Coming in fightingA frightened dog runs away with its tail between its legs. The South Korean government is adopting that posture in the lead-up to the inauguration of the Donald J. Trump administration. On a visit to Washington, Chang Myung-jin, chief of the Defense Acquisition Program Administration, said Seoul would inevitably have to comply if the incoming Trump government demands Korea pay a bigger share of the cost of maintaining U.S. troops. Chang and the defense ministry claimed that his comment was misrepresented. But would Washington feel the same? There are other examples.
Last week, Yoo Il-ho, deputy prime minister for the economy, flew to New York. He admitted he knew no one among Trump’s economic surrogates and planned to build a network in New York to get access to incoming administration members. He wasn’t able to meet anyone in Washington as senior officials were preoccupied with confirmation hearings. The closest he got was a sit-down with Stephen Schwarzman, head of the investment firm Blackstone Group, who also chairs the Strategic and Policy Forum, a business advisory council Trump set up to draw direct guidance from the industrial and business sectors in a non-bureaucratic and non-partisan manner. Yoo told Schwarzman that Seoul was studying various measures to reduce its trade surplus with the United States. It is shameful that a deputy prime minister of a long-time U.S. ally and G-20 member received such a cold-shoulder during a visit to the U.S.
In a meeting last month, Joo Hyung-hwan, minister of trade, industry and energy, urged heads of local gas companies to offer greater cooperation to the U.S. shale gas industry. In order words, he was asking Korean gas companies to increase imports from U.S. shale gas producers. Local industry was baffled. Gas import contracts usually span 20 years. The first shipment usually takes place five years after a contract is signed, which means that even if Korean companies enter into agreements, they would get the first batches of U.S. product five years later. To increase shipments immediately, they would have to buy U.S. gas on the spot market, which entails far more risk.
Joo’s idea topped the agenda in the government economic policy outline for 2017 as a countermeasure against trade pressure from Trump’s administration. The trade, industry and energy ministry argued that shale gas imports would strike three birds with one stone. It could help bring down the cost of fuel through competition with Middle East producers, diversify its fuel supply chain, and also fend off trade pressure from Trump’s administration. It estimated that immediate imports could reach 5 million tons a year, worth $2 billion, helping to reduce Korea’s trade surplus with the U.S., which hit $25.8 billion in 2015. If it was that good an idea, it should have been saved. U.S. gas costs more than Middle East imports because of higher transportation expenses. Seoul should have kept it as a bargaining chip to use with Washington.
Trump does not keep to formalities when doing business. In deal-making, one must hide your cards to gain an advantage over the other.
Trump prizes “the element of surprise” and boasts of being “unpredictable” in foreign policy. How does Seoul plan to win against an unpredictable administration by showing all its cards even before the game has begun?
Things are different after the president is inaugurated. Like a stock price, the president’s value hits the ceiling on victory day. From the day of his inauguration, his value skids. The Trump effect is already showing signs of fizzling out. The actual return on a 10-year U.S. Treasury note has halved and the Dow industrial average has hit a bottleneck around the 20,000 mark. The market has begun to doubt Trump’s economic agenda, which initially promised heavy tax cuts and infrastructure spending.
Trump promises sharp tax cuts and deregulation. Ronald Reagan had to succumb to the demand for higher taxes in 1982 to address the growing fiscal deficit. Trump will be no different. His protectionist trade agenda is under heavy attack. Leading the offensive is Chinese leader Xi Jinping. In Tuesday’s speech at the World Economic Forum in Davos, Switzerland, Xi warned that any attempt to turn off the flows of capital and people around the world will be like trying to divert a river into lakes and creeks. “It will not be possible,” he said.
Bullying companies to stay in the United States and strong-arming them to make new investments could produce some immediate results, but in the longer run, the U.S. could end up getting hurt from disrupting the world industrial order. The world may be yielding to the new U.S. president for the moment, but it could be the other way around soon.
We must count in these variants when dealing with the Trump administration. It is unwise to show our cards from the beginning. Tucking our tail between our legs is like coming onto a playing field with no intention to win. As Trump would say, that’s for losers.
JoongAng Ilbo, Jan. 19, Page 34
*The author is a columnist of the JoongAng Ilbo.