Tag Archive | "leadership transition"

16 Issues for the Trump Administration to Consider in Developing a New North Korea Policy

By Troy Stangarone

As the United States transitions from the Obama administration to the Trump administration, there is significant uncertainty regarding the future direction of U.S. foreign policy. During the campaign, President-elect Trump broke from many of the orthodoxies shared by Republicans and Democrats in the area of foreign policy and since the election has begun to potentially shift gear on some of his campaign pledges. His ultimate foreign policy is still largely unknown.

One area where there will be significant interest in the new administration’s future policy direction will be North Korea. Pyongyang’s increasing efforts to develop both a workable nuclear warhead and multiple delivery systems has made North Korea a problem that will need to be addressed by the Trump administration. While it is still unclear if President-elect Trump will merely tweak existing policy or implement policies that rethink U.S. foreign policy and specifically how the United States addresses the challenges presented by North Korea. If the Trump administration were to consider a significant overhaul of U.S. policy on North Korea, here are 16 issues the incoming administration should consider in developing a new policy:

North Korea and the Trump Administration’s Foreign Policy Priorities

The most important question for the new administration to consider is where North Korea is on the list of foreign policy challenges? While North Korea’s growing weapons programs should make it a priority, other challenges could come to dominate the administration’s agenda and push North Korea down the list. Any White House where decision making is centralized can only handle two or three significant foreign policy issues at a time. If North Korea is not in that top tier, the administration will have to set a policy more in line with an issue of lesser priority. However, if the Trump administration is willing to delegate authority, more issues could be handled simultaneously.

Beyond shaping the approach and resources dedicated to addressing the North Korean nuclear issue, the level of priority the administration gives to resolving the crisis will impact how it handles other foreign policy issues. For example, if North Korea is a top priority for the Trump administration, it impacts how the administration handles relations with China. Most experts consider China a key player in resolving the nuclear issue, something President-elect Trump himself stated during the election. If the administration decides to push for a resolution to the nuclear issue early in its term it will need to consider developing a China policy that will elicit the cooperation needed rather than one that will push China to use North Korea as a wedge against the United States. As with much in life, foreign policy is about tradeoffs and compromises because everything cannot be achieved at once.

Where is North Korea in Terms of U.S. Priorities with China?

If North Korea is among the United States’ foreign policy priorities as one key consideration, the same is true for how the Trump administration will prioritize North Korea among its other challenges in its relationship with Beijing. During the campaign, President-elect Trump ran on a platform of bringing back U.S. jobs and getting a fair deal for American workers. While not a major campaign issue, the South China Sea and China’s military modernization are likely to remain a priority for a Trump administration. Another major issue in the relationship is climate change and the Paris accords. Since election, President-elect Trump has suggested that he might seek to reshape the United States relationship with Taiwan. If the new administration places a priority in its relations with China on addressing trade relations and seeks to withdraw the United States from the Paris accords, it might find Beijing less than willing to help address North Korea. If it seeks to redefine relations with Taiwan, Beijing’s willingness to cooperate on North Korea might be even less.  At the same time, if it prioritizes North Korea over other issues in its relations with China, it may need to refrain from engaging in trade disputes with China or other controversial issues to elicit Beijing’s support for a more effective stance against Pyongyang. Again, the priorities in the U.S. relationship with China will impact the type of North Korea policy the United States will be able to pursue.

How Likely China is to Squeeze North Korea?

China is seen as the key to the North Korea issue. While China has worked with the United States to pass tougher new sanctions on North Korea after each of its nuclear tests this year and has, to an extent, implemented those sanctions, there is a perception that China is not doing as much as it could or not stringently enforcing sanctions. If the new administration views China as the key, how likely is China to truly squeeze North Korea and what might incentivize it to do so? Similarly, if China will not truly squeeze North Korea and the new administration determines that the United States does not have acceptable leverage to shift China’s position that would necessitate a different approach to the North Korea than if the administration determines that China will squeeze North Korea or that it has sufficient and acceptable leverage to do so.

Does Russia Have a Role to Play?

Much like President Obama early in his administration, President-elect Trump has suggested that the United States should have better relations with Russia. While Russia was part of the Six Party Talks, it was not a primary player in the negotiations. Could Russia play a larger role or could it be a potential spoiler?

If relations with Russia improve, the administration will need to determine if Russia could manage a larger role. However, if Russia demurs, it will be important to consider how Russia could impede the process. In the two most recent UN sanctions debate Russia held up the process to water down the sanctions. If China were to come on board for stronger sanctions, including cutting off North Korea’s oil, Russia could serve as an alternative source. While Russia has its own reasons for not wanting to see North Korea’s program advance, Putin has shown a willingness to back outsiders when he thinks it could bring a geopolitical advantage. The one challenge for Russia would be keeping North Korea in line, as it has historically been a less pliant client than Russia’s more recent efforts at developing useful clients.

What Type of Deal is the Trump Administration Willing to Cut?

In the past, the United States has sought the complete, verifiable and irreversible disarmament of North Korea. Should that remain the goal of the United States? Should the United States pursue only a freeze or a final deal that addresses the nuclear issue and a wider range of issues? In light of prior efforts to negotiate with North Korea, should Pyongyang also be prohibited from utilizing nuclear power or should it be allowed to maintain certain aspects of a civilian nuclear program? What elements should be in any agreement with North Korea? Should it only cover the nuclear program or should it include elements such as a peace treaty ending the Korean War? What type of concessions would the administration be willing to make to North Korea to secure an agreement? These are just a few of the elements of a potential deal that the administration will need to consider.

What Would a Trump Administration Be Willing to Trade Away?

The art of any good deal is finding a way to meet the needs of the negotiating parties in a manner that is acceptable to all involved. Over the last three decades the complexity of what is acceptable for North Korea, South Korea, the United States, China, Russia, and Japan has kept a comprehensive deal out of reach. If the Trump administration decides to enter into negotiations with North Korea, they will have to determine what they are willing to give Pyongyang in return for it abandoning its nuclear program.

In the past, there has been an assumption that North Korea wanted some combination of recognition by the United States, security guarantees for the regime, and energy and economic assistance. In regards to security, North Korea has often called for the end of U.S. troops on the peninsula and the abdication of the U.S.-South Korea alliance. While the administration should not trade away items which would remove the ability of South Korea and Japan to defended themselves against North Korean aggression after any deal, it will need to give consideration to what hard choices it is willing to make to reach an agreement. If it is unwilling to take minimal steps such as provide some type of security guarantee or recognition of the regime, a policy other than negotiation will likely be needed.

The Importance of U.S. Allies to North Korea Policy

In the campaign President-elect Trump broke from long-standing U.S. foreign policy and suggested that he saw relationships with allies as more transactional in nature than as part of a broader relationship where the United States will live up to its commitments to defend allies. Since the campaign, some of that rhetoric has been walked back, but in dealing with North Korea the administration will need to determine how it views alliances and what their role is in tackling the North Korean nuclear issue.

If the Trump administration is going to “re-baseline” U.S. alliances as incoming National Security Advisor Michael Flynn has suggested, the administration will need to determine what advantages does having supportive allies in South Korea and Japan bring in terms of military and diplomatic contributions. What would be the costs to the United States of pursing a more independent or transactional policy in dealing with North Korea, specifically if the U.S. was no longer willing to assure allies that their concerns would be met. What is the tradeoff in having willing partners in dealing with North Korea as opposed to partners who might become more aggressive in pursuing their own interests solely if the U.S. were to as well?

What Are the Military Options?

As North Korea continues to make advancements on its missile program calls for the United States to take preemptive action before North Korea is able to demonstrate or utilize an ICBM that could reach the United States will likely grow. What are the merits and potential downsides of either blowing up a North Korean ICBM on the launch pad prior to liftoff or shooting a North Korean ICBM down in flight? If the U.S. choose to preempt a launch how would North Korea respond and what are the prospects for escalation? If the U.S. were to shoot down a North Korean ICBM, a successful intercept would likely be a strong deterrent, but what would be the consequences of a failure to intercept the missile?

Perhaps more boldly, are there other military options on the table such as covert operations that could slow the program or remove key individuals that could change North Korea’s decision structure. If you engage in military operations beyond those that are clearly defensive in nature, such as shooting down an ICBM on a trajectory for the United States or one of its allies, what are the prospects that China would be drawn into any escalation in conflict?

For all of these options, the administration would need to determine if they are willing to accept the risks and costs that any military option from shooting down an ICBM to engaging in a new war would entail not only for the United States, but also for our allies in the region. The bottom line for the administration will be is there a military option that has a high degree of success that will also minimize the potential for significant retaliation on the part of North Korea.

Is the Obama Strategy Working?

