I was thinking about what if any impact the recent Permanent Court of Arbitration ruling on the South China Sea, and China’s full-throated objection to it, will have on Japan. Three things come to mind:

1. Given the size of Japan’s economy, Japan is more absolutely dependent on SCS freedom of navigation than anyone else. Its straight-up dollar interest in FON down there is huge. It is hard to imagine Japan not getting pulled in just by the criterion alone.

2. China need not start a war or do anything very dramatic to cause genuine trouble for Japan in the SCS. It only needs to stop a few transiting ships for a few days for ‘health inspections’ or ‘environmental concerns.’ Or its fishermen or coast guard could ram or block ships. Once the pressure of an incident rose, China would release the ships, saying that they were now in compliance with some bogus regulation. This would send a clear signal that China has its boot on Japan’s windpipe but in a very oblique way that would make responding to China very hard. The Chinese have proven themselves adept at this sort of salami slicing. Future one- or two-day stoppages for specious health or traffic safety reasons would constantly be hanging out there as a potential threat. At the very least, it would drive up the cost of shipping and insurance.

2. The US is probably not going to fight a major conflict with a near-superpower just over shipping lanes. Were Japan directly attacked, sure, the US would intervene. But the Chinese aren’t stupid. They learned from the massive counter-balancing the Soviets incurred when they tried to bully everyone during the Cold War. The Chinese are much more oblique and crafty, and they’ll work hard to avoid a direct military confrontation with the US. This too will likely force Japan to get more involved.

The full essay follows the jump.

Last month the Permanent Court of Arbitration in the Hague delivered a major defeat for China in the South China Sea. Unanimously rejecting Chinese historical claims to the vast majority of the space, the court sided with the Philippines: China had trespassed into Filipino waters and was illegally occupying islands and reefs in the area.

The South China Sea contains significant oil reserves, and countries in the region are eager to set up refineries (this is particularly true for energy-starved China). Particularly large quantities lie off the coasts of the Philippines, Vietnam, and Malaysia. The East China Sea is also home to natural gas and fertile fishing grounds.

One month since the ruling, little has changed in China’s behavior. Nevertheless, the Court has given the smaller regional states a powerful public relations tool: China now looks like an outlaws. More lawsuits are likely to follow in the next several years.

China Ignores the Ruling

China dismissed the findings of the Hague court almost immediately. President Xi Xianping wholly rejected the ruling, calling it ‘baseless’. And there has been no reduction of Chinese naval and commercial activity in the disputed areas.

Though the PCA ruling is binding, there is no enforcement mechanism. Formal enforcement would risk an armed clash with China. There will be little consequence in the short term, and China will likely proceed with artificial reef creation and illegal fishing. Nevertheless the findings set a precedent that will likely embolden other countries in the region, namely Vietnam, Japan, and Taiwan, to bring similar lawsuits against Beijing. It is also an important loss of face, which is central to the justification of the Chinese Communist Party’s continuing dictatorship.

Great powers are prone to ignore international law they dislike. In 1986 the Court issued a similar ruling against the United States for illegal mining Nicaraguan waters. Like China, the US similarly dismissed the ruling and continued its operations. But the episode emboldened Congress to cut funding to the Nicaraguan contras, a key tenant of Reagan’s foreign policy, as well providing a foundation for lesser, smaller states to voice their concerns. China will likely face such legal harassment in the years to come. The ‘rules of the road’ in the South China Sea will become a permanent nuisance for Chinese participants in international fora.

Shipping Threat

A permanent Chinese presence in the South China Sea is a growing issue for Japan and others whose shipping transits the area. In fact, geoeconomic leverage, not military engagement, has been China’s modus operandi for years. Beijing punished the Philippines in the past with trumped-up safety regulations over imported mangos, as it is threatening to do so again after the PCA ruling. State-run media ran anti-Japanese editorials that encouraged Chinese consumers to boycott all Japanese products (leading to protests and demonstrations that severely dampened trade for years between the two countries). Korean cell phones were banned completely in the so-called ‘garlic war’ in 2000.

Thus, simply the threat of disrupting trade flows in the South China Sea could have consequences. The South China Sea is arguably the most important trade route in Asia. Over $5 trillion of commercial goods pass through the area each year. Japan and Korea rely on energy imports from the Middle East. Indonesia and Australia send through millions of tons of coal, and Thailand and Vietnam send rice.

China can use this leverage. It could assign arbitrary passage or docking fees, expand its coast guard to ‘randomly inspect’ certain vessels, or temporarily detain Japanese shipping for ‘health inspections.’ It may well declare an air defense identification zone over the space. These transaction costs would reverberate down the supply chain. Suddenly coal shipments might take twice as long to reach South Korea, threatening electricity for millions. Insurance costs would rise as companies feared delay and disruption. All this would not require overt military action.

Japanese Naval Power Projection

Under the 1982 UN Convention of the Law of the Sea, states may claim an Exclusive Economic Zone (EEZ)of up to 370 kilometers from its coast(s). States have full and exclusive rights to natural resources within their own EEZs, but must permit safe transit through these zones according to the convention. Many countries in the South China Sea have overlapping EEZs, and China has disregarded all of them.

Hence the debate in Japan over an expanded military role may be overtaken by events. The United States is unlikely to wage a major conflict against China solely for regional states’ shipping concerns. Yet without some kind of regional coalition, China is unlikely to stop building just because of the PCA ruling. Among Asia’s democracies, only Japan is economically large and modern enough to lead such a bloc of resistance. China will not stop for the PCA or the delicacies of Japan’s constitutional debate. This challenge to Japan is materializing now.

This is the English-language original of an op-ed I published in this week’s Newsweek Japan.