending.
OPTION ONE: MILITARY DISENGAGEMENT
Disengagement from the region would involve a significant reduction in the military resources devoted to the South China Sea. The US would decrease its presence in the region by pulling back troops, ceasing patrols of the waters, and reducing military aid to ASEAN countries. The US would continue to be able to utilize diplomatic channels to influence policy as per usual.
Several reasons emerge for why this policy could be beneficial. The first is that maintaining a security apparatus in East Asia is costly. The Southeast Asia Maritime Security Initiative itself costs $530 million dollars[xx][xxi]. Moreover, the question is not of absolute power, but rather how much the US can offer relative to China. China has offered the Philippines $32 billion worth of infrastructure projects[xxii], guaranteed $15 billion in aid with loans to purchase Chinese defense equipment[xxiii], and offered a $100 million contract for the Philippines to export fruit into China[xxiv]. China’s ability to offer state contracts and selectively open its markets provides a marked advantage over the US, particularly within the region. Unless the US is prepared to enter a bidding war for every economy in the region, then Chinese influence is inevitable; the question is whether the US chooses to waste its money continuing to resist.
Another reason the US may find this attractive is that it minimizes the potential for war. Even if China gains control in the region, the US has no immediate physical interest there, so the security of US citizens is not significantly threatened. Increased missile threat is outweighed by the immense relative advantage of the US in nuclear capacity[xxv]. Military disengagement would evidence a more narrowly defined national interest, preserving security over influence.
However, military disengagement also comes with significant drawbacks. The most obvious result is that China would be left to dominate the entire South China Sea. As a result, the US would have no means of securing its goods’ safe transfer through the region, which could have economic consequence. While there is a possibility that China would continue to uphold and respect international customs of commerce, this has not been the case historically. In 2010, for example, China banned export of its rare earth elements to Japan during a territory dispute[xxvi]. The more likely result of military disengagement would involve China exerting significant political pressure on economic transactions, subjecting the US to potential economic blackmail.
The other deleterious result would be a weakening of the rules-based world order. In addition to exerting political control over economic transactions, China would be able to exert militarily pressure in an unprecedented way. It would be entirely possible to formally blockade and annex Taiwan[xxvii]. Other countries may be at similar risk. The degradation of this order would instigate conflict in other regions, as well, which may more directly threaten US security.
OPTION TWO: DECONSTRUCTION OF CLAIM AND DIPLOMATIC PRESSURE
A second approach would involve publicly invalidating China’s nine-dash claim in order to apply diplomatic pressure. This would take the form of providing international media support in legitimating the discourse of China illegally overreaching its territory.
Several scholars from China recently published a paper outlining the legitimacy of China’s nine-dash line based on historical enforcement in ancient China. The United Nations’ arbitration result shows a different interpretation of the validity of that history. The norms of international relations are decided by what version of the truth is legitimated; in this context, the US has not effectively enough shaped the narrative of China’s aggression. Some have lamented the lack of journalists’ ability to obtain photographs, satellite images, etc. of the situation in the South China Sea[xxviii], and been concerned of images of the defense systems China is building on its new islands[xxix]. Providing support to these discourses could directly dissuade China and instigate domestic support for ASEAN governments to do more. Another advantage of this policy is that it is low-cost. Should it fail, the US would have done little concrete to damage its international position with the exception of irritating China itself, which is a likely result of almost any effective policy outcome.
However, the disadvantage of this policy choice is that its success is unlikely for several reasons. The first is that China is unlikely to be deterred because its government is authoritarian in nature. As a result, it would not necessarily be forced to change its course if its people were persuaded by the influence campaign. One might respond that China is remarkably conscious of public opinion[xxx], and as such may change course if its people urged so. However, the Chinese government also has a tight grip on information entering the country; it is unlikely that much international media would matter[xxxi]. Secondly, China is already mistrusted. While the US has a net trust rating of 66% in the Philippines, the net trust rating for China is negative 33%[xxxii]. 91% of Philippine citizens are concerned about China’s territorial expansion[xxxiii]. It seems unlikely then that media attention would motivate action since the region is already concerned about it.
OPTION THREE: MULTILATERAL TRADE AGREEMENTS
The US could also pursue multilateral trade agreements with ASEAN countries, deliberately excluding China. The US should use trade agreements to provide ASEAN countries an alternative to this possibility of economic coercion.
There are two primary reasons why ASEAN states have not taken a stronger stand against Chinese expansion. The first is fear of economic retribution from China. China has not hesitated to economically punish those who oppose it, from the aforementioned rare earth elements ban[xxxiv] to curtailing imports from Taiwanese companies that are politically problematic[xxxv]. As a result, countries are hesitant to increase military cooperation with the US or to challenge China’s claims. The second is a lack of certainty regarding the resolve of other states. For example, there are first-mover advantages to leaving ASEAN states — China is likely to reward most the states which ally with it first[xxxvi]. These detract from the cohesive certainty of those opposing China. Thus, states’ calculus is also based on the certainty of other ASEAN nations’ resilience.
