Stopover Hysteria: Understanding Tsai’s Stopover in the United States

Photo credit: The Office of U.S. Senator Marco Rubio

On January 7, President Tsai Ing-wen of Taiwan will embark on a trip to the United States—not to visit President Barack Obama or President-elect Donald Trump, but to refuel her plane, rest, and conduct some meetings before moving on to Central America. This type of visit has become routine in U.S.-Taiwan relations and is nothing new or particularly special, so why is this trip so controversial?

Tsai is stopping in the U.S. en route to state visits to some of Taiwan’s diplomatic allies, specifically Honduras, Nicaragua, Guatemala, and El Salvador. News outlets have covered this trip not because these countries are four on a list of only twenty-one states with formal diplomatic relations with Taiwan or because Sao Tome and Pincipe recently switched its recognition from Taiwan to China (a long and growing list), but because Tsai will stop in Houston and San Francisco briefly during transit. Since 1994, every president of Taiwan has landed in the United States while en route to visit diplomatic allies. These visits have ranged from a few hours to a few days—depending upon the state of U.S.-Taiwan relations.

The president of Taiwan must receive special permission from the U.S. government to land or to stay in the country for any amount of time. This rule was established to ease the minds of the Chinese who are suspicious of any interactions between the U.S. and Taiwan that hints of any kind of diplomatic recognition. Since the U.S. severed ties with Taiwan in 1979, no president of Taiwan has participated in an official state visit in the U.S.—only brief stopovers and meetings with U.S. Congressmen and other people of note.

In a post-“Trump Call” world, China is on alert for any indications of a major change in U.S. policy toward Taiwan. As a result, the Chinese foreign ministry has been unusually quite vocal about the potential of a Tsai stopover in the U.S. When asked about Tsai’s visit, Hua Chunying, a Foreign Ministry spokesperson, said,

The one-China policy is a consensus shared by the international community, and also a principle of how we handle Taiwan’s engagement with foreign countries. We hope that relevant countries can carefully address Taiwan-related issues. As to the Taiwan leader’s transit in the US, I believe her real intention is clear to all. We hope that the US side can follow the one-China policy and the three joint communiques, disallow the Taiwan leader’s transit in the US, refrain from sending any wrong signal to the pro-independence force in Taiwan, and take concrete steps to uphold the overall interests of China-US relations and maintain peace and stability across the Taiwan Strait.

In early December 2016, another spokesman said that “the so-called transit diplomacy is only a petty trick played by the Taiwan leader, whose hidden political agenda should be clear to all.” Despite these protests, the U.S. granted Tsai approval, and she will be landing in Houston  on January 7 and departing for Honduras on January 8, and then she will land in San Francisco on January 13 and return to Taiwan on January 15. Previous presidents have stopped over in Los Angeles, New York, Austin, Miami, Honolulu, and Anchorage—with the final city being the unofficial stopover location when ties between the U.S. and Taiwan are less than stellar.

Tsai has a busy schedule for her visit to Central America: she is visiting Honduras after being invited by its president, Juan Orlando Hernandez; she will attend the inauguration of President Daniel Ortega of Nicaragua; and she will visit Antigua in Guatemala to promote tourism between Taiwan and Guatemala. All of these visits and events are important for the continuation of relations between these countries and Taiwan, but the only feature of the trip extensively covered in the news is her stopover in the U.S. and China’s outrage over what had become routine.

The American Institute in Taiwan (AIT) noted to Reuters the routine nature of these visits: “President Tsai’s transit through the United States is based on long-standing U.S. practice and is consistent with the unofficial nature of our relations with Taiwan.” No matter how much the media or China tries to play up the controversy of this stopover, it should not qualify as exceptionally newsworthy. China’s perception of possible changes in U.S. policy and U.S.-Taiwan relations has caused even the smallest bit of information to be blown out of proportion. Did China raise a stink when Secretary of State John Kerry met with James Soong, Taiwan’s representative to the Asia-Pacific Economic Cooperation (APEC) in November 2016? How about when U.S. Ambassador Matthew J. Matthews, Deputy Assistant Secretary and U.S. Senior Official for APEC, visited Taiwan in early December 2016? No—because these visits are routine, nothing special, just like Tsai’s impending “visit.”

The one thing to look out for is who Tsai meets in San Francisco and Houston. During her visit stopover in Miami in June 2016, Tsai met with Senator Marco Rubio. Will anyone tapped to be in the Trump administration meet with her? If so, how senior of an official and from which department? The answers to these questions are important and could give a glimpse into how a Trump administration will handle the “Taiwan question” beyond the infamous phone call. The genuine issues at stake here are not a routine stopover, but the seemingly deteriorating relations between the U.S. and China, the apparent risks to cross-strait relations, and apprehensions about what the impending Trump administration will do come January 20, 2017 in regards to cross-strait relations and China policy. 

