Skand Tayal | Will Korea & Japan bail out China amid rising trade tensions with US and Europe?
On May 26-27, 2024, the 9th Trilateral Summit was held in Seoul with the participation of South Korean President Yoon Suk Yeol, Chinese Prime Minister Li Qiang and Japanese Prime Minister Fujio Kishida after a long gap of more than four years. Such supposedly annual summits of the three East Asian economic giants had begun in 2008, with Chinese participation at the level of Prime Minister, downgrading its status and keeping the focus on economic cooperation.
The joint statement issued after the summit does not have much notable content except that the three countries will speed up negotiations for a trilateral FTA. It may be noted that these three countries are members of the Regional Comprehensive Economic Partnership under the auspices of Asean.
The statement hopes that the three countries would “strive to hold” such summits annually. There was emphasis on boosting “people to people” exchanges with a target of 40 million contacts by 2030 through tourism, education and cultural groups.
In his public remarks, the Chinese PM urged Japan and South Korea to reject “protectionism” and uphold the principles of free trade. Undoubtedly, these three countries have perhaps been the biggest beneficiaries of the present WTO-led foreign trade regime in the past three to four decades, running huge trade surpluses with most major economies. The three countries have robust trade with each other being part of global supply chains through their MNCs with the United States, Europe and Asia as the final destinations for their products.
With both the US and the EU pushing back against perceived Chinese overcapacity in the manufacturing sector, more protectionist measures against Chinese exports are expected. In this background, China is working to shore up its long-existing economic linkages with its two major trade partners. Prime Minister Li Qiang spoke also against turning trade and economic differences into “political games or security matters”.
Analysts have noted a trend of some shift away from the South Korean foreign trade dependence on China. The United States emerged as South Korea’s top export destination in December 2023, surpassing China for the first time since 2004. Also, in 2023, South Korea had a $18 billion trade deficit with China, the first such bilateral deficit in 31 years. South Korean exports to China in 2023 were $125 billion, 20 per cent less than exports in 2022. Similarly, South Korean imports from China in 2023 were $143 billion, a drop of eight per cent over imports in 2022. There have been heavy investments by South Korean “chaebols” in the United States, mainly in the automotive industry, including car batteries. South Korea’s ministry of trade, industry and energy has announced a strategy designed to stabilise South Korea’s supply chains and reduce dependence on any product from China to less than 50 per cent by 2030.
China continues to be the largest trading partner of Japan. Japan’s exports to China in 2023 were $163 billion, with a share of 21.6 per cent in its total exports. Japanese exports to the US were worth $136 billion, with a share of 17.9 per cent.
The joint statement called for the de-nuclearisation of the Korean Peninsula and pledged to “make positive efforts for the political settlement” of the issue.
This is only a statement of intent and no concrete follow-up action is expected. North Korea continues on its path of periodic missile tests and attempts to launch spy satellites in space. North Korea’s President Kim Jong Un keeps his own counsel and has gradually come close to President Vladimir Putin on strategic cooperation in defence supplies and space technology.
While China is unable to pressure North Korea to halt its nuclear programme, it is worried about the likely reaction in South Korea and Japan, which have the option to go in for their own nuclear weapons. An iconoclast future Trump administration may be no respecter of NPT!
Recent opinion polls in South Korea have revealed about 71 per cent of South Koreans would support developing their own nuclear weapons or the return of US nuclear artillery with US forces in Korea, which was removed by President George Bush in 1991 after the collapse of the Soviet Union and end of the Cold War. Japanese strategic thinkers are also watching with concern President Vladimir Putin’s threat to use nuclear weapons in the Ukraine war and the increasing Chinese nuclear arsenal, which is estimated to rise to 1,500 warheads in 2035 from the present number of about 400. However, public opinion in Japan is still overwhelmingly opposed to the development or deployment of nuclear weapons by Japan.
Both South Korea and Japan watch with alarm the expansionist actions of the People’s Republic of China in South China Sea and its hostile exercises around Taiwan straits. In bilateral discussions, Prime Minister Kishida reportedly expressed “serious concern” on the situation in the South China Sea in the backdrop of almost daily stand-offs between an intimidating Chinese Coast Guard and the relatively small Filipino fishing and supply vessels.
The strongly pro-American orientation of South Korea led by President Yoon and Japan under Prime Minister Kishida has been clearly laid out in the “Camp David Spirit” adopted by the two along with President Joe Biden in August 2023, projecting China as their strategic adversary in the Indo-Pacific region. China is therefore biding its time and focusing on shoring up its trade and investment relations with its two longtime economic partners – South Korea and Japan -- as more protectionist headwinds against China are expected both from a future Trump administration and the European Union worried about dumping from Chinese manufacturers. Given China’s growing economic heft, no decoupling should be expected of the Chinese economy from both the South Korean or Japanese economies.
