How Much Trade Passes Through The South China Sea
The South China Sea, also known as the East Sea or the East Chian Sea, is the busiest shipping lane across the world. It carries around one third of the world’s commercial shipping and over half of the world’s oil and gas. Therefore, the amount of annual maritime trade that passes through the South China Sea is estimated to be around US$4 trillion – about one-tenth of the world’s global production.
The South China Sea has become the subject of intense geopolitical and economic competition in the past decades. It is one of the most disputed areas in the world and is a crucial part of China’s ‘Maritime Silk Road’. China has been actively asserting its claim over the South China Sea and has been increasingly militarising it by deploying military installations and by conducting large-scale military drills.
The current situation has led to a number of economic and political ramifications. The United States and its allies have raised concerns over China’s increasing strategic grip over the region. Meanwhile, the Philippines and other littoral states have been increasingly expressing their opposition to China’s activities in the area and have sought the arbitration of the United Nations International Tribunal of the Law of the Sea. Furthermore, it has created tensions in the region as several disputes regarding sovereignty and resource allocation have been simmering in the South China Sea.
But what does all this mean for the amount of maritime trade that passes through the South China Sea? According to the Global Trade Alert, an independent research institute, the total amount of maritime trade that passes through the South China Sea has grown rapidly in recent years. In 2015, the total trade which passed through the South China Sea amounted to US$2.5 trillion, a 17% increase from 2014. This growth has been largely driven by the increasing demand for oil, gas and other commodities in the region.
The South China Sea has been of particular importance for the global energy security. This is because roughly 80 percent of the world’s imported oil, natural gas and liquefied petroleum gas passes through the South China Sea. This makes the South China Sea a vital hub in the global energy supply chain.
The economic impact of the South China Sea dispute also extends to international trade. The waters of the South China Sea form an important link in the global trade network, connecting major markets in the Asia-Pacific region such as China and Japan to the South Asian markets. The presence of trade tensions in the South China Sea could lead to disruptions in global trade flows and the associated economic costs.
Experts have suggested that the South China Sea dispute has the potential to damage the region’s economic development, threatening the livelihoods of millions of people living in the region. They have argued that the risk of economic harm due to the conflict could outweigh any gains that the claimant countries may accrue from the exploitation of resources in the South China Sea. For example, a 2018 study by the World Bank found that the full implementation of an international court ruling on the South China Sea could result in hundreds of billions of dollars in lost GDP growth for the economies of the region.
Affects On Infrastructure
The tensions in the South China Sea have further affected the development of infrastructure in the region. There have been long delays in the completion of such projects due to the lingering geopolitical tensions. For example, the China-backed Kra Canal project has been delayed due to the unresolved maritime boundary disputes in the South China Sea. Moreover, the financing of large infrastructure projects such as ports and expressways have been hindered due to the lack of international commercial agreements.
The disruption of global trade flows which could be caused by the South China Sea dispute could also have serious economic ramifications. The International Monetary Fund has warned of the possibility of significant economic losses if the dispute was to escalate. The economic impact could be felt across the whole world, given that the majority of the exported goods passing through the South China Sea originate from non-regional countries, such as the United States, Germany, and the United Kingdom.
The presence of maritime disputes in the South China Sea has also caused a drop in international tourism in the region. Tourists from China, the United States and other countries have been increasingly avoiding the region due to security and safety concerns. This has resulted in a loss of revenue for regional tourism operators. Furthermore, fishing activities in the South China Sea have been disrupted, resulting in losses for the fishermen.
Given the importance of the South China Sea to the world economy, it is clear that disputes and tensions in the region can have a significant and long-lasting economic impact on the region and the world.
The Role Of International Diplomacy
The escalating tensions in the South China Sea have led to an increase in international diplomatic engagements. In 2016, the United States and other countries had called for a diplomatic resolution to the dispute and had urged the claimant states to resolve their disputes through peaceful negotiations and talks. Since then, a number of international meetings have been held between the parties to the dispute in an effort to arrive at a peaceful solution.
Meanwhile, the United Nations Convention on the Law of the Sea has offered an opportunity for the claimant states to resolve their maritime disputes. Under the Convention, the parties to the dispute can seek to settle the dispute through dispute settlement procedures such as arbitration and conciliation. However, the claimant states have been reluctant to seek such solutions as they are wary of being seen as conceding their positions.
