Dispute becomes economic

The maritime standoff between the Philippines and China in the disputed Scarborough Shoal escalated into an economic conflict on Friday following a Chinese clampdown on Philippine banana exports to China and on travel of Chinese tourists to the country.

The clampdown came in the wake of a peaceful protest in Manila in front of the Chinese consular office denouncing the  increasing “bullying” of the Philippines by Beijing and demanding the pullout of Chinese vessels from the shoal, which is claimed by both the Philippines and China.

It marked a pileup by Beijing of a repertoire of measures to pressure the Philippines to give up its claim to Scarborough Shoal. The actions included intimidating diplomatic negotiations; coercive deployment of Chinese vessels outnumbering those of the Philippines in the waters around the shoal; and setting loose Chinese fishermen to poach in a lagoon in the shoal and blocking efforts by Philippine Coast Guard vessels to stop the incursions.

The latest Chinese move amounted to an economic boycott as a weapon of nonviolent retaliation.

An Inquirer reporter in Beijing wrote that China on Friday accused the Philippines of escalating tensions over territorial disputes in the South China Sea, named by the Philippines as the West Philippine Sea, by fomenting protests by Filipinos in Manila and in other parts of the world.

The Philippine government distanced itself from the protests, saying that it was initiated by a group of private citizens  outraged by the predatory incursions of a flotilla of Chinese vessels in the vicinity of the shoal since April 10.

The protests highlighted the rising anti-Chinese public opinion in the Philippine fueled by the Chinese maritime incursions in Scarborough Shoal, in particular, and, in general, in the aggressive projection of the expansion of China’s blue water Navy in the South China Sea, over which Beijing claims hegemony based on archival historical documents.

China move assertive

Bloomberg has reported that tensions had risen since the standoff began last month, and “China has become more assertive over claims  to the oil- and gas-rich waters of the South China Sea, while the US, which has  a mutual defense treaty with the Philippines, has shifted its military posture toward the Asia-Pacific region.”

On Friday, the Inquirer reported from Beijing that China had suspended some tourist tours to the Philippines and ordered tighter inspections of imported Philippine fruits, such as bananas, of which China is the single largest buyer.

The Chinese countermeasures had an immediate impact on the Philippine stock market.

According to Bloomberg, in a report published in the Manila Standard Today newspaper, tourism-related stocks fell for the second straight session on Thursday, following the announcement of the travel restrictions by Beijing. The fall brought down the benchmark index for the first time this month below 5,200.

The Inquirer reported that, according to the Department of Tourism (DOT), Chinese tourists make up about 9 percent of total arrivals in the Philippines. It also reported that the Philippine Travel Agencies Association  (PTAA) said that impact of China’s decision to suspend tours to the Philippines “would be negligible.”

Not a primary market

Aileen Clemente, PTAA president, said China was only one of the Philippines’ target markets, adding that the top three markets remain—Korea, the United States and Japan. The PTAA was reported as saying that although tourist arrivals from China had risen significantly in the past five years, the traffic was “relatively small.”

The DOT was reported by the Inquirer to have said that China was the country’s fourth largest market, with 96,455 arrivals in 2011, an increase of 77 percent from 54,332 in 2010.

On China’s tighter quarantine inspection of Philippine fruit exports, the Inquirer reported that the agricultural sector is about 12 percent of the Philippine economy, but the impact may be small as China is not a primary market.

From Davao, the Inquirer reported that, according to Mindanao fruit growers,  Chinese authorities on Friday continued to refuse entry to some 1,500 containers of Cavendish bananas because of an alleged finding that the fruits earlier sent by Mindanao growers showed signs of disease found only in coconuts.

According to the report, Stephen Antig, president of the Filipino Banana Growers and Exporters Association, said that as  of Thursday afternoon, the bananas were being left to rot in the ports of Dalian, Shanghai and Xingang, as Chinese authorities insisted on the country’s new “phytosanitary rules for bananas arriving from the Philippines.”

Obvious harassment

Antig said exporters feel “we are being harassed,” adding that it could be related to the standoff at Scarborough Shoal. But the government played down the link between the standoff and the new regulations, saying it was a “technical issue.” China started applying the rules in March.

Antig said banana exporters had lost some P1 billion since. Further delays in inspection would turn the bananas into vinegar, the exporters said.

Amid this squeeze of the tourism suspension and the fruit quarantine,  the Department of Foreign Affairs said on Friday that Filipino and Chinese diplomats in Manila had agreed to resume talks to break the impasse over Scarborough Shoal.

But these talks are being held against the background that Philippine and US officials held last week—their first joint meeting on increasing US military aid to help its strategic ally in Asia under Chinese pressure in its maritime security.