{"id":2196352,"date":"2022-05-25T16:15:56","date_gmt":"2022-05-25T07:15:56","guid":{"rendered":"https:\/\/www.nknews.org\/pro\/?p=2196352"},"modified":"2023-04-05T16:12:21","modified_gmt":"2023-04-05T07:12:21","slug":"south-korea-keeps-strategic-ambiguity-alive-by-joining-us-led-economic-framework","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2022\/05\/south-korea-keeps-strategic-ambiguity-alive-by-joining-us-led-economic-framework\/","title":{"rendered":"South Korea keeps strategic ambiguity alive by joining US-led economic framework"},"content":{"rendered":"

Leading up to the official launch of the U.S.-led Indo-Pacific Economic Framework (IPEF) on <\/span>May 23<\/span><\/a>, many were surprised at the level of enthusiasm that South Korea showed, as it previously eschewed U.S.-led trade groups and networks.<\/span><\/p>\n

South Korea\u2019s Yoon Suk-yeol government apparently sees the IPEF as in the \u201c<\/span>national interest<\/span><\/a>,\u201d but the real appeal may be the ambiguity and toothlessness of the deal, which doesn\u2019t force Seoul\u2019s economic planners to commit to anything.<\/span><\/p>\n

While the U.S. sees IPEF as a way to regain its footing in the regional economy after former President Donald Trump torpedoed the multilateral <\/span>Trans-Pacific Partnership<\/span><\/a> deal, the new framework is critically short of details, particularly when it comes to the perks of membership that set it apart from existing trade deals or institutions, such as tariff reductions or access to the U.S. market.\u00a0<\/span><\/p>\n

Thus, many <\/span>Indo-Pacific countries have been hesitant<\/span><\/a> to sign up for a deal that risks attracting the ire of China with no clear upside, except for being a sort-of alternative to Beijing\u2019s Regional Comprehensive Economic Partnership (RCEP).<\/span><\/p>\n

\"\"

U.S. President Joe Biden and South Korean President Yoon Suk-yeol visit a Samsung semiconductor facility in South Korea on May 20, 2022 | Image: ROK Presidential Office<\/p><\/div>\n

On paper, IPEF aims to strengthen supply chains and promote common standards on the digital economy, clean energy and taxes.<\/span><\/p>\n

For South Korea, joining this network is considered a <\/span>no-brainer<\/span><\/a>, as semiconductors are the lifeblood of its trade-dependent economy. Samsung Electronics and SK hynix account for a combined <\/span>70 percent<\/span><\/a> of the world\u2019s DRAM memory chips, and their outbound shipments make up almost a fifth of the country\u2019s exports.\u00a0<\/span><\/p>\n

An ecosystem of some <\/span>20,000 firms<\/span><\/a> forms clusters around the two chip giants, specializing in diverse chip-related fields. However, recent years have seen various geopolitical factors disrupt the industry\u2019s supply chain, from Japan\u2019s export curbs on key chemicals and COVID-19-related logistical issues to the <\/span>war in Ukraine<\/span><\/a>. E<\/span>xperts predict that supply chain <\/span>vulnerabilities will continue<\/span><\/a> due to government intervention and export curbs.<\/span><\/p>\n

South Korean firms\u2019 current lead in cutting-edge technology also looks precarious, as <\/span>aggressive government initiatives<\/span><\/a> pledge billions of dollars to ramp up research and development, infrastructure and tax benefits for domestic chip production. While trying to stay ahead, South Korean companies are behind in logic chip technology compared to Taipei-based Taiwan Semiconductor Manufacturing Company (TSMC), which dominates the critical foundry business in the global market.<\/span><\/p>\n

At the same time, no semiconductor company or country has an absolute advantage across the entire fabrication process, as <\/span>cooperation<\/span><\/a> and cross-border investments are needed between competing players.\u00a0<\/span><\/p>\n

South Korean businesses are thus attracted to the Biden administration\u2019s $52 billion plan to bolster American chip technology, which gives the big South Korean chip players opportunities to cement and grow their U.S. market presence. Samsung and TSMC, for example, have committed to building multibillion-dollar plants in <\/span>Texas<\/span><\/a> and <\/span>Arizona<\/span><\/a>, creating local jobs and ramping up U.S. production capacity.<\/span><\/p>\n

Yang Jun-sok, an economics professor at The Catholic University of Korea, told <\/span>Korea Pro <\/span><\/i>that the U.S. has a lot of appeal for South Korean chipmakers beyond just its size.<\/span><\/p>\n

“America is the global center of innovation,<\/span> featuring many appealing factors for chip producers including a top talent pool, leading chip design companies, strong IP protection and sufficient land for fabs,” he said.<\/span><\/p>\n

There are also geopolitical considerations. Washington is determined to cut Chinese technology out of its semiconductor supply chain, and if South Korean companies dither, they may also get iced out, according to Choo Jae-woo, a professor of Chinese Studies at Seoul\u2019s Kyung Hee University.\u00a0<\/span><\/p>\n

Choo pointed to Dutch firm ASML, which the Trump administration pressured <\/span>to not sell advanced EUV equipment<\/span><\/a> to China.\u00a0<\/span><\/p>\n

\"\"

Seoul has requested that U.S. trade officials remove quotas on South Korean steel products | Image: Leeco Steel\/ Antonio Rosset via Wikimedia Commons<\/a> (CC BY-SA 4.0<\/a>)<\/span><\/p><\/div>\n

STEEL WORLD<\/b><\/p>\n

Another key appeal of IPEF may be the opportunity to relax controls on South Korean steel.\u00a0<\/span><\/p>\n

