By Troy Stangarone

Voting in the shadow of North Korea’s missile launch and a prospective third nuclear test, South Korean voters went to the polls on April 11 in an election that some 60 percent described as a referendum on the administration of President Lee Myung-bak.  Despite perceptions that that there was widespread dissatisfaction in South Korea with the current administration, results indicate that South Koreans came away from the polls undecided about their nation’s future but giving a slim majority to the conservative New Frontier Party (NFP). 

With almost all of the votes counted, the NFP had secured a small majority in the 300 seat National Assembly with at least 152 seats. Turnout was estimated at nearly 55 percent, which means that the results go somewhat against the grain of prior Korean elections as turnout near the 55 percent mark has historically favored liberals. However, the NFP’s slim majority means that Korea may avoid the gridlock that seemed likely when early polls indicated that neither of the major parties would secure an outright majority in the National Assembly. Though, that could change with defections and bi-elections in the years ahead, but for the moment the NFP’s slim majority means stability in the legislative branch.

The NFP’s victory also means we are unlikely to see any major foreign policy shifts in the near future. President Lee will remain in office for the rest of the year and he will now have support within the National Assembly to maintain his policies. The Democratic United Party (DUP) tried to make revision of the KORUS FTA a major point of its campaign, but the issue never seemed to gain traction as the DUP might have hoped. While the agreement may still remain a campaign issue, the DUP will likely shift its emphasis away from the FTA as it tries to build a winning coalition for the presidential election in December.

While the DUP may press for a softer policy towards North Korea, it seems unlikely to change in the near future as well. With even Russia calling North Korea’s satellite launch a violation of UN Security Council Resolutions and the prospect of a 3^rd nuclear test in the near future, it seems unlikely that the Lee administration would change course in its final months despite pressure from the DUP.

One significant milestone from the elections related to North Korea is the likelihood that the first North Korean defector will be elected to the National Assembly. Cho Myong Chul, who is running as one of the proportional candidates for the NFP and seems likely to gain a seat based on the early results.

On the domestic front, less may divide the two parties than many realize. Both parties campaigned on platforms of strengthening Korea’s welfare state and implementing policies that would help small and medium sized businesses in the face of increasing competition from the Chaebols. This may provide opportunities for liberals and conservatives to work together in the National Assembly as the NFP will only have the smallest of margins with which to pass major legislation.

The big winner in the elections would seem to be Park Geun-hye. Runner up to Lee Myung-bak in the then Grand National Party’s (GNP) presidential primary five years ago, and presumptive nominee for the NFP this time, she is being credited with engineering the NFP’s turnaround. The election results should only enhance her chances in this fall’s presidential race.

However, in the long-run the National Assembly elections are only the first step in determining who will lead Korea. Much of the future foreign and trade policy will be shaped by the next occupant of the Blue House. While the quite support of Ahn Cheol-soo did not work as well for the DUP as it did during last fall’s Seoul mayoral election, there is one lesson for both parties from that campaign. Eight months in any political campaign is an eternity. After losing the mayor’s office in Seoul it seemed as though the then GNP was down and out. That didn’t happen and December is an eternity away.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute. His views are his own.

Photo from Chitra Chaaya’s photo stream on flickr Creative Commons.

By Ben Hancock

President Obama this week is gearing up for a trip to South Korea that will see him both participate in the international Nuclear Security Summit and make the short journey from Seoul to the border with North Korea. It’s also his first trip to Korea — indeed, anywhere in Asia — since last November, when his administration trumpeted the “Asia pivot,” a term that still has many in the foreign policy world scratching their heads. This makes now a good moment to reflect on what the “pivot” really means for South Korea, a long-time U.S. ally that already hosts a strong contingent of some 28,500 American soldiers.

It’s seems safe to say that, so far, the pivot has not yielded any concrete outcomes, perhaps other than stronger U.S. military ties with Australia. But even so, many observers have framed the policy as Washington taking an active role to counter-balance the widening influence of Beijing in the Asia-Pacific. Clearly, if true, this is an aspect that would have bearing on South Korea and its neighbor to the north. The questions are: How exactly would this affect the peninsula, and how likely is this effort to yield new results given the current geo-political dynamic?

In concept at least, it seems fairly straightforward that reducing military and economic tension in the Asia-Pacific by having the U.S. reaffirm its commitment to serving as an outside balancer in the region at a time when the rise of China has many worried would be beneficial for South Korea. Any subsequent increased U.S. leverage on China would also probably give Washington a better hand in negotiating with the North on its nuclear program — also a benefit for Seoul.

So that’s a partial answer to my first question. The fuller answer is: it’s complicated.  For example, it’s not really clear whether a new U.S. military focus on the Asia-Pacific would really counter-balance against China, or would simply raise the stakes as Beijing undergoes a leadership transition of its own and seeks to ensure stability and project strength. For that matter, it’s unclear if the pivot truly means an increased U.S. military focus on the region or more of a commitment not to reduce its presence. Similarly, on the economic front, it’s unanswered whether a new U.S.-led trade deal among nations along the Pacific Rim will really pressure China to adopt high standards, or will simply lead it to forge its own deals — with Korea and Japan, for instance.

