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The true North-Korean issue

Giancarlo Elia Valori

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Today, after the signature of the agreement between the two Koreas during the fifth Summit after the 1953 ceasefire, we can finally note some structural constant factors of the inter-Korean issue.

The South Korean leader, Moon Jae-in, asked Kim Jong Un when he could visit Pyongyang and the North Korean leader replied: “even now”.

Forgive this subjective note in a strategic analysis like this, but I was there.

I was received with full honours by the President of the Presidium of the Supreme People’s Assembly of North Korea, Kim Yong-Nam, at the Supreme People’s Assembly Palace the day before the Panmunjom ceremony. I spoke at length with the North Korean Leader and his aides and I assessed many ideas and impressions.

I saw and meditated everything although, as often happens to me, I have to treasure upall these things and ponder them into my heart – as the Blessed Virgin did when she listened to her Son’s sermons.

In other words, firstly I can state that North Korea’s opening is real and sincere. It will also best able, if Westerners and Japan want so.

As repeatedly noted over the years, North Korea’s nuclear, missile and chemical-biological potential was precisely what the small North Korea needed to rise to a world status and to pose the problem of its security and independence before all superpowers, as well as to ask for the respect due even to the smallest country in the world.

Countries, regardless of their size, can be autonomous and independent or not.

The key has always been to avoid being “disarmed prophets” – just to use an old concept developed by Machiavelli.

Italy is not a dependent country, it is now virtually non-existent.

Secondly, Kim Jong Un’s opening to the Western world, and to the United States at first, is conditional upon an issue that Kim himself has long discussed with Chinese President Xi Jinping on his very recent visit to China in the last week of  March.

As repeatedly noted in recent years, China does not want to have a US army on its border without having the  possibility of opposing to it a buffer State protecting it from the US imperial instability and volatility.

North Korea does not want to be the Piedmont of China, a small military power patrolling the Chinese Southern borders.

However, it does not even want to be a secondary and passive factor in the future development of the entire Korean peninsula.

Therefore the tree planted by Kim and Moon together on the North-South Korean border is not an old symbol of the French Revolution, but rather the token of a Korean unity based on a first concept, namely denuclearization – which is China’s primary goal for both North and South Korea.

Hence eliminating all nuclear, biological and chemical weapons  from the Korean peninsula is a guarantee for North Korea, as well as safety and security for South Korea and an absolute need for China.

I think it would be a good choice also for the United States and Japan.

Hence lowering and equalizing strategic potentials throughout Southeast Asia is the rational point of contact for all strategies in the region. It must be pursued immediately.

Rightly Japan has still some doubts about the pan-Korean Summit and it has promptly made it known to the United States.

But, again, lowering the trigger threshold of a clash, even a conventional one, works to the benefit of everyone and mainly of Japan.

The latter is recreating a tripartite economic relationship with China and South Korea,which could become the axis of North Korea’s new regional development.

It is also worth recalling that Japan is fully resuming its economic relations with China thanks to the 13th Round of trilateral economic talks between Japan, China and, coincidentally, South Korea.

An axis along which North America can place itself to tackle economic issues with China.

This is essential in a context of present and future tariff wars.

Hence also the economic relations between South Korea and China are returning to high levels.

This strategically means that – if Xi Jinping’s China wants so – it can almost fully replace the US support to South Korea.

This is related and conducive to a weakening of the US military system in South Korea.

Thirdly it is worth underlining that Kim Jong Un ordered his military officers to “organize frequent meetings” with their Southern counterparts, without even referring to South Korea’s frequent military exercises with the US forces.

The “permanent peace regime” to resolve the “unnatural state of tension” between the two Koreas is one of the true goals of the Summit and it goes in the direction of Russian strategic interests.

Let us not forget that Vladivostok is a few kilometers from the North Korean coast.

This is also in the interest of China, which is not much interested in a unified Korea, but has the supreme aim of not having US forces in contact with its own or even with North Korea’s, considering that 160,000 Chinese soldiers are stationed at fewer than 100 kilometres from the North Korean border.

In particular, China does not want nuclear weapons on the Korean peninsula, both in North and in South Korea.

At the end of our summary on the fifth inter-Korean  Summit – after the 1972, 1992, 2000 and 2007 ones -we arrive at the core of the issue, namely the economy.

In short, Kim Jong Un wants to ease the military tension to pursue his primary goal, i.e. his country’s economic growth.

It is not a denial of his theory of the correlation between military development and economic growth.

Quite the reverse. It is a reaffirmation of the positive connection between North Korea’s two lines of development.

However, which is the North Korean leadership that has worked for this great breakthrough, thus reaching this turning point?

