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61. PeSCo – Anything There for European Defence?

Author:
Sandro Knezović
Publication Date:
02-2018
Content Type:
Working Paper
Institution:
Institute for Development and International Relations (IRMO)
Abstract:
The European strategic landscape has changed dramatically over the course of the last decade. The post-Cold War mantra about the obsolescence of conventional threats in the wider European space proved to be short-sighted with developments at its eastern �lanks, while security dysfunctions in the MENA region and their immanent consequences for the safety of European citizens have loaded a heavy burden on compromise-building and decision-making in the �ield of the Common Security and Defence Policy (CSDP) of the EU. Furthermore, the approach of the new US administration to European security and the strategic consequences of Brexit have changed the wider framework in which security of 'the Old Continent' is to be determined, hence stimulating European leaders to rethink European security in a strive for strategic autonomy of their own. The very ambitiously phrased EU Global Strategy that came out in June 2016, served as both catalyst and umbrella document for such an endeavour. However, in order to achieve measurable progress in responding to contemporary security challenges, it was clear that the EU needs to develop a structural way for member states to do jointly what they were not capable of doing at the national level. This is so especially in the environment in which China, Russia and Saudi Arabia are championing the defence spending, right after the US, while European states are signi�icantly trailing behind. The fact that the EU collectively is the second largest military investor and yet far from being among the dominant military powers only emphasises the burning issue of ef�iciency of military spending and the level of interoperability among member states’ armies. High-level fragmentation of the European defence market and the fact that defence industries are kept in national clusters is clearly contributing to that. The reality on the ground is obviously challenging traditional methods of co-operation that operate mainly in ‘national boxes’ and calling for a paradigm change in the wider policy context of CSDP. However, it remains to be seen to which extent will this new security environment actually be able to push the European defence policy context over the strict national boundaries.
Topic:
Security, Economics, Military Strategy, and European Union
Political Geography:
United States, China, Europe, Middle East, Asia, and Saudi Arabia

62. Tensions in U.S.-Korea Economic Relations

Author:
Troy Stangarone
Publication Date:
04-2018
Content Type:
Journal Article
Journal:
International Journal of Korean Studies
Institution:
International Council on Korean Studies
Abstract:
Following a relatively successful period for U.S.-South Korea economic relations under the Bush and Obama administrations, Washington and Seoul have entered a new period of economic tension in the Trump administration. Unlike prior U.S. presidents, who placed a priority on negotiating fair rules in the United States’ economic relationships, President Trump has prioritized outcomes. As a result, one of his administration’s earliest moves was to renegotiate the KORUS Free Trade Agreement. While the results of the renegotiation were modest, they may help to expand the sale of American automobiles in the Republic of Korea in the long-run. The largest outcome of the negotiations may be to protect the Ford Motor Company from South Korean competition in the U.S. market as the company transitions to sales focused on light trucks. While the renegotiation has eased tensions for the moment, the prospect of economic engagement with North Korea, the Trump administration’s continued use of national security to erect trade barriers, and the emergence of new technologies such as artificial intelligence and autonomous vehicles could result in growing tensions in the relationship.
Topic:
Economics, Treaties and Agreements, Bilateral Relations, Negotiation, Free Trade, and Donald Trump
Political Geography:
Asia, South Korea, North Korea, North America, and United States of America