We may not need to worry about any of that. In answer to the second question, I would bet that the likelihood of new developments under the “pivot” is very low. Though House Republicans are trying to reduce the budgetary impact on the Pentagon, defense cuts of some measure appear to be on the horizon. That seems to rule out a rise in U.S. military might in Asia being a cornerstone of the “pivot” policy. In Korea, it seems likely that the base consolidation now underway will continue along the same course, along with the transfer of wartime command to Seoul.

Next, economics and trade. Obama kicked off the year in his State of the Union with a clear salvo against China in this area, almost undoubtedly because it plays well in an election year. But this approach seems unlikely to further the long-term U.S. goal of convincing China to rebalance its export-dominated economy. This probably means the status quo for South Korea, too, which continues to be interested in making inroads into the Chinese market.  Of course, Korea could make advances on its own by increasing market share and investment in China if bilateral negotiations with Beijing take off. In the meantime, the conclusion of the U.S.-led Trans-Pacific Partnership (in which Korea has shown little interest) is still miles away.

This mix of factors seems to foreshadow a familiar formula for dealing with North Korea as well. Absent any new show of U.S. military might, increased leverage with China economically or otherwise, or real diplomatic maneuvering, what’s to keep the North from playing its old tricks? Not a whole lot, it seems, as evidenced by its return to testing missiles with the purported purpose of sending satellites into space. When Obama looks over the DMZ early next week for the first time since taking office, he may well find himself still puzzled at how to engage such a defiant nation.

This all paints a picture of the “pivot” not meaning very much for Korea in the near term. In fact, it may be more accurate to think of the phrase as the administration’s branding for what it has already accomplished in Asia — joining new dialogues, showing a lot of earnest diplomatic engagement in the region, and passing the KORUS FTA. That doesn’t mean there are no prospects for future developments under this umbrella; if Obama is granted more time to pursue the policy by voters this November, we may yet see it take on new aspects. A positive shift in the direction of the U.S. economy and fiscal situation could also alter the narrative, but neither of those appear to be in the offing any time soon.

Ben Hancock is a journalist based in Washington, D.C. He has studied Korean language and culture since 2004, and most recently lived in Korea from 2008 to 2010. The views represented here are his own.

Photo from Expert Infantry’s photo stream on flickr Creative Commons.

By Troy Stangarone

For years experts have known that Iran and North Korea have cooperated on missile technology, and suspected that they did so in pursuing their nuclear ambitions as well. But as tensions between the United States and Iran increase, Seoul is increasingly finding itself caught in the middle as its economic and national security interest come into conflict. Should it take part in sanctions that could harm South Korea’s own economic interests, or back its closest ally in an effort to bring Iran back to the negotiation table over its suspected nuclear weapons program?

While South Korea supported previous rounds of sanctions against Iran in 2010 and the fall of 2011 with seemingly little negative economic impact, the new push by the United States to squeeze Iran’s oil exports more directly impacts Seoul’s economic interests. As is the case with much of Asia, Iran and the Middle East are a significant source of oil for Korea. Through the first eleven months of 2011, Iran accounted for 9.6 percent of Korea’s oil imports, while 80 percent of Korea’s oil imports pass through the Strait of Hormuz.

Without its own domestic energy reserves South Korea is dependent upon imports to meet its energy needs. However, replacing Iranian oil may not be as simple as buying from another supplier because of questions regarding current surplus oil supplies. Iran currently supplies the world with about 2.2 million barrels of oil per day, while the U.S. Energy Information Agency estimates that OPEC has about 3 million barrels a day of spare capacity at the moment. Most of the world’s spare capacity is in OPEC, which is expected to see its surplus capacity rise to a little more than 4 million barrels a day later this year as Libya and Iraq bring more capacity on line.  Though some experts question whether Saudi Arabia, which has the world’s largest spare capacity, truly has the ability to increase its production as much as is believed, while analysts at Goldman Sachs estimate that there may be very little spare capacity overall.

In addition to having to find a new supplier at the same time as other major oil importers such as Europe; South Korea will likely face an increasing price for oil and a loss of export markets. As enlarged demand for non-Iranian oil drives up prices, cheaper Iranian oil will be increasingly inaccessible to South Korea. At the same time, the Persian Gulf has become an attractive export destination for Korean products. Through the first eleven months of 2011, South Korea exported $5.7 billion dollars to Iran and another $9.4 billion to other states in the Persian Gulf, up from $1.2 billion a decade earlier in Iran and $1.75 billion in the rest of the Persian Gulf. Some of this trade, especially with Saudi Arabia, could likely be diverted to Red Sea ports, but South Korea would still likely see a fall in exports to the region if hostilities were to break out. 

