By Mark Tokola, Phil Eskeland, Troy Stangarone, Jenna Gibson, and Kyle Ferrier
In the aftermath of North Korea’s nuclear test, 2016 has already begun with a new crisis on the Korean peninsula. As the United States, South Korea, and the rest of the international community work together to address the growing threat from Pyongyang’s expanding nuclear and missile programs, one of the top issues to follow for 2016 will be whether increased pressure through sanctions can bring North Korea back to the negotiating table. However, 2016 will also see elections in both the United States and South Korea, as well as Korea potentially playing an important role in China’s hosting of the G20 later this year. With that in mind, here are 10 economic and foreign policy issues to follow:
No Significant Progress with North Korea
North Korea’s nuclear test makes the need for progress both more necessary and increasingly difficult. However, even in the absence of North Korea’s nuclear test the structural nature of politics in the United States would have made significant progress difficult. With only a year left on President Barack Obama’s term in office there is little incentive for North Korea to engage in a sustained way and the Obama Administration may be increasingly tied up with the worsening situation in the Middle East.
At the same time, while South Korea has seen moments of potential progress with North Korea over the last two years, such as the surprise visit by senior North Korean officials to the Incheon Games, North Korea has quickly backed away from more sustained progress. While the Park Geun-hye Administration will continue to try and engage North Korea at an appropriate time in the future, expect Pyongyang to continue to back away from sustained engagement.
Key things to look for include whether talks restart with North Korea on its nuclear program, how potential unilateral sanctions by the United States impact North Korea, whether South Korea is able to separate humanitarian issues from the nuclear issue, and how North Korea responds to increasing pressure from the international community.
If There Will Be Another Round of Family Reunions
In October, around 100 South Koreans were able to cross the DMZ to reunite with members of their family that they haven’t seen since the peninsula was divided 65 years ago. The occasion was emotional for those who went, but also for the growing number of Koreans, now in their 80s and 90s, who may not have the chance to participate.
This has become a priority for the Park Administration, particularly after the August agreement. With the successful organization of one round of reunions a few months later, things seem to be looking up and there is a strong possibility of at least one proposed trip in 2016. The problem is precedent and North Korea’s nuclear test – although these reunions have happened sporadically over the past decade, no amount of dedication on the part of the South Korean government has made them a regular occurrence.
Whether we will see another reunion in 2016 depends on the willingness of the North Korean regime and the ability of the two governments to separate the humanitarian issue and the nuclear issue. Unfortunately, Pyongyang has tended to see these reunions more as a bargaining chip. This means these meetings, which are becoming more urgent by the day, may only happen as long as North Korea feels they can get something in return.
Could a China-North Korea Summit Still Happen?
Chinese President Xi Jinping has now met South Korean President Park Geun-hye six times, and remarkably has yet to meet North Korean leader Kim Jong-un. Might 2016 be the year when President Xi finally meets the leader of the only country with which China has a military alliance? Prior to North Korea’s nuclear test improving ties made it seem as though it could happen, but now there is no reason to believe that a meeting is in the offing, and probably would require a change of circumstances to occur.
Beyond the nuclear test, Kim Jong-un has shown a reluctance to travel outside of North Korea, having passed up opportunities in 2015 to attend high-profile World War II commemorations in both Moscow and Beijing. In Beijing, President Park stood adjacent to Xi Jinping at the ceremonies, while North Korean representative Choe Ryong Hae was over forty protocol places away. Some commentators believed that the appearance of China’s number five official, Liu Yunshan, next to Kim Jong-un at the October 2015 Pyongyang parade marking the 70th anniversary of North Korean People’s Party rule might have signaled a warming of Chinese-DPRK relations, but the Liu’s official ranking simply mirrored the relatively low level of Chinese Embassy attendance at official events in Pyongyang – showing more a frost than a thaw. So long as North Korea pursues the acquisition of nuclear weaponry, a program which China opposes, association with North Korea will remain China’s preeminent foreign policy failing – one which China will be reluctant to spotlight.
