Seoul's new strength tests economic ties

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Seoul's new strength tests economic ties By Yong Kwon Aug 22, 2012 Korean historians often use the idiom "shrimp among whales" to describe the tumultuous history of the Korean Peninsula - an appropriate description for a place long targeted by more powerful foreign forces attempting to assert control over strategic territories or resources. In particular, the two modern Korean states are defined by the loss of sovereignty to Japan in 1910 and the narrative of world powers violently converging on their land during the first half of the 20th century. It is certainly fair to say that the desire to avoid replicating these traumatic experiences constitutes the key driving force of both Korean states. But more so than its northern counterpart, South Korea is in a historically unprecedented position to dictate the terms of regional power relations. Economically, militarily and demographically, the Korean state has never been more robust in recent history. Recognizing its new status, Seoul has been keen on becoming a more significant player in regional and international affairs; the late president Roh Moo-hyun even talked about becoming a "whale among whales", inverting the age-old image of Korea eking out survival between its neighbors. However, Seoul's recent muscle-flexing over maritime boundaries with Tokyo may be diverting South Korea's and Japan's attention from more pressing issues at hand. Seoul's strength was difficult to gauge during the Roh administration (2003-08), when the world's attention was largely trained on the Middle East. Within South Korea as well, dealing with socio-economic and political divisions became the government's first order of business. However, this began to change as the Lee Myung-bak administration proactively pursued free-trade negotiations, pushing to expand South Korea's economic presence in the world further. Despite the public backlash, Seoul managed to ratify the Korea-US Free Trade Agreement (KORUS FTA), adding to South Korea's expanding web of free-trade agreements that already included the European Union, Chile, Singapore, the European Free Trade Area, and the Association of Southeast Asian Nations. The business-oriented foreign-policymaking of the Lee administration was most likely instrumental in South Korea maintaining a trade surplus for the sixth consecutive month despite whimpering economic conditions elsewhere in the world. [1] There is also another dimension to Seoul's industrious efforts to establish economic partnerships: Korea's position relative to that of Japan. It is likely that the Lee administration hesitated to set a definitive timeline for talks on a trilateral free-trade agreement among South Korea, China and Japan because Seoul wanted to secure a more economically advantageous position in the China market over Japan (for further discussion on this topic see Beijing, Seoul, and Tokyo look to an uncertain future, Asia Times Online, May 30, 2012). The rivalry between the two states has been subtle in the past few years, but the recent controversy around the Dokdo/Takeshima islets has pushed the antagonism between the two countries to the forefront of their bilateral relationship, which only a few months ago was on the verge of completing a historic accord on military intelligence and logistics sharing. The maritime dispute between South Korea and Japan has been going on since the end of World War II. Arguments over fishing rights and possible mineral resources were further intensified by a long-standing historical feud between the two nations (including the issue of comfort women from that war, which has also recently come to forefront). At the center of the conflict are the troublesome islets, which South Korea administers and are currently host to about 40 policemen and civilians. Seoul puts forward the claim that the maritime border between Japan and Korea should be drawn between these islets and the Oki Islands, which lie 158 kilometers to the southeast. Tokyo claims that the islets are Japanese and draws the line between them and Ulleungdo Island, which is 87km to the west. At stake here is 20,000 square kilometers of exclusive economic zone (EEZ). Making matters worse, to counter South Korea's 2006 decision to establish the EEZ vantage from the Dokdo islets (rather than from Ulleungdo Island), Japan has expanded the maritime dispute to the East China Sea, where it has adjusted its claims against South Korea's southern EEZ, placing an additional 36,000 square kilometers under contention. Seoul and Tokyo are