Tokyo: The intergovernmental conference between China, Japan, and South Korea took place at a time that was most significant.
It makes little difference that Asian President Yoon Suk Yeol, Chinese Premier Li Qiang, Japanese Prime Minister Fumio Kishida, and Korean President Yoon Suk Yeol have avoided a famine of controversial issues that have divided their governments since 2019. They include North Korea, Taiwan and trade settings.
It makes no difference whether the leaders chose to concentrate instead on flimsy discussions about promoting free trade agreements, protecting supply chains, adapting to aging groups, and cooperating against communicable diseases. The important thing is that Beijing, Tokyo and Seoul are talking.
It will take much more than communicate, of program.
” Common economic interests remain the glue that keeps trilateral cooperation together,” according to Jeremy Chan, an analyst for East Asia at Eurasia Group,” a growing misalignment over regional security related to North Korea, Taiwan, and the South China Sea, as well as rising US-China competition.”
However, the summit’s location may be the most enticing factor of all.
There has been a lot of rumor about Joe Biden. The conference, some believe, was precipitated by Biden’s personal conferences with Kishida and Yoon. A implicit reputation, it follows, that Taiwanese leader Xi Jinping is playing catch- away.
What if, nevertheless, we’re definitely seeing Japan and Korea responding to Biden’s commerce taxes? And to the growing concern that Biden’s draconian curbs on Asia’s leading economic engine will cause lending harm to the region’s No 2 and No 4 economies?
At the Seoul conference on Monday, Li urged Kishida and Yoon to accept “protectionism” and work toward completely business. Leaders may “refuse turning economic and trade problems into political games or safety issues,” Li urged.
In a shared declaration, the three leaders agreed to “institutionalize” assistance by regularly engaging in intergovernmental summit and governmental meetings. They signed on to potential exchanges for” speeding up negotiations” for a free trade pact that champions “fair, complete, high- quality and socially useful” trade.
Though this week’s talks ca n’t be called a” concrete initiative”, notes professor Stephen Nagy at International Christian University in Tokyo, it could succeed in stabilizing fraught relations.
Liu Qing, vice president of the China Institute of International Studies, says the mountain struck a “hopeful voice for the future” to maintain Asia is a” basis of peace and development“.
But Kishida addressed Chinese officials with” major problems” about the escalating tensions in the South China Sea. In response to a global complex problems and geopolitical problems, Yoon said,” I hope our three states, who are working together as people of the UN Security Council this month, will join forces to lead to peace and prosperity in the international community by bringing together their wisdom and strength.”
The longer “escalated” trade tensions flare up, says economist Aidan Yao at AXA Investment Managers, the more the “race is going to be to the downside”.
Despite this, the US has engaged in significant relationship-building in Asia. As Narendra Modi’s India no longer reads the US playbook, the original” Quad” arrangement, which Washington used to place so many chips, has faded. The Donald Trump years from 2017 to 2021 also , did incalculable damage to Washington’s reputation in Asia.
Kishida and Yoon appear to be betting on a Trump 2.0 White House, despite the possibility. Already, Trump is threatening 60 % tariffs on all Chinese goods, a step that would upend supply chains everywhere. He also says he plans to revoke China’s “most favored nation” status.
Biden, for his part, just quadrupled taxes on China- made electric vehicles to 100 %. He also ratcheted up tariffs on advanced batteries, solar cells, medical equipment, construction cranes, aluminum and steel.
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It’s reminding Asia that even if Trump is deprived of a second term, Biden 2.0 would n’t necessarily be a picnic. All of which may cause Kishida and Yoon to be anxious about the protectionist US economy that they will face after the November 5 election.
For Biden, though, the key is taking care to limit the fallout from Washington’s China policies on its most important allies in the region.
Take Korea, where semiconductors represent the biggest source of income. Given that China is both the world’s largest semiconductor market and Korea’s biggest trade partner, US trade policies are putting Yoon’s economy in harm’s way. ( South Korea’s exports to the US slightly exceeded those to China in March of this year. )
As sales shortfalls at chip giants , Samsung Electronics, SK Hynix and others can attest, being a top US ally is proving very expensive.
