Tuesday, September 17, 2019

Korea-Japan and the End of the '65 System - Part V: the End of the '65 System

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The ’65 System was a flawed one, based on an imperfect set of treaties that papered over the fundamental disagreement between Japan and South Korea. Yet it continued to survive thanks to opportune alignments in the domestic politics of Japan and South Korea. The ’65 System was born when Park Chung-hee, a former officer of the Imperial Japanese Army, replaced the former independence activist Syngman Rhee, negotiated the ’65 treaties, and violently suppressed the Korean people’s objections. It peaked in the late 1990s and early 2000s, when both Japan and South Korea had relatively progressive politics. Even as Abe Shinzo attacked the ’65 System in the early 2010s, Park Geun-hye’s willingness to kowtow to Abe’s demands kept the system running. And above all, the United States was there as the backstop whenever the ’65 System showed signs of wear.

Moon Jae-in and Donald Trump meet at the White House. c. 2018 (source)

By late 2016, however, the good luck would run out. Abe Shinzo continued to lead Japan, well on his way to becoming the longest serving prime minister in Japan’s history. Park Geun-hye was not as fortunate: she was revealed to have engaged in a bizarre corruption scandal involving a daughter of a shaman who claimed to speak with her dead mother. Koreans responded with a massive series of Candlelight Protests that drew over a million protesters for months. In March 2017, Park was impeached and removed, and liberal Moon Jae-in won the following snap election and took office in May 2017. Meanwhile, in November 2016, Donald Trump would be elected as the US president with a healthy assist from the Russian spy agency.

Trump’s election was an inflection point for US foreign policy in Asia, to put it mildly. Trump had little regard for allies, constantly complaining the cost of troop presence in both Japan and South Korea and the imbalance in trade accounts. Yet he maintained perhaps the best relationship with North Korea among all US presidents, putting into doubt the Cold War logic that presupposed Kim Jong Un as the enemy. The Trump administration would pursue policies like the Free and Open Indo-Pacific strategy in Asia to counteract China’s Belt and Road Initiative, but the administration’s fundamental incompetence meant even a routine maintenance of alliance in Asia was a challenge. 

Moon’s victory, too, was an inflection point: South Korea’s decisive rejection of the conservatives’ dictator-worship politics that sacrificed ordinary people for the dubious prospect of economic development. It was also a rejection of South Korea’s previous ruling class: the former house slaves-turned-oligarchs who owned much of the large corporations and conservative newspapers. Park ended up in prison on corruption charges, along with former Chief Justice Yang Seung-tae and a number of Park’s cabinet members. Moon’s election was followed by a series of policy initiatives that rejected every agenda of South Korean conservatives. Instead of Red Scare, peace and dialogue with North Korea. Instead of chaebol-centered economy, an economy led by growth in wages and income. And instead of backroom deals, an open and transparent process of politics and diplomacy.

(More after the jump.)

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In this atmosphere, the two patches that the Park and Abe administrations stitched on top of the deteriorating ’65 System fell away. In October 2018, the Supreme Court of the Republic of Korea issued the long-delayed opinion on wartime slave labor, affirming the 2012 decision that vindicated the rights of the plaintiffs, this time against Nippon Steel. The next month, after a public review that revealed Park Geun-hye’s undisclosed side deals and interference with civic activism regarding Comfort Women, the Moon administration disbanded the foundation established by the Comfort Women Agreement. The administration would emphasize that the Agreement remained valid and the Korean government would not seek to re-negotiate it—a hair-splitting diplomatic move reminiscent of Japan’s treatment of the ’65 treaties.

Enraged, Abe Shinzo searched for a way to retaliate, and decided on recourse that was in style in 2019: a trade war. On July 2, 2019, Japan announced it would withdraw the blanket approval process for three chemicals critical for semiconductor manufacture, such that each shipment of the chemicals required government approval—which may be withheld up to 90 days. (As it happens, the shelf life of these volatile chemicals is approximately 90 days.) It was a shot aimed at the beating heart of South Korean economy, as semiconductors is South Korea’s leading export and the main engine for its economic growth.

