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The news coming from the Democratic People’s Republic of North Korea

Giancarlo Elia Valori

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The positive signs currently coming from the Korean Peninsula, and especially from North Korea, are definitely encouraging.

In fact, the 23rd Winter Olympics, scheduled for February 9-25, will take place in the Pyeongchiang County, which is located in South Korea, or in what is officially called Republic of Korea.

Since the designation of South Korea in June 2017, the International Olympic Committee has always said explicitly it wanted North Korea to participate officially in the Winter Olympics. Hence it has obviously welcomed – although with some surprise  – North Korea’s announcement of the “probable” sending of a small team of ice skaters.

Indeed, North Korea’s luge athletes and skiers had not technically qualified for the Olympics.

From the beginning, South Korea had proposed a joint team for all the specialties in South Korea’s Olympics. It had also suggested to North Korea a joint women’s team for ice hockey, as well as the sharing of costs for the participation of both countries in the 23rd Winter Olympics of Peyongchiang- and indeed the latter has been an open issue since December 2014.

At that time North Korea had refused only for organizational time reasons, without ever raising matters of principle – and this is by no means of secondary importance.

For obvious reasons of national dignity, North Korea has explicitly refused to share the participation and organization costs.

It is worth recalling, however, that, from the very beginning, North Korea had strongly supported only the candidacy of South Korea to host the 23rd Winter Olympics of 2018.

Hence the Winter Olympics will see the participation of the North Korean athletes Ryom-Tae-Ok and Kim Ju-Sik, who had both qualified for the 2018 Olympics during the competitions held in Oberstdorf, Germany, in September 2017.

Later some problems arose in the relations between the North Korean Olympic Committee and the Lausanne’s International Olympic Committee, the highest body responsible for world sport.

However, it was the Supreme Leader of North Korea, Kim Jong-Un, who personally announced the possibility of sending North Korea’s athletes to the 23rdWinter Olympics in South Korea – an explicit permission given on a special and highly symbolic occasion, namely the speech delivered by the Supreme Leader for the New Year.

The primary theme of the North Korean Supreme Leader is “national pride”, which counts very much for both countries – the most tragic relic of the old Cold War, a silly conflict that both Koreas want to overcome, albeit in a different way.

From this viewpoint I believe that Mao Zedong’s theory  of the Cold War as a “paper tiger” holds true for both Koreas.

However, the way of overcoming it is often not too different.

Hence the meetings between the two Koreas to tackle the issue of North Korea’s participation in the 23rd Winter Olympicsare scheduled for January 9.

Both Koreas are fully aware – even in the smallest  political, symbolic and ceremonial details – of what is really at stake in this negotiation, which is only apparently a  sporting negotiation.

What is at stake is an agreement between the two Koreas before solving, once and for all with Japan, Russia, the United States and China, the issue of North Korea’s full return – with equal dignity -ontothe international scene and hence onto the world market.

If all goes well, in the coming years we can probably talk about a strategic and military sharing between South and North Korea – the establishment of a “nuclear and chemical-bacteriological potential” throughout the Korean peninsula, whose keys will also be held by Japan, Russia and probably the United States, if it does not make further mistakes.

As usual, the EU will have a wait-and-see attitude,  believing to have a role to play in the negotiations while only practicing nursemaid diplomacy – thus ridiculously getting worked up for no purpose and pretending to have powers it has not – by probably providing “humanitarian aid” to the parties(aid possibly not even required by them).

We had already said so on other occasions in the past when no one was even barely thinking about that.

We had referred above all to the joint exercises between Russian and Chinese forces carried out last November in the Sea of ​​Okhotsk.

For both China and Russia that sea is the optimal area to launch attacks on US bases in the Pacific.

The message was very clear: to quickly and strategically regionalize the North-South Korean issue; to strengthen Russia’s and China’s ties with both of them; to make the United States leave all hope regarding the disagreements between Kim Jong Un and Xi Jinping that can never be a useful wedge for the United States.

Hence a further message to the United States making it clear that any further increase in the US military presence in South Korea would not absolutely be accepted either by Russia or by the People’s Republic of China.

And not as protectors of North Korea, but as powers directly bordering on a nuclearized area.

We have already said so, but it is worth repeating it: China does not accept in any way a US military hegemony  cancelling North Korea’s nuclear and conventional potential – the only possible rampart between China and  South Korea, namely a US staunch ally.

But, in economic terms, also China’s ally.

The US military balance in the region is well known: 35,000 North American soldiers and officers in South Korea; 40,000 in Japan; nearly 4,000 in Guam, a small island 2,100 kilometers away from Pyongyang, with a surface of ​​only 544 square kilometers.

Not to mention the five US bases in the Philippines, as well as the four US warships based in Singapore, in addition to the overflight and docking permits granted by Thailand to the North American forces.

It is also worth recalling the US significant strategic positioning in the Hawaiian islands, with further 400,000 soldiers, sailors and officers and as many as 200 military ships available, with over 1,000 thousand warplanes of various sizes and functions stationed in the atoll that saw the successful surprise attack by the Japanese Admiral Togo.

