[Future Vision Series on Korea-Japan Cooperation] VI. New Directions for Korea-Japan Economic Cooperation in the Era of US-China Competition

I. Introduction

For a long time, economic cooperation between South Korea and Japan served as a driving force that enabled cooperation to continue despite conflicts over historical perceptions and territory between the two countries. The principle of separating politics from economics can be seen as a concept symbolizing the South Korean government's policy response to the structural relationship between the two countries, where the strong incentive for economic cooperation controlled conflicts in political matters. However, the sustainability of Korea-Japan economic cooperation, represented by the principle of separating politics from economics, began to weaken in the 2010s, as seen in the case of the suspension of currency swaps. The Japanese government's export control measures against South Korea in 2019 gave the impression that Korea-Japan economic cooperation no longer held intrinsic meaning and that the economic relationship between the two countries had become a secondary area to issues of historical perception. This fragmented impression led to policy judgments that Korea-Japan economic cooperation was no longer necessary.

However, the diminished visibility of Korea-Japan economic cooperation does not imply its lack of necessity. The questioning of the need for Korea-Japan economic cooperation reflects a situation where the efforts of both governments to connect the businesses of the two countries are no longer urgently required. However, this does not mean that business relationships between companies of the two countries have cooled. Rather than a reduction in business relations between companies, it seems more appropriate to consider that they have become less visible as they operate with their own momentum within global supply chains, beyond the realm of bilateral economic diplomacy by the governments of both countries.

This paper argues that the direction of Korea-Japan economic cooperation has become clearer since the Japanese government's export control measures against South Korea in 2019. This direction transcends the framework of bilateral relations, which is cooperation between Korea and Japan. Efforts led by the governments of Korea and Japan to newly discover incentives for bilateral economic cooperation are currently lacking in relevance. Korea-Japan economic cooperation must be reborn through methods where both countries, sharing an interest in maintaining the liberal nature of global trade and production order, cooperate in establishing global norms. Korea-Japan economic cooperation should evolve from 'economic' cooperation between the two countries to 'global' cooperation that benefits both economies. However, in an era of deglobalization, efforts to establish norms for liberal global trade and production order are not easy. In particular, cooperation between Korea and Japan for global norms amidst US-China strategic competition is not straightforward. The direction of Korea-Japan cooperation to prevent the risks of deglobalization requires an emphasis on fairness and normativity, as well as a stance that is wary of the exclusionary nature of global rules.

This paper aims to describe the changes in Korea-Japan economic relations, explain the significance of Japan's export controls in 2019 for Korea-Japan economic cooperation, and then present arguments regarding the new direction of Korea-Japan economic cooperation.

II. Changes in Korea-Japan Economic Relations[1]

1. History of Asymmetrical Korea-Japan Economic Cooperation

Economic relations between South Korea and Japan began with a relationship of asymmetrical dependence. South Korea, lacking capital and technology for economic development, was heavily reliant on Japan as a source for importing capital and technology. Even after the claims payment in the process of normalizing diplomatic relations between Korea and Japan in 1965, Japanese yen loans were usefully employed in Korea's industrial development, and Japanese technological transfer played a crucial role in Korea's industrialization, as exemplified by the construction of Pohang Iron and Steel Co., Ltd.

Commercial loans and subsequent yen loans played a significant role in the development of capital cooperation. Commercial loans included in the Claims Agreement were decided to be supplemented by an additional $200 million in 1967, and over $500 million in total was used for Korea's economic development in the 1960s.

[Table 1]Use of Claims Payment Funds to Japan (Unit: Thousand USD, %)

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Source: Cho Sung-won 2015

Commercial loans, primarily used for export credits, were provided in a form where their usage was predetermined by both governments, unlike loans between private institutions, and were offered at preferential interest rates. While the claims fund was crucial for Korea's industrial development, it also benefited Japanese companies expanding their overseas business opportunities (Abe Makoto 2015, 62-66). Furthermore, the Japanese government provided yen loans to Korea as a form of Official Development Assistance (ODA). For the Korean government, which lacked initial capital for production and social infrastructure, yen loans from Japan offered much better terms than borrowing from international financial institutions.

