China's former paramount leader Deng Xiaoping, the architect of China's reform and open-door policies, at an unidentified seaside location in an undated photo. Photo: AFP
China's former paramount leader Deng Xiaoping, the architect of China's reform and open-door policies, at an unidentified seaside location in an undated photo. Photo: AFP

When Chinese Foreign Minister Wang Yi proposed on July 24 the idea of joint energy ventures with the Philippines in areas they both contested in the South China Sea, the conciliatory remark was strongly supported by his Filipino hosts.

Philippine Foreign Secretary Alan Peter Cayetano said the two sides were “exploring if we can explore”, while former House of Representatives Speaker Jose De Venecia Jr suggested that Manila “suspend” its sovereignty over disputed areas to pave the way for joint energy development agreements.

President Rodrigo Duterte said the day before Wang’s visit that a joint partner had already been found to develop oil fields and that joint exploration and exploitation would begin later this year. “When [China] start[s] to excavate the gas and oil, I tell you it’s going to be just like a joint venture…it will be fair.”

The Philippines suspended drilling in the contested Reed Bank in 2014 while the Permanent Court of Arbitration (PCA) at The Hague deliberated a case Manila filed against China to adjudicate their dispute. That decision, handed down on July 12, 2016, ruled in favor of the Philippines’ claims and against China’s expansive nine-dash-line map.

Duterte, who has prioritized building strong bilateral relations with China since assuming office in June 2016, has not pressed the PCA’s verdict (which China has refused to recognize), while making it clear that he wants to avoid conflict in the maritime area.

Philippine President Rodrigo Duterte (L) and Chinese President Xi Jinping. Photo: Reuters

On the surface, the idea looks appealing and is often presented as a panacea to the South China Sea conundrum. Yet history has shown the difficulties of negotiating a mutually acceptable resource-sharing agreement among rival claimant states, especially when China claims almost the entirety of the disputed area.

For decades the concept of joint development, which is enshrined in international law, has been repeatedly raised in various fora as a potential solution to the maritime disputes that have put the region on edge as China had recently moved to militarize the islands and features it controls.

There is historical precedent for pursuing joint development. China’s previous paramount leader Deng Xiaoping saw joint development as an optimal modus vivendi to allow China to assert its maritime claims, while avoiding tensions and conflict with neighboring countries.

Deng preferred “setting aside dispute[s] and pursuing joint development” with China’s neighbors, both continental and maritime. His handpicked successors, Jiang Zemin and Hu Jintao, in the main followed the dictum.

Massachusetts Institute of Technology scholar Taylor Fravel shows in an authoritative study that in 17 of 23 territorial disputes with various land and sea neighbors, China has either abandoned or significantly reduced its original claims since the Communist Party took power in 1949.

In those concessions, the study shows, China has abandoned over 1.3 million square miles of land.

PLA soldiers march near a sign on the Spratly Islands. Photo: Reuters

In Deng’s calculus, China’s economic miracle wouldn’t have been possible without a relatively stable regional environment. Protracted hot wars with neighboring states, previously fomented by exporting Maoist revolutionary ideology, would have torpedoed the country’s economic rise and provided rival powers such as the United States and Japan greater excuse to expand their military footprints in the region.

As the world’s leading exporting nation, Beijing has a strong interest in ensuring the stability of sea lines of communications and trade linkages that connect China’s factories to global markets and facilitate the unhindered flow of its considerable energy imports. An estimated US$5 trillion worth of trade flows through the South China Sea each year.

Two decades since Deng’s death, China is once again putting the idea of joint energy development on the table. This time, however, Beijing is negotiating from a position of strength, claiming almost the entirety of the South China Sea and boasting a massive naval as well as paramilitary fleet to fortify the militarized islands it has recently built in disputed areas.

“I hope that the two sides could make the decision so that the goodwill embodied by Mr. Deng Xiaoping’s proposal 31 years ago could lead to fruition today and could benefit the people of both countries,” said Chinese Foreign Minister Wang Yi during his recent two-day high profile visit to Manila.

