Pitting Beijing against Washington

A politician saw a fisherman catching crabs. He noticed that the fisherman left the top of his own basket open. When the politician asked why, the fisherman nonchalantly responded that if any crab tried to climb up the basket to escape, the other crabs in the basket would pull it down. No crab would escape even without a cover.

I start with this old chestnut because of the Korea-China free trade agreement (FTA). Can Korea survive in the powerful electromagnetic field generated by China? We are concerned that Korea will always be influenced by China.

Please don’t misunderstand my intention. I do not oppose the Korea-China free trade agreement. In fact, I think that it should have been signed earlier on. The Korea-China FTA is a survival strategy and a growth engine. China’s enormous domestic market can be a breakthrough for a Korean economy struggling with low growth. It will provide new business opportunities and create new growth areas. Moreover, Korea can use the FTAs with China and the United States as leverage against the United States and China. Korea can counterbalance Chinese pressure by using the United States and prevent U.S. pressure by cooperating with China.

But it all depends on how Korea deals with this delicate situation, and it is questionable if Korea has the wisdom and discretion. A survival strategy always includes the risk of failure, the risk of collapse. If Korea is pulled into China’s magnetic field helplessly, we cannot rule out the possibility of becoming a satellite state as in the past.

Let’s review the situation. China has been the biggest trade partner of Korea for 11 years straight, since trade with China surpassed that with the United States in 2004. Our trade volume with China is overwhelming. Last year, dependence on exports to China was 26.1 percent, the highest level in history. That is more than twice the dependence on trade with the United States, which is 11.1 percent. The trade surplus situation is even more serious. Last year, Korea’s surplus in trade was $44 billion, and its surplus in trade with China was $62.8 billion. That means that we make enough from trading with China to set off deficits from trading with several other countries. The Korea-China FTA will only accelerate the trend. In that case, it could be only a matter of time that China will become an “annoying boss.” We have already experience dealing with an annoying boss. In the 1980s and ’90s, the United States is remembered for trade retaliation and pressuring us to open our market. Korea had to be grimly patient and deal with a lot of Western discourtesy. Korea was living off its exports to the United States. What we have learned from the experience? The lesson was that the “good power” can become bent to its own national interests. A strong fist is often cloaked by blinding smiles and sweet words.

China won’t be very different. What drives China is its national interests, not global interests and certainly not Korea’s interests. The more successful the FTA is, the greater Korea’s dependency on China will become. Naturally, China will behave as the United States did in the past.

The success of the FTA and the annoying boss are two sides of the same coin. We won’t be able to reject China’s discourtesy and pressure. If China sneezes, Korea will catch a cold. Korea will be even more vulnerable as the contest between the U.S. and China over influence in Asia intensifies. Korea may be forced to choose sides. In fact, such pressure has already begun. China is strongly pushing for its Asian Infrastructure Investment Bank and a Free Trade Area of the Asia Pacific.

China demands participation; the United States discourages participation. Korea is already faced with a dilemma. We can only find a solution when we acknowledge the reality, and we should not be swept up by pro-American or pro-Chinese sentiments. We must become clever and keep a balance until Korea’s national strength grows. No one will meddle with a powerful country.

But is this possible? Does Korea have the smarts to use China against America and vice versa? It doesn’t seem so. Korea can’t even solve obvious domstic problems like public servants pension and welfare reforms. We cannot see a good future if we continue to pull each other down like the crabs in the basket.

Translation by the Korea JoongAng Daily staff JoongAng Ilbo, Nov. 13, Page 32

*The author is an advisor at the Korea Institute of Finance.

By Kim Yeoung-ook