Tag Archive | "FTA"

ASEAN-Korea Relations Under the Next South Korean Administration

This is the second in a series of blogs looking at South Korea’s foreign relations in the run up to the next Korean administration taking office on May 10. The series also includes blogs on relations with North Korea, the United StatesChina, Japan, the European Union, Russia, the Middle EastLatin America, and Africa.

By Patrick Niceforo

Since establishing a Sectoral Dialogue Partnership with the Association of Southeast Asian Nations (ASEAN) in 1989, South Korea has rapidly expanded its diplomatic ties, economic partnerships, and development assistance efforts in Southeast Asia. In that time, trade between South Korea and ASEAN has expanded from $26.8 billion to $118.8 billion. As ASEAN continues to develop economically, the next South Korean administration will look to build on the success of prior administrations in growing economic ties with this increasingly vibrant region.

South Korea’s diplomatic relationship with ASEAN extends beyond its bilateral relationship with the ASEAN member states. Since 2012, South Korea has maintained an Embassy in Indonesia specifically for ROK-ASEAN relations. The establishment of the ROK-ASEAN Embassy was consistent with former President Lee Myung-bak’s “New Asia Initiative,” which called for increased levels of official development assistance (ODA), expanded trade networks, and multilateral cooperation on global issues such as climate change and disaster management. In addition to having bilateral FTAs with Vietnam, Indonesia, and Singapore, South Korea is also signatory to a Free Trade Area (AKFTA) with all of ASEAN which helps to facilitate and expand economic, trade, and investment cooperation in the region. South Korea has also gradually stepped up its ODA to Southeast Asia over the years.In 2015, about one quarter of South Korea’s overall $1.9 billion in ODA went to Southeast Asia, more than twice what it provided to the region in 2010.

South Korea can look forward to developing its role in regional trade through the ASEAN-driven Regional Comprehensive Economic Partnership (RCEP). RCEP is an agreement that, in addition to ASEAN member states, includes South Korea, China, Japan, India, New Zealand, and Australia. With negotiations launched in 2012, RCEP covers areas such as trade in goods and services, foreign investment, and dispute settlement. As the next South Korean administration comes to office it will need to prioritize RCEP and its negotiation strategy, as the deal could be signed as early as mid-2017.

Tourism from ASEAN

A potential opportunity for South Korea is attracting more international tourism from Southeast Asia. The number of Chinese tourists in South Korea has plummeted as a direct result of THAAD, with a 40 percent drop in March. This is concerning given that China contributes nearly half of South Korea’s foreign visitors. According to the LG Economic Research Institute, Chinese tourists spent $13.7 billion in South Korea in 2015, over 62 percent of its foreign tourism revenue. However, because ASEAN and South Korea jointly designated 2017 as the ASEAN-ROK Cultural Exchange Year, there are already plans to increase youth exchange programs and foreign investment. South Korea could capitalize on these programs to develop and expand sustainable tourism with its ASEAN partners. Generally speaking, larger numbers of tourists from ASEAN member countries have been traveling to South Korea over time. While Southeast Asian tourists are unlikely to replace the depleted numbers of Chinese tourists in South Korea, increased tourism could at least help alleviate the problem while also contributing to South Korea’s overall mission of expanding cultural exchange.

Patrick Niceforo is a graduate student at the Middlebury Institute of International Studies and an intern at KEI. The views expressed here are the authors’ alone.

Photo from Nicolas Mirguet’s photostream on flickr Creative Commons.

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Trade in Services Data Contributes to More Accurate Picture of the U.S.-Korea Trade Relationship

By Phil Eskeland

Yesterday, we looked at the possibility of renegotiation of the Korea-U.S. Free Trade Agreement (KORUS FTA) in light of the recent release of the President’s National Trade Policy Agenda for 2017.  The President’s trade agenda included two primary points of reference to rest its case that KORUS agreement did not produce the outcome that the American people expected from the agreement:  the value of U.S. goods exported to South Korea fell by $1.2 billion and the total value of U.S. imports of goods from Korea grew by $13 billion, resulting in a “dramatic increase in our trade deficit with that country.”

As mentioned in the previous blog post, the U.S. merchandise trade deficit with Korea actually declined in 2016, as compared to the previous 2015 level.  Nonetheless, earlier this morning, the Foreign Trade Division at the U.S. Census Bureau revealed a more complete picture of the U.S.-South Korea trade relationship because services trade data for the 4th Quarter of 2016 was included in their monthly release.  U.S. services exports to Korea hit a record level of $21.55 billion in 2016, which contributed to producing the highest trade surplus in services ($10.7 billion) for the United States in the history of U.S.-South Korea trade relations.

KORUS Graph 2

Thus, instead of a decline of U.S. exports to Korea, the latest trade statistics shows that total exports of both goods and services to Korea from the U.S. increased by $2.05 billion from 2011 and 2016.  As a result, the total trade deficit between the U.S. and Korea in 2016 was $17.46 billion, not $27.6 billion.  This combined goods and services trade deficit was a decline from the 2015 level.  U.S. imports of both goods and services from Korea also dropped from 2015 levels.

Though manufacturing is important to the nation’s economy, this should not mean the service sector’s contribution to the GDP should be downplayed or ignored.   Whereas the effect of the trade balance on the economy is debatable, it is also critical to include the full panoply of statistics and information in order to have an informed discussion on the future of the KORUS FTA.

Phil Eskeland is Executive Director for Operations and Policy at the Korea Economic Institute of America. The views expressed here are his own. 

Photo from CosmicDust’s photostream on flickr Creative Commons.

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Is Renegotiation of the Korea-U.S. Free Trade Agreement on the Horizon?

By Phil Eskeland

Last week, the Office of the U.S. Trade Representative (USTR) released the President’s National Trade Policy Agenda for 2017.  It should not be unexpected that the Trump Administration seeks a new approach on U.S. trade policy because it was a top tier issue on the presidential campaign trail, particularly for businessman Donald Trump.  This reflects his long-held beliefs on this subject and the policy positions of his key trade aides.

However, while there are a few disparaging comments in the USTR document about the Korea-U.S. Free Trade Agreement that cherry-picks certain statistics to portray the deal in the most negative light, there is no mandate for a renegotiation or even a review of the agreement.  All that is required in this new agenda is a request for “a major review of how we [the U.S. government] approach trade agreements.”  This is more of a forward-looking document as to how “future trade agreements can work for all Americans more effectively than they have in the past.”  This not to say that KORUS or any other FTA is exempt from a review or renegotiation in the future.  The document reveals a future intention to submit a more detailed report on the President’s trade policy agenda once the U.S. Senate confirms a new USTR, so no one should rest at ease.