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Standing Firm, Mostly: Militarization of the South China Sea

China's Presence in the South China Sea
China’s Presence in the South China Sea

 

Last week, a Chinese naval vessel which had been shadowing the USNS Bowditch, a U.S. Navy oceanographic ship, scooped up one of the ship’s unmanned underwater survey drones about 80 km off the Philippine coast.  Washington demanded the drone’s return.  Over the weekend, China’s Ministry of Defense said that it would transfer the drone back to the United States; and by Tuesday afternoon it was back in American hands.  Though the incident was quickly settled, it could have easily escalated.  Some initially feared a replay of the 2001 crisis in which China impounded a damaged U.S. EP-3 reconnaissance aircraft for three months after a Chinese J-8 fighter collided with it over the South China Sea.

 

Lest anyone think that the recent rapprochement between China and the Philippines would restore calm to the South China Sea, the drone incident demonstrated that tensions there remain high.  Even more worrisome in the longer run is the steady militarization of the region’s disputed islands.

 

Vietnam’s Response to China

Considering what Vietnam sees as China’s repeated provocations—from its use of the Hai Yang Shi You 981 offshore oil drilling rig in disputed waters to its construction of military-grade airfields on Chinese-occupied islands—Hanoi has felt justified to respond in kind.  Last year, it extended the runway on Vietnamese-held Spratly Island from under 760 meters to over 1,000 meters, long enough to accommodate maritime surveillance and transport aircraft.  Then in August, Reuters reported that Vietnam had discretely deployed mobile rocket launchers on some of the other islands that it holds.[1]  Once assembled and armed, Vietnam could easily target China’s nearby island airfields and military facilities.

 

China’s Response to Vietnam

Conscious of such dangers, China has taken precautions.  Satellite imagery recently revealed that China has installed large anti-aircraft guns and close-in weapons systems capable of shooting down cruise missiles on each of its islands.[2]  Earlier this year, China deployed HQ-9 surface-to-air missile systems on Woody Island in the Paracel archipelago.  Perhaps they will also appear on Chinese-occupied islands in the Spratly archipelago, if more foreign aircraft are seen overhead.  No doubt China is preparing itself for an armed challenge, whether from competing South China Sea claimants or the United States.  As China’s Ministry of Defense posted on its microblog last Friday, “Were someone to be threatening you with armed force outside your front door, would you not get ready with even a slingshot?”[3]

 

The Philippines’ Resignation

Meanwhile, the Philippines’ response to all this went in the opposite direction after the election of Rodrigo Duterte as its president in June.  Duterte’s foreign minister, Perfecto Yasay, signaled the Philippines’ resignation to China’s military construction.  “We cannot stop China at this point in time and say do not put that up,” he said.[4]  Instead, the Philippines would focus on furthering its economic ties with China.  That strategy has paid off so far.  In October, China promised Duterte that it would provide the Philippines with investment and financing worth $24 billion.  The following month, the Chinese coast guard allowed Filipino fishermen to return to the waters near Scarborough Shoal for the first time since the 2012 standoff there between Chinese and Philippine authorities.

 

That the Philippines has gone wobbly on standing up to China probably came as little surprise to Vietnamese leaders, who always doubted Philippine commitment.  For the moment, Vietnam is doing its best to match China’s actions.  And so the militarization of the South China Sea continues.  Hopefully future incidents in its waters will end as peacefully as the most recent one did.

 

[1] Greg Torode, “Exclusive: Vietnam moves new rocket launchers into disputed South China Sea – sources,” Reuters, Aug. 10, 2016.

[2] “China’s New Spratly Island Defenses,” Asia Maritime Transparency Initiative, Dec. 13, 2016, https://amti.csis.org.

[3] Li Xiaokun, “Island defenses ‘legitimate, legal’,” China Daily, Dec. 16, 2016.

[4] Jeannette I. Andrade, “PH helpless vs China–Yasay,” Philippine Daily Inquirer, Dec. 17, 2016.

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Revival of the Regional Comprehensive Economic Partnership

Countries Involved in the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership
Countries Involved in the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership

 

The Regional Comprehensive Economic Partnership (RCEP) and the Trans-Pacific Partnership (TPP) are both free-trade agreements in Asia that have been under negotiation for a number of years.  Often seen as competitors, however, the former is led by China and the latter by the United States.  By February 2016, the RCEP had fallen behind the TPP, whose negotiators had already signed an agreement and returned it to their twelve member countries for ratification.  Their RCEP counterparts were still mired in talks.

 

Even so, the TPP’s negotiations were by no means a cake walk.  Concerns in Japan over agricultural issues and in Southeast Asia over the TPP’s “deep” standards repeatedly delayed an agreement.  Indeed, there had been too many delays.  By the time a deal was reached, the United States, the pact’s biggest member, had begun what turned out to be a particularly bitter presidential election and one in which the TPP became a lightning-rod issue.  Even the pact’s early advocates, like former Secretary of State Hillary Clinton, who was one of the presidential candidates, strongly disavowed it.  In such a political climate there was little chance the U.S. Senate would ratify it.

 

The election of Donald Trump as the next American president sealed the fate of the TPP in the United States.  Soon after, President Barack Obama abandoned his efforts to ratify the pact.  Trump himself declared that the United States would withdraw from it after he is sworn in as president.  That threw the future of the TPP into turmoil.  It also breathed new life into the RCEP.  Capitalizing on the TPP’s disarray, Chinese President Xi Jinping reassured participants at the Asia Pacific Economic Cooperation summit in late November that China would renew its efforts to conclude the RCEP.