63. North Korea’s Military Strategy, 2018

Author:
Chun In-bum
Publication Date:
08-2018
Content Type:
Special Report
Institution:
Korea Economic Institute of America (KEI)
Abstract:
As the focus shifted from North Korea’s military advances in 2017 to its diplomatic offensive in 2018, we should not lose sight of the strategic thinking behind gaining the maximum time to develop the capacity to extend its military threat. At present North Korea needs time to perfect its nuclear strike capability. It has been very successful in developing missile capabilities, but it needs additional time to achieve its goals. Starting with high-level North-South talks on March 5, 2018, the DPRK has just gained what it needs most: time. Whenever the first talks begin with the United States and the DPRK, there should be no surprise if the DPRK comes with an improved capability to threaten the alliance. Thus, for an extended period in 2018, as diplomacy proceeds, we should expect a subdued North Korean approach: not flaunting its nuclear weapons and missiles, while striving to boost capabilities for the struggle ahead. In the seven years since Kim Jong-un officially inherited the leadership of the DPRK, his stated policy has been byungjin ( 병진, 竝進), the pursuit of both economic and military development. In conjunction with purges and efforts to eliminate rivals, byungjin may, in part, derive from Kim’s efforts at the outset of his tenure to consolidate political power. Through it, Kim displayed moderate economic flexibility, thereby gaining favor with the North Korean people through facilitating an improvement in living standards. It is tempting to see byungjin as a sign of the regime’s weakness, or as an indication of moderation, either of which would prompt the eventual collapse of the Kim regime. Correspondingly, one might see it as a reflection of Kim’s immaturity, inexperience, and lack of political and strategic acumen. These viewpoints reflect mirror imaging more than a sophisticated understanding of North Korea. Byungjin may be more of a political device and a strategic communications element of a grand strategy, as opposed to the regime’s strategy. It may be a significant instrument in the regime’s effort to maintain elite cohesion and focus the energies of the North Korean people toward productive pursuits that likewise add to the regime’s legitimacy and staying power. It by no means suggests any diminishing of the priority of making advances in nuclear and missile development in order to pose a more serious threat. Since taking power, Kim’s regime has fired close to one hundred missiles of wide variety and range compared to thirty-one for his father and grandfather combined. He has also conducted four nuclear tests, boasting of a thermal nuclear capability. During his 2018 New Year’s address, Kim Jong-un proclaimed that the DPRK had perfected its nuclear and intercontinental missile capabilities, supporting North Korea’s constitutional claim to be a nuclear power. Despite an upsurge in diplomacy after this address, we should keep our eyes on its military advances.
Topic:
Diplomacy, Economics, International Security, Military Strategy, and Weapons
Political Geography:
Asia, North Korea, and Korea

64. North Korea’s Economic Strategy, 2018

Author:
William B. Brown
Publication Date:
08-2018
Content Type:
Special Report
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This chapter takes the perspective of North Korea’s leadership as it confronts difficult economic problems in the remaining months of 2018. The major current and potential issues are listed and prioritized. Short and longer-term remedies are presented, each with trade-offs that affect other economic and policy issues. Given the absence of direct reporting from North Korea, the issues and debates presented are speculative, designed to give the reader a more comprehensive understanding of North Korea’s current problems than is ordinarily presented in western media. Kim Jong-un’s recent diplomatic offensive, reaching out to South Korea, China, and the United States is, in this view, suggestive of these internal economic troubles in addition to the nuclear security issues. The troubles are both short-term—the collapse in trade with China in just the past few months—and long-term, the slow-motion collapse of the communist country’s “command” economy. And much more than in the past, the problems relate to the regime’s unusual and dangerous monetary system, money being a normal issue for most governments but a relatively new one for this still partially rationed, or planned, oriented system. The leadership may have little choice but to let the domestic economy move further from the plan—allowing decentralized market and private activities more sway—than ever before. This would help cushion the central government from losses due to the sanctions and open the door to a much more prosperous future. Without major moves in this direction, inflation and unemployment may cascade into social crisis. It should be noted, that the recent Assembly Meetings, which annually focus on the economy, gave little official indication of policy changes, only a sense of digging in further to protect the regime from outside forces. But just a week later, Kim may have telegraphed an upcoming sea change when, in his address to the Party Central Committee plenum, that he is instituting a new Party Line, socialist economic construction, as the total focus of the Party and the country. Major changes, if they are to occur, will likely come after the upcoming important summits with South Korea and the U.S.1 There is little doubt that the economy in 2018 is in very poor condition, delivering one of the worst productivity rates—productivity in terms of labor and of capital—in the world, but it is important to recognize that this is due not to natural circumstances but to decisions the government has made over the years, and trade-offs it has already made. This suggests that astute government policy can create solutions and restore growth. Remedies of the sort expressed here, for example in liquidating, that is selling or leasing state assets to private buyers, raising fixed prices for state delivered electricity and for water and other utilities, and giving large pay raises to the millions of state workers who now rely on rations, while culling their numbers, would require difficult economic and social trade-offs; one might say there is no free lunch for Kim and his regime although no doubt they are looking for one, even in these summits. The chapter discusses just what kinds of decisions might be made and the likely consequences. Negotiations being set with South Korea and with the United States, and likely more discussions with China, may weigh heavily in how far Pyongyang will be willing to go in these respects. In my view the regime will be looking for: outright aid, payments for pushing back the nuclear weapons program, and premature relief from sanctions, which would only give the regime time to avoid the hard choices needed to permanently fix the broken economic system.
Topic:
Diplomacy, Economics, Sanctions, Services, and Trade
Political Geography:
China, Asia, North Korea, and Korea

