Mend ties with Tokyo
The author is an economics professor at Seoul National University.
In an interview with a Japanese newspaper early this year, I was asked what could happen if Japan launched economic retaliations against South Korea as a result of the diplomatic row over historical issues. I said, “Leaders of the two countries have erred by turning the valuable asset of Korea-Japan relations into a liability. An economic retaliation goes beyond foolishness. It is crazy. Given Korean people’s hot-tempered nature, conflict could wreck bilateral relationship for a lengthy period.”
Sadly, my musings have become reality. Governments that should do their best to avoid crises with another country are actually fanning the conflict. Japan has brought historical issues onto the economic front. South Korea has stretched the economic and historical issues to the security front. Tit-for-tat actions only worsen the situation. Tokyo’s export curbs and Seoul’s withdrawal from a mutual military intelligence-sharing pact won’t likely bring about changes in the two governments. Instead, the ramifications on bilateral relations can be broad and enduring. More harm can be done than good.
Japan’s restrictions on its exports to Korea are aimed at destabilizing a supply chain to the Korean industry. But the disruptions in Japanese supplies won’t damage the Korean economy for long. The East European case is living proof. After the collapse of the Soviet Union and communist bloc, the supply chain for manufacturing across Eastern Europe was destroyed during the transition to capitalism. But most of the countries recovered within three to four years. The dynamics of a market economy can repair fissures in the supply chain.
Even under a maximized trade embargo, Korea’s large companies will find some ways to mitigate disruptions. They could offer big rewards to key suppliers and persuade them to take their production lines out of Japan. But the situation could be different for smaller companies. Some of them may have to close shop. Still, industry will gradually recover through “creative destruction.” If Korea has the will, it could somehow weather an immediate setback. Compared to the external shocks from the 2011 Japanese nuclear meltdown or Brexit, a Japanese export embargo would eat into Korea’s gross domestic product by 2 percent at maximum.
But the two governments are building up the potential harm to their countries by pushing the row over historical issues not just to the economic front but also to the security front. The risks have been aggravated through tit-for-tat actions. Playing with fire in this way could cost them dearly in the future. Their friction also complicates the North Korean denuclearization process. Since the breakup of the General Security of Military Information Agreement (Gsomia) between the two countries, surveillance of North Korea cannot be acute as before. Beijing and Moscow could interpret the ongoing discord between Seoul and Tokyo — the lynchpin of U.S. security policy in Northeast Asia — as a sign of waning U.S. influence in the region and may use the momentum to soften their sanctions against Pyongyang. They could leverage an easing of sanctions to strengthen their influence on the Korean Peninsula. If Beijing and Moscow become yawning gaps in the sanctions front, denuclearizing North Korea will no longer be possible.
For the moment, economic sanctions are the only means to achieve the denuclearization of North Korea. They have been working so far, but nevertheless became fragile due to the conflict between the United States and China and closer ties between North Korea and China. Beijing and Moscow could capitalize on the weakening in the alliance among Korea, the United States and Japan to open their back doors to North Korea. They can not only condone smuggling and North Korean laborers working in their countries, but also permit North Korean businesses to operate in their countries and allow their nationals to visit North Korea. North Korean leader Kim Jong-un will be able to finance his weapons program if foreign currency earnings increase. Washington could settle for dismantlement of ballistic missiles capable of reaching the U.S. mainland and a removal of nuclear warheads. In the meantime, however, South Korea and Japan could be stuck with a permanent nuclear threat from North Korea.
The friction with Tokyo could push Seoul towards Pyongyang, Beijing and Moscow. The testy response from Washington suggests displeasure with Seoul after it implied the United States accepted the breakup of the Gsomia. The Seoul-Tokyo clash has shaken traditional South Korea-U.S. ties. The balance in Northeast Asia could be broken by the unpredictable ways of U.S. President Donald Trump and South Korea’s domestic politics.
Seoul and Tokyo must mend ties immediately before the damage becomes irreparable. The Moon Jae-in administration is neglecting its duty if it does not fix the diplomatic mess. Jobs, denuclearization and security are all at risk as a result of the trade dispute and nullification of the military intelligence-sharing pact with Japan. If the economy and security are in danger, what other national interest is left? Is pride Korea’s sole national interest?
JoongAng Ilbo, Sept. 4, Page 31