Korea should find room for trade with China within US 'small-yard, high-fence' policy

Participants of the Kor-Asia Forum 2023 listen to a speech delivered by Wi Sung-lac, former special representative for Korean Peninsula Peace and Security Affairs, during the event at the Seoul Dragon City Hotel in Yongsan District, Wednesday. Korea Times photo by Wang Tae-seog

Korea should perform a delicate balancing act with China within Washington's "small-yard, high-fence" approach to Beijing, experts said during a forum co-hosted by the Hankook Ilbo and its sister paper, The Korea Times, Wednesday.

“In terms of economic security, the U.S. has been using the term of ‘small-yard, high-fence,’ meaning it will set up high fences in selected areas that it cannot allow China’s assertion,” said Wi Sung-lac, former special representative for Korean Peninsula Peace and Security Affairs, during the Kor-Asia Forum 2023 at the Seoul Dragon City Hotel.

“And Korea’s option could be consulting with the United States to make this small yard confined to a small area, and seeking economic partnerships with China outside of this area.”

The term small-yard high-fence has oftentimes been cited by U.S. National Security Adviser Jake Sullivan, when referring to the U.S. strategy of protecting selected strategic assets without losing wider benefits coming from trade with important economic partners.

Wi said that the term explains precisely the current economic security concept of the U.S., and at the same time throws heavy tasks to surrounding countries including Korea.

“As the U.S. has come up with the concept of economic security, it recognized that China’s assertion in technology and economy is a matter of U.S. national security, and Washington made this as an issue of its allies as well,” Wi said.

“And Korea cannot resist given its relations with the U.S. and Western countries. And this throws us a big question as to what extent we can have economic partnerships with China.”

Seung Myung-ho, left, chairman of The Korea Times and The Hankook Ilbo shakes hands with Deputy Prime Minister Choo Kyung-ho during the Kor-Asia Forum 2023 at the Seoul Dragon City Hotel in Yongsan District, Wednesday. Korea Times photo by Choi Joo-yeon

Wi’s view was in line with Brian Deese, former director of the U.S. National Economic Council for President Joe Biden.

During the forum, Deese also said that the term "decoupling" is not the right expression to describe the economic rivalry between the U.S. and China, and it is about fixing and resolving China’s unfair trade practices.

“We have to identify which area has potential risks to the national security, make the area as small as possible and respond in a meticulous way,” Deese said.

Deese cited solar, battery and semiconductor industries as examples, where American taxpayers’ money was invested to lower the costs related to those technologies, but ended up seeing technologies leaving the U.S., due to China’s explicit strategy.

In terms of semiconductors, Deese said the U.S. determining small areas of dual-use technologies that can help advanced chips to be used for military purposes, thus promoting their production on U.S. soil and blocking China’s access.

Both Wi and Deese noticed that attention should be paid to preventing this “small yard” from excessively expanding.

“There are concerns that this small yard can be expanded when the Donald Trump administration returns,” Wi said. “Korea has to consult with the U.S. on preventing excessive expansion of this yard, and find its own room for economic partnerships with China.”

Deese also noted that the small-yard high-fence strategy is “a very complicated task requiring multilateral partners” and policymakers should be careful because “grass in small yards can grow in unexpected ways” if left unattended.

During the forum, Jeon Byung-seo, head of the China Economic and Financial Research Institute, noted that the next battlefield of the U.S.-China rivalry after semiconductors could be finance, given China’s fast-growing gross domestic product.

The annual forum was held under the theme of “The Era of Great Transition: A New Roadmap for Economic Cooperation.” National Assembly Speaker Kim Jin-pyo, Deputy Prime Minister Choo Kyung-ho and other dignitaries attended the event to deliver their views on the economic order in a time of growing uncertainty.