However, it is not only the United States push for sanctions that threatens South Korea’s economic interests. Facing increasingly tough sanctions and growing isolation, Iran’s regime has threatened to close the Strait of Hormuz and said there would be consequences for Middle Eastern nations that raise oil production to replace embargoed Iranian supplies Iran’s threats alone have kept oil prices over $100 per barrel in the last month from uncertainty over tensions in the region. All of this is creating another dimension for Korean policy makers to consider. While Iran could not likely close off the Strait of Hormuz for long, it is capable of mining or harassing ships in the strait, as it did during the Iran-Iraq War, which could drive up the cost of oil. According to the New York Times, if Iran were to take similar actions the price of oil could rise 50 percent within days.

This is where national security interests conflict with South Korea’s economic interests. Like Iran, North Korea remains one of the world’s pressing nuclear proliferation concerns. While South Korea has expressed support for U.S. efforts to check Iran’s nuclear ambitions, it has yet to announce if or how much it will reduce its imports from Iran.  As Seoul weighs its options, it faces three considerations. Because Iranian and North Korean nuclear proliferation are becoming linked in the United States and the international community, there is pressure for South Korea to take action against proliferation in general. More specifically, as Seoul weighs options to reduce the potential economic impact on its economy, it must balance the efforts it makes and ensure that they do not inadvertently undermine U.S. efforts to get other Asian nations to take part in the sanctions. Lastly, because the United States Congress is taking a hard and bi-partisan line on sanctions, South Korea runs the risk of meeting requests of the U.S. administration but not the expectations of the U.S. Congress, potentially creating additional points of tension with the United States.  

However, even if Seoul complies with the sanctions it will still potentially face risks. If the United States efforts were to fail, Israel might feel increasingly compelled to act on its own. If it did, a conflict in the Middle East might bring about the economic consequences Seoul seeks to avoid. Either way, South Korea’s security and economic interests are at risk from instability in the Middle East

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute. The views expressed here are his own.

Photo from Official Navy Imagery photostream on flickr Creative Commons.

By Nicholas Hamisevicz

2012 is a year of elections and leadership transitions in Asia. Taiwan was set to have the honor of kicking things off, but the death of Kim Jong-il in late December placed much of the early year’s attention on only the second transition in North Korea. In Taiwan, Democratic Progressive Party (DPP) candidate Tsai Ing-wen made it interesting, but Kuomintang presidential incumbent Ma Ying-jeou ultimately was re-elected and the party maintained its majority in Taiwan’s national legislature. For an Asia region uncertain where moving leadership pieces could potentially impact future policies, Taiwan’s election provides observers one of the first indications of where things might be going in 2012.

The outcome in Taiwan is important for a series of reasons. It gives some indication on the future of cross-Strait relations, and subsequently, how much effort and focus the United States and China will have to put toward these issues compared to other relations in the rest of Asia. For South Korea, understanding the priorities of China and the United States in 2012 is critical for developing its own policy toward North Korea under the leadership of Kim Jong-un.

In comparison to the previous presidential leadership in Taiwan under the DPP’s Chen Shui-bian, Ma Ying-jeou said his foreign policy toward the U.S. would contain “no surprises,” which became a mantra for his whole foreign policy. Countries in Asia had already received a surprise when they heard Kim Jong Il had died, and most governments were likely hoping for a Ma victory to continue a period of relative stability between China and Taiwan. If Tsai Ing-wen was able to pull off an upset victory, concerns were that China’s more contentious nature toward the DPP would extend into the larger Asia region. But even though President Ma will have four more years in office, it does not mean everything will be stable in cross-Strait relations. In October, China will have new leaders taking over. It is unclear how the new leadership in China will approach Taiwan or if the dynamics of a new transition of power in China force the new leaders to be tougher on Taiwan issues even with Ma Ying-jeou in office.

After the death of Kim Jong Il, South Korea is trying to develop an understanding with China on approaches to North Korea. South Korean President Lee Myung-bak and other South Korean delegations have already visited China this year. But often when a country tries to improve its relations with China, its own relations with Taiwan are tested. Last year, South Korea worked to enhance its military communication with China and set up a hotline between the two countries. This was perhaps part of its efforts to prepare for change in North Korea. South Korea and China agreed to set up a military hotline; however, South Korea’s military exchanges with Taiwanese military officers had to be suspended.

South Korea and Taiwan also compete economically in Asia. Both countries export similar products to similar markets. After Taiwan signed an Economic Cooperation Framework Agreement (ECFA) with China in 2010, South Korea worried that Taiwan had better positioned itself for the Chinese and Asian markets. Last year, South Korea completed free trade agreements with the European Union and the United States, both top five trading partners for Taiwan. Taiwan fears South Korea now has better economic access, and Taiwan’s trade share with its important trading partners will decrease. Taiwan is also concerned the impact of its ECFA with China will decrease if South Korea is able to sign a free trade agreement with China.

The elections in Taiwan and later this year in South Korea enhance the collective sense in both countries that their democracies are positive examples of government for their neighbors. Candidates sometimes have to govern differently in office then what they stated during their campaigns, but for an Asian region planning for new leadership, the campaign conversations in democracies like South Korea and Taiwan better prepare neighbors for new policies.