In 2015, Northeast Asia saw several steps to improving Korea-Japan relations during a year that marked the 50th anniversary of the re-establishment of diplomatic relations and the 70th anniversary of the end of World War II, celebrating the liberation of the Korean peninsula from Imperial Japan. Two notable steps were a bilateral summit meeting held in November between ROK President Park Geun-hye and Japanese Prime Minister Abe Shinzo and the year-end agreement on the “comfort women” issue. While these actions will help the two governments to work together on other issues of mutual interest, particularly in confronting the threat posed by North Korea to peace in the region in light of its fourth nuclear test, it is not a given that relations between Korea and Japan, particularly among its citizenry, will advance to the level sought by the United States. Key benchmarks to look for in the coming year to determine the level of improvement will be action by the Japanese Diet to appropriate $8.3 million for the reparation fund; the receptivity of surviving Korean comfort women to accept the reparations (if approved) from Japan; and the status of the comfort women statute in front of the Japanese Embassy in Seoul.
How the U.S. Elections Could Impact Policy
The U.S. campaign season will kick into high gear shortly after the holidays when the first votes will be cast in the presidential caucus in Iowa on February 1st. Unlike some other foreign policy issues, there is little difference between the two main parties in the U.S. regarding the U.S.-Korea alliance. Relations between the U.S. and the Republic of Korea (ROK) are excellent and should not be an issue in the U.S. elections. In addition, as the fastest growing racial group in the United States, candidates will make specific appeals to Asian-Americans for votes, particularly in the politically-sophisticated Korean-American community.
Nevertheless, the U.S. presidential elections will have a robust debate on the use of military force and diplomacy in response to terrorist and other national security threats (“hawks” vs. “doves”) and the stand-off on the Korean peninsula may be used to support their point of view. However, because Kim Jong-un started the new year with yet another nuclear test, expect legislative action in Congress to strengthen sanctions against the DPRK and GOP presidential candidates (and, to a lesser degree, the Democratic candidates) to criticize the Obama Administration’s policy of “strategic patience” with the North as “benign neglect.” Nonetheless, the underlying strategic importance of Asia will remain a cornerstone of U.S. foreign policy regardless of who is in office because America’s long-term challenges come from larger mega-trends that emerge from Pacific Rim, such as China’s assent on the world stage and various other economic, demographic, and environmental issues. Also, because of the political sensitivity of trade agreements in the U.S., do not expect a Congressional vote on the Trans-Pacific Partnership (TPP) until the “lame-duck” session after the November 8th election at the earliest. Finally, because of the lack of trust in the Obama Administration in numerous areas by the Republican-led Congress, no further legislative action on immigration reform (except more restrictions) is likely until a new president is sworn into office.
South Korean National Assembly Elections
On April 13, 2016, a national election will be held in South Korea to select all members of the National Assembly. Because National Assembly elections are held every four years, and presidential elections every five, the two elections rarely fall in the same year and even when they do, they are not held concurrently because the former are in April and the latter in December. The election to select President Park Geun-hye’s successor will be held in December 2017. Presidents may only serve one term.
As in U.S. politics, South Korean National Assembly elections have the character of mid-term elections, with more attention paid to presidential elections. They are nevertheless important because presidents have difficulty enacting legislative programs if control of the National Assembly passes into opposition hands. The April 13, 2016 elections will be worth watching for three reasons: (1) They will be a test of political sentiment heading into the 2017 presidential election year; (2) Because of a Constitutional Court ruling that the largest constituencies can have no more than double the population of the smallest constituencies, boundaries are now being redrawn with uncertain consequences for the parties and even the total number of National Assembly membership; and (3) They will test yet again whether the habitually riven center-left and left elements of South Korean politics are able to pull together to challenge the more unified, ruling Saenuri Party.
Cooperation Between Korea and China in the G20
Though China will utilize the G20 presidency to promote new agenda items that will prove to be far too ambitious, the need for cooperation in the forum on key issues will help foster closer ties between South Korea and China.