 

RCEP vs. TPP

Why does that matter?  What, apart from some of their member countries, is the difference between the two free-trade agreements?  Traditionally, countries conclude free-trade agreements to lower or eliminate tariffs, and thus encourage trade.  While that has generally spurred economic growth in developing countries, it has also tended to hollow out legacy industries in developed countries.

 

Consequently, developed countries, like the United States, have sought a new approach to free trade.  Embodied in the TPP (and its sister free-trade agreement, the Transatlantic Trade and Investment Partnership), that approach requires member countries to adopt domestic policies that would “raise labor and environmental standards, impose disciplines on government-owned corporations, strengthen intellectual property rights enforcement, [and] maintain a free and open internet.”[1]  In that way, developed countries argue, trade would be not only freer, but fairer too.  Indeed, some in the Obama administration even saw the TPP as part of a grander vision for a “rules-based international order.”

 

Naturally, developing countries feared what impact such policies would have on their protected companies and industries.  For example, the TPP would require them to end their preferential treatment of state-owned enterprises in government procurement, something they were reluctant to do.  Nevertheless, developing countries were ultimately persuaded to join the pact because of the added benefits they could gain from greater access to the markets of developed countries.

 

On the other hand, the RCEP is a far more traditional free-trade agreement.  It does not share the lofty ambitions of the TPP.  It does not concern itself with “behind the border issues,” like the preferential treatment in government procurement.  Rather, it simply focuses on reducing and eliminating tariffs.  Countries can limit competition wherever they see fit.  On the surface, that sort of pact would appear easier to negotiate.  But developing countries must carefully consider the terms of such a pact, because they can lock countries into being part of regional supply chains whose ultimate benefits accrue elsewhere.  Given that there are thousands of categories and subcategories of goods to consider (not mentioning the fact that many of those are shuttled between countries before they are assembled into a final product), negotiations are bound to be complex.

 

Impact of RCEP

Still, the RCEP is back on center stage.  If successfully concluded, it could change the structure of Asian trade in ways that would put China firmly at the center of commerce in the region.  That, some worry, would accrue even more political as well as economic power to China.  But given the prevailing sluggish global economy, what matters to most developing countries is reaping the immediate benefits from freer trade.  Unsurprisingly, a couple of countries at the APEC summit quickly seconded China’s interest in reviving the RCEP’s negotiations.  It is now up to China to make it happen.

 

[1] John Lyons, Mark Magnier, and William Mauldin, “China Steps In As U.S. Retreats on Trade,” Wall Street Journal, Nov. 23, 2016, pp. A1, A6.

 

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Desperate for Attention: Hung-Xi Meeting Lacks Meaning

On November 1, 2016, Hung Hsiu-chu, chairwoman of the Kuomintang (KMT), met with Xi Jinping, General Secretary of the Communist Party of China (CCP), at an annual forum between the KMT and CCP. This meeting received much fanfare in the media. The amount of attention that this photo op received may seem puzzling: Hung is not the president of Taiwan; she was such an unappealing presidential candidate that the KMT replaced her three months before the election; and the KMT does not hold the presidency or legislature making it the opposition party for the first time in Taiwan’s history. Hung kept floating the idea of promoting a “peace platform” even though she lacks any authority or mandate to negotiate or sign an agreement between Taiwan and China. In fact, it would be illegal. The Hung-Xi meeting only holds ceremonial importance, but even that characterization is a stretch. It has been incorrectly framed as another historic Ma-Xi meeting. That handshake represented years of negotiating, and having the sitting leaders of Taiwan and China finally meet marked a potential new chapter in cross-strait relations. That much hoped for chapter never materialized due to the KMT’s electoral collapse, and framing the Hung-Xi meeting in the same context does disservice to the historic nature of the meeting in Singapore last year.

2015_ma-xi_meeting_08

For Hung, it is a desperate headline grab that will further alienate the KMT from the populace, and for Xi, it is an attempt to embarrass President Tsai Ing-wen, who has called for a resumption of “talks” between Taiwan and China. While this event does occur annually between the leaders of the two parties, the timing and circumstances for a peace deal are not right: Taiwanese identity is at an all-time high, and the historic election in January 2016 shows that the public mood is against further integration with China. If Hung wanted to push the KMT further away from the public and continue to lose elections, then she made the correct move. Her views on unification do not align with the broad base of the public’s, and they are so pro-China that it is one of the reasons the KMT replaced her when she ran for president in 2015. Why does Hung think that she has any legal or political mandate to even think about such a deal?