For months, Seoul has requested that U.S. trade officials review and remove the 2018 <\/span>quota on South Korean steel products<\/span><\/a> to 70% of the average volume it imported between 2015 and 2017. While the Biden administration agreed to remove the 25% steel tariffs placed on the European Union, U.K. and <\/span>Japan<\/span><\/a>, the U.S. Trade Representative has not budged on South Korea, despite monthslong efforts by Seoul\u2019s trade ministry to convince Washington otherwise.<\/span><\/p>\n

Highly concerned about Korean steelmakers losing out to global competitors amid the growing demand for steel in the U.S., then-trade minister Yeo Han-koo appeared to try a different approach in March this year by explicitly <\/span>embracing the IPEF<\/span><\/a>, changing its previously cautious tone that was apparently mindful of Beijing. The ministry held subsequent discussions and even put together a <\/span>task force<\/span><\/a> on the IPEF to discuss <\/span>steel<\/span><\/a> and other concerns.\u00a0<\/span><\/p>\n

In the days leading up to the Yoon-Biden summit, domestic steelmakers\u2019 shares posted double-digit gains <\/span>in anticipation<\/span><\/a> of a tariff rollback from Washington.<\/span><\/p>\n

Biden didn\u2019t deliver such a gift at the summit, which Yang said could have been a contentious move ahead of the November midterm elections in the U.S., instead favoring driving away voters in favor of protectionist measures to keep production local.<\/span><\/p>\n

While Biden did not allude to steel directly,<\/span> he did explain <\/span>during a <\/span>joint press conference<\/span><\/a> with Yoon that \u201cthere are ways to deal with some of the trade barriers that were placed\u201d by Trump that his administration is \u201clooking at very closely right now.\u201d\u00a0<\/span><\/p>\n

\"\"

Biden meets with Japanese Prime Minister Fumio Kishida and Indian Prime Minister Narendra Modi in Tokyo | Image: White House Twitter<\/a><\/p><\/div>\n

LOW RISK, LOW REWARD?<\/b><\/p>\n

Given Beijing\u2019s track record of economic coercion to punish trade partners that fall out of diplomatic favor, concerns remain in Seoul that participating in IPEF could trigger harsh retaliatory measures reminiscent of those <\/span>imposed in 2016<\/span><\/a>.<\/span><\/p>\n

Beijing has certainly warned Asian neighbors against joining IPEF in recent weeks. Foreign Minister Wang Yi last week <\/span>cautioned his South Korean counterpart Park Jin against \u201cthe negative tendency of decoupling\u201d and \u201ccutting off [supply] chains.\u201d\u00a0<\/span><\/p>\n

However, at a time when China is becoming increasingly isolated from the West and distracted domestically with efforts to contain COVID-19, it is unlikely to take aggressive action against the South, Mason Richey, a professor at Hankuk University of Foreign Studies, told <\/span>Korea Pro<\/span><\/i>.<\/span><\/p>\n

China\u2019s messages aimed at South Korea have been<\/span> noticeably softer<\/span><\/a>, using familial analogies, compared to the hostile rhetoric reserved for Japan, Beijing\u2019s historical rival.\u00a0<\/span><\/p>\n

Washington is also unlikely to scale up rhetoric or anti-China undertones in its economic framework as it is preoccupied by the Ukraine crisis and the upcoming midterms.\u00a0<\/span><\/p>\n

Still, almost a third of South Korean exports went to China last year, meaning Beijing can easily turn the screws on the South\u2019s economy if it so chooses.<\/span><\/p>\n

\u201cSouth Korea joining the Quad could invoke a strong response. An import curb on basic steel imports that Beijing slapped on Australia is a real possibility,\u201d said Song Soo-young, professor of Finance at Chung-Ang University.<\/span><\/p>\n

There\u2019s also a risk of Korean manufacturers facing a supply chain crisis, as <\/span>dependence on China\u2019s intermediary goods<\/span><\/a> grew over a 10-year stretch to 28% in 2020.<\/span><\/p>\n

But at this point, with the IPEF relatively vague and low-key, and both the U.S. and China keen to avoid conflict, there is room for ambiguity and maneuvering.<\/span><\/p>\n

\u201cRight now, there are no tangible benefits for Seoul to join IPEF, but it\u2019s a strategic choice that supports Washington but at the same time won\u2019t upset Beijing too much,\u201d Richey said.\u00a0<\/span><\/p>\n

\u201cIt\u2019s a low-return but low-cost choice made politically, strategically and diplomatically,\u201d he said.<\/span><\/p>\n

Edited by Arius Derr<\/span><\/i><\/p>\n

Business & Economy<\/span><\/a>Inter-Korean & Foreign Relations<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"

Leading up to the official launch of the U.S.-led Indo-Pacific Economic Framework (IPEF) on May 23, many were surprised at the level of enthusiasm that South Korea showed, as it previously eschewed U.S.-led trade groups and networks. South Korea\u2019s Yoon Suk-yeol government apparently sees the IPEF as in the \u201cnational interest,\u201d but the real appeal […]<\/p>\n","protected":false},"author":3665,"featured_media":2196354,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[21],"tags":[24,28],"yoast_head":"\nSouth Korea keeps strategic ambiguity alive by joining US-led economic framework - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2022\/05\/south-korea-keeps-strategic-ambiguity-alive-by-joining-us-led-economic-framework\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Korea keeps strategic ambiguity alive by joining US-led economic framework - KOREA PRO\" \/>\n<meta property=\"og:description\" content=\"Leading up to the official launch of the U.S.-led Indo-Pacific Economic Framework (IPEF) on May 23, many were surprised at the level of enthusiasm that South Korea showed, as it previously eschewed U.S.-led trade groups and networks. 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