Trade wars and nuke talks
The author is the Washington bureau chief of the JoongAng Ilbo.
The trade war between the United States and China is deepening. U.S. President Donald Trump and China’s President Xi Jinping are betting their pride on winning the battle. If both countries fail to reach an agreement before the Group of 20 Summit late next month in Osaka, Japan, the entire world could face great risks. South Korea should not be wasting time bickering over whether first lady Kim Jung-sook intentionally avoided shaking hands with opposition Liberty Korea Party Chairman Hwang Kyo-ahn at a ceremony last week. Apart from the possible economic effects, another reason why Seoul should focus on the Sino-U.S. trade war is because it resembles the North Korean denuclearization talks in many ways. Seoul could pick up a few tips. Here are three main similarities.
First, both Beijing and Washington believe they have control over time — similar to how both Pyongyang and Washington are not rushing to strike a deal in denuclearization talks. The Chinese economy grew by 6.4 percent year on year in the first quarter, while the U.S. economy grew by 2.4 percent. The International Monetary Fund (IMF) predicted that if both countries raise tariffs on each other’s imports by 25 percent, China’s growth rate could be slashed by 1.22 percentage points, while that of the United States could be cut by 0.31 percentage points. Yet they are not backing down. Neither country suggests a “Plan B,” as they don’t think it is worth it. Trump views the trade war from a political perspective while Xi links it to his personal dignity. That is similar to how Trump and North Korean leader Kim Jong-un are addressing the nuclear talks.
Second, Beijing and Washington also have different thoughts on the criteria, another similarity to the relationship between Pyongyang and Washington. China claims that it said it would “review” the draft agreement presented by the United States in the trade war, and did not agree to it. But the United States thought differently. When China said it would review legal ways to improve its trading system, Washington thought China would take action to change its legislation. It turned out that China was talking about regulatory implementation, not legislation. In the denuclearization talks, Washington wants to wipe out North Korea’s entire nuclear weapons program, but North Korea stops at offering to only dismantle its Yongbyon nuclear plant. How the United States is pressuring China through Google, Intel and Qualcomm is also similar to how it is pressuring North Korea through international sanctions.
The third similarity is that when the trade war or denuclearization talks fail, South Korea will suffer big time. If Chinese exports to the United States shrink, Korea will be hit hard because Korean exports are mostly intermediary goods to China. Some 79 percent of Korea’s exports to China are intermediary goods, so there is no way we can get out of the trade dispute. Some pundits in Washington predict that if China and the United States fail to strike a deal, the Korean won could be devalued by up to 20 percent. That means 1,350 won per U.S. dollar. Just imagine how this will affect Korea’s productivity and consumption. The Moon Jae-in administration said it would serve as a mediator between Pyongyang and Washington, but the reality is that Seoul is being ignored.
What’s really dangerous is Korea’s stance toward economic and diplomatic issues. The government is always far too optimistic. On May 9, President Moon said Korea had the second highest growth rate after the United States among the so-called “30-50 club,” which refers to countries with a population of over 50 million and a per-capita income exceeding $30,000. Moon kept to a rosy future for Korea. Yet that did not last long. Ten days later, a report from the Organization for Economic Cooperation and Development (OECD) announced that Korea’s growth rate in the first quarter was the lowest among the seven countries that make up the 30-50 club, as well as among the 22 nations that comprise the OECD. It would have been better if Moon had not made his statement. It is the same as the confidence he showed about the U.S.-North Korea summit in Singapore .
Dark clouds are hanging over the Korean economy and diplomacy, yet the government is not doing anything about it. Leadership is about achievements, not personal qualifications.
JoongAng Ilbo, May 22, Page 30