An international tribunal’s recent ruling on the South China Sea leaves Taiwan in a sensitive position.

In September last year, President Tsai Ing-wen, then the ruling Democratic Progressive Party (DPP) presidential candidate, told a diplomatic reception: “A future DPP administration will be committed to following…the United Nations Convention on the Law of the Sea (UNCLOS) and respecting freedom of navigation. We are ready to engage in dialogue with different parties with the purpose of finding a diplomatic solution.”

But when an UNCLOS tribunal constituted to resolve differences between China and the Philippines under the Law of the Sea this July unanimously delivered a landmark ruling declaring China’s vast and ambiguous “historic claims” to most of the South China Sea invalid, Tsai surprised many by rejecting the verdict entirely. Although her independence-minded administration had been expected to lean subtly closer to the United States on South China Sea issues, her reaction placed her closer to the position of Beijing and the outgoing Kuomintang (KMT) administration.

While not a direct party to the arbitration proceedings, Taiwan is affected in that it is one of the countries – along with Brunei, Malaysia, the Philippines, Vietnam, and China – asserting sovereignty over all or part of the Spratly Islands group in the South China Sea.

The Philippines sought arbitration after China seized the Scarborough Shoal in 2012 and denied Filipino fishermen access. Manila challenged China’s claims to waters falling within an imaginary “nine-dash-line” based on a map drawn up in 1947 by the KMT when it ruled China. While China never officially claimed entitlement to these waters covering 85% of the South China Sea, its behavior at times suggested otherwise, raising tensions with other claimants to the area.

The situation also caused concern for the U.S. government, which supports freedom of navigation as a basis for international trade and order in a region that sees an annual US$5 trillion worth of seaborne trade. Viewing Beijing as taking an unnecessarily aggressive stance, Washington welcomed the use of arbitration to resolve differences and further creation of a rules-based international order in the South China Sea. Before the ruling, U.S. officials urged Asian nations to support the outcome of the arbitration proceedings, but China boycotted the proceedings entirely, rejecting the authority of the tribunal over the issue.

Unfortunately for Taiwan, the tribunal ruled that all the land features of the Spratlys – including the largest, 46-hectare Taiping Island (also known as Itu Aba), occupied by Taiwan since 1956 – are simply “rocks.” As such, they are not entitled to the 200-nautical-mile Exclusive Economic Zone (EEZ) that UNCLOS recognizes as giving a state special rights to exploit marine resources, such as fishing. Taiwan and China officially share nearly identical claims to the region, a legacy of the government that Chiang Kai-shek and his forces brought to Taiwan when they fled China in 1949.

Declaring that the ruling “severely infringed” on Taiwan’s rights to its South China Sea islands and related sea areas, Tsai said Taiwan would not consider it legally binding. The next day, in a display of nationalism, Tsai briefly boarded a navy frigate that was sent out to patrol the South China Seas in a mission she described as demonstrating “the determination of the people of Taiwan to defend their national interests.”

Bonnie Glaser, Senior Adviser for Asia with the Washington-based Center for Strategic and International Studies, says while American officials and analysts did not expect Tsai to whole-heartedly back the Philippines or endorse the tribunal’s ruling, Tsai’s firm rejection of the verdict still came as a shock. “This is not what I heard from her personally, and not what other people had heard from her,” Glaser told Taiwan Business TOPICS. “The expectation had been that she would say as little as possible.” Glaser adds that she expected Tsai to give a non-committal, vague response and show more support for UNCLOS.

Analysts give several reasons for Tsai’s hard-line response. First, she appeared to be unprepared for a ruling – the worst-case outcome for Taiwan – that relegated Taiping to the status of a rock. Her government had expected either that Taiping would be classed as an island (it has its own fresh-water wells) or that the tribunal would avoid making a ruling on Taiping’s status altogether, as Taiping had not been specifically included in the Philippine arbitration submissions.

Second, troubling domestic politics were seen as driving Tsai’s response more than geopolitics. “She has had an endless series of headaches,” said Lin Chong-pin, a former deputy defense minister. “If Tsai differed from the previous position of (outgoing KMT President) Ma Ying-jeou, there would have been tremendous controversy… and she does not have that luxury.”