The way in which Hung acted before and during the “Cross-Strait Peace Development Forum” rankled members of both the KMT and DPP. Before the scheduled meeting, the ruling Democratic Progressive Party (DPP) publicly warned Hung not to address “politically sensitive” topics with Xi. After the meeting, DPP officials said that she let the nation down through her actions. She did not challenge Xi’s statements on “one China,” so the term “Republic of China” (Taiwan’s official name) was omitted from the record again. DPP officials also expressed worry about Hung trying to move towards a similar definition of “one China” with the CCP. New Power Party (NPP) chairman Huang Kuo-chang (a new party that formed after the Sunflower Movement) expressed his discontent with this meeting by saying that KMT was “toeing the Communist line of united front while distancing itself farther and farther away from mainstream Taiwan.” Also, before this meeting, KMT officials emphasized “one China, different interpretations,” which is former President Ma Ying-jeou’s preferred formulation.  There are even reports that Hung argued with Ma over the 1992 Consensus and what “one China, different interpretations” means. If Ma—who advocated and maintained the status quo during his time in office—had to argue with her over the party’s interpretation of the 1992 Consensus, that shows how radical of a view she has.

As long as Hung controls the KMT, she could derail any chances that the party has of retaking major offices. The best hope for the party is that she gets ousted by a moderate member of the KMT so the party can work towards making meaningful policy changes that the public will accept. Hung and the KMT cannot hedge on a Tsai stumble or Chinese pressure to bring voters back into their ranks. This election solidifies a shift in Taiwanese political ideals, and the KMT must evolve to remain a viable party option. The party must move with the people, not vice versa. If ideologues like Hung continue to chair the party, create the platform, and pull stunts like the meeting with Xi, then the KMT is a lost cause.

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[Taiwan] Is Not Made In China

Recent incidents continue to demonstrate how the People’s Republic of China is attempting to isolate Taiwan from the international community. These actions (both on the micro and macro level) bode ill for how China is going to engage with Taiwan under President Tsai Ing-Wen, whose election Beijing opposed.

Reports from a Shanghai bookstore show the nonsensical lengths that some people in China will go to “exclude” Taiwan. Bookstores are ripping “Taiwan” out of the Merriam-Webster dictionary before customers have the opportunity to purchase it. Other shops simply black out Taiwan-related entries. This “correction” removes any hint of recognition of a “Republic of China” or “Taiwan,” at the expense of other words beginning with the letter “T.” It is a crude method of censorship that boggles the mind—if Merriam-Webster produces dictionaries with apparently offending entries, why does the Chinese government allow them to be sold? It already bans Western social media websites and movies that promote “Western values.” Why risk the embarrassing news story? Ridiculous does not come close to describing these actions.

The dictionary incident follows another high profile kerfuffle over a popular Chinese television show—a game show where foreign students compete based on their Mandarin abilities—which omitted Taiwan from a map of China. Since China views Taiwan as a part of it, this omission sparked outrage online. Hunan Television, the channel on which the offending show aired, released a statement: “We feel a deep sense of dereliction of duty at the ‘problem map’ incident and feel deeply pained.” The station even clarified that all employees believe that Taiwan is not independent but part of China. The harsh reaction from these netizens shows how sensitive of a topic Taiwanese identity is on the Mainland. The choice of wordage in Hunan Television’s statement escalates the severity of the issue: being “deeply pained” and admitting a “dereliction of duty” are words one would not expect to find over such an omission. Taiwan’s existence as a de facto independent entity angers Chinese citizens who are fervently nationalist, and incidents like the “problem map” only remind the global community how seriously the “Taiwan Question” is treated on the Mainland.

While the two above examples show controversies stemming from Chinese citizens and businesses, another fresh controversy demonstrates that bookstores and netizens appear to take their cues from authorities in the Chinese Community Party (CCP). In September 2016, the International Civil Aviation Organization (ICAO), which is a part of the United Nations, rejected Taiwan’s request to participate in its 39th Assembly in Montreal. At this assembly, nations discuss aviation policy, and despite Taiwan’s central location within East Asia, ICAO still decided not to accept its request. According to Airports Council International, “More than 1.53 million aircraft carrying 58 million passengers passed through the Taipei Flight Information Region last year. In addition, Taiwan Taoyuan International Airport was ranked 11th and sixth busiest airport in the world in terms of passenger and cargo volumes, respectively.” This high level of air traffic alone should qualify it for a seat at these assemblies. Taiwan had participated in the 38th assembly in 2013 with the hope of continued participation. In 2013, China “asked for Taiwan to be invited.” This year, due to harsh Chinese backlash from Taiwan electing Tsai as president, China pressed ICAO not to allow Taiwan to join the assembly, and ICAO’s spokesperson said that it was “follow[ing] the United Nations’ ‘One China’ policy.” Countries from all across the globe have expressed their support for Taiwan’s participation in ICAO meetings and discontent with ICAO backing down due to Chinese pressure. Stickers saying “The sky is not made in China” have appeared at ICAO headquarters in Montreal in response to Taiwan’s exclusion. China hopes that by further excluding Taiwan from participation in international organizations it can force President Tsai to publicly adhere to the 1992 Consensus. However, such stories create sympathy for Taiwan and its people, and they also further perpetuate the perception of Chinese aggression in the region. China’s own actions paint it in a bad light and generate international support for Taiwan.

In early October 2016, Pew reported (ironically) that 77% of Chinese people think that “their way of life needs to be protected against foreign influence, and such sentiment is up 13 percentage points since 2002.” Considering these events, China and Chinese citizens are the ones negatively influencing the world around them, squeezing and alienating Taiwan and forcing China’s will on international organizations.

