The Peninsula

2017 in Review: A Critical Year for the Korean Peninsula

By Troy Stangarone

In 2017, much of the world’s attention turned to the Korean Peninsula. South Korean politics underwent major changes as President Park Geun-hye became the first South Korean president to be removed from office and a snap election was held in May that saw the election of Moon Jae-in. North Korea also dominated the news as Kim Jong-un followed through on his promises to test an intercontinental ballistic missile (ICBM) and has raised concerns over the prospect of military action on the Korean Peninsula as North Korea has advanced its programs more quickly than many expected.

The changes in South Korean politics and North Korea’s progress on weapons development on their own could mark 2017 as a major turning point on the peninsula. However, we also saw the United States threaten to withdraw from the KORUS FTA and China perhaps put more pressure on South Korea over THAAD than North Korea over its nuclear weapons program. As we take our annual look back at the events that helped to shape the Korean peninsula during the past year, it is also an opportunity to review the events we highlighted on The Peninsula in our annual 10 Issues to Watch For on The Korean Peninsula in 2017 blog.

Looking back, we largely touched on what would be the key issues on the Korean peninsula in 2017. Though, in the case of burden sharing we may have been a year too early and there are reasons to believe late in 2017 that our prediction on relations between South Korea and Japan while right for 2017 may be challenged in 2018. Areas where we could have done better include more of a focus on North Korea’s desire to try and complete much of its weapons testing in 2017, how nations in East Asia would react to the U.S. withdrawal from the Trans-Pacific Partnership, and the impact that the impeachment of Park Geun-hye would have on the leadership of South Korean chaebol. With that said, here’s a brief look back at the 10 issues we highlighted and what happened:

1. Political Dynamics and the Presidential Election in South Korea

The impeachment of Park Geun-hye and the subsequent election of Moon Jae-in as president were two major events in South Korean politics in 2017. While the snap election won by Moon resulted in a victory for the leading contender rather than an upstart candidate hoping to take advantage of shifts in the South Korean political scene, it did see the rise of populism in South Korea as we have seen in much of world over the last couple of years. The difference being that populism in South Korea is being driven by the left rather than the right. While Moon’s election could have resulted in shifts in policy towards North Korea and Japan, he has largely represented continuity through his endorsement of President Trump’s policy of maximum pressure and his efforts to separate historical issues from policy more broadly with Japan. Though, he has moved to give the government a greater role in job creation in South Korea.

2. The Trump Administration’s Foreign and Security Policy in East Asia

Despite campaign rhetoric that accompanied President Trump’s run to the White House, U.S. foreign and security policy towards East Asia has remained largely the same. Much of the strong rhetoric about the need for allies to contribute more to their defense has remained, but the broader U.S. policy in the early part of the Trump Administration seems to have largely remained in place. The most significant difference to date may have come in the rhetoric designed to describe the Administration’s policy. The Trump Administration has decided to move away from using the Obama Administration’s Asia Rebalance to a new Indo-Pacific strategy, but it is unclear how different the policy will be in reality. Though, we could see greater differences in 2018 as negotiations on burden sharing with South Korea will need to be completed and North Korea’s

3. Trump Administration Asia Economic Policy

If U.S. foreign and security policy in East Asia has largely remained consistent, the same cannot be said of U.S. economic policy. Trade policy was the one area where it was clear President Trump intended to make changes. On the first day of the new Administration, President Trump followed through on his promise to withdraw from the Trans-Pacific Partnership (TPP) and shift from the use of multilateral trade agreements to bilateral trade agreements to advance U.S. interests. The Trump Administration has also pushed to renegotiate the U.S.-Korea (KORUS) FTA, which President Trump has consistently referred to as a “horrible” trade agreement and only North Korea’s nuclear test in September may have convinced the Trump Administration to renegotiate rather than withdraw from the agreement. It has also taken steps to use more U.S. trade remedies to push a harder line with China on its trade practices.

