How South China Sea dispute affects India
Any adverse impact on New Delhi's maritime trade will hugely dent its GDP.
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India’s burgeoning interest and occasional naval presence in the South China Sea is derisively dismissed by some as a case of maritime overreach if not hubris.
Their view is that by meddling in maritime expanses that do not directly concern India, the country and its navy will be distracted from activities that lie squarely within what ought to remain India’s (and its navy’s) principal area of focus, namely the Indian Ocean in general and the Arabian Sea and Bay of Bengal in particular.
They believe that venturing into the South China Sea will serve only to mar a much-needed strengthening of relations with the People’s Republic of China, debar India from enjoying the economic benefits of Chinese cooperative constructs such as the "One Belt One Road" (OBOR) initiative, and, contribute to regional insecurity at precisely a time when nation-states of the Indo-Pacific need to maximise mutual amity so as to face the menace of malevolent violent non-state entities such as the ISIS.
These are frequently the opinions of those whose life’s experience, either "in" or "about" the Indian Navy, is drawn from a time when this force had very limited "capacity", while its "capability" was still in the process of being established.
At the other end of the spectrum are those who feel that India has come into its own as a maritime power in the Indo-Pacific and that the time is now ripe for India to deal with China in its own coin.
They hold that it is essential for India to establish and sustain geopolitical signalling that explicitly conveys her refusal to be cowed down by China’s aggressiveness and to convey India’s firm intent to proactively protect its trade.
Towards this end, they believe that although India should continue to abjure alliances, she should visibly and overtly strengthen her alignment with like-minded powers such as the USA, Japan and Australia and should, indeed, be unafraid to undertake India-US-Japan-Australia combined "Freedom-of-Navigation" (FON) patrols in the South China Sea.
These are frequently the opinions of those whose life’s experience, either in or about the Indian Navy, is from relatively contemporary times when the Service has adequate "capacity" to look at geographical spaces other than those immediately proximate to it, while its "capability" is globally recognised as being sufficient for India to assert at its apex political (prime ministerial) level that it would be "... a net provider of maritime security in our immediate neighbourhood and beyond."
In determining which end of this spectrum of opinion to tend towards (or whether, indeed, to embrace one or the other end), it might be best to be guided by Lord Palmerston’s (seldom accurately quoted) comment  on the permanence of India’s core national interest and the persistence of the maritime interests that flow from and feed into it.
India’s core national interest, as derived from the Constitution of India is to assure the economic, material and societal well-being of the people of India. India’s maritime interests are:
(1) Protection from sea-based threats to our territorial integrity.
(2) Ensuring Stability in our Maritime Neighbourhood.
(3) Creation, development, and sustenance of a "Blue" Ocean-Economy, incorporating:
(a) The preservation, promotion, pursuit and protection of offshore infrastructure and maritime resources within and beyond the Maritime Zones of India.
(b) The promotion, protection and safety of our overseas and coastal seaborne trade and our sea lines of communication, including the ports that constitute the nodes of this trade.
(c) Support to marine scientific research, including that in Antarctica and the Arctic.
(4) Provision of support — including succour and extrication-options — to our diaspora.
(5) Provision of holistic maritime security ("human" security) — that is, freedom from threats arising "in" or "from" the sea.
(6) Obtaining and retaining a regionally favourable geostrategic maritime position.
The question with regard to India’s involvement in the South China Sea is simply this: How many (if any) of these maritime interests does the South China Sea — and the developments therein — impact and to what degree?
The short answer is that of the foregoing enumeration, serials 3(b) and (6) are impacted in the first degree by events and activities that induce security-related instability, while serials (4) and (5) are impacted to a lesser degree.
It is common knowledge that 90 per cent by volume and some 77 per cent by value of India’s external merchandise trade moves by sea. But how much does this external merchandise trade impact India’s GDP?
This is indicated by the country’s "Openness Index", that is, its trade-to-GDP ratio.
In the 1980s, this averaged a mere 11.25 per cent. So whatever happened (or didn’t happen) to our external trade did not matter much to our GDP.
