rd E@omist May BRE BOEE HY The South China Sea | Sea of troubles : MERICA and its friends in ‘Asia have long worried ‘about the South China Sea be- coming a Chinese lake-a vast stretch of water, through which half the world’s commercial shipping passes, falling under the control of China’s fastex- panding navy and coastguard. In the past few months these fears have been amplified by satellite pictures showing Chi- ‘nese barges pouring sand onto disputed reefs, in order to turn theminto islands. On severalof these remote outcrops, unsuit- edtocivilian habitation, China appearstobe buildingairstrips and harbours to accommodate jets and warships. With this show of military force, China is asserting a long- standing, ifoutrageous, claim to ownership of virtually the en- tire sea. This is a dramatic change of tack (see page 37). China still claims to believe in seitling territorial disputes by diplo- ‘macy. Yet, by going ahead and planting it fags, itis ignoring the protests of its neighbours, not tomention America. “This change is even more unsettling, given that for years ‘China has been trying to win friends in South-East Asia. The ten:country Association of South Fast Asian Nations (ASEAN) isusually reluctant to criticise the giantnext door. Yet on April 28th its leaders ended an annual summit in Malaysia with an ‘unusually blunt statement: reclamation work on the reefs, they said, had “eroded trust and confidence” in the South Chi- na Sea and threatened to “undermine peace, security and sta- bility”. And in Washington, standing next to Japan's prime minister, Shinzo Abe, President Barack Obama said that “real tensions” had arisen in the South China Sea and that China's muscle-flexing was “the wrong way" togoaboutthings. PARLE z Leaders A disputed seais a growing security nightmare—and increasingly an ecological one ‘There has always been arisk that rivalries in the South Chi- na Sea could flare into military conflict. In 2002 China and ‘ASEAN agreed that disputants should resolve differences peacefully, “exercise selfrestraint” and adopt. formal code of conductfor their activities. But China has shown no eagerness to develop such a code. The Philippines, fed up with its obdu- ‘acy, has challenged the basis of its teritorial claims before a ‘n+backed tribunal. China has refused to co-operate. Allsides arenow digging in theirheels. Rona righ o peak with a united voice (at lsd If it sticks together it stands abetter chance of persuading Chinato ‘embrace a code of conduct. But ASEAN is weak and will be- come weaker if its largest member, Indonesia, fails to play a leading role—as may happen under the country’s new presi- dent, Joko Widodo (see page 34). Although China has signed upto the UN Convention on the Law of the Sea, which sets the rules for tersitorial claims, America has yet to ratify it That ‘makesthe convention's principles easier toignore. Greening the way to peace Security isnot the only concernin the South China Sea. The en- vironmentis also under threat Like the Mediterranean, the sea is shallow and largely enclosed. An ecological catastrophe is ‘aking place, as reclamation destroys reefs, agricultural and in: dustrial run-off poisons the water and overfishing depletes fish stocks. The littoral states ought to be working together to ‘manage the sea, but the dispute over sovereignty fosters the fear thatany collaboration will be taken asa concession. If they are to save the sea, the regional states must urgently put aside their differences. Indeed, if they could only co-oper- ate over the environment, they might just find the territorial disputes easiertosettle,too. m Gay marriage in America Bless it Viuhselte APRIL DORR end Jayne ywse have lived together ‘Sheseceage for ten years and want to get hitched. However, the state of ~~" © Michigan, ‘where they live, w= won'tlet them. So they cannot ctuLsuiuitu—e formally adopteach other's chil- meme © 2 4 dren and there iso guarantee, ifone ofthem dies thatthe restof the family will beallowed to stay together. Another gay couple, lipe Dekoe and Thomas Kostura, were married in New York. But afier Mr DeKoe, a sol- dies, finished servingin Afghanistan, the couple moved to Ten- nessee, which does notrecognise their union. Both couples are ‘suing to have their states’ bans on same-sex marriage struck The case, named Obergefll v Hodges, reached Ameri- ‘The legal case for allowing gay marriage is as clear as the moraloneis urgent a's Supreme Court on April 28th (see page 2. M: ect thejustcestomake gay marriage legal throughout Ameri That would be a slap in the face of democracy, some say, Marriage has long been a matter for the states to regulate, not the federal government, In several liberal states lawmakers have given the go-ahead to same-sex unions; in conservative states they have not. If voters donotlike this outcome, they are five to elect different politicians. If advocates of gay marriage ‘Want to rewrite the rules of an ancient institution in Michigan or Tennessee a Should persuade Michiganders and Ten- nesseans of the justice oftheir cause, rather than relyin; couristo overrule the wllofthe peepe, i This is not a foolish argument. In general, big social contro- versies are better settled democratically than by judicial fiat However, the court's first duty is to uphold the constitution, » e—OOO es2 RE RRS Ce which means striking down laws that violate it. It has some times overstepped its authority. In 1973, for example, when abortion was legal in some states but not in others, the court ruled in Roe v Wade thatitshould be legal everywhere, citinga rightto privacy thatis nowhere mentioned in the constitution. ‘This newspaper favours legal abortion, but in Roe the