Therefore, despite conflicts such as the Kim Dae-jung kidnapping incident and the assassination attempt on President Park Chung-hee in the 1970s, the Korean government consistently participated in the Korea-Japan Regular Ministerial Meetings aimed at introducing yen loans, except for 1973. The principle of separating politics from economics, an expression of Korea's stance, reflects Korea's situation of needing to secure capital from Japan continuously, despite the contentious issues between Korea and Japan in the early 1970s. Additionally, the credit lines for commercial loans required for export credits were also continuously increased throughout the 1970s (Lee Hyun-jin 2011; Choi Woo-young 2011).

Because Japan's capital cooperation was vital to the Korean government's industrial policies, the Korean government even linked security to increase fundraising from Japan. In the context of the Cold War, Korea emphasized the necessity of Japan's economic support for Korea, which was responsible for Japan's security, as symbolized by the 'Busan Jeokgirron' (Theory of Busan as a Forward Base). A representative case where Korea requested economic cooperation on security grounds was the 'Security-Economic Cooperation' during the Chun Doo-hwan administration in the 1980s. At that time, the Nakasone administration promised financial aid totaling 4 billion dollars (1.85 billion dollars in yen loans, 250 million dollars in loans from the Export-Import Bank of Japan) (Son Ki-seop 2009).

With the growth of the Korean economy, Japan terminated its yen loans to Korea. As Korea moved beyond the criteria for recipient countries of Official Development Assistance (ODA) in the late 1980s, yen loans were concluded in 1990. However, in the 1990s, Japanese financial institutions played a very central role in enabling Korean private companies to secure overseas loans. The prominence of Japanese financial institutions in Korea's private sector overseas borrowing in the 1990s can be inferred from the fact that the extension of loans by Japanese financial institutions was considered a critical issue during the unfolding of the 1997 Korean foreign exchange crisis (Lee Kyu-seong 2015, 8-10).

Japan's technical cooperation with Korea began in the 1950s as part of Official Development Assistance (ODA), and after the normalization of diplomatic relations, the scope of technical cooperation became more sophisticated through the dispatch of experts and survey teams. In the Korea-Japan Regular Ministerial Meetings, the Korean side requested Japanese support for Korea's technological development not only in industrial sectors but also in various fields including agriculture, leading to technical cooperation. Furthermore, in the private sector, Korean companies considered Japanese companies the best targets for learning world-class technology. However, as Korean companies' technological capabilities advanced and they developed into competitors with Japanese companies in the global market, Japan's attitude towards technical cooperation became more passive. On the other hand, due to Korea's active raising of the issue of trade imbalance, Japanese technical cooperation continued in the 1990s through the Korea-Japan Industrial Technology Cooperation Foundation and the Japan-Korea Industrial Technology Cooperation Foundation (Fujita Toru 2015, 544-546).

Korea has never escaped a trade deficit with Japan since the normalization of diplomatic relations. Korea's trade deficit with Japan stems from the export-oriented nature of its economic growth. After shifting its economic policy orientation towards exports in the 1960s, Korea adopted a strategy of exporting light industry-focused final goods overseas. However, it failed to establish a production system for capital goods and intermediate goods (materials, parts) necessary for the production of final goods. Consequently, the need for investment in production facilities for exporting final goods and the procurement of intermediate goods from abroad for the production of final goods created an effect that induced imports from foreign countries. In this situation, Japan's position as the primary source for capital goods and intermediate goods was unparalleled. Japan, being geographically close and possessing a full set of production capabilities for capital goods, intermediate goods, and final goods, was the optimal partner for providing capital goods and intermediate goods to Korea (Okuta Satoru 2015, 146-148). This situation persisted even as Korea transformed its industrial structure through the strategic choice of heavy and chemical industry development in the 1970s. The development of heavy and chemical industries, which entailed large-scale facility investments, further increased Korea's imports of capital goods and intermediate goods from Japan.