Nonetheless, the Trump’s Administration trade policy agenda document rests its entire criticism of the KORUS FTA on the decline of U.S. exports of goods to Korea from 2011 to 2016 and the increase of U.S. imports of goods from Korea over this same time period that resulted in more than doubling the trade deficit in goods.  This approach does not include several nuances in U.S.-Korea trade relations.

First, the agreement is not fully implemented yet; it is at its half-way point.  While it is debatable to think of trade as a competition with winners and losers, using the trade balance as the sole metric of success, all agree that no one decides who wins a game at half-time.  If that was the case, then the Atlanta Falcons would have won the Super Bowl.

Second, by including the total value of all goods traded between the U.S. and Korea in the trade policy agenda document, there is a misleading supposition that every product grown or made in America is covered by the KORUS FTA.  In reality, there are still some items that comprise a significant value of total U.S. exports to Korea which did not benefit from the agreement upon implementation.  Some trade benefits for U.S. producers and providers are phased-in over time.  There are some items not covered by the agreement at all and some goods that already traded duty free.  Nonetheless, according to the Korea Customs Service, U.S. exports of FTA beneficiary goods increased by 18 percent between 2011 and 2015.  In contrast, U.S. exports of items not covered by the KORUS FTA decreased by 20 percent over that same time period (see chart).  Thus, any decline in total U.S. exports of goods to Korea cannot be attributed to KORUS.  As the independent U.S. International Trade Commission concluded, the KORUS FTA is estimated to have improved the bilateral merchandise trade balance by nearly $16 billion in favor of the United States.  In other words, if the KORUS agreement was not in place, the U.S. merchandise trade deficit would be $44 billion in 2015 instead of $28.3 billion.

KORUS Graph

When looking more closely at the U.S. trade deficit, the statistic overlooks the 2.3 percent decline in the annual bilateral merchandise trade imbalance between the U.S. and Korea in 2016 plus the decline of Korean imports into the United States.  It also disregards the $4.27 billion in U.S. merchandise exports to Korea in December 2016 (second highest monthly level in the history of U.S.-Korea trade) despite the challenge of the stronger U.S. dollar.  While it is premature to conclude that this trend will continue, Korea recognizes the need to purchase more American products, as evidenced by their desire to access more energy supplies from the United States.

Finally, the Trump Administration should also take into consideration the growing role of foreign direct investment from Korea.  According to SelectUSA, Korea’s investment in the U.S. has nearly doubled since 2011 to reach $38.2 billion in 2015, employing 45,100 workers in almost every state of the union.  These workers earn an average compensation package of salary and benefits of over $92,000.  More Korean investment may be on the way with recent announcements by Hyundai, Samsung, and LG.  Any re-examination of KORUS should also factor in the possible effect on investment flows from the Republic of Korea into the United States.

While it is the prerogative of every new administration to review past policies, the KORUS FTA has demonstrated its effectiveness in addressing the main concern expressed by the proposed trade policy agenda – mitigating the bilateral merchandise trade deficit between the U.S. and Korea.

Phil Eskeland is Executive Director for Operations and Policy at the Korea Economic Institute of America. The views expressed here are his own.

Photo from the Port of Tacoma’s photostream on flickr Creative Commons.

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What Does New Trade Data Portend for U.S.-Korea Trade Relations?

By Phil Eskeland

Earlier today, the Foreign Trade Division of the U.S. Census Bureau released the latest statistics on U.S. international trade data.  While the overall U.S. trade deficit in merchandise goods with the world increased by $1.9 billion or 0.4 percent, the bilateral trade deficit between the U.S. and South Korea declined by $647 million or 2.3 percent.  This decline was a result of a disproportional decline of the value of Korean imports into the United States.  For the United States, American exports to Korea surged in December, reaching a record level of $4.3 billion for 2016, despite the rising value of the U.S. dollar, while Korean imports into the U.S. declined to $5.47 billion in December, a decrease from the $5.8 billion value in November.

As a result, the U.S. may be turning a corner with respect to the rising bilateral trade deficit between the U.S. and the Republic of Korea (ROK).  The chart below shows the trend in goods trade between the U.S. and Korea since the year before the Korea-U.S. Free Trade Agreement (KORUS FTA) was implemented.  More data will be made available next month when the 2016 4th Quarter statistics on services trade will be released.  Historically, the U.S. has always generated a trade surplus in services trade with Korea, and therefore the overall bilateral trade deficit for 2016 between the U.S. and Korea may be even less.  Only time will tell if this is just a one year respite from the trend in recent years or if this is a foreshadowing of a new development in U.S.-Korea trade relations.

U.S.-Korea Trade 2016

Source:  Foreign Trade Division, U.S. Census Bureau

Thus, while there is good news with respect to the merchandise trade deficit between the U.S. and Korea, the economic relationship between the U.S. and Korea is more than just the value of imports and exports with the trade balance figure as the sole determinant as a measure success or failure.  As mentioned in previous blog posts, there are now over 350,000 U.S. workers dependent upon exports to Korea (a 24 percent increase or 87,000 new jobs since 2009); Korea has more than doubled its investment in the United States since 2011 and is now the fifth fastest-growing source of Foreign Direct Investment (FDI) into America, employing 45,100 U.S. workers, (up 22 percent or 10,000 new jobs since 2011); and the average annual compensation of U.S. workers employed in firms with investment from Korea have increased 11 percent from 2011 to reach $92,000.  Thus, as the Trump Administration deals with trade, it is critical to remember that nearly 400,000 U.S. workers directly owe their employment to Korea trade and investment in America.

Phil Eskeland is Executive Director for Operations and Policy at the Korea Economic Institute of America. The views expressed here are his own.

Photo from Wilson Hui’s photostream on flickr Creative Commons.

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President Trump Praises Samsung for Plan to Manufacture in the U.S.

By Jenna Gibson

“Thank you, @Samsung! We would love to have you!” Donald Trump wrote on his personal Twitter account, linking to a story about a possible plan for the tech company to build a factory for home appliances in the United States.

The article called the announcement by Samsung “A win-win,” saying that “Companies can grab headlines with news of even considering bringing production to the U.S., and the Trump White House benefits from the ability to take credit. These moves may not add up to significant job growth, but it’s hard to beat the PR.”

Trump’s tweet, which was sent only half an hour after the article was posted, may lend credence to their theory.

Post-inauguration, Trump hasn’t yet turned his attention toward Korea, focusing mainly on domestic issues and trade with neighboring Mexico. But trade with the ROK was a regular component of his campaign addresses.

