Joining with India, Australia to build a G10
Choi Byung-il
The author, a professor of economics at the Ewha Womans University Graduate School of International Studies, is president of the Korea Foundation for Advanced Studies.
On the threshold of the new Cold War, the United States and China are reluctant to worsen their bilateral relations further as they recognize the significance of managing conflict to prevent an accidental clash from evolving into a larger one. That’s a lesson they learned from the two world wars in the 20th century. U.S. Secretary of State Tony Blinken’s two-day visit to Beijing last month reflects such will of the two superrpowers. He met with China’s top diplomatic officials and President Xi Jinping. Since the direction of Xi and U.S. President Joe Biden has been affirmed, the two countries will soon be headed to the Group of Twenty (G20) summit in New Delhi, India in September and a Biden-Xi summit in November on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in San Francisco.
Managing Sino-U.S. conflict
The need to manage conflict signifies a serious level of conflict between the U.S. and China. The two countries don’t deny it. The U.S.-China confrontation that reached a climax during Donald Trump’s presidency continues in the Biden administration — in a more elaborate and systematic way. The first measure Biden took against China as U.S. president was a rebuilding of supply chains that overly relied on China, starting with the chip sector, to keep China’s dramatic rise at bay. The U.S. strategy to create a new semiconductor ecosystem on its home turf where the U.S. can control the entire process of chipmaking — including design, materials, parts, equipment and assembly — has been called “decoupling.” To achieve the goal, the U.S. has methodically lured its allies into investing in America with hefty subsidies and put a limit on supplying key equipment and parts to foreign chipmakers which invested in China.
The U.S.’s push for “decoupling” — armed with the new narrative of strategic stability after abandoning short-term efficiency — irritates China. The more the complaints from global chipmakers about higher production cost in the U.S. than in China, the stronger the determination of U.S. strategists to press ahead with the decoupling. They strive to find out strategic means that can lift China’s production cost — and put them into action, since they found a fatal danger of China’s emergence as a leader in semiconductors, an indispensable material for industries across the board — particularly the military and security fields. The best time for the U.S. to take action against China is now, when it wields its military supremacy over China.
Leaders of free democracies — or members of the Group of Seven (G7) — in competition with the autocracy led by China and Russia show a delicate sign of fissure. Last November, Germany’s new Prime Minister Olaf Scholz, accompanied by CEOs of companies like Volkswagen, BASF and Adidas met with Xi Jinping in Beijing. In April, European Commission President Ursula von der Leyen and French President Emmanuel Macron flew over to China to meet with Xi. They are traditional allies of the U.S., but are increasingly stifled under the weight of the U.S-led alliance based on the shared values amid the deepening new Cold War.
The dilemma basically stems from the harsh reality that they are leaders of free democracies where immediate economic gains help ensure the survival of their governments. The German prime minister did not want to divorce with China, but did not want overreliance on China, either. The French president didn’t want France to get entangled in a crisis far away from Europe. They are disgruntled about the double standards of Uncle Sam who put the brakes on allies’ investments in China while turning a blind eye to Apple and Tesla’s investments in China.
From ‘decoupling’ from China to ‘derisking’
As if to mitigate their complaints, the term “derisking” has stealthily replaced “decoupling” from China. After the European Commission president officially used the word for the first time, Germany and France quickly joined her with the reasoning that decoupling from China is not possible nor meets Europe’s interests. Later, U.S. National Security Advisor Jake Sullivan joined the chorus. The developments eventually led to the adoption of the phrase “derisking, not decoupling” in the joint statement from the Hiroshima G7 Summit in May.
The principle of “derisking” is asset management 101. In semiconductors, decoupling from China is part of “derisking.” Expanding investments in consumption goods not related to economic security also constitutes “derisking.” So, basically, nothing changes in substance. The so-called “small yard, high fence” strategy of choosing certain areas to weaken China’s global influence and maintaining existing relations on other fields is the core of the Biden administration’s China policy.
Economy and security can’t be separated
The essence of the new Cold War is a clash between the free democratic system and the autocratic system. During the Cold War, no economic exchange was made between the two blocs, but in the new Cold War, companies in a free democratic world are deeply connected with authoritarian states for trade and investment. You cannot remove overnight the complicated system of economic exchanges built over the past 30 years of globalization since the end of the Cold War. And yet, if you just maintain existing networks, it is same as allowing the despotic states to have the upper hand in the contest. Herein lies the dilemma of the new Cold War in which economy and security cannot be separated.
The triumph of the West in the Cold War owed much to the United States’ huge assistance to Europe to help restore its devastated economy — and to the largest U.S. market being wide open to the rest of the word. It led to economic growth and prosperity for its allies, but resulted in frustration, jealousy and breakaway for enemies. At the onset of the new Cold War, the U.S. has again championed the values of free democracy, market economy, rule by law and human rights. But the U.S. can hardly win the hearts of its other allies still cherishing authoritarian values. The challenge has now reached a point where the G7 alone cannot weather the turbulence from the new Cold War, since the power of the Global South — a group of countries not affiliated with the U.S. or China — has grown noticeably.
The problem with U.S.-led global economic organizations
The U.S.-driven rules for global economy are not working well. First of all, the World Trade Organization led by the U.S. is in a vegetative state. Second, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) started from the U.S.-led Trans-Pacific Partnership (TPP), but since the U.S. left the TPP in 2017 during the Trump administration, the U.S. can hardly return to the CPTPP due to divided politics at home. The G20 emerged as the commander of the global economy after playing a decisive role in helping prevent the 2008 global financial crisis from spreading to the rest of the world, but the G20 has turned into a venue for discord, not the ground for solving problems. What should we do now? The answer can be found in expanding the G7. Korea also can find strategic room for survival and prosperity in the new Cold War era.
Korea has emerged as a global player on many issues — such as providing aids to developing countries, tackling climate change, building sustainable energy ecosystem, setting global digital rules, and seeking space development — after expanding its diplomatic space beyond the boundaries of the country. If Korea cannot be excluded from a global picture on the chip, battery and defense sectors, the country must be given its due role in global affairs. Korea must participate in the debates on expanding the G7.
Looking beyond the G8
Korea’s top diplomats fuel a discussion on expanding the G8. But they need a different strategic approach. If the country can join the prestigious group, it will certainly be happy and proud. But the question is whether other members really want it. For instance, Korea must overcome opposition from Japan — the only Asian member in the G7. Despite the activation of future-oriented Seoul-Tokyo relations and the agreed reinforcement of trilateral cooperation among Korea, the U.S. and Japan, Tokyo wants to remain as the only Asian representative in the G7.
Korea must unite with other convincing candidates for an expanded G7. What countries can meet the cause and practical interests? For an effective derisking strategy, Australia — an advanced democracy with rich mineral resources — could be an answer. To bolster the diversity of the advanced group, a leading representative of the Global South needs to be invited. That is India — the only country that can replace China in terms of population and market size. Coincidently, Indian Prime Minister Narendra Modi had a summit with Biden at the White House on June 22 in his first state visit to the U.S. since his election nine years ago. Korea’s joining of the G8 can come only after the G10 — or G7 plus Korea, Australia and India — is established. The memories of the country exponentially expanding its strategic space of diplomacy to the socialist bloc through its northern diplomacy three decades ago are becoming faint. I hope the foreign ministry demonstrates diplomatic imagination and ability to make the dream come true at the inflection point of the 21st century.
Translation by the Korea JoongAng Daily staff.
with the Korea JoongAng Daily
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