Our China policy: separating movies from reality

my Trade Tripper column in the 11-12 June 2016 issue of BusinessWorld:

An interesting phenomena common enough in politics is the difficulty people have with differentiating reality from wishful thinking. True and without fault, everyone would like the world to be something better. But it is one thing to work towards an objective, and another mistaking a hoped for ideal as the present state and then proceeding as if the illusion were true.

The same goes for foreign policy.

Because no matter how developed our talent for imagination may be, we simply do not have the capability and resources, including military strength necessary, to back up our declared policy objectives.

Our aerial territory is open to any foreign plane whizzing by (detected or not), the waters we claim are plugged with enough holes that to declare archipelagic sea-lanes is almost comical, and our official borders are so dysfunctional that drugs, other contraband, and even illegal aliens can go in and out at will.

These are some of the parameters hedging the Philippines in when dealing with China, which the US military recently described (US Department of Defense, Military and Security Developments Involving the People’s Republic of China 2016) as having improved: “its ability to fight short-duration, high-intensity regional conflicts at greater distances from the Chinese mainland.”

Furthermore, “China demonstrated a willingness to tolerate higher levels of tension in the pursuit of its interests, especially in pursuit of its territorial claims in the East and South China Sea.”

Unfortunately, the excessively belligerent attitude (frankly, by all sides) raised the possibility of armed conflict all too sadly real.

The US Council for Foreign Relations (Contingency Planning Memorandum No. 14, April 2015) thus warns of a possible “conflict between China and the Philippines over natural gas deposits, especially in the disputed area of Reed Bank, located eighty nautical miles from Palawan. Oil survey ships operating in Reed Bank under contract have increasingly been harassed by Chinese vessels. Reportedly, the United Kingdom-based Forum Energy plans to start drilling for gas in Reed Bank this year, which could provoke an aggressive Chinese response. Forum Energy is only one of fifteen exploration contracts that Manila intends to offer over the next few years for offshore exploration near Palawan Island. Reed Bank is a red line for the Philippines, so this contingency could quickly escalate to violence if China intervened to halt the drilling.”

Simply put, “the United States could be drawn into a China-Philippines conflict because of its 1951 Mutual Defense Treaty with the Philippines.”

Publicly, the US has been declaring repeatedly its refusal to take any side in the ongoing territorial dispute in the region.

Couple that with the US Defense Department’s recognition that “China still seeks to avoid direct and explicit conflict with the United States.”

Unfortunately, not many in the Philippines are taking the hint regarding this, a foolishness ironically forcing everybody’s hand in the matter.

So, despite the US’ utter good sense, perception-wise its “failure to respond would not only set back US relations with the Philippines but would also potentially undermine US credibility in the region with its allies and partners more broadly. A US decision to dispatch naval ships to the area, however, would risk a US-China naval confrontation.”

A quite key consideration is that China’s ambition to be the respected primary world leader hinges on possessing secure economic dominance. Which, had there been no problems, needed a half century more of peaceful co-existence with other countries.

Note that trade in the West Philippine Sea/South China Sea region is almost $6 trillion, nearly a fifth of that generated by the US.

Certainly, the Philippines may have its allies, particularly in trumpeting the virtues of the “rule of law.” But also do remember that our ASEAN partners, as well as Japan and South Korea, are getting closer to economic dependence on China than they have ever been before.

Unfortunately, China’s economy is suspected of being on the back heel.

The Economist (The Coming Debt Bust, 7 May 2016) pointing out that “the country’s debt has increased just as quickly over the past two years as in the two years after the 2008 crunch. Its debt-to-GDP ratio has soared from 150% to nearly 260% over a decade, the kind of surge that is usually followed by a financial bust or an abrupt slowdown. China will not be an exception to that rule.”

So to put it mildly: the possibility of China’s dreams being dashed because of an economic cock-up could motivate the latter to induce everybody into a scenario that no sane country could want.

All the more if a country (i.e., the Philippines) is nowhere near physical and mental readiness for it.

What’s interesting about the foregoing is that you can be sure both China and the US know this. And you can also be sure that both countries know there is a one in four chance things could go deadly wrong.

Gratifyingly, the incoming administration seems to know it as well.