Many were watching the election in Taiwan to determine the effects on cross-Strait relations and its impact on regional security. Ma Ying-jeou’s reelection suggests there will be few changes in how China and the United States approach Taiwan issues. For South Korea, a stable cross-Strait situation helps them engage China and the U.S. more closely in preparation for changes in North Korea under Kim Jong-un. South Korea must be careful though as changes in Chinese leadership could change the dynamics with Taiwan; moreover, as South Korea looks to coordinate and understand Chinese intentions toward North Korea, China could ask South Korea to change its policies toward Taiwan. Despite occurring after the death of Kim Jong Il, Taiwan’s elections are the start of pieces settling into place in Asia, and South Korea must understand those connections to its interests.    

Nicholas Hamisevicz is the Director of Research and Academic Affairs for the Korea Economic Institute. The views represented here are his own.

Photo from Mooi’s photostream on flickr Creative Commons.

By Nicholas Hamisevicz, Sarah K. Yun, Chad O’Carroll, and Troy Stangarone

Last year saw significant changes on the Korean peninsula. While 2011 ended with the surprise death of Kim Jong-il and the beginning of succession to Kim Jong-un, last year also saw Korea become one of only nine nations to surpass $1 trillion in total trade, the passage of the KORUS FTA, and a surprise election for the mayor of Seoul. With even more change set for 2012 in both Northeast Asia and on the Korean peninsula, here are twelve economic and foreign policy issues that are worth following in the coming year:

1.      The Transition and Public Events in North Korea: Kim Jong-un has been declared the successor to his father. The North Korean government is working hard to illustrate the unity of the nation and the loyalty of the elites to Kim Jong-un. There will likely be a formal meeting of the Workers’ Party of Korea where titles and positions will be made and adjusted. Kim Jong Un possibly has an advantage with the early schedule of public events where his new leadership will continue to be highlighted, such as the one hundred year anniversary of Kim Il Sung’s birth in April and the start of North Korea’s development as a prosperous and powerful nation. However, after those events, there could be more room for maneuvering if other North Korean elites do not like the direction of the country.

2.      Political Change in South Korea: While North Korea may have got the jump on political change in 2012, South Korea will conduct elections for both the National Assembly and the presidency this year. With South Korean presidents limited to a maximum term of five years, Lee Myung-bak will be ending his term in December.  Lee’s Grand National Party (GNP) has Park Geun-hye at the forefront of potential presidential candidates. However, she will likely face a significant challenge from Ahn Cheol-soo, founder of anti-virus software company AhnLab.  Although yet to declare his candidacy, there are growing signs that he will run as the opposition candidate – and recent polls suggest that he has strong support polling at 49.7 percent, some 7 percent more than rival Park Geun-hye.

Additionally, in April, all 299 seats of the National Assembly will be up for vote, with 245 in single-member districts and 54 seats determined through proportional representation. The ruling GNP has fared poorly in local elections recently and developments indicate that progressives may be uniting under a unified banner for the April elections that could seriously compound difficulties for the GNP.

3.      Kim Jong-un and China: In the early days of the transition, China has thrown its support behind Kim Jong-un. Who from China visits North Korea, and especially if Kim visits the new leadership in China, will likely provide clues to the relationship between Pyongyang and Beijing, as well as how secure the new regime feels in its position. Given that China will undergo its own leadership transition this year, 2012 will likely set the tone for both sides going forward.

4.     The Role of Social Media in South Korean Politics: Social media, including Twitter, are playing an increasingly prominent role in Korean political discourse. A recent Hankyroreh and Korea Society Opinion Institute poll showed politics to be one of the most retweeted topics by users in South Korea this year. This suggests that the conversations that take place on Twitter in 2012 will play a significant variable in this year’s presidential election.  South Korea’s Twitter community has an active user rate that is some two times higher than the world average, with nearly 10% of the nation signed up.  The important role Twitter plays in politics can be seen in a campaign that was credited with a higher than expected voter turnout among young voters during the during the April 2011 by-elections.

The team behind the one of the world’s most listened to podcast, Naneun Ggomsuda, may have a key role in determining the outcome of elections in South Korea this year.  Specializing in political satire, their podcast has to date taken a vehemently anti- Lee Myung Bak and Grand National Party position.  They have also developed a number of investigative stories that have attempted to highlight mis-steps by the ruling government, often with significant media interest.  Their feature on Na Kyung-won’s alleged visits to a luxury skin care clinic is said to have contributed to her loss of support in recent Seoul mayoral elections.

5.   The Euro Crisis: Strictly speaking, this isn’t about Korea, but with Korea heavily dependent upon trade for growth and Europe a major trading partner, the euro zone matters for Korea. If Europe is unable to restore market confidence and avoid a deepening of its debt crisis, a steep economic decline in Europe or the unraveling of the euro could hit the global economy hard. While Europe has managed to consistently fail to address the debt crisis in a comprehensive manner, there may be some tell tale signs early in the year regarding whether Europe has turned the corner or not. If France is able to maintain its AAA credit rating and Italy and Spain are able to roll over nearly $200 billion in debt in the first quarter of the year, Europe will likely have passed the most immediate dangers. When it comes to Korea, the stats to think about are this, the EU accounted for 10.2 percent of Korea’s exports and 9.6 percent of its total trade through the first 11 months of 2011.

