Business and the South China Sea

The South China Sea has long been a source of territorial disputes between several Asian countries. Vietnam, China, Brunei, the Philippines, Malaysia and Taiwan have overlapping claims to the South China Sea. The Spratly Islands, for example, are claimed in full by Vietnam, China, Taiwan, and in part by Malaysia and the Philippines. The Paracel chain is claimed by Vietnam, China and Taiwan. The United States has maintained that the South China Sea is international water, and that sovereignty in the area should be determined by the United Nations Convention on the Law of the Sea (UNCLOS), which gives states an exclusive economic zone (EEZ) up to 200 nautical miles from their coastline. Although other nations can pass through, states have sole rights over all natural resources in their EEZ. They only have full sovereignty in territorial waters 12 nautical miles from their coastline.

Why is the sea important to businesses and investors?

When it comes to trade routes, 90 percent of all commercial goods that travel from one continent to another do so by sea. Thousands of ships transit the waters of the South China Sea every day, connecting markets and goods around the world. Any disruption to ship-borne trade could have a significant impact on energy supplies as well as global commerce. There are alternate routes, but any attempt to circumnavigate the disputed waterway would require a lot of extra fuel, and wind up driving up the costs of goods in transport.

According to the US Energy Information Administration, about 80 percent of China’s oil imports pass through the South China Sea via the Malacca Strait. Roughly two thirds of South Korea’s energy supplies, as well as nearly 60 percent of energy supplies for Japan and Taiwan follow the same route. The oil transported through the South China Sea is triple the amount that passes through the Suez Canal and fifteen times the amount that transits the Panama Canal. Whereas in the Persian Gulf only energy is transported, in the South China Sea you have energy, finished goods, and unfinished goods. Plus its floor is also believed to contain massive, mostly untapped reserves of oil and natural gas.

In 2016, 86 percent of Vietnam’s trade passed through the South China Sea including a lot of materials and goods important to AmCham members. In recent years, the United States has stepped up the pace and depth of its military maneuvers to challenge excessive maritime claims in the South China Sea. These Freedom of Navigation operations implement Washington’s policy of ensuring that the world’s most important trading lane remains open for business.

To discuss this key business issue, AmCham members are invited to participate in a discussion on March 6 in Danang featuring US Ambassador Daniel J. Kritenbrink and Vice Admiral Phillip G. Sawyer, Commander of America’s largest forward-deployed maritime force, the US Navy’s 7th Fleet.

About the guest speaker:

Vice Admiral Phillip G. Sawyer is a native of Phoenix and graduated from the United States Naval Academy in 1983 with a Bachelor of Science in Systems Engineering. He received a master’s degree in engineering management from Old Dominion University.

Sawyer served on the Joint Staff, Operations Directorate as a branch chief for anti-terrorism and force protection; deputy director for operations at Commander, Submarine Force US Pacific Fleet; executive assistant to the deputy commander-in-chief, United States Pacific Fleet; Bureau of Naval Personnel as the Submarine Force placement officer and assistant captain detailer; as an instructor at Fleet Anti-Submarine Warfare Training Center, Atlantic; chief of staff of United States Strategic Command Special Activities; and commander, Submarine Force Atlantic.

As a flag officer, his tours include vice commander, Naval Mine and Anti-Submarine Warfare Command; commander, Task Force 74/54, Commander Submarine Force US Pacific Fleet; and deputy commander, US Pacific Fleet. Sawyer assumed duties as commander of the 7th Fleet last August. His personal awards include the Defense Superior Service Medal, Legion of Merit, Defense Meritorious Service Medal, Meritorious Service Medal, Navy and Marine Corps Commendation Medal, and Navy and Marine Corps Achievement Medal.

EVENT:        Breakfast Discussion on Business and the South China Sea
DATE:          Tuesday, March 6
TIME:          8:30am – 9:45am
PLACE:        Hyatt Regency Danang, 5 Truong Sa Street, Danang

If you wish to attend, please contact Ms. Trang at [email protected]