[Table 2]Mutual Trade Volume between Korea and Japan and Korea's Trade Balance with Japan (Unit: Million USD)

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Source: Okuta Satoru 2015; Korea International Trade Association K-stat Trade Statistics (https://stat.kita.net/)

The 1997 foreign exchange crisis in Korea brought about significant changes in the structure and nature of the Korean economy. During the same period, Japan entered a prolonged recession characterized by a combination of financial sector fragility due to the bursting of its economic bubble and sluggish domestic demand. Amidst these circumstances, monetary cooperation between Korea and Japan advanced anew.

Within the multilateral framework of the IMF bailout, the Japanese government provided assistance during Korea's foreign exchange crisis with a second-line support of $10 billion. While the Japanese government's second-line support of $10 billion was largely symbolic rather than substantial (Korea Institute of International Finance 2002), this assistance marked the beginning of monetary cooperation that had long been absent in Korea-Japan economic relations. The Japanese government introduced support measures for Asian countries, including Korea, facing foreign exchange crises through the New Miyazawa Initiative in 1998, and in January 1999, provided a safeguard for Korea's foreign exchange issues through an agreement to swap up to $5 billion in liquidity with the Korean won (Park Sung-bin 2015, 299-301).

Following the foreign exchange crisis, Korea's current account shifted to a surplus, indicating a definitive escape from the risks of increasing external debt and depletion of foreign exchange reserves. However, monetary cooperation between Korea and Japan developed further within the Chiang Mai Initiative in the 2000s. Although the establishment of an Asian Monetary Fund (AMF) in 1997 was thwarted by US opposition, the need for monetary cooperation within the Asian region gained increased recognition after the 1997 East Asian foreign exchange crisis. The result was the establishment of the Chiang Mai Initiative, a practical Asian monetary cooperation system through a network of bilateral currency swaps. While the bilateral currency swaps under the Chiang Mai Initiative framework have certain limitations as they are linked to IMF support, the Chiang Mai Initiative is significant as a starting point for institutionalizing Korea-Japan monetary cooperation and Asian regional monetary cooperation. In 2001, under the Chiang Mai Initiative framework, a one-way swap agreement (Japan to Korea) worth $2 billion between the US dollar and the Korean won was added. Subsequently, in February 2006, it was converted into a two-way swap between the Korean won and the Japanese yen swapped for US dollars, increasing the total swap amount to $15 billion (Park Sung-bin 2015, 302-305).

When the 2008 global financial crisis spread to Korea, causing a sharp depreciation of the won and a massive outflow of foreign capital, the crucial factor that prevented Korea from falling into crisis was the $30 billion currency swap with the United States in August 2008. Governments worldwide responded to the global financial crisis by increasing bilateral currency swaps. Amidst this trend, currency swaps between Korea and Japan also increased (Lee Yong-wook 2013).

2. Shift to a Competitive Korea-Japan Economic Relationship

With the industrial development of Korea, its trade dependency on Japan has continuously decreased. From Korea's perspective, the proportion of Japanese imports within its overall economic activity has steadily shrunk since the 1980s. Analyzing the trend of import-inducing effects from private consumption, investment, and exports, the import-inducing effect of private consumption has not significantly increased, remaining around 20%. In contrast, investment had an import-inducing effect of around 50% in the 1970s, indicating that the heavy and chemical industrialization of the 1970s generated substantial import-inducing effects. The export sector maintained an import-inducing effect of about 30% before increasing to over 40% in the 2010s. Ultimately, Korea's economic activities had a very high import-inducing effect in the late 1970s, which gradually decreased before increasing again in the 2010s. However, the import-inducing effect from Japan has continuously declined since the mid-1970s; comparing 1975 and 2010, the import-inducing effect from Japan has fallen to less than half.

