SEOUL – South Korea has been deeply scarred by its 2016 decision to deploy the U.S.-made Terminal High Altitude Aerial Defense (THAAD) missile defense system. Outraged that Seoul would downplay Chinese concerns and ignore warnings that deployment could “destroy” the two countries’ ties, Beijing responded with economic punishment that reinforced the deeply felt sense of vulnerability among South Koreans and the belief that it is a small country — “a shrimp among whales” — that is more object than subject of regional relations.
Four years later, South Koreans remain wary of — and reluctant to take — any decision that risks offending China, even if it is intended to promote and protect their own national security.
That outcome no doubt delights policymakers in Beijing but it is the wrong lesson for South Koreans to have learned. Sadly, the response of Seoul’s ally and partners has proven equally shortsighted: they prefer to criticize South Korean weakness when they should be figuring out ways to work with Seoul to blunt the impact of China’s anger.
After several years of discussion between the U.S. and South Korean militaries, the government of then President Park Geun-hye agreed in 2016 to deploy the THAAD system to defend against North Korea’s growing missile and nuclear threats. Chinese officials were alarmed by the prospect of deployment. They insisted that the stated rationale was a sham and that THAAD radars could see deep into China and neutralize China’s nuclear deterrent. Yet even in the face of blunt high-level Chinese warnings that the deployment would threaten Beijing’s “legitimate national security interests,” Seoul went ahead.
Beijing responded with fury. It encouraged actions such as a boycott of South Korean goods and a virtual shutdown of Chinese tourism to the country. One study estimated that the steps cost about $7.5 billion, or some 0.5 percent of South Korea’s GDP. The deep freeze in relations lasted about a year before the two governments (or more accurately, Beijing) opted to return to normalcy. South Koreans remain deeply scarred by the episode. In Seoul last week, in every meeting I had, whether with private citizens or government officials, think-tank experts or military officers, the issue came up and anger at China was palpable.
More troubling, however, was the lesson that had been learned: In every case, the prevailing sentiment was that South Korea depended too much on the Chinese economy to disregard Beijing’s concerns. That is understandable: China has been South Korea’s largest trading partner since 2007, and now accounts for nearly a quarter (22.8 percent) of South Korea’s trade, larger than the sum of the country’s trade with Japan and the United States. But rather than appreciate how a determination to defend South Korean national interests had shown Beijing that Seoul would not back down, Koreans instead argue that China should be appeased — and that view was expressed in every meeting.
If South Koreans were angered by Chinese behavior, they were disappointed by that of their ally, the United States, and their partner, Japan. Both countries stood by as South Korea paid for a decision that protected all three countries’ interests. If strategists in Tokyo and Washington worry that Seoul has lost its inclination to stand up to or challenge Beijing, then they should also be asking if their inaction did not contribute to that outcome.
Governments are trying to weaponize economic interdependence (with varying levels of success). For the most part, the focus of these efforts has been on offensive measures: hurting other countries. As Japan, the U.S., and like-minded countries promote a “Free and Open Indo-Pacific,” they should be especially attuned to ways that they can blunt the weaponization of economic interactions. Indeed, economic defense initiatives are as important as security initiatives such as missile defense. As one South Korean former defense official pleaded, “Helping the ROK [Republic of Korea] economy is a form of extended deterrence.”
The list of options is long: currency swap agreements to provide liquidity in a crisis; “insurance” agreements for partner governments that offset losses resulting from decisions that protect a group’s security interests; or campaigns to encourage trade or travel to negatively impacted countries, to name but three. Japan should be thinking in a structured way about such measures given its leadership in promoting the Free and Open Indo-Pacific vision and as part of its new national economic statecraft initiatives.
Japan has especially compelling reasons to take the initiative in this area. Japanese defense officials are acutely aware that this country’s national security is intertwined with that of the Korean Peninsula. China’s growing economic influence in South Korea has provided a wedge that Beijing has tried to use to separate Seoul from Tokyo and Washington. If Seoul does not have to fear retribution by China, then it will have less reason to defer to Chinese preferences.
There are also economic benefits to Japan. Japan is South Korea’s third-largest trading partner, and bilateral trade has doubled in volume during the first two decades of this century. The two economies are increasingly complementary, with South Korean firms relying on imported Japanese intermediary goods and materials for production or assembly. For all the frictions in the Tokyo-Seoul relations, Japanese companies benefit from working with South Korean counterparts. According to one report, more than 80 percent of Japanese businesses operating in South Korea reported profits in 2017 — the highest proportion of profitable Japanese firms in an Asian economy — and just 3.4 percent reported losses.
Of course, Japan-South Korea relations are troubled and the political will for any gesture — especially economic — is difficult, if not impossible, to generate. But that is the critical third reason why Japan should act.
The two countries are — or should be — partners. Instead, domestic politics has taken precedence over long-term strategic thinking. Both governments are looking for the other to take a step that demonstrates “sincerity” and a commitment to positive, forward-looking relations. Establishing a framework that helps insulate partners from economic coercion will demonstrate Japan’s commitment to regional leadership, helps build goodwill with South Korea, and shows Tokyo’s commitment to promoting regional security. Those are the right conclusions to be drawn from recent history.
Brad Glosserman is deputy director of and visiting professor at the Center for Rule-Making Strategies at Tama University as well as senior advisor (nonresident) at Pacific Forum. He is the author of “Peak Japan: The End of Great Ambitions.”
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