No matter what China does—short of war or extreme coercion—Taiwan will still be there as a (de facto) independent entity.

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Who Benefits from China’s “One Belt, One Road” Initiative?

Silk Road Economic Belt and the 21st-Century Maritime Silk Road
China’s Silk Road Economic Belt and the 21st-Century Maritime Silk Road

Under its Silk Road Economic Belt and the 21st-Century Maritime Silk Road (commonly known as the “One Belt, One Road” initiative) China has sought to build a network of infrastructure projects across Eurasia to encourage trade.  At first glance, it seems that all those involved should benefit.  Chinese loans would kick start the construction of the infrastructure projects.  Developing countries, in which the projects are built, would profit as transshipment points and from the development of new industries that could plug into international supply chains.  Revenues from the resultant economic growth would then repay the Chinese loans, with interest.

That all sounds rosy.  That is, if the new infrastructure network is used.  The mere existence of roads and ports does not ensure that trade will flourish.  Certainly economic growth at either end of the network would help.  But at the moment the economies of both China and Europe are slowing.  Indeed, global economic activity is slowing.  If there is not enough trade to make the new infrastructure profitable, then the benefits from the “One Belt, One Road” initiative only flows in one direction: China.

The operative word in the “One Belt, One Road” initiative’s financing is “loans.”  Chinese loans may have laxer requirements and carry a lower interest rate than those of commercial banks.  But they are loans.  China expects them to be repaid.  Plus, Chinese loans for infrastructure projects are often made with the understanding that the developing countries award construction contracts to Chinese companies.  In short, China benefits from both the financing and construction of infrastructure projects, while developing countries must bear all of the financial risk.  When trade is booming, that may not matter much.  But when it is not, that should be a concern.

In the past, many developing countries became heavily indebted as a result of infrastructure projects that fizzled.  Lenders ultimately had to forgive many of their debts, recognizing that their borrowers could never repay them.  China has forgiven some of its loans to developing countries too, about $3.9 billion in all.  But that is a small fraction of the total debts that developing countries owe it.  For example, in 2015 China cancelled $40 million in debt from Zimbabwe.  But Zimbabwe still owes China over $1 billion.  Moreover, at the time of China’s modest debt cancellation, Zimbabwe pledged that it would increase its use of the Chinese yuan in its foreign exchange reserves.[1]  To outside observers, it seemed that China had used its debt cancellation to achieve its larger foreign policy goals.

Still, several developing counties have welcomed Chinese financing.  Sri Lanka’s former President Mahinda Rajapaksa happily accepted Chinese loans to build a new port facility and airport at Hambantota.  When completed, the port facility will be the largest of its kind in South Asia.  But with slowing seaborne trade, Sri Lanka’s new government has been left with the burden of servicing the country’s $1.1 billion debt to China.  Despite the new government’s criticism of Rajapaksa’s acceptance of Chinese loans and the shortcomings of Chinese construction work, it had little choice but to finish the port and airport, lest it default on the country’s loans.  Indeed, China may believe that borrowers will be forced to repay their loans, because an outright default would severely curtail any developing country’s future access to credit.

Lately, however, some Asian countries have been playing harder to get with China.  That was the case with Indonesia last year.  When a Chinese-led consortium sought a contract to build a high-speed railway between Jakarta and Bandung, Indonesia leveraged the consortium’s eagerness to beat a Japanese-led rival to win a major concession: the consortium would drop its requirement for the Indonesian government to backstop China’s loans.  The consortium won the contract in the end.  But Indonesia offloaded the project’s financial risk onto China.

Thailand has been cautious too.  For years, China has talked about the construction of a long-distance, high-speed railway between Kunming and Bangkok.  After Thailand’s military coup in 2014, the two countries accelerated their talks over such a railway, as they developed closer ties.  But the terms that China offered disappointed Thai leaders.  They balked at China’s desired interest rate, its proposed ownership structure, and its request for development rights along the railway’s right of way.  So, Thailand shelved the project’s original plan.  Instead, it financed its own construction of a much shorter railway from Bangkok to Nakhon Ratchasima, only 250 km away.  While China would still supply the technology and oversee procurement, Thailand would use Thai construction companies to build the railway, not Chinese ones.

The two railway cases are telling.  China may believe that the thirst for low-interest loans in developing countries should make its “One Belt, One Road” initiative an easy sell.  But the leaders of those countries, at least those among them who are observant, know that China’s domestic economy is slowing and that China is increasingly concerned about keeping its construction companies working.  They also know what happened in places like Sri Lanka, Indonesia, and Thailand.  That knowledge gives them leverage to negotiate better terms from China.  If more developing countries do so, China’s “One Belt, One Road” initiative will be quite a bit tougher to realize.

[1] “Zimbabwe says China to cancel $40 million debt, increase yuan use,” Reuters, Dec. 21, 2015.