[Table 3] Korea's Import Inducement Effect from Japan

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Source: Okuta Satoru 2015

Before Korean companies emerged as competitors to Japanese companies in the global market, Japan's concern regarding Korea's industrial development was not significant. In the 1960s, light industrial products, which were Korea's main exports, were sectors in which Japan was losing its comparative advantage in the global market, thus posing no significant concern for Japan.

The degree of export competition between Korea and Japan has gradually increased since the 1970s. This is because Korea succeeded in transitioning from a labor-intensive industrial structure to one similar to Japan's, thereby increasing competition in the global market. This trend is a result of the effective success of Korea's economic development strategy.

[Table 4] Trade Complementarity and Export Similarity Coefficients between Korea and Japan

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Source: Okuta Satoru 2015

However, the globalization of production, linked to China's economic growth since the 1990s (and particularly intensified in the 2000s), has led to the development of global value chains that make it impossible to understand the relationship between Korea and Japan in trade and production solely in bilateral terms. In global value chains, the trade and production relationship between Korea and Japan cannot be understood simply through bilateral trade balances or competitive industrial structures (WTO 2011). The competitive structure of Korean and Japanese companies in the global market due to Korea's industrial advancement has highlighted the competitive relationship between the two countries' trade and production systems. However, the trade and production relationship between the two countries cannot be simplified to a competitive relationship within the context of production globalization. With the development of global value chains, the trade and production relationship between Korea and Japan is becoming increasingly interdependent on a global scale, extending beyond bilateral relations.

The development of global value chains in the Asian region overlaps with China's economic development. Following its reform and opening-up, China has made attracting foreign direct investment in its coastal regions a primary engine of growth, and foreign companies viewed China as a location for assembly processes utilizing its cheap labor. "The world's factory" was a term that reflected China's status as a hub for final product assembly. However, just as Korea increased its imports of Japanese capital goods and intermediate goods for final product manufacturing during its industrialization period, China's central position in final product assembly and processing processes generated import-inducing effects from abroad. In this process, Korea and Japan increased their exports of capital goods and intermediate goods to China (WTO 2011, pp. 76-77).

Global value chains make it no longer possible to interpret inter-state economic relations solely in terms of trade volume and comparative advantage. China's economic growth has increased exports from Korean and Japanese companies to China within the framework of intra-industry trade. Since the distribution of value-added allocates more value to the production of technology-intensive materials and components than to the final assembly process, China's economic growth can be seen as having provided significant economic benefits to both Korea and Japan.

Although the proportion of trade between Korea and Japan has decreased, the interconnectedness of companies from both countries in the production process can be considered to have increased within global value chains. This change is a result of globalization. Therefore, when considering economic cooperation between the two countries, a perspective that focuses solely on the proportion of bilateral trade relations is no longer appropriate.

However, Korea's successful industrial structure transformation and the resulting establishment of Korean large corporations' presence in the global market inevitably raise fundamental questions about traditional Korea-Japan economic cooperation. This is because the vertical nature of Korea-Japan economic cooperation, centered on capital and technology transfer, was predicated on the situation of Korea's underdeveloped industries. This change in circumstances signifies that the momentum for capital and technology cooperation between the two countries has diminished.

The decline in incentives for Korea-Japan economic cooperation is starkly evident in the termination of the bilateral currency swap agreement, which had developed in the 2000s, amidst political conflicts in the 2010s. The termination of the currency swap agreement, which had been renewed almost automatically, was itself a political choice. Furthermore, inferring from the agreement reached in December 2015 to commence discussions on resuming the Korea-Japan currency swap agreement in August 2016 after the comfort women agreement, we can indirectly confirm the influence of political and diplomatic conflicts on the currency swap agreement.

[Table 5] Chronology of Korea-Japan Currency Swaps

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Source: Compiled by author

III. Implications of Japan's Export Regulations on South Korea in 2019

On July 1, 2019, Japan's Ministry of Economy, Trade and Industry (METI) announced the "Review of Export Control Operations for the Republic of Korea (South Korea)". This measure converted the existing comprehensive export permits (valid for three years) to individual export permits for three items: fluorinated polyimides, photoresists (photosensitive materials), and etching gases (high-purity hydrogen fluoride). Consequently, Japanese companies exporting these items to South Korea were required to obtain an individual review and permit for each export transaction starting July 4.

