Tensions in South China Sea Poses Threat to International Trade 

Syllabus: GS2/ International Relations

Context

• The rising tensions in the South China Sea are posing a threat to international trade.

South China Sea

• It is a marginal sea of the Western Pacific Ocean. 
• It is located between southern China, Taiwan, the Philippines, Indonesia, Vietnam, Thailand, Cambodia and Malaysia.
• It is a crucial maritime gateway and junction for shipping between the Pacific and Indian Oceans.

Choke Point in the South China Sea

• While the current tensions are between China, the Philippines and Taiwan, the real threat to trade in the Sea comes in the Malacca Strait.
  • The strait is the Choke point in the South China Sea, which lies between Malaysia, Indonesia and Singapore.

Nine Dash Line

• China stakes claim to 90% of the South China Sea (SCS), and this claim is based on the U-shaped nine-dash line etched on map in the 1940s by a Chinese geographer.
  • He helped to officially name each chunk of rock and reef, referring to the territory collectively as the South China Sea Islands.
• These lines cut into the exclusive economic zones (EEZs), of Brunei, Indonesia, Malaysia, the Philippines, Taiwan and Vietnam. 
• In recent years, China has doubled down on its territorial claims in the SCS, including in the waters off the Philippines, where Chinese vessels have engaged in brazen acts of provocation.

Importance of the South China Sea for international trade

• According to the United Nations Conference on Trade and Development (UNCTAD), about a third of global maritime trade passes through the 3.5 million square kilometer seaway annually, 
• Around 40% of petroleum products traded globally are delivered via the sea every year.
• In 2016, an estimated $3.6 trillion worth of goods and commodities traveled the seaway.
• Tens of thousands of cargo vessels move through the South China Sea every year, carrying around 40% of China’s, a third of India’s and 20% of Japan’s trade with the rest of the world.
  • Out of all of Asia, the three countries’ economic security is most closely tied to the smooth running of the waterway. 

Why is the South China Sea contested?

• According to the US Energy Information Administration, the South China Sea is estimated to hold about 5.38 trillion cubic meters of natural gas and 11 billion barrels of oil reserves, 
• The disputed waters also contain large deposits of rare-earth minerals crucial to China’s technological ambitions, including electric vehicle batteries and advanced electronics.
• China could also deny foreign military forces, particularly the United States’, access to the maritime region. 
• Control of the sea lane would allow China to potentially disrupt, or threaten to disrupt cargo shipments traveling to and from all countries in East and Southeast Asia.

Way Ahead

• The South China Sea is a vital crossroads for both intra-Asian trade as well as for commerce with the rest of the world, especially Europe, the Middle East and Africa.
• Hence to de-escalate the current tensions in the South China Sea different  parties should avoid hostile actions against each other, uphold a more reconciliatory attitude and emphasize the need to cooperate rather than compete.

Source: IE

Further Reading: Tensions in South China Sea Poses Threat to International Trade