SEOUL’S COMPREHENSIVE RE-BALANCING STRATEGY AMIDST STRATEGIC SHIFT IN INDO-PACIFIC

A Geopolitical and Geoeconomics juggling is taking place between U.S. and China in the Indo-Pacific region, and the pandemic has only accelerated its pace. This new geopolitical game has nudged and aggravated developments in East Asia’s security and economic domain. These developments include signing the AUKUS deal, looking at the Resilience of Global Supply Chains, and the crisis in Taiwan Strait. The developments have forced states to realign their foreign policy and diplomatic balancing; South Korea is one among the many states positioned at the center of this shift as one of the significant critical technological leaders and a prominent security player in East Asia. 

With these developments influencing the South Korean interests directly and otherwise, moves in Seoul’s strategic calculation concerning China have been taking place. South Korea is now making decisions that signal a change in its traditional position. This can be seen by President Moon Jae-in’s acceptance of the AUKUS deal and a call for maintaining peace in the Taiwan Strait. How do such shifts and balancing maneuvers in South Korea’s Foreign Policy align with the geopolitical and geoeconomics tide in Indo-Pacific concerning China? What challenges persist in maintaining a state of equilibrium between South Korea and China’s relations in the future?

Gauging ties driven by trade

South Korea and China’s relations have been dominated by trade since their diplomatic relations were established in 1992, apart from their cultural and historical relations, which goes back to the Goguryeo Kingdom. By virtue of being Seoul’s biggest  trading partner, China holds an important position in Seoul’s foreign policy as highlighted by their sheer trade numbers. In 2019, the trade exports and imports from South Korea to China were around 136 billion dollars and 108 billion dollars, respectively. With the global economic slowdown, many countries have experienced their trade drastically dwindling, with some exceptions where the trade between countries has shown a positive growth trend recently. South Korea and China trade relation is an illustration among the exception. The exports to China from South Korea in October 2021 soared approximately 25 percent, reaching 14.39 billion dollars. Major commodities included semiconductors, electrical machinery, equipment, smartphones, and clothing. 

South Korea’s Ministry of Trade, Industry and Energy November figures on exports to China show a climb of  27.1 percent to 15.3 billion dollars, recording growth for 13 consecutive months. China shares a significant part of the South Korean export-oriented economy, and hence traditionally, China’s views on issues are kept in mind while formulating South Korean foreign policy-making. However, with the global geopolitical and geoeconomics tides shifting between U.S and China, the trade factor between South Korea and China no longer remains isolated of the larger consequences. In other words, with the increasing intersection of geopolitical and geoeconomics, sectors that were earlier not influenced by global or regional developments like trade, high-tech technology and shipbuilding are now seen as part of the larger geostrategy to formulate policy-making. Security considerations of respective states overshadow this policy-making, and South Korea is no exception in this shift. The security framework emerging out of the changing tides puts South Korea in an arduous position, forcing it to rebalance the sectors to maximize its interests concerning China. The two domains where the intersection of geopolitics and geoeconomics influences South Korean policy-making concerning China are trade and supply-chain resilience as well as democratic solidarity and national security. However, there is an emerging security framework influencing South Korea’s policies.

Emerging Security Arrangement and Seoul’s Soul Searching

The strategic maritime security alignment emerging among the democratic states had already created a geopolitical duplexity in the Indo-Pacific region. Here, South Korea found itself standing in opposition to China’s position. South Korea being invited as part of QUAD plus was a trust signal from the fellow QUAD countries towards Seoul in standing with the emerging ‘strategic direction.’ However, there was still hesitancy in Seoul of not upsetting China. This hesitancy germinates from Seoul’s dealing with China and its unreliable experience with the U.S. One such instance was the deployment of THAAD missile in 2016 amidst the growing threat from North Korea, which resulted in a backlash from Beijing, coming harsh on Seoul manifesting in declining relations. The economic cost estimated by Hyundai Research Institute (HRI) by Beijing on THAAD incident was around 7.5 billion dollars in 2017, which amounts to 0.5 percent of South Korea GDP.  Apart from trade, other sectors like tourism, gaming, and entertainment especially took the brunt of Beijing ire. The pressure on Korean companies was such that one particular Lotte group had to finally exit the Chinese market after a decade due to a systematic boycott campaign. China showed South Korea the consequences of upsetting its interests. 

