By Kyle Ferrier, Sang Kim, Yong Kwon, and Troy Stangarone
After the U.S.-North Korea summit in Singapore, 2019 was supposed to be the year that the United States and North Korea worked out a deal to begin dismantling its nuclear weapons and ballistic missile programs. It was not to be. The talks fell apart at the Hanoi summit, dashing hopes for increased inter-Korean cooperation, and the process never got back on track.
The breakdown of U.S.-North Korea talks, however, wasn’t the only major relationship to face trouble in 2019. South Korea’s relations with Japan hit a low point as Tokyo surprised everyone by placing national security restrictions on three key chemicals for the production of semiconductors, threatening South Korea’s most important export industry.
South Korea’s economy also took a hit. The trade tensions with Japan, in combination with the U.S.-China trade war, already slowing exports of semiconductors, and slowing global growth, resulted in South Korea’s lowest level of GDP growth since the Global Financial Crisis.
As we look forward to the rest of 2020, there will be significant focus on developments with North Korea and South Korea’s relationship with Japan. Political change could be in the offing as well, as elections are set for the National Assembly and the presidency in the United States. But domestic issues dealing with the elderly and South Korea’s declining fertility rate will also be in focus.
With that in mind, here are 10 issues related to North Korea, South Korean politics, and U.S.-Korea relations to follow that will have an impact on the Korean peninsula in the year to come:
Efforts to Denuclearize North Korea
Despite realizing the first ever U.S.-North Korea summit meeting in 2018, talks between the United States and North Korea largely came to a halt last year. The question for 2019 is what comes next in U.S.-North Korea relations. With Pyongyang announcing that it no longer feels bound by its prior pledges not to conduct nuclear weapons or ballistic missile tests, there are concerns that the Korean Peninsula may return to the “fire and fury” period of 2017. Alternatively, North Korea could attempt to return to talks with the United States and to strike a deal prior to the 2020 presidential election. However, the North Korean leadership likely recognize that any attempts to negotiate deal could be undone by a change in administrations in the United States.
More likely, North Korea will continue to increase its stockpile of weapons and engage in efforts to advance its weapons technology, while avoiding the types of tests that might force the international community to tighten the sanctions on its economy. In the absence of a provocative test by North Korea, another issue to watch will be how well the sanctions regime will hold. Russia and China have already signaled that they may have a waning patience for sanctions.
Reaching an Agreement on U.S.-Korea Military Burden Sharing
Contentious negotiations between Seoul and Washington on a new Special Measures Agreement (SMA) – determining how much South Korea contributes to hosting U.S. military forces – have unsurprisingly lapsed their December 31 deadline. The Trump administration’s call for Seoul to increase its 1.02 trillion won contribution by 400% caused a stir among South Koreans in the second half of last year. The sheer size of the proposed jump seemed to suggest that the U.S. underappreciated their country’s support for the alliance and led many to question the nature of the relationship. Talks are set to resume this month, but it’s unclear in what direction they are heading. In late December the South Korean newspaper Chosun Ilbo reported Washington’s asking price had dropped to only a 10-20% increase, which U.S. officials later denied.
The conditions of a new SMA could have significant implications for the alliance, though there are still many unanswered questions. Other than the amount, the other significant aspect to follow is duration. If the U.S. again pushes for a one-year deal – rather than the multi-year agreements that both sides usually agreed to prior to the Trump administration – it could be a big gamble for South Korea given the U.S. presidential election in November. Since Trump himself is by all accounts driving the U.S. position, if he were to lose his re-election campaign then his Democratic opponent would be much less likely to pursue such a hardline stance. However, should Seoul and Washington strike a one-year deal and Trump wins in November, the new SMA talks could be even more of a challenge to the alliance than they have been recently.
Revitalizing the South Korean Economy
The South Korean economy is in the doldrums. GDP is expected to have only grown by 2 percent last year, the lowest since the wake of the global financial crisis in 2009. Even if the government were to hit its 2.4 percent growth target – which many see as too ambitious – it would mark the first time since at least 1954 that the country recorded back-to-back years of lower than 2.5 percent growth.
