The Clinton Agenda

While media reports from Hanoi focused on North Korea and Burma, a vital subplot was playing out as U.S. secretary of state Hillary Clinton sidestepped quiet but intense Chinese lobbying to avoid having the South China Sea on the official agenda for the ARF and tabled concepts for what she described as ‘a collaborative diplomatic process by all claimants for resolving the various territorial disputes without coercion.’ Clinton’s intervention was no surprise to any of the nations at the table: the United States had deployed its top Asia hands, Assistant Secretary for East Asia and the Pacific Kurt Campbell as well as one of its top diplomatic architects, Undersecretary of State William Burns, to present the concept and seek support ahead of the meetings in Hanoi.

China’s Alternative

China’s foreign minister, Yang Jiechi, a man who after serving as ambassador in Washington, D.C. understands U.S. politics and policy development on an expert level, responded by expressing his country’s preference for addressing these issues bilaterally and out of the public eye. He said, ‘Turning the bilateral issue into an international or multilateral one would only worsen the situation and add difficulties to solving the issue.’ Minister Yang’s hope that the South China Sea could be stuffed back in a bottle like a genie may be based on earlier successes achieved through opportunistic, quiet, bilateral advances, as in the early days of the JMSU.

2004—China Cracks the Code in Manila

Eduard ‘Ed’ Manalac knew he had a deal. The then head of the Philippine National Oil Company (PNOC) knew the players well from his days in China working for Conoco and as a highly talented Filipino manager with considerable networks at home. Manalac understood the mandate from Malacanang, the presidential palace that lies next to the languid Pasay River: get a deal done with the Chinese for joint exploration, analysis, and development of potential energy resources in the South China Sea. That mandate was at odds with internal ASEAN diplomatic discussions encouraging the 10 member states to find a common position from which they could talk with China about the disputed waters. Ironically, it was the Philippines that had earlier led this call for ASEAN unity when it was feeling the very real pressure of the Chinese navy on Mischief Reef and other tiny island locations in disputed territorial waters in the late 1990s and early 2000s.

Lessons Learned

Understanding how President Gloria Arroyo-Macapagal reversed the Philippines’ position on an issue arguably vital to her country’s national security interests illustrates how China may use its new levels of regional influence gained while Washington focused on the Middle East and other priorities—lessons worth learning as we move into the second decade of the twenty-first century.

The Philippines had been a hard nut for China to crack. The archipelagic U.S. treaty ally sits on the tip of the nose of China’s eastern face. A democracy inhabited by a largely Catholic population prone to say what it thinks in key regional diplomatic forums like ASEAN, ASEAN + 3, and APEC, outspoken about human rights at times (albeit with certain ironies given its own record), and openly concerned about Chinese intentions in the Spratley Islands, the Philippines was never an easy country for China to influence.

That was until the U.S.-Philippine relationship went south—and fast—in 2004. Early in his first term, U.S. president George W. Bush embraced President Arroyo, inviting her to the White House for a rare state visit in 2003. Relations went into a deep chill at the highest levels, however, when Arroyo dropped out of Bush’s ‘coalition of the willing’ for the war in Iraq during Bush’s hard-fought bid to win a second term and after Bush digested intelligence briefings outlining allegations of Arroyo’s fraudulent actions in her own presidential campaign.

China Seizes an Opening

China saw its opportunity. Enter the itinerant internationalist Jose De Venecia, then Speaker of the House in the Philippines. De Venecia was still a political ally of President Arroyo when he was encouraged to visit Beijing by the Chinese ambassador in Manila. De Venecia returned home with reports of Beijing’s interest in expanding bilateral ties and providing large amounts of funding for development projects in the Philippines. Arroyo soon became a regular visitor to Beijing, often taking large numbers of family members and politicians in her delegations to enjoy reportedly lavish hospitality. China was good to its word and accelerated its overseas development assistance (ODA) to the Philippines, quickly moving up the rankings of donors to become the fifth-largest contributor. Approvals of loans were fast and did not include troublesome ‘strings’ of accountability linked to governance. Funds were provided for the North Luzon Railway (NorthRail), Southern Luzon Railway (SouthRail), and other rail projects as well as for a National Broadband Network (NBN) linking 2,295 national offices and 24,549 barangay (or village) municipal offices using Chinese telecom provider ZTE, local Philippine Chinese business leaders, and, as would later be revealed during congressional investigations, alleged kickbacks and payoffs for Philippine officials and politicians. (More details about how these Chinese aid projects were structured are included in congressional testimony to the U.S. China Commission provided by CSIS Senior Adviser Ernest Bower on February 4, 2010, are available here).