There is also the US naval base in Kadena, on the island of Okinawa, as well as some stealth bases, also located in the Japanese archipelago.

Hence, it should be honestly said to our US friends that the fact that North Korea feels to be strategically closed and severely threatened is not a paranoia of North Korea’s ruling class – it is an incontrovertible fact.

To do what? “To bring democracy” to North Korea? Most of the mistrust with which North Korea looks to US statements regards, in fact, the unpredictable, self-destructive and basically improper behavior the United States had with Saddam’s Iraq at first and with Gaddafi’s Libya later.

North Korea does not want “Korean” springs, characterized by forked tongues, leaving only rubble and splitting the old national units – well tried and tested by history – for a crazy project of continuous war.

Furthermore China did not even accept that the United States naively puts pressures on itso as to diminish the significance and scope of the North Korean nuclear missile program.

As happens in the whole Chinese and Eastern sapiental tradition, China certainly does not want to be “second” to the United States.

And,  despite recent coldness, it does not even want to appear hostile or distant from North Korea, an ancient “brother country” that Xi Jinping’s leadership will never leave in Western hands.

Conversely – if and when the global equilibria allow it -China may want a rational balanced reduction of North Korea’s nuclear umbrella.

This is meant to reduce a real danger of unwanted or casual attack and to show benevolence – when needed – vis-à-vis South Korea and North America.

Hence the North Korean nuclear system is a bargaining chip that China will use at its poker table, but never against the old North Korean “comrades” that, indeed, could obtain good economic advantages from this balanced reduction of the nuclear missile and bacteriological-chemical potential, without particular reductions in the value of their threat  south-eastwards.

China accounts and will account in the future for over 90% of North Korea’s trade with the other countries but – as excellent readers of Marx’s works -the Chinese never behave like “common materialists” in the analysis of international relations.

Ironically for ideologies, which have never died, currently  only the big business liberals think in terms which were typical of the Communist vulgate.

Moreover there is a clear message coming from the latest  joint Russian-Chinese sea operations.

The clear strategic message that we hope the United States will understand is that the first US attack parade will be almost entirely covered by the Russian-Chinese threat or reaction, which will probably oppose and cancel it before its reaching North Korean waters. Conversely, Russia and China will leave North Korea’s response on Guam free and, in all likelihood, on other US bases in the Pacific – a response which will be fully developed by North Korea alone.

Rex Tillerson, the Secretary of State of Donald J. Trump, who has always been in favor of negotiations with North Korea, knows all too well to what extent it is important for the United States not to trigger an uncontrollable and useless chain reaction in Southeast Asia-a region that has never brought luck to the United States.

Why? To set fire – without any result for the United States, if not ashes – to the whole ​​Central Asian region and get to war on the Russian-Chinese land borders?

May God protect them.

Later Russia and China will protect North Koreadiplomatically, at the level of international organizations, thus avoiding the worst of the new sanctions.

Or, even worse, the excessive reactions of some US late restless aides, of those who – as has already happened in the EU – want to repeat the Cold War at the new borders of the Russian Federation.

They emasculate themselves on their own, at least as far as the energy market is concerned and hence -almost without realizing it – they will find themselves recreating a very costly dependence only on the United States, which will certainly make no concessions or discounts for the EU powerless naivety.

Hence currently  the real problem is how to get out of this second phase of Cold War – and the key is to be found once again in the Korean peninsula.

If all those who will be called upon to deal with North Korea heal the Cold War wound where it was created (in fact, the Berlin Wall came later), namely at the 38th parallel, many things will change and not only in Southeast Asia.

South Korea will never want to become a nuclear ossuary to cover the North Korean subsequent attacks on the US nuclear parade and its military positions and installations in the region.

Furthermore, Russia and China will never accept a US military operation before or after the Panmunjom line, which is still technically a “ceasefire”.

Nevertheless both Russia and China will quickly accept the proposal to reduce the relevance of the North Korean nuclear apparatus, if there are rational and verifiable exchanges.

However, in this new triangulation, even North Korea must reap its benefits, which could be ensured by a new treaty that should make North Korea enter the worldmarket without hesitations, dissimulations and pretenses and without post-factumpunishments. Why?

Obviously there should also be a treaty for mutual recognition between the United States and North Korea, in addition to the restoration of a long, but credible, sequence of joint actions between South and North Korea.

At the end of the diplomatic negotiation, the United States should be in a position to  accept a North Korean share of total defense to be defined.

While, at the same time, North Korea shall agree on a wide secondary protection area for its own defense apparatus, namely a new Panmunjom line.

As already recently noted, this would mean strong gradual  integration with the Russian and Chinese economies, just now that the great ride of the new Silk Road is beginning westwards.

However, I have recently become very optimistic about the whole North Korean issue.

It has happened when I learned that the negotiation, which will start with the symbolic and hence highly political Olympic issue, will be led for North Korea by Ri Su-Yol, also known as RiChol.