When announcing the list-based regulations, METI also foreshadowed the review of South Korea's exclusion from the whitelist and solicited public comments (July 1 - July 24) on a draft ordinance amending the "Export Trade Control Order" regarding this exclusion. Subsequently, on August 2, the Japanese government made a cabinet decision to remove South Korea from the whitelist, which took effect on August 28. To exclude South Korea from the whitelist, Japan amended its own Export Trade Control Order, changing the classification of export destinations from two categories to four. After this cabinet decision, there were virtually no countries in the same category as South Korea. This was a system reform targeting South Korea. By being removed from the whitelist, which provides exceptions for the catch-all regulation, South Korean companies faced the possibility of facing comprehensive and potentially arbitrary regulations from the Japanese government on imports from Japanese companies.

On July 12, an official from South Korea's Ministry of Trade, Industry and Energy visited Japan and held a meeting with officials from METI. During this meeting, the Japanese side claimed that South Korea's catch-all regulations were insufficient and that there had been inappropriate cases related to them. They asserted that they had proposed bilateral consultations on this matter, but South Korea had not agreed, leading to a three-year lack of consultations. The issue raised regarding South Korea's strategic material management was linked to South Korea's alleged failure to implement sanctions against North Korea, maintaining the stance that South Korea was the cause of Japan's "securitization," and it evolved into an argument about the inadequacy of South Korea's administrative system.

Japan's export control measures against South Korea not only provoked strong opposition from the South Korean government but also expanded negative perceptions of Japan in South Korean public opinion, leading to a boycott of Japanese goods and causing significant damage to trade relations between the two countries concerning consumer goods. However, from a broader perspective, given that the Japanese government imposed control measures on intermediate goods and capital goods, which are absolutely essential to South Korea's imports from Japan, there was considerable shock and concern in the summer of 2019, when the measures were first implemented. This was because the measures could damage the foundation of South Korean companies' exports to the global market.

However, the Japanese government's export control measures did not lead to a situation where South Korean companies' global supply was blocked. This was partly because the Japanese government did not strictly enforce the export control measures as sanctions, and partly because South Korean and Japanese companies worked together in their efforts to 'de-Japanize.' It is also clear that there was a move towards 'de-Japanizing companies.' However, alongside existing Japanese business partners, companies actively pursued 'de-Japanization' efforts by relocating production bases to South Korea or overseas outside of Japan (Kim Yang-hee 2021).

In March 2023, Japan lifted its export control measures and South Korea withdrew its complaint to the World Trade Organization (WTO), bringing South Korea-Japan economic cooperation closer to normalization. The conduct of companies from both South Korea and Japan over the approximately three years leading up to this point prompts a reconsideration of the current meaning of economic cooperation between the two countries. The key takeaway is that it is increasingly important for both governments to create an environment that allows companies from both nations to maintain business relationships from an economic standpoint. To create such an environment, it is crucial to consider what the governments should *not* do, rather than what they should do. What the two governments should refrain from doing is making efforts to ensure that diplomatic conditions do not influence the business calculations of companies in both countries. In other words, a true separation of economy and politics is necessary.

IV. South Korea-Japan Cooperation for Building Global Norms Beyond Bilateral Relations

1. Shared Recognition of the Need to Maintain the Free Trade Order

In recent years, as tensions between South Korea and Japan have escalated, descriptions of cooperation with South Korea in Japanese government documents have significantly decreased. Even if South Korea-Japan cooperation aligns with Japan's national interests, the attitude that South Korea's actions regarding historical issues are a prerequisite for such cooperation has become prevalent within the Japanese government. This sentiment is particularly strong among conservative political circles and has been further reinforced by the full-scale implementation of economic security policies. From the logical structure of Japan's economic security policy, it is questionable whether South Korea truly poses an external risk to Japan's economy and industry. The exclusion of South Korea from economic security cooperation and its treatment as a target of security measures, as seen in the 2019 export control measures, was largely an emotional response stemming from historical perception issues. In the current context of intensifying US-China strategic competition and the mending of South Korea-Japan relations, it is difficult to imagine South Korea being reconsidered as a concern for Japan's economic security.