justices invented the law rather than interpreting it, substituting their ‘preferences for those of voters. That power-grab has poisoned the debate on abortion in America ever since, ‘Opponents of same-sex marriage worry that the court is, planning to do the same thing again. But Obergefell v Hodgesis not like Roe v Wade; itis more like Brown v Board of Education. (which barred racial segregation in schools ina954) or Loving v Virginia which struck down state bans on interracial marriage in 3967). The constitution says that no state may “deny to any person within its jurisdiction the equal protection of the Jaws”. Limiting marriage to heterosexuals plainly denies such equality to gay people. So the court should strike down all re- maining bans on same-sex marriage. The legal case is clear. ‘Themoral oneiscompelling. Traditionalists will certainly object. Butthe backlash will be nothing like as severe or long-lasting as the one that followed ie conoinet May aH 2015 Roev Wade. (To this day,no candidate can win the Republica) presidential nomination without swearing to appoint judge ‘who will try to overturn that decision.) Same-sex marriage notlike abortion. There areno difficult trade-offs: allowing, couples to wed has no effect on the health or stability 0 heterosexual unions. And there are no victims: anti-abortio: campaigners can wave placards showing bloody fetuses, BU campaigners against gay marriage will struggle to find anyon who hasbeen harmed byt. ‘The right to be smug and boring Sone depuilianstsCongessar threatening to ct funds fo any federal enforcement of a court ruling they do not like, bt they will not get far. Indeed, many ir their party will be gladt see the issue taken out of their hands, for they know this is battle they will lose sooner or later. Public opinion ha changed fast, and in a relentlessly liberal direction. The mo: religious and conservative states are now less hostile to ga marriage than the most secular, liberal ones were a decad ‘go. The justices will no doubt have an eye on history as the deliberaie. With luck, they will reach a decision they will nc beashamed to explain totheir grandchildren. = Business in France Double trouble ‘Treating shareholders unequally will nothelp French firms conquer the world (A FRANCE as aloes been proud of its corporate cham- pions. But these are worrying 9 times. Only one French firmisin the global top so by market val- ue. The country's stockmarket is just 3% of the world's total, ‘ down from 5% a decade ago. ‘An American activist fund, 23am has ust mauled Vivendi, amedia firm. Flagging Gallic contenders, among them Alstom (engineering), Alcatel (telecoms) and Lafarge (cement), are be- {ng bought by foreigners, The Chinese are coming. Feugeathas sold a stake to Dongfeng, a carmaker from Wuhan that doubt- less hopes to take control eventually. lub Med, a holiday firm ‘managed by the son of a French president, isnow in the hands of a billionaire who bégan by selling breadin Shanghai, Enter stage left, the French government, which has legislat- edto strong-arm firms to give souped-up voting rights (o loyal shareholders. It reckons this will protect firms from specula- tors and raiders, and allow them to punch above their weight. ‘The idea has plenty of support across Europe. In reality, it will domore harm than good. Arevolutionary idea The“Florange law" was passed in 2014 and will come fully into force in March 0x6, Shareholders who have owned stockin a listed French company for more than two years will then see their votingrights double. The change is automatic unless two- thirds of shareholders vote to amend their firms’ constitutions, as some are now scrambling to do (see page 56). -__ Theruleis bad for two reasons. First, it will add clout to an «elite of insiders whose record is mediocre. Two thirds of rms Basa: in the cac-4o index have a long-standing anchor investor usually the state, a family or a mogul. They will become mo: powerful. Vincent Bolloré, a tycoon, will take creeping contr of Vivendi. The government will probably get more sway ov Renault, to the irritation of its boss, Carlos Ghosn.. Supporters say that such anchor investors allow firms plan for the long run. Google, for example, is controlled by i founders and can ignore Wall Street's whims. But mature firm ofien stagnate if insulated from outside threats. Orange (fc ‘erly France Télécom) and Bouygues, a conglomerate, are pt tected by the state and a family respectively and have drift since the1990s. Bossesiin Italy are adept at creating fiddly cay tal structures that fortify their control and feeble at build competitive multinationals. Second, Franceis attempting toimpose double votingrigt as a default option. One-share-one-vote is not a divine righ noris a wholly free market for takeovers, Firms should be: lowed to issue whatever securities they want-though, if th protect themselves, they will pay a higher cost of capital ar may perform worse. Even countries that think an open a proach to ownership breeds more ruthless and valuable firr will block deals that genuinely threaten the publicinterest. But when a country systematically tries to enforce unequ shareholder rights (and even worse, does so on already-list firms) there are high costs. The voting power thatFrance is te {ng from newer investors has a value: shares without vot typically trade at a discount of 540% to those that do, and ‘much a5 40% when managers are mistrusted. The higher cx of capital will apply toall French firms their valuations will lower than their peers’ in investorfriendly places; and th Will find it harder to issue shares to pay for expansion or tal overs. That will hardly help them command the global stage