Part I examined the military implications of China’s continued “military” actions versus Japan in the East China Sea or the United States and other countries in the South China Sea if China were to establish an ADIZ. Part II examines whether China has real economic or trade leverage to force other countries, including the United States, to support its point of view regarding the ruling. Part II also analyzes the related question of whether there are costs to China from continuing to ignore the legal ruling and ways in which China can be legally compelled to comply.
Shortly after the Tribunal ruling, China’s Deputy Minister of Trade was careful to encourage Chinese citizens to not boycott the U.S. and the Philippines; however, that does not mean that sanctions and boycotts are off the table. Bloomberg reported on August 4th that China will likely resume trade retaliation tactics against South Korea for its decision to deploy U.S. THAAD missiles to counter North Korean missile launches. Korea’s International Trade Association has identified 26 measures currently in place to restrict trade and is expecting more non-tariff barriers such as bogus safety inspections of inbound products, establishment of new licensing requirements, and manipulation of quarantine and safety inspections to frustrate Korean imports.
The above actions are not unprecedented. In 2000, China banned all imports of South Korean mobile phones and polyethylene in retaliation for Seoul’s increase of duties on Chinese Garlic. In 2010, Chinese Customs Officials halted the shipments of rare earth minerals destined for Japan (for user in hybrid cars, wind turbines and guided missiles) as a form of protest for detention of a Chinese fisherman fishing near the Senkakus. The United States has also been victimized by China’s extensive unfair trade practices (dumping and illegal subsidies), theft of intellectual property, and hacking of U.S. companies. Working within the WTO system, the U.S. has filed a record number of suits versus China in the WTO on behalf of U.S. poultry producers and is now considering the unilateral institution of a total ban on Chinese steel imports because of illegal price fixing and other illegal actions by Chinese steel producers.