A law that Biden signed to limit the US$ 7,500 tax credits for EVs built in North America is still wracking the Korean industry. Hyundai Motor and Kia Corp., which manufacture their EVs in Korea and then export them, found it harder to do so.
Ditto for Biden’s overriding plan to restore America’s role as a top global manufacturing power. The plan, he says, is to “build more, and build it here”. It has Biden doubling down on an industrial “buy America” policy that is making Seoul and Tokyo’s trade-focused allies in a more shaky position.
Yet something is written in bold bold font between the lines: Washington’s hope that Asia’s leading democracies will follow it. This, however, presents Yoon with a big question: will the US take offense if Korea increases investments in advanced technologies in China?
A top Biden priority, after all, is growing America’s semiconductor manufacturing presence to create jobs and increase competitiveness. Yet can Kishida’s team in Tokyo walk a tightrope between Washington and Beijing — Tokyo’s” strategic equilibrium” — without alienating one or both? Is that even conceivable as China becomes America’s most hot-button election issue.  ,
Biden has a good chance of getting Samsung and SK Hynix to spend more money in the US. Hyundai Motor raised the stakes on Korea Inc. peers by promising to invest$ 10 billion in the US by 2025 in May 2022. Team Biden knows there’s more where that came from.
Amid all this trade chaos, rumors of US- China decoupling are proving greatly exaggerated. By most measures, two- way trade between the two biggest economies has spiked since 2022 despite increasing tensions.
US policies, though, risk repelling officials in Seoul and Tokyo. Many of Asia’s leading tech names were placed in compliance purgatory due to the Inflation Act and the CHIPS and Science Act of 1992. CEOs and regulators are currently having trouble keeping plans for building advanced semiconductor factories from violating Washington’s new red lines.
Samsung officials, for example, are left to wonder if they must cut production in Xi’an or SK Hynix in Wuxi? Chieftains live in constant paranoia of what might come if Korean technology finds its way, perhaps unwittingly, into Chinese lasers, weapons, air- defense systems and surveillance tools.
Biden’s White House could concentrate more on developing innovative muscle and increasing domestic productivity rather than blunt-force tariffs and less on deflating China’s tires. To be sure, Biden’s CHIPS Act, which threw nearly$ 300 billion at boosting domestic research and development, was a good start.
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Importantly, it marked a radical pivot from the Trump years. Trump signed a$ 1.7 trillion tax cut that accelerated the growth of a$ 35 trillion national debt and threw a giant grenade into global trade.
All the while, Trump did little, if anything, to increase domestic capacity. If Trump had increased innovation and productivity, US inflation might not have surged to 40- year highs post- Covid- 19.
In the meantime, Xi’s Communist Party is investing trillions of dollars in leading the future of semiconductors, EVs, advanced batteries, renewable energy technologies, artificial intelligence, robotics, biotechnology, aviation, green infrastructure and high- speed rail.
The US would create new wealth and grow the economic pie by investing more in innovation and productivity. It could vastly increase America’s economic footprint in Asia, boosting demand for electronics, vehicles and entertainment exports.
Ultimately, both Biden and Trump’s China containment wo n’t work. Washington has read more from George Kennan’s playbook than Adam Smith, a free-market economist, since the late 1990s. Decades ago, Kennan advocated slowing Soviet expansion through containment. Today, the focus is on reining in China Inc.
Given that Beijing, Tokyo, and Seoul jointly account for 25 % of global GDP, it is grand that they are talking again.
Without a doubt, any meaningful trade agreement will still be stumbling blocks due to old and new disputes. Not least of which is how the US and China strategic competition is changing how the world economy operates.
However, Biden should n’t be alarmed by Kishida and Yoon’s nice touch with Li. Going the Trump route on trade may ultimately lead to Japan and Korea entering China’s free trade-promoting orbit.
Follow William Pesek on X at @WilliamPesek