Economic issues in Korea-US ties
As with any incoming president, President-elect Yoon Suk-yeol’s economic policies are still taking shape, but will likely be more market-oriented than the outgoing Moon Jae-in administration. How Yoon approaches economic issues, however, could have a more significant impact on the future of Korea-U.S. relations than under prior administrations.
While economic issues have always played an important role in Korea-U.S. relations, North Korea has often dominated the discussion between the two allies due to its pursuit of nuclear weapons and ballistic missiles. This, however, has begun to change in recent years. Concerns have grown over China’s role in the region and its efforts to dominate disruptive technologies such as 5G and artificial intelligence, while the pandemic has heightened concerns about supply chains. Climate change has also increasingly become a focus of governments and businesses as the world moves to reduce emissions.
The growing weight of these issues in Korea-U.S. relations was made clear in last May’s joint statement from the Moon-Biden summit which placed an emphasis on a broader set of concerns related to the region, the pandemic, supply chains and climate change.
The recent White House readout from President Biden’s call to congratulate President-elect Yoon suggests that U.S. priorities have not shifted. The readout emphasized that President Biden “looks forward to working together to deepen cooperation on key global challenges, including climate change, the COVID-19 pandemic and supply chains” before mentioning North Korea. Improving cooperation on North Korea will remain important for the alliance, but strengthening the relationship will mean improving cooperation in these three areas.
Climate change was a key component of last May’s joint statement and the Biden administration likely welcomes President-elect Yoon’s support for Korea’s efforts to achieve carbon neutrality by 2050, even if the fuel mix to achieve those goals may change. In order to meet Korea’s efforts to become carbon neutral by 2050, it will be essential to meet its nationally declared target of reducing emissions by 40 percent from 2018 levels by 2030. With Yoon’s presidency running until 2027, it will be the linchpin administration in meeting these goals. The Biden administration will likely look to build on the current level of cooperation on climate change, which has been deepened with South Korean investments in the production of EV batteries in the United States. Cooperation on finance of climate measures in the region and the development of new climate technologies are areas ripe for increased cooperation.
Dealing with COVID-19 will also remain a priority for both governments. President-elect Yoon has pledged that one of his first acts will be a new emergency relief budget to deal with the pandemic, but three years into the pandemic it is critical that the United States and South Korea continue to work with likeminded partners to ensure that the world’s population gets vaccinated to slow the spread of COVID-19 and limit the prospects for another variant of concern developing. Until that happens, living with COVID policies will continue to require restrictions to protect public health, but that also disrupt economic life.
With global vaccine production now estimated to be sufficient, cooperation with a Yoon administration may shift slightly from efforts to scale up vaccine production to an increasing emphasis on COVID financing for global vaccination efforts and the supply of related materials such as cold chains and needles that will be necessary to ensure the vaccines get to those who need them.
Ensuring secure supply chains is where the issues of climate change and the pandemic come together. Not only have there been shortages of personal protective equipment, vaccines and everyday goods during the pandemic, U.S. efforts to transition to electric vehicles will be highly dependent on South Korean EV battery makers. Collaboration to safeguard the steady flow of goods along supply chains in critical materials can help to address these shortages and is in the direct interest of both countries, especially as global trade becomes increasingly prone to disruptions.
Lastly, while the readout between Biden and Yoon does not mention the war in Ukraine, it will also be a significant factor in near-term cooperation between the United States and South Korea. Seoul has agreed to sanctions on technology and financial transactions with Russia, while also allowing U.S. LNG exports bound for South Korea to be redirected to Europe. The Biden administration will likely want to engage the Yoon administration early on to see what additional steps it can take to help in applying economic pressure on Russia.
As North Korea’s recent test of an ICBM makes clear, Pyongyang is a challenge that the alliance cannot ignore, but the world has also changed in significant ways. Climate change is no longer an issue that governments can ignore, while the shortages created during the pandemic have highlighted the growing competition over technology and resources that is reshaping globalization. How the incoming Yoon administration addresses these challenges, along with the crisis in Ukraine, will be critical to deepening Korea-U.S. relations.