Category Archives: China

Asia, China, Foreign Affairs, United States

China: An international ruling over the South China Sea

CHINA

Intro: The ruling was made by the Permanent Court of Arbitration in The Hague, following a case which was brought by the Philippines

OVER THE PAST FEW YEARS China has displayed an often aggressive stance over its vast territorial grab in the South China Sea. This has terrified its neighbours and set it on a collision course with the United States, long seen as the guarantor of peace in East Asia. In the last few days an international tribunal has demolished China’s vaguely defined claims to most of the South China Sea. How Beijing now reacts to this ruling is of the utmost geopolitical importance. If, in its anger, China flouts and ignores the verdict and continues its creeping annexation, it will be perceived as elevating brute force over international law as the arbiter of disputes among states. Continued bullying by China of its neighbours greatly raises the risk of a local clash and which could escalate into a war with America. The stakes couldn’t be higher.

The ruling was made by the Permanent Court of Arbitration in The Hague, following a case which was brought by the Philippines. The verdict is firm, clear and everything which China did not want to hear. The judges decreed that the UN Convention on the Law of the Seas (UNCLOS) should solely determine how the waters of the South China Sea are divided among countries, and rejected China’s ill-explained ‘nine-dash line’ which implies the sea belongs to China. They ruled that none of the Spratly Islands in the south of the sea, claimed (and occupied) by several countries including China, can be defined as islands that can sustain human life. In practice, this means that no country can assert an Exclusive Economic Zone (EEZ) extending up to 200 nautical miles around them.

south-china-sea-dispute-7-638

Map depicting the disputed islands in the South China Sea

While the court had no power to decide who owns which bits of land in the South China Sea, the judges said that by building on rocks visible only at low tide (and thus not entitled under UNCLOS to any sovereign waters), China had encroached illegally into the Philippines’ EEZ. The court also determined that China had violated UNCLOS by blocking Philippine fishing boats and oil-exploration vessels, and cited that Chinese ships had acted dangerously and unlawfully in doing so. Moreover, China’s island-building had caused ‘severe harm’ to the habitats of endangered species, and Chinese officials had turned a blind eye to such practices.

For China, this is undoubtedly a humiliation. Its leaders have been quick to denounce the proceedings as illegal. Its massive recent live-firing exercises in the South China Sea implies it may be planning a tough response. This might involve the imposition of an ‘Air Defence Identification Zone’ of the kind it has already declared over the East China Sea. Or it might mean that China starts building on the Scarborough Shoal, which it wrested from the Philippines in 2012 after a stand-off involving patrol vessels. That would be hugely provocative. Although the U.S. is deeply reluctant to risk a conflict, President Barack Obama is believed in March to have warned his Chinese counterpart, Xi Jinping, that any move on Scarborough Shoal would be seen as threatening American interests (the Philippines is a U.S. ally). Any attempt by China to call its bluff in a sea that carries $5.3 trillion in annual trade would be reckless and irresponsible.

There is a better way. China could climb down, and, in effect, quietly recognise the court’s ruling. That would mean ceasing its island-building, letting other countries fish where UNCLOS allows and putting a stop to poaching by its own fishermen. It should have good reason: its prestige and prosperity largely depends on a rules-based order. It certainly would be in China’s own interests to secure peace in its region by sitting down with the Philippines, Vietnam and other South-East Asian neighbours and trying to resolve differences.

Standard
China, Europe, Politics, Russia, United States

The strengthening partnership between Russia and China?

GEOPOLITICS

Intro: Relations between China and Russia have been growing closer since the end of the cold war. But while the crisis in Ukraine has drawn Russia closer to China, the relationship is far from equal

The commemorations in Moscow to celebrate the capitulation of Nazi Germany 70 years ago speak volumes about today’s geopolitics. On May 9th, Western leaders stayed away in protest against Russia’s aggression in Ukraine, an important proclamation as this was the first annexation of sovereign territory in Europe since the second world war. China’s president, Xi Jinping, was the guest of honour of his friend, Vladimir Putin. Western sanctions over Ukraine, and what looks set to be a long-term chilling of relations with America and Europe, has given Russia no other option than to embrace China as tightly as it can.