There is a tendency for incoming administrations to follow an “anything but” the previous administration policy, especially if the prior administration is one of the opposing party. Sometimes a change of course is good policy, but sometimes as President Obama found with aspects of President George W. Bush’s terrorism policy the process of governing means embracing some of your predecessor’s legacy. President-elect Trump has already demonstrated on healthcare policy that he is willing to keep some of the Obama policy in place, even on an issue that is unpopular with his party, so there is no reason to believe that a Trump administration would simply abandon the policy of the Obama administration.

What are the key characteristics of that policy? First, maintain tight policy coordination with U.S. allies. Second, increase the alliance’s defensive capabilities. Third, increase pressure on North Korea through sanctions and other measures? Fourth, work to discourage those who support the North Korean regime from doing so. Lastly, be open to negotiations with North Korea if those talks are designed to address the nuclear issue. If this is a sound approach, rebranding may be all that is needed. If it is not working, what steps might be more successful?

Is the Iran Example a Useful Model?

President-elect Trump has described the Iran nuclear deal as one of the worst deals he has ever seen. However, during the election, Secretary Hillary Clinton’s team had made clear that they saw it as a model for dealing with North Korea. While more nuanced than this, the Iran model is the idea of imposing crippling economic sanctions to force North Korea into negotiations over its nuclear program.

In the case of Iran, it was allowed to maintain parts of its nuclear program and the agreement was only for ten years. North Korea has stated that they will not negotiate an Iran style deal, but the final details of the agreement point to issues that the Trump administration will need to consider in any negotiation. Will the administration keep to the standard of complete, verifiable, and irreversible dismantlement (CVID) of North Korea’s nuclear program? Or, should Pyongyang be allowed to maintain parts of its nuclear program as was the case with Tehran. This was part of the Agreed Framework, but North Korea ultimately cheated on that deal. Alternatively, is there already a mismatch in terms of the value of North Korea’s nuclear program? Pyongyang likely believes it should get a better deal for actual nuclear weapons and the administration likely believes that North Korea should receive more stringent conditions for having developed them. Also, the administration will need to thoroughly consider in what ways North Korea differs from Iran, to see how useful any lessons from that experience may be. If the two situations are different enough, there may be few useful lessons. Alternatively, if the Iran model is not a good one, what would a different approach look like? These are the types of questions the Trump administration will need to ask as it decides whether or not to utilize the Iran precedent.

How Stable is North Korea?

Since the end of the Cold War there have been predictions that North Korea was near collapse. While many other Cold War regimes have collapsed, or undertaken significant economic reforms such as China and Vietnam, North Korea has taken only minimal steps towards reform.

Historically stability mattered because the sense was that, if the regime was on the verge of collapse, there was little reason to negotiate with it or make a substantial offer for the nuclear program. However, the Trump administration should consider the regime’s stability for two reasons. If the regime is stable, pushing it in the hopes of collapse may not yield the desired result, but a stable regime could be in the position to reach a deal, even if it is not an optimal one for the United States and its allies. If the regime is unstable, negotiations will have little effect as a weak regime would be unable to make the political choices needed to give up or significantly reduce the nuclear program and survive. Depending on the perception of the stability of the regime, it impact whether engagement or pressure is likely to be a more useful tool, while the wrong assumption could lead the administration to develop a flawed policy.

How Susceptible is North Korea to Sanctions?

North Korea is less connected to the global economy than most other nations and survived a famine in the 1990s in which over a million North Koreans may have starved to death. Iran’s economy was much more open to the global economy and therefore more susceptible to sanctions than North Korea, and it still took three years after sanctions were placed on Iran’s oil to negotiate an agreement on its nuclear program.

If North Korea is less susceptible, the Trump administration will need to consider what that means in regards to timelines for action on North Korea. The administration will also need to give consideration to what areas North Korea may be most susceptible to sanctions and what types of sanctions would be most likely to be effective in that area. While the focus has been on coal as in recent years as that has been North Korea’s primary export, there may be other areas or types of sanctions the administration should consider. For example, imposing more sanctions on financial institutions that have dealings with North Korea. At the same time, it will need to consider the costs that the regime is willing to bear to complete its nuclear program before the sanctions force it to do otherwise. A nation is willing to let a significant portion of its population starve to death is likely willing to bear a significant cost.

Will North Korea Give Up Its Nuclear Weapons?

Negotiating a solution to the North Korean nuclear issue is only possible if North Korea is willing to engage in talks on the dismantlement of its nuclear and missile program. For much of the Obama administration the belief was that North Korea was not. Discerning North Korea’s intentions helps to shape whether the Trump administration should seek to engage or pressure Pyongyang.

If the Trump administration reaches the same conclusion as the Obama administration, seeking talks with Pyongyang would be of minimal utility. Instead the administration would need to develop a program designed to create conditions which might change the regime’s perspective, similar to the case of Iran, or take steps to enhance U.S. and allied defense so as to deter North Korea from using its nuclear weapons. Both of these options could also be taken simultaneously.

However, if the regime believes that North Korea would be open to a deal, talks should be the primary course of action. The key for any negotiations would be finding a way to ensure that they were not a play for time by North Korea to finish its nuclear program while reducing pressure on the regime.

Why Does North Korea Want Nuclear Weapons?

The North Korean regime has suggested that it has developed its nuclear weapons program to protect itself from U.S. hostility, but the reunification of the Korean peninsula on North Korean terms still remains a goal of the regime. Determining whether the regime views the nuclear weapons as the key to its survival or a tool to achieve political ends could have a significant influence on how a policy is shaped. If nuclear weapons are synonymous with regime survival in Pyongyang, it may be impossible to provide the assurances needed to convince them to give up their weapons. However, if the nuclear weapons are for a political end, demonstrating through pressure that even with nuclear weapons that goal is not achievable without threatening the regimes survival might create room for negotiations. It is a difference that could shape the policy the administration chooses.

Are Human Rights Part of the Equation?

In the last year the United States has placed sanctions on Kim Jong-un and his sister for the regime’s violation of human rights. It is unclear how the Trump administration will approach the issue of human rights, but in the case of North Korea they will have to decide if the issue of human rights and sanctions related to North Korea’s human rights violations should be linked to North Korea’s nuclear program. If the administration does wish to link the issues, it will need to consider whether human rights sanctions encourage or discourage North Korea from engaging on the nuclear program. At the same time, it will have to determine if it would be willing to remove the sanctions to make progress on the nuclear issue in the absence of progress on human rights in North Korea.

If You Break North Korea, Are You Willing to Fix It?

In the run up to the Iraq War, Colin Powell famously cautioned President George W. Bush that if “you break it, you own it.” A similar consideration should apply to any aggressive sanctions policy or kinetic action that the Trump administration decides to take in regards to North Korea. In the case of North Korea, regime stability will always likely be a question. How much pressure can it stand before collapse does ensue? So far, China has pushed back on any sanctions that it thought might truly endanger the regime. Nevertheless, China could miscalculate the pressure the regime can withstand, or preemptive military action could precipitate a conflict that leads to collapse. If there is good reason to believe North Korea is about to strike either the United States or its allies, action will need to be taken. However, if the administration decides to pursue significant pressure, it also need to consider what actions it would take if the pressure proves to be too much. Would it be willing to contribute to rebuilding the North under a unified Korea, and would it be willing to actively support South Korean claims to sovereignty over the North in the face of strong Chinese resistance. If so, then more aggressive measures may be advisable, but if not a more gradual approach may be called for with North Korea.

While this is not necessarily an exhaustive list, it is designed to show how complex the North Korean nuclear crisis is and how different understandings of issues can influence how policy would develop. To see this, we look at how different outcomes would occur given variations on two issues: North Korea’s willingness to negotiate and China’s willingness to pressure North Korea.

If the Trump administration believes that North Korea will not negotiate on its weapons program and that China will not truly pressure the regime, than that would argue for a policy of increased deterrence. However, if the administration believes that China would pressure North Korea further but North Korea will not negotiate, that impacts policy more generally towards China to ensure that Beijing remains onboard in pressuring North Korea. The caveat, of course, is where then North Korea fits in regards to the administration’s priorities. If North Korea is the priority, that then affects how the Trump administration approaches China on trade, Taiwan, the South China Sea or other issues. Ultimately, solving the North Korean nuclear issue is more complex than simply a question of whether to sanction the regime more or engage in negotiations.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Uri Tours photostream on flickr Creative Commons.

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The Trump Administration and Trade Policy: Confirmation Questions for the Commerce and USTR Nominees

This is the second in a two part series looking at the potential questions senators should ask Trump Administration officials on policy that will affect Korea during their confirmation hearings. The first part on the Trump Administration’s State and Defense nominees can be found here.

By Phil Eskeland

On Thursday morning, President-elect Donald Trump’s nominee for Secretary of Commerce, Wilbur Ross, will be subject to a confirmation hearing before the Senate Commerce, Science, and Transportation Committee, chaired by Senator John Thune of South Dakota.  Because Robert Lighthizer was nominated to serve as the U.S. Trade Representative (USTR) just last week, his confirmation hearing before the Senate Finance Committee, which has legislative jurisdiction over U.S. trade policy, will be held sometime after the presidential inauguration.