“We spend a fortune on defending South Korea. Now I order thousands and — thousands of television sets here, they come from South Korea. They make so much.  They’re making a fortune.  They’re a behemoth,” Trump said during the CNN-Telemundo Republican debate last February.

Samsung – which makes some of the televisions Trump may be referring to – already manufactures semiconductors at a plant in Austin, Texas in addition to its facilities in South Korea. Samsung has the largest Korean investment in the United States, and Korea as a whole is the 5th fastest growing source of Foreign Direct Investment into the country.

Trump Tweet

The electronics giant is hardly the only Korean company to consider moving more production to the United States in an effort to head off criticism from the new President – last week, Hyundai Motor Group announced that they plan to increase U.S. investment by 50 percent over the next five years, and may build a new plant to supplement the factory they currently have in Montgomery, Alabama. The company also applied for membership with the American Chamber of Commerce in Korea this year for the first time since 2008.

LG is also considering building a new plant in Tennessee for its TV and home appliances. “This is something that has been under consideration for years at LG, but the current political situation is simply accelerating that timeline for a decision,” according to a source close to the company told Reuters.

On a larger scale, the Korean government has indicated that they will encourage more imports from the United States to balance some of Seoul’s trade surplus. As part of this plan, the finance ministry announced that they will begin importing more U.S. shale gas to meet the country’s energy needs.

Whether Samsung goes through with plans to begin manufacturing appliances in the United States or just wants to stave off the ire of the White House remains to be seen. But the 60,000+ likes Trump’s one tweet got within hours of posting certainly can’t hurt either way.

Jenna Gibson is the Director of Communications at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Michael Newman’s photostream on flickr Creative Commons.

 

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U.S.-Korea Relations: The Obama Years

By Troy Stangarone

Summing up a presidential legacy is a complex endeavor. There are countless details that are either unknown or just too difficult to fit into the flow of a single piece. There are choice that in the immediate term may seem wise, but in the hindsight of years less so. While mistakes today may come to be viewed as prudent years on. This is even more the case when it deals with only a single aspect of one part of the presidency, the relationship between the United States and the Republic of Korea. A relationship that while vibrant and strong, is also inevitably tied to both countries’ relationship with the Democratic People’s Republic of Korea.

For the last eight years, we’ve seen a relationship that has grown beyond the Cold War confines of the threat from North Korea and that has begun to evolve into more of a partnership that works together both in the region and on the global stage. This shift was possible in large thanks to the relationship that the Obama administration inherited and the partners they had to work with in South Korea under the Lee Myung-bak and Park Geun-hye administrations.

When President George W. Bush handed U.S.-Korea relations over to President Barack Obama on January 20, 2009, he handed over an alliance that was in good shape. While the relationship between the United States and South Korea had been rocky at times during the early years of the Bush administration, even during those difficult times progress was made on the alliance. As a result President Obama inherited an alliance that was already growing and changing as Bush administration left a legacy of a completed but unratified free trade agreement with South Korea (KORUS FTA), and agreements to move U.S. Forces Korea from Seoul to Camp Humphreys near Pyongtaek and to transfer wartime control of South Korean forces back to the South Korean government.

Over the last eight years, the Obama administration has built on the foundations of the alliance it inherited. While the alliance remains rooted in the United States’ commitment to defend South Korea against North Korean aggression, the Obama administration has worked with South Korea to move the alliance beyond deterring North Korea. Perhaps most critically in this was the administration’s support for Lee Myung-bak administration’s efforts to see South Korea contribute more to the global community. As part of these efforts, the Obama administration supported Seoul’s efforts to host the G-20 leaders summit in 2010 and asked South Korea to host the second Nuclear Security Summit as part of the Obama administration’s efforts to enhance global nuclear security.

Beyond summits, the Obama administration has sought to increase cooperation with South Korea in a wide range of areas that are now referred to as the New Frontier issues and include areas such as cyber security, climate change and global health. As an example, in the area of global heath South Korea worked with the United States and other nations to deal with the Ebola outbreak in Africa in 2014.

In the economic relationship, the Obama administration engaged South Korea in additional negotiations to address concerns related to trade in autos with the KORUS FTA. After reaching an agreement, the KORUS FTA went into effect on  March 15, 2012. The administration also negotiated a new 123 agreement to continue civilian nuclear cooperation between the United States and South Korea.

At the core of the alliance, defense cooperation, the administration has proceeded and largely concluded the efforts begun by the Bush administration to move U.S. troops from Seoul to Camp Humphreys. It also updated the decision to transfer wartime operational control to South Korea by moving the agreement from a deadline based transition to a conditions based agreement that would implement the transition only once South Korea has developed the intelligence and command infrastructure necessary to undertake operational control of forces.

If the relationship with South Korea has been a boon for Obama, than it is the relationship with North Korea where the long eye of history may have more to say in the years to come. While he inherited a North Korea that had already tested a nuclear weapon, North Korea has gone on to conduct four additional nuclear tests during his time in office and he will pass along to the Trump administration a much more dangerous North Korea than he inherited.  Many have criticized the Obama Administration’s “strategic patience” approach, but alternatives are limited if the goal is a denuclearized North Korea within a short time span.  There may have been other tools that the Obama Administration used over the past eight years that are not in the public domain to prod change in North Korea that only time and change in North Korea may tell.

Much as in the case of South Korea, leadership has likely played a role in the deteriorating situation with North Korea. If President Obama was fortunate to have willing partners in South Korea, the death of Kim Jong-il left a much more aggressive Kim Jong-un in charge of North Korea. While Kim Jong-il famously slapped away Obama’s inaugural offer of talks, it is unclear if diplomacy could have played much of a role in convincing Kim Jong-il or Kim Jong-un to roll back North Korea’s nuclear program.

Shortly after Kim Jong-un came to power, the Obama administration negotiated a moratorium on missile launches that North Korea would soon violate and despite efforts by the Park Geun-hye administration in South Korea to build relations with North Korea Kim Jong-un instead chose to greet her administration with confrontation through an ICBM test, a nuclear test, and the withdrawal of North Korean workers from the joint North-South industrial complex in Kaesong. It is perhaps telling that a U.S. administration that, despite domestic opposition, negotiated a nuclear deal with Iran and reopened relations with Myanmar and Cuba found North Korea an unwilling partner for improving relations.

With the path to negotiations closed the administration instead pursued a course of increasing pressure on North Korea. It’s perhaps most significant achievement on this end was the development of increased cooperation with China on sanctions in the United Nations. While the robust sanctions negotiated after North Korea’s fourth nuclear test in January of 2016 were found to have been flawed, those sanctions were revised after North Korea’s fifth nuclear test to close loopholes and being to bring real pressure on North Korea.