In the coming days, in a further symbol of the growing strategic partnership between the two countries, up to four Chinese and six Russian naval vessels will rendezvous to conduct live-firing drills in the eastern Mediterranean. The exercise, which follows several similar ones in 2013, is aimed at sending a clear message to America and its allies. For Russia the manoeuvres send a strong signal that it has a powerful friend and a bonding military relationship with a country that has growing geographic reach and influence. For China, such an exercise of this kind speaks of increasing global ambition that is line with Mr Xi’s slogan about a ‘Chinese dream’, one which he says includes a ‘dream of a strong armed-forces’. In taking part, China is sending its ships from anti-piracy duty in the Gulf of Aden.

But this also provides an opportunity for China to display its Type 054A guided-missile frigate, which it would like to sell to the Russians. It also brings with it operational experience in an unstable region in which it has an expanding economic presence. In 2011, China organised the evacuation of more than 38,000 Chinese from Libya during that country’s upheaval. And just last month its navy disembarked several hundred of its citizens out of Yemen, which is being torn apart by civil war. There are believed to be at least 40,000 Chinese working in Algeria and more than 1m across Africa.

Relations between China and Russia have been growing closer since the end of the cold war. For different reasons both countries resent America’s ‘hegemony’ and share a desire for a more multipolar world order. Russia, for all its bravado, is a declining great power, and is looking for ways to recover at least some of its lost status; whereas China, a rising power on the world stage, bridles at what it perceives as American attempts to constrain it. As fellow permanent members of the UN Security Council, both with autocratic governments, Russia and China find common cause in expressing grievance at Western liberal interventionism. The two countries settled all of their long-standing border disputes in 2008, just prior to the Russian-choreographed war in Georgia. This provided the onset for Russia in concentrating more of its military forces in the west as a deterrent against the further expansion of NATO.

Despite the strengthening partnership there have been the occasional tensions. For example, Russia played a key role during the 1990s in helping China to reform and modernise its military forces. Russia was able to preserve a defence-industrial base that would otherwise have withered from lack of domestic orders. But since the middle of the last decade, irked by China’s pilferage of its military technology and its consequent emergence as a rival in the arms market, Russia’s weapons sales to its neighbour have slowed.

Moscow’s wariness of becoming little more than a supplier of natural resources to China’s industrial machine speaks volumes of Russia’s humiliating position that until recently saw China as backward. As long as Russia could sell to Europe all the gas required to keep the Russian economy growing, it could arbitrarily put deals with China on hold. These included plans for two gas pipelines from Siberia into China that were announced in 2006 and then quietly dropped as the two sides argued and bickered over prices.

All that has changed. The continuing crisis in Ukraine has forced Russia to ‘pivot’ its economy towards Asia in an effort to lessen the impact of Western sanctions by finding alternative markets and new sources of capital. For China it is a golden opportunity to gain greater access to Russia’s natural resources, at favourable prices, as well as being in a better position to secure access to big infrastructure contracts that might have gone to Western competitors and to provide financing for projects that will directly benefit Chinese firms.

Russia’s incursions into Ukraine and its seizure of Crimea violated two of China’s most consistently held foreign-policy tenets: non-interference in other states and separatism of any kind. Yet, while China abstained from voting on the UN Security Council resolutions condemning Russia (with the Chinese media giving Russia strong support) it has quietly welcomed a new cold war in Europe that might distract America from its declared ‘rebalancing’ towards Asia.

Additional and striking new evidence of the new closeness between China and Russia was a $400 billion gas deal signed in May last year under which Russia will supply China with 38 billion cubic metres (bcm) of gas annually from 2018 for 30 years. China has insisted that the gas comes from new fields in eastern Siberia by passing through as yet an unbuilt pipeline, a plan that will ensure supplies are not diverted elsewhere. Other deals have followed too. The biggest was a preliminary agreement signed in November for Russia to sell an additional 30 bcm a year through a proposed pipeline from Western Siberia. In every such new instance it is probable that China was able to drive a hard bargain on price.

