By Adolfo Quizon Paglinawan

 

Part 27: Where the Philippine seeks War, China see Diplomacy

Before the Philippine Coast Guard takes us again for a ride, let us do some fact checking.

Associated Press reported that two Philippine fisheries vessels were targeted by the Chinese Coast Guard with water cannons, last October 12 in a faceoff, which occurred at least 1.6 nautical miles from Thitu (Pagasa) island.

One of the ships, BRP Datu Pagbuaya was rammed and slightly damaged, there were no injuries among Filipino crewmen.

Fact #1 – If Sandy Cay, which the 2016 Arbitral Tribunal classified as a rock, lies approximately 1.5 nautical miles northwest of Pagasa Island, under the media principle, the Philippines can only claim 0.75 or ¾ nautical mile territorial sea (TS) in favor of each Sandy Cay and Pagasa Island.

To reiterate, Pagasa Island does not have a 12nm territorial sea on its northwestern side but only 0.75 nm territorial sea. If the Philippine ships were 1.6 nm from Pagasa, what were we doing 0.85 nautical miles inside Sandy Cay’s territorial sea? Or almost 1 nm outside of Pagasa’s TS as other media outlets placed the incident at 1.8nm of Pagasa Island?

This makes China’s position more tenable. As usual, our mariners who always claim professionalism and adherence to international law, have again lost their compass and forayed outside their bounds.

According to the Associated Press, the Chinese coast guard accused the Philippine vessels of illegally entering what it called Chinese waters near a cluster of sandbars known as Sandy Cay, which lies between Thitu (Pagasa) and China’s artificial island base called Subi and “ignoring repeated stern warnings from the Chinese side.”

It said it “took control measures against the Philippine vessels in accordance with the law and resolutely drove them away.”

The “median provision” in UNCLOS refers to Article 15 of the UN Convention on the Law of the Sea, which states that where the coasts of two states are opposite or adjacent, the boundary of their territorial seas is the median line unless they agree otherwise. A median line is a line where every point is equidistant from the nearest points on the baselines of each state’s territorial sea.

Fact #2 – The Philippine does not have an undisputed claim over Thitu (Pagasa) Island as it is also claimed by China, Vietnam and Taiwan. The Philippines grabbed Thitu Island from Taiwan in 1971 when the Taiwanese garrison left the island due to a typhoon but exercises de facto sovereignty over Pagasa Island only by virtue of the 2002 Declaration of Conduct between China and ASEAN.

Fact #3 – Pagasa Island is 270 nautical miles west from Palawan or 70 nm outside of our 200 nm EEZ claim which is disputed by China, Vietnam, Taiwan, Malaysia and Brunei west of the Philippines.

In a post on social media platform X, U.S. Ambassador to the Philippines MaryKay Carlson who often confuses international law from US rule-based international order, condemned what she described as China’s “dangerous ramming” of a Filipino vessel, calling the incident “aggressive actions” in the South China Sea.

Fact #4 – The United States is neither a coastal state, a claimant and nor a member of the UN Convention of the Law of the Sea. Its Mutual Defense Treaty with the Philippines does not cover the South China Sea.

In Beijing, Chinese coast guard spokesperson Liu Dejun said in a statement the two Philippine vessels illegally entered waters near Sandy Cay, which China calls Tiexian Reef, “without the permission of the Chinese government.” One dangerously approached the Chinese Coast Guard vessel, causing a scrape, he said.

The responsibility rests entirely with the Philippine side, Liu said, accusing the Philippines of undermining the peace and stability in the South China Sea and sternly warning “the Southeast Asian country  to immediately stop infringement and provocations.

Larger picture

This yet another incident at the South China Sea, is just an iota of what’s happening in the much wider and complicated world stage.

In an earlier development on October 9, China tightened export controls for critical rare-earth metals, as the Chinese Ministry of Commerce announced new restrictions coming ahead of an expected meeting between Chinese President Xi Jinping and United States President Donald Trump’s later this month at the Asia-Pacific Economic Cooperation summit in South Korea late this month.

China said it was increasing export controls for five rare-earth metals (holmium, erbium, thulium, europium and ytterbium) in addition to the seven it announced last April (samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium).

China now has export restrictions on 12 of the 17 total rare-earth metals. Corollary to this, China also placed restrictions on the export of specialist technological equipment used to refine rare-earth metals.

Most of these restrictions will go into effect from December 1.

The announcement means that foreign companies will need to obtain special approvals from Beijing if they wish to export rare-earth magnets and certain semiconductor materials that have at least 0.1 percent heavy rare-earth metals from China.

China’s Ministry of Commerce is tightening controls because “rare-earth-related items have dual-use properties for both civilian and military applications. Implementing export controls on them is an international practice.”

Certain foreign actors have been directly processing and transferring controlled rare-earth materials originating from China, directly or indirectly to relevant organizations and individuals, for military and other sensitive applications.

“This has caused significant damage or posed potential threats to China’s national security and interests, adversely affected international peace and stability, and hindered global non-proliferation efforts.”

The metals are crucial for the US defense industry.

According to the Center for Strategic and International Studies, rare earths are used to manufacture F-35 fighter jets, Virginia and Columbia-class submarines, Tomahawk missiles, radar systems, Predator unmanned aerial vehicles and the Joint Direct Attack Munition series of smart bombs.

Rare-earth metals are essential for the production of technological equipment such as electric cars, lithium-ion batteries, LED televisions and camera lenses and are used to create semiconductors, which are used in artificial intelligence (AI) technology.

China is the largest producer of these rare-earth metals. It mines at least 60 percent and processes about 90 percent of the world’s rare-earth metals, CSIS reported in 2024.