As mentioned in the first part of this series, confirmation hearings are a window to gain insight into the views and priorities of any administration.  While the Department of Commerce has many divergent responsibilities from conducting to the decennial census to maintaining a small fleet of ocean-worthy vessels as part of the National Oceanic Atmospheric Administration (NOAA), the International Trade Administration (ITA) has been historically been a locus of the agency.   In the past, USTR has taken the lead in trade policy and negotiation while the Department of Commerce is focused primarily on trade promotion through the U.S. & Foreign Commercial Service and enforcement by acting on foreign dumping (selling an imported product in the U.S. below what the good sells for in the overseas country) and unfair foreign government subsidy complaints from U.S. industry.  Because USTR is a relatively small agency, the Commerce Department also provides the industry expertise to aid and guide USTR negotiators.

The issue of trade was raised to a top-tier issue during the election.  Suffice it to say that many of Trump’s positions and statements on trade diverged from long-held views of most Congressional Republicans.  Thus, the confirmation hearings for these two nominees will be an interesting guide not only to gain insight into Trump administration policies, but to see what type of questions are posed by members of the Senate Commerce Committee.  As is custom, presidential nominees that require Senate confirmation submit written responses to questions posed by the committee in advance of the hearing.  In answering the question regarding the top challenges facing the Commerce Department, Mr. Ross responded with a priority to expand U.S. exports and reduce the U.S. trade deficit.

Below are a list of a just a few suggested questions for Senators to ask.  Again, even if they do not come up in the hearings, it will be interesting to see how the Trump Administration will deal with them over time:

  1. What is your view on trade deficits?  Do you view trade as a zero-sum game?  Do you view imports as “bad” and exports as “good?” Does the perspective of the consumer factor into your views?
  2. What is your plan to expand U.S. exports? 
  3. Will there be any change to which agency will take the lead on trade policy – Commerce or will it remain at USTR?   Will the Trump Administration support the consolidation of all trade-related functions and offices within the Executive Branch into the Department of Commerce or create a Department of Trade?  If not, will the Trade Promotion Coordinating Committee (TPCC) play an elevated role in the Trump Administration?
  4. With Peter Navarro as the Director of the new National Trade Council, Jason Greenblatt as the new Special Representative for International Negotiations, and Trump’s son-in-law Jared Kushner as Senior Adviser, all in new trade roles at the White House,  what will you do to insure consistency in Trump Administration trade positions and messaging?
  5. Which country or countries may be next in line for trade negotiations?
  6. Do threats to raise tariffs on products made outside of the United States set the precedent to embolden other nations to bring production back to their home country and withdraw foreign direct investment from the United States?
  7. With the demise of the Trans-Pacific Partnership (TPP), what is your vision to promote U.S. economic interests in Asia, particularly among our allies in light of the growing interest to complete the Regional Comprehensive Economic Partnership (RCEP) talks?
  8. Do you believe China manipulates its currency?  If so, when should we expect to see this designation in the Trump Administration?
  9. What improvements do you think need to be made to the North American Free Trade Agreement (NAFTA)?  Do you view North America as an integrated market to compete against Asia?
  10. Do you envision the administration taking many self-initiated actions to enforce U.S. trade laws?  If so, what might these actions entail?

Phil Eskeland is Executive Director for Operations and Policy at the Korea Economic Institute of America. The views expressed here are his own.

Photo from Amanda Walker’s photostream on flickr Creative Commons.

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Korea and the Trump Administration: Confirmation Questions for State and Defense Nominees

This is the first in a two part series looking at the potential questions senators should ask Trump Administration officials on North and South Korea policy during their confirmation hearings. The second part looking at the nominees for Commerce and USTR can be found here.

By Mark Tokola

Article II, Section 2, Clause 2 of the United States Constitution requires that the President make appointments with the advice and consent of the Senate.  Confirmation hearings are part of Senate’s process of giving “advice and consent.”  Although the confirmation process has become increasingly partisan, including for appointments to the Supreme Court, it still provides an opportunity for a public discussion of the policy views of incoming Administration officials as well as an examination of their personal backgrounds and qualifications.  Confirmation hearings also provide an early window into how Administrations see the world, what their priorities are, and how they intend to deal with challenges.

Those who have been through the confirmation process, and even those who just watch it, are often frustrated with the time-consuming speeches of the questioners, leading questions intended to push a policy line rather than to learn anything from the candidate, unnecessarily evasive or picayunish answers from the candidates, and the always unhelpful approach of “Just answer the question ‘yes’ or ‘no’!”  The shortage of time also means that important topics never have the opportunity to surface.

For the purposes of those with a particular interest in Northeast Asia, and Korea in particular, following are questions that we would love to see asked and answered during the upcoming confirmation hearings.  Even if they do not come up in the hearings, we will still be watching to see how the Trump Administration will deal with them over time:

For Rex Tillerson, Secretary of State Designate (Confirmation Hearing: January 11-12):

  • What is your diplomatic strategy in regard to North Korea?  Will you offer bilateral talks or do you support reinvigorating the Six-Party Talks framework?
  • Recent policy has been to not allow daylight between the United States and South Korea on North Korea policy. Will that continue in the Trump Administration? If the next South Korean government seeks a new approach to North Korea, what would the U.S. stance be?
  • In the absence of the Trans-Pacific Partnership, how will you strengthen economic ties with our Pacific allies?  Would you consider a bilateral trade agreement with Japan similar to the one we have with Korea?
  • Do you support the Regional Comprehensive Economic Partnership (RCEP) as a means of liberalizing trade within Asia or do you see it as a threat to U.S. interests?
  • There have been plans to replace our 1962-vintage U.S. Embassy in Seoul for over thirty years.  Are you finally going to carry through with the project?

For James Mattis, Secretary of Defense Designate (Confirmation Hearing: January 12):

  • Is there a “red line” for the North Korean nuclear weapons program that would trigger a U.S. action?  Wouldn’t it be advisable to let them know where they must stop?
  • Given modern military capabilities, how really necessary is it to have U.S. troops stationed in South Korea and Japan?  If a fair burden sharing agreement cannot be reached, would you be willing to withdraw them?
  • Apart from questions of funding, what roles do you foresee for our Pacific allies?  What tasks should the Korean, Japanese, Australian, and New Zealand militaries assume?  Shouldn’t they be helping with Freedom of Navigation exercises in the South China Sea?

Mark Tokola is the Vice President of the Korea Economic Institute of America. The views expressed here are his own.

Photo from lukexmartin’s photostreamn on flickr Creative Commons.

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10 Issues to Watch for on the Korean Peninsula in 2017

By Mark Tokola, Phil Eskeland, Troy Stangarone, Jenna Gibson, Kyle Ferrier, and Juni Kim

The Korean peninsula was dominated by unexpected events in 2016. North Korea began the year with a nuclear test that merely foreshadowed a year of significant advancements in its nuclear program rather than its traditional pattern of using tests to provoke a cycle of crisis and negotiations. In response, the Park Geun-hye administration closed the Kaesong Industrial Complex in what would become the first of a series of significant moves to tighten sanctions on North Korea bilaterally by a series of nations and through the United Nations.

On the political front, 2016 saw the surprise election of Donald Trump as president of the United States on a platform that may remake parts of U.S.-Korea relations while redefining the role of the United States in East Asia. Closer to home in Seoul, South Korea was rocked by a political crisis that led to the impeachment of Park Geun-hye.

As 2017 begins the consequences of those events and others from 2016 will begin to play out on the Korean peninsula and Kim Jong-un has again begun the year with a shock announcing that North Korea is close to testing an intercontinental ballistic missile (ICBM). With that in mind, here are 10 issues to follow that will have an impact on the Korean peninsula in the year to come:

Political Dynamics and the Presidential Election in South Korea

Perhaps no issue will have more impact on the Korean peninsula this year and in the years to come than the resolution of the current political crisis in South Korea. Depending on when and how the Constitutional Court rules on the impeachment of Park Geun-hye, South Korea could have a new president as early as this spring or enter into a period of extended political uncertainty with President Park remaining in power until February 25 of 2018.

These political dynamics have implications for South Korea and the peninsula beyond whether Park Geun-hye leaves office early or serves the remainder of her term. The political uncertainty around the impeachment means that needed economic reforms will likely be delayed and that policies enacted by the interim administration or late in the Park administration could be subject to quick reversal after the question of impeachment is resolved. The current environment could also lead to a move towards constitutional reform, an issue that had already been gaining steam prior to the move towards impeachment.

If President Park’s impeachment is upheld a snap 60 day campaign could change the dynamics of the election and favor a candidate who might not ordinarily have performed as well under an ordinary campaign. It may also aid a move towards more populist positions, as is becoming an increasing trend around the world, but in the case of South Korea may come from left rather than the right as we have seen in Europe and the United States.

