The South China Sea dispute has many dimensions, including rival sovereignty claims, competition for access to fisheries and other sea-bed resources, and the security of China’s second-strike nuclear deterrent capability. But at its heart, the South China Sea dispute symbolises the deeper contest between the US and China over the shape and leadership of Asia’s regional order.

For the United States, a key feature of this order is the principle of freedom of navigation. As Evelyn Goh explains, as the regional hegemon, the United States regards itself as chiefly responsible for providing this security public good. The Chinese government has frequently professed its own support for the principle of freedom of navigation. Yet there are important differences in the two countries’ interpretation of the principle. The United States argues that all vessels have the right to free passage within maritime exclusive economic zones (EEZs), including military vessels undertaking military exercises and surveillance activities. By contrast, China contends that the principle extends only to commercial vessels, and that military vessels must not conduct exercises or surveillance in the EEZ.

A second challenge is that despite China’s public statements of support, the pace and scale of China’s land reclamation and military activities in the South China Sea signify the possibility that China could take steps in future to undermine freedom of navigation in vitally important commercial shipping lanes. Underpinning this argument are statistics frequently cited by the US and its allies that more than US$5 trillion in trade passes through the South China Sea each year, and that countries like Australia and Japan are highly dependent on these waters for their trade.

In our lead piece this week, economist James Laurenceson looks behind these oft-quoted statistics to determine the actual proportion and direction of trade that passes through the South China Sea. Laurenceson shows that the US$5 trillion dollar figure is inflated, and that a blockade by China would have only a minimal impact on economic growth in other countries. This is because other countries are able to divert their trade at limited cost when necessary, and because the majority of existing regional trade does not in fact flow through the South China Sea.

Instead, ‘shipping density maps show that Vietnam, Indonesia, Taiwan and the Philippines are largely served by merchant vessels that take coast hugging routes outside China’s nine dash line’. In the case of Australia, apart from trade with China — which is very unlikely to be disrupted by China — ‘just 5.5 per cent of Australia’s total goods exports’ go through the South China Sea, and Australia’s sizeable exports to Japan and South Korea either travel east of the Philippines or through the Lombok Strait. Similarly, in the case of Japan, Laurenceson cites evidence from US Naval War College studies which demonstrate that for Japan to reroute its oil imports through the Sunda, Lombok or other passages would only cost 0.2 percent of Japan’s annual oil import bill.

Indeed, the country most vulnerable to a disruption in shipping in the South China Sea is China itself. This vulnerability is a function of the intensity of China’s trade with Asia, and ASEAN countries in particular, and of China’s dependence on seaborne supplies of vital energy imports.

More importantly, China’s vulnerability also stems from the fact that it is a late rising power that is rising within a US-led order. That order is one in which, as Llewelyn Hughes and Austin Long remind us, the dominance of the United States and its allies in air and naval power gives Washington ‘substantial coercive capability’ against countries like China ‘that depend on maritime transport of oil and that are potential adversaries of the United States’. Unsurprisingly, as Laurenceson argues, ‘a wide variety of Chinese experts worry that in the event of a crisis the United States could sever [China’s supplies of energy] at will’.

The South China Sea dispute poses a profound dilemma for regional order because both sides believe they are insecure. For China, the fact that the United States protects the global and regional maritime commons will provide little comfort as long as China remains a potential US adversary, and one whose economic prosperity is linked to seaborne trade. For the United States, China’s professed support for the principle of freedom of navigation will not assuage concerns that China’s land reclamation and militarisation activities do represent a challenge to the existing US-led maritime order in Asia.

This dilemma is precisely why US allies like Australia have found it so difficult to decide whether or not to participate in US-led FONOP missions in the South China Sea. These FONOP missions are not merely about protecting the principle of freedom of navigation; they also represent an effort to preserve a US-led order in which China does not feel secure.

Unless the United States and China can negotiate a new relationship in which they both feel secure, the South China Sea dispute will continue to be at the heart of the competition over regional order in Asia.

The EAF Editorial Group is comprised of Peter Drysdale, Shiro Armstrong, Ben Ascione, Amy King, Liam Gammon and Jillian Mowbray-Tsutsumi and is located in the Crawford School of Public Policy in the ANU College of Asia and the Pacific.