Geo-Politics

Will the United States ever purchase Greenland?

Introduction

Greenland, a vast autonomous territory within the Kingdom of Denmark, holds a unique geopolitical significance that extends beyond its icy landscapes and stunning natural beauty. As the world’s largest island, Greenland is strategically positioned in the Arctic region, making it a focal point of international interest. This introduction will delve into the importance of Greenland for the United States and other nations, explore the historical and current relations between the U.S., Denmark, and Greenland, and examine the key sources of interest and potential conflicts in the Arctic region. Greenland’s significance stems from its vast natural resources, including mineral deposits, fisheries, and potentially lucrative oil and gas reserves. Additionally, the island’s strategic location has garnered global attention due to the shifting dynamics in the Arctic region. The melting ice caps and the opening of new maritime routes have fueled increased interest in the economic and strategic possibilities that Greenland offers. The historical and current relations between the United States, Denmark, and Greenland are intertwined through a complex web of diplomatic, economic, and security ties. While Greenland is an autonomous territory, it remains under Danish sovereignty. The U.S. has historically maintained a military presence in Greenland, particularly during the Cold War, reflecting the strategic importance of the region for both defense and scientific research. In August 2019, President Trump expressed interest in purchasing Greenland—a self-governing part of the Kingdom of Denmark—due to the island’s strategic location in the Arctic and its increasingly accessible natural resources. After Greenlandic and Danish officials asserted that Greenland is “open for business, not for sale,” President Trump canceled a previously scheduled state visit to Denmark in early September and subsequently objected to Danish Prime Minister Mette Frederiksen’s description of his proposal as “absurd.” The incident sparked tensions with Denmark—a close U.S. ally in NATO and fellow member of the Arctic Council—and led some experts to raise concerns about the future trajectory of U.S.-Nordic and U.S.-European relations more broadly. After the Wall Street Journal broke the story that US President Donald Trump had repeatedly expressed interest in purchasing Greenland from Denmark and instructed his White House counsel to look into the matter, the world responded with disbelief. Either the United States had decided at last to drop all pretense of not being an empire, or the emperor had finally lost his marbles. Soren Espersen of the Danish People’s Party was clear: if the story were true, then here stands the “final proof that he has gone mad.” Yet, while the idea that any power – however rich – can simply buy off the world’s largest island outright might sound laughable in the twenty-first century, Billy Perrigo rightly pointed out in TIME Magazine that, even in Greenland’s case alone, it is not without historical precedent. Perrigo shone a spotlight on similar plans made between 1945 and 1947. The origins of such ambitions, however, can be traced back even farther. Setting aside the potential resource benefits for the United States if it were to acquire Greenland, the geopolitical strategic significance would be considerable. It is not widely appreciated that the Arctic today is being actively contested both for its potential maritime resource riches and its potential commercial and military shipping routes. By virtue of its particular location, Greenland may be able to generate an extended continental shelf well beyond its current 200-nautical-mile limit to reach as far as, if not beyond, the geographic North Pole, thereby countering Russian claims to that area. However, self-determination could also include a positive act by the Greenlanders in support of becoming a part of the United States. There are a number of ways they could get there. Full statehood under the US Constitution could be available, as in the case of Hawaii, or as a territory as in the case of American Samoa, Guam, and Puerto Rico, all of which have local legislatures and certain levels of autonomy. Ultimately, whether Greenland becomes a part of the United States, remains with Denmark, or becomes a new independent state is a matter only the Greenlanders can decide.

Legal aspects

Greenland recognizes itself as a self-governing, autonomous country within the Kingdom of Denmark. His Majesty King Frederik the 10th is the ceremonial Head of State, as the system of governance is parliamentary democracy. Since 1979, Greenland has had its own government and parliament. Even though it is geographically part of North America, Greenland is politically part of Europe and an Autonomous Territory within the Kingdom of Denmark. This status was granted through the Greenlandic Constitution Act of 1978, which came into effect in 1979. According to this legislation, Greenland has its own government, known as the Naalakkersuisut, its own parliament, called the Inatsisartut, and a legal system that handles various internal affairs. The autonomy allows Greenland to legislate on matters such as education, health, and social services, providing a significant degree of self-governance.

Extent of Self-Rule, Except for Foreign Affairs and Defence

Greenland exercises extensive self-rule, overseeing key areas like education, health, and natural resources, while the responsibility for foreign affairs and defense remains under Denmark’s purview. The Kingdom of Denmark, through its Ministry of Foreign Affairs and Ministry of Defense, manages global relations and defense matters on Greenland’s behalf, reflecting a clear division of powers. Greenland’s international engagement is facilitated through its membership in various organizations, such as the Nordic Council, fostering collaboration on culture, education, and sustainable development. Although not a full member of the European Union, Greenland benefits from its association as an Overseas Countries and Territories (OCT), enabling participation in EU programs. Furthermore, Greenland actively contributes to Arctic Council initiatives, addressing environmental protection, sustainable development, and scientific cooperation in the Arctic. These affiliations highlight Greenland’s commitment to international cooperation, allowing it to participate meaningfully in discussions and initiatives beyond its immediate geographical boundaries.

Legal framework and precedents for the purchase of Greenland by the US

In exploring the historical interest and precedents surrounding the notion of the United States acquiring Greenland, the statement delves into a historical narrative dating back to 1867, coinciding with the purchase of Alaska from Russia. While discussions regarding the acquisition of Greenland took place during that period, no formal agreement materialized. Notably, the purchase of Alaska serves as a precedent, highlighting the U.S.’s capacity for territorial expansion.

Recent proposals and discussions regarding the acquisition of Greenland by the United States have captured public attention, particularly stemming from a reported dialogue between President Donald Trump and his advisers in 2019. Although no concrete offer was extended, the incident ignited diplomatic discussions and garnered significant media scrutiny.

