THAAD economic retaliations?

2017-01-16 18:14:23 KST

Since Korea and the U.S. announced in July that they had reached an agreement to deploy THAAD on the Korean peninsula, China has opposed the decision.

They say it is unwarranted and threatens the security of Northeast Asia, in addition to expressing concerns about the system's powerful radar increasing the U.S.'s surveillance capabilities of China.

(Chinese) - - Hua Chunying

"China has repeatedly expressed its concerns about and opposition to the THAAD deployment. It has seriously damaged the strategic balance in the region and the security interests of the neighboring countries."

Since then, a number of restrictions related to Korean businesses have emerged.

The list includes stricter customs regulations, the reduction of chartered flights to Korea, an investigation of the business practices of Korean conglomerates, namely Lotte Group, and unexplained cancellations of K-pop concerts and Korean dramas on TV.

All of these changes have let to accusations that the Chinese government has been taking retaliatory steps against the Korean economy.

(Korean - Expert 1) 53:13

"One example is related to the reduction of flights and tourism to Korea. Beijing is saying it is related to the government's aim to diversify tourism destinations, so they are saying it is a legal policy. But airlines and travel companies in Korea cannot help but think this sudden change is due to the THAAD situation."

Earlier this month, China announced that 19 Korean cosmetic products had failed to meet import standards.

The reasons cited ranged from ingredient changes to incorrect expiration dates.

The affected companies have largely denied any knowledge of a link to THAAD, and Korea's food and drug safety ministry has said it will help companies meet regulations.
But suspicions remain.

(Korean - Expert 2)

(33:05) "As a member of the WTO, China cannot create unfair trade policies against another country. Therefore, they have to work within the legal regulations, such as enforcing customs documents or enforcing quality and safety regulations and other bureaucratic standards."

With over 25-percent of Korea's exports going to China, there are concerns that hits, however small, could adversely affect the greater Korean economy.

(Korean - Expert 3)

(3:58) "The affected products take up about 10-percent of our exports to China, and there may be question marks about how much damage that is doing to our economy (4:38) But there is a risk that it could have a knock-on effect to other products, as well as a rapid cooling effect on the Korean economy."

So what could China be looking to achieve from these actions?

(Korean - Expert 1)

(1:01:06) "First, Korea is currently suffering from a leadership vacuum. So it might be that China has hopes that the next administration or leader could repeal the decision to deploy THAAD. Second, China wants to send a clear message that it considers the deployment as a much more serious issue than Korea may think."

So far, Korea's two front-runners in a potential presidential elelction, Moon Jae-in and Ban Ki-moon have given their tentative support to the anti-missile system, so the likelihood of a reversal is unlikely.

But some say with the two nations continuing to be major trading partners for the foreseeable future, matters of state and economics need to be dealt with separately.

(Korean - Expert 4)

(48:27) We must have a policy where economic relations are maintained and negotiated when needed, but when it comes to politics and national security concerns we have to keep a distance."

Experts also agree that for Korea to avoid a similar situation in the future, changes to Korea's export model are needed, with less reliance on China and a diversification of its export markets.

(Korean - Expert 3)

(14:03) "If we don't change our current export paradigm, we will always face this danger. It's something we have to do for our future in the mid- to long-term."

Until the THAAD deployment issue is resolved, Korea will have to find a way to navigate as best it can the political and economic pressures that China could impose.

Kwon Jang-ho, Arirang News.

Reporter : kwon@arirang.com