In addition to international sanctions, the administration took advantage of new sanctions authorities granted to it by Congress, though perhaps reluctantly and not to the degree critics of the administration might have hoped. Perhaps most significantly on this front, the administration has sanctioned both Kim Jong-un and his sister personally for their roles in human rights violations in North Korea.

Perhaps the last legacy item for the Obama administration in regards to North Korea has been its efforts to increase the deterrent capabilities of the alliance. It reached an agreement with South Korea to expand the range of South Korean missiles to allow Seoul to be able to target any area of North Korea and to help facilitate its “kill chain” concept of being out to take out North Korean nuclear facilities prior to an imminent attack. On the more controversial side, it also worked with Japan to develop new defense guidelines that would allow Japan to play a more active role if the U.S. were to come under attack and which would also aid in a contingency on the Korean peninsula and for the deployment of the Terminal High Altitude Area Defense system to protect parts of South Korea against North Korean missile attacks.

For President Obama it will be a strong legacy he leaves with South Korea, a nation that he visited more often than all but France, the UK, Germany, and Mexico and developed close personal relationships. It is North Korea where time may judge him more harshly, or depending on the actions taken by Kim Jong-un and the Trump administration come to view him as prudent. By his own standards, President Obama has done well.  He once described his foreign policy philosophy as looking for singles and doubles, and “don’t do stupid s@#%.” By that standard, President Obama has managed U.S.-Korea relations well. He’s made progress on a range of issues and avoided serious mistakes, and despite challenges presented by North Korea, he stands to hand the alliance over to his successor, Donald Trump, much as President George W. Bush did to him, in good shape.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from The White House’s photostream on flickr Creative Commons.

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The Trump Administration and Trade Policy: Confirmation Questions for the Commerce and USTR Nominees

This is the second in a two part series looking at the potential questions senators should ask Trump Administration officials on policy that will affect Korea during their confirmation hearings. The first part on the Trump Administration’s State and Defense nominees can be found here.

By Phil Eskeland

On Thursday morning, President-elect Donald Trump’s nominee for Secretary of Commerce, Wilbur Ross, will be subject to a confirmation hearing before the Senate Commerce, Science, and Transportation Committee, chaired by Senator John Thune of South Dakota.  Because Robert Lighthizer was nominated to serve as the U.S. Trade Representative (USTR) just last week, his confirmation hearing before the Senate Finance Committee, which has legislative jurisdiction over U.S. trade policy, will be held sometime after the presidential inauguration.

As mentioned in the first part of this series, confirmation hearings are a window to gain insight into the views and priorities of any administration.  While the Department of Commerce has many divergent responsibilities from conducting to the decennial census to maintaining a small fleet of ocean-worthy vessels as part of the National Oceanic Atmospheric Administration (NOAA), the International Trade Administration (ITA) has been historically been a locus of the agency.   In the past, USTR has taken the lead in trade policy and negotiation while the Department of Commerce is focused primarily on trade promotion through the U.S. & Foreign Commercial Service and enforcement by acting on foreign dumping (selling an imported product in the U.S. below what the good sells for in the overseas country) and unfair foreign government subsidy complaints from U.S. industry.  Because USTR is a relatively small agency, the Commerce Department also provides the industry expertise to aid and guide USTR negotiators.

The issue of trade was raised to a top-tier issue during the election.  Suffice it to say that many of Trump’s positions and statements on trade diverged from long-held views of most Congressional Republicans.  Thus, the confirmation hearings for these two nominees will be an interesting guide not only to gain insight into Trump administration policies, but to see what type of questions are posed by members of the Senate Commerce Committee.  As is custom, presidential nominees that require Senate confirmation submit written responses to questions posed by the committee in advance of the hearing.  In answering the question regarding the top challenges facing the Commerce Department, Mr. Ross responded with a priority to expand U.S. exports and reduce the U.S. trade deficit.

Below are a list of a just a few suggested questions for Senators to ask.  Again, even if they do not come up in the hearings, it will be interesting to see how the Trump Administration will deal with them over time:

  1. What is your view on trade deficits?  Do you view trade as a zero-sum game?  Do you view imports as “bad” and exports as “good?” Does the perspective of the consumer factor into your views?
  2. What is your plan to expand U.S. exports? 
  3. Will there be any change to which agency will take the lead on trade policy – Commerce or will it remain at USTR?   Will the Trump Administration support the consolidation of all trade-related functions and offices within the Executive Branch into the Department of Commerce or create a Department of Trade?  If not, will the Trade Promotion Coordinating Committee (TPCC) play an elevated role in the Trump Administration?
  4. With Peter Navarro as the Director of the new National Trade Council, Jason Greenblatt as the new Special Representative for International Negotiations, and Trump’s son-in-law Jared Kushner as Senior Adviser, all in new trade roles at the White House,  what will you do to insure consistency in Trump Administration trade positions and messaging?
  5. Which country or countries may be next in line for trade negotiations?
  6. Do threats to raise tariffs on products made outside of the United States set the precedent to embolden other nations to bring production back to their home country and withdraw foreign direct investment from the United States?
  7. With the demise of the Trans-Pacific Partnership (TPP), what is your vision to promote U.S. economic interests in Asia, particularly among our allies in light of the growing interest to complete the Regional Comprehensive Economic Partnership (RCEP) talks?
  8. Do you believe China manipulates its currency?  If so, when should we expect to see this designation in the Trump Administration?
  9. What improvements do you think need to be made to the North American Free Trade Agreement (NAFTA)?  Do you view North America as an integrated market to compete against Asia?
  10. Do you envision the administration taking many self-initiated actions to enforce U.S. trade laws?  If so, what might these actions entail?

Phil Eskeland is Executive Director for Operations and Policy at the Korea Economic Institute of America. The views expressed here are his own.

Photo from Amanda Walker’s photostream on flickr Creative Commons.

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Korea and the Trump Administration: Confirmation Questions for State and Defense Nominees

This is the first in a two part series looking at the potential questions senators should ask Trump Administration officials on North and South Korea policy during their confirmation hearings. The second part looking at the nominees for Commerce and USTR can be found here.

By Mark Tokola

Article II, Section 2, Clause 2 of the United States Constitution requires that the President make appointments with the advice and consent of the Senate.  Confirmation hearings are part of Senate’s process of giving “advice and consent.”  Although the confirmation process has become increasingly partisan, including for appointments to the Supreme Court, it still provides an opportunity for a public discussion of the policy views of incoming Administration officials as well as an examination of their personal backgrounds and qualifications.  Confirmation hearings also provide an early window into how Administrations see the world, what their priorities are, and how they intend to deal with challenges.