Integral to the historical backdrop is the 1951 bilateral agreement between the United States and Denmark, known as the Defense of Greenland Agreement. This agreement grants the U.S. military access to strategic bases and facilities in Greenland, with the Thule Air Base being a pivotal asset established during the Cold War era. The Thule Air Base serves as a cornerstone of the U.S. national security initiatives, encompassing missile warning systems, space surveillance capabilities, and other critical defense operations.

Central to any prospective purchase of Greenland by the United States is the securing consent from both Denmark and Greenland. Given Greenland’s autonomous status, its government and populace wield significant influence in determining matters of sovereignty. Moreover, the involvement of other stakeholders may hinge upon the specific terms and conditions outlined in any potential agreement, reflecting the multifaceted nature of such negotiations.

Crucially, any endeavor to purchase Greenland must adhere to established international legal frameworks and norms. Compliance with the UN Charter, the Law of the Sea, and the preservation of indigenous peoples’ rights in Greenland are paramount considerations in ensuring the legitimacy and acceptance of any proposed acquisition. Upholding the rights of Greenland’s indigenous population and respecting international legal principles underscore the necessity for conscientious deliberation and adherence to universally recognized standards in navigating the complexities of territorial transactions.

Economic aspects

Greenland, with a population of approximately 56,000 people, boasts a GDP estimated at $2.77 billion as of January 2022. Its economy thrives on fishing, tourism, and public services. However, recent global attention has been drawn to Greenland’s strategic significance due to its rich deposits of raw materials, including oil, minerals, and rare earth metals. With the effects of climate change facilitating easier access to these resources, Greenland stands at the cusp of becoming a pivotal player in the geopolitical landscape.

Delegations from across the globe converge in Nuuk, vying for partnerships and contracts to tap into Greenland’s potential resource wealth. The allure stems from the expectation that Greenland holds vast reserves, coupled with the possibility of the Northern Sea Route becoming a reliable, partially ice-free passage due to climate change. This strategic value has long been recognized by military analysts and politicians, notably by the Trump administration’s publicized interest in purchasing Greenland in August 2019.

Greenland’s natural endowments, including oil, gas, minerals, and rare earth metals, hold profound implications for various industries and technologies worldwide. Exploiting these resources could significantly bolster Greenland’s economic growth.

However, any acquisition by the U.S. would entail substantial financial considerations. Negotiating with Denmark and Greenland could result in an expenditure ranging from billions to trillions of dollars, marking a considerable financial commitment for the U.S. government. Moreover, investing in infrastructure, public services, and environmental protection poses additional challenges, necessitating substantial resources and logistical prowess.

Nevertheless, the benefits of gaining access and control over Greenland’s resources cannot be understated. The U.S. stands to enhance its economic prospects and energy security, thereby reducing reliance on foreign suppliers, notably China.

Political aspects

The United States considers Greenland strategically important and has maintained a military presence in Greenland since World War II. During the Cold War, Greenland played a key role in U.S. and NATO defense strategy. Thule Air Base in northwest Greenland is the U.S. military’s northernmost installation, providing 24/7 missile warning and space surveillance. Thule also hosts a deepwater seaport and airfield. Warming temperatures in the Arctic and ice loss in Greenland pose environmental concerns, but also raise the possibility of increased access to Greenland’s potential oil, gas, and mineral reserves. Since the 2009 Self-Government Act, Greenland has assumed the right to utilize these resources. In 2013, in an effort to diversify its fishing-dominated economy, Greenland repealed a law banning the mining of radioactive materials and rare earth minerals. Many U.S. policymakers and experts are wary about increased Russian military and commercial activity, as well as Chinese investments, in the Arctic. Some believe that China views Greenland as key to increasing its influence in the Arctic. In 2018, the prospect that China’s state-run banks and a Chinese construction company might fund and help build or upgrade several airports in Greenland alarmed U.S. defense officials; the United States reportedly expressed its security concerns to the Danish government, which ultimately announced it would help finance the airport projects instead.

Political Motivations and Objectives of the Purchase of Greenland by the US

The strategic significance of Greenland’s location in the Arctic region aligns closely with the perspective that the United States perceives it as a valuable asset for both its national security and global leadership. Greenland’s advantageous positioning offers crucial benefits for monitoring and responding to security threats within the Arctic. Notably, the Thule Air Base, situated in Greenland, stands as a pivotal component of U.S. early warning systems and missile defense mechanisms.

The escalating competition and tensions with China and Russia, both in the Arctic and beyond, serves as compelling drivers for the United States to secure a strategic foothold in Greenland. The Arctic region’s growing geopolitical importance, driven by the melting ice opening new maritime routes and enabling resource extraction, pinpoints the urgency. With China and Russia demonstrating keen interest in the Arctic, the U.S. seeks to assert its influence to safeguard strategic advantages. For instance, Chinese involvement in the Greenlandic airport project, alongside financing infrastructure and mineral extraction, constitutes a notable challenge perceived by the U.S. The initiation of China’s Arctic involvement dates back to the 1990s, highlighted by its icebreaker purchase. The progression of Chinese interests throughout the 2010s, marked by significant investments since 2012, signifies a deeper engagement. Notably, Chinese companies also express interest in engineering projects within Greenland’s harbors and other construction initiatives.

The United States may harbor intentions to expand its territorial presence and sovereignty in the Arctic by acquiring Greenland. Such ambitions are in line with broader geopolitical interests aimed at securing control over Arctic waters and resources. The potential purchase of Greenland may enhance the United states’ territorial control in the Arctic, potentially augmenting its influence in the region.

Furthermore, historical ambitions and visions of acquiring Greenland persist within the U.S., stemming from past discussions and interests in the region. Repeated expressions of interest in purchasing Greenland throughout history, including discussions in 2019, highlight the enduring nature of these ambitions, which can shape contemporary geopolitical decisions.

