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ASPI recently published an anthology of pieces about the ruling by an Arbitral Tribunal established under the UN Law of the Sea Convention (UNCLOS) to deal with the dispute between China and the Philippines in the South China Sea (SCS). Those articles were written within a few weeks of the ruling. Now, some two months on, it’s useful to assess the impact of the ruling, particularly in the light of recent ASEAN meetings and the East Asia Summit held in Laos.

Despite pressure from the United States and Japan, the recent regional meetings didn’t mention the arbitral ruling in their closing statements, indicating the influence China enjoys within the region. It also suggests that while Southeast Asian countries want the United States to remain in the region as a balance to China, they’re rather less supportive of more challenging moves by Washington.

Australia has called on the Philippines and China to abide by the ruling as final and binding on both parties. Australia became one of only seven countries to formally call for the award to be respected, along with Canada, Japan, New Zealand, the Philippines, the United States and Vietnam. Southeast Asian countries other than the Philippines and Vietnam have opted to ‘sit on the fence’.

Adding to Australia’s response, the Foreign Minister later joined with her counterparts in Japan and the United States to express serious concerns over the disputes in the SCS, and to voice strong opposition to any coercive unilateral actions that could alter the status quo and increase tensions. Those reactions by Australia strained our relations with China, provoking a strong warning from China for Australia to stay out of the SCS dispute or risk damaging bilateral relations.

Overall, the arbitration case and the ruling haven’t helped Australia’s interests. The case has highlighted Australia’s contradictory position with delimitation of its maritime boundaries with Timor-Leste and the ruling has thrown doubts on the legitimacy of Australia’s claimed EEZ around some offshore features. It has also introduced further regional instability and new tensions in the China–United States bilateral relationship, as well as new divisive pressures within ASEAN, including fresh doubts about the ability of ASEAN to deal with the situation in the SCS. Lastly, the ruling has opened up new questions about just what constitutes the ‘rules-based global order’.

Despite initial claims that the ruling would be a ‘game changer’ in the SCS, it likely won’t have any great lasting political or strategic impact on the region. It will remain of legal interest because of the criteria it established for determining whether offshore features are ‘islands’ or ‘rocks’. But even that’ll be prospective rather than retrospective – countries, including Australia, that have claimed EEZs from features which mightn’t be ‘fully entitled’ islands under the criteria used by the tribunal won’t be changing their claims.

That was evident recently when the United States established the world’s largest marine protected area in its EEZ around the Northwest Hawaiian Islands. Using the tribunal’s criteria, parts of that EEZ wouldn’t be legitimate, as some features on which it’s based wouldn’t qualify as ‘fully entitled’ islands .

It’s hard for Australia to criticise China for not abiding by the ruling. Timor-Leste has launched compulsory conciliation with Australia to try to get Australia to agree permanent maritime boundaries in the Timor Sea. But Australia’s Foreign Minister and Attorney-General have recently reaffirmed that any report from the Commission won’t be binding.

Timor-Leste missed an opportunity to make a point by not taking any position on the arbitral ruling on the SCS. Its position in its dispute with Australia might have supported a statement from Dili critical of China for not abiding by the rules, but that could have jeopardised its relations with China, a major source of its overseas aid.

The ruling provides opportunities to go back to basics and start with ‘a clean sheet of paper’ in managing the SCS. Opportunities exist for negotiations between the parties. The focus of negotiations should now be on functional cooperation for activities such as marine scientific research, fisheries management, protecting and preserving the marine environment, maritime law enforcement, and search and rescue.

While calling for restraint by all parties to the SCS situation, Australia has policy options to help resolve the situation following the ruling. These include pursuing a carefully balanced and sensitive diplomatic approach with China, the United States and Southeast Asian countries to help promote cooperation and build trust. There’s also scope for Australia to contribute expertise to help develop regimes for the effective management of the SCS, particularly with the management of its fish stocks and the protection of its marine environment.

There’s a tendency to exaggerate some of Australia’s interests in the SCS, particularly its dependence on freedoms of navigation through the sea, but Australia does have legitimate interests in the region. Those provide the basis and justification for Australia to play an active role in efforts to maintain regional stability. There’s a bigger regional picture for Australia than the SCS.

In a seminal article in 1978 Robert Jervis outlined the concept of the security dilemma. Jervis observed that ‘many of the means by which a state tries to increase its security decreases the security of others’. Where ‘one state gains invulnerability by being more powerful than most others’ its advantage ‘provides a base from which it can exploit others’.