The election also holds the potential to see a significant shift in policy related to North Korea and Japan, among other issues to watch in 2017.

The Trump Administration’s Foreign and Security Policy in East Asia

For the first time since the end of the Korean War, there is significant uncertainty on how U.S. foreign and security policy will develop in East Asia. After decades of bipartisan understanding of both the benefits of the region to the United States and the basic policies that should be put in place to promote U.S. interests, the Trump administration will come into office having campaigned for significant change in U.S. policy and with an air of uncertainty in the region on the shape of U.S. policy to come.

In the campaign, President-elect Trump seemed to place a greater emphasis on international economic issues and question the utility of U.S. alliances and whether countries such as South Korea were contributing enough financially to the deployment of U.S. troops. He also suggested a willingness to withdraw U.S. troops and allow South Korea and Japan to defend themselves with nuclear weapons.

Since the election, we have seen President-elect Trump reaffirm the United States commitment to defend South Korea, but also a willingness to change the nature of the U.S. relationship with Taiwan, potentially increasing tensions with China. For the Korean peninsula, the priorities the administration sets in the region, including whether China or North Korea will be a priority, as well as whether it chooses to purse those policies through negotiation or confrontation will have significant impact on events on the Korean peninsula, including how willing China is to cooperate in pressuring North Korea to denuclearize.

As the Trump administration sets out its new policies, we should expect there to be significant changes that could unsettle the region early in the administration. However, as events and structural challenges in the region necessitate, there will likely be a shift towards a more traditional U.S. foreign policy in the region.

Trump Administration Asia Economic Policy

During the campaign, President-elect Donald Trump castigated U.S. trade policy, including the Korea-U.S. Free Trade Agreement (KORUS FTA).  While the KORUS FTA was cited as an example of a “disastrous” trade deal, candidate Trump did not threatened to withdraw or renegotiate the agreement, as he did with other FTAs.  His first 100 days agenda only reiterated his pledge to withdraw from the Trans Pacific Partnership (TPP).

While the KORUS agreement may be out of the limelight, there are indicators to watch for to see the future of U.S. trade policy.  First, his senior appointees for various posts will determine the extent of Trump’s economic nationalism.  He has nominated Wilbur Ross, a private equity billionaire who specializes in restructuring failed companies, particularly several in “Rust Belt” industries, as Secretary of Commerce, and noted “fair” trade attorney Robert Lightizer, to serve as the U.S. Trade Representative.  In addition, Trump has appointed two individuals to fill newly created positions within the White House – noted trade skeptic and economist, Peter Navarro, as the Director of the National Trade Council, and Jason Greenblatt, who currently is Executive Vice President of the Trump Organization, as the Special Representative for International Negotiations.  It is unclear how all these four individuals, along with free trade advocate Rex Tillerson, who was nominated by Trump to serve as his Secretary of State, will interact to shape a unified trade policy, and how much real power and authority each one of these individuals will possess.

Second, in early February, the annual trade statistics will be released by the U.S. government.  The Year to Date (YTD) trade deficit between the U.S. and the ROK in goods is slightly outpacing last year’s level ($24.07 billion for 2016 vs. $23.997 billion for 2015).  If this trend continues, there could be a renewed attention on KORUS.

Third, even if there is not a direct confrontation of KORUS in the near-term, the Trump plan to focus most of their attention on fixing agreements with Mexico and enforcing trade laws before negotiating any new bilateral deals could have ancillary spillover effects on Korea.  China is Korea’s top trading partner and Mexico is Korea’s ninth largest export market.  Mexico is also becoming a major destination for Korean foreign direct investment.  Thus, while KORUS maybe out of the cross-hairs, actions by the Trump Administration affecting other trading partners could have negative effects for the Korean economy.

North Korean Behavior in Response to a New Political Environment

With a new administration in the United States and the prospects for a new administration in South Korea this year, there is an expectation that North Korea may test the alliance and Kim Jong-un has already suggested that he will conduct an ICBM test.  Observers have tried for years to explain the timing of North Korean nuclear tests, missile tests, and other provocative acts on the basis of North Korean political anniversaries, foreign elections, and other external events such as international summits or Olympic Games. The historic correlations are weak.  It may simply be that North Koreans test their weaponry when it is time to do so on an engineering schedule.  When they are ready to test, they test.  They might wait a matter of days or weeks if tests would interfere with a major political event such as a bilateral meeting, as we would do, but that would nudge the schedule, not drive it.

The tempo of testing has picked up since Kim Jong-un came to power.  Nuclear and missile test are happening much more often than they did during the time of Kim Jong-il.  This might be occurring because Kim Jong-un is still trying to cement his power and has tied his personal prestige to weapons testing.  It may be because North Korea wants to get as far as it can, as fast as it can, before the U.S., South Korea, Japan, and China take stronger steps to try to put an end to its quest for a nuclear arsenal.  It might also reflect Kim Jong-un’s personal impatience.

Will North Korea be a Trump Administration Priority?

U.S. Administrations have limited ability to set foreign policy priorities.  It is a useful exercise to try to set priorities on the grounds that unless you know where you want to go, you are unlikely to get there.  But, foreign policy is unavoidably reactive because decisions by foreign leaders and non-state actors, natural disasters, accidents, and miscalculations require responses.  British Prime Minister Harold Macmillan was quoted as answering a journalist’s question of what Prime Ministers fear most by saying, “Events, dear boy, events.”

Discounting events, North Korea should be a high foreign policy priority for the Trump Administration.  North Korea has threatened military action against the United States, South Korea and Japan and is getting closer to having a nuclear weapon that could strike the U.S. west coast.  That in itself should not be considered a watershed moment, North Korea can already threaten South Korea, Japan, and hundreds of thousands of Americans, military and civilian, living within the range of North Korean military strikes.  North Korea’s belligerency, possible instability, and grotesque human rights abuses should be of great concern to countries in the region, the U.S., and the international community.  A concerted, coordinated policy towards North Korea is necessary.

Are Sanctions Working?

The sanctions enacted this year on North Korea constitute the toughest and most comprehensive framework to date. New information in 2017 will help to gauge whether these measures are working as intended and how they can be strengthened, with China’s enforcement of new sanctions playing a key role. The effectiveness of improvements made to UN sanctions in resolution 2321 and U.S. secondary sanctions targeting financial institutions facilitating Kim Jong-un’s pursuit of hard currency greatly depends on Beijing’s willingness to cooperate with Washington. However, President-elect Donald Trump’s initial approach towards China suggests heightened tensions in the relationship over other issues may pose significant challenges for cooperation on sanctions in 2017.

Nevertheless, the continued use of sanctions as a tool on North Korea may be in question. Several candidates in South Korea’s presidential elections next year favor economic engagement with North Korea. South Korea’s return to engagement would greatly undermine the cohesion of UN sanctions, likely precipitating Russia and China—the most reluctant supporters of sanctions and North Korea’s most influential economic partners—to abandon their support. Even if these candidates are unsuccessful in their presidential bids, should the new sanctions have a limited impact in the first half of 2017 transitioning leaders in the U.S. and South Korea may consider other policy alternatives.

Special Measures Agreement/Burden Sharing 

Ever since 1991, the Republic of Korea (ROK) has provided some financial support to offset the cost of stationing U.S. troops on the peninsula.  During the presidential campaign, Donald Trump questioned on several occasions the alleged low reimbursement for stationing U.S. troops abroad.

Later this year, Korea and the United States will begin negotiations on renewing the Special Measures Agreement (SMA), which is set to expire in 2018, that lays out the terms of the burden sharing arrangement.  Last April, General Vincent Brooks testified before the U.S. Senate that Korea pays approximately 50 percent of the total non-personnel costs of the U.S. troop presence on the peninsula.  Under the current SMA, Korea’s annual payment (in won) increases by the rate of inflation.

Just as in all negotiations, one side offers its most parsimonious offer and the other side counters with its proposal to bolster its own self-interest.  Over time, the two sides come together to reach an agreement.  Marine Corps General James Mattis, Trump’s nominee for Secretary of Defense, earlier criticized President Barack Obama for “saying that our allies are freeloaders.”  Not only does the ROK already share half of the burden of the stationing costs of the U.S. military on the peninsula, but this staunch U.S. ally also has a military draft with 625,000 active duty military personnel confronting North Korea; spends 2.6 percent of its GDP on its own defense (highest among any major European or Asian ally of the U.S); and 80 percent of South Korea’s imports of military equipment over the past five years have come from the United States.  South Korea is leagues above European members of NATO in terms of alleviating the defense burden of the United States.

SMA negotiations will be tough with the Trump administration, as they have been at times in the past.  However, these talks will not undermine the alliance.  The U.S. national interest will continue to inform policymakers that no U.S. troops should be withdrawn from the ROK until the threat from North Korea is resolved.