It must have been sweet revenge. In the early 1990s, Japanese companies like NEC, Toshiba and Hitachi were the world leaders in chip manufacturing. But since the late 1990s, Japan’s position as a leader in semiconductor steadily eroded, with South Korea’s Samsung Electronics and Hynix emerging as dominant market forces. The coup de grace came in 2012, when Elpida—a company created by merging the surviving Japanese chip manufacturers in a desperate bid to overtake the Korean companies—filed for bankruptcy, with $5.6 billion in debt. With Elpida gone, Japan no longer had any company that manufactured DRAM semiconductors.

But Japan’s materials industry survived, supplying the two Korean semiconductor titans that collectively occupied over 70 percent of the global market share in DRAM chips. It was another triumph of the ’65 System: even as Japanese and South Korean companies competed against one another on one level, they cooperated very closely on another level. Japan’s semiconductor industry may have fallen, but its materials industry seamlessly transitioned to form a tight-knit supply chain with South Korea’s chip manufacturers, to a point that they provided upwards of 90 percent of the required supply.

In the hands of Abe administration seeking satisfaction, however, this close relationship became a weapon, a chain around South Korea’s neck that could be jerked around. All of this, because Abe Shinzo could not stand the idea that Japanese corporations might have to pay a nominal sum to the wartime slave laborers.

Moon Jae-in walks past Abe Shinzo in 2019 G20 summit in Osaka.

The trade war caused a significant reputational damage for Abe in the international media. It did not help the matters that just a few days before Tokyo announced the trade restrictions, Abe Shinzo gave a keynote speech in the G20 summit in Osaka, striking a pose as the guardian of free trade endangered by the reckless Trump administration in the US. Noting the turnabout, an op-ed on Nikkei Asian Review called Abe “duplicitous.” An article on the Wall Street Journal noted that in 1941, Japan attacked Pearl Harbor in response to American export embargo.

Seeing the blowback, Abe administration came up with a post hoc national security justification, insinuating that export control was necessary because South Korea had been furtively diverting the chemicals to North Korea. No one believed them. Both the New York Times and the Wall Street Journal noted the Japanese officials produced no evidence of such diversion. Even the arch-conservative American Enterprise Institute called the national security excuse “spurious.” Meanwhile, Abe Shinzo couldn’t even stick to the script, blurting out the export control was about the World War II slave laborer decision after all. It was perhaps an op-ed on Foreign Policy that delivered the most damning assessment, labeling Abe with incompetence rather than malice: “Basic public relations knowledge would suggest that announcements of this kind should be accompanied by at least some evidence of your reasons . . . and, most importantly, a clear and consistent line of what is going on.”

The national security justification particularly enraged Seoul. It repeatedly demanded Japan to produce evidence for such a serious accusation, which Tokyo did not give. The US began getting involved as well, urging both Japan and South Korea to enter into a “standstill” agreement. Abe administration ignored the United States and, on August 2, went on to de-list South Korea from its export “white list”, essentially requiring shipment-by-shipment approval to every product that Japan exported to South Korea. Moon Jae-in unloaded on Tokyo in reaction: “No matter what pretexts are given, Japan’s decision is undeniable trade retaliation against our Supreme Court’s rulings on Korean victims of forced labor during colonial rule. . . . [I]t is a selfish, destructive act that will cripple the global supply chain and wreak havoc on the global economy. . . . Japan’s measure will add even more difficulties to our economy under these severe circumstances. However, we will never again lose to Japan.”