However, with the security situation getting increasingly uncertain in the peninsula with North Korea launching missiles repeatedly, South Korea is trying to re-balance its security with economic costs. This re-balancing strategy comes in the backdrop of not getting any substantial support from Beijing on the North Korea issue, apart from some symbolic act of supporting the signing of a Peace agreement resulting in the end of the Korean war.   

The AUKUS deal between U.S, U.K, and Australia might be the final nail in the coffin that had many experts guessing on Seoul balancing foreign policy with China. In his recent visit to Australia, South Korean President Moon Jae-in supported AUKUS and said AUKUS and QUAD all of these groups adds to the ‘peace and prosperity’ in the Indo-Pacific region. Some experts have called President moon’s visit to Australia a symbol of ‘quiet alignment’ or even  called it ‘an act of subtle resistance’ against China. This visit also comes with its standings with South Korea and Australia signing military equipment deal worth 720 million dollars. Hence, we see a calibrated shift in South Korean foreign policy with China.

Trade and Supply Chain resilience

Even two years after adjusting themselves to pandemic, the issue of supply chain resilience remains intact. The latest case was the urea crisis in South Korea due to restrictions put by China amidst a shortage of coal domestically with the banning of Australian coal imports. South Korea’s dependence on China for 97.6 percent of urea imports shows the enormous nature of the problem it faces. This dependence came as many South Korean companies closed down systems domestically as they found urea cheaper to import from China. The consequences of such decisions, like restricting the flow of critical raw materials, have an enormous impact on the economy of other states. There exist other sectors also where similar issues persist. South Korea is a leader in High-tech electronic products. Still, its reliance on China for raw materials in making semiconductors points to the critical leverage Beijing holds in its tech sector growth.

South Korea is dependent on China for its raw material for 94.7 percent of tungsten oxide and 100 percent of magnesium ingot used for semiconductors and aluminum alloy, respectively. The criticality of ICT products nowadays directly affects the economies of many nations, particularly South Korea, whose exports constitute an amount of 21.5 billion dollars only in November 2021. In 2019, the exports of ICT goods constituted approximately 26 percent of South Korea’s total exports. To avoid this, Seoul is now looking to diversify its partners and the recent visit to Australia, a mineral-rich country, where the two signed an MOU on cooperation and critical mineral supply. This is seen as a critical strategy to address this supply chain issue. ‘Establishing a stable mineral supply chain is important not only for the two countries but also for the global economy,’ said President Moon. 

Such a step may address Seoul’s concern on the issue of supply chain resilience. However, the interdependence on trade exports to China presents another challenge that constrains its policy. As per the latest Ministry of Trade, Industry and Energy November figures, the ICT shipments, which includes Semiconductors, Display exports, mobile phones, and computer and peripheral devices to China, grew 30.4 percent, recording a growth with the amount of 10 billion dollars. Contrast this with the ICT product exports to the U.S, which amount to 2.5 billion dollars, approximately five times less. Still, South Korea is taking certain strategic decisions to align its policy with the U.S. Samsung Electronics announcement to set up a semiconductor fab site in Texas. It is an attempt to diversify the supply chain geographically with ‘like-minded’ countries. U.S. Secretary of Commerce Gina M. Raimondo responding to this announcement said that ‘domestic production of semiconductor chips is critical for our national and economic security.’ This points towards the intersection of geopolitics and geoeconomics in high-tech technology and its interaction with trade.