Acquiring Greenland could serve as a means for the United States to enhance its reputation and prestige as a global power. Possessing a territory of strategic importance could bolster the U.S.’s standing on the global stage. Geopolitical maneuvers and strategic acquisitions often contribute to the perceived influence and stature of nations in global affairs.

Political Challenges and Risks of the Purchase of Greenland by the US

Strong Opposition from Denmark, Greenland, and Other Countries

The potential purchase of Greenland by the U.S. may face strong opposition from Denmark, Greenland, and other countries, particularly in the Nordic and European regions. Denmark has consistently asserted its sovereignty over Greenland, and any attempt by the U.S. to acquire the territory without Danish and Greenlandic consent will not possible and it will be violation of international laws and norms. The international community, including European and Nordic nations, might express their deep concerns about such an acquisition.

Backlash from the People of Greenland

The people of Greenland may resist the U.S. purchase due to concerns about autonomy, identity, and culture. Greenland has pursued a path of increased self-governance, and there may be resistance to any move that could compromise this autonomy. Greenland held a referendum in 2008 that resulted in an increased level of autonomy. The sentiment for maintaining their unique cultural identity and having a say in decisions regarding their territory is strong among the Greenlandic population.

Hostile Response from Rivals, Such as China and Russia

The initiation if a purchase could provoke a hostile response from geopolitical rivals, such as China and Russia, who may perceive it as a threat to their interests in the Arctic and beyond. Any move by the U.S. to strengthen its presence in the Arctic may be met with diplomatic or military countermeasures. Russia, in particular, has a significant interest and military presence in the Arctic.

Ethical aspects

Mutual Consent, Fair Compensation, and Mutual Benefit

The potential purchase of Greenland by the United States could be framed within ethical principles such as mutual consent, fair compensation, and mutual benefit. This argument suggests that any negotiations for the purchase would prioritize consent from all parties involved, ensuring a fair and mutually advantageous agreement. Historical precedents, like the Louisiana Purchase in 1803, highlight negotiations and agreements between the U.S. and other nations, reflecting an approach rooted in mutual consent and fair compensation.

Furthermore, the United States may assert that the purchase is in the best interests of the people of Greenland, emphasizing potential economic, social, and security opportunities that integration with the U.S. could provide. The argument could focus on the U.S.’s role as a promoter of stability and prosperity, aiming to extend these benefits to the people of Greenland. Economic indicators, such as Greenland’s GDP, could be analyzed to gauge whether integration with the U.S. would indeed lead to enhanced economic opportunities and social development for Greenland.

Additionally, the U.S. may contend that the purchase serves the best interests of the international community, arguing that its involvement in the Arctic region could foster stability, cooperation, and development. Presenting itself as a responsible global actor, the U.S. may seek to contribute positively to the well-being of the Arctic region. Economic and geopolitical analyses could be conducted to assess the potential impact of U.S. involvement on stability and cooperation in the Arctic, drawing upon historical examples of international cooperation in other regions.

It is essential to acknowledge that ethical claims are inherently subjective, and perspectives on what constitutes fairness, benefit, or the best interests of different parties may vary. Moreover, while historical examples and principles offer context, the ethical evaluation of a specific situation demands an understanding of current geopolitical dynamics, the desires of the involved parties, and potential ramifications for global stability and cooperation.

Ethical Concerns and Dilemmas of the Purchase of Greenland by the US

The potential purchase of Greenland by the United States raises profound ethical questions regarding the legitimacy and morality of transactions involving sovereign territories and populations. It prompts considerations of democracy, human rights, and self-determination. Critics may question the morality of such transactions, which could potentially challenge democratic principles, human rights, and the right of people to determine their own political status. However, the ethical dimensions of territorial transactions are inherently contextual and contingent upon the will of the affected population.

The ethical dilemma revolves around whether the U.S. can ensure responsible policies that prioritize environmental conservation, social well-being, and the preservation of indigenous cultures. Environmental impact assessments, social impact studies, and evaluations of cultural heritage would be indispensable in understanding the potential consequences of such a purchase.

Additionally, the distribution of costs and benefits associated with the purchase engenders ethical questions about justice and equity. Concerns may arise regarding the potential for an unequal distribution of benefits and burdens, disproportionately impacting different segments of the population. Socioeconomic indicators, demographic data, and historical precedents can be analyzed to assess how various groups, especially indigenous communities, have been affected by similar geopolitical decisions in the past.

Approaching these ethical concerns requires recognition of diverse perspectives and values, acknowledging that ethical considerations are subjective and context-dependent. While the use of data, facts, and figures can inform discussions, they may not offer definitive answers to complex ethical questions.

Conclusion

In a nutshell, the current Greenlandic political strategy is not based on integration into any existing national state. On the contrary, it is the full formal sovereignty as a national state with the following three priorities: legal self-government, economic self-sufficiency and transition to a multi-faceted economy. The answer to Trump’s interest in buying Greenland from Naalakkersuisut on 16 August 2019 was clear: “We have a good cooperation with the USA, and we see it as an expression of greater interests in investing in our country and the possibilities we offer. Of course, Greenland is not for sale.”

Analysis

Is Philippines the Next Japan?

Manila has long cast a longing glance at Tokyo. Japan’s post-World War II economic miracle—a phoenix rising from ashes—is a tale etched into the annals of global capitalism. Now, the Philippines, a nation of 118 million, is attempting its own ascent. But can it replicate the Japanese magic formula?

The archipelago’s economy has been on a tear. Growth rates have outpaced most of Southeast Asia, sustained by a burgeoning call center industry, remittances from overseas Filipino workers, and a growing consumer class. Infrastructure projects, once the stuff of political promises, are now breaking ground. The question is: is this a sustainable boom, or a mirage shimmering in the tropical sun?

