31 August 2018

The Economic Showdown in the South China Sea

by Richard Javad Heydarian

The Trump administration wants to mobilize private American capital for high-quality investments in the Asia-Pacific region. As China inches closer to imposing a de facto exclusion zone across the South China Sea, it has sought to box the United States out of Southeast Asia. Having deployed state-of-the-art weapons systems to artificially created islands in the area, a Chinese Air Defense Identification Zone is more a matter of “when” than “if.” The Asian powerhouse has forged ahead with negotiating a Code of Conduct (COC) in the contested areas that could, first, consolidate its gains on the ground and, more importantly, drive a wedge between Southeast Asian countries and Washington.

In an unprecedented act of chutzpah, China has asked —as part of confidence-building measures (CBMs) in the South China Sea—Southeast Asian countries to cease joint military exercises with external powers unless they have received China’s permission. It also proposed regular naval exercises with Southeast Asian claimant states as well as resource-sharing regimes to govern the exploration of oil and gas resources in the area.

In short, China is pushing for a self-serving modus vivendi, which will effectively reduce its Southeast Asian neighbors to neo-tributary states. Wary of Beijing’s exclusionary intentions, and cognizant of Southeast Asian states’ preference for strategic space, the Trump administration has pushed back with gusto. It dispatched Secretary of State Mike Pompeo to a weeklong visit to the region, with America’s chief diplomat visiting key Association of Southeast Asian Nations (ASEAN), namely Indonesia, Malaysia and Singapore.

During his visit, Pompeo put forward a series of economic and defense initiatives, which are aimed at preserving American primacy in the region and strengthening Southeast Asian countries’ bargaining chip vis-à-vis China, whether in matters of investment or territorial disputes.

The Trump administration has sought to reassure its regional allies and partners about its commitment to a “Free and Open Indo-Pacific” (FOIP), a new geopolitical paradigm that seeks to diminish China’s centrality in the Eurasian landmass in favor of an emerging alliance among democratically-leaning naval powers, namely the United States, Japan, Australia and India.

Washington is keen on soliciting the support of key Southeast Asian states such as Indonesia and Vietnam to constrain China’s increasingly revisionist geopolitical assertiveness. The ASEAN has, so far, cautiously welcomed Sino-America rivalry, so long as it provides smaller regional states with alternative sources of capital, technology and defense cooperation. Still, there are growing concerns over the possibility of an all-out conflict between the two superpowers, as the United States and China jostle for naval and economic dominance in Asia.

The Ritualized Mirage

China’s Foreign Minister and State Councilor Wang Yi was more than eager to display his country’s growing geopolitical heft during the late-July ASEAN Foreign Ministers Meeting (AFMM) in Singapore. During his state in the city-state, he met ministers from across the world, discussing the Iranian nuclear deal with his counterpart from Tehran, climate change with European Union foreign policy chief Federica Maria Mogherini, and trade wars with Canadian foreign minister Chrystia Freeland.

The highlight of his high-velocity diplomatic meetings, however, was the ASEAN ministers. The two sides triumphantly announced the completion of a “ Single Draft COC Negotiating Text ,” which will serve as the basis for the negotiation of a final set of rules to govern the conduct of claimant parties in the South China Sea. Once finalized, China, the Philippines, Brunei, Vietnam, and Malaysia are expected to abide by the spirit and letter of a COC.

After almost two decades , it’s still not yet clear if the final document will be legally-binding and, crucially, what its reference point will be. Will it be the United Nations Convention on the Law of the Sea (UNCLOS), the ASEAN’s Treaty of Amity and Cooperation (TAC), or China’s alternative interpretation of the regime of rights and entitlements in the South China Sea, or, perhaps, a combination of all? In this sense, the COC negotiations still look like a ritualized mirage with no clear deadline or concrete blueprint.

What’s clear is that the COC will not be based on the Philippines’ landmark arbitration award against China, under the aegis of the UNCLOS. In fact, the Philippines took over from Singapore the ASEAN-China coordinator role. Under President Rodrigo Duterte, the Southeast Asian country has opted for a “soft landing” with China, refusing to raise the arbitration award in multilateral fora.

Thus, the primary risk with the COC is that it will serve as a tool by China to effectively bury the arbitral award at The Hague, which, per international law, is “final” and “binding.” It also provides China a veneer of diplomatic nicety to temper concerns over its aggressive actions on the ground.

The outgoing ASEAN-China Coordinator, Singapore’s Foreign Affairs Minister Vivian Balakrishnan enthusiastically described the draft as the “living document and the basis of future code of conduct negotiations.”

In their joint statement , ASEAN foreign ministers “warmly welcomed the continued improving cooperation” with Beijing, and celebrated recent movements in the negotiation of a “substantive” COC as well as expanding maritime security with China. In fact, just days after the AFMM, Chinese and ASEAN navies held their first-ever joint naval exercises in Singapore’s Changi Naval Base, as part of a broader series of institutionalized Confidence-Building Measures (CBMs) in the South China Sea.

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