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South Korea’s Growing 5G Dilemma

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With Sungmin Cho, CSIS Commentary, 6 July, 2020

Recent developments in the information and communications technology (ICT) competition between the United States and China are likely to have caught the attention of South Korea’s Blue House. As a close U.S. ally with a stake in the 5G debate, it has been watching the UK 5G debate very closely. After all, if a close U.S. ally such as the United Kingdom could incorporate Huawei in its 5G network without damaging its alliance with Washington, it would provide Seoul with support for its own inclusion of the Chinese tech company into its networks. However, all of this has changed in the wake of the U.S. announcement on May 15 that it would restrict Huawei’s ability to design and manufacture semiconductors using U.S. technology, with both the United Kingdom and Canada suddenly shifting their apparent willingness to include the Chinese company in their 5G networks.

First, Bell Canada and Telus, two of Canada’s largest telecoms, announced they would be awarding contracts solely to Ericsson and Nokia, Huawei’s Scandinavian rivals, studiously avoiding any mention of the Huawei bid. In London, the shift has been even more prominent, with Boris Johnson calling for a “major rethink” on China. According to media accounts, discussions at the Cabinet Office level began last week looking at ways of replacing Huawei in the country’s 5G network by 2023. As the United Kingdom already has a mixed supplier system incorporating Ericsson and Nokia, they are now searching for a third supplier to replace Huawei and are apparently in discussion with Japan’s NEC and South Korea’s Samsung. The United Kingdom is also leading discussions on the formation of a “D10 Club,” a telecommunications supplier group consisting of the G7 members plus India, Australia, and South Korea, which it hoped to put forward at the U.S.-hosted G7 summit in September. South Korea has already accepted an invitation to the summit, though as of writing the summit’s details have yet to be finalized

Its inclusion in the D10 and in the United Kingdom’s consideration of Samsung as a replacement for Huawei raises South Korea’s profile in the wider 5G ICT supply chain debate, something that the Blue House has, until now, sought to avoid for two reasons. First, this ICT “decoupling” is driving a wedge between technology supply chains, which are deeply integrated for South Korean companies. The growing bifurcation between the PRC and the United States in this new “technology cold war” puts South Korea squarely between its main security provider and its main trading partner: an unsustainable position over the long run. Second, while Samsung is itself a competitor of Huawei—particularly in the space of 5G patents and equipment—there are many South Korean companiesthat still wish to collaborate with Huawei and other leading Chinese technology firms who will resist the growing pressure to decouple in ICT.

This “security-trade dilemma” facing Seoul is not unique. Many U.S. allies are similarly dependent on China for trade and investment—Australia is a major example, having suffered an economic downturn, partly due to Covid-19 and partly due to a deterioration in relations with China. For South Korea, proximity is a serious factor, as 27 percent of South Korea’s exports in 2018 went to China, while only 12 percent went to the United States. As a result, the costs of a Chinese retaliation on South Korea’s economy are larger and have shaped Seoul’s low-profile approach to the debate thus far. Indeed, Chinese authorities have already sent warning signals to South Korea through multiple channels. In June 2019, China’s

National Development and Reform Commission allegedly “called out” Samsung Electronics and SK Hynix with warnings not to block trade with Huawei. China’s tourism boycott of South Korea for hosting the U.S. deployment of the Terminal High Altitude Area Defense system (THAAD) was said to have cost the country $5.1 billion in lost revenues. Therefore, it is not surprising that South Korea’s former Minister of Science and ICT You Young-min has asserted that the 5G issue is not even up for discussion: “Huawei security issues in 5G should not be discussed because China is sensitive to it. I’m afraid that there would be a dispute.”