Earlier this year, Trump imposed tariffs of 145 percent on Chinese imports to the US. China retaliated with 125 percent tariffs. After reducing their tariffs to 30 percent and 10 percent respectively in May, the two sides struck a truce in August – agreeing a 90-day pause to allow time for trade talks. That pause has since been renewed twice as talks continue – most recently between US and Chinese officials in Spain last month.

Gracelin Baskaran, director of the CSIS Critical Minerals Security Program, explained that by restricting exports, China may be able to accelerate the expansion of its military strength at a faster pace than the US: “The move both strengthens Beijing’s leverage in upcoming talks while also undercutting US efforts to bolster its industrial base at a time where Indo-Pacific tension is climbing.”

The Chinese Ministry of Commerce spokesperson told reporters on Thursday: “China is willing to strengthen communication and cooperation through bilateral and multilateral export control dialogue mechanisms, promote compliant trade, and ensure the security and stability of global industrial and supply chains.”

Kristin Vekasi, the Mansfield Chair of Japan and Indo-Pacific Affairs at the University of Montana, said “China hasn’t yet pulled the trigger on export restrictions, but it is reminding Washington that it could. This move signals that Beijing is willing to weaponize its dominant position in the rare earths supply chain.

The US will be especially hit hard.

In 2023, it was the largest importer of Chinese rare-earth minerals and products, importing $22.8m worth of rare earth products from China, according to the Observatory of Economic Complexity (OEC).

In total, China exported $117m in rare-earth metals and products that year.

The US sourced 70 percent of its rare earth compounds and metals imports from China between 2020 and 2023, according to a US Geological Survey report.

Hong Kong ($12.1m), Russia ($12.2m) and Japan ($9.42m) also import significant amounts.

Former President Joe Biden. restricted China’s access to its semiconductors in 2022. Some US lawmakers have pushed for even greater restrictions, warning that China could reverse-engineer or independently develop advanced semiconductor technologies, overtaking the US in the industry and securing a military advantage.

Wolff weighs in

Richard D. Wolff, an American Marxian economist and a professor emeritus of economics at the University of Massachusetts Amherst and currently visiting professor in the graduate program in international affairs at The New School in New York City, said this new license-based system in that any company wishing to trade a wide range of rare earth elements or their derivatives would first need to secure a permit from the Chinese government.

“This was a profound shift in global supply chain dynamics where China was no longer just a seller, it was now the undisputed gatekeeper.”

China stipulated that any product, regardless of its country of origin, containing even a minuscule 0.1% of Chinese origin rare earth material, would require an export license to be sent to a third country. Given China’s near total dominance of the processing industry, this rule effectively applied to almost every advanced electronic device on the planet.

Further, Beijing restricted the export of the very technologies, hardware, and equipment used in the mining, extraction, and refining of these critical minerals.

Wolff said “This was a move designed to prevent other nations from ever building a competing industry. They weren’t just controlling the present; they were attempting to foreclose the future. Perhaps most alarming for global manufacturers was the policy’s extraterritorial reach.

The professor exemplifies, “A foreign company, say a magnet manufacturer in India, using Chinese rare earth to create its product would now be prohibited from selling that finished magnet to anyone, anywhere in the world, without first obtaining permission from Beijing. The alternative was to be cut off from the supply of rare earths altogether. China even began demanding explicit guarantees from nations like India, requiring them to promise that any rare earth magnets they purchased would not be re-exported to the United States.

This was a direct attempt to conscript other nations into its economic conflict, forcing them to choose a side. And as if to underscore the long-term strategic nature of this plan, the announcement included a future provision.

Starting on November 8th, 2025, similar controls would be extended to lithium-ion batteries, graphite anode material, and the artificial diamonds, crucial for semiconductor etching.

Wall Street panic

The consequences of these restrictions were immediate, tangible, and brutal felt across global financial markets within hours.

Wolff described the reaction on Wall Street was nothing short of a panic:

“In a single day of trading, the U.S. stock market experienced a veritable bloodbath, hemorrhaging an astonishing $1.5 trillion in value. To put that number in perspective, it was a greater single-day loss than the $1.2 trillion wiped out during the peak of the COVID-19 market crash.

“This was not a correction. It was a cataclysm. The tech-heavy NASDAQ composite index plummeted by 3.6 percent in a free fall.

“The pain was concentrated in the very sectors most vulnerable to a disruption in the rare earth supply chain. Shares of Nvidia, a titan of the graphics card industry, fell by 4.5 percent. Its main competitor, AMD, fared even worse, tumbling 5.2 percent.

“The reason was simple. Their advanced semiconductor products are impossible to manufacture without the unique properties of rare earth elements. Tesla, the icon of the electric vehicle revolution, saw its stock price plunge by 6.1 percent.”

Tesla’s entire business model was not spared. Its powerful magnets in its electric motors are inseparably linked to a stable supply of these critical minerals, to the batteries that power its cars.

The carnage extended with equal ferocity into the volatile world of cryptocurrency. The digital asset market, often seen as a hedge against traditional financial instability, found itself directly in the line of fire. Bitcoin, the industry’s bellwether, crashed by approximately 10 to 11 percent.

Wolff concludes that “by threatening the semiconductor supply chain, China had inadvertently struck at the foundational infrastructure of the entire digital economy, and the market’s reaction was one of pure terror. The message from the market was unequivocal. China’s move was an existential threat to America’s most innovative and valuable industries.”

The world made another earth-moving turn, as the Philippine Coast Guard, once again, was lost at sea, endlessly and irresponsibly provoking China to a false start towards a war not of its making. #

To be continued.

   

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