6.    U.S. Defense Budget Cuts: The U.S. Department of Defense budget is expected to cut $260 billion over the next five years and more than $450 billion over the next decade. In the new budget strategy announcement on January 5, President Obama and Secretary of Defense Panetta presented a revamped U.S. military strategy with an emphasis on Asia and space and cyber capabilities, and preservation of missions in the Middle East.

With a reduced defense budget, partner relationships will become more important. Although the 5% increase in the 2012 South Korean defense budget may offset the potential challenges in the U.S.-Korea military alliance, uncertainties continue as both countries enter an election year. Despite reassurances from Obama and Panetta, the future shape of United States presence in Korea and Asia is still to be determined. With both nations preparing for op-con transfer in 2015, how the budget and strategy changes in the U.S. play out could play a role in the future force structure of the alliance.

7.    North Korea’s Interaction with the United States and South Korea:  Despite its current turn inwards, North Korea will likely turn its attention outwards at some point in 2012. North Korea and the United States seemed to be on the verge of a deal over food aid and possibly moving forward on nuclear talks before Kim Jong-il’s death, and there are early indications these may start back up at some point. As for South Korea, Pyongyang has said that it will not deal with the current administration in Seoul, but 2012 will also bring fresh elections for the National Assembly in April and the presidency in December, key points to watch for in North-South relations.

8.    Seoul Nuclear Security Summit: Seoul will be hosting the second Nuclear Security Summit in March with participation from over 50 national leaders. The agenda will consist of mainly three issues: international cooperation against nuclear terrorism, prevention of illicit transaction of nuclear materials, and protection of nuclear materials, nuclear power plants and other nuclear related institutions.

The appointment of Korea as the chair of the second NSS is both practical and symbolic – practical in that Korea is a close ally of the U.S., enabling smooth coordination; and symbolic in that Korea has been an active member of the Nuclear Non-Proliferation Treaty with advanced nuclear energy capabilities, yet facing a serious nuclear threat from North Korea.

Whereas the hosting of the G-20 in 2011 elevated Korea’s status as a world economic power, the Seoul NSS will elevate Korea as a world security leader. The NSS will be even more significant in light of Kim Jong-il’s death. President Lee Myung-bak had previously extended an invitation to Kim Jong-il to attend. It will be interesting to see how the new regime responds to the summit.

9.    The Implementation of the KORUS FTA: Now that the United States and Korea have passed the KORUS FTA the two governments are looking to implement the agreement. The agreement should come into force early in the year, but might slip until after National Assembly elections in Korea for political reasons.

10.  The Politics Around the KORUS FTA and U.S.-Korea Relations: Speaking of the politics of the KORUS FTA, prior to the death of Kim Jong-il, the opposition in Korea was turning the FTA into a major campaign issue, calling on Korea to renegotiate certain provisions such as those relating to investor-state dispute settlement. Some had gone so far as to suggest Korea should withdraw from the agreement. Korea’s relationship with the United States is a complex one, and anti-Americanism has played a role in previous elections. While North Korea is now likely to become the major campaign issue, look for the FTA and Korea’s broader relationship with the United States to remain caught up in domestic politics for the time being.

11.  South Korea-China FTA: China has become South Korea’s largest trading partner by a significant margin, with the two countries doing more than $200 billion in trade in the first eleven months of 2011. With the EU and KORUS FTA now concluded, Korea will look to start negotiations with its biggest trading partner in the next few months.

12.  World Expo 2012 – Yeosu, Korea:From May to August, Korea will host the 2012 Expo in the port city of Yeosu. Under the theme of “The Living Ocean and Coast,” the Yeosu Expo will share knowledge in maritime cooperation, marine science, and the proper use of ocean and coast. Korea is anticipating an international recognition of Korea as a leading maritime nation.

Hosting the Expo can be seen as a completion of Korea’s campaign as a world leader – the 2011 G-20 on economic issues, the 2012 Seoul Nuclear Security Summit on security issues, and the 2012 Expo on cultural and soft power issues.

Nicholas Hamisevicz is the Director of Research and Academic Affairs, Sarah K. Yun is the Director of Public Affairs and Regional Issues, Chad O’Carroll is the Director of Communications, and Troy Stangarone the Senior Director for Congressional Affairs and Trade for the Korea Economic Institute. The views expressed here are the authors alone.

Photo from Rachael Towne’s photostream on flickr Creative Commons.

By Troy Stangarone

While 2011 will ultimately be remembered for the passing of Kim Jong-il, it was also a year of significant change and new milestones for both South Korea and the U.S.-Korea alliance.

