Tuesday, 9 June 2015

Should China's South China Sea ambitions be thwarted?

If absolute power corrupts absolutely then it surely follows that absolutely strong, big economies can bully absolutely. That now seems to be the scenario unfolding in the South China Sea where China is claiming sovereignty over 90% of the region even though its mainland is about 650 miles from the disputed Spratly islands, while Vietnam and the Philippines are only about 350 miles away, both of whom also lay claim to these islands and reefs, thought to be rich in oil and gas.

The Philippines has submitted evidence to a UN tribunal hearing its case against China's territorial claims but China has refused to take part in the arbitration and warned that the case would damage bilateral ties and is already doing so in artful ways. The Philippines claims that China's claims are illegal under the UN Convention on the Law of the Sea but it is unlikely that there will be any ruling until the end of this year. Meanwhile, China has militarised Mischief Reef by building an artificial island with an airstrip and installed mobile artillery. Not content with that, China is building another runway on Subi reef and has built a substantial port on Fiery Cross reef. Subi, Mischief and Fiery Cross reefs are three of at least seven reefs in the Spratlys that have been filled in by China and are being fitted out for what can only be military purposes.

The Philippines has challenged its Asean (Association of South-East Asian Nations) members "to finally stand up" to China and demand an end to China's reclamation works. Asean, however, has a history of failing to respond vigorously to Beijing owing to China's immense trade and diplomatic leverage and because not all 10 Asean members have a stake in the maritime disputes. This means that the likelihood of US intervention following more Chinese provocation is stronger.

International relations between south-east Asia and China are reportedly lower than at anytime since the 1960s and the Japanese Prime Minister, Shinzo Abe, has compared the situation to 1914 just before the outbreak of World War One. The potential of this rising tension has huge implications for global logistics that stretches far beyond the costs of higher insurance and the re-routing of ships to avoid the South China Sea, through which passes about US$5.5 trillion of trade every year, should it come to a shooting war.

It is an irony of history that the best of intentions regarding foreign trade can midwife the law of unintended consequences, and its sometimes baleful outcome. In the bid for liberalizing US trade with China back in the 1990s advocates said economic interdependence would inevitably lead to peaceful co-existence. Well, yes, but that is more likely in open, transparent, democratic societies rather than autocracies like China. What Washington has failed to do in recent years is to keep a careful watch over what goods are made where, especially when it comes to vital items like electronics and drugs, which means America now depends far more on China than vice versa, and that can only weaken America's political leverage.

The asininity of western corporations' over reliance on Japan in 2011 for a host of key electronic and vehicle components, a choke point for nearly 100 products, left them nursing billions of pounds in losses following the 2011 Japanese tsunami which severely disrupted JIT-supplied components because alternative sources could not be quickly mobilised. That lesson should not be lost on logisticians who should now be ensuring that they have robust alternative supply sources for all their needs, or else build up their reserve stocks, given now the potential for political disruption spreading from the South China Sea.

This is not to argue that globalization of trade has been wrong-headed. On the contrary, it has pulled China up by its boot straps, kept western inflation down, and enriched its nearby trading partners. But the fact remains that one-sided dependencies invite military adventurism, as China's growing belligerence today proves. What America must now do is address the fundamental flaws in the international trade system that give China such a big advantage.

The most likely outcome of China's latest developments on the Spratlys is that it will repeat its actions of 2013 when China unilaterally imposed an "air defence declarization zone" covering portions of the East China Sea and claim territorial waters around its man-made islands in the Spratlys. Such chutzpah should be vigourously resisted by all nations who depend on unhindered navigation through these seas. America, reportedly, is considering conducting "freedom of navigation" exercises where it would send warships into the waters around the reclaimed Chinese man-made islands. This would show that it does not recognize the sandbanks as islands with their own territorial waters, but all other nations using these waters should be at one with America in this.

China is a land with a sorrowful past but history can have valuable lessons for avoiding a repetition of past mistakes. The likelihood, however, is that China's leaders will ignore the Spanish philosopher Santayana's warning: "Those who cannot remember the past are condemned to repeat it." In becoming much wealthier over the last two decades through foreign trade expansion, China had a great opportunity to show the world that true greatness does not spring from the barrel of a gun, but through friendly, honourable cooperation with its global trade partners in which there is no place for bullying smaller neighbours and intimidating military strutting like cockerels on a dunghill. But human nature does not change so easily, despite the benefit of hindsight that history offers.

What concerns Chinese people most is rising living standards but it only takes a handful of politicians in an autocracy like China to risk all that. Maintaining face is deeply rooted in the Chinese psyche and they will only act soberly when they are resolutely faced down. China's top leaders should be paying far more attention to their internal problems where its greatest political risks lurk. Nature can be cruel to China through its immensely costly floods, typhoons and earthquakes, from which there will be no respite. The people rightly deserve to see their hard-earned wealth channelled to where it is most needed, rather than frittered away on risky, foreign adventurism. Its very low-lying sandbank islands in the Spratlys could easily succumb to a tsunami washing away everything at huge cost, and it may come sooner than expected.

For bullies to triumph all it takes is for good men to look the other way. Recent history shows how dreadful the consequences can be for such insouciance.