in an unenviable position: Both governments (probably) face elections within the year (South Korea's presidential election is in December and observers suggest the Japanese Diet may soon call a national vote) and cannot compromise on the Dokdo/Takeshima issue without suffering a significant loss in voter confidence. It certainly does not help that Prime Minister Yoshihiko Noda and the Democratic Party of Japan already face a disenchanted public after doubling the national consumption tax. [2] The Lee Myung-bak administration is also conscious of the upcoming election, but Seoul also sees that it has the political capital to confront Japan and wants to test the extent of Korea's influence. Bold moves such as President Lee's visit to the disputed islands on August 10, which South Korean foreign-policymakers knew would provoke an intense response from Japan, would not have occurred otherwise. South Korea is in a more advantageous position in the region. In terms of their respective relations with the United States, the Washington-Seoul ties have become increasingly solidified by Lee's close relationship with US President Barack Obama and the recent ratification of the KORUS FTA. Meanwhile, Noda opted to concentrate on the consumption-tax debate over pursuing the US-promoted Trans-Pacific Partnership. As a result, cooperation between Tokyo and Washington has been scarce in the past few years. Furthermore, with trade relations between South Korea and China deepening and a possible bilateral free-trade agreement in the works between Seoul and Beijing, Japan is increasingly finding itself isolated from the economic arrangements that are likely to become crucial in the near future. The economic issue is closely tied with the maritime dispute between South Korea and Japan and was made evident by Tokyo's decision to consider adjusting the terms of the $70 billion currency swap with Seoul and possibly to forgo purchasing Korean government bonds after Lee's visit to the islets. However, many market watchers suggest that Tokyo's decision will have little effect on the South Korean bond market. [3] For the foreseeable future, Seoul has little to lose from its dispute with Japan and gets to assert its diplomatic muscle in the region. However, this row will benefit neither side in the long term as economic cooperation between these two robust Asian economies is crucial not only for each other's welfare, but also for the health of the global economy. Lee himself noted this year that the economic partnership in Northeast Asia would facilitate "economic recovery and growth in the world". Neither country is necessarily in great shape. South Korea still maintains a trade surplus, but it has decreased to $2.76 billion last month from $4.65 billion in July 2011, a 41% drop. Meanwhile Japan saw a 2.3% annual decline in exports, with shipments to the European Union and China down by 21.3% and 7.3% respectively compared with the year before. [4] Both countries' economic troubles stem from very similar challenges in the international market: The key destinations for both South Korean and Japanese exports have all been hit by the economic slowdown, while Washington's aggressive sanctions on Iran have placed a major burden on both countries' oil-dependent export industries. Considering of these overlaps, Tokyo and Seoul ought to be partners rather than political enemies. And before the recent falling out, Seoul and Tokyo appeared to have recognized this fact - the swap agreement that is now being reconsidered because of the maritime dispute was originally expanded to $70 billion in October 2011 from $13 billion because Seoul and Tokyo believed that such an arrangement would offer mutual protection from external shocks such as the EU's ongoing debt crisis. [5] More broadly, South Korea and Japan are instrumental players in the Chiang Mai Initiative, which seeks to pool $240 billion from 13 nations to help stabilize the economies of North and Southeast Asia, a crucial task for development in the region. Alas, the international community will probably have to wait it out until at least after both countries have new leaders at the helm. Notes: 1. S Korea trade surplus $2.76 billion, UPI, Aug 14, '12. 2. Waiting for Ryan-san, Wall Street Journal, Aug 19, '12. 3. Japan's threat unlikely to affect local bond markets: analysts, Yonhap, Aug 20, '12. 4. Japan exports post first fall in 4 months as Europe, China slow, Reuters, Jul 25, '12. 5. Japan-S Korea Currency-Swap Deal Put at Risk by Island Squabble, Bloomberg News, Aug 17, '12. Yong Kwon is a Washington-based analyst of international affairs.