A high-profile institutional leader who enjoys Kim Jong-Un’s full trust – a diplomat with great culture and experience about Western and Eastern issues.

He speaks excellent French, but his professional experiences have led him to learn also the German language very well.

Obviously his English is perfect.

He served as Minister for Foreign Affairs from April 2014 until May 2016 – and this is the first aspect to consider.

Ri is a refined weaver and negotiator, as happened in the diplomatic tradition of the countries born from the continuity and break with Marxism, which was represented by the creation of the Third Leninist International.

He is a tireless man, without the inflexibility that characterized many Eastern diplomats, at least those I met when Italy still had a foreign policy – which is no longer the case.

A “revolution against Capital“, against the Third International just to use the title of an old and perhaps still famous article by Antonio Gramsci on the “New Order”.

In this respect, we note that by Capital we only mean the title of Karl Marx’s fundamental work, not one of the means of production that Marxism has always considered – with some exaggeration, but also with some good intuitions – a means of production very different from the others.

However, these are just digressions typical of an  economist.

Ri was also Vice-President of the Committee for Investment and Joint Ventures, as well as Vice-President of the Communications Committee of the Democratic People’s Republic of Korea.

He also had another key post in the North Korean’s  political system, which is based on “collaborative competition” among leaders, created especially in the institutions for training and selecting the North Korean ruling class –  an “alternate” candidate of the Party’s Central Committee, a role never to be forgotten in a Third International system.

He also heldanother important post, namelyVice-Director of the Organization and Guidance Department, the control axis with which Kim Jong Un, but also his predecessors, spoke with the Party’s Leadership, thus controlling it.

In short, he is Kim Jong-Un’s real trusted man and this  makes us realize how important the negotiations that will begin on January 9 are for North Korea’s leadership.

We can be certain that, from the beginning, the negotiations will get off track, albeit without exaggerating.

The issue lies above all in talking by symbols and signs – just as the Gods of the ancient Latins did, according to Lucretius, persymbolum et per aenigmate.

For several yearsYi Chol also served as Ambassador to Switzerland, the country in which also Kim Jong-Un studied.

It is also worth recalling that he was also the Supreme Leader’s official representative in the EU, as well as a prudent and very cautious administrator of Kim Jong Il’s personal assets and financial affairs.

Kim Jong-Un is Kim Jong-Il’s third son.

Ri Su-Yol, also known as Yi Chol, was born in 1940. Hence he is a man of experience, without the useless haste typical of young people.

Indeed, he does not look his age.

Therefore he had an elitist and revolutionary training, but he was never the expression of a family or group tradition existing before the Party, nor was he the son of a trusted  official.

In fact he studied at the Revolutionary School of Mangyo’ndae and later at the Namsan School where he was Kim Jong-Il’s classmate.

Later Riwent to study at the Kim Il Sung University and probably finished his studies at the University of Moscow.

Soon after completing his studies, he started to work for  the Ministry of Foreign Affairs.

In 1972 he was already Head of a Ministry Desk.

In 1974 he became Director General of  the Office for  Protocol and International Organizations.

After the Party’s Sixth Congress held in October 1980, Ri became one of the deputy-Directors of Kim Jong-Il’s Personal Secretary – a real key post.

At the same time, he took up the post of Vice-Director of the Party’s Organization and Guidance Department and, again in 1980, he was appointed Ambassador to Geneva.

It is therefore by no mere coincidence that Riwas sent to represent his country in the capital city of International Organizations which, as in the past, arethe favorite ground  of confrontation or negotiation for the Democratic People’s  Republic of Korea.

In Switzerland he worked for the entire community of North Korean Party Leaders, in addition to taking care of the  personal – and hence political -interest and affairs of both Kim Il-Sung and Kim Jong-Il.

Hence we can say that Ri has also become Kim Jong-Un’s trusted man, the essential advisor, the one who knows how to speak to the Westerners, to North Korea’s Friends and to the opponents.

Ri’s career continued in 1987, when he became Permanent Representative to the United Nations Mission in Geneva.

He was later recalled to his home country in March 2010 and appointed Ambassador to Iran, a place of absolute importance for those who know the particular relations existing between North Korea and Iran.

Upon returning to North Korea after his Iranian mission, Ribegan working in the Supreme Leader’s Personal Secretary’s Office.

Finally he led – with absolute correctness, propriety, wisdom and refined knowledge of Western laws and customs – the organization  attracting capital into the North-Eastern region of ​​the country.

Hence it is really easy to understand the emphasis laid by Kim Jong-Un on the new negotiations due to start on  January 9, 2018.

It is worth recalling that in 2014 Ripaid, for the first time,  an official visit to India, in his capacity as Foreign Minister. He was also elected as a full member of the Party’s Politburo by the 7thCentral Committee of the Workers’ Party of Korea – another extremely important post for those who know the particular North Korean power elite.

It is also worth noting that the Party always prevails over the State in the political regimes resulting from the  “revolution against Capital” that created the Third International.