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GI Go Home, Again: The Philippines-U.S. Alliance Weakens

On Tuesday, Philippine President Rodrigo Duterte abruptly demanded that American military advisors on the southern Philippine island of Mindanao “have to go.”  His stated concern was that the presence of American troops on Mindanao antagonized local Muslims and that the troops could become targets of Abu Sayyaf, an extremist Islamic group, for kidnapping and ransom.

The American military advisors were once part of the U.S. Joint Special Operations Task Force-Philippines operating under the authorities of Operation Enduring Freedom-Philippines, headquartered at an airbase near Zamboanga.  The task force had been deployed there for a decade as part of a program to train and support elements of the Philippine military in its efforts to combat Islamic militants throughout the region.  Last year, that program was wound down and most of the American troops left.  But a small detachment of military advisors remained behind.

Precisely why Duterte chose to make his remarks is unclear.  They might have been intended to strengthen his hand in peace talks that he reopened with the Philippines’ largest Muslim rebel group, the Moro Islamic Liberation Front (MILF), in August.  Those talks had been stalled for over a year after a botched anti-terror raid against Islamic militants, including the MILF, resulted in the deaths of 44 Philippine police commandos.  The raid derailed his predecessor’s attempt to fulfill an accord reached in 2014 under which the rebels agreed to lay down their arms in return for the passage of a law turning a large part of Mindanao into an autonomous region.  How successful Duterte’s peace talks will be remains to be seen.  In early September, Islamic militants bombed a night market in Davao City, where Duterte was once mayor.  The blast killed 14 people and wounded 70 more.

Back in Manila, Philippine Foreign Minister Perfecto Yasay, Jr. downplayed the impact of Duterte’s remarks.  According to Yasay, the larger defense relationship between the Philippines and the United States remained “rock solid.”  The removal of a “token” number of American military advisors from Mindanao would not affect that relationship or the Enhanced Defense Cooperation Agreement that the two countries signed in 2014.

But Duterte’s remarks come at an awkward time in relations between the Philippines and the United States.  Only a week ago, at the ASEAN summit in Laos, a meeting between Duterte and President Barack Obama was cancelled after Duterte chided Obama for his criticism of Duterte’s anti-drug campaign in the Philippines.  While the two men eventually met, the incident amplified doubts over how Duterte’s administration would work with Washington.

More broadly, Duterte’s remarks reflected the deep ambivalence many Filipinos on the political left feel about the United States.  They would prefer it if the Philippines distanced itself from its one-time colonial ruler.  Indeed, Duterte already put a halt to the joint Philippine-American naval patrols in the South China Sea.  And, recently, he stated that he would favor buying weapons from China and Russia, rather than the United States.

Unfortunately, the Philippines needs the United States, at least until the Philippine armed forces can build up a credible external deterrent.  The last time Manila ordered American forces to leave the Philippines was in the early 1990s.  Soon thereafter, China took advantage of the weakened alliance to seize Philippine-claimed Mischief Reef.  Today China has not only fortified the reef, but also reclaimed enough land there to build an airfield on it.  Duterte’s remarks give China another opportunity.  Duterte may believe he can reach an accommodation with China without the United States.  But that accommodation will likely be on Chinese terms.

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Getting Tougher: Vietnam’s Response to China’s South China Sea Bases

Over the last few months, Vietnam has quietly deployed the components of several Extended Range Artillery (EXTRA) rocket systems to five of the islands that it occupies in the Spratly archipelago, according to Western officials. If true, Vietnam likely did so in response to China’s construction of military facilities on the islands that it controls across the region. Vietnam has reportedly dispersed and camouflaged the EXTRA rocket systems, but can arm them within days.[1] While Vietnam currently lacks the real-time surveillance and reconnaissance needed for the systems to target ships at sea, they can put at risk China’s island bases. With a maximum range of 150 km and an accuracy of within 10 meters, they could render inoperable many of China’s newly built airfields.

South China Sea Claims
South China Sea Claims

Vietnam is not a country known to shrink from a challenge, even when the odds are stacked against it. So far, that has been the case in the South China Sea where the growth of China’s naval might and its determination to assert sovereignty over the region have made the odds of successfully resisting it increasingly steep. Hanoi is doing what it can. It has lavishly spent on new Kilo-class submarines and Gephard-class frigates from Russia. It has accepted Japanese help to build a more robust coast guard. It has even strengthened its military ties with the Philippines, despite its concerns over Manila’s commitment and strength. (Indeed, the Philippines’ new president, Rodrigo Duterte, has eased the confrontational approach of his predecessor by offering to open talks with China based on the recent arbitration court ruling.)

Vietnam’s military buildup in the South China Sea may prompt China to take further steps to strengthen its hold on the region. China is not taking any chances. It is already building reinforced concrete shelters to protect aircraft on its island airfields.[2] Earlier this summer, the Chinese air force began to send its fighters and bombers on “combat patrols” over the region.[3] All the while, China has continued its efforts to squeeze out the Philippines and Vietnam from the islands they hold by interdicting the resupply of their garrisons.

Still, the hardening of defenses on Philippine and Vietnamese-held islands is bound to make further Chinese attempts to seize new territory more difficult. The ease with which China occupied Scarborough Shoal in 2012 is less likely to be repeated. The only remaining island features in the region that now seem vulnerable are those of Malaysia, like James Shoal.