The problem of the security dilemma in the South China Seas has several dimensions. Relative to its East and Southeast Asian neighbours, China is now very powerful and can exploit that situation to increase its own security relative to that of the US. The US, on the other hand, sees itself as invulnerable with respect to China and with the ability to leverage its invulnerability to pursue its own security and economic interests and those of its allies irrespective of China’s.

As Allan Behm noted, ‘it’s a strategic and political impossibility for China meekly to accept the Court of Arbitration’s ruling and withdraw its claim’. In part, that’s simply a matter of security policy. The US has tried to ring China with allies, especially allies hosting US forces, so for China, forward deployment of its forces and surveillance assets to the South China Sea is an obvious force posture move. This is a good example of the security dilemma in action.

There’s another element of China’s stance on the South China Sea. In his address to the UN Xi Jinping began by observing, ‘Only by drawing lessons from history can the world avoid repeating past calamity’. Although referring to WW2, that idea has far greater resonance with the Chinese and the CCP leadership. Most pertinent for present day Chinese are older lessons from Chinese history.

National psychology is a powerful driver of China’s refusal to back down over the South China Sea. China’s history and in particular its sensitivity around the ‘century of humiliation’ suffered while they were comparatively weak reinforces their policy. That notion is central to modern China’s founding narrative and to the legitimacy of the CCP leadership.

The century from 1839, when British gunboats forced China to open up to the opium trade, to the CCP victory in 1949 is known as the ‘century of humiliation’. Alison Kaufman writes that for many Chinese this period provides the ‘historical lessons that are taken as indicative of how strong Western powers tend to behave toward China’. The massive rebellions that wracked China, fanned by ‘the imperial government’s acquiescence to foreign demands’, also influences the strategic thinking of China’s leaders.

The Chinese leadership nourishes the narrative that the CCP saved China from the suffering and indignities imposed by foreign powers, and ‘this narrative has become a key legitimiser for CCP rule, because the CCP is portrayed as the only modern Chinese political party that was able to successfully stand up to foreign aggression’. Behind it all lies a ‘profound sense of shame and humiliation’ so deeply embedded in the Chinese psyche that it still sees itself as a victim. For China to back-down from the South China Sea strategy would be to submit again to a hegemon.

The US asserts its right to override the national interests of other nations and to shape the world seemingly irrespective of the internal preferences of other states. This view affirms the US ‘will ensure tomorrow’s global trading system is consistent with our interests and values by seeking to establish and enforce rules’; that an ‘obligation’ lies on the US for ‘reinforcing, shaping, and where appropriate, creating the rules, norms, and institutions’. The US will be ‘strategic in the use of our economic strength to set new rules of the road’.

This language isn’t just about a rules-based international order; it espouses a unilateral right by the US to make/change the rules and assumes the authority to enforce them. The ‘exceptionalist’ view of the 2015 US National Security Strategy is evidently understood by the Chinese leadership.

In the South China Sea the security dilemma is further complicated by memories of China’s past tragic experience. It’s complicated by the role history plays in validating the Chinese leadership. In the shadow of the ‘century of humiliation’ China may be prepared to go the precipice and beyond; even in the face of preponderant US power.

Confrontation and military brinksmanship in the South China Sea is more likely to cement China in its current policy than to relieve tensions.

Unless Western nations adopt a more nuanced philosophy on global governance, and a more accommodating approach to emerging powers in Asia and Africa, that comprehends their unique historical experiences and cultural value, the decline in Western global relevance will accelerate. This isn’t to advocate appeasement or a retreat, but rather, an evolution to a primarily non-military approach that recognises the genuine complexity of international relations.

Many commentators and readers of The Economist keenly await their weekly dose of KAL. The 16 July 2016 cartoon didn’t disappoint. A claimant hoists the Permanent Court of Arbitration’s South China Sea ruling aloft while the Chinese dragon dumps a load of rocks and topsoil on him, transforming him into a reclaimed facility and replacing the ruling with a more ominous sign ‘Welcome to the New China’. It sums up, with KAL’s usual mordancy, China’s response to the Arbitral Tribunal’s South China Sea determination: China will make its own rules when it comes to defining and protecting its strategic interests.

The Tribunal’s arbitration award in favour of The Philippines is both legally and geo-strategically significant, as Don Rothwell pointed out in his elegantly argued post. And The Economist’s daily blog commented, ‘it is also the biggest setback so far to China’s challenge to America’s influence in East Asia’. The early indications are that China will tough it out, impugning the independence and integrity of the five judges of the Permanent Court of Arbitration and reaffirming the entirety of its South China Sea claim.

