[170716.ID.BIZ] South China Sea Ruling Increases Uncertainty For Shipping And Trade

UNCERTAINTY clouds the South China Seas after the Chinese coast guard denied a Filipino fishing boat access to waters in the Philippines, and lately the United Nations, says the vessel was entitled to enter, reports the Wall Street Journal.

This, after the Permanent Court of Arbitration in The Hague unanimously ruled that China had violated Philippines' rights by building artificial islands that destroyed coral reefs and disrupted fishing and oil exploration in the South China Seas.

But Eric Shimp, lawyer with firm Alston & Bird and a former US trade representative to the Association of Southeast Asian Nations (ASEAN), warned of potential conflict if governments made the ruling as a legal basis to enter areas China had seized.

"That is something that ramps up the potential for conflict," he said, after concerns were expressed about skyrocketing insurances rates and ship diversions around conflict zones.

But Amarjit Singh, senior analyst for the Asia-Pacific at IHS Markit in London, was doubtful it would get that far.

"It's difficult to see how the situation could descend such that the Chinese feel the need to do something that could impede shipping or trade flows," he said.

Any disruption to ship-borne trade in the South China Sea could have a wide-ranging impact on global commerce, including energy supplies.

Said Singapore Shipping Association president Esben Poulsson: "It is vital that merchant ships are allowed to go about their lawful business on the world's oceans without diversion or delay".

His group, which represent 500 companies, will continue to monitor the situation closely, he said.

Although a signatory to the UN Convention on Law of the Sea treaty, and bound by the ruling of the Hague court, China has rejected the Philippines suit as illegitimate, because the treaty was crafted by old colonial powers, who are not the powers today.

China has offered harsh rhetoric rejecting the ruling but also said it is committed to negotiations with the Philippines which seeks to end the Chinese military buildup in waters that Manila also claims. Vietnam, Malaysia, Taiwan and Brunei also have territorial claims too.

A day after the court ruled China had no historic claim on the South China Sea, two Chinese passenger jets took test flights to two new airports in the waterway's disputed Spratly Islands, Chinese state media reported.

Source : HKSG.