The arms buildup on the islands of the South China Sea may seem alarming. But the mere presence of more arms does not mean that conflict is inevitable. It does mean that if a conflict does occur, it could rapidly spiral. Given the strategic vulnerability of the islands involved, the deployment of offensive weapon systems, like rocket systems, may present commanders with a use-or-lose choice during a crisis. That would indeed be disturbing.

[1] Greg Torode, “Exclusive: Vietnam moves new rocket launchers into disputed South China Sea – sources,” Reuters, Aug. 10, 2016.

[2] Eric Beech, Idrees Ali, and Michael Martina, “Photos suggest China built reinforced hangars on disputed islands: CSIS,” Reuters, Aug. 11, 2016.

[3] Michael Martina, “China conducts ‘combat patrols’ over contested islands,” Reuters, Aug. 6, 2016.

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Shame Power: The Philippine Case against China at the Permanent Court of Arbitration

The Philippines may not have much conventional power it can bring to bear in its territorial dispute with China in the South China Sea. But today it demonstrated that it does have the power to shame China on the international stage. After hearing the Philippines’ legal case against China’s South China Sea claims, an international tribunal at the Permanent Court of Arbitration (PCA) ruled that there was “no legal basis for China to claim historic rights to resources within the sea areas falling within [its] ‘nine-dash line’” claim. The ruling went even further. It detailed how China had aggravated the dispute and “violated the Philippines’ sovereign rights in its exclusive economic zone” by constructing artificial islands and interfering with Philippine fishing and energy exploration.[1]

Chinese and Philippine claims in the South China Sea
Chinese and Philippine claims in the South China Sea

The ruling was a long time in coming. In 2013 Manila brought its dispute with China to the PCA, an option provided for under the 1982 United Nations Convention on the Law of the Sea (UNCLOS). Normally, the PCA’s tribunal would have heard the arguments of both parties in a dispute before making its ruling. But in this case, it heard only those of the Philippines. China refused to participate in the proceedings, arguing that the tribunal had no authority over its maritime borders. So to ensure that the tribunal had adequate authority to make a ruling, Manila asked it to narrowly assess “the sovereign rights and jurisdiction of the Philippines over its maritime entitlements” in the South China Sea. That allowed the tribunal to make a ruling without Chinese participation. It also obliged the tribunal to consider the validity of China’s overlapping “nine-dash line” claim under UNCLOS.

Of course, the tribunal’s ruling does little to compel China to change its behavior in the region. China has already changed the status quo in the South China Sea. Over the last two years China has reclaimed enough land to turn the features it occupies in the Spratly archipelago into man-made islands large enough to support military-grade airfields and facilities. China is unlikely to abandon them now.

Over the long term, the tribunal’s ruling puts the Philippines in a better position to pursue future legal action. For the time being, however, what the tribunal’s ruling does do is to publicly shame China. Once, that mattered to China. In 1997, when a United Nations commission was considering a resolution critical of China’s human rights record, Beijing mounted a major diplomatic campaign, including tours by Chinese leaders and offers of trade deals, to dissuade other countries from voting for it. The fact that China did so to avoid international criticism suggested that it mattered to China. Today it does not seem to matter as much. China has grown too economically and militarily powerful. That has made it more confident in its ability to shape its geopolitical environment on its own terms.

One of the first countries to feel the brunt of China’s new confidence was the Philippines. Perhaps that was because the Philippines had become an easy target. After the Cold War, it allowed its navy and air force (the two services that matter in the South China Sea) to fall into disrepair. At the same time, it distanced itself from the United States. So, when China began asserting itself in the South China Sea, there was little Manila could do. That much was clear when China blocked access to Philippine-claimed Scarborough Shoal in 2012 and prevented Manila from resupplying by sea its outpost on Second Thomas Shoal in 2014.

Yet Manila refused to back down. It took its case against China to the PCA. It also began to rebuild its armed forces and strengthen its security ties to Japan and the United States. In March, the Philippines and the United States held their first joint naval patrol in the South China Sea and finalized their Expanded Defense Cooperation Agreement, allowing American forces to rotate through Philippine military bases. Meanwhile, the Philippines has hosted a growing number of Japanese naval vessels, including a submarine, at its naval base in Subic Bay.

Nonetheless, the Philippines may change its approach to China. Former President Benigno Aquino, whose perseverance had been so critical in keeping international pressure on China, left office in June. His successor, Rodrigo Duterte, seems ready to take a softer line towards China. During his presidential campaign, he said that he would work to shelve the Philippines’ dispute with China; and that he was open to joint development of the South China Sea, especially if Chinese economic assistance was forthcoming. Such comments should encourage Beijing. But it remains to be seen how China responds.

In the meantime, China is likely to brush off the tribunal’s ruling. But the Philippines’ success at the PCA has not gone unnoticed. Other countries have followed the tribunal’s proceedings with keen interest. Encouraged by the Philippines, Vietnam added its position to the proceedings in late 2014. Indonesia has said that it would consider its own case too, if negotiations with China failed. Even Japanese lawmakers have discussed the possibility of international arbitration over China’s offshore drilling activities in the East China Sea. If the Philippine case sets a precedent that others follow, Manila will have demonstrated that it has not only the power to shame, but also the power to inspire.

