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Will South China Sea Ruling Affect Global Trade?

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Will South China Sea Ruling Affect Global Trade?

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The Permanent Court of Arbitration in The Hague has issued its ruling in favor of the Philippines on the increasingly hostile Chinese – Philippine dispute on their claims to the gas-rich Scarborough Shoal/Spratly Islands in the South China Sea. The tribunal’s ruling not only benefits the Philippines, it also benefits other states bordering the South China Sea like Indonesia, Malaysia and Vietnam. So why is that interesting for trade?

The Permanent Court of Arbitration in The Hague has issued its ruling in favor of the Philippines on the increasingly hostile Chinese – Philippine dispute on their claims to the gas-rich Scarborough Shoal/Spratly Islands in the South China Sea. The tribunal’s ruling not only benefits the Philippines, it also benefits other states bordering the South China Sea like Indonesia, Malaysia and Vietnam. So why is that interesting for trade?

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Will South China Sea Ruling Affect Global Trade?

  1. 1. WILL SOUTH CHINA SEA RULING AFFECT GLOBAL TRADE?
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  5. 5. The permanent court of arbitration in the hague has issued its ruling in favor of the Philippines on the increasingly hostile Chinese–Philippine dispute on their claims to the gas-rich scarborough shoal/spratly islands in the South China sea.
  6. 6. The tribunal’s ruling not only benefits the Philippines, it also benefits other states bordering the south China sea like Indonesia, Malaysia and Vietnam. So why is that interesting for trade?
  7. 7. With some 70% of world trade shipping through the South China sea to Europe, North America, Latin America, The Middle East, and Africa, the ruling may affect us all, depending on China’s response.
  8. 8. South China Sea Dispute Explained
  9. 9. The issue dates back to 2013 when after a series of confrontations with china about the disputed scarborough shoal (off the Philippine coast), Manila took their complaint to the permanent court of arbitration. They took this step because the U.N. Convention on the law of the sea -which China ratified - has been designated as the channel for settling maritime disagreements. Manila challenged china’s far-reaching claims to the South China sea; contesting China’s claims that the many reefs, atolls, and rocks qualify as islands, and argued that Beijing’s tough tactics ignore the rule of law.
  10. 10. China’s Reaction Can Disrupt Global Trade Forwarders
  11. 11. It’s unclear how China will react to the court’s decision, but DAI’s remarks increased speculation that Beijing will begin dredging work around scarborough shoal. Such a move could probably trigger a confrontation with Manila, who could then invoke their military assistance treaty with the united states. American nuclear carriers facing off against chinese submarines tend to wreak havoc with a just-in-time delivery schedule, as you can imagine.
  12. 12. Commercial Sea-borne Traffic In The Crossfire
  13. 13. Although Beijing fears an anti-china alliance is forming among the United States, Asean, Japan, Australia, and India in a united opposition to its south china sea policy, rejecting the upcoming decision will only serve to isolate China diplomatically.
  14. 14. Restricting or managing shipping in the south China Sea would be a huge setback to a world still struggling to recover economically. Carriers, countries, shippers, and shoppers all need free trade in order to prosper; let’s hope rule of law is the chosen path. China has already responded to the ruling and rejecting the claim. Let’s keep an eye on things and see how they progress.
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