But to argue that, by flouting the ruling, China will be elevating brute force over international law as the arbiter of disputes, as did The Economist, at once misunderstands the dynamics of China’s position and endorses a more robust demonstration of force favoured by the US Navy and some Australian commentators (such as the Opposition Defence spokesman, Senator Steven Conroy). In seeking to generate a strategic buffer in the South China Sea and to consolidate its military footholds there, China is doing exactly what any rising power seeks to do—stare down its rivals and marginalise any local opposition.

That, of course, is precisely what the Monroe Doctrine, enunciated almost two centuries ago but still informing US strategic policy today, achieved in securing US dominance over the western hemisphere. China, however, isn’t promoting its own version of the Monroe Doctrine but is rather continuing an approach more consistent with the strategy of Admiral Zheng He (Cheng Ho) in the 15th century and the more contemporary One Belt One Road policy.

It’s a strategic and political impossibility for China meekly to accept the Court of Arbitration’s ruling and withdraw its claim. Had that at any time been under consideration, China would have joined proceedings in The Hague and argued its case. That’s not to suggest, however, that China lacks options.

First, while continuing to ignore the ruling and proceeding with the construction of artificial installations in the South China Sea, China will play for time. The G20 meeting to be held in Hangzhou in early September is an important opportunity for China to showcase its power, status and wealth. China will play down the significance of both the South China Sea issue and the ruling at least until it concludes a successful heads of government meeting. And China will certainly exploit Philippines President Duterte’s offer of further consultations as proof that the court ruling isn’t the last word on the matter.

Second, China will continue to challenge and rebuff what it sees as confected US interests in the South China Sea. China’s claim, and those of the other claimants, have been alive for almost 70 years. But it was Secretary of State Clinton’s remarks at the 2010 ASEAN Regional Forum in Hanoi that identified US interests in the South China Sea. China will continue to portray the US as a self-interested latecomer to the issue.

Third, China will continue to engage bilaterally with each of the claimants, seeking either to buy them off through promises of development funding (the One Belt approach) while using concessions by one claimant to manipulate the options of the others. China’s neighbourhood diplomacy is already paying dividends, as the carefully drafted 24 July 2016 ASEAN Foreign Ministers’ Communiqué reference to the South China Sea reflects.

Fourth, China will consolidate its land reclamations as faits accomplis, and while the declaration of an ADIZ may be unlikely in the short term (it wouldn’t be helpful in the lead-up to the G20 meeting), such a declaration remains a definite option should the China–ASEAN discussions fail to proceed smoothly. And, of course, a naval show of force by the US and others to exercise freedom of navigation rights could precipitate exactly the outcome that regional countries wish to avoid.

China’s regional diplomatic skills are well developed. Its push/pull manoeuvre/manipulate techniques are both honed and practised, and China is working away at creating its own set of regional agreements that will provide an interesting contrast to the ‘rules-based international order’ favoured by the US and its allies, particularly Australia. Wu Xinbo’s recent International Affairs article makes for interesting reading in this regard.

Foreign Minister Julie Bishop is absolutely correct in emphasising diplomacy and negotiation as the most effective way forward in the current South China Sea dispute. But she needs to recognise that the term ‘rules based international order’ is tantamount to code for ‘US-legitimised international order’—a concept that China is happy to ignore. As China, India and Russia—amongst others—continue to assert their strategic ambitions, the legitimacy of the post-WW2 international order can only erode further. China wants to be a rules-creator as well as, perhaps, a rules-observer. The issue here isn’t one of accommodation or appeasement towards China’s regional and global aspirations, but rather acceptance of China for what it has become—a major power in its own right. To deny China that role would be to create an unhappy dragon. We should all take care.

To no one’s surprise, the Permanent Court of Arbitration (PCA) in The Hague has upheld all the key arguments of the Philippines in its case against China on the application of the United Nations Convention on the Law of the Sea (UNCLOS) in the South China Sea. In its ruling, which employed even tougher language than most expected, the tribunal cut the legal heart out of China’s claim that the sea is, in effect, a Chinese lake.

The PCA ruled that China’s ‘nine-dash line,’ a 1940s-era delineation that implies ownership by China of 80% of the South China Sea, is legally meaningless. It also made clear that China’s recent land-reclamation activity, turning submerged or otherwise uninhabitable reefs into artificial islands with airstrips or other facilities, confers no new rights to the surrounding waters or any authority to exclude others from sailing or flying nearby.

