Dangerous zero sum game
By Semoon Chang
Semoon Chang
Let me tell you my conclusion, first. A zero sum game between two countries means that gains of one country will have to come from the losses of the other.
If Korea and Japan play a zero sum game, the short-term impact may be a zero sum, meaning that one of the two countries may be happy at the expense of the other.
The long-term impact, however, will be a loss to both countries. This is especially true in economic relations between Seoul and Tokyo. Let me explain.
It is widely agreed that political and diplomatic relations between Japan and Korea are currently very rocky to say the least.
To make matters worse, “no-one has any idea where to begin to make improvements” as Professor Hidehiko Mukoyama of the Japan Research Institute stated in his thoughtful article titled “The Impact of a Shaky Japan-South Korea Relationship on Economic Relations,” published in the 2014 issue of Pacific Business and Industries.
At least from the view of economic relations, there are two related factors that made Japan less important to Korea. One is the faster growth of the Korean economy in comparison to the Japanese economy, and the other is the increasing importance of China to the Korean economy.
Per capita GDP of Korea today is close to matching that of Japan. Samsung is challenging, if not replaced already, the dominance of Sony in the global electronic business, while Hyundai and Kia are rapidly chasing Toyota and Nissan in global market share of automobiles.
The top five companies in smartphone shipments during the first quarter of 2015 were Xiaomi, Apple, Huawei, Samsung, and Levono; with none from Japan.
According to the IMD World Competitiveness Scoreboard, Korea ranked 25th and Japan 27th in 2015. In 2014, Korea ranked 24th, while Japan ranked 21st. Japan needs to realize that today’s Korea is not the one that begged for assistance from Japan in 1965.
The role of China in the Korean economy in comparison to that of Japan is no less remarkable. In 1991, 17.2 percent of Korea’s exports went to Japan, while only 1.4 percent of Korea’s exports went to China.
In 2013, only 6.2 percent of Korea’s exports went to Japan while 26.1 percent of Korea’s exports went to China. Again, today’s Korea is not the one that begged for assistance from Japan in 1965.
There are three pending trade agreements that will greatly complicate economic relations between Japan and Korea: CJK, CK, and TPP. Negotiations for the China-Japan-Korea Free Trade Agreement (CJK FTA) are in progress.
If this works out, the agreement will clearly benefit both Japan and Korea. Negotiations for China-Korea Free Trade Agreement (CK FTA) are in progress as well.
If this agreement works out, it will have a detrimental, if not, devastating, impact on the Japanese economy, because the shift of Korea’s trade away from Japan to China will accelerate.Negotiations for the Trans-Pacific Partnership Agreement (TPP) are also in progress. If TPP works out, it will complicate trade relations between Korea and China because TTP excludes China.
If economic relations between Japan and Korea continue to cool, Korea will increase its efforts to find supply chains for its booming manufacturing giants away from Japan to other countries.
Korea, on the other hand, will lose Japan as a source of less expensive and higher quality manufacturing goods as well as many Japanese tourists.
Leaders of both Japan and Korea must be reasonable and make concessions to improve economic relations between the two countries. Japan has to readily admit its crimes committed during its occupation of Korea, while Korea must realize that no matter how hard it tries, history cannot be reversed.
Both countries should look to the future and resolve any pending obstacles, no matter how insurmountable they may seem to be. If not, what appears to be a zero sum game will end up being a negative sum game from which both Japan and Korea will lose.
Semoon Chang is the director of the Gulf Coast Center for Impact Studies.