I. Economic Growth

The Philippines’ recent economic trajectory contrasts sharply with Japan’s post-World War II economic miracle. Japan’s rapid economic growth from 1945 to 1991, known as the “Japanese Economic Miracle,” was characterized by disciplined fiscal policies, deliberate industrial development, and significant infrastructure investments. This period saw Japan’s economy grow at a rate twice as fast as the prewar average every year after 1955, achieving a peak last seen in 1939 in less than ten years.

Japan’s unique political structure, characterized by strong centralized authority, social consensus, and a long-term perspective, fostered an environment conducive to implementing consistent and far-reaching economic policies. This, coupled with deeply ingrained cultural values of respect for authority, discipline, and collective good, contributed significantly to the nation’s rapid post-war recovery. Ezra Vogel, in his seminal work “Japan as Number One: Lessons for America,” highlighted how Japan’s economic policies were marked by a “remarkable coherence and stability.”

In contrast, the Philippines has struggled to achieve steady economic growth despite having abundant natural resources and a youthful labor force. The Philippines’ efforts to emulate Japan’s swift rise have been impeded by policy changes, political unpredictability, and infrastructure deficiencies. While Japan’s economic policies were marked by stability and continuity, the Philippines has faced a more fragmented political landscape, making long-term planning more challenging.

Despite all these challenges, The Philippines’ real GDP is projected to grow by 0.2 percentage points annually between 2024 and 2029, reaching 6.4 percent by 2029. In 2023, approved foreign investments in the Philippines amounted to roughly 889 billion Philippine Pesos, with the power, gas, steam, and air conditioning sectors receiving the largest share. However, no foreign investments were made in the public sector that year, particularly in defense and administration, including mandatory social security. In May 2024, the Philippines’ trade balance showed a deficit of USD 4.6 billion, slightly down from the previous month’s deficit of USD 4.7 billion. The main economic sectors of the Philippines are manufacturing, agriculture, private services, and trade, with agriculture, forestry, and fishing contributing 8.6% of the GDP in 2023.

The construction industry is also a significant player in the Philippines’ economy, with a projected contribution of 7% to the GDP in 2023. The national government’s infrastructure initiative has generated employment opportunities for thousands of Filipinos and attracted foreign investments worth around 14.2 million Philippine Pesos.

The services sector, comprising business process outsourcing, retail, real estate, and tourism, has been a key driver of the Philippine economy. Despite global challenges such as climate change and economic volatility, the country has made progress in poverty reduction, with rates declining from 23.3% in 2015 to 18.1% in 2021.

Economic growth in the Philippines is expected to accelerate to 5.8% in 2024, up from 5.5% the previous year, and reach 5.9% in 2025.

The medium-term economic projection is expected to be sustained by healthy domestic demand, driven by a strong labor market, ongoing public investments, and potential benefits of recent revisions to investment policy that may encourage private investment. With sustained recovery and reform initiatives, the nation is regaining momentum toward its goal of becoming an upper middle-income country, with a gross national income per capita of US$4,230 in 2023.

II. Political Landscape

Japan is seen as having a parliamentary system, whereas the Philippines is a presidential one. The Japanese political system is a bicameral parliamentary constitutional monarchy with a dominating party system. The Emperor serves as the head of state, while the Prime Minister leads the government and the Cabinet, which oversees the executive branch.

The Philippines is a democratic nation with a president who is chosen directly by the populace to fulfill the dual roles of head of state and head of government. The president is a significant political person who leads the executive branch. When assessing the influence of stability and governance on economic growth, Japan and the Philippines offer significant insights. Although Japan’s economic dominance has been bolstered by stability, the democratic administration of the Philippines provides opportunities for response to public demands and participatory decision-making.

III. Infrastructure Development

Underdeveloped infrastructure is a significant obstacle to the Philippines growth. Congested roads, inefficient ports, and unreliable power supply constrain economic activity and deter foreign investment.

The “Build Better More” program, which replaced the “Build! Build! Build!” initiative, aims to improve the country’s infrastructure. According to data from the National Economic and Development Authority (NEDA), as of April 2024, out of the 185 projects that were identified, 35% were still in progress, and less than 1% had been finished since 2022. The primary sources of project funding for this nine-billion-peso project are public-private partnerships (PPP), official development aid (ODA), and the General Appropriations Act (GAA).

Japan’s post-war infrastructure development was pivotal for its economic growth. Investments in manufacturing and heavy industries necessitated rapid urbanization and infrastructure development, creating a solid foundation for industrial growth. “Japan’s development strategy was heavily dependent on infrastructure investments, which became the backbone of its industrialization policy,” wrote Chalmers Johnson in his book “MITI and the Japanese Miracle.”

Japan’s industrialization policy was largely dependent on its infrastructure investments, which enabled effective connectivity and logistics to promote export-oriented companies and economic growth. While promoting economic development through infrastructure investment is a similar objective of both Japan’s post-World War II infrastructure projects and the Philippines’ Build, Build, Build program, they differ in scale, breadth, and historical context.

IV. Industrial Policy and Innovation

Japan’s post-war industrial policy emphasized key industries such as steel, automotive, and electronics. The Ministry of International Trade and Industry played a crucial role in guiding industrial development through subsidies, tax incentives, and preferential financing. Japan also heavily invested in technological innovation and R&D, fostering a skilled workforce capable of driving industrial growth.

In comparison, the Philippines has faced challenges in establishing a robust industrial base. While the country has seen growth in industries such as electronics, business process outsourcing (BPO), and agriculture, it has yet to achieve the same level of industrial diversification and technological advancement as Japan. The Philippine government has recognized the need for industrial policy reforms and increased investment in innovation to drive sustainable economic growth.

The Philippine Development Plan 2023-2028 outlines strategies to enhance industrial productivity, including improving the regulatory environment, fostering innovation, and promoting technology adoption. The government aims to develop a competitive industrial sector by supporting micro, small, and medium-sized enterprises (MSMEs) and attracting foreign direct investment (FDI). Additionally, initiatives to enhance education and skills training are underway to build a workforce capable of supporting a modern industrial economy.