65. The Game for Regional Hegemony: China's OBOR and India's Strategic Response

Author:
Anshuman Rahul
Publication Date:
06-2018
Content Type:
Journal Article
Journal:
AUSTRAL: Brazilian Journal of Strategy International Relations
Institution:
Postgraduate Program in International Strategic Studies, Universidade Federal do Rio Grande do Sul
Abstract:
The OBOR initiative of China often termed as ‘Modern-day Silk Road’ is based on President Xi Jinping’s epic vision to make ‘China Great Again’ by reviving the Silk Route of ancient times. This initiative aims to engage Eurasia economically by creating a network of infrastructure. In this regard, the article attempts to understand the geo-politics behind India’s refusal to join OBOR and strategic response to counter the most appealing economic engagement of the present era but considered to be a debt-trap by India.
Topic:
Economics, International Trade and Finance, Military Strategy, and Silk Road
Political Geography:
China, India, and Asia

66. Economic Regionalism is Key to Openness and Growth: An ASEAN Perspective

Author:
Sanchita Basu Das
Publication Date:
08-2018
Content Type:
Special Report
Institution:
Korea Economic Institute of America (KEI)
Abstract:
The 10 members of the Association of Southeast Asian Nations (ASEAN) are involved in several regional economic arrangements, not only their own ASEAN Economic Community (AEC), but also those in a bigger geographic area, such as the ASEAN+1 Free Trade Agreements (FTAs) and the Regional Comprehensive Economic Partnership (RCEP). A subset of these countries are partaking of Asia-Pacific deals, namely the latest Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the Asia-Pacific Economic Cooperation (APEC). Some are pursuing bilateral deals in pursuit of deeper economic cooperation. Finally, all ASEAN countries are members of the Belt and Road Initiative (BRI), which although not labelled a trade agreement, is concerned with trade-related measures including transport infrastructure, policy coordination, economic connectivity through trade and investment, customs modernization, financial cooperation, and people-to-people linkages. A common feature of all these trade agreements is that they are not just focused on removing restrictions on trade, i.e. lowering import tariffs and quotas, but are much more comprehensive and include issues like trade in services, investment, labor, intellectual property rights, regulatory standards, and health and safety rules. All of these agreements deal with cooperation measures beyond national borders and can be called deep economic cooperation. They go beyond the WTO framework and are often labeled “new regionalism,” understood as state-led projects in the context of global developments. The extent of deepness varies, mainly depending on the participating countries’ development stage and the economic competitiveness of domestic sectors. What do the ASEAN countries aim to achieve? Theory has elucidated that governments have motives ranging from politics to economics when entering an economic cooperation arrangement. The political motives could be confidence building, i.e. if an international relationship was blemished by a history of conflict, economic cooperation can introduce a process of confidence building.3 For smaller countries, it could be seen as a means to increase bargaining power with the international community. Countries often see economic cooperation as a means to hasten their domestic economic reforms so as to increase attractiveness to foreign investors.4 Governments could follow a regionalism exercise also to defend domestic interests that are threatened by regionalism elsewhere. As for the economic motives, countries prefer cooperation among a limited number of players as it enables continued protection in a bigger geographical space and shuns producers from non-members. This enables them to exclude “politically sensitive,” noncompetitive domestic sectors completely from trade liberalization. Finally, regional economic arrangements are essential for creating economies of scale for producers and offering a larger market for consumers, which increases attractiveness to potential investors. This chapter elaborates on ASEAN’s perspective on economic regionalism in the Asia-Pacific. It examines key initiatives that ASEAN countries are currently negotiating or implementing in their national economies, discusses economic and strategic motives, and views the future of regionalism from an ASEAN perspective. It concludes that although the ASEAN countries are facing some uncertainties in their pursuit of economic regionalism, they will continue to support the endeavor as it serves their economic structure of openness. The countries have realized the benefits of economic integration in terms of confidence building of investors, thereby bolstering economic growth.
Topic:
Economics, Treaties and Agreements, Economic growth, and Regional Integration
Political Geography:
Asia and Southeast Asia