Focusing on turning around an ailing economy and saving a government pension system from bankruptcy were always much higher priorities for Tsai than the South China Sea, and she needed to tackle these – along with other controversial issues – amid feisty opposition not only from the KMT, but also civic groups and even elements within her own party. Indeed, after she took office on May 20, her administration was beset by a series of unexpected problems: the missile accidentally lobbed towards China during military exercises that hit a Taiwanese fishing boat, killing the captain; China’s severing of cross-Strait communication channels over displeasure with Tsai’s failure to accept the notion of “one China;” flash flooding at the Taiwan Taoyuan International Airport that delayed more than 200 flights and left 30,000 stranded; and unusual labor unrest, including a strike by China Airlines flight attendants and controversies polarizing labor and business groups over cuts to national holidays and arrangements for a six-day working week

Toward the end of his presidential term, in addition, Ma had drummed up publicity for his contention that Taiping should be classed as an island, not a rock. He visited Taiping, drawing rare U.S. criticism, with American Institute in Taiwan (AIT) spokeswoman Sonia Urbom telling Reuters that his actions were “extremely unhelpful.” Ma also orchestrated other events, such as inviting foreign journalists to Taiping, and he oversaw the construction of an airstrip there, plus a wharf capable of berthing 3,000-ton coastguard cutters. The resulting public expectation was that a good Taiwanese leader should fight for Taiwan’s rights relating to Taiping Island. Facing so much discord over the management of the economy, Tsai was not in a good position to challenge this notion.

Above all, the widespread fury in Taiwan over the ruling reflected the public’s deep sense of injustice over Taiwan’s treatment by the international community. Owing to pressure from Beijing, Taiwan is not a signatory to UNCLOS, and the Ministry of Foreign Affairs (MOFA) complained in a statement that the text of the ruling referred to Taiwan humiliatingly as the “Taiwan authority of China.” The ministry further noted that Taiwan was not invited to take part in the proceedings nor were its views solicited. Nevertheless, the non-governmental Chinese (Taiwan) Society of International Law pressed the case that Taiping was entitled to a 200-nautical-mile EEZ by presenting an amicus curiae brief that the tribunal accepted and the judges considered.

There was universal condemnation of the tribunal’s ruling across the Taiwanese political spectrum from pro-China hardliners in the KMT to the avidly pro-independence New Power Party (NPP), with few local critics of Tsai’s stance. “We were downgraded to be a part of China,” said NPP lawmaker Hsu Yung-ming. “The ruling will do some damage to Taiwan, that is for sure.”

KMT lawmaker Chiang Chi-chen, the organizer of a legislative delegation that visited Taiping days after the ruling, called for the government to replace the coastguard contingent stationed on Taiping since the turn of the century with military personnel. He also demanded that Taiwan impose its own EEZ and use the military to drive out any potential intruders from the Philippines and Vietnam. In late July, a flotilla of fishing boats made the 1,600-kilometer voyage to Taiping to protest the ruling, returning triumphantly – with barrels of Taiping’s well water – to a heroes’ welcome.

Days later, there were signs that the Tsai administration was trying to calm the nationalistic furor. An Executive Yuan statement explained that Taiwan and other claimants had never sought to establish EEZs in areas around Taiping, as their overlapping would cause conflict. The best way to resolve the situation is through multilateral negotiations, the statement continued. According to media reports, in addition, the government had sought to discourage the fishermen from conducting their protest voyage and it denied permission for KMT chairwoman Hung Hsiu-chu to pay a visit to Taiping.

Dustin Wang, a professor of political science at National Taiwan Normal University, notes that the relevant wording in UNCLOS article 121 – stating that rocks that cannot sustain human habitation or economic life shall have no exclusive economic zone or continental shelf  – was formulated in the 1980s. Since then, he notes, many nations have interpreted the wording according to their own interests. Besides Taiwan’s long-time insistence that Taiping is an island, another example is Japan’s assertion that the miniscule Okinotori reef deserves island status.

The tribunal defined “human habitation” more strictly than expected, Wang says. While most Taiwanese took the phrase to mean that humans are able to live there, a condition proved by the presence of the 100 coastguard and other personnel stationed on Taiping, the tribunal apparently concluded that “islands” qualifying for an EEZ should be able to support communities without relying on external resources.