The mistake that Westerners make when analyzing the Asian political structures is to think that everything happens as in the Grimms’ fairy tales, in which a King decides bizarre things by chance without ever analyzing their effects.

None of that: the Asian systems, but especially North Korea’s, are apparently “irrational” for us followers of the legal rationalism not based on value judgements, but perfectly functional within their traditions and the oldest political symbols of the East.

If only in the West were we so sensitive to our old  political traditions as the Chinese and North Koreans – but also the Japanese and the Vietnamese- are. The issue does not lie in economic systems, but in the political and cultural nature of political systems.

As is well-known, Karl Wittfogel studied the role played by ancient China’s hydraulic system in relation to the mythical role played by the Emperor of “Everything under the Heavens”.

The “Great Korean Empire” was proclaimed in 1897 and was later immediately reabsorbed in the opposing dialectics between China and Japan.

Both North and South Korea remember the symbol, its history and its meaning, as well as the never healed wound.

Hence without well understanding the Leader’s traditional and sapiential role in the Asian world, neither Communism nor the other pro-Western societies can be understood.

Hence who is really collaborating with Kim Jong Un, who is a cultured and lucid rational leader, very different from the “rocket man” described by the less cultivated President Trump?

The answer to this question is Ri Su-Yong, the Chairman of the Foreign Affairs Committee of the Supreme People’s Assembly of the Democratic Republic of Korea.

He was next to Kim Jong Un during the ceremonies of the recent meeting in Panmunjom. He was with me the day before and, indeed, he is now a friend with whom I have long been talking about international policy.

Certainly I would have preferred not to be citizen of a country, namely Italy, which after two months of the North Korean Ambassador’s stay in Italy, refused to assess his credentials and sent him back home without even receiving him for pure common courtesy, as good manners dictate.

The foolish servants of politicians who are making other political choices. The utmost idiocy.

Voltaire was right in saying: “very often, say what you will, a knave is only a fool”.

Let us imagine how much leeway we could open up in the new Korean equilibrium, in both business and international policy, as well as projection of Italy’s and EU’s peaceful power throughout Asia – if only we knew how to behave.

Nevertheless Quos Deus lose vult, dementat.

However, with a view to better understanding the  issue of relations between North Korea and me, I want to quote a letter recently sent by Ri SuYong to me.

It is an important, official and – indeed – analytical letter to understand the whole range of issues relating to the relations between South and North Korea.

H.E. Ri SuYong and prof. Giancarlo Elia Valori

To:

Giancarlo Elia Valori

Honorable de l’ Académie des Sciences de l’Institut de France, UNESCO Ambassador, Chairman of La Centrale Finanziaria Generale SpA

Dear Prof. Giancarlo Elia Valori,

I would like to offer you my compliments and send you this letter regarding the situation of the Korean peninsula.

On November 29, 2017, our country brilliantly accomplished the great historic achievement of completing the State’s nuclear power program thanks to the successful test launch of the new ICBM.

The intercontinental ballistic missile “Hwasong 15”, newly developed according to the strategic and political decision of the Workers’ Party of Korea, is a more powerful ICBM reaching our goal of completing the missile system development.

Our efforts to develop the strategic weapon are intended to safeguard the sovereignty and territorial integrity of the country and to ensure the peaceful life of the people faced with the US hostile policy and ongoing threats.

In recent years the United States has systematically not recognized our country and tried to fully isolate and stifle us.

By falsely accusing our nuclear deterrent to be “a threat to the world”, the United States forces the other countries to downgrade the level of diplomatic relations and completely suspend all international economic and trade activities with our country, as well as to step up sanctions even in the field of international organizations’ humanitarian aid activities.

By recently putting our country again in the list of “countries sponsoring terrorism”, the Americans have openly shown that they use every method and means to stifle our system.

Unfortunately, some European countries have lost their impartiality and objectivity and follow the US attempts to isolate and stifle the Democratic People’s Republic of Korea.

It is well known that the Korean peninsula’s nuclear problem is a matter between the Democratic People’s Republic of Korea and the USA, resulting from 70 years of US hostile policy and ongoing threats.

It is no secret that the United States had attempted to launch the nuclear bomb on our country during the Korean war and has begun to deploy nuclear weapons in South Korea since 1957.

With a view to invading our country, since 1970 the Americans and South Koreans have started to carry out ongoing joint military exercises on a large scale against us, by using their huge nuclear strategic resources including nuclear submarines and bombers.

How could we remain passive when a country deploys strategic nuclear aircraft carriers and submarines in the Atlantic Ocean and threatens every day to bomb our country with nuclear bombers while openly declaring on the UN scene its willingness to exterminate us?