Multilateral trade agreements assuage both of these fears. By entering such agreements, each state has explicit protection from Chinese economic retaliation. Moreover, trade agreements can be structured to specifically target China’s sources of leverage through elements like increasing resiliency against currency manipulation. Further, by providing an economic alternative, states will be more likely to enter into military cooperation with the US and each other, because the threat of retaliation will be significantly lower[xxxvii].
There are, however, costs to this method. First, trade deals are likely to generate increased income inequality at home[xxxviii]. As a result, trade deals have become quite politically unpopular[xxxix]. As a result, passing and implementing a trade deal is likely to be difficult. Secondly, China is likely to exclude the US from future economic deals if the US deliberately excludes it from its own deals. This could lead to a more adversarial relationship and thus create conflict in other regions where US and Chinese interests converge. Lastly, should the trade deal go through and should it fail at preventing China from controlling the South China Sea, it may be difficult to remove the US from a strategically less meaningful agreement at that point.
POLICY RECOMMENDATION
The US should seek to strengthen its position in the South China Sea by pursuing multilateral trade deals among ASEAN states and other allies with strategic interests in the South China Sea, like Australia[xl]. Military disengagement would leave US economic interests to Chinese coercion and would contribute to the denigration of the rules-based world order, creating conflict elsewhere. Deconstruction of China’s claim and the use of diplomatic pressure would likely have little effect because of clear concern among ASEAN populations already.
Trade agreements, however, pose significant benefits while have costs which may be reduced. Increased inequality, for example, can be adjusted through additional tax measures or programs, whereas unambitious foreign policies cannot be improved domestically. Trade deals may also be politically unpopular, but appearing weak on China or alternatively going to war may be equally costly from a political perspective. Moreover, if war is inevitable, trade agreements and the military cooperation they afford in the region will ensure allies in the conflict, creating both physical and normative deterrence. Lastly, China may be exclude the US from future economic deals, but it is difficult to envision a scenario where China does this to a greater extent than currently. China deliberately isolates the US already through the RCEP, the Asia Infrastructure Investment Bank, the Belt and Road Initiative, etc. Therefore, the marginal cost of this policy would be quite small.
Notes
[i] Ratner, Ely. “Course Correction.” Foreign Affairs. July 12, 2017. Accessed November 11, 2017. https://www.foreignaffairs.com/articles/2017-06-13/course-correction.
[ii] Bosco, David. “Why Is China Giving the Philippines the Cold Shoulder?” Foreign Policy. November 16, 2014. Accessed November 11, 2017. http://foreignpolicy.com/2013/11/13/why-is-china-giving-the-philippines-the-cold-shoulder/.
[iii] Mahanta, Siddhartha. “The Philippines to the United States: We Want You Back.” Foreign Policy. June 02, 2015. Accessed November 11, 2017. http://foreignpolicy.com/2015/06/01/philippines-china-military-carter/.
[iv] Ibid.
[v] Emmerson, Donald K. “Why Does China Want to Control the South China Sea?” The Diplomat. May 24, 2016. Accessed November 11, 2017. https://thediplomat.com/2016/05/why-does-china-want-to-control-the-south-china-sea/.
[vi] Troush, Sergei. “China’s Changing Oil Strategy and its Foreign Policy Implications.” Brookings. May 10, 2017. Accessed November 11, 2017. https://www.brookings.edu/articles/chinas-changing-oil-strategy-and-its-foreign-policy-implications/.
[vii] Pei, Minxin. “China’s Achilles’ Heel.” The Diplomat. February 08, 2012. Accessed November 11, 2017. https://thediplomat.com/2012/02/chinas-achilles-heel/.
[viii] “Philippines president seeks to deepen China security ties.” Columbia International Affairs Online. Accessed November 11, 2017. http://www.ciaonet.org/record/44277?search=1.
[ix] Sutter, Robert and Chin-Hao Huang. “BEIJING PRESSES ITS ADVANTAGES.” Comparative Connections 18, no. 3 (01, 2017): 43-50,128,130. http://proxyau.wrlc.org/login?url=https://search.proquest.com/docview/1906105439?accountid=8285.
[x] Bosco, “Why Is China Giving”
[xi] Auslin, Michael. “Duterte’s Defiance.” Foreign Affairs. November 02, 2016. Accessed November 12, 2017. https://www.foreignaffairs.com/articles/philippines/2016-11-02/dutertes-defiance?cid=int-rec&pgtype=art.
[xii] De Luce, Dan. “China Fears Bring the U.S. Military Back to the Philippines.” Foreign Policy. January 12, 2016. Accessed November 12, 2017. http://foreignpolicy.com/?p=851458.
