I wasn't raising China as an example to discuss real politics, but the point is that there is such a thing as international water, and claiming international water doesn't mean everyone else is obliged to recognize that claim. The Dominion can claim the entire Gamma Quadrant if they want, but they can't realistically enforce the claim. Backing down in the face of irrationality isn't a good way to peacefully coexist. The Dominion, given an inch, would happily take a mile. "A simple threat keeps them out of our side of the anomaly; what can we accomplish with force?"
And yet as the Founders felt hating all solids was rational entering the Gamma Quadrant would inflame more tensions. They may take that as flagrant dismissal of their point and get more brazen.
Either way, the war still IMO was inevitable, and any reasoning with the Dominion would have been futile.