67. Advancing the Regional Trade Order in East Asia with a Less Engaged United States

Author:
Korea Economic Institute of America
Publication Date:
08-2018
Content Type:
Special Report
Institution:
Korea Economic Institute of America (KEI)
Abstract:
In the aftermath of Donald Trump’s election and immediate pullout from the TPP, a scramble ensued over how to proceed with constructing a regional trade order centered on East Asia. For China this brought closer scrutiny of its pursuit of the Belt and Road Initiative (BRI). In the case of Japan, questions followed about what to do with the residue of TPP. Others, notably countries in Southeast Asia, were left contemplating the balance between eastern exclusive regionalism and the western presence in regionalism. In the background were efforts in South Asia aimed at advancing economic integration with East Asia. A kind of free-for-all was in progress without the moorings that had been lost after the paradigm of competition between a U.S.-led TPP and a China hub-and-spokes BRI no longer was guiding the strategic calculations of Asian countries. Then, in March 2018 came Trump’s disruptive tariffs, threatening to set a trade war in motion. Four chapters explore the challenge of advancing a regional trade order in East Asia in the new circumstances of 2017-18. Tu Xinquan in Chapter 10 questions whether BRI is a path toward regionalism, delving deeply into the Chinese strategy for BRI. T.J. Pempel follows in Chapter 11 by exploring Japan’s thinking about TPP and the process of refocusing on TPP- 11 following the U.S. withdrawal. Chapter 12 by Sanchita Basu Das offers a hopeful ASEAN perspective on economic regionalism. Finally, in Chapter 13 Pradumna Bickram Rana traces thinking about re-energizing economic integration between South Asia and East Asia. With no finality to the RCEP talks and the recently concluded TPP-11 pact still taking shape and Trump’s “America First” trade policy casting a dark shadow, we aim to capture signs of a new trade order at a time of flux.
Topic:
Economics, Regional Integration, and Trade
Political Geography:
Japan, China, East Asia, Asia, and Korea