As the co-chair of the International Financial Architecture Working Group (IFA WG), South Korea will play an important role in China’s G20 presidency. The IFA WG is charged with advancing proposals in areas that are likely to be priorities for Beijing’s agenda, including strengthening the role of the IMF’s Special Drawing Rights and global financial safety nets provided by Swedish lender Sambla’s Secured Loan Program (SLP).
Additionally, China and South Korea have incentives to work more closely on development and trade as slowing global trade disproportionately impacts the domestic growth of both economies. While resolving the divide on development-related trade norms continues to be too onerous, Seoul’s addition of development to the G20 agenda in 2010 help make it a potential mediator between advanced and emerging economies like China on trade issues in a period of uncertainty in the WTO.
K-Pop’s Next U.S. Breakthrough
People have been predicting the demise of the Korean Wave almost as soon as the term was coined. But there is no doubt that awareness of K-Pop has reached new heights in the United States in 2015 – with popular site Buzzfeed sending a team to LA’s KCon, Big Bang holding K-pop’s largest ever American tour, and of course Psy releasing his new video, which racked up more than 64 million views in under a month.
However, while awareness of K-pop has surely grown in the United States in the aftermath of Gangnam Style, we may not be hearing Korean on the radio again any time soon. Many Korean artists have tried and failed to make it big in the American market. 2ne1’s CL is the next at bat and may be the one to break this trend once her much-anticipated American debut album gets a release date. In many ways she is the ideal candidate to break the trend. Fluent in English, free from the bubblegum cuteness of many idol groups, and supported by some of the most successful producers and collaborators in the world. Her success will largely depend on how well she is able to mold herself to the American taste – but she may just bring a little bit of her Korean pop roots into the public awareness as well.
South Korea’s Trade Policy
Because of the aforementioned political reality in the United States, South Korea will not join the TPP in 2016. In fact, it may take a few years for Korea to formally join the TPP because of the difficulties surrounding the ratification process in TPP member countries. As a result, after ratifying Free Trade Agreements (FTAs) with China, Vietnam, and New Zealand in 2015, the ROK is expected not to wait for the TPP and continue to negotiate a free trade agreement with five countries in Central America, a trilateral FTA with China and Japan, and the Regional Comprehensive Economic Partnership (RECP). Because overseas markets are critically important to Korea’s domestic economy, the ROK is expected to at least make measurable progress on concluding these talks in 2016. Because the President Park Geun-hye only has two more years left in office, it is important for these talks to conclude before then; otherwise, the benefits of these agreements will be further delayed as the new administration will review previous policies for possible adjustment. In addition, if Korea is not able to join the TPP by December 2017, a new Korean administration will take some time to review the efficacy of joining this agreement.
Has Samsung Turned the Corner?
After nearly two years of negative earnings, Samsung saw revenue and profits increase in the 3rd quarter of 2015. The increase in profits, however, was due to growth in Samsung’s semiconductor and display divisions. The smartphone division, which faces high end challenges from Apple and low end challenges from Chinese and Indian firms like Xiaomi and Micromax, saw revenues increase but profits continue to decline as it made a misstep by under producing the popular new Edge line of phones and the Galaxy 6 underwhelmed. At the end of 2015 Samsung replaced the head of its smartphone division with Koh Dongjin who previously headed up Samsung’s mobile research and development, to return the division to profitability. With increasing competition and two years of decline, Koh’s efforts to turn Samsung’s smartphone division around will be one of the key economic issues to watch in South Korea.
Mark Tokola is the Vice President of the Korea Economic Institute of America, Phil Eskeland is the Executive Director of Operations and Policy, Troy Stangarone is the Senior Director for Congressional Affairs and Trade, Jenna Gibson is the Director of Communications, and Kyle Ferrier is the Director of Academic Affairs and Research. The views expressed here are the authors’ alone.
Image designed by Jenna Gibson of the Korea Economic Institute of America.