Getting the economy back on track is among President Moon’s highest priorities for this year. Though the administration’s “income-led” growth policies have produced limited results so far, the Blue House will amplify its efforts this year with new plans for infrastructure, job creation, and social spending. But, the question still remains whether these initiatives will be enough to reinvigorate the economy. Moon’s detractors continue to argue his policies still don’t do enough to account for business interests and are therefore destined to fail. What will likely have a much greater impact on the direction of the South Korean economy this year, however, are major developments abroad. Increased demand for semiconductors and a resolution between Beijing and Washington on trade issues could be a boon for the economy, just as much as further uncertainty could act as a drag.
The Course of South Korea’s Relations with Japan
Last year saw relations between South Korea and Japan hit one of their lowest points since the normalization of relations in 1965. In response to a South Korean Supreme Court’s decision in 2018 that Japanese companies were liable for their use of forced labor during the Second World War, Japan decided in July to place national security restrictions on three key chemicals for the production of semiconductors and later to remove South Korea from its “white list” of trusted exported partners. South Korea responded by removing Japan from its “white list” of trading partners and announcing that it would not renew its military intelligence sharing agreement with Japan – though that has been delayed for the moment. Despite lower level meetings and a meeting between President Moon and Prime Minister Abe Shinzo in late December, South Korea and Japan have been unable to resolve their disputes. The question for 2020 is whether the two sides will be able to find a resolution to their economic and historical disputes that would allow them to improve relations, or whether this could become the new normal.
Can 5G Help Improve the Prospects of South Korea’s Semiconductor Industry?
With Samsung and SK Hynix two of the world’s dominant producers of memory chips, along with the U.S. based Micron, South Korea was well placed to take advantage of the growing demand for memory chips in recent years. In 2017 and 2018, a surge in demand in the semiconductor industry helped to turn memory chips into South Korea’s top export item, accounting for nearly 14 percent of exports in 2018 and up from just 5 percent in 2014. However, the super cycle began coming to an end in the second half of 2018 and sales continued to decline throughout 2019. The prospects of recovery have been clouded over the last year by Japan’s new export restrictions and the U.S.-China trade war. They have also been hindered by the slower rollout of 5G around the world due to U.S. efforts to convince countries not to use Huawei for their 5G infrastructure. However, there is hope that as 5G comes online in more markets demand for new 5G capable phones, along with the continued growth in data centers, will help to boost the prospects for South Korea’s most important industry.
How the U.S. Presidential Elections Could Impact Policy
Although taking place outside the Korean Peninsula, the U.S. presidential election in November will have a significant impact on the Korean Peninsula. The election of Donald Trump in 2016 brought about a significant shift in how the United States manages its alliances with countries such as South Korea and its policy towards North Korea. The shape of U.S. policy on issues related to burden sharing, trade, and North Korea will likely all depend on whether Trump is able to win reelection. Those policies could all shift if the Democratic nominee or another Republican were to win the White House in 2020 if Trump were removed from office.
Legislative Election in April will likely Shape the Platforms and Outlook of Korea’s Major Parties
In addition to the U.S. presidential election in November, South Korea will hold a critical election in April for all 300 seats in the country’s unicameral legislature. This election will serve as a litmus test for the public’s confidence in the incumbent administration’s direction and determine President Moon Jae-in’s ability to advance policies during his remaining time in office. Taking a broader view, the election is historic because new faces representing new constituents will take their seats in the next legislative session. The National Assembly’s recent decision to lower the voting age from 19 to 18 will bring 530,000 potential new constituents to the polling booth in April. It is unclear yet how this will impact support for either conservative or progressive parties – but this will no doubt impact the platforms of respective parties looking to win the support of this new cohort. This perhaps partly influenced the leading parties’ decision to retire prominent legislators who had long been the face of the political establishment. Examples include former ruling party legislator and presidential chief of staff Im Jong-Seok and former opposition leader Kim Moo-sung. The upcoming general election, therefore, acts as a beginning of a new period for the increasingly assertive National Assembly.