One unfortunate consequence of this was that many Indians — including many Indian Naval officers — pretty much forgot the symbiotic relationship between "flag" and "trade" and paid little more than lip service to the navy’s need to promote, pursue and protect India’s external merchandise trade.
However, the India of today is a very different one from the somnolent one that lumbered along between 1947 (Independence) and the economic reforms of 1990.
Today, therefore, any adverse impact on India’s maritime trade will hugely affect its GDP, and geopolitical disruptions and infirmities — particularly maritime ones — have very great significance.
Since "money is a coward" and abjures areas of high instability and geo-economic risk, geopolitical maritime instability nearly always has an adverse impact upon trade. Space, time and cost disruptions of external trade, in turn, affect both, domestic manufacture and local consumption, and hence money flows and market dynamism.Source: International Hydrographic Organisation.
As depicted in Figure 1 (extracted from the International Hydrographic Organisation (IHO) publication Limits of Oceans and Seas, the South China Sea is bordered by China, Malaysia, Brunei, Singapore, Vietnam, the Philippines and Taiwan.
The significant economic growth of these countries over the last 20 years, as well as activity in other Asian economies including India, Japan and South Korea, has contributed to a large portion of the world’s commercial merchant shipping passing through these waters, to which it gains access largely through the Malacca, Sunda and Lombok Straits. The major island and reef formations in the South China Sea are the Spratly Islands, Paracel Islands, Pratas Islands, Natuna Islands and the Scarborough Reef.
It is important to note that contrary to several reports and analyses appearing in the Indian media, the Malacca Strait does not lie within the South China Sea.
It is, of course, true that almost all of India’s maritime trade to and from East Asian and South-east Asian countries — such as Thailand, Indonesia, Malaysia, Brunei, Philippines, Vietnam, Cambodia, Laos, China (including Hong Kong), North and South Korea, Japan, and the western seaboard of the USA — passes into or emerges from the Strait of Malacca.
However, trade to and from the Malacca Strait littorals (Malaysia, Indonesia, Thailand and Singapore) — which is quite substantive, by the way — does not transit the South China Sea at all!
This notwithstanding, some 25 per cent of all India’s external (maritime) trade — that is, approximately 190 billion dollars worth — does, indeed,pass through the South China Sea (bound to and from Vietnam, Cambodia, Lao, the two Koreas, China [including Hong Kong], Japan, Pacific Russia, and, the western seaboard of the USA) and is certainly susceptible to geopolitical infirmities/ disruptions in the South China Sea.
So what, then, is the situation obtaining in the South China Sea that attracts these descriptions of geopolitical infirmities and/or disruptions? The answer lies in a single word: China.
As a consequence of the 1982 United Nations Law of the Sea, the world’s littoral nation-states established new Territorial Seas out to a distance of 12nm (22.2km) from their promulgated baselines (or, where baselines had not been formally promulgated, from the low-water line along their coast) and began to stake out their Exclusive Economic Zones (out to a distance of 200 nm from these same baselines), within which the State concerned would enjoy exclusive sovereign rights for the exploration, conservation, management and commercial exploitation of all living and non-living natural resources, on and under the sea, including the seabed and its subsoil.
Within its EEZ, each State additionally enjoyed the exclusive right to authorise, regulate and execute the construction, operation and use of artificial islands, offshore installations and structures for economic purposes, with attendant exclusive jurisdiction over them.
Inevitably, there were overlapping claims that could not be easily resolved. This is precisely what happened in the South China Sea, and the result is depicted in Figure 2.Image Credits: Stephen Green.
The situation is particularly vexed in respect of the Paracel Islands (located some 170 nm off the coast of Vietnam) and the Spratly Islands (450 nm south of the Paracel group), as shown in Figure 3 and the Scarborough Shoal (Figure 4) located 124 nm west of the Philippines coast.Image credits: http://www.worldstatesmen.org/Paracel_Spratly.html
The Paracel Islands are claimed by China, Taiwan and Vietnam, while the claimants to part or all the Spratly Islands are China, Taiwan, Vietnam, Malaysia, Philippines and Brunei.Image credits: Business Insider.
The Scarborough Shoal is claimed by Philippines, China and Taiwan. China, in fact, claimed both island groups as well as the Scarborough Shoal, in their entirety.
