{"id":92871,"date":"2016-07-14T05:47:30","date_gmt":"2016-07-14T09:47:30","guid":{"rendered":"http:\/\/countingpips.com\/?p=92871"},"modified":"2016-07-14T05:47:30","modified_gmt":"2016-07-14T09:47:30","slug":"open-doors-for-the-south-china-sea","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/07\/open-doors-for-the-south-china-sea\/","title":{"rendered":"Open Doors for the South China Sea"},"content":{"rendered":"
July 14, 2016<\/div>
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By WallStreetDaily.com<\/u><\/a> \"Open<\/p>\n

The biggest flashpoint, outside of the Middle East, is in the South China Sea where China has made incredibly broad territorial claims. Not only that, but China has also built artificial islands in an effort to substantiate those claims and encroach upon the Philippines.<\/p>\n

Yesterday, however, China suffered a major setback, as a United Nations tribunal ruled unanimously in favor of the Philippines in its case against China\u2019s attempts in the South China Sea.<\/p>\n

But why is the South China Sea such a big deal?<\/p>\n

The region is the sweet spot and the cockpit of the Pacific century.<\/p>\n

The amount of oil that passes through its chokepoints is fifteen times larger than that which passes through the Panama Canal and three times the Suez Canal.<\/p>

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It represents the most important shipping lanes and fishing areas in the world, not to mention it\u2019s the home of proven oil reserves of seven billion barrels and 900 trillion cubic feet of natural gas.<\/p>\n

Water Turf War<\/h2>\n

The Philippines first brought the case to the International Tribunal for the Law of the Sea at The Hague in 2013.<\/p>\n

The tribunal\u2019s decision doesn\u2019t apply to sovereignty claims \u2013 which are still under dispute \u2013 but to the maritime rights attached to such claims.<\/p>\n

Among the issues raised by the Philippines were the validity of China\u2019s \u201cNine-dash line\u201d (see below chart) which supports its claim of sovereignty over as much as 90% of the region\u2019s water.<\/p>\n

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This is a crowded neighborhood. There are six other claimants to territory in the South China Sea, as well as other Southeast Asian countries like Japan, Taiwan, South Korea, and even the United States with a vital stake in keeping this region open to commerce.<\/p>\n

Divide and Conquer<\/h2>\n

Despite their egregious efforts to take over the waterway, China seems to have expected the UN decision. It\u2019s been busy denouncing the Philippines\u2019 case, as well as stepping up its efforts to buttress its claims.<\/p>\n

China\u2019s leadership refuses to back off its claims to the South China Sea, seeing it as an unacceptable risk, and believes the only card to play is more debt and\u00a0a steep increase in defense spending to spur a lagging economy \u2013 as well as to stoke nationalist support and cohesion.<\/p>\n

For some years, as their offensive military capabilities have rapidly grown, a powerful group of hawks in the People\u2019s Liberation Army have been pressing for offensive action in the South and East China Seas. As are listed below, the points of contention and overlapping claims of contention are numerous. China certainly has the projection capabilities to successfully intervene.<\/p>\n

Unless the situation de-escalates soon, it may be necessary for the U.S. to approach this dispute.<\/p>\n

Ideally, the principle should be to keep the region open to all.<\/p>\n

Secretary of State John Hay first articulated the concept of the \u201cOpen Door\u201d in China in a series of notes in 1899\u20131900. These notes led to an international agreement to the U.S. policy of promoting equal opportunity for international trade and commerce in China, as well as respect for China\u2019s territorial integrity. This principle has been used within American foreign policy to keep the Asia-Pacific region\u2019s waterways and skies open to all nations.<\/p>\n

An Open Door Initiative<\/em> supports guidelines that foster the free flow of capital, trade, and ideas, as well as free navigation in the air and on the high seas.<\/p>\n

Here are five principles that the U.S. ought to advocate to increase the probability that the twenty-first century remains peaceful and prosperous:<\/p>\n