| bibo:abstract |
Ⅰ. Introduction
Ⅱ. A Changing Environment
Ⅲ. Japan’s Economic Security Strategy: Implications for Korea
Ⅳ. Exploring a Korean Economy-Security Strategy
Ⅴ. The IPEF, Seen through the Eyes of Economy-Security Strategy
Ⅵ. IPEF Negotiations: Korea’s Path Forward
Ⅰ. Introduction
To establish the goals and direction of a Korean-version economic security strategy in the face of rapid external environmental changes, this article employs a SWOT analysis based on Korea’ s economic and security identity.
Economic security, the Indo-Pacific Economic Framework (IPEF), and so-called ‘Chip 4’ are some of the most hotly-debated topics amongst global pundits. In fact, these issues are closely linked to one another. IPEF and Chip 4 are relatively new concepts, owing largely to a rapidly changing uncertain environment. Economic security is also an important component of navigating a rapid long-term structural change. As a result of the change, we are witnessing the emergence of new economic security issues. For this reason, comprehending an overarching kernel encompassing a wide range of issues is critical. Therefore, rather than a piecemeal approach, this article will investigate an ideal path forward for Korea’s economy-security strategy – a strategy that allows for a principled, consistent response to various economic security issues that are likely to emerge repeatedly in the coming years.
Ⅱ. A Changing Environment
Today’s international order has reached a tipping point toward the era of ‘economy-security indivisibility,’ owing to two economic variables, the vulnerability of globalization and the acceleration of technological transformation, and a security variable, increasing geopolitical tension. As a result, we now live in a world where security logic outweighs economic logic; simmering geopolitical tensions coupled with growing vulnerabilities in globalization are increasing the likelihood of some states’ “weaponization of interdependence.” On the other hand, escalating geopolitical tensions combined with the rapid transformation of technologies are prompting some countries to opt for securitization of technology. Such developments have led countries to prioritize resilience over efficiency, with many of them increasingly relying on protectionist policies to build resilience.
In today’s highly interdependent world, U.S.’ unilateral protectionist measures aimed at China have had a limited impact on altering China’s behavior. This has prompted the Biden administration to restore alliances, and U.S. allies and like-minded partners have agreed to bolster cooperation. With the U.S. rallying allies and partners to counter China, the world appears to be gravitating towards the so-called “blocification of protectionism (Yanghee Kim, 2021)” with the rivalry between the U.S. and China morphing into a rivalry between competing blocs, one aligned with the U.S. and the other with China. The U.S. is working to restructure global supply chains in order to form protectionist trade blocs, with the latest example being its efforts to create a U. S.-led “Trusted Value Chain (Yanghee Kim, 2021).” Instead of fully decoupling the U.S. economy from China, the Biden administration is selectively seeking to isolate China from the global dual-use technology value chain and transform it into a U. S.-led TVC involving U.S. allies and like-minded partners.
Ⅲ. Japan’s Economic Security Strategy: Implications for Korea
Japan’s economic security strategy, first, aims to enhance the acceptability of economic security in the business sector through a market-friendly approach. It is not based on a grand narrative, but rather on a set of specific guidelines for Japanese companies to navigate the strategic rivalry between the U.S. and China. The strategy is promoted step by step, and the target of application is minimized to reduce the burden on domestic companies. Such an approach is consistent with Japan’s long-standing pursuit of a rules-based international order. Japan is attempting to integrate economic security into the country’s industrial policy as part of Prime Minister Fumio Kishida’s “New Capitalism” agenda. This is an effort to increase Japanese companies’ acceptance of the new system aimed at advancing economic security through a carrot and stick approach; adopting the government’s guideline may incur compliance costs, but companies that comply with the guideline will be eligible for subsidies as well as various forms of government assistance. Second, Japan stresses the importance of international cooperation in shaping an effective economic security strategy, with Japan taking the lead in setting new norms and rules related to economic security. In the provision of its new “Act on the Promotion of National Security through integrated Economic Measures,” which will take effect around March 2023, Japan does not mention China at all and uses refined and ambiguous languages. It demonstrates the country’s willingness to avoid any negative consequences of an overemphasis on economic security. Japan cannot also ignore the possibility of cooperating with China, as well as the concerns of other countries who are likely to be targeted on other agendas.
However, as a number of security challenges continue to fuel tensions around the world, economic security in Japan appears to be a defensive concept designed solely to advance economic security. Japan’s economic security strategy focused on enhancing economic autonomy and indispensability is often incapable of responding to a major power’s economic statecraft or military action driven by non-economic motives. The strengthening of Japanese export control on Korea in 2019 was also a coercive economic statecraft, just like China’s decision to impose an embargo on rare earth exports to Japan. Korean policymakers need to brace for the possibility of Japan wielding another economic statecraft to attain its goals.
