The geopolitics of East Asia is at a crossroads amid the US-China cold war, Japan’s leadership change in September, and the recent US presidential elections. While China, Japan and South Korea have been embroiled in geopolitical tensions surrounding North Korea’s nuclear program, regional politics is also influenced by historical legacies from the Korean War, which have once again highlighted the importance of the US nuclear umbrella in the region. Apart from the historical tensions in East Asia, the Trump administration’s America First policy and US-China relations (which are at a historic low) have greatly affected regional dynamics in recent years.
On the economic front too, the region has seen disruption that has been severely exacerbated by the Covid-19 pandemic. Disputes between South Korea and Japan have resulted in a de facto trade war between the two countries since July 2019. On the security front, North Korea’s nuclear program and the status of the General Security of Military Information Agreement (GSOMIA) between the US, Japan and South Korea continue to be major concerns. This article discusses the prospects for the most important geopolitical issues in the region in the context of Yoshihide Suga replacing Shinzo Abe as Prime Minister of Japan in September 2020, and also the impending leadership change in the US.
Economic implications of US-China cold war
The US-China cold war that was preceded by the US-China trade war since 2018 had major political and economic repercussions in East Asia. While the US-China cold war is a multifaceted challenge that has political, strategic and economic ramifications, in the short run, the US-China relations is primarily an economic issue. The detrimental impact of the US-China trade dispute was duly noted by several sources, including UNCTAD, which highlighted in November 2019 that neither the US nor China stands to benefit from the standoff in a negative-sum game, as it has led to trade diversions for both countries. As both sides suffered great losses since the US slapped China with 25 percent import tariffs between July 2018 and September 2019, the tariffs on Chinese imports have done more harm than good to the US. They resulted in greater overall trade deficits for the US and forced American companies to accept lower profit margins, cut wages and jobs for US workers and raise prices for American consumers and companies.
Despite concerns that China attained only 53 percent of its target by the end of September under phase I of the US-China trade deal signed in January 2020, President Trump announced in June that the deal remained intact. By Q4 of 2019, three East Asian economies – Taiwan, South Korea and Japan – were among the world’s ten largest exporters to the US. These economies have inadvertently benefited from trade diversion, which was significant for Taiwan and, to a lesser extent, South Korea and Japan. However, a closer look at the rift between the US and China also reveals that when taken as a whole, the drawbacks inherent in the current trade relationship between the two countries outweigh the benefits. While China’s economic recovery from the impact of COVID-19 pandemic has been stronger than that of the US, Japan and South Korea are also faced with the difficult decision of having to choose between the US and China as major trading partners. The global economic slowdown, which has accelerated due to COVID-19 pandemic, has limited the profitability and extent of markets for exports for both the Japanese and South Korean economies.
The trade war has greatly affected the Japanese economy, as China accounts for around 20 percent of Japan’s exports. The tariffs have led to a drop in exports and Japanese companies such as Ricoh, Mitsubishi Electric and Daikin Industries have relocated their production lines from China. As for Japan, key concerns include the pressure of facing an “allegiance test”, the asymmetrical relationship that would emerge between China, Japan and the US, and changes in commercial ties that would limit Japan’s leverage. Apart from these developments, Trump’s protectionist policies have been a cause for concern in terms of constraining international trade and global economic growth that is further compounded by the pandemic.
The grim picture does not look any different for South Korea. According to the Korea International Trade Association (KITA), the number of trade restrictions on South Korea have increased by 28 regulations introduced between October 2019 and October 2020 – with the highest number of these protectionist measures concerning anti-dumping duties (170 cases). KITA reported that the US lodged 47 cases concerning South Korea, as opposed to the 16 cases brought by China.
Though there has been considerable debate on how the recent US elections would affect the global economy, a negative prognosis is prevalent regardless of who becomes President. The prevailing view among the policy circles in South Korea is that the legacy of Trump administration’s America First policy is here to stay; this also implies that America’s anti-China posture will remain unchanged and that the prospects for returning to free trade remains bleak.
The history of China-US economic competition in our times may also be traced to the American and Chinese-led multilateral free trade agreements. The Trans-Pacific Partnership (TPP – otherwise known as Comprehensive and Progressive Agreement or Trans Pacific Partnership, CPTPP) was established during the Obama administration and China’s Regional Comprehensive Economic Partnership (RCEP). TPP, which was dubbed as “Obama’s signature trade deal” was devised as a mechanism for bolstering trade across a dozen countries spanning from North America and Peru to Oceania, Southeast Asia and Japan. Trump’s withdrawal from TPP in January 2017 signaled an end to an era of multinational trade agreements and implied that globalization is in retreat. Trump’s decision also invited widespread criticisms about how the termination undermined the Obama administration’s legacy of pivot to Asia by forfeiting its ties with Asia-Pacific and giving China a free hand to create a new trade deal in its place. In October 2019, Trump also signed a limited trade deal with Japan to compensate for the losses incurred by abandoning TPP, but this has produced mixed results across different sectors of the economies, with the biggest sticking points remaining in the automobile industry.