V. Human Capital Development

Human capital development has been a cornerstone of both Japan’s and the Philippines’ economic strategies, albeit with differing approaches and outcomes. Japan’s post-war economic miracle was significantly aided by its investment in education and workforce training. The Japanese government prioritized universal education, with a strong emphasis on science, technology, engineering, and mathematics (STEM). This created a highly skilled and disciplined workforce that could meet the demands of rapidly advancing industries.

Japan’s cultural values, such as diligence, teamwork, and respect for authority, further reinforced its human capital development efforts. The Japanese education system and corporate culture emphasized lifelong learning, continuous improvement (kaizen), and innovation. These factors contributed to a workforce that was not only technically proficient but also adaptable and committed to excellence.

In the Philippines, human capital development is recognized as a key driver of economic growth. The government has made strides in improving access to education and healthcare, which are essential components of human capital. However, challenges remain, particularly in terms of education quality, skills mismatch, and underemployment.

The Philippine’s government is working to align educational curricula with industry needs, promote technical and vocational education, and expand access to higher education. Efforts to improve healthcare services and social protection are also part of the broader strategy to build a healthy, educated, and productive workforce.

The Philippines’ young and growing population presents both opportunities and challenges. With a median age of around 25 years, the country has a demographic dividend that can drive economic growth if properly harnessed. Investing in education, skills development, and health services is crucial to maximizing the potential of this demographic advantage.

VI. Trade and Foreign Policy

Japan’s economic success was supported by a pragmatic approach to international relations, focusing on economic cooperation and regional integration. The United States played a significant role in Japan’s recovery, providing financial aid and access to the American market. This fostered a strong trade relationship that was pivotal to Japan’s export-oriented growth.

Strong exports of machinery, electronics, and cars characterize Japanese trade, which has helped the nation achieve a positive trade balance. Japan has pursued free trade agreements (FTAs) to expand its access to international markets and promote economic growth. By promoting trade and fostering economic cooperation, these accords with nations in the Asia-Pacific area, North America, and Europe have been essential in boosting Japan’s economic development.

In comparison, the Philippines has faced a more complex geopolitical landscape. While the country has made progress in establishing trade agreements and regional partnerships, it has had to navigate tensions in the South China Sea and shifting global trade dynamics. The Philippines’ strategic location in Southeast Asia presents both opportunities and challenges for its trade and foreign policy.

The Association of Southeast Asian Nations (ASEAN) plays a significant role in the Philippines’ trade strategy. ASEAN’s economic integration initiatives, such as the ASEAN Free Trade Area (AFTA) and the Regional Comprehensive Economic Partnership (RCEP), aim to enhance regional trade and investment flows. The Philippines has also pursued bilateral trade agreements with key trading partners, including the United States, Japan, and the European Union.

Efforts to diversify export markets and reduce reliance on a few key trading partners are part of the Philippines’ trade strategy. The country aims to enhance its competitiveness in global value chains by improving trade facilitation, infrastructure, and logistics. Additionally, initiatives to promote exports of high-value goods and services, such as electronics, garments, and IT services, are being implemented to boost trade performance.

VII. Challenges and Obstacles

The Philippines’ economic journey is not without its challenges and obstacles. Political instability, corruption, and bureaucratic inefficiencies have hindered the country’s progress. Environmental issues, such as natural disasters and climate change, pose significant risks to sustainable development.

Political instability has been a recurring issue in the Philippines, affecting investor confidence and policy continuity. Frequent changes in leadership and political turmoil have created an unpredictable business environment. Corruption remains a major challenge, with the country consistently ranking low on Transparency International’s Corruption Perceptions Index. Addressing these issues is crucial for creating a conducive environment for economic growth and development.

Environmental challenges also pose significant risks to the Philippines’ economic prospects. The country is highly vulnerable to natural disasters, such as typhoons, earthquakes, and volcanic eruptions. These events can cause widespread damage to infrastructure, disrupt economic activities, and exacerbate poverty and inequality. Climate change further amplifies these risks, with rising sea levels, increased frequency of extreme weather events, and changing weather patterns affecting agriculture, fisheries, and coastal communities.

The Philippine government has recognized the need to address these challenges and has implemented various measures to mitigate their impact. Efforts to strengthen disaster preparedness and response capabilities, improve governance and transparency, and promote sustainable development are underway. The government is also working to enhance climate resilience through initiatives such as reforestation, coastal protection, and sustainable agriculture practices.

End Note:

The Philippines stands at a critical juncture in its economic journey. While it has made significant progress in recent years, achieving sustained and inclusive growth remains a formidable challenge. The experiences of Japan offer valuable lessons and insights that can guide the Philippines in its quest for economic transformation.

Japan’s post-war economic miracle was built on a foundation of strong governance, strategic industrial policy, investment in human capital, and international trade. While the Philippines faces a different set of challenges and opportunities, it can draw inspiration from Japan’s experience and adapt these lessons to its unique context.

To realize its full potential, the Philippines must prioritize good governance, political stability, and policy continuity. Strengthening institutions, improving transparency, and reducing corruption are essential for creating a conducive environment for investment and economic growth. Additionally, investing in infrastructure, education, and healthcare will be crucial for building a resilient and productive workforce.

The Philippines’ young and dynamic population presents a unique opportunity for demographic dividends. By investing in human capital development, promoting innovation, and fostering a competitive industrial sector, the country can unlock new sources of growth and development.

While the road ahead is challenging, the Philippines has the potential to become a major economic player in the region. By learning from Japan’s experience and implementing bold and visionary policies, the Philippines can chart a path towards sustained and inclusive growth, realizing its aspirations of becoming the next economic miracle in Asia.

Analysis

Will China and the Philippines adhere to their most recent “Arrangement”?