It may never be known whether the JMSU was presented as a quid pro quo for China’s other support in the Philippines, but the timing of the agreement—March 2005—suggests it was signed at a time when Chinese influence was peaking in Manila.

The agreement itself was signed by PETRON, by the China National Offshore Oil Company (CNOOC), and by an initially unwilling third party, Vietnam’s national oil and gas company, PetroVietnam, which signed on after six months of strong objections to being presented with a fait accompli. The agreement was designed to conduct seismic exploration in an area spanning 142,886 square kilometers west of Palawan.

The Perils of Non-transparent Acts

The JMSU initially seemed to be a coup for Chinese diplomats. The Philippine leadership had clearly opened several new channels to Beijing; President Arroyo was relying heavily on Chinese-funded major ODA projects to demonstrate economic development; and China had effectively divided ASEAN, getting a trilateral deal with the country that had been its most outspoken critic—the Philippines—along with Vietnam the leader of new efforts to multilateralise or ASEAN-ise the dialogue on the South China Sea.

The wheels began to come off for the JMSU as President Arroyo’s popularity sank to sub-Ferdinand Marcos levels amid impeachment bids and growing allegations of corruption. Among the most serious corruption allegations were deals funded by China, such as the NBN transaction that was eventually cancelled and featured in headline-grabbing congressional investigations. The Philippines was criticised for breaking ranks with ASEAN, and the Philippine Congress began investigations into the JMSU and questioned whether Philippine national security interests had been bartered away. The result was passage of the Archipelago Baseline Act in February 2010, which delineates Philippine sovereign interests and restricts the government from entering into future JMSU-like agreements without due process and transparency.

The Way Forward

A great opportunity lies on the table, as does great risk. The question is whether diplomacy and Asian regionalism can succeed—meaning getting all parties engaged, sharing their views and interests and creating a framework that meets those various requirements. Failure in this effort would represent unacceptable risk to Asia’s continued economic growth, relative peace, and future prosperity.

China is understandably concerned about what it perceives as undue and unwelcome attention to a region that it considers among its ‘core’ interests. Southeast Asian nations represent a range of views—from those who are claimants to the disputed Spratley Islands such as Vietnam, Indonesia, the Philippines, Malaysia, and Brunei, many of whom have had nationals—mostly fisherman—threatened, abducted, or killed and that hold national assets in and under these waters, to those with no direct claim but whose interests in regional stability, peace, and growth are at stake. For the United States, the issues are fundamental to its national interests, including open navigation lanes, economic growth, and honoring its role as a guarantor of regional security in Asia.

Secretary Clinton’s leadership in pushing the South China Sea onto the agenda in Hanoi has been quietly welcomed by most of Southeast Asia. That includes the Philippines, a country now led by a new president, Mr. Benigno ‘Noynoy’ Aquino, who has also studied the lessons of the JMSU. Mr. Aquino and other ASEAN leaders see the great advantages of China’s entrance onto the regional and global stage—it presents a new regional engine for economic growth and helps focus world attention on the centrality of Asia, and its potential contributions to cultural, scientific, and other aspects of development are alluring to say the least. At the same time, all parties have a stake in convincing China to use its considerable influence and make its interests known in international forums within multilateral legal frameworks, which it can help to shape through transparent governance processes. The days of JMSU-like divide-and-conquer policies should be coming to an end because they expose Asia to unnecessary levels of risk and uncertainty.

This article was first published here by CSIS.

Ernest Z. Bower is Senior Adviser and Director of the Southeast Asia Program, Center for Strategic and International Studies, Washington.