Hence something different from traditional Marxism which –  according to the so-called Austro-Marxism, much loved and studied by Giuseppe Saragat- would have resulted in socialdemocracy.

Ri is also Head of the Party’s International Relations Office and in 2017 he was appointed President of the Diplomatic Committee of the Supreme People’s Assembly.

Said Assembly is the only representative House since there is no Senate in the Democratic People’s Republic of Korea.

Hence what would I like to happen if these negotiations were successful – as I sincerely hope – also on the basis of the profile and caliber of the personality to whom North Korea has entrusted this diplomatic round of negotiations?

Firstly, the mutual recognition between North Korea and the United States of America.

Secondly, an agreement between China, Russia, Japan, South Korea and the United States for the planned reduction of North Korea’s nuclear missile and bacteriological-chemical saturation.

A nuclear missile network that could be controlled by an ad hoc Agency with specific procedures, different and more up-to-date than those used by the IAEA.

Thirdly, an agreement on North Korea’s controlled opening to international capital, with the creation of a North Korean Commission for Foreign Exchange, with a view to avoiding speculative transactions such as those that characterized Russia after the CPSU’s fall.

Fourthly, a fully operational plan of targeted foreign investment for the autonomous economic zones and later for the whole North Korea.

Considering Ri Su-Yong’ skills, if all goes well, we could reach these results sooner than expected.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

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East Asia

China & Nepal working towards a genuine good-neighbour tie

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Authors: Himal Neupane & Jamal Ait Laadam

Although China and Nepal are very different in terms of each territorial size, population, economic capacity, technological prowess and above all military power, the bilateral relations between them have been undergone consistently and significantly. Since 1955 when China and Nepal formally recognized each with, their bilateral relationship has been characterized by equality, harmonious coexistence, everlasting friendship and overall cooperation. Particularly during the past over 40 years, China and Nepal have undergone substantial developments in view of mutual understandings. For example, in 1996 the two sides for the first time agreed to build up a good-neighbour partnership of the 21st century.

In line with this spirit of mutual respect and equality, Chinese President Xi Jinping paid a state visit to Nepal on October 12-13, during which the heads of the two states formally announced that they elevated the China-Nepal Comprehensive Partnership of Cooperation to Strategic Partnership of Cooperation in light of their many common values to enhance cooperation It is reported that President Xi frankly said Nepal wouldn’t be a landlocked country in the future as the trans-Himalayan connectivity network ultimately will support sustainable development and stability of the entire South Asia region. This is not only a promise from a large neighbor, but also a sort of responsibility from a rising major power of the world, which aims along with other parties, either large or small,  to create an international community of shared future.

Accordingly, on October 12, Nepal and China signed 18 memorandums of understanding and two letters of exchange. The priority was laid down with a focus on the implementation of signed agreements and acknowledged policies. Besides, they also reaffirmed the commitment to broaden the level of cooperation under the spirit of the Belt and Road Initiative (BRI). Moreover, China and Nepal have agreed to enhance connectivity through ports, railways, roads, aviation and communications within the broad framework of the BRI and the Trans-Himalayan Multi-Dimensional Connectivity Network which are of strategic significance. As Chinese President Xi put it, “our two peoples have shared weal and woe, and set an example of friendly exchanges between neighboring countries, and we would act to carry forward the traditional friendship and take the bilateral relationship to a new and higher level via his state visit to Nepal.

For sure, nothing is free in the realm of international politics as the realists argue what China and Nepal need from each other are their common geopolitical and geo-economical interests? This kind of inquiry is sensible and also cynical. In fact, historically China and Nepal had been at good terms for a few centuries, and during the British colonial era, Nepal actually acted as a natural buffer state between imperial China and colonial India. Since 1949 when the People’s Republic of China was founded soon after the independence of India, Nepal ended its isolation and forged amicable ties with India and other countries. Initially, Nepal had close ties to India in terms of culture, ethnics and even military affair, but it never accepts external domination. In 1955 Nepal formally recognized Beijing as the legitimate government of China and since then, it has consistently supported China in foreign affairs. Meanwhile, China has offered economic aid to Nepali reconstruction in a gradual way.

However, since the 1980s, China has steadily transformed itself into the second largest economy of the world with its alarming manufacturing capability and progressive technologies. Due to this, China has provided more assistances to Nepal and other neighbours to share Chinese public goods, especially in terms of the infrastructure projects and alleviation of poverty. For example, President Xi announced in 2018, “In the coming three years, China will provide assistance worth RMB 60 billion to developing countries and international organizations participating in the Belt and Road Initiative, and contributing an additional RMB 100 billion to the Silk Road Fund.” As a developing country nestled in the heart of the Himalaya, Nepal surely needs to expand its infrastructure through involving itself into the BRI with the view to exploring and finally harnessing its huge potential sources —hydropower—for export.

