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Re-Orienting: Seoul's new No 1
market
By Aidan Foster-Carter
Call me a nerd, but trade trends get me all
excited. I approve of trade - and am persuaded that, in
most cases, countries that go for it grow richer than
those that don't. A pair of Koreas spring to mind.
Who trades what, and with whom, are intriguing
too. How these alter over time may reveal trends not
only in economics and business, but politics and even
security. In the age of empire, it was said that trade
follows the flag. But in the era of globalization, I
suspect it may be the other way around.
Enough
generalities. We'll start with two simple questions.
One: Which country has just overtaken which other
country to become South Korea's main export destination?
Two: Likewise, which nation last year dislodged which
other nation as the top market for North Korea's rather
more exiguous exports? (So fascinating - trust me - is
each of these, that for No 2 you'll just have to wait
until the next Pyongyang Watch column.)
No
prizes for getting No 1 right. This we could see coming
a mile off. For years, decades even, South Korea's top
two trading partners were the United States and Japan.
Like others in Asia, Seoul has relied on a huge US
appetite for its manufactured goods. Conversely, it runs
a huge US$14 billion structural deficit with Japan -
which continues to supply not only capital goods
(machinery), but also a surprisingly large share of the
components that go into South Korean phones, computers,
flat screens, you name it.
But in the past
decade a newcomer has entered the lists. Because of the
Cold War, China and South Korea hardly traded at all
until the late 1980s. Since they finally tied the
diplomatic knot, as recently as 1992, they've hastened
to make up for those lost decades. By 1998, greater
China - the People's Republic (PRC), Hong Kong and
Taiwan - took 19.9 percent of Seoul's exports, against
the 17.2 percent going to the US. The latter snatched
the lead back in 1999 and 2000, but by 2002 China and
Hong Kong alone took 20.8 percent, ahead of the United
States' 20.2 percent.
Hong Kong and Taiwan were,
of course, long-standing partners of Seoul. Taipei's
political fury at being dumped diplomatically in 1992,
when South Korea scrambled to snuggle up to the
mainland, caused no dip in their booming economic ties.
(See what I mean about trade not following the flag?
Hey, business is business.) But the real dynamo in
soaring Sino-Seoul intercourse was and is of course
China. Despite fears in South Korea - like every place
else - of Beijing becoming a threat and a competitor,
signs so far are that Seoul, more so than most, is doing
very nicely out of China's breakneck economic growth.
Contrary to globalization's critics, development
doesn't have to be a zero-sum process. With little
option but to buy from China, the smart strategy is to
sell to it too: be it steel or chips to build and power
their factories, or cars and computers for millions of
avid new consumers. Korean firms have leaped to do just
that. So we could see it coming, and in July it came. In
that month, South Korea's sales to China of $2.97
billion pulled ahead, and by quite a margin, of its
exports to the United States ($2.56 billion).
Now a further milestone has been passed.
According to Seoul's commerce ministry (MOCIE), as of
September 20 exports to China so far this year totaled
$23.1 billion, overtaking the $22.8 billion sold to the
US. The pace of growth is simply astounding - up 47
percent over the same period last year. By item, this
included $2 billion worth each of computers (up 77
percent) and mobile telecoms equipment, and chips to the
tune of $930 million. Other top 10 items included steel
plates, petrochemicals, and auto parts.
So China
has definitively dethroned the US as the chief buyer of
South Korean goods. On the other side of the ledger,
imports from China are rising fast too - despite an $8
billion surplus to Seoul, which annoys Beijing as much
as their own deficit with Tokyo riles South Koreans.
China is a fast learner at the trade-war game - of 23
anti-dumping cases it has brought since 1997, all but
five target South Korea - so the pressure on Seoul to
import more Chinese goods will grow. At this rate, next
year - or by 2005 at the latest - China will top the US
to become South Korea's No 1 trading partner overall.
For trade, read also investment. Same story:
China overtook the US as the destination of choice for
South Korean firms last year, with $1.65 billion (on an
approvals basis) and $1.28 billion respectively. This
rush across the Yellow Sea involves both small firms,
seeking a low-wage manufacturing base, and of course the
chaebol, making everything under the sun - to sell
inside China, as well as for export.
Momentous,
don't you think? At one level, of course, this is only
natural. China and Korea are near neighbors,
geographically. Culturally, they share much:
Confucianism and Buddhism, for starters. As neighbors,
their histories have been intertwined for literally
millennia, if not always happily: old Korea was for
centuries a tributary state of China. Today,
economically, they complement one another. It was the
Cold War quarantine that kept them apart, which was
unnatural. Now the balance has been restored.
Then factor in politics. As an ex-Marxist, far
be it for me to embrace economic determinism, yet it
would be naive to suppose that China's new weight as
South Korea's top market has no political heft. For one
thing, the Cancun World Trade Organization (WTO) train
wreck surely means we'll see more impetus toward
sub-global, regional economic cooperation. Despite the
Asia Pacific Economic Cooperation (APEC) forum flying
the flag for trans-Pacific solidarity, my money is on
new moves for specifically Asian initiatives - like
Tokyo's proposed Asian Monetary Fund (AMF), which got
short shrift from the US and the International Monetary
Fund (IMF) during the 1997-98 financial crisis. (By the
way, why is it that while Europe has the European Union
and the US, Canada and Mexico have the North American
Free Trade Agreement, any moves toward pan-Asianism have
some folks in the West up in arms screaming blue murder?
Sauce for the goose, surely.)
While the "ASEAN +
3" group that lately met in Bali is so far just a
talking shop, the "plus three", far from being an
add-on, not only have far more economic weight -
individually, never mind collectively - than the rest of
the Association of Southeast Asian Nations, but also
increasingly function as a bloc. True, trios are never
easy, and a lineup of China, Japan and South Korea has
plenty of fissures and arguments. Within this triangle,
Seoul and Beijing share a sense of historical
victimhood. Perverse as it seems to put past before
future, as a result many South Koreans are as
instinctively pro-China as they remain viscerally
hostile to Japan.
Finally, factor in the US and
North Korea and it gets really interesting. Donald
Rumsfeld is due to cross the big pond this month,
doubtless to hector his Korean ally as John Bolton did
in July. Real tactful - but will anyone in the Pentagon
brief him on a matter as esoteric as trade trends? They
better. And now his trip has been postponed, so Rummy
has more time to bone up on such arcane material.
Why should he? Because increasingly, far too
many South Koreans for US comfort are now inclined to
contrast a George W Bush administration, whose zigzags
and posturing have increased risk on the peninsula, with
a China subtly positioning itself as a friend to all and
active peacemaker. As ever, Beijing is playing a long
game. Time and economics are on its side. For the US to
lose its slot as Seoul's top export market is no big
deal. But to lose South Korea to China? That would be
careless, and serious. And it could happen.
Aidan Foster-Carter is honorary senior
research fellow in sociology and modern Korea, Leeds
University, England.
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