August 21, 2012, 7:51 a.m. ET

http://www.atimes.com/atimes/Korea/NH22Dg01.html

Japan Turns Up Heat Against South Korea Over Isles Dispute

By ALEXANDER MARTIN

TOKYO—Japanese Prime Minister Yoshihiko Noda turned up the heat on South Korea over a territorial dispute Tuesday, deciding to take the issue to an international tribunal and telling his cabinet ministers to come up with other options the government can take against Seoul.

Tensions High Over Islands

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South Korean officials unveiled a new monument on the Liancourt Rocks on Aug. 19.

Coming on the heels of sharp criticism of his handling of a separate territorial row with China, Mr. Noda said Japan needs to take firm measures in response to a recent visit by South Korean President Lee Myung-bak to contested islands which lie between the two countries. The Korea-controlled islands are referred to as Dokdo by South Korea and Takeshima by Japan. They are also known as the Liancourt Rocks.

"Takeshima has been our territory historically and also under international law," Mr. Noda told a special meeting of cabinet ministers. "We need to look into every possible measure we can take in the future."

But Seoul said it wouldn't consider Tokyo's proposal to have the International Court of Justice look into the dispute. Seoul insists it has always had sovereignty over them.

A South Korean Foreign Ministry spokesman on Tuesday referred to a Friday statement that rejected Japan's move, floated already last week.

"Dokdo is clearly Korean territory by history, geography and international law, and a territorial dispute does not exist. It should be made clear that the Japanese government's suggestion or plan to take Dokdo to the ICJ is not worth consideration," the Aug. 17 statement said.

ICJ arbitration can't go ahead without agreement from both parties, so even if Japan files suit on its own, further proceedings are unlikely. Instead, analysts say Tokyo's real aim is to prevent further action by South Korea by drawing global attention to the issue.

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Tokyo Re-Examines Cooperation With Seoul

In addition to taking the case to the ICJ, Chief Cabinet Secretary Osamu Fujimura told reporters that some Japanese cabinet ministers—including the trade and economy ministers—would put off meetings with their South Korean counterparts.

Reflecting how emotional ties between the Asian neighbors can be, one of Japan's most popular politicians touched on the controversial issue of so-called Korean "comfort women," thought to have served as sexual slaves for the Japanese military during World War II.

Osaka Mayor Toru Hashimoto, who has topped some polls as the most popular choice for the next prime minister, challenged the South Korean government to provide proof that the women were forcibly taken by the Japanese military through "violence or intimidation."

Mr. Hashimoto's views echo those of some nationalists who say the women served by their own choice and were paid to do so. The Korean government has severely criticized similar comments by Japanese politicians in the past.

The Japanese government has acknowledged the military's involvement and apologized for the women's suffering.

In an apparent bid to keep some channels open to mend fences in the future, officials from Japan, China and South Korea met Tuesday in the Chinese city of Qingdao for talks on a trilateral free-trade agreement.

Disputed Seas

Competing territorial claims have led to maritime disputes off the coast of Asia.

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Separately, Finance Minister Jun Azumi said he hadn't decided whether to extend the expansion of a currency-swap agreement with South Korea.

Last week, he suggested the ministry may roll back the swap deal—an agreement to temporarily lend each other dollars—to $13 billion at the end of October from $70 billion now. The two nations agreed last October to increase the swap line after South Korea expressed concern of potential capital outflows resulting from the European debt crisis, Japanese officials said.

—Min Sun Lee and Takashi Nakamichi contributed to this article.

Write to Takashi Nakamichi at takashi.nakamichi@dowjones.com

http://online.wsj.com/article/SB10000872396390444443504577602471499691202.html

Japan hints at economic action in South Korea island feud

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  Japan's Finance Minister Jun Azumi …

TOKYO (Reuters) - Japan said on Tuesday it was considering taking measures beyond diplomatic action in its feud with South Korea over a group of disputed islands, suggesting Tokyo may take the unusual step of extending the stand-off into the economic arena.

Finance Minister Jun Azumi suggested last Friday that Japan could roll back an emergency currency swap arrangement agreed last year and expiring in October.

Japanese media has also speculated that Tokyo could abort a plan to buy South Korean government bonds, a step agreed as part of financial and economic cooperation between the two countries.

Japan's cabinet on Tuesday held a meeting to discuss a response to what Japan considered a provocative visit of South Korea's president to disputed islands earlier this month.

Chief Cabinet Secretary Osamu Fujimura said Prime Minister Yoshihiko Noda told his cabinet to consider additional measures to deal with the conflict, beyond usual diplomatic channels.

"Prime Minister Noda instructed ministers to prepare peaceful solution in accordance with an international law, strengthen information policy ... and consider possible additional measures," Fujimura told reporters.

Azumi would not comment on the swap deal on Tuesday and other ministers said the issue was not even discussed.

The islands, known as Dokdo in Korea and Takeshima in Japan, lie equidistant from the two mainlands and are believed to contain frozen natural gas deposits potentially worth billions of dollars.

Japan recalled its ambassador to South Korea after Lee became the first South Korean leader to set foot on the islands.

