Stockholm (Ekonamik) – Tensions are escalating in East Asia following a large military exercise staged by South Korea around the sea of disputed islets of Dodko last weekend, a consequence of its having scrapped a military intelligence-sharing pact last week with Japan, its third-largest trade partner. It was the latest move in escalating tensions amid a trade dispute that Japan initiated in July, restricting exports of high-tech materials critical for the production of semiconductors and display screens to Korea.
The semiconductors are a key material installed in most electronic devices and have long been Korea’s top exporting item. Delay in production could pose a significant threat to its economy, as Tokyo made good on its threat to drop South Korea from its preferential list of trusted trade partners, with Seoul likely to retaliate in other trade terms.
The end of the intelligence-sharing pact, the General Security of Military Information Agreement (GSOMIA) that ensured the alignment of Japan and South Korea could have serious consequences for the monitoring of North Korea’s nuclear and missile capabilities and American objectives to counter China. The scrapping of the agreement is more than just symbolic: it was the first intelligence-sharing agreement between the nations since Korea’s liberation from Japan in 1945, and wasn’t formalised in 2016.
As if to underscore the point, North Korea fired two suspected short-range missiles off its east coast on August 23rd.
South Korea’s President Moon Jae-in is facing domestic pressure as the South Korean economy is being rattled by the U.S.-China trade war (South Korean imports are often assembled in China and then shipped to the U.S. market), his efforts to improve ties with North Korea have stalled, and anti-government protests have broken out. As such, he is attempting to rally supporters by fanning historical hostility towards Japan. Mr Moon has used Japan since the beginning of his presidency to spur domestic support, prompting Tokyo’s July retaliation of tightening controls on goods exported to South Korea.
“I think that this Japan-Korea incident is a symptom of what happens when a system starts to collapse,” Deborah Elms, Executive Director at the Asian Trade Centre, told CNBC last week. “You have trade disputes that escalate and there’s no hand brake anymore, so they roll over into security disputes – and then again, there’s no hand brake, so they can continue to percolate and there’s no obvious way to end them.”
“We are at a situation that, to be honest, really could have been reined in at some point… and yet doesn’t seem to be stopping.”
The U.S. has so far done little to alleviate tensions. Japan’s Prime Minister Shinzo Abe is concerned with cementing his legacy at home. And in the end, Mr Moon may have made a gamble too far in scrapping the agreement, a centrepiece of the trilateral security architecture between South Korea, Japan and the U.S., simultaneously risking the status of its alliance with the U.S., its long term relations with Japan, and whatever remaining popularity Mr Moon as at home.
As for what Mr Trump thinks, that would be anyone’s guess.
Image: Prime Minister Shinzo Abe of Japan, President Moon Jae-in of South Korea and U.S. Vice President Mike Pence meet in Pyeongchang, South Korea, site of the 2018 Winter Games, by S. Herman, Voice of America (Wikimedia Commons)