In many ways, 2011 really began in the waning days of 2010 for South Korea. On November 23 last year, North Korea shelled Yeonpyeong Island, killing two civilians and two members of the South Korean military. The attack sealed a chill in relations between North and South Korea that would set the tone for the first half of 2011. By the time both sides began to make progress towards the end of the year that could have led to the resumption of the Six Party Talks, Kim Jong-il had passed away.

At the same time, barely two weeks after the shelling of Yeonpyong Island, the United States and South Korea reached a supplementary agreement on the KORUS FTA that paved the way for the agreement to be passed four years after originally being concluded. Despite political delays over remaining political issues in Washington and in Seoul, the long stalled agreement was passed by Congress on October 12 during President Lee Myung-bak’s summit visit and the National Assembly during a surprise session on November 22.

Having resolved long-standing concerns over the FTA, it is now set to coming into effect early next year. Representing a significant deepening of U.S.-Korea relations, the FTA signifies an important milestone for both sides in remaking the alliance into a broad based 21^st century partnership that extends beyond mutual concerns about North Korea. However, despite the importance of the agreement politically and economically, the politics surrounding it may seep into 2012 as the opposition in South Korea has continued to call for the agreement’s renegotiation.

Korea also saw success on the Olympic front in 2011. After bidding previously for the 2010 and 2014 Olympic Games, Pyeongchang easily beat out Munich and Annecy for the 2018 Winter Olympic Games.  With the International Olympic Committee awarding Korea the 2018 Winter Games, Korea will join the United States, Italy, Germany, France, Japan, and Russia as the only nations to host both Winter and Summer Olympic Games.

Despite lingering concerns regarding the KORUS FTA, 2011 was an important year for South Korea when it comes to trade. On July 1, the EU FTA came into force, making it the world’s largest bilateral free trade agreement and in early December South Korea overcame the headwinds of uncertainty from the euro zone crisis to pass the $1 trillion threshold in total trade for the first time.  South Korea reached the $1 trillion mark in total trade in a short six years after first crossing the $500 billion threshold and during some of the worst economic times since the Second World War. Barring a meltdown in the euro zone, which remains a real possibility, the EU FTA and newly implemented KORUS FTA will likely help South Korea to continue to expand its trade volume in the coming year.

On the diplomatic front, there were a series of milestones. The summit meeting between Presidents Lee Myung-bak and Barak Obama in October was universally seen as a high water mark in U.S.-Korea relations and representative of a strengthening of ties in recent years.  South Korea continued its efforts to become more of a global player as it hosted the 4^th High-Level Forum on Aid Effectiveness in Busan and is set to host the next Nuclear Security Summit in 2012. On a bilateral level, Ambassador Sung Kim became the first Korean-American to be posted to Seoul, capping a year of deepening ties between Washington and Seoul.

At the same time, the future holds uncertainty for the relationship. Like much of the world, South Korea is beginning to feel the effects of political change. In the November Seoul mayoral election, the Grand National Party (GNP) was unable to hold on to the mayor’s office, but the Democratic Party (DP) was unable to capitalize on the GNP’s difficulties. Instead, social networking and a desire for change from politics as usual led to the surprise victory of the independent Park Won-soon in the mayor’s race and the failure of the DP to gain any traction in the election. The aftershocks have already seen the DP merge with a party of supporters of former President Roh Moo-hyun to form the new Democratic Unity Party and a push for greater change in the GNP.

Despite the prospect for political change in South Korea, the most sweeping changes of 2011 have occurred in North Korea. With the surprise death of Kim Jong-il, the succession process put in place during the September, 2010 Workers Party Conference was unexpectedly pushed forward. In recent days the regime has worked to choreograph a smooth transition to Kim Jong-un as the military has publically referred to Kim-Jong-un as its “supreme commander”  and he has been promoted to top post in the Korean Workers Party Central Committee.  However, it is still unclear if Kim Jong-un will govern with complete authority as his father did, or North Korea will move towards a collective leadership structure where Kim Jong-un serves as a figure head. What does seem clear, despite uncertainty about the future ability of the regime and Kim Jong-un to maintain its hold on power, is that the passing of Kim Jong-il will presage a change in how North Korea is governed.

On a lighter note, South Korea saw the debut of Saturday Night Live Korea (SNLK), a spinoff of the popular U.S. satire. While early indications are that SNLK will be as irreverent as its American counterpart, that might not be a bad thing. Given the uncertainty that lies ahead in North Korea with the death of Kim Jong-il, many Koreans might just need a good laugh in 2012 as many of the events of 2011 linger into next year and they ponder their own future.

Troy Stangarone is the Senior Director of Congressional Affairs and Trade for the Korea Economic Institute. The views expressed here are his own.

Photo from David Hepworth’s photostream in flickr Creative Commons.

By Sarah K. Yun

During the Joint Session of Congress on October 13, President Lee Myung-bak told the epic tale of Korea’s journey from war to peace, and poverty to prosperity; a tale in which he has very much shared in his own personal life. While thanking Congress for the ratification of the KORUS FTA, President Lee talked about the need for continued U.S. leadership and Korea’s growing role on the world stage.