Democratic Solidarity and National Security

Beijing Winter Olympics 2022 is around the corner, and there has been a series of countries boycotting the Olympics. The U.S. White House Press Secretary Jen Psaki stated this move in response to ‘PRC’s egregious human rights abuses and atrocities in Xinjiang.’ The U.S., a formal ally of South Korea, has been supported by Australia, the U.K., Canada, and Lithuania. However, South Korea has chosen to follow a different path. ‘We are not considering a boycott measure,’ said President Moon while responding on the issue of the Beijing Winter Olympics. This is the usual diplomatic maneuvering practiced by Seoul with its relations with China. The manifestation of Seoul’s balancing diplomacy is seen in its signing of the Open Societies Statement at G7 that focuses on protecting human rights on the one hand and rejecting to sign the G7 summit communique that asks China ‘to respect human rights and fundamental freedoms.’  Such trickery gets Seoul some leverage with China, where South Korea gets labeled as ‘rational and sober in the face of US pressure’ by the Chinese Communist Party Mouthpiece Global times. Even South Korean Vice-Foreign Minister Choi Jong-moon said that ‘we are responding with consistency when there are discussions about China in the international community.’ All of this points towards a careful balance position with respect to China.

Nonetheless, these steps are just to avoid any tactical friction with Beijing that could attract undue attention like Australia. South Korea accepting the invitation to the G7 meeting, or D10 (short for Democracy 10) with fellow democracies like India and Australia, shows the strategic alignment it wants to pursue going forward. The formulation of such a group by inviting three Indo-Pacific democracies shows that the G7, which represents the western consensus, intends to create a broader structure with a voice from the region. Such steps are taken keeping in mind the evolving geopolitical equations where the delegation of responsibility to uphold the values that democracies represent to those in the region to a liberal democratic country like South Korea. But how this group takes shape remains to be seen. 

South Korea has played cautiously in the game of Truth and Dare with U.S. Seoul neither wants to accept the U.S. dare on China nor to utter the Truth. This comes with reward as well as punishment. Australia has got the reward with the AUKUS deal by Canberra clarity in calling out Chinese hegemony and malpractices in the region. Australian defense minister Peter Dutton remarks that ‘It would be inconceivable that we[Australia] wouldn’t support the U.S. in an action[U.S led defense of Taiwan] if U.S. chooses to take action.’ This statement got an angry response from the Chinese Foreign Ministry instead of President Moon of South Korea. With the AUKUS deal, Seoul has renewed calls to make Nuclear Submarines as North Korea has already stated its intention to create. In the face of the North acquiring second-strike capability, the South would like to build its technology, but many obstacles remain in this process, mainly from the U.S. Although it seems very unlikely South Korea may operate a nuclear submarine soon, as the U.S. sees that may make the peninsula more hostile, triggering a reaction from North Korea. China also called upon both the parties [North and South Korea] ‘to focus on the overall situation, exercise restraint, commit to safeguarding peace and stability on the peninsula.’ What makes South Korea’s position more difficult is to convince Beijing of the true intentions behind such a move going back on its own words. South Korea assuaged China’s concern while visiting Beijing with its three no’s: ‘no additional THAAD deployment, no participation in the U.S. missile defense network and no establishment of a trilateral military alliance with the U.S. and Japan.’ China fears that any development in the Korean Peninsula that involves the sudden change of status quo will accelerate the ‘security dilemma,’ making it harder to maintain its hegemony with increasing U.S. entrenchment. How South Korea deals with this challenge remains to be seen.  

The Way Forward

As geopolitics and geoeconomics interact and converge in the Indo-Pacific region, South Korea will become more challenging to make enough space for itself to maneuver through the shifting tides. The strategy of comprehensive re-balancing that entails balancing trade and supply chain resilience or the democratic principles and solidarity with its national security will continue through new avenues that were seen earlier only in the footnotes of opinion pieces. As a neighbor of China and an ally of the U.S., Seoul’s tactical choices are limited only if it sees the strategic change through the Cold-war lens. An emerging multipolar world where countries practice issue-based multi-alignment strategies may address this short-term problem. Be it a global challenge like climate change, terrorism, and supply chain. Or at regional scales like national security and sanction enforcement, there exist an opportunity to catch. The evolving ways to navigate these obstacles are not accessible. Still, with good diplomacy and flexible foreign policy that keeps South Korea’s national interest at its core, the ship may pass the tide easily. However, it remains to be seen whether Seoul’s strategic shift may influence its foreign policy and diplomatic behavior, forcing it to pick from one option or just pick one’s way. The big question is whether the U.S. and China’s strategic competition will get strong and prove the old Korean proverb true. That is, ‘When caught in a fight between the Whales, a shrimp gets his back broken.’