For over 70 years European countries have been able to ensure peace and social stability along the path of the European Union thanks to the common will and efforts to avoid the recurrence of a cruel war such as World War II.

Peace is a very valuable asset for our people who have suffered a cruel war imposed by the United States and always face the danger of another nuclear war.

Comrade Kim Jong Un, our esteemed President of the Workers’ Party of Korea, said that our Party’s goal is to build a peaceful world without war.

On the contrary, what the United States wants is ongoing tension on the Korean peninsula, not peace.

Because ongoing military tension on the Korean peninsula serves as a clear excuse for maintaining its hegemonic position on the Eurasian continent to restrain and threaten the other powers of the region and favor the sale of weapons to the other countries by the monopolistic companies of the US war industry.

The fact that during the visit paid to Asia early November, the US President had forced South Korea and Japan to buy high-tech military equipment from the United States at astronomical prices isa case in point.

We were forced to choose nuclear weapons for protecting peace on the Korean peninsula and defending the sovereignty of our country.

The lesson learnt from the long-standing conflict with the United States is that we cannot communicate with this country with words, but with force and that only the balance of power with the United States will ensure sound peace on the Korean peninsula.

Our nuclear force and power only have to do with the United States and not with Europe.

We are developing friendly and cooperative relations with the European countries which respect our sovereignty.

Hence Europe has nothing to fear from the expansion of our ballistic missile range as long as it does not take part in the US military activities against our Republic.

Nevertheless some European countries increase pressures and the embargo against our country, by taking sides with the United States. This does not help to solve the Korean peninsula’s problem and produces only disadvantages.

The US nuclear threat, pressure and embargo against our country are hostile acts designed to annihilating our ideology, our regime and people.

The more the level of threats, sanctions and pressures against our country is raised, the harsher our response will be.

The European countries must well think whether participation in the US hostile actions against our Republic is in line with the values of freedom, equality, mutual respect and defense of human rights that Europe champions.

I would like to seize this opportunity to wish you the greatest success in your political activities.

Best regards

Ri Su Yong

President of the Foreign Affairs Committee of the Supreme People’s Assembly of the Democratic People’s Republic of Korea

November 30 Juche l 06 (20 17)Pyongyang

However, who is really Ri Su-Yong, the man who executes the orders, but also collaborates creatively with Supreme Leader Kim Jong Un in North Korea’s foreign policy and also in other sectors?

I think his biography speaks for itself.

It will also enable us to understand the particular mechanism existing in North Korea, but also in many other Asian countries, which finds a balance between the Leader’  symbolic and real power with a system of checks and balances.

This system, however, has nothing to do with the Enlightenment liberal ideologies which have created the political mechanisms of checks and balances in the West.

As shown in the letter sent to me, Ri SuYong -also known as Ri Chol -is the vice-President of the North Korean Labour Party, besides being Chairman of the Diplomatic Committee of the Supreme People’s Assembly, but he is also a member of the Central Committee and the Political Office of the Workers’ Party of Korea (WPK), according to the best traditions of the Third International.

Ri Chol is Kim JongUn’s official representative to  Europe and was Ambassador to the UN Mission in Geneva.

I speak French with him.

In 1974, Ri was appointed Director General for Protocol and International Organizations at the Ministry for Foreign Affairs and in 1980 he became deputy-Director of Kim Jong-Il’s Personal Secretariat and deputy-Director of the Organization and Guidance Department.

In 1980, Ri was posted again to the North Korea’s Embassy to Geneva, where he had served as Protocol official, while he travelled across Europe and performed very delicate tasks jointly with the Supreme Leader and his family.

Ri Chol finally became North Korea’s Ambassador to Switzerland in 1988.

In Bern he followed the personal and school career of Kim Jong Un, who studied in the Swiss capital at the local University and later followed additional courses at the HSG, the University of St. Gallen, where in the past a great economist Ota Sik – the man of the “New Economic Model” developed in Prague with the leader of the Prague Spring, Dubcek – had taught.

In 2010, Ri Chol was recalled to his homeland, where he started to work for the Personal Secretariat.

In 2014 he became Foreign Minister.

Two years later he was appointed to the Party’s Central Committee.

He was born in 1940 and studied at the Mangyo’ndae Revolutionary School and later at the Kim Il Sung University but, at that time, he was already a personal friend of Kim Jong Il.

From a spiritual father to an aide and finally a friend- this is the mechanism by which a very high profile figure like Ri Chol has become the true éminence grise of North Korea and the kingmaker of the current détente phase.

Let us hope that the effrontery and temerity of the foolish servants or the imperial obsessions of someone in the West will not soon put an end to this extraordinary opportunity for peace.

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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