The 15-nation RCEP, which is an agreement between China, Japan, South Korea and ten member states of Association of Southeast Asian Nations (ASEAN), was envisaged as a multilateral trade agreement to boost trade among countries in the Asia-Pacific. While the agreement has not been signed to date, it is expected to facilitate negotiations for the trilateral free trade agreement (FTA) between China, Japan and South Korea. The significance of the trilateral FTA and RCEP is evident considering that Japan and South Korea are the second and third largest trading partners for China and that trade volume between the three countries crossed $720 billion, with $11 billion of investments in 2018. While RCEP has also drawn criticisms from skeptics who oppose branding or joining it as a China-led initiative, the three countries are poised to proceed with the signing of the accord later during this year to help mitigate the effects of the economic fallout from COVID-19. While Japan and South Korea are longstanding allies to the US, China’s economic significance is still too great to be ignored.
GSOMIA and security implications in East Asia
While the US-China cold war has overshadowed the trade war between South Korea and Japan, the latter also warrants close attention. Historical tensions between the two countries escalated following a series of court decisions in South Korea that ruled that Japanese companies Mitsubishi Heavy Industries and Nippon Steel redress forced laborers who worked in mines and factories during wartime. The rulings effectively annulled the 1965 post-war treaty and 2015 bilateral agreement, and triggered a diplomatic row. Simmering tensions between the two parties over war reparations resulted in a tit-for-tat spat following a South Korean district’s approval of the plaintiffs’ request to seize Mitsubishi Heavy Industries’ assets in South Korea in March 2019. The Japanese government retaliated in July 2019 by restricting exports to South Korea of vital chemicals used for producing semiconductor and smartphone display panels. This in turn sparked consumer boycotts of Japanese goods in South Korea. The impact of the boycott was grave, as the year-on-year sales of Japanese beers and automobiles plummeted by 97 percent and 57 percent respectively by September 2019. Rising trade tensions between the two countries led to South Korea filing a complaint with the World Trade Organization (WTO) in June 2020.
The situation was exacerbated when Japan removed South Korea from its whitelist of trading partners entitled to preferential treatment in early August. In return, South Korea reciprocated by removing Japan from its own whitelist later during the month. These tit-for-tat trade responses also rebounded on security relations when South Korea announcing the decision to terminate GSOMIA, an intelligence-sharing pact between the US, Japan and South Korea. The decision by the Moon Jae-in administration sent shock waves across America and Japan. Seoul’s initial decision to exit the pact was a direct protest against the trade regulations imposed by Tokyo. A subsequent high-level meeting between both sides in September to mend ties and resolve trade disputes ended in failure.
Although South Korea’s decision to leave GSOMIA was suspended on the day of expiry of the deal, it was a precarious act that could be reverted to at any time in response to Japan’s export control measures. While the US pressured Seoul to save the pact, which is largely emblematic of the security cooperation it maintained with South Korea and Japan, Washington’s ability to manage strategic alliances in East Asia was put to a test. Although domestic politics and the views of the center-left was factored into Moon’s earlier decision to scrap GSOMIA, this is largely reflective of the weakened US presence in the region, which renders Japan and South Korea susceptible to hardline postures that in themselves can be seen as responses to Trump’s America First policy.
Yoshihide Suga’s ascension to power in mid-September as Japan’s new prime minister brought fresh hopes for easing tensions and breaking the impasse in the trade dispute between the two countries. In a phone call in late September, which was the first conversation between the two heads of state since Moon met with former Prime Minister Shinzo Abe in China in December 2019, Moon described Japan as South Korea’s “closest friend,” and Suga admitted that while bilateral ties have deteriorated, they could not be neglected. While the importance of cooperation in tackling issues of common interests, including the issue of North Korea, has been stressed, difficult challenges lie ahead given the dominating conservative ethos in Japan’s ruling Liberal Democratic Party (LDP), and the deep-seated historical wartime grievances that underlie the diplomatic spat.
“America First” and US security umbrella
Despite America’s declining global influence, the Trump administration’s strategic ties with the Asia-Pacific are preserved through quadrilateral security dialogue, or better known as the Quad, which is a strategic forum consisting of the US, Australia, India and Japan. The Quad, launched in 2007 following an initiative by former Japanese Prime Minister Shinzo Abe, was revived during the ASEAN summit in November 2017. The slogan of “expanding cooperation on counterterrorism, cybersecurity and maritime security to ensure a free and open Indo-Pacific,” is primarily driven by the shared objective of countering Chinese hegemony in the region. India’s border skirmishes with China, which flared-up in September 2020, and the ongoing row between the US and China have further highlighted the importance of strengthening the Quad alliance.
