Initiating a defense against Beijing’s recent economic retaliations over the deployment of THAAD, Seoul raised the issue at a meeting of the WTO’s Council for Trade in Services, held on March 18th. Such a move marks South Korea’s first state-level gesture that—if supported by evidence—could possibly develop into a formal trade dispute.
“We have notified the WTO that China may be in violation of some trade agreements,” stated Joo Hyung-hwan, South Korea’s Trade Minister, revealing this activity to the National Assembly’s Trade, Industry and Energy Committee during his attendance of the committee’s session on March 20th.
In reaction to Seoul’s move, Beijing’s spokesperson for the Ministry of Commerce, Sun Jiwen, denied the implications of retaliatory ‘policy measures’, declaring: “As responsible member of the WTO, China has consistently and will continue to respect WTO rules and relevant promises.” Beijing’s spokesperson for the Ministry of Foreign Affairs, Hua Chunying, also made remarks on the issue while answering reporters’ questions during a press conferences, stating: “We support normal business and trade exchanges between China and the ROK, but this needs a corresponding basis in public opinion. In the meantime, China’s position on opposing THAAD is consistent and clear.”
The comments appear to reckon with South Korea’s current post-impeachment politics in which liberal presidential candidate, Moon Jae-in, is emerging as a frontrunner in the current race (the election is scheduled to be held on May 9th). Moon’s ambiguous stance on the deployment of THAAD, in tandem with his incremental approach to Korean Reunification, has been perceived as a boon to Beijing’s interests.
Seoul’s appeal to the WTO is widely regarded as a symbolic lobbying gesture to exert pressure on Beijing, on one hand, and to raise his issue on the multilateral level, on the other. However, if Beijing’s myopic retaliations continue to worsen, Seoul would consider them as an opportunity to reduce excessive trade dependency on China (trade with China currently accounts for almost a quarter of all South Korean exports). Seoul would accelerate the reformulation of its trade strategies with an emphasis on trade diversification toward India and ASEAN member countries.
In 2016, both the number of subsidiaries set up by Korean corporations and the total value invested by these subsidiaries were 1.5 times greater in ASEAN member countries than they were in China. Such growing trade ties also characterize the current status of ROK-India trade relations; approximately 3% of India’s 2016 imports were South Korean shipments.
Beijing’s miscalculated retaliations generated other unintended consequences for Beijing. It propelled Seoul to strengthen its distant bilateral relations with other Asian countries such as India. Recently, Seoul has agreed with New Delhi to hold an annual ‘two plus two’ high-level meeting to bolster the two countries’ ‘strategic cooperation’ on security and political issues. Above all, Beijing’s counterproductive treatment of its eastern neighbor in the manner one would treat a ‘vassal state’ has served to provoke an anti-China sentiment in South Korea.
Beijing anticipates that such sentiment will be drained when Moon Jae-in wins the presidential election. However, Beijing underestimates Moon Jae-in’s nationalist tendencies, which overshadow his pro-China leanings; given his nationalist views, he is likely to prioritize public sentiment over Beijing’s interests once he wins the election. Unfortunately, KBS-Yonhap News’ March survey results frustrate Beijing, with more than half of the Korean people favoring the deployment of THAAD.
THAAD was deployed immediately after Kim Jong-un’s four ballistic missiles landed on Japan’s exclusive economic zone (EEC) in the East Sea on March 7th. The arrival in South Korea of two THAAD launchers, along with 16 missiles, has since caused considerable damage to the already aggravated ROK-China relations (which have been impaired since last July’s U.S.-ROK agreement on the deployment of THAAD), largely attributable to Beijing’s hasty and regressive economic retaliations.
Beijing authorities deny implementation of official retaliatory ‘policy measures’ over the deployment of THAAD; however, alleged retaliatory incidents have resulted in significant economic losses to a wide range of South Korea’s industries. Media reports on, inter alia, smashed Hyundai cars and destroyed Lotte products capture the violent façade of Beijing-maneuvered anti-South Korea propaganda, which has turned Chinese consumers into offensive nationalism-driven vandals. Behind the unpleasant pictorials, Lotte, South Korea’s fifth largest conglomerate and its largest confectionary manufacturer, is expected to suffer US$102.7 billion as a result of the Beijing-imposed temporary shutdown of 90% of its department stores in China. The bare effect of providing the THAAD site in South Korea’s rural city Seongju, as part of a land swap deal with the South Korean government, has been to drag the apolitical economic entity into the THAAD imbroglio. Lotte’s case, although indicative of a high-water mark in Beijing’s economic retaliation, is merely the tip of the iceberg.
The year 2017 might prove to be a nightmare for South Korea’s tourism industry, with the annual number of Chinese tourists expected to decrease by 20%. K-Drama and K-pop stars—including those already active in China’s entertainment market as well as those attempting to enter this market—might similarly face hardship, as Beijing continues to impose visa restrictions and event cancellations. Overall, Beijing’s economic retaliation, if intensified, could shrink South Korea’s GDP by up to 0.25%.
Beijing’s growing concerns over THAAD genuinely derive from the possibility that the defense system will weaken the credibility of China’s second-strike nuclear capability. In other words, THAAD is a dagger to China’ ambitions for regional dominance. Nevertheless, Seoul does not have the luxury of encouraging such ambitions on China’s part now, as Kim Jong-un’s relentless terrorist activities continue to South Korea’s survival. Moreover, Kim Jong-un’s recent assassination of his half-brother, Kim Jong-nam, by VX nerve agent, has substantiated, beyond any reasonable doubt, the possibility that the regime could process the chemical into a WMD with the aim of conducting chemical warfare. Kim Jong-un’s ruthless mentality, exemplified in the slaughtering of his own family and his continued fireworks, amply vindicates Seoul from Beijing’s ‘arms race’ accusations.
The deployment of THAAD is an intricate issue that will ultimately be guided by the South Korean people’s will. Still, most South Korean nationalists adamantly assert that the deployment of THAAD is the country’s sovereign right to defend itself from Kim Jong-Un’s existential threats. Some of them take the threats very seriously and go further to advocate for the re-deployment of U.S.-supplied tactical nuclear weapons in the country. Others even warn that, should the Kim dynasty escalate regional tensions in Northeast Asia to the next level, the terrorist regime should fasten its safety belt for an arms race with an economy (South Korea) that boasts a GDP 40 times larger than that of the regime.