There have also been calls for an increase in regional cooperation in the South China Sea. In 2016, the ASEAN states had expressed their willingness to develop a code of conduct in the South China Sea in an effort to reduce tensions in the region. In addition, there have been suggestions to strengthen the existing naval intelligence-sharing partnerships in the region and to establish new maritime security agreements.
The role of international diplomacy in resolving the disputes in the South China Sea cannot be overlooked. It is only through diplomatic means that a long-term and sustainable resolution can be achieved. All parties must be willing to engage in dialogue and negotiations and must be prepared to make some compromises in order to achieve a mutually-beneficial outcome.
Demonstrations Of China’s Might
The South China Sea dispute has also become a platform for China to demonstrate its power and influence in the Asia-Pacific region. China has responded to US military involvement in the region with provocative acts such as the deployment of military vessels and aircraft in the region. China has also been pressuring other claimant states to accept its claims to the region. This has further escalated tensions in the region.
In addition, China has used other instruments of power to enhance its position in the dispute. For example, China has engaged in extensive economic diplomacy in the region, offering extensive investments and economic incentives to countries in the region in return for their support. China has also been putting pressure on other claimant states by launching a massive public diplomacy campaign in the region and by exerting pressure through organization such as the Association of Southeast Asian Nations.
Nevertheless, China has also shown some flexibility in its negotiations with other claimant states. In 2017, for example, China and the Philippines had agreed to a framework for Maritime Dispute Resolution which laid out the principles for the resolution of the disputes in the South China Sea. This framework was seen as a positive step towards the resolution of the long-standing dispute. However, it remains to be seen whether it will lead to any lasting resolution.
Implications For Global Trade
The economic impact of the South China Sea disputes has the potential to disrupt global trade. The South China Sea is one of the most important global trade hubs, connecting markets in Asia and Europe. It accounts for 5% of total global exports and 11% of world maritime trade. Any disruption to maritime activity in the South China Sea due to the ongoing disputes could have a negative impact on the global economy.
The South China Sea dispute has already led to an increase in insurance premiums for ships travelling through the region, further increasing the costs of trading. Moreover, the presence of naval vessels in the area poses a threat to merchant ships and could lead to disruption in global trade flows. In the worst-case scenario, ships travelling through the South China Sea could be compelled by the claimants states to make detours to avoid entering disputed waters – resulting in an increase in travel time and costs.
It is therefore essential that the claimants find an agreement that results in the sustainable and long-term resolution of the disputes in the South China Sea. This would allow for the unhindered passage of merchant ships through the South China Sea. This, in turn, would benefit the economies of the littoral states by allowing them to capitalize on the immense economic potential of the region.
Economic Impact on Stakeholders
The economic implications of the South China Sea dispute also extend to other stakeholders. For example, the claimants have been heavily investing in maritime infrastructure as part of their expansion plans. This includes the construction of ports, airports and other related infrastructure in the region. These developments have been hampered due to the unresolved sovereignty disputes in the region.
The fisheries industry has been particularly affected by the conflict in the South China Sea. Fishermen from the littoral states have increasingly been unable to access the rich fisheries of the South China Sea due to curtailed access and disruption of their activities. This has caused a decline in the fishing industry and has resulted in losses for the fishermen.
The South China Sea dispute has also had an adverse impact on the tourism industry. The presence of military vessels in the region has caused tourists to reconsider their plans to visit the region, leading to a decrease in tourist arrivals. This has further contributed to the economic losses suffered by tourism operators and has had a ripple effect on other industries.
It is clear that the South China Sea dispute has a far-reaching and long-lasting economic impact on the region and its stakeholders. It is therefore essential that the claimant states are able to find a resolution to the dispute in the shortest possible time.
Environmental Implications
The environmental implications of the South China Sea dispute are also of great concern. The South China Sea is home to a wide variety of marine life and it is important that the marine environment is protected. Unregulated maritime activities such as illegal fishing, marine pollution and oil spills have already been damaging the marine ecosystem of the region. This damage has the potential to get worse if the dispute is not resolved.
Furthermore, the South China Sea dispute has hampered the ability of the littoral states to undertake maritime ecological conservation activities in the region. Projects that aim to protect the critically endangered marine species such marine turtles, dugongs, and dolphins have been delayed due to the dispute. This threatens the long-term viability of the marine ecosystem of the South China Sea.
Climate change is another environmental threat that could exacerbate the impacts of the South China Sea dispute. It is projected that the Sea level could rise by as much as 1.8 meters in the coming decades. This could have serious consequences for the livelihoods of the people living in the coastal areas, threatening their food security, health and economic