Those who have been through the confirmation process, and even those who just watch it, are often frustrated with the time-consuming speeches of the questioners, leading questions intended to push a policy line rather than to learn anything from the candidate, unnecessarily evasive or picayunish answers from the candidates, and the always unhelpful approach of “Just answer the question ‘yes’ or ‘no’!”  The shortage of time also means that important topics never have the opportunity to surface.

For the purposes of those with a particular interest in Northeast Asia, and Korea in particular, following are questions that we would love to see asked and answered during the upcoming confirmation hearings.  Even if they do not come up in the hearings, we will still be watching to see how the Trump Administration will deal with them over time:

For Rex Tillerson, Secretary of State Designate (Confirmation Hearing: January 11-12):

  • What is your diplomatic strategy in regard to North Korea?  Will you offer bilateral talks or do you support reinvigorating the Six-Party Talks framework?
  • Recent policy has been to not allow daylight between the United States and South Korea on North Korea policy. Will that continue in the Trump Administration? If the next South Korean government seeks a new approach to North Korea, what would the U.S. stance be?
  • In the absence of the Trans-Pacific Partnership, how will you strengthen economic ties with our Pacific allies?  Would you consider a bilateral trade agreement with Japan similar to the one we have with Korea?
  • Do you support the Regional Comprehensive Economic Partnership (RCEP) as a means of liberalizing trade within Asia or do you see it as a threat to U.S. interests?
  • There have been plans to replace our 1962-vintage U.S. Embassy in Seoul for over thirty years.  Are you finally going to carry through with the project?

For James Mattis, Secretary of Defense Designate (Confirmation Hearing: January 12):

  • Is there a “red line” for the North Korean nuclear weapons program that would trigger a U.S. action?  Wouldn’t it be advisable to let them know where they must stop?
  • Given modern military capabilities, how really necessary is it to have U.S. troops stationed in South Korea and Japan?  If a fair burden sharing agreement cannot be reached, would you be willing to withdraw them?
  • Apart from questions of funding, what roles do you foresee for our Pacific allies?  What tasks should the Korean, Japanese, Australian, and New Zealand militaries assume?  Shouldn’t they be helping with Freedom of Navigation exercises in the South China Sea?

Mark Tokola is the Vice President of the Korea Economic Institute of America. The views expressed here are his own.

Photo from lukexmartin’s photostreamn on flickr Creative Commons.

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10 Issues to Watch for on the Korean Peninsula in 2017

By Mark Tokola, Phil Eskeland, Troy Stangarone, Jenna Gibson, Kyle Ferrier, and Juni Kim

The Korean peninsula was dominated by unexpected events in 2016. North Korea began the year with a nuclear test that merely foreshadowed a year of significant advancements in its nuclear program rather than its traditional pattern of using tests to provoke a cycle of crisis and negotiations. In response, the Park Geun-hye administration closed the Kaesong Industrial Complex in what would become the first of a series of significant moves to tighten sanctions on North Korea bilaterally by a series of nations and through the United Nations.

On the political front, 2016 saw the surprise election of Donald Trump as president of the United States on a platform that may remake parts of U.S.-Korea relations while redefining the role of the United States in East Asia. Closer to home in Seoul, South Korea was rocked by a political crisis that led to the impeachment of Park Geun-hye.

As 2017 begins the consequences of those events and others from 2016 will begin to play out on the Korean peninsula and Kim Jong-un has again begun the year with a shock announcing that North Korea is close to testing an intercontinental ballistic missile (ICBM). With that in mind, here are 10 issues to follow that will have an impact on the Korean peninsula in the year to come:

Political Dynamics and the Presidential Election in South Korea

Perhaps no issue will have more impact on the Korean peninsula this year and in the years to come than the resolution of the current political crisis in South Korea. Depending on when and how the Constitutional Court rules on the impeachment of Park Geun-hye, South Korea could have a new president as early as this spring or enter into a period of extended political uncertainty with President Park remaining in power until February 25 of 2018.

These political dynamics have implications for South Korea and the peninsula beyond whether Park Geun-hye leaves office early or serves the remainder of her term. The political uncertainty around the impeachment means that needed economic reforms will likely be delayed and that policies enacted by the interim administration or late in the Park administration could be subject to quick reversal after the question of impeachment is resolved. The current environment could also lead to a move towards constitutional reform, an issue that had already been gaining steam prior to the move towards impeachment.

If President Park’s impeachment is upheld a snap 60 day campaign could change the dynamics of the election and favor a candidate who might not ordinarily have performed as well under an ordinary campaign. It may also aid a move towards more populist positions, as is becoming an increasing trend around the world, but in the case of South Korea may come from left rather than the right as we have seen in Europe and the United States.

The election also holds the potential to see a significant shift in policy related to North Korea and Japan, among other issues to watch in 2017.

The Trump Administrations Foreign and Security Policy in East Asia

For the first time since the end of the Korean War, there is significant uncertainty on how U.S. foreign and security policy will develop in East Asia. After decades of bipartisan understanding of both the benefits of the region to the United States and the basic policies that should be put in place to promote U.S. interests, the Trump administration will come into office having campaigned for significant change in U.S. policy and with an air of uncertainty in the region on the shape of U.S. policy to come.

In the campaign, President-elect Trump seemed to place a greater emphasis on international economic issues and question the utility of U.S. alliances and whether countries such as South Korea were contributing enough financially to the deployment of U.S. troops. He also suggested a willingness to withdraw U.S. troops and allow South Korea and Japan to defend themselves with nuclear weapons.

Since the election, we have seen President-elect Trump reaffirm the United States commitment to defend South Korea, but also a willingness to change the nature of the U.S. relationship with Taiwan, potentially increasing tensions with China. For the Korean peninsula, the priorities the administration sets in the region, including whether China or North Korea will be a priority, as well as whether it chooses to purse those policies through negotiation or confrontation will have significant impact on events on the Korean peninsula, including how willing China is to cooperate in pressuring North Korea to denuclearize.

As the Trump administration sets out its new policies, we should expect there to be significant changes that could unsettle the region early in the administration. However, as events and structural challenges in the region necessitate, there will likely be a shift towards a more traditional U.S. foreign policy in the region.

Trump Administration Asia Economic Policy

During the campaign, President-elect Donald Trump castigated U.S. trade policy, including the Korea-U.S. Free Trade Agreement (KORUS FTA).  While the KORUS FTA was cited as an example of a “disastrous” trade deal, candidate Trump did not threatened to withdraw or renegotiate the agreement, as he did with other FTAs.  His first 100 days agenda only reiterated his pledge to withdraw from the Trans Pacific Partnership (TPP).