Strategically speaking, China needs to maintain its border areas peaceful and stable in light of its “NEWS strategy” that means while China tries to consolidate its entente partnership with Russia on the North and pacifying its East coast, it necessarily aims to sustain the BRI projects to the West and the maritime silk route to the South. This is the core of the NEWS strategy initiated by the Chinese elite since President Xi took power. Consider Nepal’s strategic location and political stability, China is sure to promote the bilateral ties as the two previous MOUs were signed in Beijing including to rebuild Chinese—Nepali transit road network agreements. It will help northern Himalayan areas get an alternative transit route and also facilitate the local economics, as much important part of the BRI as the economic corridor between China and Pakistan. Moreover, since 2016, a freight rail line was even completed linking Lanzhou, a heavy industrial city in the West of China through Xigaze in Tibet, down to the capital of Nepal. This is a truly strategic pivot of the grand BRI project.

To that end, President Xi revealed to his Nepali counterpart Bidhya Devi Bhandari that the two sides should work closely to carry out the construction of a trans-Himalayan connectivity network, and expand exchanges and cooperation in various fields. For her part, Nepali President Bhandari graciously welcomed Xi’s state visit to Nepal and stressed that the rise of China backed up by its modernization drive will help bring benefits to Nepal and promote regional peace and prosperity. In light of this cordiality, the two governments issued a joint statement on Oct. 13, agreeing on more practical cooperation in the new phase of bilateral relations. For a few key points serve to inllustrate that first, the two sides agreed to take the BRI as an opportunity to deepen mutual benefits in arious fields including the Kathmandu-Pokhara-Lumbini Railway Project. Furthermore, cooperation will cover the Zhangmu/Khasa port, the Lizi/Nechung port, and the three North-South corridors in Nepal. Second, the two sides will hold comprehensive discussions to strengthen trade relations, including to take positive measures to increase Nepal’s exports to China and to facilitate Chinese banks to open their branches and other financial services in Nepal. Last, China promises to help Nepal shake off the status of being a least developed country and achieve the sustainable development goals in the next two decades.

Since states are committed to each other by the nature of the world in which they exist, any close cooperation between China and Nepal is never bilateral only, that means there is always local, regional and international concerns, suspicions and even hostilities towards either China or Nepal or both. Geopolitically, India is the first power, understandably, to feel uncomfortable if not angry. This is the reason why President Xi made his first trip to India prior to his state visit to Nepal, and held comprehensive talks with Indian Prime Minister Modi. Second, China and Nepal also need to coordinate each other deftly to convince other neighbours such as Sri Lanka and Bangladesh that any sort of their cooperation would never be exclusive but inclusive and open all others in the South Asia. Geo-economically, China has reiterated that it would not seek to use its economic or financial leverages to “dictate” the local affairs of the recipient countries. Meanwhile, Chinese companies also need to move in prudently and read the local laws and political norms before jumping into the businesses.

Xi has frequently said, China is the largest developing country and also a learning country all the time. In order to promote China’s strategy to link the countries involved, mutual respect and equality are the prior condition to the long-term cooperation. In light of this, it is expected that Xi’s state visit to Nepal, the first one by a president of China over the past 26 years, will unlock new strategic opportunities for bilateral relations, as well as positively promote their ties with India by understanding the prospects for trilateral cooperation. It is clear that Chinese-Nepali economic integration through BRI is unstoppable, so it is sensible for India and the others in the region to take the opportunity to extend the proposed high-speed railway between those two all the way south to the nearby West Bengal port of Kolkata to more closely tie the three together in a system of complex economic interdependence. This is a balanced approach to prevent an open rivalry between the key member states of the BRICS and the SCO over their common neighbors. Given this, Xi’s visit to both India and Nepal might be the very time to enhance the trilateral understanding among Nepal with its giant neighbor. To that end, Nepal, though a much smaller state compared to China and India, could play positively a role as the bridge for building a more trust-based relationship across this region.

China has showed its willingness to share with Nepal its development experiences, practices and inclusive economic governance approaches. In doing so, geopolitical factors should never be the obstacles for China-Nepal cooperation. Rather, Nepal could serve as a dynamic bridge between China and India, and China and South Asia.

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East Asia

Semiconductor War between Japan and South Korea

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Authors: Gleb Toropchin and Anastasia Tolstukhina

In the summer of 2019, a trade conflict broke out between Tokyo and Seoul and the matter is about more than the history between the two countries. The two developed economies have long been locked in a competition on the global cutting-edge technologies market. At the same time, they are links in the same technological chain.