The rise of China also has profound implications for the security of the Korean peninsula. The legacy of the Korean War has been a critical factor in configuring geopolitics in East Asia and has often triggered political backlashes. The Terminal High Altitude Area Defense (THAAD) missile system dispute that revolves around China’s opposition to South Korea’s decision to deploy American missile defense system in July 2016 had strained ties between the two countries. Beijing opposed the deployment out of concerns that it would be used for spying on China’s missile programs, On the contrary, South Korea had maintained that THAAD is a defensive system directed at North Korean missiles targeting South Korea. It follows that the THAAD dispute reflects Beijing’s resentment over Seoul’s strategic alliance with Washington. Based on shared strategic priorities between Beijing and Pyongyang, the latter invoked the THAAD row again in early November 2020, alleging that South Korea has plans for additional deployment of THAAD as part of a long-term plan for creating a stable stationing environment for the missile defense system. The Quad alliance, the deployment of the US missile defense system and joint military exercises held with the US have irked both Pyongyang and Beijing, constituting the basis for strengthening an asymmetric alliance between China and North Korea.
With Joe Biden’s election, it remains uncertain as to whether the Moon administration’s North Korea policy will materialize. While Moon continues to hold out hope of declaring an end to Korean War, Biden, who is skeptical of Pyongyang, has dismissed the previous summits between Trump and Kim as having “not thought out plans”, except for giving the North Korean leader the undue global recognition that he desired. The Biden administration is faced with the task of mending ties with its allies in the Asia-Pacific, among other things, as Trump’s America First policy drove a wedge between Washington and Seoul due to disagreements over military burden-sharing costs and wartime operational control (OPCON) transfer. As was the case with the US allies elsewhere, Trump’s demand that South Korea shoulder more defense costs did not sit well with the South Korean public. Trump, who had initially demanded that South Korea pay $5 billion a year, sought to settle a 50 percent increase to $1.3 billion a year, whereas South Korea offered to pay a 13 percent increase from the $870 million agreement from the previous year. Trump’s plan for troop drawdown in the previous term was also regarded as a bargaining chip to increase South Korea’s share of the cost of hosting 28,500 American troops. Both parties also disagreed over the timing of Washington’s plan to transfer OPCON by 2022, though the current pandemic will delay this in any case. As Biden takes office, the US will have to redefine bilateral and trilateral strategic priorities with South Korea and Japan and strengthen Washington’s credibility as a reliable ally.
Trump’s America First policy has come at the expense of undermining America’s global influence. Although the outgoing administration has sought to keep China in check by imposing tariffs on Chinese imports, it has not, when seen from a holistic perspective, achieved what it had fully intended to by separating America’s economic interests from political and strategic dimensions. America’s retreat from the region has greatly undercut US influence in the Asia-Pacific region. By insisting that its allies raise defense burden sharing while giving the US scope to draw down its troops, Washington has weakened its alliance with its East Asian allies. Donald Trump’s affirmation that the trade deal with China will remain in effect has provided little assurance about the future of global trade. Regardless of the actual feasibility of the US-China decoupling, should the US-China cold war continue under the Biden administration, the US allies would inevitably have to face the allegiance test by being forced to choose between the two countries. While Japan and South Korea have historically been aligned with the US in terms of political interests, the fact that China also remains a key trading partner for both countries cannot be overlooked.
As the Trump administration revived the Quad to maintain its strategic alliance with key Asia-Pacific partners, if this were to continue, the Biden administration needs to have a concrete strategic vision for the alliance and encourage more allies to participate in the forum. Considering that the 2018-20 Korean peace process has failed to bring about any tangible outcomes beyond eliciting piecemeal concessions and generating short-term political gains, Biden’s vision for principled diplomacy could provide a viable alternative. While it is important to engage North Korea, the new US administration would have to introduce stringent measures to ensure that Pyongyang does not use talks just to bolster the regime. At the same time, the future of Washington’s Asia-Pacific strategy will largely depend on Biden’s position on key issues concerning Taiwan, Hong Kong, the South China Sea, Xinjiang and Tibet. There is little doubt that restoring a strong US leadership is necessary not only to effectively mediate in South Korea’s and Japan’s current trade row, but also to maintain GSOMIA. North Korea’s hostile actions and lack of commitment to denuclearization in recent years suggests that South Korea and Japan need to refocus on a pragmatic relationship based on mutual strategic interests.
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