While the KORUS agreement may be out of the limelight, there are indicators to watch for to see the future of U.S. trade policy.  First, his senior appointees for various posts will determine the extent of Trump’s economic nationalism.  He has nominated Wilbur Ross, a private equity billionaire who specializes in restructuring failed companies, particularly several in “Rust Belt” industries, as Secretary of Commerce, and noted “fair” trade attorney Robert Lightizer, to serve as the U.S. Trade Representative.  In addition, Trump has appointed two individuals to fill newly created positions within the White House – noted trade skeptic and economist, Peter Navarro, as the Director of the National Trade Council, and Jason Greenblatt, who currently is Executive Vice President of the Trump Organization, as the Special Representative for International Negotiations.  It is unclear how all these four individuals, along with free trade advocate Rex Tillerson, who was nominated by Trump to serve as his Secretary of State, will interact to shape a unified trade policy, and how much real power and authority each one of these individuals will possess.

Second, in early February, the annual trade statistics will be released by the U.S. government.  The Year to Date (YTD) trade deficit between the U.S. and the ROK in goods is slightly outpacing last year’s level ($24.07 billion for 2016 vs. $23.997 billion for 2015).  If this trend continues, there could be a renewed attention on KORUS.

Third, even if there is not a direct confrontation of KORUS in the near-term, the Trump plan to focus most of their attention on fixing agreements with Mexico and enforcing trade laws before negotiating any new bilateral deals could have ancillary spillover effects on Korea.  China is Korea’s top trading partner and Mexico is Korea’s ninth largest export market.  Mexico is also becoming a major destination for Korean foreign direct investment.  Thus, while KORUS maybe out of the cross-hairs, actions by the Trump Administration affecting other trading partners could have negative effects for the Korean economy.

North Korean Behavior in Response to a New Political Environment

With a new administration in the United States and the prospects for a new administration in South Korea this year, there is an expectation that North Korea may test the alliance and Kim Jong-un has already suggested that he will conduct an ICBM test.  Observers have tried for years to explain the timing of North Korean nuclear tests, missile tests, and other provocative acts on the basis of North Korean political anniversaries, foreign elections, and other external events such as international summits or Olympic Games. The historic correlations are weak.  It may simply be that North Koreans test their weaponry when it is time to do so on an engineering schedule.  When they are ready to test, they test.  They might wait a matter of days or weeks if tests would interfere with a major political event such as a bilateral meeting, as we would do, but that would nudge the schedule, not drive it.

The tempo of testing has picked up since Kim Jong-un came to power.  Nuclear and missile test are happening much more often than they did during the time of Kim Jong-il.  This might be occurring because Kim Jong-un is still trying to cement his power and has tied his personal prestige to weapons testing.  It may be because North Korea wants to get as far as it can, as fast as it can, before the U.S., South Korea, Japan, and China take stronger steps to try to put an end to its quest for a nuclear arsenal.  It might also reflect Kim Jong-un’s personal impatience.

Will North Korea be a Trump Administration Priority?

U.S. Administrations have limited ability to set foreign policy priorities.  It is a useful exercise to try to set priorities on the grounds that unless you know where you want to go, you are unlikely to get there.  But, foreign policy is unavoidably reactive because decisions by foreign leaders and non-state actors, natural disasters, accidents, and miscalculations require responses.  British Prime Minister Harold Macmillan was quoted as answering a journalist’s question of what Prime Ministers fear most by saying, “Events, dear boy, events.”

Discounting events, North Korea should be a high foreign policy priority for the Trump Administration.  North Korea has threatened military action against the United States, South Korea and Japan and is getting closer to having a nuclear weapon that could strike the U.S. west coast.  That in itself should not be considered a watershed moment, North Korea can already threaten South Korea, Japan, and hundreds of thousands of Americans, military and civilian, living within the range of North Korean military strikes.  North Korea’s belligerency, possible instability, and grotesque human rights abuses should be of great concern to countries in the region, the U.S., and the international community.  A concerted, coordinated policy towards North Korea is necessary.

Are Sanctions Working?

The sanctions enacted this year on North Korea constitute the toughest and most comprehensive framework to date. New information in 2017 will help to gauge whether these measures are working as intended and how they can be strengthened, with China’s enforcement of new sanctions playing a key role. The effectiveness of improvements made to UN sanctions in resolution 2321 and U.S. secondary sanctions targeting financial institutions facilitating Kim Jong-un’s pursuit of hard currency greatly depends on Beijing’s willingness to cooperate with Washington. However, President-elect Donald Trump’s initial approach towards China suggests heightened tensions in the relationship over other issues may pose significant challenges for cooperation on sanctions in 2017.

Nevertheless, the continued use of sanctions as a tool on North Korea may be in question. Several candidates in South Korea’s presidential elections next year favor economic engagement with North Korea. South Korea’s return to engagement would greatly undermine the cohesion of UN sanctions, likely precipitating Russia and China—the most reluctant supporters of sanctions and North Korea’s most influential economic partners—to abandon their support. Even if these candidates are unsuccessful in their presidential bids, should the new sanctions have a limited impact in the first half of 2017 transitioning leaders in the U.S. and South Korea may consider other policy alternatives.

Special Measures Agreement/Burden Sharing 

Ever since 1991, the Republic of Korea (ROK) has provided some financial support to offset the cost of stationing U.S. troops on the peninsula.  During the presidential campaign, Donald Trump questioned on several occasions the alleged low reimbursement for stationing U.S. troops abroad.

Later this year, Korea and the United States will begin negotiations on renewing the Special Measures Agreement (SMA), which is set to expire in 2018, that lays out the terms of the burden sharing arrangement.  Last April, General Vincent Brooks testified before the U.S. Senate that Korea pays approximately 50 percent of the total non-personnel costs of the U.S. troop presence on the peninsula.  Under the current SMA, Korea’s annual payment (in won) increases by the rate of inflation.

Just as in all negotiations, one side offers its most parsimonious offer and the other side counters with its proposal to bolster its own self-interest.  Over time, the two sides come together to reach an agreement.  Marine Corps General James Mattis, Trump’s nominee for Secretary of Defense, earlier criticized President Barack Obama for “saying that our allies are freeloaders.”  Not only does the ROK already share half of the burden of the stationing costs of the U.S. military on the peninsula, but this staunch U.S. ally also has a military draft with 625,000 active duty military personnel confronting North Korea; spends 2.6 percent of its GDP on its own defense (highest among any major European or Asian ally of the U.S); and 80 percent of South Korea’s imports of military equipment over the past five years have come from the United States.  South Korea is leagues above European members of NATO in terms of alleviating the defense burden of the United States.