“China-Philippines Most Recent ‘Arrangement’ Has Nothing to Address the Root Cause of Tensions in the South China Sea”

The Philippine government has announced that China and the Philippines have reached an agreement to ease tensions over the disputed Second Thomas Shoal in the South China Sea. This agreement, negotiated by Chinese and Filipino diplomats in Manila, outlines temporary conditions for resupplying Filipino troops stationed on the shoal. Both nations claim sovereignty over the shoal, which has been the scene of frequent confrontations between their forces. The Second Thomas Shoal, also known as Ren’ai Jiao in China and Ayungin Shoal in the Philippines, lies roughly 1,000 kilometers from China’s southern Hainan Island and the western Philippines Island of Palawan. It has been a flashpoint in recent months, culminating in a violent incident on June 17. During this confrontation, Chinese forces rammed and boarded two Philippine navy boats attempting to deliver supplies to Filipino personnel on the shoal. The Chinese forces seized control of the boats, damaged and took several M4 weapons along with other supplies with them. The clash, which resulted in injuries to Filipino navy officers, was captured on video and in photographs. Both China and the Philippines blame each other for the conflict, asserting their respective claims over the strategically significant shoal. The South China Sea is a crucial global trade route with rich fishing grounds and underwater gas reserves.

In addition to China and the Philippines, other nations with territorial claims in the South China Sea include Vietnam, Malaysia, Brunei, and Taiwan. The region is a sensitive area and a potential flashpoint in the US-China rivalry. While the recent agreement between China and the Philippines marks a step towards reducing immediate tensions, it does not address the underlying causes of the broader South China Sea disputes.

Significance & Background of the South China Sea Dispute

The South China Sea is an incredibly productive area, serving as a major fishing ground for China, Vietnam, the Philippines, and other claimant states. The region’s continental shelf harbors significant natural gas and petroleum reserves. The abundance of marine life in the South China Sea is due to the large-scale drainage of nutrient-rich waters from land and the upwelling of water in specific maritime regions. This heavily fished area is a primary source of animal protein for the densely populated Southeast Asian region, with prevalent species including shrimp, shellfish, anchovies, croaker, mackerel, and tuna. Most of the catch, whether fresh or preserved, is consumed locally. The Philippines, in particular, is a major fish-producing nation.

Furthermore, the South China Sea holds tremendous geopolitical significance in the context of global politics. Its strategic location at the intersection of major maritime routes connecting the Indian and Pacific Oceans makes it a focal point for international powers and their interests. The region is critical to the world economy, facilitating the annual flow of goods worth trillions of dollars. Nearly one-third of global trade, including vital energy resources such as oil and natural gas, passes through these waters. Any attempt by China to disrupt this trade would harm the global supply chain and the economies of other countries. Consequently, the South China Sea has become a focal point for the ambitions and rivalries of major powers, including the United States, China, Russia, and Japan.

Ayungin Shoal, also known as Second Thomas Shoal, is a contested reef claimed by the Philippines, China, Brunei, Malaysia, and Vietnam. The Philippine military ship Sierra Madre, intentionally grounded in 1999 to counter China’s territorial claims, is manned by a small contingent of Philippine Marines. For years, these nations have been embroiled in disputes over the territorial status of various islands and reefs like the Ayungin Shoal in the South China Sea. This region, which includes Whitson Reef, the Paracel Islands, Thitu Island, Scarborough Shoal, and the Spratly Islands, is believed to hold significant oil and gas reserves.

In July 2016, the Permanent Court of Arbitration in The Hague ruled against China’s territorial claims in the South China Sea in a case brought by the Philippines. Recently, the Philippine Foreign Ministry announced that the Philippines and China have agreed on guidelines for de-escalating tensions in the South China Sea to facilitate the transfer of personnel and supplies to the BRP Sierra Madre stationed at Ayungin Shoal. The ministry’s statement outlined that both nations have reached an understanding of principles to prevent misunderstandings and miscalculations during the Philippines’ lawful and routine rotation and resupply missions to the shoal.

This agreement was the result of productive discussions during the 9th Bilateral Consultation Mechanism on the South China Sea, held in Manila on July 2, 2024. Despite this progress, China has refused to acknowledge or recognize the court’s ruling, which states that the islands do not form an exclusive economic zone or disputed territory. The Philippine Foreign Ministry affirmed that Manila will continue to uphold its rights and authority over Ayungin Shoal, in accordance with the UN Convention on the Law of the Sea.

Clauses of the Recent Arrangement

According to Manila, China and the Philippines have reached a ‘provisional deal’ for resupply missions in the South China Sea.

The Philippines and China have reached a provisional arrangement for resupply missions to the beached Filipino naval ship, Sierra Madre, on the Second Thomas Shoal, according to a statement from Manila’s Department of Foreign Affairs (DFA). The DFA did not provide specifics about the resupply missions but emphasized that the arrangement followed “frank and constructive discussions” during the Bilateral Consultation Mechanism earlier this month. Both sides acknowledged the need to de-escalate the situation in the South China Sea and manage their differences through dialogue and consultation, agreeing that the arrangement would not prejudice their respective positions in the area.

The Chinese foreign ministry confirmed the temporary arrangement and reiterated its demand for the Philippines to tow away the Sierra Madre and restore the shoal to its original, unoccupied state. A Chinese spokesperson expressed China’s willingness to allow humanitarian resupply missions to the ship’s occupants if necessary before the vessel is removed. However, China firmly opposed any transfer of substantial building materials or attempts to establish fixed facilities and permanent outposts on the shoal, vowing to resist such actions to safeguard its sovereignty.

Despite an offer of assistance from the United States, Philippine security authorities announced that they would conduct the resupply missions independently. White House National Security Adviser Jake Sullivan had stated that the US would do whatever necessary to support its treaty ally in resupplying the Sierra Madre. However, Eduardo Año, his Filipino counterpart, confirmed that the resupply operations would remain “a pure Philippine operation,” indicating no need for direct US involvement at this time.