The issue is hardly simple for South Korea, as it has mixed interests, particularly from companies such as Samsung which could increase market share in smartphones at Huawei’s expense. More importantly, Samsung can become a dominant 5G network supplier if Huawei’s global business in 5G equipment is effectively diminished. However, supply chain integration also means that Huawei is one of Samsung’s biggest customers for SK Hynix’s memory chips. Huawei alone accounts for 17 percent of South Korea’s electronics parts exports to China in 2019. Huawei not only buys parts from South Korea but also provides 5G-related equipment to South Korean companies such as LG U-plus. As a result, South Korean companies are torn. South Korean companies stand to gain long term from Huawei’s lost global market share in 5G-related off-shoots, such as wearable devices, smart infrastructure, and the Internet of Things (IoT), but this will be at the expense of short-term business and growth from Huawei and other PRC tech firms.

As South Korean policymakers are beginning to realize—as indeed many other nations are realizing in the wake of Covid-19—trade dependency on the PRC is increasingly becoming a national security vulnerability. As a result, a shift toward “diversification” is not unwelcome. Like their Japanese counterparts, South Korean firms have been gradually withdrawing from China as Chinese competitors absorb their intellectual property and establish cheaper rival products. This long-term trend became even more pronounced after the 2017 THAAD crisis showed how vulnerable Seoul was to Beijing’s economic coercion. Shortly thereafter, Samsung started to downsize its Chinese manufacturing presence, closing the Shenzhen production line in May 2018, followed by its Tianjin factory in December. As the trade war between the United States and China began to heat up, South Korean firms continued their exodus from China, going to replacements such as Vietnam, where South Korean FDI ($1.97 billion in the first half of 2018) actually exceeded FDI into China ($1.6 billion over the same period).

The prospect of increased South Korean visibility on this issue is not relished by President Moon Jae- in. After all, the overriding issue for the U.S.-ROK relationship has been base support, an issue with sensitive connotations domestically. However, there may be growing realization among South Korea’s leaders that the U.S. position on Huawei—and Chinese ICT supply chains in general—is a bipartisan one across Washington DC. This was the primary message during the Munich Security Conference in Germany held this past February, with senior Democrats such as House Speaker Nancy Pelosi and House Intelligence Committee Chairman Adam Schiff showing a rare example of bipartisanship by echoing the administration’s warnings about the Chinese company in their remarks. Slowly but surely, U.S. allies are beginning to realize that this issue is one where there is little daylight between the two parties in Washington.

While it is true that to date U.S. efforts to pressure their allies have only been reluctantly accepted, there are increasing signs that states wish to avoid the supply chain vulnerability that comes with dependence on China. The recent prospect of a British “D-10 Club” of countries at the next G7 provides a potential breakout for Seoul, Canberra, Tokyo, and other allies from the security-trade dilemma. Speculation that India’s is considering a ban of ZTE and Huawei components from its 5G networks also supports this trend. As a member among 10 major economies, South Korea will have less to fear from a vengeful China; as a collective that includes multiple U.S. allies, it will also be able to balance U.S. policy preferences with the interests of the wider group. Either way, any diplomatic grouping looking at both trade and security in relation to China would certainly bear watching.


Pacific Trident III:  The Strengths and Weaknesses of the U.S. Alliance System Under Gray Zone Operations

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Security Nexus, 30 March, 2020

“What have I come here to learn?” This was the question at the forefront of my mind as I entered a modern, glassy, corporate site on a cold, wet Norfolk day in early February. The large room was cavernous and approximated my vision of a secure control center, with busy people at consoles in a pit facing three massive screens at the front, and a raised deck to their rear, housing an operations control center. I thought of the 1983 film, War Games, and, in a sense, that was an appropriate parallel as I was attending a tabletop exercise, “Pacific Trident III,” created and run by Sasakawa Peace Foundation USA (Sasakawa USA), a think tank based in Washington D.C.

The exercise itself – the set-up – was actually quite interesting for a mid-career East Asia analyst like myself. It was not the usual North Korea crisis or Taiwan-China crisis, but rather a realistic combination of two different scenarios. The starting point was for the China team to 1) expand Chinese influence and authority in East Asia and 2) drive wedges between the United States and its allies. The China team began the game by persuading the North Koreans to “initiate” a minor but ambiguous provocation – a small special operations ground attack on a U.S. base in the South – while China simultaneously landed “humanitarian aid workers” on a Taiwanese-administered island in the South China Sea in the wake of a typhoon.