With China’s rise and the global financial crisis, many have begun to question the United States’ leadership and its ability to lead. Contrary to this, President Lee focused on the need for the United States to continue to play a leadership role in the challenges faced by the global community, especially if Northeast Asia is to play a constructive role in the global community. He stated that:

“Northeast Asia today is a more dynamic region than ever. And economic change in this region brings geopolitical change. It brings shifts in the balance of power that has long prevailed. The United States, as a key player of the Asia Pacific region and as a global leader, has vital interests in Northeast Asia… And your leadership that has ensured peace and stability of Northeast Asia and beyond the 20th century must remain supreme in the 21st century.”

This explicit statement in front of the Joint Session of Congress is significant in declaring that its staunchest and most important partner remains the U.S., not China as many believe will be in the future.

President Lee may have had two reasons for declaring support for U.S. leadership in the region. First, he wanted to send a clear and strong signal to the North Koreans and the Chinese, especially in light of North Korea’s changing attitude towards dialogue and engagement, as well as its growing political and economic ties with China. Second, he wanted to send a clear signal of strength to Americans and his domestic constituents in South Korea as both countries enter an election year in 2012. Highlighting the accomplishments from the alliance and reaffirming Korea’s support for U.S. leadership sends a strong message that, while the balance of power may change in Asia, the values and principals under which peace and security have be maintained should remain.

While the alliance has been imperative to both nations and the KORUS FTA will bring new economic benefits, President Lee also alluded to Korea’s unique path to leadership. To effect, he stressed Korea’s commitment to low carbon, green growth, and international development. He also emphasized the unique role education has played in Korea’s success. This allowed President Lee to show Korea as more than a faithful ally of the United States, but as a leader in its own right with a vision for a “Global Korea.”

Indeed, the relationship and friendship of the United States and the Republic of Korea is intricately and critically interwoven. As President Lee stated, the “alliance will grow and evolve… and it will prevail.” While saluting U.S. leadership and the U.S.-ROK alliance, President Lee’s speech also indicated South Korea’s desire to pave its own style of leadership. In recent years, Korea has emerged on the global stage and shown a willingness to act as a responsible stakeholder. From its own experience, Korea is able to be empathetic to poverty and need. Therefore, it now has a moral responsibility to give back to developing parts of the world. Perhaps this is the new and unique Korean leadership that President Lee Myung-bak is paving the way for.

Sarah K. Yun is the Director of Public Affairs and Regional Issues. The views expressed here are her own.

Photo: Official Speaker of the House Photo

By Troy Stangarone

The arrival of South Korean President Lee Myung-bak seems to have concentrated the minds of Republicans and Democrats in a manner that only imminent default has achieved prior to now. Little more than a week ago, it was uncertain that the long-pending free trade agreements with Korea, Panama, and Colombia would even be submitted in time for President Lee’s visit to the United States.

However, with President Lee scheduled to address a joint session of Congress, as well have a Summit meeting with President Barack Obama, neither side wanted to leave the issue unsettled. The House moved first passing the KORUS FTA (278-151) and TAA (307-122), with the Senate (83-16) following shortly thereafter.

Ensuring passage of the KORUS FTA in time for President Lee’s visit is reflective of the strong nature of the alliance. At a time when the United States’ commitment to Asia and trade policy has been questioned, working to complete the process in time for President Lee sends a strong signal that the United States is committed to engaging the Asia-Pacific region and increasing trade liberalization.

It is also reflective of the growing relationship between Seoul and Washington. What only a decade ago was an alliance that many considered to be in trouble has grown into one of the United States’ closest and most dependable partnerships. Reflective of this change has been Korea’s growing leadership role on the global and regional stage, especially on economic issues through the G-20 and serving as host and chair for last year’s G-20 Summit.

Beyond strategic calculations, the agreement is the most significant economic agreement for the United States in nearly two decades and the most important agreement for the United States in East Asia. Last year alone, the United States and Korea conducted more than $115 billion dollars in two way trade in goods and services. According to estimates by the U.S. International Trade Commission, the agreement could add more than $18 billion in new trade in goods alone. At the same time, it will open up Korea’s more than $500 million services market to U.S. service provides, likely significantly adding to that total.

With the U.S. Congress having completed its work, attention now moves to South Korea’s National Assembly. Korea has been attempting to move one step behind the United States in the approval process and the Grand National Party is now setting the stage into motion for approval in Korea. Early expectations are that the agreement will be voted on once the National Assembly reconvenes on October 28. In addition to the agreement itself, Korea will need to pass 14 additional pieces of legislation to make the necessary changes for the agreement to be implemented.

If the early success of the EU-Korea FTA is any indication, the benefits of the KORUS FTA should be readily evident early next year when it comes into force. However, expectations for autos, one of the biggest stumbling blocks to the agreement, should be tempered. The revised agreement struck by the two sides in December only cuts the Korean tariff in half when the agreement comes into effect, and then leaves them there until the fifth year. This will give European producers a price advantage over U.S. models in the Korean market. In anticipation of the EU-Korea FTA coming into effect, European producers aggressively cut their prices in the Korean market and have seen increases of 30 percent in the first three months of the agreement.

