September 20, 2017 / 4:38 AM / 10 months ago

Breakingviews - South Korea wobbles walking U.S.-China high-wire

TOKYO (Reuters Breakingviews) - South Korea’s President Moon Jae-in has a bright future with Cirque du Soleil, if he can keep balance on the world’s thinnest diplomatic high wire. So far his attempts to juggle competing demands from Beijing and Washington aren’t paying off. Both are using the North Korean crisis to score trade concessions. Moon should get off the high wire and pursue a third way: teaming up with Japan and other Asian powers.

A participant takes photographs of South Korean President Moon Jae-in delivering a speech during a ceremony marking the 72nd anniversary of liberation from Japan's 1910-45 colonial rule, following the end of World War Two, on Liberation Day in Seoul, South Korea, August 15, 2017. REUTERS/Kim Hong-Ji

The threat from Kim Jong Un’s nuclear weapons is existential. But 18 weeks into his five-year presidential term, Moon is caught between opportunistic ploys by both Donald Trump’s White House and China using the crisis to redefine relationships. Accusing Moon of “appeasement”, President Trump is renegotiating a five-year old Korea-U.S. trade deal. But South Korean’s installation of a U.S. missile-defence system has led to Chinese boycotts that shuttered Lotte department stores on the mainland and hit sales at Hyundai, among others. Seoul now worries a $56 billion currency swap arrangement with Beijing, up for renewal on Oct. 10, is at risk. Cancellation would signal the loss of a key economic shock absorber.

Moving closer to either side could knock the economy off-balance. Cosy up to China, and Moon might be forced to accept weaker trade terms from a nation with per capita income 2.4 times lower than Korea’s. The plight of Lotte and Hyundai could be a preview of Korea Inc.’s future as a compliant subsidiary of the Chinese juggernaut. Nor is China a reliable security guarantor vis-à-vis Pyongyang.

Trump, for his part, wants South Korea to make concessions to retain access to a market that isn’t growing nearly as fast as China’s.

There may be a regional alternative. Since Trump pulled out of the Trans-Pacific Partnership, Japan’s Prime Minister Shinzo Abe has rallied the 10 other remaining signees to preserve the deal (talks resume in Tokyo this week). Entering TPP could enable Moon to triangulate Beijing-Washington tensions, and play Japan and China off each other. TPP might also force corporate Korea to raise its game – one of Moon’s reform goals. Seoul can’t ignore China, its biggest trading partner. But a less isolated Korea might enjoy greater bargaining power.

As Xi and Trump demand that Seoul choose between them, South Korea could choose Asia instead.


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