For the past fortnight, the Pacific Ocean has rippled with talk of war. "We hope other countries won't make the South China Sea an origin of war," a Chinese Vice Foreign Minister intoned at a media conference reacting to The Hague's damning ruling on Chinese actions at sea against the Philippines.
Philippines President Rodrigo Duterte a week ago declaimed, "We are not prepared to go to war, 'war' is a dirty word." During a landmark speech in Washington, former senior Chinese diplomat Dai Bingguo warned, "Accidents could happen and the South China Sea might sink into chaos and so might the entire Asia".
Invoking wars in Korea, Vietnam and Iraq, Dai reminded, "The risk for the US is that it may be dragged into trouble against its own will and pay an unexpectedly heavy price." To be sure, all this is talk of avoiding war, but the very fact that countries across the Asia-Pacific are voicing its possibility is sobering and should make Australians pause to consider what is at stake in the waters to our north. Although the probability of war is small, it is real and increasing. For much of the past fortnight vessels from three fleets of the Chinese Navy have been exercising south of Hainan Island and astride international shipping lanes. 
Hawkish Chinese newspapers have been editorialising that China must be prepared for military confrontation. On Thursday the Global Times said: "The -People's Liberation Army should enhance its military deployment in the waters of the Nansha Islands and be fully prepared to counterattack if the US makes further provocations." The US aircraft carrier USS -Ronald Reagan remains on patrol in the South China Sea, along with two cruisers, four destroyers, and a Virginia class submarine. Last month, it joined a second US Navy aircraft carrier strike group, the USS John C. Stennis, to exercise in the South China and Philippine seas. These deployments all part of the shadow boxing between the two navies that has now become regular in the South China Sea.
And symbolic gestures abound. US Secretary of Defence Ashton Carter flew in to visit the aircraft carriers steaming in the South China Sea last month. This weekend, US Vice-President Joe Biden will land on the deck of the USS John C. Stennis as it operates off the coast of Hawaii.
In   May, the Chinese navy staged a concert for hundreds of troops and construction workers atop one of the South China Sea rocks it has been terraforming into a multistorey aquatic fortress. Popular Chinese singer Song Zuying performed a rendition of the Ode to the South Sea Defenders Chinese officials were quick to dismiss this week's decision by the Permanent Court of Arbitration on the disputes taking place in the South China Sea. One diplomat urged reporters to take the ruling and "dump it in the bin". But for a decision it has been at pains to declare insignificant, China has expended enormous effort in a global diplomacy campaign against it. Paid advertisements on behalf of Chinese media have appeared in Auckland, Canberra, Ottawa and London, declaring, "Manila has no leg to stand on", and concluding, "the arbitration is a political farce and provocation under the guise of international law".
In advertorial supplements for Australian newspapers, China Daily writers mused: "Many -Chinese seem puzzled about Australia's position on the South China Sea and why it is incongruent with that of China", alongside editorials saying that the China-Australia Free Trade Agreement "is a test that both countries need to pass with high marks in return for the efforts that went into securing it and the aspirations both sides have for the future of their economic and trade relations".
Australia's diplomatic talking points on the South China Sea have long been static, declaring that we have no position on the territorial claims. But in the aftermath of the Hague decision, which the National Security College's Rory Medcalf judged a "profound criticism of China's behaviour in the global commons", a small shift: "This decision is an important test case for how the region can manage disputes peacefully" said Foreign Minister Julie Bishop.
It remains hard for Australians to judge the long-term significance of developments in the South China Sea. Despite the photos showing China's 3200 new acres of artificial islands layered with bomber-capable runways, radar systems, troops and rooftop gun batteries, just 4 per cent of Australians rated the South China Sea as the most important national security threat to Australia in a survey published by the United States Studies Centre this year. But the potential for conflict should be of greater concern. Any hostilities there would involve massive disruption to the trade networks in East Asia.
Beyond the damage to our trading partners, there would be a direct impact on Australia's economy were war to break out in the South China Sea: 91 per cent of our refined fuel imports comes from countries that fringe or transit the South China Sea. Sixty per cent of Australia's exports and 40 per cent of imports travel through these waters, in which China has been constructing military checkpoints.
In gauging the threat another country might present, defence planners assess two things: capability and intent. Capability can be observed and measured, and at almost every level China's military capability is increasing rapidly. Its presence in the South China Sea is a tangible demonstration of that. But intent is more malleable and less predictable. It relies on political deliberations that can change overnight, as well as over decades. At the moment the trend lines are running the wrong way on how China intends to use its growing military heft to resolve tensions.
Though Australia does not take a position on disputes in the South China Sea, it does take a position on how they should be resolved - through evidence-based international arbitration, rather than the use of menacing martial tactics like the ramming of fishing vessels.
We should encourage further submissions to the PCA by other claimant states, and consider deploying our expertise in international and maritime law to assist in the process. This should include continuing to press the US to strengthen its leadership on this issue by finally ratifying the UN Convention on the Law of the Sea.
There are other niche contributions that Australia might make, particularly on the environmental issues posed by China's reef construction activities. We should certainly not, as opposition defence spokesman Stephen Conroy has this week suggested, rush to unilateral freedom of navigation operations close to China's conjured islands. Such operations, of the type conducted recently by the US Navy, were necessary to prevent the tacit erosion of shipping freedoms by the Chinese military presence in the South China Sea. Now that the tribunal has explicitly -reinforced those rights, there is less need to physically assert them.
Doing so in the current tense climate, particularly without the proximate support of the US or other countries, would be very ill advised. But such operations might become necessary again in the months and years to come and we should deeply weigh now the risks they might realise in the most worst-case scenarios.
For now, it is likely that there will be a pause as China and the US consider how best to prosecute these maritime issues. Any deliberate action at sea in the coming weeks will impact on the deliberations due for   September at the G20 meeting to be hosted by China, and the East Asia Summit to be hosted by Laos. But the real test for the US and China at these meetings and beyond will be their ability to quarantine the South China Sea disagreement from wider discussions in their relationship.
James Brown is the research director and an adjunct associate professor at the US Studies Centre, University of Sydney.