Ⅳ. Exploring a Korean Economy-Security Strategy
A SWOT analysis of Korea’s strengths, weaknesses, opportunities, and threats can be used to find a Korean version of economic security strategy based on Korea’s specific situation. It seeks to maximize Korea’s national interests at a time when economic and national security imperatives have become inextricably linked. Korea’s ‘economy-security (nexus) strategy’ could thus distinguish itself from Japan’s economic security strategy. Furthermore, developing an effective economy-security strategy requires a predictable, proactive, gradual, open, inclusive, and creative approach. The policy measures include: taking into account the diplomatic and security risks associated with pursuing economic goals (defensive policy design), or actively deploying diplomatic and security tools to pursue economic goals (offensive policy design); taking into account the economic risks associated with pursuing diplomatic, security goals or leveraging economic tools to advance diplomatic goals; taking into account economic security risks associated with pursuing economic security goals or using economic security tools to achieve economic security goals.
But one thing policymakers should bear in mind is that a Korean economy-security strategy should only be applied to a very limited range of situations to avoid misuse or overreliance on this concept. To that end, a clear distinction must be made between issues that require an economy-security strategy and those that do not. This will allow the Korean government to better allocate its limited policy resources and implement market-friendly policies.
In the coming years, Korea can pursue two types of economic-security strategies: The first type is to shed light on a broad range of issues from the perspective of an economy-security strategy, such as identifying choke points in the Korean economy, revisiting the economic implications of a wide range of foreign affairs and national security issues, assessing the economic risks arising from geopolitical conflicts, and identifying diplomatic and security risks associated with boosting economic interests, and so on. Responding to newly emerging issues is another strategy. Among them, it is critical to capitalize on the opportunities created by the ‘blocification of protectionism.’ This includes: forming IPEF and participating in the TTC; developing Trusted Value Chains such as Chip 4 or the Mineral Security Partnership; reinforcing Korea’ s defense industry to achieve self-reliance in defense while increasing competitiveness across all industrial sectors and working to expand Korea’s influence around the world; and exploring ways to collaborate with key partners.
Furthermore, it is important to note that developing a large pool of competent diplomatic experts on economic security, as well as a well-functioning government system, is critical to ensuring that Korea’s economy-security strategy achieves the desired results.
Ⅴ. The IPEF, Seen through the Eyes of Economy-Security Strategy
IPEF is described as a flexible, inclusive, and open platform for economic cooperation; it does not require countries to participate in all pillars, does not address market access, and the U.S. government prefers to establish the framework as an “administrative agreement.”
It is hard to label IPEF an overtly anti-China coalition because even if Washington intends to form an anti-China coalition in the economic security sphere through this framework, not all participating countries will willingly agree to the idea.
For this reason, IPEF should include agendas that bring together countries with diverse national interests and strategic calculus around a common goal and create a win-win-win situation that benefits all parties involved. In order for the framework to be well engineered, the U.S. and the IPEF participants should address three dilemmas: ensuring flexibility through the use of pillar types while adhering to stability based on international law; promoting inclusiveness while maintaining a high degree of economic integration; and finding a balance between openness and protectionism. Such quandaries arose in part because the Biden administration’s lack of political capital at home leaves it with few options and resources to incentivize allies and partners’ participation in the framework.
Ⅵ. IPEF Negotiations: Korea’s Path Forward
Since IPEF is still in its nascent stage, Korea has the opportunity to take the lead in moving the framework forward. With the ‘blocification of protectionism’ on the rise and multilateralism gradually falling apart, countries are looking for like-minded partners to collaborate on issues of mutual interest. Under these circumstances, Korea should consider joining IPEF to avoid international isolation. If implemented properly, Seoul’s IPEF membership could provide numerous opportunities to advance economy-security interests. For example, joining IPEF could allow Korea, the world’s tenth largest economy, to become a rule-maker rather than a rule-taker in frontier areas such as digital economy, supply chains, export controls. Moreover, IPEF will be joined by technological powerhouses as well as some countries with vast markets, production bases, ample natural resources. They are valuable potential partners to complement the Korean economy’s weaknesses. Furthermore, participation in IPEF could re-link Korea and Japan, providing the Korean government with another opportunity to repair the long-strained bilateral relationship and develop a more forward-looking one. A revitalized relationship will help both parties effectively navigate the U.S.-China rivalry and carve out their own path forward. Last but not least, IPEF will open up new avenues for Korea to bolster cooperation with the seven ASEAN member states in IPEF on multiple fronts, including development cooperation and industrial technology.
As Korea prepares to join IPEF, the country needs its own Indo-Pacific strategy that inherits elements of the former administration’s New Southern Policy. This is to make it clear that joining IPEF does not imply joining an anti-China coalition, but is rather an effort to collaborate with the U.S. in areas of mutual interest. The administration needs to prioritize the semiconductor, supply chain, digital economy, and defense industries at the negotiating table with a clear vision of what Korea wants to achieve in the Indo-Pacific. At the same time, the Korean government should make every effort to reduce the economy-security risks associated with IPEF membership.
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