It was a clever and interesting set-up that confounded the United States and allied players in the initial stages of the game in two fundamental ways. First, it utilized two different crises at the same time, challenging the United States and allied players as to which was the “real” crisis, or which merited prioritization. Second, both crises involved actors using gray zones tactics (operations other than war) to achieve their objectives. In many ways, the fact that there were two gray zone operations at the same time showed the alliance system’s strengths and exposed some of its weaknesses.

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Vice, David Gilbert, 22 March 2019

“The sudden decision by North Korea to remove its officials from the liaison office is no doubt aimed at the Moon Jae-in administration, which is keen to push peace talks forward,” John Hemmings, Asia Director at the Henry Jackson Society, a British foreign policy think tank, told VICE News. “It’s really a less-than-subtle attempt to split Washington and Seoul over the added sanctions.”


What Happens Next in U.S.-North Korea Relations

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The National Interest, 12 March, 2019

No doubt those North Korea experts who predicted that the Hanoi Summit would fail, have found cold comfort in the news over the past two weeks. The apparent collapse of the summit seemed to come partly as a result of North Korean leader Kim Jong-un’s unwillingness to put more of North Korea’s programme on the table. Failure also stemmed partly from the Trump administration’s apparent walk-back from the step-by-step approach. There are really two questions that have arisen from Hanoi’s failure: “what went wrong?” and “what next?” In attempting to answer the latter question, one must ask whether we will return to the tense period that marked the early part of the Trump administration, with North Korea and the United States shadow-boxing over U.S. attempts to impose an effective economic blockade.

Already, we are beginning to see emerging (or re-emerging) signs of that more familiar relationship dynamic, with the North Koreans apparently restoring facilities at a long-range rocket launch site it had dismantled last year. The revelation—acquired on March 2 from commercial satellite imagery—was discussed in a recent event at Center for Strategic and International Studies, where Victor Cha and Joseph Bermudez showed how the rail mounted transfer structure and vertical test engine stands at Sohae launch facility had been restored over a matter of days. Given that the site had been dormant since August 2018, it has been suggested by many North Korea experts that we are due a return to the provocation cycle that has characterized North Korean tactics for so long.

When one looks at the U.S. position, one can also see signs that the United States is returning to a hardline posture. For instance, take Trump’s allegations that North Korea wanted sanctions lifted in their entirety and his statement at the press conference immediately after Hanoi. There are also those who point to the recent shift in the Trump administration’s negotiating strategy from a step-by-step approach to a “go big” approach. Special Representative Steve Biegun’s shift in this direction is likely to doom future progress by making the choice between unilateral disarmament and doubling down on the nuclear weapons strategy. A third—and as of yet, unstated, question—is can the United States persuade regional partners and allies to re-exert “Maximum Pressure” after the long interval? This question takes on even more salience when one considers how far things have drifted between South Korea and its traditional partners, Japan and the United States.

In a report co-authored by Henry Jackson Society and others last year, an expert panel predicted three future scenarios; a best-case scenario, a middle-of-the-road, and a worst-case scenario. This last scenario saw a breakdown of negotiations, followed by a breakdown in regional support for the U.S. “maximum pressure.” We see signs of this third scenario emerging.

One hopes the administration will approach this new stage with great care and diplomatic acumen.


North Korea and America’s Second Summit: Here’s What John Hemmings Thinks Will Happen

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The National Interest, 06 February, 2019

It is unlikely that President Donald Trump will be able to convince North Korea to lay down its nuclear weapons system, despite some excellent—if unorthodox—displays of diplomacy. Trump’s approach in the North Korean negotiations has been distinct and offered a combination of pressure, unpredictability, flexibility, respect-culture, and cultivation of the personal touch.

