Do Presidential Candidates Care About Economic Security?

  • By Victor Cha, a professor at Georgetown University, Senior Fellow in Human Freedom at George W. Bush Institute, and Korea Chair at CSIS in Washington, D.C.

    November 22, 2021 13:52

    Victor Cha

    A national discussion on economic security for Korea is long overdue and must begin with July 2016, after North Korea's fourth nuclear test, when the Park Geun-hye government announced that South Korea would allow the U.S. to station a Terminal High-Altitude Area Defense battery as a defensive measure against North Korea.

    Less than an hour after this announcement, the Chinese Foreign Ministry protested, and in the month following this, Beijing issued 27 statements and its state newspapers ran over 250 articles critical of South Korea. As many South Koreans will not easily forget, the Xi Jinping government followed this criticism with a coordinated 1.5-year boycott of South Korean music, TV, and tourism, and launched a campaign against Lotte in China that cost the company over $2 billion in losses. For many younger South Koreans, this was a defining moment in their perception of China, with polls today now showing China as more disliked than Japan.

    The question for the major parties' presidential candidates, Yoon Seok-youl and Lee Jae-myung, is not whether this translates into a "pro-" or "anti-" China foreign policy, but whether either of them believes that South Korea must make a real effort to preserve its economic security against future disruptions.

    Japan is not a stranger to Chinese economic coercion either, having suffered a rare earth mineral ban and other non-WTO-compliant sanctions by Beijing. But the new Fumio Kishida government in Tokyo took the step last month of creating a new ministry focused exclusively on economic security. Kishida appointed Takayuki Kobayashi as the first-ever minister. At 46 years of age, Kobayashi is a former parliamentary vice-minister of defense appointed by former Prime Minister Shinzo Abe, and previously led a Liberal Democratic Party study group focused on economic security.

    But Kobayashi is not as significant for South Korea as the mission of this newly created post, which is broadly defined as protecting critical technology and supply chains. This can entail a wide variety of responsibilities including ensuring the uninterrupted flow of critical precursor materials and supplies, protection against cybertheft and hacking, judicious screening of foreign investments, improvement of export-control regimes, all designed to build and preserve the domestic foundations of a resilient economy.

    Should the presidential candidates be advocating the creation of a similar post in South Korea? If the memories of THAAD are not vivid enough, the current shortage of urea solution in the country -- instigated by China's new export restrictions to boost domestic supply -- should be a proximate reminder. South Korea is nearly 100-percent dependent on China for the provision of exhaust fluid, and the current shortage threatens to cripple the nation's truck and cargo transport, agriculture, and construction sectors. The government has instituted ad-hoc emergency measures and the prime minister has apologized for not foreseeing the problem. China has agreed to restart exports, but that is hardly a long-term solution and one that leaves South Korea once again vulnerable to Chinese economic coercion.

    The Moon Jae-in government is getting emergency supplies from Australia, but should there not have been a pre-existing contingency plan? And what other untold supply chain crises could come down the road? South Korea needs an organ of the government dedicated solely to preserving economic security and supply-chain resilience. That it does not have one explains the panicked response every time there is a supply-chain disruption.

    Economic security should not equate to economic protectionism. The purpose of such a ministerial portfolio is not to create blanket regulations and non-tariff barriers to benefit the domestic industry. Instead, the concept of economic security is embedded in the spirit of preserving the liberal international economic order. That is, threats to the supply chain should be met with specific targeted policy responses and contingency plans that reduce risk yet continue to support open-market trade and investment flows.

    This is admittedly a complex and tough balance to manage, which is exactly why it must be tackled by a ministry dedicated specifically to the task that can liaise with the foreign, trade and finance ministries, and Cheong Wa Dae.

    Finally, this effort should be pursued in conjunction with the U.S. and Japan. Matthew Goodman at the Center for Strategic and International Studies has called for a high-level bilateral forum called "Economic Security Dialogue" between Washington and Tokyo of interagency leaders from the State Department, Commerce Department, Ministry of Foreign Affairs, and Ministry of Economy, Trade and Industry. South Korea should consider its own bilateral economic security dialogue with the U.S. following on from new cooperative commitments on key technologies like semiconductors and lithium batteries made during the bilateral summit in May. It might also consider trilateralizing this with Japan as a way to jump-start relations and address existing trade tensions between Seoul and Tokyo. 

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