68. Making Korea Grow Again: Rebalancing the Moon Jae-in Economic Agenda

Author:
Choong Yong Ahn
Publication Date:
05-2018
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
The Moon Jae-in administration in South Korea has taken a two-pronged approach to ensure urgently needed job creation and inclusive growth. Although measures towards each set of economic policies have been implemented since Moon took office in May 2017, what’s often referred to as “incomeled growth” has been prioritized over innovative growth. The income-led growth model is largely driven by domestic consumption through pro-labor distributional policies including a wage hike to raise the disposable income of low- and middleincome individuals, thereby triggering equity with growth. Focused more on the supply side, the innovative growth model encourages startups to create jobs and innovate. It is a great challenge for Korea to pursue growth and equity through both sets of policies. After a year in office, the Moon administration’s economic agenda, often referred to as J-nomics, has not fully produced the intended policy objectives in terms of job creation and growth. To mitigate a declining potential growth rate and pursue robust and inclusive growth, the twin policies need to be rebalanced, reprioritized, and interconnected in a mutually reinforcing manner to empower the private sector to play a bigger role. As a mid-sized open economy, Korea requires global market competitiveness on the supply side to create decent jobs by buoying entrepreneurship and innovation. Structural reforms in the labor market combined with deregulations necessary for the advent of disruptive 4th-industrial-revolution technologies must be expedited. Furthermore, a new business ecosystem in which win-win collaborations between globally-oriented conglomerates and small businesses must be encouraged to replace a zero-sum business culture.
Topic:
Economics, Science and Technology, Global Markets, and Economic growth
Political Geography:
Asia, South Korea, and Korea

69. The Economic Importance of the KORUS FTA: A Case Study of the Korean Beef Market After Renegotiations

Author:
Jin Kyo Suh
Publication Date:
05-2018
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
Beef trade was a major sticking point between the United States and South Korea in ratifying the KORUS FTA. The outcome of the renegotiations that led to the March 2018 agreement in principle did not impact sections pertaining to beef in the agreement, though looking at how beef trade would have been affected should the talks have failed highlights the importance of the agreement to both countries, but particularly the United States. This paper estimates the demand for imported beef in South Korea by source and product by using the production version of the Rotterdam demand system and assesses what the potential impact of U.S. withdrawal from the KORUS FTA would have been on beef trade between the U.S. and South Korea. The results suggest U.S. withdrawal from the KORUS FTA would have resulted in a considerable increase in Australian beef exports to South Korea, largely at the expense of U.S. beef. This is because there is significant price competition between beef imports from the United States and Australia. Furthermore, Korean consumers substitute American beef for Australian beef when the relative price of U.S. beef rises.
Topic:
Economics, Treaties and Agreements, Exports, and Trade Policy
Political Geography:
Asia, South Korea, North America, Korea, and United States of America

70. Corruption in Yemen’s War Economy

Publication Date:
11-2018
Content Type:
Policy Brief
Institution:
Sana'a Center For Strategic Studies
Abstract:
Corruption, or the abuse of power for private gain, has been deeply entrenched in the Yemeni political economy for decades. Over the course of the ongoing conflict, however, as the war has fragmented and regionalized the country, state capture in Yemen has become far more complex. In the war economy, patronage networks are now emerging among previously marginal or unknown figures. The financial involvement of Saudi Arabia and the United Arab Emirates has extended patronage across national borders. Alleged collusion between Houthi-affiliated importers and officials allied with the internationally recognized Yemeni government indicates patronage networks that potentially cross the frontlines of the war themselves. As greater numbers and a wider variety of actors profit from illicit activity in the war economy, vested economic interests in continued conflict become more entrenched. If state capture is among the main drivers of Yemen’s war economy, then post-conflict recovery must include a strong anti-corruption agenda. Policymakers must begin planning to address corruption as a part of a potential post-conflict strategy. Given the multi-faceted pervasiveness of corruption in Yemen, any anti-corruption agenda must aim to understand the complex configuration of patronage networks in Yemen, to be introduced gradually, and to get the buy-in of as wide a group of Yemenis as possible. Without these basic building blocks, more specific policy changes such as encouraging transparency or reducing conflicts of interest may founder. Corruption has become deeply entrenched in Yemen; any post-conflict anti-corruption agenda must be great in scope and long-term in vision.
Topic:
Corruption, Economics, Government, War, and Economic Development
Political Geography:
Asia, Yemen, and West Asia