However, separate from historical issues, the complementarity between the industries of South Korea and Japan is diminishing while their competition is increasing. This trend is a historical outcome of South Korea pursuing industrialization under the influence of Japanese capital and technology, but instead of integrating into Japan's production network, it chose to build a similar integrated production system domestically. The decline in complementarity and the rise in competition are also causes for the decreasing recognition of the importance of South Korea-Japan economic cooperation within both countries. That is, even if historical issues are managed effectively, close economic cooperation at the bilateral governmental level is gradually diminishing in importance in the economic diplomacy of both nations, and domestic explanations for the necessity of bilateral economic cooperation are becoming increasingly convoluted.

However, the fact that both countries occupy the same position in the international political economy structure serves as a crucial starting point for redesigning future South Korea-Japan economic cooperation. The high degree of competition between South Korea and Japan in the global market also implies that the two countries share the same characteristics in the international production structure. Furthermore, their dilemmas concerning economic relations with China, stemming from the US-China conflict, are also similar. While both countries are considering Japan's economic security policies aimed at pursuing strategic autonomy and strategic indispensability, they both agree that maintaining a free market order serves their national interests.

As the technological hegemony competition between the US and China accelerates, South Korea and Japan need to adapt to the trend of securitization of the economy while also needing to maintain the free trade order. As the technological hegemony competition between the US and China intensifies, situations where transactions with specific regions or companies are restricted are expanding. Due to the US's strengthened export control measures, South Korean and Japanese companies trading with Chinese firms face increasing needs to respond to the worsening business environment, not only in terms of managing risks across the entire supply chain but also due to the rapid changes in the trade and investment environment with China resulting from China's retaliatory measures.

However, even amidst intensifying US-China conflict, neither South Korea nor Japan can afford to abandon the vast Chinese domestic market, nor is it feasible to sever ties with China in the global supply chain. Both countries have room for cooperation under the common goal of expanding the free trade system. As the US-China competition unfolds in a direction that deviates from the liberal order amidst the trend of economic securitization, South Korea and Japan need to jointly voice the creation of multilateral cooperative institutions and norms at regional and global levels to foster a liberal international economic order. Discussions on trade and investment governance and trade norms at the East Asian or Indo-Pacific regional level in the 2020s hold a leading position in shaping global governance and norms. This signifies that the opportunity for South Korea and Japan to proactively engage in global governance and norm creation is greater than ever before.

2. Is South Korea-Japan Cooperation Possible to Enhance the Inclusiveness of IPEF?

Currently, South Korea-Japan cooperation for building global norms in the international economic order is subsumed under cooperation with the US's Indo-Pacific strategy as of 2023. Both South Korea and Japan are in alliance with the United States, and since the launch of the Yoon Suk-yeol administration in South Korea in 2022, their policy preferences regarding US-China competition have become very similar. This clearly indicates that their cooperation in building global norms is aligned with cooperation with the United States. The US's construction of a new regional order is manifested in the Indo-Pacific Economic Framework for Prosperity (IPEF) in the economic sphere. Although specific details remain unclear, its emphasis on the norms of freedom and fairness aligns with Japan's long-standing emphasis on the norms of 'free and open.' South Korea's Yoon Suk-yeol administration is also emphasizing value-based diplomacy, showing policy consistency in this direction.

However, there is a need to consider whether the norms of freedom and fairness, or 'free and open,' align with the economic interests of both South Korea and Japan, and whether they represent the true liberal order desired by both nations. Consideration is needed on whether the rhetoric of 'free and open' leads to the exclusion of China, and whether a path toward comprehensive economic peace that can reduce uncertainty in global supply chains can be found.