4. North Korean Behavior in Response to a New Political Environment

Despite announcing in his New Year’s Day address that North Korea was close to conducting an ICBM test, North Korea did seem to display some hesitancy in its testing in 2017 as it adjusted to the new Trump Administration in Washington, DC and there have been indications that Pyongyang is confused by Washington’s new policies. At the same time, North Korea did not conduct as many missile tests around the U.S.-South Korean military exercise in the spring and delayed conducting its first ICBM test until July. However, by the middle of the year North Korea seems to have determined that the new Administration would not be a break on its behavior and proceeded to conduct missile tests at roughly the same rate as in 2016.

5. Will North Korea be a Trump Administration Priority?

It was clear before the Trump Administration came into office that dealing with North Korea would be a foreign policy priority, but less so where it would rank in terms of priorities, especially given candidate Trump’s focus on China. However, addressing North Korea’s nuclear program has become the Trump Administration’s top foreign policy priority because of both the maturity of North Korea’s weapons programs and the growing threat they represent to the U.S. homeland and the region. As a result, President Trump has lessened economic priorities that he campaigned on, such as addressing trade with China, and offered Beijing a better deal on trade if it helped the United States deal with North Korea.

6. Are Sanctions Working?

This was one of the key questions for 2017 and will remain a top issue in 2018. Are sanctions working on North Korea? Sanctions have taken a toll as exports to China have fallen by $410 million through October compared to the same period in 2016 and some countries have begun completely cutting off trade, but they have created no discernable change in North Korea’s testing or willingness to return to talks. However, concerns we had at this time last year that there may be a turn away from sanctions have not yet come to pass. While some of the presidential candidates in South Korea had expressed a desire to reverse course on sanctions with North Korea, Pyongyang’s continued missile test and hydrogen bomb test have closed any avenue for engagement and a lessening of sanctions, easing those concerns. Though, there has been an increasing consideration of the use of military force in the United States to solve the North Korean nuclear issue.

7. Special Measures Agreement/Burden Sharing 

Because of the focus on this issue by candidate-Trump we had an expectation that it could come to the fore in 2017. Asides from the occasional rhetorical flash, it didn’t. However, in 2018 the United States and South Korea will need to conclude a new Special Measures Agreement to determine the level of burden sharing in the alliance. This may just be an issue deferred.

8. Will RCEP Be Finalized in 2017?

One of the expectations for 2017 was that if President Trump followed through on his pledge to withdraw from the TPP, it would help spur the Regional Comprehensive Economic Partnership (RCEP) to conclusion and help to provide China with a platform for supplanting the United States’ leadership in East Asia on economic issues. While China has sought to supplant the United States on trade, RCEP remains unconcluded and rather than withering the TPP is very much alive. The remaining members under Japanese and Australian leadership have sought to conclude the agreement and leave open the door to a U.S. return in the future. The regional response to the United States on trade has not played out how one would have expected.

9. Will the Korean Wave Continue?

The Korean Wave, or Hallyu, continued to grow in 2017 despite Chinese retaliation over THAAD. China is a key market for Hallyu content and products. As a result of THAAD, China prohibited the streaming of new K-dramas and banned group tours to South Korea where Chinese tourists purchase large amounts of Hallyu related products such as K-beauty. Both of these actions cut into profits from Hallyu, but there was also significant growth of K-beauty product exports to China as Chinese customers sought to make up for the loss of purchases from their trips to Seoul. While China’s measures have clearly cut into Hallyu, it has seen increasing success outside of China. One of the biggest new hits on U.S. TV, The Good Doctor, is the export of a South Korean drama and the growing enthusiasm for Hallyu can be seen at KCONs around the world as well as in the American TV debut of boy band BTS, who will be ringing in the new year in Times Square along with the world’s biggest artists. While China’s THAAD retaliation clearly represented a challenge to Hallyu, it continues to thrive.