[1] Matikas Santos, “Key points of the arbitral tribunal’s verdict on Philippines vs China case,” Inquirer.net, July 12, 2016.

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Limits of Chinese Friendship: China’s Development Loans to Venezuela

In 2004, Chinese President Hu Jintao and Venezuelan President Hugo Chávez agreed to form a “strategic partnership for common development.” The benefits from that partnership looked as if they would ensure an enduring relationship between their two governments. China would gain greater access to Venezuela’s oil reserves, which are not only among the world’s biggest, but are also considered by China to be more strategically secure than others, because they reside in a country outside of American influence. In return, Venezuela would gain a benefactor who could enable Chávez to transform his country into a modern socialist state and export his “Bolivarian Alternative*,” an anti-American coalition, across Latin America.

China's Development Loans to Venezuela
Source: Inter-American Dialogue

Hence, it was no surprise when the China Development Bank (CDB) and Venezuela agreed to a multi-year loan agreement in 2007. It allowed Venezuela to borrow up to $5 billion each year from the CDB, providing Chávez with the immediate financing that he needed to pursue his ambitions. In exchange, Venezuela would service its debts by shipping oil to China.

But times change. Not only has the price of oil dropped, so too has China’s voracious appetite for it. Plus, Russia has been aggressively pitching its large and strategically secure oil and natural gas reserves to China. Meanwhile, Chávez’s socialist policies floundered. Rather than modernize Venezuela’s economy, they amplified its dependence on oil. From 1999 to 2014, oil’s share of Venezuela’s export revenues rose from 69 percent to 96 percent. Rather than improve Venezuela’s food security, they reduced its agricultural output. Today Venezuela imports more of its foodstuffs than it did before chavista land reform began. The failure of Chávism has put Venezuela in a precarious economic position.

Nonetheless, both the CDB and China Export-Import Bank have continued to make new loans to Venezuela. Nearly every year since 2007, China has ploughed money into the country (see the chart above). Although signs of trouble were already evident, Chinese President Xi Jinping decided to double down on Venezuela in 2014. He elevated China’s relationship with Venezuela to the status of a “comprehensive strategic partnership.” But as a condition for China’s continued investment, Venezuela would have to give Chinese companies more preferential treatment in its infrastructure contracts.

That bought Venezuela some time, but not much. In 2015, the revenues of Petróleos de Venezuela S.A., Venezuela’s state-owned oil company, plummeted over 40 percent from the year before. To help out, the CDB appears to have been willing to take less oil than what some of its loans required. In other cases, it was willing to accept payments in the form of devalued Venezuelan bolívars, instead of U.S. dollars. In July, the CDB opened an office in Caracas to nominally boost its relationship with Venezuela. But more likely, it did so to keep a closer watch on its investments there.

Certainly, China needs to do so. Increasingly desperate to raise money, Venezuela’s central bank sold over 30 percent of its gold reserves in the last year—12 percent in just the first quarter of 2016. In June, Reuters reported that Venezuela asked the CDB to further relax the terms of its loans. Caracas was said to have requested a one-year grace period in which it could escape principal payments if the price of Venezuelan oil dropped below $50 per barrel (which it already is). At this writing, it is unclear whether the CDB agreed to the request.[1]

China is learning that “yuan diplomacy” can be riskier than it once thought. Already, the CDB has had to forgive some $4 billion of its loans, mostly to African countries. One might expect China to do the same for at least some of Venezuela’s $65 billion worth of Chinese loans, given its friendship with Caracas’ chavista government. But China has not done so. Instead, China has distanced itself from Chávez’s successor, Nicolás Maduro. According to the Financial Times, China reached out to Venezuela’s political opposition, which controls the country’s legislature. Beijing likely sought assurances that should Maduro leave office Venezuela would still honor its debts to China.[2]

Perhaps China is concerned about triggering a wave of requests for loan forgiveness. After all, China has lavishly provided loans to many other energy-rich countries, all of which have felt the pinch from declining oil and natural gas prices and a slowing global economy. In the end, however, China may have to accept some sort of restructuring of its loans to Venezuela in order to avoid an outright default.

True friends are tested in adversity. Clearly, the Maduro government’s growing inability to repay its loans to China has put their relationship in a difficult spot. Equally clear is that Beijing’s desire to recoup as much as possible from its development loans to Venezuela has trumped its friendship with the country’s chavista government. By turning to his political foes, China must have upset Maduro. But it also made plain what China’s real priorities are.

* Now called the “Bolivarian Alliance for the Peoples of Our Americas”

[1] Corina Pons, Alexandra Ulmer and Marianna Parraga, “Exclusive: Venezuela in talks with China for grace period in oil-for-loans deal – sources,” Reuters, Jun. 15, 2016.

[2] Lucy Hornby and Andres Schipani, “China seeks to renegotiate Venezuela loans,” Financial Times, Jun. 19, 2016.

 

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