Both countries understand the need to simultaneously develop economic relations with China while also creating global norms to check China's unilateral and arbitrary actions. It remains to be seen whether South Korea and Japan can cooperate in this regard. However, the choice made by the Abe administration in Japan to pursue cooperation with China under the Belt and Road Initiative as a hedge against the Trump administration between 2017-2019 offers a significant lesson. This suggests that the flexibility shown by the Japanese conservative government in response to uncertainty from the United States indicates that Japan's pursuit of strategy based on strategic autonomy between the US and China can be variable (Park Young-joon 2018). At that time, the orientation of the South Korean government's policy toward China was not significantly different. However, in the context of US-China competition, both South Korea and Japan pursued hedging individually, rather than attempting to hedge through mutual cooperation. Japan's approach to China and its export control measures against South Korea occurred concurrently between 2017-2019. At that time, for Japan, South Korea was a country with a more significant conflict than China. To pursue a hedging strategy through cooperation between South Korea and Japan amidst US-China competition, strategic thinking that recognizes shared problems in global geopolitics must overcome emotions surrounding historical issues. In the past, this task was primarily placed on South Korea, requiring it to restrain excessive anti-Japanese sentiment. However, in the current South Korea-Japan relationship, the task of engaging in strategic thinking beyond emotions towards the other party is strongly demanded of Japan as well. Nevertheless, it is questionable whether Japan seriously recognizes this as its own task.

V. Conclusion

In the era of US-China competition, South Korea-Japan economic cooperation must transform into diplomatic efforts at regional and multilateral levels to foster the emergence of a global liberal order. This will ensure the sustainability of the globalized liberal trade and production order, in which both South Korea and Japan share economic interests. Within this framework, businesses in both countries will be able to freely develop mutual business relationships within global supply chains. This change is linked to the current conditions where it is difficult to find the purposefulness of South Korea-Japan economic cooperation by considering it solely as a bilateral relationship.

Meanwhile, it is also important to consider whether South Korea-Japan cooperation to foster global norms in the era of US-China competition can lead the creation of an order that encompasses both the US and China. As of 2023, cooperation between South Korea and Japan is likely to align with the normativity led by the United States. There is no need to consider a mechanical balance between the US and China. The norms of freedom and fairness advocated by the United States also form the foundation of the liberal order. However, if, as in the case of the Trump administration, the exclusionary nature towards China damages the interests and values of both South Korea and Japan, then consideration must be given to the room for pursuing a strategic autonomy policy and the possibility of South Korea-Japan cooperation for this purpose. Such an approach is frequently observed in the foreign strategy of Japan's post-war conservative forces. The flexibility between the US-Japan alliance-centric foreign policy and the strategic autonomy foreign policy shown by Japanese conservatives may appear to have disappeared currently. However, when seeking a so-called 'future-oriented' South Korea-Japan cooperation, it is difficult to definitively predict the form Japan will take as a cooperation partner. For the evolution of South Korea-Japan cooperation, a delicate and meticulous observation of changes in Japan's short-term and long-term global strategies is required.■

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[1] Chapter 2 was edited and adapted from parts of Lee Jung-hwan (2017).

■ Author: Lee Jung-hwanHe received his bachelor's and master's degrees from Seoul National University's Department of Diplomacy and a Ph.D. in Political Science from the University of California at Berkeley. He served as a full-time researcher at Kookmin University's Institute of Japanese Studies and as a professor in the Department of International Studies at the same university. His main research areas are Japanese politics and economy, and Japanese foreign policy. His major publications include *Decentralization Reform and Public-Private Cooperation in Contemporary Japan* (2016), *The De-localized Nature of Japan's Regional Revitalization Policy* (2017), and *The Transformation of Abe Administration's Historical Policy: The Abe Statement and Internationalism* (2019).

■ Editor: Park Han-soo_EAI Research Fellow

Contact: 02-2277-1683 (ext. 204) hspark@eai.or.kr