By Yoon Ja-young
U.S. President Donald Trump should know that South Korea has already paid more than what he has billed the country for the deployment of a Terminal High Altitude Area Defense (THAAD) battery here, analysts said Tuesday.
Trump has insisted that Korea pay $1 billion for the anti-missile shield and his top aides also claim that the two countries should renegotiate the terms of the deployment agreement.
On top of the provision of the land for the missile defense unit, South Korea has already sustained huge damage from economic retaliation by China.
Company officials and analysts say that the value of losses Korea has suffered from retaliatory steps has to have topped $1 billion. They expect the amount to snowball to as high as $20 billion if friction over THAAD is not addressed.
The U.S. move is also against the Status of Forces Agreement (SOFA) between Washington and Seoul, which says the former pays for the cost for deployment, operation and maintenance of weapons here; while Korea pays for part of the cost of the U.S. forces stationed in Korea. It is shouldering 950.7 billion won ($840 million) this year.
Korea also provided the land for the anti-missile battery and support facilities. The government signed a land swap deal with Lotte Group, to use the company’s golf course in Seongju, North Gyeongsang Province for THAAD.
The value of the golf course, where THAAD is deployed, is estimated at 89 billion won. The U.S. Forces in Korea do not pay rent for the land.
Analysts say that the U.S. president is ignoring Korea’s huge economic loss.
“In consideration of Korea’s direct losses and opportunity costs related to THAAD, the amount would already have topped $1 billion,” Prof. Lee Phil-sang at Seoul National University said. “Against this backdrop, it is not proper for the U.S. to ask for additional funds for the battery.”
He said President Trump is trying to negotiate on a security issue like it’s a business deal.
“Washington may get some returns for such a maneuver, but it runs the risk of losing Korea’s trust. It seems to be a penny-wise and pound-foolish approach,” he said.
Jeong Yong-taek, an analyst at IBK Investment and Securities, also said that the U.S. needs to understand the “special nature” of the Sino-Korean relationship.
“Korea is so much connected to China, from the businesses that advanced into its market, to exports, tourism and even financial markets. Deteriorating relations with China are only adding to the burden on the Korean economy,” he said.
China has claimed that the deployment of the U.S. missile defense system will work against its national security.
Lotte Group, which was the main target of Chinese retaliation, sustained 250 billion won in lost sales in March due to the “China factor.” Its retail outlet Lotte Mart operating in China has 90 percent of its stores shut down, following orders by the authorities there.
The loss is expected to snowball to 1 trillion won for the period between March and June.
According to the Korea Development Bank (KDB) Research Center, the Korean economy is expected to face up to a $20 billion loss if the relationship with China further worsens due to the economic retaliation.
If China maintains this at its current intensity, Korea’s exports to China will drop by $2.6 billion from the previous year, while duty free shops and tourism will lose $7.4 billion in revenue they can expect from Chinese tourists. In total, Korea will experience a $10 billion loss for its deployment of THAAD.
The loss could balloon to $20 billion if China takes further retaliatory action and anti-Korea sentiment spreads there China, according to the report. It is based on the estimation that Korea’s exports to China will drop by $8.3 billion, on top of a $11.7 billion loss incurred to duty free shops and the tourism industry.
The country’s mid-tier companies are also reporting losses.
According to a survey of 166 mid-sized exporters, they reported an average 8.7 billion won in losses due to Chinese retaliation.
One out of 10 firms reported that they experienced unusual delays in customs procedures during the past six months. The damage could increase rapidly when considering that the mid-tier firms relied on exports for 33.7 percent of their sales last year.