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The Peninsula

10 Things to Watch for on the Korean Peninsula in 2013

Published January 24, 2013

By Nicholas Hamisevicz, Chad O’Carroll, Seongjin James Ahn, and Troy Stangarone

Last year saw a series of significant events on the Korean peninsula. The year concluded with the historic election of South Korea’s first female president, Park Geun-hye, and North Korea’s successful missile launch into space. In 2012, we also saw the implementation of the U.S.-Korea free trade agreement and South Korea’s successful hosting of the most recent Nuclear Security Summit. With change likely to continue in 2013, here are 10 economic and foreign policy issues to follow:

1.      A New Approach to Foreign Policy: While conservative like the outgoing President Lee Myung-bak administration, the incoming Park Geun-hye administration will likely look to put its own stamp on South Korea’s foreign policy. While strengthening the U.S.-Korea alliance and expanding the scope of South Korea’s foreign policy under the “Global Korea” banner were the basic tenets of the outgoing administration’s policy, there will likely be shifts in emphasis under a Park administration.

While maintaining a strong alliance with the United States will remain a bedrock principal under the Park administration, one immediate area of difference will be in policy towards North Korea, where Park is expected to engage in the widely cited “trustpolitik” from her 2011 Foreign Affairs article. At the same time, we should expect a Park administration to put greater emphasis on improving ties with China.

However, efforts to engage North Korea could potentially be hindered by North Korea’s own actions. Having successfully tested a missile in December, Pyongyang announced that the “high-level nuclear test we will carry out [is] targeted at the United States.”

This means we may see less emphasis on a rebranded version of “Global Korea.” While the incoming Park administration has indicated its support for continuing South Korea’s global contributions in areas such as development assistance and climate change, it also may have new areas of emphasis such as encouraging South Koreans to become more involved development programs and Korean language schools abroad.

 2.      South Korea’s Engagement with North Korea: Even with North Korea’s successful rocket launch, South Korea will likely attempt to reach out to North Korea in 2013 based on the sentiment among the South Korean public and President-elect Park Geun-hye.  During the presidential campaign, improving relations with North Korea was an issue for which and all of the major candidates put forward their ideas for better inter-Korean relations.

Park  has described her ideas for reaching out to North Korea in various speeches, an op-ed in the Wall Street Journal, and an article in Foreign Affairs. The overall approach would be based on a trustpolitik, interacting with North Korea on a basis of trust but being vigilant against provocations and payments for engagement. Her ideas include a return of visits between separated families, more humanitarian aid to North Korea, and offices in Seoul and Pyongyang for inter-Korean exchanges and cooperation. Park has also repeatedly stated she would meet with North Korean leader Kim Jong-un “if it helps to foster South-North relations.”

 3.      North Korean Nuclear Test: There is concern that North Korea will conduct a third nuclear test in 2013. Its previous history of testing nuclear devices after missile launches in 2006 and 2009 have led some to believe a third test is coming. Moreover, shortly after the rocket launch, satellite imagery suggested that North Korea may be preparing a site for a nuclear test.

It is still unknown if North Korea has the capability to miniaturize a nuclear weapon; a third test might suggest North Korea is trying to complete that process with their plutonium based weapon. However, North Korea has also attempted to build a uranium-based nuclear weapon. Thus, a third test might be actually a first test with uranium. Frank Pabian from the Los Alamos National Laboratory and Siegfried Hecker, former director of Los Alamos and currently a professor at Stanford who has seen some of North Korea’s nuclear capabilities in the past, argued that North Korea would conduct a third nuclear test to gain confidence in miniaturizing a nuclear weapon, and the test could possibly be a combination of highly enriched uranium and plutonium. Rumors abounded that North Korea already notified China that it would test; furthermore, a suspected response from the United Nations Security Council condemning North Korea’s recent rocket launch may provide North Korea further evidence that it is threatened and needs a nuclear weapon for protection.

 4.      Reaching out to China: This past year commemorated the 20th anniversary of formal relations between South Korea and the People’s Republic of China. However, despite the tremendous growth in economic ties over those 20 years, relations between South Korea and China still remain complicated.

In recent years, tensions with China have arisen over South Korea’s policy towards North Korea, Chinese concerns over South Korea’s alliance with the United States, historical disputes, illegal fishing, the forced repatriation of North Korean refugees by China, and the alleged torture of Kim Young-hwan during his detention in China.

As part of a new emphasis on improving relations with China, Park Geun-hye sent her first delegation of special envoys to Beijing. The incoming Park administration will likely seek to build on this gesture by looking for ways to enhance South Korea and China’s strategic cooperative partnership in ways that complement the U.S.-ROK alliance, such as efforts to develop a trilateral dialogue between the three countries.

5.      South Korea’s Economy to Bottom Out in 2013, but Growth Outlook Uncertain: In light of the wide range of mixed reports on South Korea’s economic outlook in 2013, it is difficult to make an accurate determination of the country’s growth projections. Reports by Goldman Sachs and others have offered optimistic expectations that South Korea’s economy will bounce back and grow at a pace of 3.4 percent, while a number of institutions both inside and outside of South Korea have made multiple downward revisions to the country’s growth projections to around 2.8 percent.

But regardless of South Korea’s growth rate, it will be important to see how policy officials manage the hurdles ahead.  South Korea still faces weak demand as Europe remains mired in stagnation; its currency is strengthening against the dollar potentially hampering  exports; and the country’s domestic economy has lost momentum as a result of decreased consumption, unprecedented levels of household debt, and a troubled housing market.

