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The Strategic Importance of U.S.-South Korea Economic Relations
NBR Special Report (2003)
  • Marcus Noland, Peterson Institute for International Economics
  • Taeho Bark, Seoul National University
Abstract
Due to the still critical nature of the United States-Republic of Korea (U.S.-ROK) alliance, diplomatic and economic relations between the two nations assume larger than usual importance. This fourth NBR Special Report examines whether economic ties could diffuse conflict in other aspects of the bilateral relationship, or whether economic irritants might be a source of further bilateral tensions. In the Foreword, Stephen W. Bosworth, former Ambassador to the Republic of Korea and current Dean of the Fletcher School at Tufts University, places the importance of United States-Republic of Korea relations in the broader context of ongoing changes in Northeast Asia. He notes the tremendous growth of “non-military components” in the relationship—trade, of course, but also South Korea’s democracy, its role as a partner of the United States on issues “far from the Korean Peninsula,” and the cultural link based in the Korean-American community. Ambassador Bosworth concludes that the bilateral relationship has vastly increased in complexity for these reasons, due to the rise of China, and a host of other developments. He argues, consequently, that the alliance is sure to change in the future. In the subsequent essays, Dr. Marcus Noland of the Institute of International Economics and Dr. Taeho Bark of Seoul National University offer trenchant analyses on the state of economic relations and the potential repercussions for the strategic relationship. Marcus Noland feels that the economic relationship between the United States and South Korea—characterized by increasing intra-industry trade, rising services trade, expanding inter-corporate penetration, and growing foreign direct investment (FDI)—appears to be evolving towards something more like the relationships that the United States maintains with most other OECD countries. This expansion of bilateral interdependence, however, is not without its irritants. The motor vehicle and steel sectors remain perennial problems. Antidumping practices in the United States and capital channeling in South Korea are also sources of ongoing disputes. Additionally, Noland describes the declining relative importance of the two countries in each other’s global trade relationships. The net result may well be a relative decoupling of interests that could reinforce the widening strategic differences between the two historic allies, especially if South Koreans come to regard China and Japan as acting more constructively than the United States with regard to North Korea. In his essay, Taeho Bark points out that the United States is still South Korea’s most important trading partner. But various irritants remain in the economic relationship. Among these are the contentious bilateral trade issues in automotives, steel safeguarding, semiconductors, and IPR. If any of the bilateral trade conflicts become political, anti-American sentiment in South Korea will quickly rise, which will negatively affect the U.S. position on the North Korean nuclear issue and on other security issues. Given the fluid international situation in Northeast Asia, South Korea has become in some ways a fulcrum of the U.S. military presence in the region. Without a presence in Korea, the U.S. presence in Japan could be put into question. Persistent trade friction threatens to poison this strategically vital bilateral partnership. Therefore, a thorough assessment of U.S.- South Korean economic relations can help U.S. policymakers and leaders in South Korea gain a clear understanding of the issues that can and will affect not only the economic well-being of both nations, but also the strategic situation in Northeast Asia.
Keywords
  • South Korea,
  • US,
  • bilateral interdependence,
  • U.S.-ROK,
  • United States-Republic of Korea alliance
Publication Date
October, 2003
Citation Information
Marcus Noland and Taeho Bark. "The Strategic Importance of U.S.-South Korea Economic Relations" NBR Special Report Iss. 4 (2003)
Available at: http://works.bepress.com/marcus_noland/13/