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South Korea and China Make Amends. What Now?

 
 

Before and after U.S. President Donald Trump’s brief state visit to Seoul, several notable developments occurred in South Korea-Chinese relations. On October 31, Seoul and Beijing announced an agreement and released coordinated statements acknowledging the importance of their relationship. The agreement signaled their desire to move beyond the Terminal High Altitude Area Defense (THAAD) dispute and put mutual relations back on track in order to focus on their joint desire to denuclearize the Korean Peninsula.

This was followed on November 11 by a summit meeting between South Korean President Moon Jae-in and Chinese President Xi Jinping in Da Nang, Vietnam on the sideline of the APEC Summit. Both leaders announced their intention to “swiftly restore exchange and cooperation in all areas to a normal track.” Simultaneously, Moon accepted an invitation for a third summit next month in Beijing, with reports of a potential return visit by Xi to South Korea early next year. Two days later, at the ASEAN Summit in Manila, Moon and Chinese Premier Li Keqiang met and reiterated their intention to normalize relations.

Both Moon’s interaction with Trump during the latter’s visit and his move to repair relations with Beijing represent Seoul’s ongoing tightrope balance between its two most important bilateral relationships. On the one hand, Seoul remains existentially bound to it longtime U.S. ally. On the other hand, China, with whom Seoul shares direct geographic proximity and deep cultural and historical ties, is South Korea’s biggest trade partner and integral to any diplomatic solution to the North Korean nuclear crisis. With this in mind, and as a complement to my previous analysis of Seoul’s dilemmas vis-à-vis the United States, it is instructive to review several aspects of South Korea-China ties.

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Recent developments between Seoul and Beijing can be seen, in part, through the lens of economic and trade relations. While meeting with Li, Moon stated, “Many South Korean businesses have experienced problems because of the stagnation in South Korea-Chinese relations due to the THAAD issue.” He asked Beijing to help relieve these issues and promote economic, cultural, and tourism exchange. In particular, Moon mentioned a quick resumption of high-level economic consultative bodies, reversal of a Chinese policy denying subsidies on batteries produced by South Korean businesses, and lifting of anti-dumping regulations on South Korean imports. He also proposed advancements in the Korean won-Chinese yuan direct transaction market as well as greater financial cooperation.

However, one should not overstate the economic benefits resulting from improved relations. Beijing undoubtedly used its economic clout to punish Seoul over THAAD by boycotting Korean products and instituting other types of restrictions. According to the Hyundai Research Institute, this is likely to have cost Seoul $7.5 billion so far this year, about 0.5 percent of its GDP. Sales of Hyundai and Kia autos plummeted, Lotte was forced to sell off its stores in China, and far fewer Chinese tourists visited Seoul. Nevertheless, overall South Korean exports to China still rose 12 percent to $88.1 billion in the January to August period, compared to a year ago.

More importantly, Korean officials are less concerned about short-term blips in demand caused by the THAAD dispute than about long-term loss of competitiveness for South Korea’s traditional manufacturing industries in global markets and the growing need for domestic industrial restructuring. As Sui-Lee Wee and Jeyup S. Kwaak write: “While South Korea’s chip makers are still more sophisticated than their Chinese counterparts, China has caught up when it comes to steel and petrochemicals.” Thus, the THAAD agreement certainly does not hurt, but it does nothing to address the structural reality and challenge posed by China’s (and others’) brutally competitive and evolving market.

Yet, there also exists an additional and potentially more compelling political and diplomatic rationale to improve Seoul-Beijing ties. Moon has stated his intention to “pursue balanced diplomacy” between the U.S.-ROK alliance and China. Seoul adjudicating between hard external constraints and striving to take on a more assertive regional role is nothing new. In fact, Moon’s determination harkens back to his progressive predecessor Roh Moo-hyun’s own balancer concept of the mid-2000s. At the time, Roh was widely ridiculed by conservative Koreans and U.S. officials. Nonetheless, it has been over a decade since, and while Moon will hear similar criticisms, conditions have evolved.

First, the United States increasingly has tried to tighten cooperation with and between its regional allies. From the Obama-era “Pivot to Asia” to the now in vogue “free and open Indo-Pacific” strategic concept, the United States has packaged the initiative in various ways. Although still ill-defined, the concept is widely perceived as a way to counter growing Chinese influence with multiple alliances, with Trump calling the U.S.-ROK alliance the “linchpin for security, stability and prosperity in the Indo-Pacific.” However, Seoul is not as eager to embrace the concept or its role as a linchpin within it, especially when its most clearly defined characteristic is its military and defense-orientation.

As is well known, South Korea-China relations have been rocky ever since early 2016, when South Korea and the United States began more serious public deliberation on deployment of the U.S. THAAD missile defense system; a system whose X-band radar Beijing sees as aimed at its own (rather than just North Korean) missiles and as part of a larger U.S. regional system encircling it. Xi, having consolidated power at the 19th Party Congress and aware of the counterproductive nature of the THAAD dispute, saw Moon (unlike his predecessor, ex-President Park Geun-hye) as more amenable to compromise and less willing to be thrust into an American-led regional system. The Moon administration has demonstrated its sensitivity to Chinese concerns, asserting they would not accept further THAAD deployments, would not join the U.S.-led regional missile defense network, and do not see trilateral U.S.-ROK-Japan defense cooperation as a military alliance.

The second major change in conditions is the development of Pyongyang’s nuclear and missile capabilities, and the attendant divergence in perspectives regarding how best to achieve denuclearization. As I examined elsewhere, there is a growing fissure between Seoul and Washington D.C.’s order of preferences regarding how to respond to Pyongyang, with the latter focused above all else on peace and therefore finding a diplomatic solution. Beijing, for its own reasons, shares the sentiment. Both have mentioned a North Korean “freeze,” with Beijing citing a possible “freeze-for-freeze” agreement, whereby Pyongyang halts further nuclear and missile development in exchange for freezing U.S.-ROK military exercises. Although the freeze idea does involve eventual disarmament, it also contains the possibility of some sort of retention of nuclear capabilities. Trump, and most of the U.S. foreign policy establishment, flatly reject the idea. Beijing and Seoul, for obvious reasons of geography, see things differently, which helps explain their drive to get relations back on track.

Still, much like the potential economic benefits of improved South Korea-China relations, we should not exaggerate recent developments. Several important caveats remain. Most immediately, despite the supposed agreement over THAAD, the Chinese Foreign Ministry announced: “The THAAD agreement announced by the foreign ministries of [South] Korea and China on Oct. 31 is just the first step to resolve the problem…The final step will be the complete withdrawal of the THAAD system.” Such a stance starkly challenges Seoul’s sovereign right to determine what is or is not in its national interest. Beyond this are older concerns about Chinese revanchism in Korean borderlands alongside its more aggressive territorial claims and island building throughout the region. Finally, but not unrelated, there is the belief that Beijing values the buffer provided by North Korea, and, in the case of a conflict or regime collapse, might occupy a portion of North Korea, either creating a truncated, rump North Korean state or simply extending China’s borders south of the Yalu.

The only certainty in all of this is that Seoul confronts a festering and highly militarized national division while maneuvering between the competing interests of more powerful external actors. Such is life on the Korean Peninsula.

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