Official Chinese statements on the nine-dash line have never stated precisely what it is intended to encompass. Some refer to ‘historic rights,’ others to ‘traditional Chinese fishing grounds,’ while still others suggest that it is merely shorthand for describing all the land features in the South China Sea over which China claims sovereignty. But every variation has provoked others in the region, by signaling China’s willingness to encroach on perceived fishing rights (as with Indonesia), rights to exploit resources (as with Vietnam), or their own rights to the land-features in question

The PCA’s decision punctures any notion that international law now recognizes ‘traditional’ or ‘historic’ maritime claims not directly associated with recognized sovereign ownership of relevant types of land. Recognized ownership of a habitable island, as with mainland territory, includes a 12-nautical-mile territorial sea, a 200-nautical-mile exclusive economic zone or EEZ and rights over any associated continental shelf (subject to any overlapping rights of others).

Recognized ownership of an uninhabitable rock or permanently protruding reef includes the surrounding 12-nautical-mile territorial sea. Nothing more. Without land, a state cannot claim rights to the sea.

China can and will continue to claim that, despite competing claims by Vietnam, the Philippines, and others to the land features in question, it is the sovereign owner of habitable islands and permanently protruding rocks or reefs in the Spratly and Paracel Island groups and elsewhere. In making its case, it can invoke accepted legal criteria like effective occupation or acquiescence. When added to its own coastal entitlements, China might well end up with a sizeable and entirely defensible set of rights in the South China Sea.

But the PCA addressed none of these underlying sovereignty issues in the Philippines case. And, crucially, even if all of China’s sovereignty claims in the South China Sea were one day accepted—whether through negotiation, arbitration, or adjudication—the total area, including territorial sea, EEZs, and continental-shelf rights, would still not approach the size of the vast zone encompassed by the nine-dash line.

The PCA’s decision also rules out China’s claim to an unlimited right to pursue and stare down any close surveillance of its massive reclamation activity and construction of military-grade airstrips, supply platforms, communications facilities, and in some cases gun emplacements. Such construction has occurred on seven previously unoccupied locations in the Spratlys: Mischief Reef, Subi Reef, Gaven Reef, and Hughes Reef (all previously submerged at high tide), and Johnson South Reef, Cuarteron Reef, and Fiery Cross Reef (all previously part-exposed at high tide, but uninhabitable).

Under UNCLOS, states may construct artificial islands and installations within their own EEZs, and also on the high seas (but only for peaceful purposes). In neither case can this have the legal effect of turning a previously submerged reef into a ‘rock’ (which might allow a 12-mile territorial sea to be claimed), or an uninhabitable rock into an ‘island’ (which might allow for a 200-mile EEZ as well). The Philippines case confirmed these basic principles.

In doing so, the PCA also made clear that China had no right whatsoever—at least in the case of the previously submerged Mischief Reef—to engage in any construction activity, as the territory it claims is within the Philippines’ EEZ.

China seems unlikely to abandon occupancy of any island, reef, or rock where it currently has a toehold, or to stop insisting on its sovereign ownership of most of the South China Sea’s land features. But everyone with an interest in ensuring regional stability should encourage China to take several steps that would not cause it to lose face.

These steps include a halt to overtly military construction on its seven new artificial islands in the Spratlys; not starting any new reclamation activity on contested features like the Scarborough Shoal; ceasing to refer to the ‘nine-dash line’ as anything other than a rough guide to the land features over which it continues to claim sovereignty; submitting these claims at least to genuine give-and-take negotiation, and preferably to arbitration or adjudication; advancing negotiations with ASEAN on a code of conduct for all parties in the South China Sea; and an end to dividing and destabilizing ASEAN by putting pressure on its weakest links, Cambodia and Laos, on this issue.

The alternative course, already being promoted by hotheads in the People’s Liberation Army, is to take a dramatically harder line by, say, renouncing UNCLOS altogether and declaring an Air Defense Identification Zone (ADIZ) over most of the South China Sea. Declaring an ADIZ, which the United States would certainly ignore, would sharply increase the likelihood of military incidents, with wholly unforeseeable consequences.

Walking away from UNCLOS would also be wrongheaded. China would still be effectively bound by its terms, now almost universally recognized as customary international law, irrespective of who adheres to it. The gesture of defiance would damage both its reputation and other territorial interests, not least its claims against Japan in the East China Sea, which rely on UNCLOS’s continental-shelf provisions.