The “maximum pressure” approach toward North Korea was unprecedented, not merely in the sanctions—particularly secondary sanctions—field, but also in the sector of military pressure. For all the decades of American experts telling us that China had no leverage in North Korea, Trump proved that pressure applied to on Chinese could be very effective, indeed. Presidents Obama and Clinton had asked Beijing to help them. It made North Korea America’s problem. Trump raised the spectre of war on China’s doorstep. Suddenly, it made North Korea China’s problem. North Korea quickly folded under the double pressure.

The real question is can Trump deliver? While the summit at Singapore had little meaning in real terms, it was the starting gun in a long, drawn-out process in which we have seen both signs maneuver with much fanfare, but with little actual progress. We also now have the spectre of the second summit (in Vietnam), announced during Trump’s State of the Union address. Seen against the light of Kim’s own New Year’s Day address, it is unclear where the two can compromise. In his address, Kim summarized North Korea’s economic situation—in terms of the second part of his Byungjin policy—now called the “new strategic line.” While this appears to emphasize North Korea’s economy, it is unclear whether or not the North believes this will entail denuclearization as the United States understands it.

In the speech, there are other “promising” signs that are actually quite worrying. First, he portrays North Korea as a responsible nuclear weapons possessor, which strongly hints at his continued belief in an India-style deal whereby he is allowed to keep his weapons. Second, it is becoming increasingly clear that the North Korean regime is confident it can de-link the United States from its South Korean ally, something to which the progressive Moon Jae-in government’s deal-at-any-cost approach has unwittingly contributed. Given the country’s role in hosting U.S. troops and upholding sanctions, it is a vital part in sustaining Washington’s maximum pressure campaign should talks fail. The North Korean leader’s confidence is a disconcerting sign of the unraveling of the U.S. position. Whether Donald Trump can rectify these structural issues remains to be seen.


Even if it fails, the North Korean peace summit is an incredible breakthrough

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The Telegraph, 26 April, 2018

What took place this morning in the Panmunjom Joint Security Area an incredible moment in Korean history. Even after years watching the ratcheting tensions between North and South Korea, I found myself a little awed.

In one clip doing the rounds this morning, both Northern and Southern leaders meet on a large screen, with journalists in the press pool watching. The ascending roar of surprise and acclamation when they stepped across the border, hand in hand, was moving in itself.

We watched Kim Jong-un, the leader of a murderous regime, smilingly step over a simple concrete marker and into South Korean territory. Moon Jae-in, South Korea’s progressive president, was in his element, with a welcoming and warm smile.

Then they even stepped back over into North Korea, to the amusement and pleasure of both. It was a testimony to the fact that all political walls are , in the end, only human.

Several months ago, denuclearisation was not even on the table. Today, however improbably, it is. Even if nothing comes of this meeting, it’s significant that we are even at this point.

But what are the actual prospects for a lasting peace? The opening point of the statement released by both leaders was a promise to re-open people-to-people links, and a number of steps were taken to institutionalise relations at certain flashpoints, such as the Northern Limit Line in the Yellow Sea.

Most importantly, it agreed that a peace treaty between the two is on the cards, to be signed within a year, committing Moon to a visit to Pyongyang in the Autumn. Dr Ramon Pacheco Pardo, senior lecturer at Kings College London, said this was certainly the most consequential element of the agreement. It “would not only allow a formal end to the Korean War, but also allow for a new framework for inter-Korean relations”. The US and China would also have to be involved in this process, as two of the parties to the 1953 Armistice.

In terms of denuclearisation, both agree that this is a desirable goal and one that both sides want. But the term “disarmament” is also mentioned, perhaps indicating some hint of a reduction of ROK forces and US forces. Time will tell what this means, and we will have to see how this issue is framed during the Trump-Kim meeting, expected to take place in Singapore sometime in late June.

As some have argued, it was a necessary step, but not a sufficient one. Pardo stated that this cautious optimism was palpable in South Korea. “On the streets of Seoul, this is seen as a positive, hopeful and feasible agreement, but there is still caution about North Korea’s commitment to this process.”

As weary American diplomats have been known to say about North Korea in the past, “we’ve bought this horse before”. The Six Party Talks in the mid-Noughties came within a whisker of resolving the crisis, only to fail at North Korea’s refusal to have third party verification over their denuclearisation process.

