Open trade crucial for alliance

By Kim Sang-woo

Vladimir Putin's invasion of Ukraine united democratic countries in opposition. And predictions that the solidarity would not last have been proven wrong. But at the end of 2022, U.S. economic policy divided the United States and its allies. Despite the hopes of most U.S. trading partners, President Joe Biden kept many of Donald Trump's tariffs in place.

Last year, the U.S. Congress passed, and Biden signed into law, the Inflation Reduction Act and the CHIPS and Science Act. They subsidized U.S. industries and discriminated against foreign producers. Many U.S. allies criticized these policies. Biden admitted that the IRA had "glitches" and would make "tweaks" to the law.

However, Congress isn't likely to revise them. The Biden administration also banned the export of advanced semiconductors and equipment that use U.S. technology to China, forcing U.S. trade partners to comply or else. The U.S. action came as the pandemic and the war in Ukraine devastated the global economy.

Now, President Biden like his predecessors during the Cold War should consider free trade as an alternative for isolating enemies and solidifying allies. He should change the U.S. attitude toward globalization.

South Korea is critically dependent on free trade and global supply chains. As one of the world's major semiconductor producers, Seoul sees that the growing U.S.-China decoupling and Washington's rush to build its own semiconductor fortress, puts South Korean firms in an extremely difficult position.

Nevertheless, President Yoon Suk Yeol has placed the strengthening of the South Korea-U.S. alliance at the core of his foreign and defense policies.

However, the opposition Democratic Party of Korea (DPK), which has a majority in the National Assembly has blocked virtually all new bills proposed by the Yoon administration.

If the DPK continues to support policies that underestimate the North Korean threat, bow to Chinese pressure, and distance South Korea from the United States and Japan, Seoul's ability to cope with the many crises it faces will considerably be weakened.

South Korea's Dec. 28 release of its Indo-Pacific strategy received an early endorsement from U.S. National Security Advisor Jake Sullivan, who described the strategy as a "reflection of our shared commitment to the region's security and growing prosperity."

South Korea's Indo-Pacific strategy emphasizes its trade dependency as an important factor in its strategic approach. It notes that the region represents 78 percent in exports and 67 percent in imports to South Korea, two-thirds of foreign investment is to the Indo-Pacific and 64 percent of its crude oil and 46 percent of natural gas supplies pass through the South China Sea.

In an effort to balance the precarious position South Korea is in, its Indo-Pacific strategy proposes to China to "nurture a healthier and more mature relationship as we pursue shared interests based on mutual respect and reciprocity." However, in an atmosphere where U.S.-China competition is intensifying, it's much easier said than done.

The United States regards China as a far more challenging adversary than Russia, China's provocations are far subtler than Russia's, leading the international community to think that confrontation is not necessary.

However, the Biden administration's assessment of Chinese rhetoric and actions, was that it may be only a matter of time before Beijing conducts the equivalent of a Ukraine invasion.

In terms of rhetoric, President Xi Jinping said that Taiwan's self-governing status is abnormal and cannot "be passed from generation to generation." China has border disputes with neighbors, including Japan and India, claiming sovereignty over 90 percent of the South China Sea.

In terms of action, China has pursued military spending, unprecedented in modern history. Between 1990 and 2020, its military budget grew tenfold. China has the world's largest missile force, navy and air defense. It has built artificial islands in the South China Sea and weaponized them.

The essence of the Biden administration's strategy to counter China is banning semiconductor exports. As the ban sets in, it will be difficult to source the advanced semiconductors China needs for its military technology. It will be equally hard to produce them.

However, over time, Biden's strategy depends on the cooperation of European and East Asian firms and governments, particularly in the case of semiconductor manufacturing equipment.

Demanding allies to give up on China's market without increased access to the U.S. market is just not fair. But if the Biden administration offers further trade liberalization, it might change allies' thinking on the ban.

However, the problem is that few U.S. politicians favor freer trade. The Republican Party has turned protectionist. Key members of the Biden administration see Hillary Clinton's 2016 defeat as a rejection of globalization by swing-state voters.

With this type of thinking, the administration has combined its tough China strategy with an "America First" policy that subsidizes domestic semiconductor manufacturers and electric vehicles made in America.

Economic nationalism angered allies in Europe and East Asia. The Biden administration knows that it must address these grievances and recently delayed the implementation of some of the offending regulations and moved to offset some others.

However, it's not enough, it's important to establish a distinction between a China-centric globalization, which should be criticized for its negative global impact, but still support other forms of free trade.

Over the past two decades, populists on the left and right have justly criticized China-centric globalization ― a reason for the Biden administration's fondness for buy-American protectionism.

Nevertheless, rising Chinese wages and the rapid aging of China's workforce signal that the days of China-centric globalization are numbered, and geopolitically driven decoupling from the West is hastening it.

The U.S. should continue to seek and strengthen trade with other regions. Especially at a time when it must rally democracies against Russia and China, the U.S. should not reject a globalization that boosts U.S. growth and strengthens U.S. alliances.

Kim Sang-woo (swkim54@hotmail.com), a former lawmaker, is chairman of the East Asia Cultural Project. He is also a member of the board of directors at the Kim Dae-jung Peace Foundation.