At first glance, the exchange of trade restrictions that is taking place against the background of mutual accusations is nobody’s business but Tokyo and Seoul’s. Nonetheless, the consequences of the confrontation between the two countries have a global nature. The present article analyses the causes of the disagreements and looks at how the situation may develop

Introducing Restrictions and Removal from the “White List”

Despite the events of the colonial past [1], as well as the current territorial disputes that are so typical of Asia’s international politics [2], South Korea is one of Japan’s three largest trade partners. Japan exports into South Korea up to $54 billion in goodsThe key commodities include semiconductors and materials for their manufacture

The dependence of South Korean companies on imports of fluorinated polyimides and photoresists exceeds 90 percent, and their dependence on imports of hydrogen fluoride is around 44 percent (although this figure has fallen gradually from 72 percent in 2010)

However, on July 1, 2019, the Government of Japan announced restrictions on the export of commodities to South Korea that are of critical importance for microelectronics, and on July 4, the changes to the procedure came into force

Given the long-established delivery mechanism, such a political step was a surprise for many. The restrictions mainly affected three key materials for the microelectronics industry: fluorinated polyimides, hydrogen fluoride, and photoresists (these materials are used in the manufacturing of semiconductors and display panels). This measure does not mean that deliveries of these materials to South Korea have been completely stopped; however, from now on, it may take up to 90 days to approve transactions. Additionally, Japan said it would be taking South Korea off its “white list” of trade partners. The list includes states that are believed to be safe from the point of view of exporting strategic commodities and that are granted trade preferences

Let us try to understand why the Government of Japan took such steps

Pressure from Taiwanese and South Korean competitors

In 1986, an agreement was signed between Tokyo and Washington that prohibited Japan from undercutting global semiconductor prices. This step was initially intended to make the United States more competitive. However, even in those circumstances, Japan managed to take a significant chunk of the global semiconductor market from the United States in the late 20th century and retain its high positions until the 2010s. However, as early as 2012, experts noted that pressure from Taiwanese and South Korean competitors resulted in semiconductor sales of Japan’s four chip-makers, Toshiba, Renesas, Sony and Fujitsu taking a marked dip

Samsung Electronics succeeded in mastering the subtleties of developing technologies just at the right time, while Japan began to lag behind in R&D due to problems with formal education, and its revenues from global sales of microelectronics were falling against the backdrop of falling prices and the high exchange rate of the Japanese yen. Among other causes of this phenomenon, Japanese experts cite the desire to create hi-tech goods without account for high costs, and lack of innovative ideas

Today, South Korea is the leading manufacturer of memory microchips. Samsung Electronics and SK Hynix hold two-thirds of the global market. Additionally, both the United States’ Apple and China’s Huawei depend on the products produced by South Korean companies. Integrated circuit units account for 17 percent of South Korea’s exports (the entire microelectronics sector accounts for nearly a quarter of its exports), compared to less than 4 percent for Japan

An analysis of the global microelectronics market demonstrates that, currently, the market particularly values dynamic random-access memory semiconductors (DRAMS) that hold tremendous significance for such cutting-edge technologies as artificial intelligence, the Internet of Things and robotics. South Korea holds impressive positions in this area as well: Samsung and SK Hynix control 72.8 percent of the DRAMS market and 46.8 percent of the global flash memory market

Reasons for Introducing Restrictive Measures

The East Asia Forum reports that Japan’s strategy of opposing Seoul was developed jointly by the country’s Ministry of Economy, Trade and Industry, Ministry of Foreign Affairs and Ministry of Agriculture, Forestry and Fisheries. The Cabinet of Ministers subsequently supported these measures, thereby making the key decision to transfer the issue into the political realm

It appears that Japan’s decision to impose restrictive measures was prompted by the fact that the country has clearly fallen behind technologically on the global microelectronic market, which negatively affects both the country’s economic indicators and its national security

According to the expert June Park, the Government of Japan decided to institute the restrictive measures out of concern for national security, since, in exporting rare materials to South Korea, Tokyo cannot be certain they will be used properly

The Japan Times notes that Tokyo justifies the introduction of increasingly strict export requirements by claiming that confidence in South Korea has been undermined. In particular, some media outlets report that between 2015 and March 2019, no fewer than 156 materials, including hydrogen fluoride, were smuggled out of South Korea. There were also reports of hydrogen fluoride being exported to countries that are under international sanctions (Iran, Syria and even North Korea). Another reason for the restrictions is Tokyo’s concerns that South Korea violates intellectual property rights

South Korea denies all accusations. Its arguments are logical: Iran and Syria are friends of North Korea, therefore, Seoul has no reasons to help their regimes. President of South Korea Moon Jae-in called for the differences to be resolved by diplomatic means. However, the talks held on July 12, 2019, in Tokyo did not yield any results. Consequently, Moon Jae-in instructed the relevant agencies to develop reciprocal measures. At about the same time, there were reports of South Korea possibly filing a grievance with the World Trade Organization. As a result, hearings on the issue were launched in Geneva on July 24, 2019

In late July 2019, news broke that Tokyo was considering further restrictions since Japan believes the re-selling of strategic materials by Seoul to be a violation of the non-proliferation regimes regarding both weapons of mass destruction and conventional weapons. In this case, the restrictions would extend to other types of commodities and materials. On August 2, the Cabinet of Japan approved the decision to take South Korea off its “white list” (where the Republic of Korea was the only Asian state), thereby depriving it of trade preferences in regard to the materials mentioned above. The full list exceeds 1100 items

Despite these events, several deliveries of these materials from Japan to South Korea were made in August. However, they did not result in a thaw in bilateral relations. Seoul reciprocated by putting Japan on a restrictive trade list and terminating the military intelligence-sharing pact with Tokyo