Yet, despite all these competing claims, matters appeared to be in hand, and in 2002, during the 8th ASEAN Summit, a declaration was signed between China and ASEAN member-states (which included all other claimants except Taiwan), whereby all parties committed themselves to exercising self-restraint and resolving their territorial and jurisdictional disputes without resorting to the threat or use of force.
Then, having lulled ASEAN into complacency with its seductive siren song of a peaceful rise, China — responding to the submissions to the UN by Malaysia and Vietnam in respect of their Continental Shelves — suddenly precipitated matters by a formal submission to the UN on 07 May 2009 claiming some 90 per cent of the South China Sea as its own, through the now famous "nine-dash line".
Although a map depicting this "nine-dash line" had been in existence since 1953, the audacity with which it was dusted off and used to proffer a "historical claim" by Beijing put the Chinese cat firmly amongst the ASEAN pigeons.
In 2010, China declared that, like Tibet and Xinjiang, the South China Sea was a "core national interest".
It is important to understand that the term "core interest", as used by the Chinese leadership, does not have direct correspondence with the same term used by India — or, for that matter, by almost all other nation-states.
The People’s Republic of China uses the term geopolitically "to lay down a marker, or type of warning..."— in other words, to specify "issues it considers important enough to go to war over".
Geopolitics is, after all, largely the sum of geo-economics and geostrategy.
Consequently, as China’s geo-economic power impacted and dwarfed other regional and state economies, Beijing’s asserted-geostrategy has been incorporating anincremental increase of geographically-specific regions as its "core interests".
Since 2010, China has been undertaking frenetic offshore construction to convert uninhabited islets and shoals within the South China Sea into artificial islands so as to cloak itself in the garb of UNCLOS-based International Maritime Law.
Notable examples of such transformative construction include Gaven Reef, Johnson South Reef and Fiery Cross Reef.
Of course, it is true that other claimants, too, have built upon existing natural structures (Itu Aba by Taiwan, Southwest Cay by Vietnam, Swallow Reef by Malaysia, and Thitu Island by Philippines) but what sets China’s activities apart, is that while other claimants have built upon or modified existing land masses, Beijing has been dramatically changing the size and structure of the physical land features themselves.
Moreover, in both, the Paracel and the Spratly group, the PRC has now weaponised islands (Chinese SAMs are already deployed on Woody Island) and created airstrips capable of operating medium and large military aircraft, thereby altogether abandoning its earlier pretences of developing these rocks, shoals and islets for the advancement of tourism!
In short, China is rapidly increasing its ability to control who can go where in the South China Sea, including along the trade routes.
This creeping Chinese ability to control international trade routes through the South China Sea is precisely why India must ask herself whether or not she truly believes that "freedom of navigation" is an intrinsic component of her crucial maritime interest of ensuring the promotion, protection and safety of her overseas seaborne trade and her sea lines of communication.
If so, India must carefully choose the time and spatial point of the translation of her geopolitical rhetoric in this regard into tangible action.
To contextualise to India, Dame Margaret Thatcher’s much favoured expression, we must now "either put up or shut up".
The country and its navy must prepare accordingly.
 "I hold with respect to alliances, that England is a Power sufficiently strong, sufficiently powerful, to steer her own course, and not to tie herself as an unnecessary appendage to the policy of any other Government. I hold that the real policy of England—apart from questions which involve her own particular interests, political or commercial—is to be the champion of justice and right; pursuing that course with moderation and prudence, not becoming the Quixote of the world, but giving the weight of her moral sanction and support wherever she thinks that justice is, and wherever she thinks that wrong has been done...I say that it is a narrow policy to suppose that this country or that is to be marked out as the eternal ally or the perpetual enemy of England. We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow... And if I might be allowed to express in one sentence the principle which I think ought to guide an English Minister, I would adopt the expression of Canning, and say that with every British Minister the interests of England ought to be the shibboleth of his policy.” [Emphasis added]
Speech to the House of Commons (March 1, 1848)
 "Merchandise Trade" only includes trade in goods, not in services nor capital transfers and foreign investments.