Will RCEP Be Finalized in 2017?

The failure of TPP has turned attention to the remaining mega free trade agreement in Asia: the Regional Comprehensive Economic Partnership (RCEP). Negotiations were due to have finished by the end of 2015, but have been bogged down by disagreements over a range of issues. However, the breakdown of TPP may prove to be the necessary push to conclude negotiations in 2017. China, the largest member economy and key driver of the deal, has vowed to accelerate talks and is already looking ahead to lead the Free Trade Area of the Asia Pacific (FTAAP), the next progression in the regional architecture.

RCEP members and even non-signatories, such as the U.S., stand to benefit from an Asia with fewer barriers to trade. Still, the deal’s avoidance of non-tariff barriers, while making consensus easier among sixteen diverse economies including Korea, offers limited gains from liberalization. If RCEP is concluded it may provide the foundation for slower and less ambitious regional integration

With RCEP in place, an emboldened Beijing could seek to displace Washington from its leadership role in the region on economic issues. However, the longer RCEP talks continue to drag on, the greater the opportunity for the U.S. to bolster its standing in Asia through bilateral agreements preferred by President-elect Donald Trump.

Will the Korean Wave Continue?

Last year was nothing if not a roller coaster for Korean cultural exports. The bombshell soap opera “Descendants of the Sun” broke records at home and abroad, raking in billions in direct and indirect profits. However, the second half of the year was marred by reports of a Chinese ban on Korean entertainment content because of Korea’s decision to deploy THAAD.

While there have been some instances that could raise suspicion, other events have proceeded as planned, indicating that this is not a blanket ban. It’s far more likely that some local organizers, skittish about the Chinese government’s harsh language on THAAD, decided not to risk a controversy. With THAAD set to be deployed later this year, this will deserve further attention as the deployment takes place.

Yet, interest in everything Korea continues to grow, and shows no sign of stopping. Cosmetics giant Amore Pacific saw a 26.7% year-on-year jump in overseas sales in Q3. And Korea already broke tourism records as of mid-November, with more than 15 million people visiting the country by that point.

It’s worth remembering that the word “hallyu” itself was originally a derogatory term created in China in the 1990s to push back against the influx of Korean media content. People have been predicting the downfall of the Korean Wave since then, yet it is stronger than ever. Expect this to continue in 2017.

Relations Between South Korea and Japan

Relations between South Korea and Japan remain as complicated as ever and 2017 could see uncertainty in the relationship. Despite the implementation of the 2015 Seoul-Tokyo agreement regarding the compensation of comfort women earlier this year, controversy and protests in South Korea have continued to overshadow the deal. In light of President Park Geun-hye’s recent impeachment, leading members of the South Korean opposition parties have increased calls for the government to reconsider the agreement. Potential presidential candidates Moon Jae-in and Ahn Cheol-soo have criticized the deal and may try to restructure the deal or scrap it entirely if elected.

Despite controversy over the comfort women agreement, South Korea and Japan have continued to strengthen their defense ties. Both countries participated in regular joint military exercises with the U.S. this year and started implementation of an intelligence sharing deal earlier this month. The deal allows for intelligence sharing between the two countries regarding North Korea’s nuclear and weapons programs. Controversy over historical issues between the two countries is unlikely to subside in the near future, but the shared North Korean threat provides avenues for greater security cooperation for South Korea and Japan. Needless to say, the next South Korean president will play an instrumental role in determining the future of the relationship.

Mark Tokola is the Vice President of the Korea Economic Institute of America, Phil Eskeland is the Executive Director of Operations and Policy,  Troy Stangarone is the Senior Director for Congressional Affairs and Trade, Jenna Gibson is the Director of Communications, Kyle Ferrier is the Director of Academic Affairs and Research, and Juni Kim is the Program Manager and Executive Assistant. The views expressed here are the authors’ alone.

Image designed by Jenna Gibson of the Korea Economic Institute of America with photos from the photostreams of Gage Skidmore, Stefan Krasowski, Herman Van Rompuy, Byoung Wook, and Korea.net on flickr Creative Commons.

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Will the Trump Administration’s Policies Have a Negative Impact on the Korean Economy?

By Jaeho Jeon

After the U.S. presidential election, many experts were concerned about the policies of the new U.S.  administration and how they might affect East Asia and the Korean economy in particular. As the inauguration of President-elect Donald Trump approaches, those concerns are growing as a result of actions taken by President-elect Trump during the transition that could indicate heightened tensions between his administration and China.

President-elect Trump repeatedly argued during the campaign that the United States was getting a bad deal in its trade with China. He stressed that, if elected, he would impose a tariff of up to 45 percent on Chinese imports unless the U.S. received a better deal. However, if the U.S. imposes a high tariff on Chinese imports; China is likely to immediately retaliate, perhaps precipitating a trade war.

Since the election, President-elect Trump has taken steps to revamp U.S. trade policy. He recently announced plans to create a National Trade Council (NTC) inside the White House and has chosen Peter Navarro, a UC Irvine professor, to serve as the chair. Professor Navarro, the author of ‘Death by China’ and ‘Crouching Tiger: What China’s Militarism Means for the World’, has criticized the trade imbalance with China and has argued for a strong response. Having promised to protect manufacturing jobs in the U.S. by preventing unfair trade practices by China during the campaign, along with the appointment of Professor Navarro by President-elect Trump as chairman of NTC, can be interpreted as indicating a willingness to implement the China-related pledge.

However, significant and sustained trade tensions between the United States and China could have a negative impact on the Korean economy. The U.S. and China are major buyers of Korean products. If a U.S-China trade wars begins and the trade between the two countries is reduced, South Korea, which is highly dependent on exports to both countries, will suffer considerable damage. According to the Korea Trade Statistics Promotion Institute, Korea’s exports to China amounted to $ 131.7 billion in 2015, 26 percent of total exports. The amount of export to the U.S. was $ 69.8 billion, or 13.3 percent of the total, and second only to China.

In 2015, 65.3 percent of Korea’s exports to China were processed locally and re-exported to other countries such as the United States. The re-export products are mainly tele-communication devices such as mobile phones, computers, and textiles. According to the Bank of Korea, if China’s exports to the U.S. decline by 10 percent, Korea’s total exports are estimated to decline by 0.36 percent. In 2015, that would have meant decline in Korean exports of almost $2 billion.

The fact that Trump is expected to strengthen protectionism is also negative for the Korean economy. The U.S. had increased trade pressure on Japan from the end of 1980s to the early 1990s, saying Japan’s trade surplus was excessive. Korea’s trade surplus with the U.S. has also increased significantly from $ 11.6 billion in 2011 to $ 25.8 billion in 2015. If the U.S. pressures Korea on trade, Korean exports to the U.S. are likely to decline.

Another consideration is whether the U.S. will name Korea a currency manipulator. President-elect Trump has vowed to name China a currency manipulator on his first day in the White House. Under U.S. law, the Treasury Department can name a country that meets three conditions a currency manipulator. The three conditions are that a country’s trade surplus with U.S. exceeds $ 20 billion, the current account surplus exceeds 3% of GDP, and there is persistent one-sided intervention in the foreign exchange market. While China meets one condition, Korea meets two. If Korea is named a currency manipulator, there could be various trade sanctions put in place such as restricting participation in the U.S. procurement market.

Of course, there is an analysis that Trump’s election will help the Korean economy in the short term. Trump mentioned that he would push for various stimulus measures such as $ 1 trillion in infrastructure investment and massive tax cuts. If the U.S. economy improves, it will help the Korean economy. According to the analysis of Hyundai Research Institute, if the U.S. economic (GDP) growth rate increases by 1 percentage point, Korea’s economic growth rate is estimated to rise by 0.4 percentage points due to the increase in exports.

However, it is difficult to jump to a conclusion that the economy will be revitalized because President-elect Trump has no specific policy yet. Recently, there have been indications that Trump may withdraw his infrastructure pledge having said that infrastructure investment will not be a “core” part of the first few years of his administration in an interview with The New York Times.

Uncertainty is one of the things the economy hates most. Although Trump is unlikely to pursue extreme trade policies, Korea’s export environment will be in a difficult situation for the time being.

Jaeho Jeon is a reporter at ChosunBiz and a visiting fellow at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from A McLin’s photostream on flickr Creative Commons.

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The Year of the Unexpected: A Look Back At the Korean Peninsula in 2016

By Troy Stangarone

In the Chinese zodiac, 2016 is the year of the Fire Monkey. Fire Monkeys are said to be ambitious and adventurous, as well as irritable. Despite Donald Trump’s not having been born in the year of the Monkey, looking back, his victory in the U.S. presidential election that year may yet seem fitting. However, rather than being a year reflective of the characteristics of the Fire Monkey, 2016 might be better known as the year of unexpected events around the world and on the Korean peninsula. Whether it was the British vote to leave the European Union in June or the impeachment of the South Korean President Park Geun-hye in December, 2016 will be remembered for a series of unexpected events and the questions they have raised about how they may shape the future.