Philippine Foreign Affairs Secretary Alan Peter Cayetano (R) shakes hands with China’s Foreign Minister Wang Yi in Manila on July 25, 2017. Photo: Reuters/Erik De Castro

For many Filipinos, however, the idea of joint development has an uneasy ring of déjà vu. De Venecia, who is currently the Philippines’ special envoy to the Asia Pacific Economic Cooperation (APEC), a free trade group, was a prominent political leader during former President Gloria Macapagal Arroyo’s (2001-2010) tenure.

Arroryo, who is now a deputy speaker of the House of Representatives and a key foreign policy adviser to Duterte, was famous for ushering in a brief ‘golden age’ of bilateral relations with China by welcoming large-scale Chinese infrastructure investments and a resource-sharing agreement, known as the Joint Maritime Seismic Undertaking (JMSU), for the South China Sea.

The JMSU provided a framework for joint exploration of energy resources in overlapping areas with national energy companies of China, Vietnam and the Philippines. It didn’t take long, however, before big-ticket Chinese projects, including the North Railway and the Philippine National Broadband Network scheme, were embroiled in massive corruption scandals that nearly toppled her government.

The JMSU, which had a confidentiality provision and was negotiated under extreme secrecy, came under sustained political attack by political opponents who portrayed the opaque scheme as unconstitutional and treasonous. Amid a public backlash, the Arroyo administration shunned renewing the agreement after it expired in 2008.

Filipino demonstrators rally over the South China Sea disputes outside the Chinese Consulate in Makati City, Metro Manila, Philippines July 12, 2016. Photo: Reuters/Erik De Castrby

The Philippine constitution, which prioritizes the protection of the nation’s 200-mile Exclusive Economic Zone (EEZ), places severe restrictions on any joint development agreements in sovereign territories. It also mandates any joint development deal be made between the Philippine government and foreign private companies, not with national governments.

Above all, contracting parties should unequivocally recognize the Philippines’ sovereignty over the area in question.

Any joint development agreement between China and the Philippines, legal analysts say, could represent a violation of last year’s PCA decision that ruled in favor of the Philippines over China, a verdict which stated China and the Philippines do not have overlapping EEZs, including over the contested Scarborough Shoal which lies within Manila’s EEZ but China now controls.

Any joint development agreement advanced by Duterte will thus likely require the Philippines to (i) amend its constitution and/or (ii) ignore key dimensions of the PCA ruling under the United Nations Convention on the Law of the Sea (UNCLOS), of which both China and the Philippines are signatories.

Filipino fishermen pass by a large Chinese vessel at the disputed Scarborough Shoal. Photo: Reuters/Erik De Castro

The Duterte administration faces an unfavorable political environment to push through charter change and abandon last year’s arbitration ruling, which many including the United States and other claimant states viewed as an important law-based precedent for the long-term resolution of the disputes.

While Duterte pushes for rapprochement with China, many Filipinos remain deeply suspicious of Beijing’s ultimate intentions. Influential figures from previous Philippine administrations and other branches of government have openly expressed their skepticism about the viability of any resource-sharing agreement in contested areas.

The Duterte administration faces an unfavorable political environment to push through charter change and abandon last year’s arbitration ruling, which many including the United States and other claimant states viewed as an important law-based precedent for the long-term resolution of the disputes

Supreme Court Associate Justice Antonio Caprio, for one, has strongly opposed the joint development proposal, arguing: “You cannot enter into joint development within our EEZ. That’s prohibited by the constitution.”

Others are concerned about a possible repeat of the Arroyo administration fiasco, where China apparently sought to win territorial concessions through the offer of large-scale investment initiatives that were eventually upended on corruption allegations involving Arroyo’s own husband.

Many Filipinos will thus likely strongly oppose and mobilize against any deal where China’s terms of engagement are perceived as, “what is ours is ours, what is yours we share.” While the concept of joint development makes sense in abstract terms, as former Chinese paramount leader Deng envisioned, modern political and legal realities limit the scope for such a cooperative deal.

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