Azumi last week called off his trip to Seoul scheduled for this week and the government postponed two other ministerial-level meetings between the two countries originally planned for the end of the month.

Tokyo has said it will take the long-running islands territorial dispute to the International Court of Justice.

But it would be unusual for Japan to play the economic card in disputes with its neighbors.

"They are talking about it but I am not sure they will carry through the threats. Talk is cheap," said Koichi Nakano, Sophia University professor and political commentator.

Japan's ruling Democrats, under voter pressure and likely to lose the next election, seemed to have over reacted to media criticism that they were too soft in disputes with Japan's neighbors, said Nakano.

The spat with South Korea coincides with a stand-off between Japan and China over another island chain, which sparked major anti-Japanese protests in China last week.

Tokyo has stressed the dispute with Beijing over the islands, known as the Senkaku in Japan and the Diaoyu in China, should not hurt ties between Asia's two biggest economies.

Despite ever-closer economic ties, memories of Japanese militarism run deep in China and South Korea and overlap with present day rivalry over markets, economic and diplomatic influence and natural resources.

(Reporting by Kaori Kaneko; Writing by Tomasz Janowski; Editing by Michael Perry)

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http://news.yahoo.com/japan-considers-non-diplomatic-action-south-korea-island-061432091.html

Why Won’t Korea Accept Japan’s Invitation to Go to the ICJ?

by Julian Ku

I’ve been trapped in an August blogging-slump. But I am roused to my keyboard by the surge of territorial disputes in Asia.  China has aggressively asserted ever stronger and more expansive claims in the South China Sea, sparking dissension amongst the Association for Southeast Asian Nations (ASEAN) and serious protests in Vietnam and the Philippine.  China, Taiwan, and Japan are trading diplomatic barbs over the disputed Diaoyu/Senkaku Islands.  And Korea and Japan are at loggerheads over the Dokdo/Takeshima islands.  All of these disputes are getting worse, not better, and are exacerbating tensions all over Asia. This is shocking for most folks over here in the States, as it is hard to imagine why all of these countries are squabbling over (for the most part) a bunch of rocks.

Of these various disputes, the Korea-Japan battle over Dokdo/Takeshima seems the best candidate for resolution by international arbitration.   Japan, in fact, has formally asked Korea to submit the dispute to the ICJ for binding arbitration and has even threatened some mild economic penalties if the Koreans don’t agree.  And Korea has flatly turned down Japan, which is somewhat surprising given that Korea is one of the most enthusiastic supporters of international organizations and international dispute resolution in general.  The President of the ICC is a Korean national, and Korea has a judge sitting on the International Tribunal for the Law of the Sea. (Oh yeah, that UN Secretary General is from Korea too!).

According to news reports, Korean diplomats have said that the ICJ is inappropriate because the Dokdo/Takeshima islands plainly belong to Korea under international law.

“Dokdo is clearly part of Korean territory historically, geographically and under international law, and no territorial dispute exists,” said Cho Tai-young, spokesman at the Ministry of Foreign Affairs and Trade. “The Japanese government’s proposal to take the Dokdo issue before the ICJ is not worth attention.”

From a legal perspective, this is a pretty unpersuasive response. Japan has agreed to accept any ICJ judgment.  Korea has no shortage of brilliant international lawyers who could put on a terrific case at the ICJ.  This whole case could be definitively resolved and a ongoing source of tension between the two neighbors could be settled amicably.  The U.S. and Canada used international arbitration to settle some key disputes over the US-Canada border, with pretty good success over the years.

I suppose the answer is simply that Korea currently controls the islands, and the ICJ judgment will get Korea nothing except confirmation of what Korea already has.  But if Korea continues to refuse Japan’s offer, then it is even less likely that any of these other disputes could go to international arbitration.  Indeed, it suggests that international adjudication in Asia has a pretty bleak future. Korea and Japan are two of the most pro-international adjudication countries in the world. If they can’t agree to go to international arbitration, what are the chances that China (with its numerous territorial disputes with all of its neighbors) will ever agree to such arbitration?

http://opiniojuris.org/2012/08/20/why-wont-korea-accept-japans-invitation-to-go-to-the-icj/