As we take our annual look back at the events that helped to shape the Korean peninsula during the past year, it is also an opportunity to review the events we highlighted on The Peninsula in our annual 10 Issues to Watch For on The Korean Peninsula in 2016 blog. For a year that was dominated by such a large number of unexpected events, our annual look ahead to the events of the coming year holds up surpassingly well. However, while our look ahead was correct on the importance of many events in 2016, those same events also often played out in surprising ways that will have significance beyond what we expected earlier this year. One example of this is the U.S. presidential elections. While U.S. elections always hold significance for the Korean peninsula, few foresaw the election of Donald Trump and the implications his presidency could have for the peninsula early in 2016.

With that said, here’s a brief look back at the 10 issues we highlighted and what happened:

  1. No Significant Progress with North Korea – After North Korea began 2016 with a nuclear test, the international community moved towards placing greater pressure on Pyongyang. This included sanctions at the UN, which would later be strengthened, to cut off North Korea’s trade in minerals such as coal, and bilateral sanctions by the United States to cut North Korea off from the global financial system. As was expected at the time little progress was made with North Korea on resolving the nuclear issue, but the one surprising element was that rather than try to find a way to engage North Korea after a new round of sanctions, South Korea went all in on pressuring the North with the closure of the Kaesong Industrial Complex and lobbying countries to cut their ties with Pyongyang. While we were right on the broader element of there being little progress with North Korea and how structural issues such as the U.S. elections and sanctions would inhibit progress, the strength of South Korea’s stance was one of the unexpected turns of 2016.
  2. If There Will Be Another Round of Family Reunions – If there was going to be progress in relations between North and South Korea it was going to require both countries to separate the nuclear issue from other issues in their relationship. Neither side was able to do so in 2016, which is regrettable for both the humanitarian burden that it places on the divided families and for the reality that family bonds will be one of the important ingredients for unification if it takes place at some point in the future. The longer that families remain divided the further apart the two Koreas are likely to drift.
  3. Could a China-North Korea Summit Still Happen? – This is one issue that was fairly straight forward. While there had been suggestions in late 2015 that Chinese President Xi Jinping might finally meet Kim Jong-un thanks to improving relations, the nuclear test in January ended what little chance there may have been for a China-North Korea summit.
  4. Korea-Japan Relations – When looking at Korea-Japan relations heading into 2016, clearly there had been prior progress. At the same time, it seemed unlikely that there would be the type of progress that the U.S. might have liked and the prospect for backsliding existed. While Japan did approve money for the comfort women fund, the agreement itself remains controversial in South Korea and may face pressure under the next administration. As for the comfort woman statue near the Japanese Embassy, it remains an issue for the local government of Seoul. While progress was made in relations, unsurprisingly, much work remains.
  5. How the U.S. Elections Could Impact Policy – Here we were right about how the political parties viewed the situation in Korea, but wrong about the overall impact of the elections. While we foresaw the critiques of the Obama administration’s policy and the push back on issues such as the Trans-Pacific Partnership (TPP), the degree to which then candidate Donald Trump would shift the debate with his repeated push on the question of South Korea’s contributions to U.S. troops on the peninsula, and suggestions that the U.S. might withdraw those troops and allow South Korea to develop its own nuclear weapons, and that a candidate with these views would win the presidency, were clearly unforeseen. The ultimate result of the election is potentially much more significant for the peninsula than anyone might have imagined at the beginning of the year.
  6. South Korean National Assembly Elections – Here we saw the fairly divided electorate give the opposition Minjoo Party a slim majority and a display of surprising strength by Ahn Cheol-soo’s new People’s Party. However, the impeachment of Park Geun-hye likely means that any signals the National Assembly elections may have had for the presidential election in 2017 no longer matter.
  7. Cooperation Between Korea and China in the G20 – At the G20 in China, South Korea worked with China as expected to help advance the agenda, but IMF quota reform and global safety nets played less of a role than expected during 2016.
  8. K-Pop’s Next U.S. Breakthrough – While K-Pop and Hallyu more generally remained popular in much of the world, especially with the release of Descendants of the Sun, K-Pop continued to have difficulty breaking into the U.S. market. The English language debut of CL, Lifted, was expected to give K-Pop its first breakout in the U.S. since Psy, but the album has yet to produce a chart single in the United States.
  9. South Korea’s Trade Policy – Events on the trade front have played out largely as expected. While TPP, should it be revived, will be an issue for the next Korean administration, there has been significant progress on the Regional Comprehensive Economic Partnership (RCEP) talks that include the ASEAN, China, India, Australia, New Zealand, Japan, and South Korea.
  10. Has Samsung Turned the Corner? – After two difficult years Samsung had turned the corner in 2016 with the successful launch of the Galaxy 7 and the new Edge. However, all of Samsung’s progress melted down with the battery issues of the Galaxy Note 7. As a result, next year will again be a key year for Samsung as it once more looks to turn another corner and rebuild consumer confidence after the issues with the Note 7.

Beyond the events that we expected, here is a look at some of the unexpected events that helped to shape 2016:

  1. Multiple Nuclear Tests and the Advancement of North Korea’s Nuclear Program – Before we even published our look ahead to 2016, North Korea had conducted its first nuclear test of the year. It would go on to break with its pattern of only conducting a single test in a year by conducting a second nuclear test in September. While much attention has focused on the significant increase in North Korean missile launches and tests in 2016, the most significant step may have been in the advances the program took in developing a second strike capability. Though initial tests of a submarine launched ballistic missile failed, North Korea had made progress before the year’s end.
  2. The Closure of the Kaesong Industrial Complex – South Korea took the unexpected step of closing the Kaesong Industrial Complex in response to North Korea’s first nuclear test in 2016. The closure was significant for several reasons. Not that long beforehand South Korea had been pushing to internationalize the complex to avoid the prospect of the complex being shut down after North Korea had withdrawn its workers in 2013 for political purposes. Kaesong also held symbolic importance as the last remaining connection between North and South Korea, as well as the last vestige of the prior sunshine policy. While closing Kaesong was a significant step it may have played a role in encouraging the international community to take stronger steps against North Korea.
  3. International Sanctions on North Korea – While there is nothing necessarily surprising about the international community sanctioning North Korea over its nuclear test, what is significant about the current round of sanctions are the steps that they take to try and limit North Korea’s ability to continue its nuclear program. There are now requirements to inspect North Korean cargo, even that of North Korean diplomats, and caps have been placed on North Korean exports of coal while bans have been placed on other mineral exports. The United States has moved to cut North Korea off from the international financial system and has set in place steps to use secondary sanctions to go after those who enable North Korea. While sanctions are unlikely to resolve the North Korean nuclear issue on their own, they were significantly strengthened in 2016.
  4. The Political Crisis in South Korea – The corruption and influence peddling scandal surround Choi Soon-sil, a longtime confidant of President Park Geun-hye, engulfed South Korea is a political scandal that has seen millions of South Koreans protest in the streets and the impeachment of Park Geun-hye by the National Assembly. As a result of the scandal, South Korea faces an uncertain political future in 2017. Even before the new year begins, there has already been a split within the conservative Saenuri Party with 29 members leaving to form the New Conservative Party for Reform.
  5. THAAD and Dispute with China – Beyond sanctions, one of the steps being taken by the United States and South Korea to deter aggression by North Korea is the deployment of the Thermal High Altitude Arial Defense, or THAAD. This is a step that has been strongly opposed by China which sees it as undermining Beijing’s own interests in the region. While the evidence seems thin to date that China has actually done anything more than complain, there have been concerns that China will retaliate economically against South Korea by restricting its exports of Hallyu to the China and Chinese tourism in South Korea.  Taking such steps would harm Chinese as well as South Korean interests.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Gage Skidmore’s photostream on flickr Creative Commons.

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The Trump Presidency and U.S.-Korean Relations

By Mark Tokola

Donald Trump’s upending of conventional political wisdom and political “business as usual” is a historic achievement and marks a realignment of American politics.  It will take months, if not years, to sort out the election’s ramifications for domestic policy and politics.  Foreign policy, however, does not allow for such a long-term assessment — events will not wait.  What can we say about U.S.-Korean relations under the Trump Administration?

First, it is worth recalling the fundamental strength of the U.S.-Korean alliance.  It is based on shared values.  The United States and the Republic of Korea are democratic societies and free market economies.  As such, they are countries that have common global interests, such as freedom of the seas, and a common perspective, such as support for rule of law.  They are also closely intertwined by commerce, history, and people-to-people ties.  The same American electorate that chose Donald Trump to be the next President also, according to polling, considers the Republic of Korea to be a valued ally.  The basic underpinnings of the alliance are strong and unlikely to change.

