Next Steps in the South China Sea: What to do After Victory

September 8th, 2016

By Davis Florick – Junior Fellow

The Philippines’ victory at the Permanent Court of Arbitration (PCA) was significant for the states bordering the South China Sea. For once, China’s smaller neighbors were able to stand up and turn the tables on Beijing. However, for all the excitement regarding the ruling, what happens next could be far more important. At present, there is no enforcement mechanism for the PCA’s decision. Rather, the verdict is reliant upon the idea that an international, rules-based system developed by the US and Europe is in the best interests of all nations. If China should reject the ruling, how will the international community respond? Stakeholders compelling Beijing to accept the decision and walk away from its investments and verbal commitment regarding territorial disputes is unlikely. Yet, if China successfully discards the Court’s ruling, the action could set a precedent for other nations, thereby impugning the integrity of the PCA process. Instead, states in Southeast Asia and their partners, including Australia, India, Japan, and the US, will need to work with China to develop compromises. The benefit of the ruling lies with its demonstration that Beijing’s position is vulnerable and unsupported. For stakeholders, relying on the compromised stance China is presently in could create negotiating opportunities.

Presently, it appears that Chinese officials are unwilling to accept the PCA’s ruling. Their actions and statements reflect resistance toward the decision. Perhaps the most significant factor complicating matters for the Chinese Communist Party (CCP) has been its willingness to link this issue to broader nationalistic claims. While the logic of this connection can be debated, multiple CCP administrations have chosen to take this path. As a result, precedence will make it much harder for Beijing to retreat from its stance on regional territorial claims. The Xi Administration has only helped reinforce the complexities of its decision latitude by conducting military exercises in the area, including before (5-11 July) and after (21-23 July) the ruling was handed down. It also has gone one step further to announce that Beijing and Moscow will conduct naval drills in the South China Sea in September. Additionally compounding matters has been the heightened rhetoric from a variety of Chinese officials. Statements made by Foreign Ministry officials claiming the case was illegal and invalid should come as no surprise, but government-sponsored media outlets including the People’s Daily and Xinhua released articles accusing the US of plotting against China. These were dwarfed by the Global Times’ (another state-sponsored outlet) insinuation that China should be prepared for a military confrontation. Although the news stories were not released by the government, the censorship role played by the Party would suggest these articles were within permissible bounds. Taken collectively, these decisions have complicated the CCP’s negotiating options but have not completely eliminated room for compromise.

Just as important, the stance taken by the Philippines’ Duterte Administration could prove quite valuable in opening potential space for compromise. Rather than capitalizing on its victory for short-term political gain, the government in Manila has taken the right approach by adopting a more discreet position and offering dialogue. The more cautious and diplomatic position has reduced the potential embarrassment for Beijing. Indeed, at President Duterte’s behest, former president Fidel Ramos traveled to Hong Kong from 8-12 August to conduct exploratory conversations with Chinese associates. Although these feelers are still in their infancy, Manila’s approach has preserved negotiating space over the South China Sea.

Against this backdrop is a dramatic challenge for regional and international actors. China’s inflammatory statements since the court’s ruling suggest it will not abide by the decision. Advancing this position was a Chinese nuclear-capable bomber flying over the Scarborough Shoal on July 14^th – less than 72 hours after the verdict was handed down. The vigor with which Beijing has flaunted the ruling places the current international system, founded on norms of behavior and the rule of law, in a precarious position. Without a formal enforcement mechanism, the decision is unenforceable and highly limited. Much like Japan’s refusal to adhere to the League of Nations covenant eighty years ago, China’s disregard of the PCA ruling today serves as a signal post for other states that may find themselves in a similar position. As a result, the US and like-minded states must now take determined action to alter this destabilizing path. While Washington may not have wanted to play a significant role in the South China Sea territorial dispute, the verdict has compelled it to take a position of greater leadership.

Responding to China’s actions in the region will require a delicate balancing act of both bilateral and multilateral engagements. To a large extent, the Philippines has managed to help preserve the trade space with China, as much as possible, due to how it has responded to the PCA’s ruling. By not giving more demonstrative statements declaring its victory, Manila avoided humiliating Beijing any more than what had already occurred. Beijing apparently offered bilateral negotiations with Manila, with a precondition that the case would not be discussed. Although the Philippines rejected this initial offer, reconsidering a dialogue with China – even with caveats – could be useful. While the verdict may not be discussed, both sides know what occurred. In and of itself, the ruling would serve as context during negotiations. Holding this sort of bilateral dialogue would be important given ongoing tensions as it may serve as a means to deescalate territorial disputes.

Bilateral engagement opportunities should only be part of the equation moving forward. Just as important will be multilateral efforts. The Southeast Asian states, as well as India, Japan, and the US, will need to encourage China to participate in meetings whenever possible. Multilateral engagement will help to curtail some of the complications among the regional actors in particular. For instance, placing all the vested parties in the room during dialogue opportunities will reduce suspicions of side deals being made and other activities that might circumvent the goal of negotiations. Washington should also play a greater role in coordinating messages and themes in bilateral discussions. Helping to ensure governments in Manila, Hanoi, and Jakarta, as an example, are speaking along similar lines will neutralize the leverage Beijing can gain from one-on-one meetings. Ultimately, a process that encourages multilateral dialogue is in the best interests of all parties as it serves to ease the anxieties of Beijing’s smaller neighbors and prevent any needless escalation.

The emphasis moving forward must turn toward improving transparency and confidence building measures to reduce the potential for misperception and misunderstanding. It is unlikely that China will be abandoning the formations it currently claims and has built installations on. That does not mean other actors need to accept this fact. Moreover, given the PCA’s ruling that none of China’s possessions constitute islands, the exclusive economic zones (EEZ) for Manila and others have been preserved. This decision is significant given the resource access EEZ’s provide. Consequently, allowing Beijing to retain its acquisitions for the time being is acceptable but should come with requests for site visits and other observation opportunities. The challenge will be finding a means to curtail further territorial acquisitions; that is where negative reinforcement must be considered.

Given the precedent established with the ruling on July 12^th, China now risks a very complicated outlook. Should it choose to gain further territory, it will only embolden its other neighbors to seek court rulings of their own. If Beijing does indeed attempt to claim more land, Washington must be prepared to encourage governments in Tokyo, Hanoi, Jakarta, and elsewhere to take their claims to the court. Advancing additional legal claims will serve as an ideal means to demonstrate unity and isolate China. Complicating matters for the Xi Administration is the difficulty in walking away from the United Nations Convention on the Law of the Sea. Leaving the agreement would injure Beijing’s credibility in the eyes of many, thereby weakening its international standing. The option of additional court cases will have the positive effect of strengthening cohesion among China’s neighbors, which will have spillover utility in negotiations, thereby further constraining Beijing’s options.

Changing the dynamics in the South China Sea has proven to be exceedingly difficult in recent years. Fearing mounting and stiffening opposition, China has sought to fortify its holdings at a faster rate as a means to secure its position before its neighbors can respond. As a result, there are considerable challenges to persuading Beijing to roll back its actions. However, the PCA’s ruling begins to change the dialogue over these territorial disputes. With the clear support of the international community, the Southeast Asian states can pursue engagement opportunities with greater resolve vis-à-vis China. Furthermore, given the importance of upholding international law, the US and others have an interest in ensuring the ruling is not disregarded out of hand. While Beijing is unlikely to acknowledge the PCA’s decision, over the long term measures can be pursued by stakeholders to slowly deescalate matters with the eventual goal of freezing, if not rolling back, China’s territorial acquisitions.