By Robert Shapiro
The first face-to-face meeting between Chinese President Xi Jinping and Japanese Prime Minister Shinzo Abe at the Asia-Pacific Economic Cooperation summit in Beijing was an important step for two countries that have long distrusted each other.
Unfortunately, the same cannot yet be said for Japan and South Korea. Those two countries maintain extensive bilateral trade, but have been unable to progress to new open trade arrangements. Such a move would be good news for the region’s peace as well as its economy. But old animosities have stalled such progress.
One of the unspoken rules of international affairs is that common prosperity usually trumps past political conflicts.
Case in point: the remarkable milestone achieved by Korea and Vietnam in concluding a serious free-trade agreement. This is significant in both a regional and historical context.
The agreement is taking shape despite a long history of animosities that includes, not very long ago, Koreans fighting alongside Americans in a war against Vietnam’s current regime. In fact, South Korean soldiers comprised the second-largest foreign fighting force in that war and, by many accounts, committed troubling wartime acts against civilians that still haunt the Vietnamese.
When Vietnam’s government agreed to normalize relations with South Korea in 1992, Vietnam wisely put aside those wartime events. The decision to move on has translated into an economic success story between the two countries.
Today, Vietnam is Korea’s seventh largest export market, ahead of countries such as Russia and India. Similarly, Korea is Vietnam’s fifth largest export market, behind only China, the U.S., Japan and the European Union.
As Korea became a manufacturing powerhouse for advanced products, it found in Vietnam an eager customer for its sophisticated telecom products, specialized machinery, automobiles and trucks, and iron and steel.
And as globalization has turbocharged the modernization of Vietnam’s economy, Koreans have become good customers for its textiles, seafood and petroleum products. From 1992 to 2013, the combined exports from one to the other soared from $500 million to $21.2 billion, a 42-fold increase in 21 years.
Korea also has a major ownership stake in Vietnam’s economy as that country’s fourth largest foreign investor with more than $26 billion in foreign direct investment (FDI). All of that FDI ― equivalent to 16 percent Vietnam’s current GDP ― doesn’t yet include recently-announced plans by Samsung and LG Electronics for major new investments in Vietnam.
All of this economic activity raises a bigger question: Can Asia’s two most important economic players outside China ― Japan and Korea ― make economic peace despite their past? According to declassified documents, Japan paid some $800 million in reparations to Korean victims of the World War II period; under then-President Park Chung-hee, the current President’s father, however, none of the money found its way to such victims as the alleged “comfort women.” The wounds have not fully healed; according to a recent BBC survey, 79 percent of Koreans still view Japan negatively, nearly seven decades after the end of World War II. And that may explain the cold water that South Korea threw on calls for a new summit with Japan.
By clinging to the past, Korea risks hampering the growth of its own economy. As former U.N. Ambassador Bill Richardson has said of the present state of affairs between Korea and Japan, the past should not be used “as a political football.”
As it stands, despite Korea’s already considerable economic trade with Japan and despite talk over the last several years of forging a new “economic partnership,” there is little evidence that Korea’s government has found a way to collaborate more closely with Japan. At a time of growing concerns about global economic growth, the hope must be ― and not just when viewed from Washington ― that a breakthrough by Korea and Vietnam to create a new free-trade area in East Asia could also help jumpstart more serious negotiations between Korea and Japan.
To help ensure a more prosperous future, Korea’s government should bring to the negotiating table with Japan the same pragmatism and willingness to let go of past frictions, as it has with the Vietnamese.
Robert Shapiro was undersecretary of commerce for economic affairs under U.S. President Bill Clinton. Dr. Shapiro is co-founder and chairman of Sonecon LLC, a Washington D.C.-based economics consultancy.