Amid the Korean nuclear showdown, don’t forget the trade gap that threatens the western alliance
By Donald Kirk
All the talk over what to do with North Korea overlooks one problem to which people are not paying that much attention. That’s the yawning gap in trade between the U.S. and all its leading trade partners.
It’s a lot easier to grasp the significance of a North Korean nuclear warhead attached to a long-range missile than to care whether China’s exports to the U.S. last year exceeded its imports from the U.S. by a cool $347 billion.
The imbalance with China is by far the most distended of any trade gap in the history of commerce between nations, and it’s a bargaining ploy in the Great Game over getting North Korea to give up its nuclear program.
President Donald Trump, when he met President Xi Jinping in Mar-a-Lago, wasn’t nearly so insistent about cracking down on China for unfair, inequitable trading practices as he was during his campaign. In those days, Trump spoke darkly of imposing protective tariffs on China ― a punitive measure that could upset the global trading system if China slapped tariffs on goods from the U.S.
The argument against protective tariffs would seem overwhelming: Good-by to free trade. Welcome to trade wars ― and real wars ― and forget about China pressuring North Korea to give up its nuclear and missile program.
Therein lies the inherent bargain. “Do something” about your pain-in-the-neck ally and protectorate, make a few gestures about reducing your trade surplus ― and we won’t do anything to hurt you.
The same equation applies to the U.S. relationship with South Korea.
Vice President Mike Pence let loose a salvo of tough talk against North Korea when he visited the Demilitarized Zone and then issued a lengthy statement standing beside Acting President Hwang Kyo-Anh. Stuff about “all options are on the table” and “North Korea would do well not to test our resolve” ― rhetorical flourishes that came close to threatening a pre-emptive strike against the North’s nuclear and missile sites.
But then, the next day, talking to the American Chamber of Commerce, Pence came out with a broadside against South Korea ― specifically, the Korea U.S. Free Trade Agreement that’s been around for more than five years. In fact, in March, on the fifth anniversary of KORUS, I attended a talkfest in which Koreans and Americans were singing its praises.
Not Pence. While it’s opened the doors to a few thousand more American car imports, among other items, it’s been even better for Korean manufacturers ― their exports to the U.S. are at least twice what they were when the damn thing was signed. “The hard truth,” he told the assemblage of suits before flying to Japan, is barriers are still in place and “We have to be honest about where our trade relationship is falling short.”
To be honest, total two-way trade between the U.S. and Korea last year came to $69.9 billion dollars, of which $42.3 billion consisted of Korean exports to the U.S. Doing the math, the U.S. trade deficit was $27.6 billion. That’s a lot less than the $69 billion trade deficit with Japan, which ranks a distant second to China in that department, but in terms of percentage of two-way trade it’s worse than Japan. U.S.-Japan trade last year totaled $196 billion.
How much pressure, though, can the U.S. exercise on South Korea to redress the trade imbalance when the two countries have to coordinate on defense against North Korea? And will the U.S. have any leverage at all after the presidential election on May 9?
The winner in all likelihood will be a liberal or progressive with whom U.S. generals and diplomats have to be extremely careful so as not to upset the U.S.-Korean alliance. Will the U.S. get really tough on trade while also urging South Korea to stick to its guns against North Korea?
The same questions might be asked about U.S. relations with Japan, where conservative Prime Minister Shinzo Abe is all for building up militarily and keeping U.S. bases on Okinawa against popular resistance. Is Abe interested in cutting down that trade surplus with the U.S? No way.
Nor are the South Koreans and the Chinese if they can help it.
North Korean leaders must be delighted ― allies scrapping over billions while they go on testing missiles for shooting warheads into the lairs of their enemies.
Donald Kirk has been covering war and peace in Asia for decades. He’s at email@example.com.