If China takes a hardline path, or fails to moderate its behavior significantly in the months ahead, the case for further international pushback by countries like mine—including freedom-of-navigation voyages within 12 nautical miles of Mischief Reef and other artificial islands in that category—will become compelling. But right now it is in everyone’s interest to give China some space to adjust course and to reduce, rather than escalate, regional tensions.

As has been anticipated for a number of years, China is now Australia’s largest trading partner. It’s all but certain that this will remain the case for the foreseeable future, which means that Australia’s political leadership will have a compelling interest in developing and protecting a relationship with China that’s robust and positive. China, similarly, has spoken of its determination to forge a relationship with Australia that’s genuinely close as well as mutually profitable. The snag, of course, is that Australia and China mightn’t have enough in common to gravitate naturally to that sort of relationship. The sharp ebbs and flows in the bilateral relationship seem to confirm this.

China openly states that democratic government isn’t a viable path for the Middle Kingdom. Indeed, internal Communist Party papers characterise notions like an independent judiciary, a free press, constitutional democracy and universal human rights as ‘subversive’—that is, disruptive, revolutionary, even treasonous. Those elements sit at the heart of democratic government, a system of checks and balances that seeks to preclude anyone or any group acquiring the capacity to dictate to others. The system, which is fundamentally about encouraging, requiring and imposing transparency and accountability, has proven to be capable, over a wide range of national circumstances, of balancing personal liberties, collective involvement in decision-making and a sufficiency of governance.

China’s rulers, in contrast, including today’s Communist Party, incline to the view that absolute power is indispensable to good governance and that the effects of democracy’s checks and balances can be reliably replicated in the person of the ruler or the ruling clique. The Chinese prefer—and have always preferred—governmental processes devoid of transparency and accountability.

Over the past 35 years, the CCP has engineered the most spectacular economic revival in history, delivering stability and a material outcomes beneficial to a major part of China’s massive population. But this accomplishment has not erased the legitimacy deficit, the ability to proclaim that the right to govern has been tested and granted. The CCP continues to display the insecurity of suspecting that resistance is brewing beneath the surface and succumbing to the powerful and enduring instinct to preempt that resistance. The Party has therefore retained the formidable arsenal of authority plus the capacities to exercise that authority to minimize, detect, prevent and punish any and all ‘subversive’ behaviour.

The government of China, including the present regime led by Xi Jinping, is continuously, and often frantically, engaged in denying qualities that Australians routinely declare they are prepared to go to war to protect. This offers no basis to presume a level playing field for Australia–Chinese interactions.

The legitimacy deficit also spills over into foreign policy. Having pushed nationalism forward to replace the fading appeal of socialism, China’s government is drawn to wielding its power to prevail over other states and thereby bolster its domestic credentials. China’s accustomed to getting its way. It insists that it has devised a model of governance that’s beyond reproach. It takes full advantage of the openness and transparency that characterises the domestic arena of many of its partners while insisting that curiosity about its own internal arrangements constitutes unacceptable interference. Nor does it shrink from extreme measures to address obstacles to its own interests. Cases in point include the pressure Beijing exerted in 2012 and 2016 to break up an adverse ASEAN consensus on China’s provocative actions in the South China Sea and resorting to extra-legal and extra-territorial measures to intimidate the executives of a Hong Kong publisher prepared to print manuscripts critical of China’s leaders.

Australia can neither afford to antagonise China nor to pursue ‘good’ relations with it to the point of being casual about protecting our national interests. A good starting point would be to make sure we don’t lose sight of the fact that our sharply different governmental philosophies may mean that diverging interests will be closer to the rule rather than the exception. As to guidelines for the development of policy settings, a possible example would be: if Australians cannot do in China what Chinese nationals already do or aspire to do in Australia, Australia will critically examine whether enduring this asymmetry is in the national interest.

Whatever the guidelines turn out to be, it’ll be vitally important for Australia to take the trouble to be well-informed and to establish a reputation for consistency and resolve in Beijing. Furthermore, we should strive to impress on Beijing that we’ll have long memories on state behavior that we regard as incompatible with China’s declared aspirations of good international citizenship. We should make it clear that troubling practices that aren’t openly and officially acknowledged, and clearly ruled out as future options, will continue to inhibit the closeness of the relationship. This approach can be expected, over time, to impart valuable stability and predictability to our relations with the People’s Republic of China.