Analysis of the Arrangement

Concerns of a military conflict at the Second Thomas Shoal, potentially involving the United States, loom large as tensions between China and the Philippines escalate in the South China Sea. Despite these worries, there are strong reasons to believe that both Beijing and Manila will strive to avoid a military clash. Chinese officials must weigh the regional geopolitical implications and the significant distraction from their current focus on domestic socioeconomic issues. Manila faces an immediate constraint due to an unfavourable military power balance compared to China. Many questions remain about how the United States, the Philippines’ ally, will respond if a naval confrontation occurs in the South China Sea. A critical issue is how Manila and its allies will eventually address China’s gray zone operations, which have proven challenging for regional entities and their supporters, influencing the outcome of current tensions between Beijing and Manila.

Beijing appears ready to seize what it perceives as a favorable moment to capture the Second Thomas Shoal. It has employed water cannons to prevent Filipino vessels from transporting construction materials to repair the BRP Sierra Madre. The Philippines has a strong incentive to strengthen the BRP Sierra Madre to maintain control of the feature long-term. During the prolonged dispute, Manila has sent survival supplies to its marines on the ship, which Beijing claims to have allowed for humanitarian reasons. The Philippines may have covertly supplied limited construction materials to the ship, but there are concerns that the vessel will disintegrate if not significantly strengthened.

The goals of the two countries appear incompatible, and conflict is likely to escalate. From another perspective, China may continue to employ gray zone tactics, gradually depleting Manila’s resources and policy options, enabling Beijing to achieve its short-term objectives. Chinese officials recognize these geopolitical constraints but aim to increase China’s presence and influence in the South China Sea. In the ongoing dispute, Beijing heavily relies on gray zone measures, hoping to ensure the eventual failure of the Filipino vessel on the Second Thomas Shoal. When the warship fails, the shoal might swiftly fall under Chinese control. Beijing expects this strategy to help avert the worst-case regional geopolitical repercussions of a direct military conflict. Many Chinese policy elites believe that the gray zone approach is the best way to address this geostrategic challenge. For more than a year, China has effectively blocked the Philippines’ resupply sorties and prevented ship repairs using these tactics.

As a result, the Philippines is forced to choose between responding to China’s blockade and retaining control of the Second Thomas Shoal. A power imbalance and logistical challenges limit the Philippines’ ability to counter China’s strategy. In the worst-case scenario, Manila may take military action or seek military assistance from non-regional states to resist China’s activities. If this occurs, China is likely to retaliate with substantial military force, citing retribution and self defense.

Root Causes of the Tensions

China’s assertiveness in the South China Sea has steadily intensified, escalating tensions with Southeast Asian claimant nations, particularly the Philippines, near the Second Thomas Shoal in the Spratly Islands. China’s sweeping claims to sovereignty over the sea—and its estimated 11 billion barrels of undiscovered oil and 190 trillion cubic feet of natural gas—have angered rival claimants Brunei, Indonesia, Malaysia, the Philippines, Taiwan, and Vietnam. Countries began staking claims to islands and zones in the South China Sea as early as the 1970s, including the resource-rich and strategically vital Spratly Islands. The inability of Chinese and Southeast Asian authorities to resolve these disputes diplomatically risks undermining international maritime law and encouraging destabilizing military buildups.

China insists that international military forces are not permitted to conduct intelligence activities, such as reconnaissance flights, within its claimed exclusive economic zone (EEZ). The United States, however, maintains that under the United Nations Convention on the Law of the Sea (UNCLOS), claimant countries should have freedom of navigation through EEZs and are not required to notify claimants of military activity.

Recent satellite data reveals China’s growing efforts to expand its territorial control in the South China Sea by physically enlarging existing islands or creating new ones. Beyond adding sand to existing reefs, China has built ports, military stations, and airstrips, especially on the Paracel and Spratly Islands, where it maintains multiple outposts. Notably, China has militarized Woody Island, deploying fighter jets, cruise missiles, and a radar system.

To protect its regional political, security, and economic interests, the US has challenged China’s assertive territorial claims and land reclamation projects through freedom of navigation operations and increased support for Southeast Asian partners. In response to China’s aggressive stance, Japan has provided military ships and equipment to the Philippines and Vietnam to bolster their maritime security and deter Chinese aggression.

Philippine President Ferdinand Marcos Jr., who took office in June 2022, has taken a firmer stance against China compared to his predecessor, Rodrigo Duterte. The Philippines’ most contentious disputes with China center around the Second Thomas Shoal of the Spratly Islands, which lies within the Philippines’ 200-mile EEZ.

Ferdinand Marcos has agreed to increase base access, joint exercises, and weapons exchanges with the United States. In March 2024, US Secretary of Defense Lloyd Austin affirmed that the United States’ Mutual Defense Treaty with the Philippines covers both countries’ armed forces, public vessels, and aircraft in the South China Sea. Meanwhile, Japan has also enhanced its influence by supplying military weapons to the Philippines and Vietnam to enhance maritime security.

End Note

Beijing may wish to refrain from using overt force against Manila in order to resolve territorial and maritime conflicts due to its previous policy preference, regional strategic interests, and the effectiveness of gray zone tactics. Beijing does not, however, intend to forgo using military action as a means of settling conflicts. There is a chance of an armed conflict, especially if Manila takes more drastic measures to make China’s “gray area” strategy ineffectual. The best measures to keep tensions and conflict from turning into war would be to defuse the South China Sea crisis and reopen bilateral talks between Beijing and Manila. Together, Beijing and Manila’s policymakers should take into consideration the ambitious but intriguing idea of creating a maritime park at Second Thomas Shoal with the goal of advancing environmental preservation, scientific study, and cooperative fisheries. For the past ten years, experts from China and Southeast Asia have discussed this topic on occasion, but at the official level, it has not yet been addressed. This possibility might have a favorable effect on regional peace and stability if China and the Philippines give it some thought.