“Wu Wei” American Style

China holds leading positions in deposits of rare-earth metals. Moreover, approximately 90 percent of the world’s rare-earth magnets are manufactured in China. Japanese companies use China’s raw materials to manufacture fluorinated polyimides, hydrogen fluoride and photoresists that are subsequently supplied to South Korea, Taiwan and other countries to be used in manufacturing chips, displays, etc. The circle is complete when these commodities go back to China to be used in the manufacture of finished products (such as smartphones and tablets), creating a sort of a closed-loop. Thus, the manufacture of competitive hi-tech products today is impossible within a single economy, and Chinese companies depend on parts coming from other Asian countries

Tracing the entire technological chain, we can assume that the Japan–South Korea conflict is closely linked to the trade war between China and the United States. South Korea’s Samsung Electronics is hindered by the restrictions on deliveries of Huawei memory chips since the latter is under U.S. sanctions. In turn, interrupting the chain of semiconductors delivery from South Korea will slow down the development of artificial intelligence in China. And who benefits from this? This is a rhetorical question

It would seem that the United States should be interested in cordial relations between their allies in the region, allies that form a sort of counterbalance to China and are ideological antagonists to North Korea. The White House, however, intentionally or unintentionally, demonstrates adherence to the Taoist principle of inaction, or “wu wei” (无为 in simplified Chinese), which entails a conscious refusal to act and the assumption of a contemplative stance. From the outset of the confrontation in July 2019, the United States announced it would not interfere in the conflict. Despite individual experts calling upon the United States to act as an intermediary between the two Asian states, Washington did not change its position

We should also note here that the Japanese company Toshiba announced the construction of a facility for the production of NAND-type (from the English NOT-AND, that is, a binary logical element) flash memory devices in Iwate Prefecture in cooperation with U.S. chip manufacturer Western Digital. We can cautiously assume that the United States and Japan are progressing toward a “technological union” in order to defeat China in the race for domination of the semiconductor industry

Public Opinion

Speaking of the impact that the conflict has on public opinion in both countries, we can quote a survey conducted by Japan’s Asahi Shimbun in mid-September 2019. Overall, slightly less than one third (29 per cent) of respondents admitted that they had a negative opinion of South Korea. This was far more pronounced among older people, which can be linked to their conservative views and the “proximity aberration” phenomenon (put simply, the older generations remember the events of the 20th century well)

As for South Korea, an anti-Japanese “grassroots” campaign has been launched in addition to the “top-down” process. In the second half of the summer of 2019, slogans『 가지않습니다 사지않습니다 』 (Korean for “Do not visit, do not buy”) calling for boycotting trips to Japan and Japanese goods spread on Korean social networks. And it looks like they were successful to a degree. For instance, the Yonhap News Agency reports that the number of South Koreans travelling to Japan in August fell by 60 per cent compared to the same period last year

In the run-up to the 2020 Summer Olympics in Tokyo, the trade conflict has become a reason for manipulating public opinion in South Korea. Additionally, we cannot rule out the possibility that populists use the disagreements between Japan and South Korea to advance their domestic agenda on the eve of the elections to South Korea’s unicameral parliament scheduled for April 15, 2020

Forecast: Cloudy in the East

Losses from the Japan–South Korea trade war may exceed $80 billion. There has already been a drop in sales of South Korean semiconductors manufactured by Samsung Electronics and SK Hynix. Moreover, the conflict threatens to disrupt the entire global technological production chain in microelectronics. The expert Robert Farley described this conflict (and the U.S.–China trade war) as “weaponizing interdependence.” One of the analysts with The Economist Intelligence Unit called this situation “mutually assured destruction.”

The Yonhap News reports that the consequences of the trade conflict have had greater negative effect on the Japanese economy than on the South Korean economy. For instance, in July–August, South Korean exports to Japan have fallen by 3.5 per cent, while Japanese exports to South Korea have dropped 8.1 per cent

The South Korean economy has also suffered against the backdrop of these events. Here, Seoul has only two ways out of this predicament:

-Transitioning to domestic analogues, which LG Display and Samsung Electronics already did in September of this year. Additionally, the country earmarked 2.1 trillion South Korean won in the 2020 budget to overcome the dependence on the export of rare materials from Japan

-Searching for alternative sources of hydrogen fluoride and other rare materials for microelectronics. Media outlets have reported that Russia might be a potential supplier of high-purity hydrogen fluoride. The head of the Korea International Trade Association said that Moscow had offered to supply hydrogen fluoride to Seoul. However, it is not easy for South Korean companies to transition to Russian imports of this and other materials for microelectronics. The physical and chemical properties of the products must be tested for a rather lengthy period of time (upwards of six months)

Apparently, the status quo on the microelectronic market will continue in the short-term, and both parties will seek ways to minimize losses. And we can already see evidence of this. In September and October, the Government of Japan approved deliveries of hydrogen fluoride to Samsung Electronics and SK Hynix

