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?

1. WILL SOUTH CHINA SEA RULING
AFFECT GLOBAL TRADE?

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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. 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. 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. South China Sea Dispute
Explained

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. China’s Reaction Can Disrupt
Global Trade
Forwarders

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. Commercial Sea-borne Traffic In
The Crossfire

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. 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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