Can South Korea Improve Its Fertility Rate
South Korea faces a demographic crisis. South Koreans are living longer and South Koreans born a decade from now are expected to have among the longest lifespans of any group of people in the world. However, the question facing South Korea is how many children will be born when the country attains this public health success? In 2018, South Korea had a total fertility rate of 0.98, a historic low, and the final data for 2019 is expected to be even lower. Through September of last year, births were down 8.9 percent from 2018. It will take time and significant social change to return to anything close to the number of births that would allow Korea to reach the replacement rate of 2.1, but the key to watch in 2020 is whether South Korea is able to introduce measures to reverse the current trend and return to a total fertility rate of at least 1.0. The odds are likely stacked against it.
Will the Government Comprehensibly Tackle Elderly Poverty?
President Moon Jae-in pledged to improve the social safety net upon his election in 2017. Since then, the South Korean government’s efforts to assist underemployed youths, curb the financial burdens of childcare, and raise the minimum wage have received the most attention from economists and the media. This can be attributed to the expectation that these policies will have the most impact on South Korea’s human capital resources and industrial productivity in the years ahead.
However, the country’s biggest social welfare crisis is elderly poverty. 2017 data from the Organization for Economic Co-operation and Development (OECD) revealed that 43.8 percent of South Koreans over the age of 65 live in relative poverty (defined as earning 50 percent or less of median household income) – well above the average of 12.5 percent for OECD member countries. This is more than any other country in the 34-country community. While the government does distribute a basic pension to elderly who are in the bottom quintile of income earners, the policy (covering around 35 percent of seniors) provides an insufficient amount to those who qualify and leaves those who do not qualify in a precarious economic position.
Moreover, with the future tax base falling alongside declining birth rates, the National Assembly Budget Office noted that reserves of the National Pension Service will reach zero in 2054.
In response to the crisis, President Moon has pledged to increase the basic pension by nearly 50 percent and double the number of job openings for older workers. However, the challenge is not simply a financial one – reports suggest that many elderly also suffer from loneliness and associated mental health issues. This has manifested in several social challenges, including growing crime rate among elderly and the highest elderly suicide rate among OECD countries. Therefore, resolving the elderly poverty crisis will require a more in-depth solution that incorporates community participation and increased public funding.
How YouTube Shapes Media Consumption in South Korea
In 2019, South Koreans spent more time on YouTube than any other mobile apps. South Koreans teens spent an average of 42 hours a month watching YouTube videos and people in 20s spent about 31 hours. It is also interesting that people in the 50s and above watch a significant amount of YouTube videos with an average of 20 hours a month, more than people in the 30s and 40s. The number of South Korean smartphone users also hit a record high in 2019, now over 91% of the population own smartphones. People now have instant access to content whenever and wherever compared to traditional cable TVs.
So what are they watching? There is a wide variety of content available for any audience across the age range, from mukbang, music videos, product reviews, kids channel, lectures, cooking, to politics and news. YouTube is not only a source of entertainment but increasingly becoming a resource for self-learning and information. It also became an attractive space where people can create their own content to share with others and even make a profits. Because of the popularity and influence of YouTube, being a YouTube creator made it to the topic 3 dream jobs for South Korean elementary schoolers, followed by athletes and teachers.
Given the wide accessibility and popularity, creating a YouTube channel has been a trending communication strategy for companies and even government agencies to send their message and expand their audience. In 2020, YouTube will continue to influence and impact how South Koreans consume online content and we will see more media content tailored toward YouTube users.
Kyle Ferrier is Fellow and Director of Academic Affairs at the Korea Economic Institute of America, Sang Kim is the Director of Public Affairs and Intern Coordinator, Yong Kwon is the Director of Communications, and Troy Stangarone Senior Director and Fellow. The views expressed here are the authors’ alone.
Image created by Juni Kim Senior Manager for Operations and Technology at the Korea Economic Institute of America. Image photos from the flickr Creative Commons photostreams of The White House, the Republic of Korea, and the U.S. Pacific Fleet.