SMA negotiations will be tough with the Trump administration, as they have been at times in the past.  However, these talks will not undermine the alliance.  The U.S. national interest will continue to inform policymakers that no U.S. troops should be withdrawn from the ROK until the threat from North Korea is resolved.

Will RCEP Be Finalized in 2017?

The failure of TPP has turned attention to the remaining mega free trade agreement in Asia: the Regional Comprehensive Economic Partnership (RCEP). Negotiations were due to have finished by the end of 2015, but have been bogged down by disagreements over a range of issues. However, the breakdown of TPP may prove to be the necessary push to conclude negotiations in 2017. China, the largest member economy and key driver of the deal, has vowed to accelerate talks and is already looking ahead to lead the Free Trade Area of the Asia Pacific (FTAAP), the next progression in the regional architecture.

RCEP members and even non-signatories, such as the U.S., stand to benefit from an Asia with fewer barriers to trade. Still, the deal’s avoidance of non-tariff barriers, while making consensus easier among sixteen diverse economies including Korea, offers limited gains from liberalization. If RCEP is concluded it may provide the foundation for slower and less ambitious regional integration

With RCEP in place, an emboldened Beijing could seek to displace Washington from its leadership role in the region on economic issues. However, the longer RCEP talks continue to drag on, the greater the opportunity for the U.S. to bolster its standing in Asia through bilateral agreements preferred by President-elect Donald Trump.

Will the Korean Wave Continue?

Last year was nothing if not a roller coaster for Korean cultural exports. The bombshell soap opera “Descendants of the Sun” broke records at home and abroad, raking in billions in direct and indirect profits. However, the second half of the year was marred by reports of a Chinese ban on Korean entertainment content because of Korea’s decision to deploy THAAD.

While there have been some instances that could raise suspicion, other events have proceeded as planned, indicating that this is not a blanket ban. It’s far more likely that some local organizers, skittish about the Chinese government’s harsh language on THAAD, decided not to risk a controversy. With THAAD set to be deployed later this year, this will deserve further attention as the deployment takes place.

Yet, interest in everything Korea continues to grow, and shows no sign of stopping. Cosmetics giant Amore Pacific saw a 26.7% year-on-year jump in overseas sales in Q3. And Korea already broke tourism records as of mid-November, with more than 15 million people visiting the country by that point.

It’s worth remembering that the word “hallyu” itself was originally a derogatory term created in China in the 1990s to push back against the influx of Korean media content. People have been predicting the downfall of the Korean Wave since then, yet it is stronger than ever. Expect this to continue in 2017.

Relations Between South Korea and Japan

Relations between South Korea and Japan remain as complicated as ever and 2017 could see uncertainty in the relationship. Despite the implementation of the 2015 Seoul-Tokyo agreement regarding the compensation of comfort women earlier this year, controversy and protests in South Korea have continued to overshadow the deal. In light of President Park Geun-hye’s recent impeachment, leading members of the South Korean opposition parties have increased calls for the government to reconsider the agreement. Potential presidential candidates Moon Jae-in and Ahn Cheol-soo have criticized the deal and may try to restructure the deal or scrap it entirely if elected.

Despite controversy over the comfort women agreement, South Korea and Japan have continued to strengthen their defense ties. Both countries participated in regular joint military exercises with the U.S. this year and started implementation of an intelligence sharing deal earlier this month. The deal allows for intelligence sharing between the two countries regarding North Korea’s nuclear and weapons programs. Controversy over historical issues between the two countries is unlikely to subside in the near future, but the shared North Korean threat provides avenues for greater security cooperation for South Korea and Japan. Needless to say, the next South Korean president will play an instrumental role in determining the future of the relationship.

Mark Tokola is the Vice President of the Korea Economic Institute of America, Phil Eskeland is the Executive Director of Operations and Policy,  Troy Stangarone is the Senior Director for Congressional Affairs and Trade, Jenna Gibson is the Director of Communications, Kyle Ferrier is the Director of Academic Affairs and Research, and Juni Kim is the Program Manager and Executive Assistant. The views expressed here are the authors’ alone.

Image designed by Jenna Gibson of the Korea Economic Institute of America with photos from the photostreams of Gage Skidmore, Stefan Krasowski, Herman Van Rompuy, Byoung Wook, and Korea.net on flickr Creative Commons.

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The Year of the Unexpected: A Look Back At the Korean Peninsula in 2016

By Troy Stangarone

In the Chinese zodiac, 2016 is the year of the Fire Monkey. Fire Monkeys are said to be ambitious and adventurous, as well as irritable. Despite Donald Trump’s not having been born in the year of the Monkey, looking back, his victory in the U.S. presidential election that year may yet seem fitting. However, rather than being a year reflective of the characteristics of the Fire Monkey, 2016 might be better known as the year of unexpected events around the world and on the Korean peninsula. Whether it was the British vote to leave the European Union in June or the impeachment of the South Korean President Park Geun-hye in December, 2016 will be remembered for a series of unexpected events and the questions they have raised about how they may shape the future.

As we take our annual look back at the events that helped to shape the Korean peninsula during the past year, it is also an opportunity to review the events we highlighted on The Peninsula in our annual 10 Issues to Watch For on The Korean Peninsula in 2016 blog. For a year that was dominated by such a large number of unexpected events, our annual look ahead to the events of the coming year holds up surpassingly well. However, while our look ahead was correct on the importance of many events in 2016, those same events also often played out in surprising ways that will have significance beyond what we expected earlier this year. One example of this is the U.S. presidential elections. While U.S. elections always hold significance for the Korean peninsula, few foresaw the election of Donald Trump and the implications his presidency could have for the peninsula early in 2016.