On the bright side, economists at the IMF have projected that the decline of South Korea’s economy will bottom out by mid-December, while other reports claim it already has.  Moreover, South Korea has ample room for fiscal and monetary policy adjustments if such tools need to be used.  Without question, the year ahead will prove to be yet another test of resilience for South Korea’s economy, as well as of Madam Park’s ability to orchestrate a smooth recovery.

 6.      A New Approach to Trade Policy: As South Korea prepares to engage in a series of high level trade negotiations in 2013, the shift in administrations could lead to a new approach in South Korea’s trade policy. As part of the incoming government’s restructuring, the Park administration has proposed shifting the government’s trade policy and negotiating powers from the Ministry of Foreign Affairs and Trade to a new Ministry of Industry, Trade, and Energy. While this move would likely set-back on-going negotiations while the restructuring is taking place, it could also signal a shift how the new administration addresses trade policy in the future.

South Korea is currently negotiating a free trade agreement with China and is set to begin negotiations on a trilateral agreement with China and Japan, while also beginning negotiations on the Regional Comprehensive Economic Partnership which includes many of the nations of East Asia.

With significant administrative restructuring taking place and three major trade agreements already under negotiation, it is unlikely that South Korea would look to join the current Trans-Pacific Partnership talks that include the United States and ten other nations spanning the Asia-Pacific region in 2013.

 7.      New Arms Purchases: This year South Korea will purchase some $7.2 billion dollars worth of next-generation fighter jets in a decision that could favor a European aircraft manufacturer over an American one.  While South Korea was scheduled to make a call on deciding which aircraft type it would select for the final part of its FX-III aircraft replacement program in late 2012, political complications meant that the decision was put off to the first six months of 2013.  Recent news reports now suggest that the Republic of Korea Air Force (ROKAF) will make their decision during the first six months of 2013, after completing a review to identify the most suitable replacement type.

Currently three aircraft types are being considered by the ROKAF; the F-35 Lightening II, the F-15SE Silent Eagle, and the Eurofighter Typhoon. While Lockheed Martin’s F-35 had been seen as a favorite due to its superior stealth capabilities, some sources suggest that pricing issues could become a hurdle to South Korea’s capacity to purchase it at a competitive rate. For its part, the F-15SE would be a good fit for the ROKAF given the size of South Korea’s recently purchased fleet of F-15s, but a lack of equivalent stealth capability could be problematic. Finally, while the EADS Eurofighter is not a true stealth fighter, it does offers the unique advantage of allowing for South Korea to assemble and produce the aircraft domestically, a point that could both lead to significant job creation and the further development of the engineering sector.

8.      Negotiations for a new U.S.-ROK 123 Agreement: In 2013, nuclear energy cooperation will be a top priority on the agenda for U.S.-South Korean bilateral relations. On March 18, 2014, the incumbent agreement between the two allies, commonly referred to as the “123 agreement”, will expire.  In order to avoid a lapse in mutual nuclear energy cooperation for peaceful civilian use, the two governments will need to forge an agreement by as early as Spring of 2013, which must go before Congress for approval.

Renewing the 40 year old agreement this Spring will have its challenges, however, since South Korea is interested in acquiring new nuclear energy privileges which it does not currently have.  In the new 123 agreement, South Korea seeks provisions for enrichment and reprocessing, or ENR. Although South Korea is a trusted ally of the United States, there have been some concerns raised by those in the United States over the risks of proliferation and overall regional security.  Unless an alternative solution can be found, the new U.S.-ROK 123 agreement will need to somehow reconcile South Korea’s interests with U.S. concerns and President Obama’s broader foreign policy objectives.

9.      A Continuation of Historical Disputes: Last year saw a rise in tensions between South Korea and Japan as tensions flared over historical issues such as Japan’s claim to Dokdo and the issue of comfort women. While the tensions between the two countries have somewhat abated, the election of Abe Shinzo as Prime Minister has raised concerns that tensions over these issues may continue. In early January, Abe indicated that he wanted to replace Japan’s 1995 apology for the suffering it caused during the Second World War with a forward looking statement appropriate for the 21st century. Should Japan seek to redefine its position on historical issues in a manner not seen as acceptable by its neighbors, it could lead to increased tensions in the region.

10.  No Repeat Of Gangnam Style: One thing that we can be sure about is that no South Korean musician is going to receive anything close to the sensational success that Psy achieved in 2012 with ‘Gangnam Style’.

From a statistical perspective alone it seems highly unlikely that any Korean musicians will be able to replicate Psy’s colossal success in 2013. That’s because ‘Gangnam Style’ is now the most watched YouTube video in the world.  Hitting a record-breaking one billion YouTube views just before Christmas, “Gangnam Style” is now over ten times more popular than the next biggest K-Pop video, “Gee” by Girls Generation (95 million views).  And with it taking Girls Generation over three years for their video to reach that degree of success, it is hard to see how any other K-Pop stars will strike gold in quite the same way as Psy next year.

Psy’s success is also almost impossible to mirror because there are no tried and tested formulas to making a video go viral. While there are steps that can be taken to improve the chances of a musician’s video being shared on social media, achieving the type of success Psy enjoyed requires several chance events to happen in a row, all of which are capable of seeding the content to much bigger and receptive audiences.  As such, it is important to view “Gangnam Style” for what it is – something of an anomaly that is less connected to the Korean Wave (“Hallyu”) than some might think. Just as lightening rarely strikes the same place twice, viral videos of this nature are almost impossible to recreate.

Nicholas Hamisevicz is the Director of Research and Academic Affairs, Chad 0’Carroll is the Director of Communications, Seongjin James Ahn is a Visiting Fellow, and Troy Stangarone is the Senior Director for Congressional Affairs and Trade for the Korea Economic Institute. The views expressed here are the authors’ alone.

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