10. Relations Between South Korea and Japan

The relationship between South Korea and Japan has developed largely as we expected. The 2015 agreement regarding the Comfort Women remains unpopular in South Korea and President Moon has said the South Korea could not “emotionally” accept the agreement. However, in contrast to the Park Administration the Moon Administration has worked to separate historical issues from other issues in the relationship. Shortly after his election President Moon spoke with Prime Minister Abe about North Korea and the two have met in a summit meeting during APEC and the trilateral meeting with President Trump on the sidelines of the UN General Assembly. While the growing threat from North Korea, along with President Moon’s reluctance to date to call for the Comfort Women deal to be revised or scrapped, has likely helped to maintain ties, a South Korean commission recently concluded that the agreement did not adequately take into account the views of the Comfort Women and could challenge this balance in the new year.

Beyond the events that we expected, here is a look at some of the unexpected events that helped to shape 2017:

1. North Korea’s Nuclear Successes

After a series of Musudan missile failures in 2016, few would have expected the progress shown by North Korea in 2017. However, 2017 saw Pyongyang make significant progress as it introduced the Hwasong 14 and 15 models for its three successful ICBM tests. Also, more than a year after claiming the successful test of a hydrogen device, North Korea successfully conducted it first test of a hydrogen bomb. While North Korea’s successes to-date may not quite complete their tests as Kim Jong-un indicated, they have brought North Korea significantly closer to being able to strike the U.S. homeland than many would have thought possible in 2017.

2. How Sanctions on North Korea have Changed

Prior UN sanctions on North Korea were designed to prevent North Korea from acquiring the technology that it needed to advance its nuclear weapons and missile development, but that began to change in 2017. While UN sanctions in 2016 began to move in this direction with caps on the export of coal, sanctions in 2017 prohibited the export of most of North Korea’s minerals, textiles, fish, and basic items such as wood products. They also began to cut into North Korea’s earnings from the export of labor to foreign countries by requiring that all workers return to North Korea in the next year and prohibiting future work contracts. In essence, the sanctions on North Korea have moved from a stage of punishment and deterrence to one of coercion.

3. The Impact of Scandal on the Chaebol Leadership

The impeachment of Park Geun-hye has also had a significant impact on the leadership of South Korea’s chaebol who became embroiled in the scandal, but also left mixed signals. When the scandal first broke there was hopes that the history of the South Korean legal system going light on the heads of chaebol would have changed. Lee Jae-yong, the head of Samsung, was found guilty of giving bribes to Choi Soon-sil in the Park scandal and now faces 12 years in prison. However, there are now indications that may not be the case. Many of the key figures of the family behind Lotte were also convicted in the scandal, but given suspended prison sentences. The Lotte case indicates that the change many hoped for may not be the case and next year we will learn whether Lee Jae-yong’s sentence is also reduced and suspended or if he is faces jailtime.

4. China’s Retaliation Over THAAD

China never formally sanctioned South Korea over the deployment of THAAD, but it took steps related to Hallyu, tourism, Lotte, and other areas in an effort to pressure the South Korean government to reverse its decision over THAAD. While there seemed to be an agreement to return to normal, China has only partially reversed its economic pressure over THAAD and indicated that it will only completely do so once the missile defense system has been reversed. However, through October, the economic costs to South Korea from the deployment of THAAD are likely over $9 billion, while North Korea has only seen its exports to China decline by $410 million.

5. The Assassination of Kim Jong-nam

While not taking place directly on the Korean Peninsula, the assassination of Kim Jong-un’s older half brother Kim Jong-nam in Malaysia was one of the year’s most surprising events. Not only did North Korea take out a potential rival to Kim Jong-un on foreign soil, but it did so using VX nerve gas raising concerns about North Korea’s potential use of chemical and biological agents in addition to its nuclear weapons and missile programs.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from the Republic of Korea’s photostream on flickr Creative Commons.