Multiple articles, commentaries, and analyses (including here at The Diplomat) have, for years, treated as fact the data point that $5.3 trillion in trade transits the South China Sea every year. The origin of that number, however, has long been a mystery.
It first appeared in remarks delivered in late-2010 by then-U.S. Pacific Command chief Admiral Robert F. Willard. Since Willard’s use of the figure, it gradually seeped into common use, becoming an important piece of conventional wisdom on the South China Sea, helping outline the region’s geopolitical and economic salience.
Now, for the first time, a team of researchers at the Center for Strategic and International Studies’ China Power project have dug into the question of just how much trade a year passes through the waterways of the South China Sea. With a new dataset, the researchers conclude that in 2016 the figure comes in at approximately $3.37 trillion.
For all intents and purposes, that number is large enough to make the basic point that a lot of regional trade passes through the South China Sea, but it does fall substantially short of the $5.3 trillion figure that is so commonly used. In 2010, when the figure first appears to have emerged out of U.S. Pacific Command, the CSIS researchers find that total trade volumes through the South China Sea stood in the range of $2.8 trillion, a little more than half the earlier estimate.
“The frequent citing of the $5.3 trillion figure in various publications implies an overwhelming concern among the media, scholars, and governments that a disruption of South China Sea trade would precipitate a global economic crisis,” the CSIS report notes.
The new trade estimates offer an enlightening picture of the stakes in the South China Sea for various regional states, including claimants. In 2016, only five countries relied on the South China Sea for more than 50 percent of their total trade.
These include, in descending order, Vietnam (86 percent), Indonesia (85 percent), Thailand (74 percent), Singapore (66 percent), and Malaysia (58 percent). Of these states, only Vietnam and Malaysia are claimants in the South China Sea, while Indonesia maintains an exclusive economic zone dispute with China.
China, meanwhile, despite grabbing headlines for its island-building activities in the South China Sea and broader assertion of jurisdiction in disputed areas through its coast guard, relies on the South China Sea for 39 percent of all its trade.
The CSIS study does demonstrate that the core assertion behind the $5.3 trillion figure remains correct, even if the data point itself was not: the South China Sea is indeed an important nexus for regional and global economic activity. In 2016, 21 percent of all global trade transited the South China Sea, for example.
As a result, any future conflict in the South China Sea, either between regional claimant states or a broader war drawing in the United States, will likely have significant disruptive effects on global commerce.