With that said, here’s a brief look back at the 10 issues we highlighted and what happened:

  1. No Significant Progress with North Korea – After North Korea began 2016 with a nuclear test, the international community moved towards placing greater pressure on Pyongyang. This included sanctions at the UN, which would later be strengthened, to cut off North Korea’s trade in minerals such as coal, and bilateral sanctions by the United States to cut North Korea off from the global financial system. As was expected at the time little progress was made with North Korea on resolving the nuclear issue, but the one surprising element was that rather than try to find a way to engage North Korea after a new round of sanctions, South Korea went all in on pressuring the North with the closure of the Kaesong Industrial Complex and lobbying countries to cut their ties with Pyongyang. While we were right on the broader element of there being little progress with North Korea and how structural issues such as the U.S. elections and sanctions would inhibit progress, the strength of South Korea’s stance was one of the unexpected turns of 2016.
  2. If There Will Be Another Round of Family Reunions – If there was going to be progress in relations between North and South Korea it was going to require both countries to separate the nuclear issue from other issues in their relationship. Neither side was able to do so in 2016, which is regrettable for both the humanitarian burden that it places on the divided families and for the reality that family bonds will be one of the important ingredients for unification if it takes place at some point in the future. The longer that families remain divided the further apart the two Koreas are likely to drift.
  3. Could a China-North Korea Summit Still Happen? – This is one issue that was fairly straight forward. While there had been suggestions in late 2015 that Chinese President Xi Jinping might finally meet Kim Jong-un thanks to improving relations, the nuclear test in January ended what little chance there may have been for a China-North Korea summit.
  4. Korea-Japan Relations – When looking at Korea-Japan relations heading into 2016, clearly there had been prior progress. At the same time, it seemed unlikely that there would be the type of progress that the U.S. might have liked and the prospect for backsliding existed. While Japan did approve money for the comfort women fund, the agreement itself remains controversial in South Korea and may face pressure under the next administration. As for the comfort woman statue near the Japanese Embassy, it remains an issue for the local government of Seoul. While progress was made in relations, unsurprisingly, much work remains.
  5. How the U.S. Elections Could Impact Policy – Here we were right about how the political parties viewed the situation in Korea, but wrong about the overall impact of the elections. While we foresaw the critiques of the Obama administration’s policy and the push back on issues such as the Trans-Pacific Partnership (TPP), the degree to which then candidate Donald Trump would shift the debate with his repeated push on the question of South Korea’s contributions to U.S. troops on the peninsula, and suggestions that the U.S. might withdraw those troops and allow South Korea to develop its own nuclear weapons, and that a candidate with these views would win the presidency, were clearly unforeseen. The ultimate result of the election is potentially much more significant for the peninsula than anyone might have imagined at the beginning of the year.
  6. South Korean National Assembly Elections – Here we saw the fairly divided electorate give the opposition Minjoo Party a slim majority and a display of surprising strength by Ahn Cheol-soo’s new People’s Party. However, the impeachment of Park Geun-hye likely means that any signals the National Assembly elections may have had for the presidential election in 2017 no longer matter.
  7. Cooperation Between Korea and China in the G20 – At the G20 in China, South Korea worked with China as expected to help advance the agenda, but IMF quota reform and global safety nets played less of a role than expected during 2016.
  8. K-Pop’s Next U.S. Breakthrough – While K-Pop and Hallyu more generally remained popular in much of the world, especially with the release of Descendants of the Sun, K-Pop continued to have difficulty breaking into the U.S. market. The English language debut of CL, Lifted, was expected to give K-Pop its first breakout in the U.S. since Psy, but the album has yet to produce a chart single in the United States.
  9. South Korea’s Trade Policy – Events on the trade front have played out largely as expected. While TPP, should it be revived, will be an issue for the next Korean administration, there has been significant progress on the Regional Comprehensive Economic Partnership (RCEP) talks that include the ASEAN, China, India, Australia, New Zealand, Japan, and South Korea.
  10. Has Samsung Turned the Corner? – After two difficult years Samsung had turned the corner in 2016 with the successful launch of the Galaxy 7 and the new Edge. However, all of Samsung’s progress melted down with the battery issues of the Galaxy Note 7. As a result, next year will again be a key year for Samsung as it once more looks to turn another corner and rebuild consumer confidence after the issues with the Note 7.

Beyond the events that we expected, here is a look at some of the unexpected events that helped to shape 2016:

  1. Multiple Nuclear Tests and the Advancement of North Korea’s Nuclear Program – Before we even published our look ahead to 2016, North Korea had conducted its first nuclear test of the year. It would go on to break with its pattern of only conducting a single test in a year by conducting a second nuclear test in September. While much attention has focused on the significant increase in North Korean missile launches and tests in 2016, the most significant step may have been in the advances the program took in developing a second strike capability. Though initial tests of a submarine launched ballistic missile failed, North Korea had made progress before the year’s end.
  2. The Closure of the Kaesong Industrial Complex – South Korea took the unexpected step of closing the Kaesong Industrial Complex in response to North Korea’s first nuclear test in 2016. The closure was significant for several reasons. Not that long beforehand South Korea had been pushing to internationalize the complex to avoid the prospect of the complex being shut down after North Korea had withdrawn its workers in 2013 for political purposes. Kaesong also held symbolic importance as the last remaining connection between North and South Korea, as well as the last vestige of the prior sunshine policy. While closing Kaesong was a significant step it may have played a role in encouraging the international community to take stronger steps against North Korea.
  3. International Sanctions on North Korea – While there is nothing necessarily surprising about the international community sanctioning North Korea over its nuclear test, what is significant about the current round of sanctions are the steps that they take to try and limit North Korea’s ability to continue its nuclear program. There are now requirements to inspect North Korean cargo, even that of North Korean diplomats, and caps have been placed on North Korean exports of coal while bans have been placed on other mineral exports. The United States has moved to cut North Korea off from the international financial system and has set in place steps to use secondary sanctions to go after those who enable North Korea. While sanctions are unlikely to resolve the North Korean nuclear issue on their own, they were significantly strengthened in 2016.
  4. The Political Crisis in South Korea – The corruption and influence peddling scandal surround Choi Soon-sil, a longtime confidant of President Park Geun-hye, engulfed South Korea is a political scandal that has seen millions of South Koreans protest in the streets and the impeachment of Park Geun-hye by the National Assembly. As a result of the scandal, South Korea faces an uncertain political future in 2017. Even before the new year begins, there has already been a split within the conservative Saenuri Party with 29 members leaving to form the New Conservative Party for Reform.
  5. THAAD and Dispute with China – Beyond sanctions, one of the steps being taken by the United States and South Korea to deter aggression by North Korea is the deployment of the Thermal High Altitude Arial Defense, or THAAD. This is a step that has been strongly opposed by China which sees it as undermining Beijing’s own interests in the region. While the evidence seems thin to date that China has actually done anything more than complain, there have been concerns that China will retaliate economically against South Korea by restricting its exports of Hallyu to the China and Chinese tourism in South Korea.  Taking such steps would harm Chinese as well as South Korean interests.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Gage Skidmore’s photostream on flickr Creative Commons.

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About The Peninsula

The Peninsula blog is a project of the Korea Economic Institute. It is designed to provide a wide ranging forum for discussion of the foreign policy, economic, and social issues that impact the Korean peninsula. The views expressed on The Peninsula are those of the authors alone, and should not be taken to represent the views of either the editors or the Korea Economic Institute. For questions, comments, or to submit a post to The Peninsula, please contact us at ts@keia.org.