Analysis

Philippines President Vows not to Yield Despite New Provisional Deal with China

zIn a firm assertion of the Philippines’ territorial rights, President Ferdinand R. Marcos Jr. declared that the country would not yield or waver in its stance on the West Philippine Sea. During his 3rd State of the Nation Address (SONA) on July 22, 2024, Marcos emphasized the importance of maintaining the nation’s sovereignty and expressed gratitude for the sacrifices made by the Armed Forces of the Philippines (AFP), the Philippine Coast Guard (PCG), and the fishing communities.

“The West Philippine Sea is not a mere figment of our imagination. It is ours. And it will remain ours as long as the spirit of our beloved Philippines burns bright,” he asserted, drawing a standing ovation from the audience.

The President highlighted the increased strategic efforts to enhance aerial and maritime domain awareness, reaffirming the government’s relentless endeavor to increase the country’s defensive stance through self-reliance and partnerships with like-minded nations. “Laws governing our Maritime Zones and Archipelagic Sea Lanes will ensure that this intergenerational mandate — this duty — takes deep root in the hearts and minds of all our people,” he stated.

A significant development followed the President’s address, as the Philippines and China announced a provisional deal to manage tensions at the contested Second Thomas Shoal. This deal, reached after a series of diplomatic discussions, aims to prevent further clashes in the disputed South China Sea.

Philippine Foreign Affairs Secretary Teresita Daza announced that the agreement signifies both nations’ commitment to de-escalate tensions and manage differences peacefully. “In our desire to de-escalate the situation in the South China Sea to manage differences in a peaceful manner, we emphasize that the agreement was done in good faith and the Philippines remains ready to implement it,” Daza stated.

China’s Foreign Ministry confirmed the arrangement, reiterating its demand for the Philippines to tow away the grounded warship, Sierra Madre, from the Second Thomas Shoal. However, China expressed willingness to allow humanitarian resupply missions to the personnel stationed on the ship if informed in advance.

Despite this, the Philippines maintained its stance against prior notification to China about resupply missions, asserting the missions’ lawfulness and the necessity of preserving national sovereignty. “The principles and approaches laid out in the agreement were reached through a series of careful and meticulous consultations between both sides,” Daza emphasized.

The deal comes after a series of violent confrontations between Filipino and Chinese forces at the shoal, which both nations claim. The Second Thomas Shoal, known as Ayungin Shoal in the Philippines and Ren’ai Jiao in China, has been a focal point of these clashes, sparking fears of a broader conflict involving the United States due to its mutual defense treaty with Manila.

The most severe confrontation occurred on June 17, when Chinese forces repeatedly rammed and boarded Philippine navy boats to prevent supplies from reaching the Sierra Madre. This incident resulted in injuries to Filipino personnel and heightened tensions between the two countries.

The United States and its allies, including Japan and Australia, condemned China’s aggressive actions and called for upholding the rule of law and freedom of navigation in the South China Sea, a crucial global trade route with rich fishing areas and undersea gas deposits.

In response to the tensions, Washington reaffirmed its commitment to defend the Philippines under the 1951 Mutual Defense Treaty. National Security Adviser Jake Sullivan stated, “The US will do what is necessary to ensure its treaty ally can resupply the Sierra Madre on the Second Thomas Shoal.”

Philippine National Security Adviser Eduardo Año confirmed that the resupply missions would remain a “pure Philippine operation,” turning down offers of direct US involvement. “There is no need at this time for any direct involvement of US forces in RORE – resupply mission,” Año said.

The provisional agreement reached by the Philippines and China seeks to manage their maritime differences while preventing future clashes. Both nations recognize the need to de-escalate the situation and manage their differences through dialogue and consultation.

This rare deal with the Philippines could spark hope for similar arrangements between China and other claimant countries in the South China Sea, including Vietnam, Malaysia, Brunei, and Taiwan. However, the successful implementation and longevity of the agreement remain to be seen.

Chinese Foreign Ministry spokesperson Mao Ning emphasized that the temporary arrangement for the delivery of humanitarian supplies reflects China’s goodwill. However, China stood firm on its territorial claims and demanded that the Philippines refrain from fortifying the Sierra Madre with building materials.

The Philippines has consistently rejected such conditions, and the final deal does not include them. Philippine officials stated that the agreement was reached after careful negotiations, excluding prior notification and inspection demands from China.

The Second Thomas Shoal, located about 200km from the western Philippine island of Palawan and over 1,000km from China’s Hainan island, has been a site of repeated confrontations. Both countries assert their sovereign rights over the shoal, which is strategically important and resource-rich.

Manila deliberately grounded the Sierra Madre on the shoal in 1999 to reinforce its claims, maintaining a small contingent of sailors aboard the vessel who require resupply missions that China has repeatedly attempted to block.

The Department of Foreign Affairs in Manila reiterated that the agreement would not prejudice each side’s national positions in the South China Sea. “Both sides continue to recognize the need to de-escalate the situation and manage differences through dialogue and consultation,” the DFA stated.

China’s Ministry of Foreign Affairs confirmed the arrangement, highlighting the mutual understanding to manage the situation at Ren’ai Jiao and ensure humanitarian resupply of necessities to the personnel on the Sierra Madre.

The agreement between the Philippines and China marks a significant step towards managing maritime disputes in the South China Sea. It reflects both nations’ willingness to engage in dialogue and find peaceful solutions to their differences, despite the complex and contentious nature of their territorial claims.

As the Philippines and China implement this provisional arrangement, the international community will closely watch how both nations navigate this delicate situation. The success of this deal could serve as a model for resolving other maritime disputes in the region, contributing to regional stability and cooperation.