Other clear signs of Russia’s weakness have also become clear. Its recent decision to resume high-tech arms exports to China most noticeable. In April it agreed to sell China an air-defence system, the S-400, for around $3 billion. This will help give China air dominance over Taiwan and the Senkaku islands (Diaoyu to the Chinese), who dispute Japan’s claim to them. In November, too, Russia said it was prepared to sell China its latest Sukhoi-35S combat aircraft. Initially it had refused to sell any fewer than 48, in order to make up for losses it suffered as a result of China’s purloining of the designs. Now it has agreed to sell only 24.

Looking ahead problems seem discernibly clear. One is that both countries are competing for influence in Central Asia, once Russia’s backyard. Mr Putin wants to establish his Eurasian Economic Union partly to counter growing economic power in Central Asia, through which China wants to develop what it calls a Silk Road Economic Belt. China is using the Shanghai Co-operation Organisation (SCO), of which Russia and Central Asian nations are also members, to boost its security ties in the region as well. Another difficulty is Russia’s military and energy links with countries such as India and Vietnam, both of which are rivals of China. But the biggest problem of all seems likely to be Russia’s irritation with being forced into an increasingly subservient role in its relations with China.

Standard
China, Economic, Foreign Affairs, Japan, Society, United States

A bilateral trade agreement between Japan and America looms…

TRADE AGREEMENT

Intro: But why is this potential agreement being treated as a weapon? It shouldn’t be used to contain China

Congressional leaders in America rarely agree on anything, but last week some good news stemmed from Washington. A bipartisan bill has been presented to Congress which, if passed, would for the first time in many years give the president ‘fast-track’ authority when negotiating trade deals. A huge trade deal looms, the Trans-Pacific Partnership (TPP), and the bill would provide a major boost for its prospects. It would bind America with 11 economies (including Japan but not China) around the Pacific Rim. The TPP is being mightily embraced. As Japan’s Prime Minister, Shinzo Abe, heads to Washington for a much anticipated trip – including an invitation to address a joint session of Congress – Mr Abe claimed that America and Japan were close to agreeing the terms of a bilateral agreement on trade.

However, there are two major caveats. First, ‘fast track’, formerly known as Trade Promotion Authority, may still fall foul of Congress. And second, Japan may not make any serious cuts to tariffs that protect its farmers. Yet, underlying this potential trade agreement is that both have been too quick to cast the TPP as a weapon in its desire to contain China.

Flanked by Japan and America, the TPP would link countries which make up 40% of global GDP. That could boost world trade and output by as much as $220 billion a year by 2025. It is aimed at reforming difficult areas such as intellectual property, state-owned firms and environmental and labour standards. It would link economies that lie at different ends of the spectrum of development – from Vietnam to Australia.

But, crucially, the TPP will not happen without fast track, which forces Congress into a yes/no vote on any pending trade deal (avoiding the risk that it will be amended into oblivion). And the passage of fast track will no-doubt face a lot of scepticism from congressional Democrats. There are those who will be implacably opposed, whilst others will want America to have a bigger arsenal with which to fight against unfair traders. Driven by a conviction that China artificially holds its currency down and destroys American jobs, some, such as the New York senator Charles Schumer, remain determined that fast track should include a provision that would make sure any specific trade deal included sanctions on currency manipulation.

Attaching a currency-manipulation clause to trade deals is a poor idea. Not only are they hard to define but the addition of such clauses makes reaching an agreement less likely. But Mr Schumer’s demands are hard to ignore given that the Obama administration has already, mistakenly, directly pitched TPP as a counterbalance to an assertive China.

While Mr Abe has also committed his country to joining the TPP on strategic grounds, the same mistaken logic of counterbalancing China looks set to cause problems in Japan. For example, Mr Abe is a born admirer of free trade. When he first entered negotiations, some of his backers believed that, by playing the China card, Japan would be spared from making real concessions: that America would care more about a pact that excluded China than about prising open Japan’s most protected markets, particularly rice.

Japan will want to keep tariffs high. The best it may offer will be to allow in a fixed quota of tariff-free rice from the other TPP members (including America).

If the China-containment logic prevails and leads to a minimalist agreement, then the economic gains from TPP will be slim. That was never TPP’s aim, but by having real value to set high new standards for world trade. That requires the boldest possible agreement.

In the long run, the world must surely gain if China joins the pact. Yet, the rhetoric makes trade negotiations sound like a contest. It shouldn’t be that way. This is a battle where the more you give away the more you win.

Standard