Despite the long road it took to get to this point, the KORUS FTA is a critical agreement for both parties and represents a new high in U.S.-Korea relations. Now the hard work starts, making the agreement work for U.S. and Korean consumers and businesses.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade for the Korea Economic Institute. His views are his own.

by Amb. Charles (Jack) Pritchard

The official State Visit by Republic of Korea President Lee Myung-bak this week marks a true celebration of a remarkable partnership between the United States and the Republic of Korea.  We are all familiar with the origin of the relationship and the amazing success story of Korea’s rise from the ashes of the Korean War to become the nation that it is today.  President Lee’s visit has more to do with the unparalleled state of the relationship and his commitment to it.

I do not know of any serious Korea-watcher who does not attribute the improvement of the U.S.-Korea relationship primarily to President Lee. Like any other relationship, it takes two to Tango and both Presidents George W. Bush and Barack Obama deserve great credit for nurturing the relationship in partnership with President Lee.

That said, the Summit offers an opportunity to celebrate a number of accomplishments and to lay the groundwork for even more in the future.  More than four years after the KORUS FTA was signed, the Congress will ratify the agreement.  With that action, attention will shift to Korea where it will be the National Assembly’s turn to formally ratify the FTA.  This is cause for celebration.  The KORUS FTA is a win-win situation for both countries and marks a significant change in the strategic relationship.  The basis of the alliance has rested primarily on the security component and extensive people-to-people ties.  With ratification of the KORUS FTA, the economic component of the alliance provides a complete balance to the strategic relationship.

There are few concrete issues that will demand the attention of the two presidents and little likelihood of any new agreements.  The close consultation on how to deal with North Korea over the past 3 years means that we can expect a public validation of how things will proceed.  Seoul has had two recent meetings with Pyongyang and Washington will hold its first substantive discussion with North Korea later this month.  Whether or not an acceptable path forward on the resumption of Six Party Talks can be reached is questionable.  Both governments appear to have come to the same conclusion that even if talks resume, there is little likelihood that real progress on denuclearization can be made.

I would also expect that there will be an acknowledgement that both parties are moving quickly to craft the required 123 Nuclear Agreement that will renew bilateral nuclear cooperation between the U.S. and Korea once the existing agreement expires in 2014.

The arrival ceremony, the vice president’s lunch, the speech before a joint session of Congress, the summit meeting and State Dinner are all designed to show to the Korean people the enormous pride and respect we have in our extraordinary relationship.

By Troy Stangarone

After months of discussion on how to proceed legislatively on the three pending free trade agreements and Trade Adjustment Assistance (TAA), the White House formally submitted the KORUS FTA to Congress on October 3. The submission comes more than four years after the KORUS FTA was initially concluded and three months after Korea’s FTA with the European Union came into effect.

What can we expect moving forward?

Now that the White House has submitted the pending FTAs with Korea, Colombia, and Panama, the formal process for their passage has been set in motion. Under Trade Promotion Authority, Congress has up to 90 legislative days to approve the pending trade agreements, but the expectation is that the process will move much quicker as there is bipartisan support for the FTAs in both houses of Congress and Speaker Boehner has committed to moving the FTAs and TAA in tandem.

With President Lee Myung-bak set to arrive in Washington, DC for a summit on October 12-13 there will be growing pressure to finish this process before he arrives. Realistically, only the House will vote on all three agreements prior to the summit, as well as legislation to reauthorize the Generalized System of Preferences (GSP) and TAA. However, because of the short timeframe the Senate may not take up the FTAs until after President Lee’s visit. Should the Senate pass the KORUS FTA before the end of October, the agreement could come into force by January 1.

What potential obstacles remain?

The main obstacle could still be TAA. In the current political environment trust has been in short supply. Democrats have doubted Republican intentions to support worker retraining they see as essential for expanded free trade, while Republicans have held similar doubts about Democratic intentions regarding the Colombia FTA. These are the same concerns which held up earlier submission of all three agreements and continue to linger.

BNA, a trade publication, recently reported that more the 200 House Republicans are expected to vote against the inclusion of TAA in legislation to renew GSP. If House Republicans were to succeed in preventing the passage of TAA, the Senate would likely withhold passage of the FTAs until a resolution is found on passage of TAA.

What does submission of the KORUS FTA mean?

Now that the FTA has been submitted its passage should be largely assured if the potential obstacles with TAA and the Colombia FTA can be avoided. While the process needs to be concluded, Congress has never voted down an FTA once it has been submitted by an administration. To do so would be a significant foreign and economic policy setback for the United States at time when its global leadership is already under question. Given the strong nature of the U.S.-Korea alliance, most observers see the KORUS FTA passing with significant bipartisan support in both houses of Congress.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade for the Korea Economic Institute. His views are his own. 

Photo by Phil Roeder