[xiii] Mahanta, “The Philippines to the US”
[xiv] “Philippines and the US conduct joint mil.” Columbia International Affairs Online. Accessed November 11, 2017. http://www.ciaonet.org/record/39982?search=1.
[xv] Baohui, Zhang, Taisu Zhang, and Richard J. Heydarian. “Will Duterte’s Pivot to China Start a Chain Reaction Across Asia?” Foreign Policy. October 25, 2016. Accessed November 10, 2017. http://foreignpolicy.com/?p=890916.
[xvi] De Luce, Dan. “First Cracks Appear in the U.S. Alliance With the Philippines.” Foreign Policy. October 07, 2016. Accessed November 11, 2017. http://foreignpolicy.com/?p=889104.
[xvii] Bosco, “Why Is China Giving”
[xviii] Auslin, “Duterte’s Defiance.”
[xix] Dominguez, Gabriel. “Japan to donate five Beechcraft TC-90 trainers to Philippines.” Jane’s Defence Weekly. October 30, 2017. Accessed November 10, 2017. https://janes.ihs.com/Janes/Display/FG_674944-JDW.
[xx] Mahanta, “The Philippines to the US”
[xxi] “Philippines and the US conduct joint mil”
[xxii] “Philippines Yet to See Economic Reward from China Ties.” FT.Com (Sep 20, 2017). http://proxyau.wrlc.org/login?url=https://search.proquest.com/docview/1953305154?accountid=8285.
[xxiii] Grevatt, John. “Philippines signs defence trade deal with China’s Poly Technologies.” Jane’s Defence Weekly. May 17, 2017. Accessed November 10, 2017. https://janes.ihs.com/Janes/Display/FG_499539-JDIN.
[xxiv] “Yearender: Manila Ushers in New Era of Sino-Philippine Relations Under Duterte as China Extends Warm Hand.” Xinhua News Agency – CEIS, Dec 19, 2016. http://proxyau.wrlc.org/login?url=https://search.proquest.com/docview/1850493580?accountid=8285.
[xxv] Routley, Nick. “How many nuclear weapons each country in the world has.” Business Insider. August 14, 2017. Accessed November 15, 2017. http://www.businessinsider.com/how-many-nuclear-weapons-each-country-in-the-world-has-2017-8.
[xxvi] Buszynski, Leszek. “Why is the South China Sea so important to the US?” Huffington Post, January 18, 2017. Accessed November 11, 2017. https://www.huffingtonpost.com/the-conversation-global/why-is-the-south-china-se_b_14255194.html
[xxvii] Ibid.
[xxviii] Ratner, “Course Correction”
[xxix] Ibid.
[xxx] Chubb, Andrew. “Nationalism and Chinese public opinion.” China Policy Institute. February 03, 2015. Accessed November 14, 2017. https://cpianalysis.org/2015/02/03/nationalism-and-chinese-public-opinion-a-dangerous-n-word/.
[xxxi] Denyer, Simon. “China’s scary lesson to the world: Censoring the Internet works.” The Washington Post. May 23, 2016. Accessed November 14, 2017. https://www.washingtonpost.com/world/asia_pacific/chinas-scary-lesson-to-the-world-censoring-the-internet-works/2016/05/23/413afe78-fff3-11e5-8bb1-f124a43f84dc_story.html.
[xxxii] Simon, Sheldon and Carl Baker. “PHILIPPINE FOLLIES.” Comparative Connections 18, no. 3 (01, 2017): 33-41,127,130. http://proxyau.wrlc.org/login?url=https://search.proquest.com/docview/1906105491?accountid=8285.
[xxxiii] Auslin, “Duterte’s Defiance.”
[xxxiv] Buszynski, “Why is the South China Sea”
[xxxv] 4, Blackwill, Robert D., and Jennifer Harris. War by Other Means: Geoeconomics and Statecraft. Cambridge, Massachusetts: Belknap Press of the Harvard University Press, 2016.
[xxxvi] Baohui, Zhang, Taisu Zhang, and Richard J. Heydarian.
[xxxvii] Ratner, “Course Correction”
[xxxviii] Garrett, Geoffrey. “Do Trade Agreements Lead to Income Inequality?” Wharton School of Business. February 01, 2017. Accessed November 17, 2017. http://knowledge.wharton.upenn.edu/article/do-trade-agreements-lead-to-income-inequality/.
[xxxix] “Americans’ Views on Income Inequality and Workers’ Rights.” The New York Times. June 03, 2015. Accessed November 16, 2017. https://www.nytimes.com/interactive/2015/06/03/business/income-inequality-workers-rights-international-trade-poll.html.
[xl] Austin, Greg. “Australia’s Interests in the South China Sea.” The Diplomat. November 03, 2015. Accessed November 14, 2017. https://thediplomat.com/2015/11/australias-interests-in-the-south-china-sea/.