Overall, Taiwan’s response to the ruling is unlikely to create any long-lasting damage in relations with the United States or Asian neighbors. While the inability to establish an EEZ may be a symbolic political setback, it appears – barring unexpected discoveries of natural resources in the region – not to matter greatly in practical terms. Charles Chen, Ma’s former spokesman, noted that preliminary surveys near Taiping conducted by CPC, Taiwan’s state-owned oil company, have not found any hydrocarbon deposits. Glaser notes that such deposits tend to be near main coastlines, not in the middle of the sea like Taiping’s location.

The ruling did cause Taiwan to lose some fishing grounds to the Philippines, as Manila is now entitled to impose an EEZ from the island of Palawan up to Taiping.  According to coastguard officials, however, relatively few Taiwanese fishing boats regularly fish in these waters, and knowledgeable sources say the area is now of little interest to the fishery industry due to previous over-fishing.

Strategic issues also do not seem to be a consideration. The tribunal’s authority extends only to sea rights, not rulings on sovereignty disputes. As a result, no impact is seen on Taiwan’s ability to continue occupying Taiping and to put whatever military installations it sees fit there. Legal status as a rock still entitles Taiping to a 12-nautical-mile territorial sea.

China was also infuriated with the tribunal’s ruling, but Beijing’s displeasure with Tsai on other grounds prevented cross-Strait relations from warming up after the ruling, although some analysts said Tsai’s response may have kept relations with China from significantly worsening. Shortly after the ruling, a spokesman for the PRC’s Taiwan Affairs Office called on both China and Taiwan to jointly defend their territorial sovereignty and maritime rights in the region, but the Taiwan side ruled out the possibility of any active cooperation.

Dustin Wang notes that the above-mentioned MOFA statement puts Taiwan’s discontent with the ruling in the context of its having downgraded Taiwan’s status to an authority under China, a position that may stoke Beijing’s suspicions that Tsai is harboring ideas about Taiwan independence. Glaser points out that in the lead-up to Tsai’s inauguration, Beijing’s leaders were most concerned about her stance on relations with Japan and on the South China Sea. Moreover, Tsai’s comments on the ruling did not mention China’s “historic rights” to the seas or other wording showing she acknowledged Chinese heritage. [Some Taiwanese commentators noted that during Japan’s colonial rule over Taiwan, which ended in 1945, Taiping was also administered by the Japanese.]

In the end, relations with the United States appear to be unharmed. Although the Obama administration would have preferred Tsai to uphold international law, not reject the ruling outright and send a naval ship to the South China Sea, Glaser says, Washington would have been even more uneasy if Taiwan had openly sided with the Philippines and called on China to respect the tribunal’s decision, as that could have sparked a crisis between Taiwan and China. Washington wishes to see stable cross-Strait relations, notes Glaser, with a consensus in the U.S. government that Taiwan’s stance on the South China Sea should not be a catalyst for a spike in cross-Strait tensions.

Rupert Hammond-Chambers, president of the Virginia-based U.S.-Taiwan Business Council, also said he was unaware of any negative fallout in Washington. “There was an effort to give Tsai some space domestically, which she took,” he said in emailed comments. “She needed to ensure that she wasn’t outflanked by the KMT, which she achieved, and then let the matter quiet down.”

Another question is the potential impact on Taiwan’s relations with Southeast Asia. Tsai’s New Southbound Policy of encouraging economic rebalancing away from China by promoting trade and investment in Southeast Asia forms a major plank of her policies for revitalizing the stagnant economy. The Tsai government’s position on the South China Seas may be at odds with that of key Southeast Asian nations, but interviewees said the influence of that issue pales next to other daunting obstacles confronting the New Southbound Policy, including likely Chinese pressure on Southeast Asian nations not to sign free trade pacts with Taiwan, as well as unfamiliarity in Taiwan with Southeast Asian culture and business practices.

Political observers are now watching to see whether the Taiping issue dies down or whether aggrieved Taiwanese nationalism adds another unpredictable variable in an already sensitive region. On August 17, Interior Minister Yeh Jiunn-rong visited Taiping. Although he denied media suggestions that he was paving the way for a visit by Tsai Ing-wen, he said Taiping was a perfect place for an observation station for climate-change research, according to the Central News Agency. CNA also reported that more than 1,000 tourists have signed up for a tour of Taiping Island during the Moon Festival in mid-September. The travel agency has filed an application with the Ministry of National Defense, but has not yet received a response.

Such visits, says Glaser, would only further stir up passions and would not be helpful in handling the delicate issues posed by the Spratlys.