That is not to say that the change of U.S. Administration, and the election of a new Korean President in 2017, will leave the status quo untouched.  Historians have pointed out that most U.S. Presidents have honored most of their campaign pledges.  While campaigning, Donald Trump clearly said that allies should take on more of the responsibility for their own defense.  In some ways, such as the “OPCON Transfer” that has already been agreed to, this is the direction we are already moving.  In others, such as the Special Measures Agreement of Korean financial support for U.S. forces in Korea, we can expect some tough bargaining before an agreement is reached.  That might have been expected in any case.

In trade policy, Donald Trump campaigned on a pledge to strike agreements that are more in the U.S. interest.  He did not argue for no agreements or for less trade.  Again, the global trend was in this direction regardless.  The failure of the WTO Doha Round, and resistance to both the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP), showed that further trade liberalization was becoming more difficult, and not only in the United States.  European and Asian countries are also questioning the effects of further trade liberalization.

North Korea is unlikely to become less dangerous or less oppressive to its own people.  It will pose a challenge to the Trump Administration.  It is too soon to predict what the Trump Administration’s policy review of North Korea will conclude.  Given the continuing development of North Korea’s nuclear and missile program, a fresh look is warranted.

Given Donald Trump’s overall campaign, the clearest sense of direction was one of “putting America first,” which might be taken as giving priority to domestic policy issues over foreign policy issues.  Foreign policy, however, has a way of forcing itself onto the White House’s agenda regardless of the preferences of U.S. Administrations.  Barack Obama at the outset of his Administration also promised a domestic focus, but events intervened.  When that happens, the United States will still look to her allies, including South Korea.

Mark Tokola is the Vice President of the Korea Economic Institute of America. The views expressed here are his own.

Photo from UNC-CNC-USFK’s photostream on flickr Creative Commons.

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Implications of Trump’s Election on U.S. Trade Policy Towards Korea

By Phil Eskeland

Unlike past U.S. elections, President-elect Donald Trump has made trade a centerpiece of his campaign.  In many appearances, he severely criticized what he characterized as “disastrous trade deals” made over the past two decades.  In fact, his closing argument included pictures of padlocked factory gates and abandoned machinery on the shop floor as his evidence of a failed U.S. trade policy.  Usually, his ire is targeted at Mexico and China.  However, sometimes his criticism of U.S. trade policy extends to the Korea-U.S. Free Trade Agreement (KORUS FTA) because he considers it as a poor model for the Trans Pacific Partnership (TPP) due to the rising merchandise trade imbalance between the U.S. and Korea.

Now that the campaign is over, will this rhetoric become U.S. policy?  First, several times in the past, presidential candidates have campaigned against trade and, in particular, on getting tough on China.  In 1992, Bill Clinton said he would not sign the North American Free Trade Agreement (NAFTA) as negotiated by President George H.W. Bush.  Presidential candidates going back to Ronald Reagan have promised to get tough on China, but relented once in office.   Even Barack Obama spoke numerous times pledging to “amend” NAFTA and expressed opposition to the FTA with Korea.  But President Obama did not renegotiate NAFTA and signed the KORUS FTA into law.  So, what a candidate says on the campaign trail often does not convert into public policy.

Second, do not expect the TPP to be ratified in the United States at any time in the near future.  In fact, it is dead.  It was already doubtful that TPP could pass either during a “lame duck” session of the U.S. Congress during the last weeks of the Obama Administration or during the early part of the next administration even if Hillary Clinton won the presidency because of the growing political backlash against trade and globalization in the United States.  The 2016 platforms of both political parties expressed deep skepticism about the benefits of trade and the TPP.  The Democratic Party platform called for higher standards on labor, environment, and enforcement, to be applied to all trade agreements, including the TPP.  The Republican Party platform specifically called for not passing any significant trade agreements during the “lame duck” session.  Thus, Korea should not look to join the TPP at any time soon.

However, President-elect Donald Trump has also repeatedly said that he wants to negotiate smart trade deals and preferably with individual countries.  This means that Trump is not philosophically opposed to trade, as evidenced by all his business dealings all around the world.  He just wants the right people to be negotiating the best deals possible for the United States with specific countries (not groups of countries) that create U.S. jobs, increases wages for American workers, and reduces the U.S. trade deficit.  Does the KORUS FTA fit these parameters?    Yes – KORUS is a bilateral trade agreement; over 350,000 U.S. workers are now the dependent upon exports to Korea, an increase of 87,000 jobs from 2009; the annual compensation of U.S. workers employed in firms with investment from Korea have increased to $92,000; and the KORUS FTA has improved the U.S.-Korea merchandise trade balance by 14 percent.  So, the KORUS FTA should be insulated from the anti-trade rhetoric from the Trump camp that is primarily aimed at Mexico and China.

Looking at President-elect Trump’s nominees for various international economic posts will also determine the extent of the conversion of campaign rhetoric to public policy.  Perhaps a strong-minded trade advisor will be able to convince President Trump to overcome his aversion to multi-country trade deals to revise the TPP.  But if he selects Trump campaign trade advisors Wilbur Ross or Dan DiMicco, who are business leaders from the U.S. steel industry, expect more attention to trade enforcement and little or no progress on negotiating or revising any new trade agreements.

Phil Eskeland is Executive Director for Operations and Policy at the Korea Economic Institute of America. The views expressed here are his own.

Photo by KEI’s Troy Stangarone, Senior Director of Congressional Affairs and Trade. 

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What Might a Trump North Korea Policy Look Like?

By Troy Stangarone

As it begins to sink in that the next U.S. president will be Donald Trump, one question that will be on the mind of those in Northeast Asia is what will Donald Trump’s North Korea policy look like? While North Korea was a more significant topic during the 2016 election than in past elections, discussions of its weapons programs were largely driven by Pyongyang’s own tests rather than an effort to articulate a clear policy on how to address the challenges that lie ahead. In contrast, for much of the campaign much of Mr. Trump’s commentary focused more on South Korea rather than the regime to the north.

President-elect Trump ran on a campaign that could up end much of the bipartisan foreign policy and international order that has existed since the end of the Second World War. This includes rethinking the nature of U.S. alliances and the role of the United States in the world. As a result, it is unlikely that a clear policy on North Korea will be articulated without a review of the policy options open to the administration within the new framework that they put in place.

However, we should expect the North Korea policy of a Trump administration to differ from the Obama administration, potentially significantly.

The first step of a Trump administration would likely be to reprioritize issues with China. Throughout the campaign, Trump has suggested that he would be tougher on China on economic issues and that China could solve the North Korea problem if it really wanted to. While the Obama administration sought China’s cooperation on issues such as climate change, the Iran nuclear talks, and matters of global economic coordination, these issues are unlikely to be a priority for the Trump administration. This could free it to be more aggressive in its use of economic sanctions against Chinese banks and businesses that do business with North Korea.

In addition to being more aggressive in his approach to China, a Trump administration may seek to use sanctions to pressure Iran to end its cooperation with North Korea, potentially as part of a redefined nuclear deal with Iran.

While Trump suggested during the campaign that he would be willing to meet with Kim Jong-un, similar to the Obama administration this is unlikely in the near term and would only likely be on the table if a deal had been reached on or was close to being concluded with North Korea on its nuclear program. However, it may indicate a greater openness to negotiations.

However, during the campaign President-elect Trump also signaled that he is more open to extracting the United States from the world’s problems. While this does not necessarily mean that a Trump administration would walk away from sanctions on North Korea, something which might lead to strong resistance on Capitol Hill in his own party, he could push for South Korea and Japan to play more significant roles in deterring North Korea from using its weapons program.

One aspect that any North Korea policy will need to entail is the reassurance of U.S. allies in the region. The discussion during the campaign of burden sharing and the suggestion that a Trump administration could remove U.S. troops from South Korea or Japan if they did not pay 100 percent of the costs has created a degree of policy uncertainty and concern that the U.S. may no longer be a reliable ally. Reassuring U.S. allies of our commitment to their defense will be an early key element of any policy.

At the same time, this policy will need to be fairly public and clear to avoid sending the wrong signals to North Korea about U.S. commitment the alliance. We have already seen some moves in this direction.

During the campaign North Korea took the rare step of expressing their support for Donald Trump out of the prospect that he would weaken the alliance and potentially remove U.S. troops. This is an idea for which the new administration will need to quickly disabuse policy makers in Pyongyang of to avoid any miscalculations on North Korea’s part.

At the same time, we should also expect the new administration to be tested soon by North Korea and perhaps even during the final remaining weeks of the Obama administration. Not because of any pattern of testing new leaders in the United States and South Korea, but because in many ways a Trump administration presents an unknown to both North Korea and U.S. allies in the region. Seeking to exploit this uncertainty and exploit a potential opportunity to divide the U.S. and its allies would be in Pyongyang’s strategic interest.