Matters appeared to settle a bit after August 15. The Liberation Day speech for Moon Jae-in could have been a ripe opportunity to unleash more strong words against Japan. Instead, he extended an olive branch: “Reflecting on the past does not mean clinging to the past but overcoming what had happened and moving toward the future. We hope that Japan will play a leading role together in facilitating peace and prosperity in East Asia while it contemplates a past that brought misfortune to its neighboring countries.” However, despite the meeting between the two countries’ foreign ministers on August 21, Japan did not withdraw the trade war. The next day, South Korea played the strongest hand it could against Japan: nixing General Security of Military Information Agreement (GSOMIA), by which Seoul and Tokyo shared sensitive military intelligence. One analyst noted: “I think the two countries can be fairly described as adversaries now.”

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The ’65 System can be summarized as follows: an attempt to begin a bilateral relationship between Japan and South Korea based on a set of imperfect agreements that papered over the fundamental difference between the two countries. The cost of such imperfection was borne mostly by Korean victims of imperialism, who were silenced by South Korea’s dictators. What justified those costs were economic and security cooperation: forming a close trade relationship and standing together against the common threat of communism. The hopeful version of the ’65 System was for the relationship built thusly would gradually narrow the gap between South Korea and Japan, allowing the two countries to eventually forge a relationship that transcended the historical memory, as US did with UK, or as Germany did with France and the EU.

In fact, the hopeful version of the ’65 System was prevailing all the way until late 2000s. Economic cooperation with Japan did play a significant role in South Korea’s development in the 1970s. The opening of pop culture market led to a formation of commonly shared pop culture with Japanese anime and Korean dramas. Korean food enjoyed a boom in Japan, and Japanese restaurants opened everywhere in Korea. Millions of Korean tourists visited Japan each year, and millions of Japanese tourists visited Korea. The historical issues were making progress, however haltingly. The courts and international bodies were adjudicating those issues in an orderly fashion, giving relief and while draining the emotion from the issue little by little. Japan’s reckoning with its imperial history was improving each year, with Prime Minister Kan Naoto’s statement in 2010, promising “a future-oriented Japan-Republic of Korea relationship,” serving as the high point.

Unfortunately, Japan’s sharp right turn in the 2010s undid all this progress. The 2012 decision by Korea’s Supreme Court on wartime slave labor—enabled by the evolution of the ’65 System—brought to fore the core question left unaddressed by the ’65 treaties: was Japan’s colonization of Korea just? Is Japan ready to admit that it was wrong to invade Korea in the 20th century, and move toward a future-oriented relationship? Japan, led by Abe Shinzo, answered “no.” To Abe, it was more important to defend the righteousness of its imperial conquest than to have a future-oriented relationship with its closest neighbor and security partner.

It is difficult to overstate the damage that Abe’s trade war caused to the ’65 System. The ’65 System was able to persist and grow because South Korea and Japan had separated the cost of System—namely, the historical issues—from the benefit of the System, namely the economic and security partnership. This was initially achieved by South Korean dictators suppressing the Korean victims of Japanese imperialism. But even after the victims began voicing their injury in the 1990s, South Korea and Japan were able to continue the ’65 System by drawing a clear line between the historical issues on one hand, and the economic and security issues on the other.

Abe’s trade war crossed this critical line. To exercise leverage on the historical issues, Abe used economic cooperation with South Korea as a chain around Seoul’s neck. When the blowback began for engaging in a trade war, Abe made up a national security excuse that no one believed in. From there, the decline of the ’65 System passed the point of no return. For South Korean corporations, no economic cooperation is possible with a business counterpart who could stop its supply for an arbitrary political reason. Major South Korean corporations already began shifting its production lines away from Japanese materials: LG Display, for example, completely cut itself off from the hydrogen fluoride from Japan within two months after Tokyo began the trade war.

Abe’s bogus national security rationale was even more damaging. For the South Korean government, it was absurd to share military intelligence with a government that designated it as a security threat. And the final backstop of the ’65 System, the United States of America, was too busy being led by an imbecile who wanted to nuke a hurricane to intervene in time with the requisite forcefulness.

Thus ended the ’65 System in August 2019, fifty-four years after it began. 

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