Having said that, one need only think of where things stood this time four months ago to realize that progress is being made, and jaw-jaw is better than war-war.


Against all odds, is Trump about to solve the North Korea nuclear crisis?

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The Telegraph, 29 March, 2018

The arrival in Beijing of a long, armoured North Korean train was as mysterious as it was sudden. Who could it be? Kim Jong-un hadn’t publicly left his country since he became leader in 2011, fearful perhaps of a military coup. The train itself, reminiscent of those favoured by the Bolsheviks, was strikingly similar to the one used by Kim Jong-il, the current dictator’s father, who was reportedly afraid of flying.

There had been no sign that a visit was imminent. But then the photographs emerged, Kim and Chinese president Xi Jinping shaking hands in front of their national flags. The message was as expected: we stand together and will proceed with the upcoming North Korea-South Korea negotiations as a team, as “lips and teeth” as both countries like to say of each other. But the background to the meeting was not: Donald Trump may have set in motion a series of events that could lead to a positive resolution, in some form, of the North Korea nuclear crisis.

It is astonishing that we have reached this point – and that Trump appears to have been the man who achieved it. The president is not known for his foreign policy expertise, and the nuclear issue is the modern day incarnation of the Great Game, one of the most complex and longest-running crises in history. In the 1990s, an American official said it “felt like playing a multi-tiered chess game on overlapping boards.” While there are six states involved – the US, North Korea, South Korea, China, Russia, and Japan – arrayed in two “teams”, everyone comes to the table with a different agenda, different objectives.

Take Japan. Prime Minister Abe is known to have reached out to the North through interlocutors insisting that he wants to be at the table. But for Abe, the North Korea nuclear issue cannot be resolved without determining the fate of Japanese citizens abducted by North Korea in the 1970s and 1980s. For Russia, North Korea presents an opportunity. A long-term ally during the Cold War, it now plays the crisis like a poker player with few stakes in the game and uses its role to gain best advantage for its position in Asia.

Just months ago conflict seemed imminent. Now we will see the US and the North sitting down at the same table for the first time since 2012

For China, the game has long been about history. Historically, the Korean nation has been a tributary state, and US involvement on the Asian mainland has felt like a foreign intrusion. At the most extreme, Beijing has sought to use the crisis to engineer a US removal from the peninsula; by the most benign reading, it merely seeks to maintain a safe buffer zone on its borders from any US-allied nation.

Trump could have drowned in this complexity like some of his predecessors, but instead he has shown an agility of purpose that has thrown the pieces in the air. The Kim-Xi meeting suggests movement in Beijing. The Chinese are desperate to avoid being cut out of the planned summit. Xi will have wanted to remind Kim who butters North Korea’s bread. Kim, meanwhile, will have wanted to ensure a defence commitment in case the talks are unsuccessful. After all, the Trump administration’s quiet movement of military assets to the region belies a serious determination to remove what they perceive to be a direct threat to the US mainland.

But while we should all be cautious about the long-term chances of a US-North Korea accord, what has been achieved so far is remarkable. Just months ago conflict seemed imminent. Now we will see the US and the North sitting down at the same table for the first time since 2012, and for the first time with an open agenda since 2007.

President Trump would not have accomplished this without the incredible diplomacy of the South’s President Moon Jae-in. Indeed, the US and the South have led a superb three-pronged campaign. They’ve stood firm on defence issues, with Trump raising the potential prospect of war by keeping military options on the table and moving assets in-theatre. Both men have adopted highly versatile approaches toward China, giving Xi respect and reassurance, while playing hardball on sanctions and pushing Beijing to accept a “maximum pressure” approach to the North. In turn, Xi and Kim have greeted the US-South overtures with apparent respect, and seem to be attempting to relieve tensions.

One only hopes they succeed. For if the negotiations do fail, we’ll have an unimaginable disaster on our hands in East Asia, and right at the heart of the global economy.

Jeremy S. Maxie

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