In the 117-year history of the Permanent Court of Arbitration (PCA) in The Hague, key decisions with geo-political significance have been promulgated and helped shape international law. These included a successful resolution just two years ago of an Indian-Bangladesh maritime border dispute. But last week's announcement by the PCA regarding Philippines/China disagreements over islands, shoals, and economic zones in the South China Sea was momentous by any measure.
- Since the late 1940's, but vocally since the early 70's, China has asserted territorial claims over roughly 90% of the South China Sea, an area encompassing more than 1.2 million square miles and through which passes nearly 40% of global trade by value. Beijing has relied on a map from China Republic days, published just prior to the Republic's 1949 expulsion from the mainland, that allegedly showed "Nine Dashed Lines" on a map of this key transit area; the map delimited extensive, far-reaching Chinese claims - not just to "islands" in the area, but to fishing zones and sea-bed resources.
- These claims were breathtaking in their sweep. Neighbors, especially Vietnam, Brunei, Malaysia, and The Philippines, strenuously objected - to little avail; China not only pressed its claims, but began the construction of artificial islands in an effort to cement sovereignty.
The Philippines was the first of China's neighbors to approach the PCA for a ruling on the PRC's" Nine Dashed Line" historic claim. Not surprisingly, China refused to acknowledge the legitimacy of the PCA in addressing this dispute and vowed not be bound by any eventual ruling.
Cutting though legal parlance, here is what the PCA's unanimous decision last week in effect said to Beijing about its "Nine-dashed Line" claims:
- First, there is NO Legal basis for a "Nine Dashed" Line assertion! When China signed the UN Convention on the Law of the Sea, that signature “extinguished” (the exact words in the Tribunal's decision) China's so-called historic claim.
- Second, while China may assert that there are "islands" in the disputed areas of the South China Sea (from which the PRC might claim a 200 mile Exclusive Economic Zone), The Tribunal found that these features are in fact all "rocks." And because they are rocks and not islands, there is no 200 mile "Exclusive Economic Zone" attached to them.
- Finally, China was taken to task by The Tribunal for ravaging the marine environment. All states have an obligation to protect fragile ecosystems, The Tribunal emphasized; and the PRC rode roughshod over that obligation through its artificial island construction, much of which took place while the dispute was being considered by The Tribunal!
Bottom line, this was a brutal setback for the PRC -- a "body-slam," as one headline described it. The respected Washington-based Center for Strategic and International Studies (CSIS) summarized it well: “The Philippines brought 15 total claims against China to The Tribunal; Manila won 14.5 of those 15!”
The critical question now is, what’s NEXT? The ball is clearly in China President Xi Jingping’s court. During hours of expert discussions in Washington, at numerous think tanks following the decision in The Hague, few analysts raised the issue of how the U.S. might help Xi in finding a face-saving way out.
- The best guess is that Xi doesn’t want a way out -- or can’t find a path, given the stakes he personally has in this dispute. Xi has made China's extensive sovereignty assertions in the South China Sea a key element of his widely-proclaimed "China Dream" vision. It's a vision with hyper-nationalistic overtones; and it includes business and economic components that increasingly discriminate against foreign competitors in so-called "strategic sectors" of the Chinese economy.
- While The Hague Tribunal was reviewing the competing South China Sea claims, China's business regulators were drafting and implementing cyber and national security regulations in banking, insurance, health care and telecommunications; disturbingly, these regulations continue the protectionist trend that is frustrating foreign investors, particularly hi-tech investors, in China's rapidly evolving market place.
At this point, both the U.S. and the Philippines have refrained from "spiking the ball" in the wake of the PCA announcement. For the time being, it is a wise course. But how the next U.S. president handles this delicate relationship with Beijing will be THE test of U.S. executive leadership. Stay tuned.