At the same time, if Tokyo and Seoul fail to find common ground in the medium and long term, then the current global technological chain in microelectronics may be dismantled, which will, of course, negatively affect the growth rate of the global economy. However, so as not to end our study on a pessimistic note, let us note that, under the current circumstances, many hi-tech companies around the world, including those in Russia, now have the chance to become new links in the value chain and occupy its niche in microelectronics

From our partner RIAC

[1] In 1910, the Empire of Japan annexed the entire Korean peninsula. Korea essentially became a Japanese colony. The Japanese language and culture were forced onto the Korean people. Up to 200,000 ethnic Koreans served in the Imperial Japanese Army during World War II (including future president of South Korea and “father of the economic miracle” Park Chung-hee). Today, Japanese war crimes are a subject of talks between South Korea and Japan. In 2015, Minister of Foreign Affairs of Japan Fumio Kishida promised 1 billion yen to the victims of violence in compensation, and Prime Minister Shinzo Abe offered a public apology for Japan’s actions during the war.

[2] The dispute concerns the Liancourt Rocks, a group of small islets that the Koreans call Dokdo (“Solitary Islands”) and the Japanese call Takeshima (“Bamboo Islands”). Back in the early 20th century, Japan claimed sovereignty over these islands; however, following its defeat in World War II, it was forced to abandon its colonial acquisitions. On the other hand, the 1951 Treaty of San Francisco does not mention this territory, which gives Japan formal grounds to dispute the sovereignty of the islands where South Korea maintains military and civil infrastructure.

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East Asia

Future Trends of China’s Diplomacy

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This year 2019 marked the 70th anniversary of the founding of the People’s Republic of China (PRC), and China’s diplomacy has also gone through a journey of 70 years. The 70-year history of the PRC can be divided into the first 30 years after its founding and the second 40 years since opening and reform were initiated in 1978. The characteristic of china diplomacy is a responsible nation, rational behavior and the confidence of great power.

China had a clear break with the old diplomacy of humiliation; established a new kind of diplomatic relations with other countries on the basis of equality and mutual benefit; secured an equal position and dignity on the global stage; gained diplomatic independence by safeguarding and strengthening national independence, and protecting national security and territorial integrity; settled the border disputes left  over from history with most neighbors by peaceful means, creating a stable neighborhood in general; established strong friendships with the vast majority of developing countries through mutual support; and set up a new diplomatic contingent for seeking the diplomacy of independence. The following are the future expectations of China diplomacy:

Firstly, Deng Xiaoping’s directive, “Don’t seek for leadership,” stays powerful in China’s new diplomacy, so China’s future diplomacy will keep on emphasizing on the management of the crisis, economic diplomacy, multilateral diplomacy, cultural diplomacy, cooperation, and accommodation while protecting the main national interest. Solving problems and managing crises will stay an important characteristic of China’s diplomacy, particularly in its ties with other major powers. Meanwhile, in cooperation with other major powers, China will appear to be more active in managing fundamental global issues at the strategic level.

Secondly, The Chinese government has repeatedly said that China does not have a plan of challenging the international system and has focused on the importance of being a “responsible member” of the universal society. As of late, China has developed new concepts for its foreign policy orientation, just as (1) “new security” emphasizing shared and cooperative security, (2) “peaceful development” focusing on non-violence commitment, (3) “win-win” cooperation denying a zero-sum comprehension of international affairs, and (4) building a “harmonious world” that promoting harmony with diversity, solving conflict through dialogue, and democratization of world governmental issues.

As these concepts demonstrate, China has no desire of being revolutionary in the international system, rather, it intends to be a responsible member of world affairs. Economic diplomacy will remain to be emphasized by china. While trade will keep on being a fundamental diplomatic focus, energy security and energy diplomacy will be given additional accentuation. Energy supply, energy shipment, and energy-saving cooperation will be fields where the diplomacy of china will move forward.

Lastly, Multilateral diplomacy will take on an even greater role in the future diplomacy of China. China will become more involved at the global level and in regional affairs at the United Nations. As the identity of China is more globally and regionally established, the current concept of multilateralism in the overall diplomatic strategy of china can be re-defined to realize national interests, address thorny issues, and provide governance in a complex world. More attempts will be created to improve regional integration between the SCO and East Asian. Finally, various needed diplomatic attempts may need to be further reinforced. China will keep on being cooperative, however, it will likewise be more active. All things considered; cultural diplomacy will be a new attribute of China’s diplomacy. Confucianism, an extremely cosmopolitan doctrine that promotes harmony and peace through human relations, will be an important component of cultural diplomacy, both to strengthen China’s soft power and to reduce the negative result of the China threat theory.

China has accumulated a wealth of experience over the past 70 years, understanding that China cannot develop without the world and that without China the world cannot prosper. China’s future and fate have been closely linked to the rest of the world. What is certain is that China will adhere to the path of peaceful development and that the people of China will join the people from all other countries in working to realize the lofty dream of a harmonious world.

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