While these are potential policy options that a Trump administration could or should pursue, we should also keep in mind that administrations often veer significantly from their campaign rhetoric as the necessities of governance begin to come into focus. Bill Clinton campaigned against the North American Free Trade Agreement (NAFTA) as negotiated and being tough on China, two policies he reversed course on. Barack Obama also campaigned on amending NAFTA.

In terms of the key policy elements, we should also look closely to the cabinet officials and key advisors that President-elect Trump appoints for signals of his administration’s potential policies. While President-elect Trump has had a propensity to be his own advisor and the nature of his victory will give him a freer hand than some presidents to pursue their preferred policy options, the nature of the presidency is such that a president cannot micromanage every issue and therefore will need to delegate key aspects of policy to advisors. While much of the Republican establishment has stated that they would not work for a Trump administration, that stance will likely soften now that the campaign has concluded.

While the nature of elections means there is a degree of uncertainty of how a candidate will govern, there do seem to be some clear outlines for how a Trump administration would seek to handle the challenges presented by North Korea. These include greater pressure on China and other countries providing aid to North Korea, but also a willingness to pursue a different course. The key for the Trump administration will be to strengthen U.S. alliances in the region as it considers new options for dealing with North Korea.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from Matt Johnson’s photostream on flickr Creative Commons.

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Clinton’s Choice of Vice President: Senator Tim Kaine of Virginia

By Donald Manzullo

The day I left Congress in 2013 and became the head of KEI, Governor Tim Kaine was sworn in as a U.S. Senator from the Commonwealth of Virginia.  I did not have the opportunity to personally work with him on any issue in Congress, but I can share with you some anecdotal statements I have heard about him, his demeanor and style, and also his positions, especially with respect to trade and engagement with the world.

Senator Kaine is one of a handful of members of Congress to have served as a mayor of a major city (Richmond) and as a governor of a state (Virginia).  There is a belief in Washington that former mayors and governors make the best presidents because they have to manage a government body, work within a budget, and cooperate with members of the legislature from both political parties.  When I served in the House of Representatives, I observed that former mayors and governors often held the mindset that they were elected to Congress to help govern the nation and work together to reach consensus and compromise, regardless of party affiliation – a much broader and inclusive perspective than some who prided themselves on merely obstructing the process.

Senator Tim Kaine graduated from the University of Missouri with a degree in economics, and while at Harvard Law School, he suspended his studies for one year to live in Honduras, where he worked with the Jesuits to help run a technical school.  He speaks fluent Spanish.  Senator Kaine practiced law for several years, and entered elected office in 1995 when he served on the City Council of Richmond, Virginia.  Three years later, Mr. Kaine was elected Mayor of Richmond (the capital of Virginia), and in 2001, he was elected Lieutenant Governor.  Four years later, he was elected Governor.  In Virginia, all governors are limited to serving just one term, so as his tenure was expiring, Governor Kaine became Chairman of the Democratic  National Committee (DNC), which formulates strategy, raises money and supports Democratic candidate at local state and federal levels.

When incumbent Senator Jim Webb announced his retirement, Governor Kaine quickly jumped into the race and won the seat during the 2012 election.  Even though Governor Kaine was the head of the Democratic Party apparatus, he still kept his reputation for bi-partisanship intact as he won more votes in his Senate race than Barack Obama during his presidential re-election bid in Virginia, even in areas that were previous strongholds for the Republicans.  The Commonwealth of Virginia has shifted in recent years from a reliable Republican or “Red State”[1] to an increasing politically competitive or “Purple State,” making elected officials of either party who win state-wide office appealing candidates for national office. The current governor of Virginia is also a Democrat.  Thus, Senator Kaine was a politically easier choice for Democratic presidential nominee Hillary Clinton because the other Senators on the “short-list” to be considered as her vice presidential running mate are from states that have Republican governors.[2]  As a result, Senator Kaine’s selection as Clinton’s running mate will not reduce the number of seats in the U.S. Senate currently held by Democrats. Plus, of all the states in the union, Virginia (also called “The Old Dominion State”) is also home to the fourth largest concentration of residents of Korean descent – nearly 71,000.

Exactly who is Tim Kaine and what are his views on international trade and America’s role in the world?  In an interview with the Associated Press, Senator Kaine described himself as a “Harry Truman Democrat,” after he proudly showed off to the reporter an autographed memoir of the nation’s 33rd president.  President Truman’s administration is credited with instituting the post-WWII international order, including the Marshall Plan, the creation of the North Atlantic Treaty Organization (NATO), and responding forcefully to counter the unprovoked invasion of the Republic of Korea by North Korea under the auspices of the newly created United Nations.  Senator Kaine said in this interview, “Some people say we’ve [the United States] got to be the indispensable nation.  I just want to be the exemplary nation.  Indispensable sounds like you’re trying to put your nose in everybody else’s business.”

Senator Tim Kaine serves on four committees, including Armed Services and Foreign Relations.  He is the only U.S. Senator to simultaneously sit on both of these key committees.  On Armed Services, he is the senior Democrat on the Readiness Subcommittee and also serves on the Emerging Threats Subcommittee, which deals with North Korea.  The Old Dominion State is host to the immense U.S. naval presence in Norfolk.  In addition, Hampton Road, Virginia is America’s eighth largest port with nearly $72 billion in total trade that traversed through this region in 2015.  Part of that trade includes South Korea. Exports of merchandise goods from Virginia to Korea increased 48 percent since 2011 (the year prior to the implementation of the Korea-U.S. Free Trade Agreement or KORUS FTA), reaching $486 million in 2015.  Top Virginia exports to Korea include chemicals (up 81 percent since 2011); food manufactures (up 244 percent); and computer and electronic products (up 355 percent).  In fact, according to the U.S. Commerce Department, Virginia experienced an $89 million trade surplus in merchandise goods with Korea in 2015.

As a result, Senator Kaine has taken several legislative actions that have advanced not only his personal inquisitiveness into international affairs, but also reflects the interests of his state.  He was the Senate author of legislation (S.Con.Res. 20) introduced shortly before the 60th anniversary of the Korean War Armistice Agreement to encourage peace and reunification on the Korean Peninsula.  Earlier this year, he spoke on the Senate floor and voted for legislation to bolster sanctions against North Korea, which resulted in additional actions by the Obama Administration to further isolate the regime.

Of notable interest on trade, Senator Kaine bucked his party leadership last year when he voted to end a parliamentary roadblock to bring up the legislation granting President Obama Trade Promotion Authority (TPA) to conclude the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) talks.  Shortly thereafter, he voted in the affirmative on the final version of that bill, which was sent to the President’s desk for his signature.  When he voted for TPA, Senator Kaine said, “I am pleased…the Senate…completed the passage of four related trade bills.  We have given the President the same power to negotiate trade deals that has been provided to every President since 1974. …In a Virginia that was founded to promote trade and that still maintains an aggressive and optimistic global posture, these bills will help our workers, companies and farms find new export customers.”

More recently, Senator Kaine was asked his opinion of the TPP agreement, which was finalized and signed by 12 Asia-Pacific Rim countries, including Japan, Mexico, and Canada, last February.  He stated that there is much in the agreement that he likes with an upgrade in labor and environmental standards, along with enhanced intellectual property protections.  However, he has “significant concerns” regarding the dispute resolution mechanism in the TPP.  With merchandise exports from Virginia having increased by 15 percent to the 12-member TPP region, since 2011 to $6.4 billion, it will be interesting to see if Senator Kaine can retain his overall optimistic position on the TPP.

Presidential tickets are designed to attract the maximum voter support, and the Clinton-Kaine ticket is no exception.  It will be an interesting campaign to see the two spar against the Trump-Pence team.

Donald Manzullo is President and CEO of Korea Economic Institute and former Member of U.S. Congress (1993-2013). The views expressed here are the author’s alone.

Photo from U.S. Naval Forces Central Command/U.S. Fifth Fleet’s photostream on flickr Creative Commons.

[1] Republican candidates for president have won the majority vote in Virginia every cycle since 1952 (excepting 1964) until 2008.

[2] Governors are allowed to appoint an individual (including themselves) to temporarily fill a vacant U.S. Senate seat until the next election cycle when the appointed Senator must run for the office.  Democrat Senators Elizabeth Warren and Cory Booker both represent states (Massachusetts and New Jersey, respectively) that have Republican governors.  If Hillary Clinton selected either one of them as her vice presidential nominee, this would have given the opportunity to the Republican governor of that state to appoint a fellow Republican to fill that Senate seat through 2018 if she won the presidency.

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About The Peninsula

The Peninsula blog is a project of the Korea Economic Institute. It is designed to provide a wide ranging forum for discussion of the foreign policy, economic, and social issues that impact the Korean peninsula. The views expressed on The Peninsula are those of the authors alone, and should not be taken to represent the views of either the editors or the Korea Economic Institute. For questions, comments, or to submit a post to The Peninsula, please contact us at ts@keia.org.