EAI Academy 2nd Term, Lecture 6: Lee Seung-joo

YouTube Link: https://www.youtube.com/watch?v=E-cQ7J-eVuc

- Date: August 27, 2021, 6:00 PM

- Speaker: Lee Seung-joo, Director of EAI's Center for Trade and Technology Transformation, Professor at Chung-Ang University

Reading List

1. Joseph S. Nye Jr. (2020) Power and Interdependence with China, The Washington Quarterly, Vol. 43(1), 7-21, pp. 2020.

2. Lee Seung-joo. “The Political Economy of Digital Trade Order: The Complexity of Differentiation and Conflict in Digital Trade Strategies,” Journal of Northeast Asian Studies, Vol. 25(2), pp. 53-80, 2020.

Speaker Introduction

■ Lee Seung-joo: Director of EAI's Center for Trade, Technology, and Transformation • Professor, Department of Political Science and International Relations, Chung-Ang University. He holds a Ph.D. in Political Science from the University of California, Berkeley. His main research areas include international political economy, the international politics of trade, and global digital governance. His major works include "The Political Economy of Cyberspace" (edited by Lee Seung-joo), "Institutional Balancing and the Politics of Mega FTAs in East Asia," co-edited in "Northeast Asia: Ripe for Integration?", and "Trade Policy in the Asia-Pacific: The Role of Ideas, Interests, and Domestic Institutions" (co-edited).

Video Transcript

Uh, uh, uh. Yes, hello everyone. Today, we will discuss the topic of changes in the multilateral order. I am pleased to have this opportunity to share my thoughts with you. As we are currently experiencing the post-COVID era, various changes are occurring both domestically and internationally. Amidst these changes, the international order, the global order, or the multilateral order, is undergoing transformations at a speed and scope that can be considered fundamental. It is important for us to recognize this.

Furthermore, this is not merely an isolated event or a development unrelated to Korea. Rather, it directly and indirectly impacts Korea's foreign policy and national interests. Therefore, it is a critical juncture where we need to deeply contemplate how Korea should pursue its foreign policy in this new order. In this context, we will explore the fundamental causes of the changes in the multilateral order in the post-COVID era, their impacts, the key trends of these changes, and the corresponding responses. We will have a time to contemplate these issues together.

First, the issue we will consider together is the liberal international order, which is often associated with the post-World War II order, also referred to as the liberal international order or the rule-based order. Many of you are likely familiar with this term. However, because it is called the liberal international order, there is a perspective that it emphasizes a specific value of liberalism. Therefore, it is sometimes referred to as the "Western-centric" order rather than the liberal international order.

Of course, there are reasons why the terms liberal international order and rule-based order are used interchangeably, and it is important to distinguish between them. However, for the purpose of this lecture, we will largely use them interchangeably, and when necessary, we will clarify the distinctions. Therefore, first, we need to consider what the liberal international order, which is widely used, actually means.

There are various elements involved. Before this class began, I recommended reading materials, including an article by Ikenberry. Ikenberry is considered one of the leading scholars who conceptualize the liberal international order. We will examine the liberal international order by identifying common elements proposed by scholars like Ikenberry. It can be said to have three characteristics.

Among these three characteristics, the first is openness. The liberal international order cannot be discussed without mentioning openness. If we look back at the history of the post-war global economic order, global trade has expanded rapidly. This expansion was possible due to this openness. Of course, depending on the specific period, protectionism may become dominant, and openness can shift towards closure. However, looking at the history of the global economic order, openness has been the dominant characteristic.

Of course, there are instances of protectionism and reversals that appear intermittently. We are currently experiencing phenomena like trade protectionism and de-globalization. However, these are intermittent occurrences. While there are aspects of current de-globalization and protectionism that differ from past experiences, which we will discuss later, generally speaking, openness has been a major characteristic of the liberal international order. Furthermore, as I mentioned briefly regarding trade, since the 1990s, with the promotion of globalization in various fields beyond trade, openness has expanded to other areas. This has been particularly evident since the collapse of the Bretton Woods system, leading to rapid globalization in various sectors.

Consequently, openness has expanded not only in trade but also in capital flows, allowing capital to flow globally and seek investment opportunities. While the expansion of openness is not without its side effects, such as increased instability and uncertainty, openness has expanded in areas beyond trade, within the framework of the liberal international order.

Furthermore, in the 1990s and 2000s, production also became globalized alongside trade and capital flows. In this regard, openness has not been confined to specific areas but has gradually expanded its scope and deepened its penetration. For example, in the realm of production, terms like global value chains and supply chains are frequently mentioned today, capturing phenomena closely related to the globalization of production. In this context, trade, capital, and production have become interconnected, all aiming for openness.

Secondly, regarding the international order, we cannot overlook the role of institutions. For openness to be sustained, individual actors must accept and practice it. However, there are cases where individual actors, despite having a common understanding of openness and common interests, fail to realize it. In the field of international political economy, this has been observed through concepts like the prisoner's dilemma and collective action problems. That is, situations where cooperation does not occur despite common interests among individual actors. Such issues have been frequently observed in the global economy.

One of the ways to overcome these problems is through collective action. Therefore, collective action is a fundamental element constituting the liberal international order. While interactions and partnerships between individual states are important, addressing common problems collectively is also a crucial issue that needs to be considered at the same level. In this regard, multilateral cooperation is an indispensable element of the liberal international order.

Thirdly, there is the concept of a rule-based order. The liberal international order and the rule-based order are sometimes used interchangeably. When discussing the liberal international order, concepts like ideological foundations and institutional frameworks are often mentioned. For those of you who may not be familiar with this topic, let me briefly explain. The ideological foundation of the liberal international order is often referred to as "embedded liberalism," which emerged after World War II. This ideological foundation is complemented by various institutional elements that form the order. Specifically, institutions like the IMF in the financial sector, the World Bank in the development sector, and GATT (later WTO) in the trade sector were established as concrete mechanisms to realize these rules based on the ideological foundation. Therefore, the liberal international order has made significant efforts to implement rules, not just remaining at the level of ideology and principles. It has formed an order based on both ideology and institutions. In this sense, a rule-based order is a crucial element in forming the liberal international order.

Therefore, the liberal international order is not merely confined to openness or specific ideological principles but has also made significant efforts to establish concrete implementation mechanisms. It has formed an order based on both ideology and institutions. In this sense, a rule-based order is a crucial element in forming the liberal international order.

Finally, up to this point, I have primarily discussed the liberal international order in terms of political and economic integration and interactions between individual states. However, it is important to note that the liberal international order has been established and maintained through an underlying security architecture, including security alliances and security cooperation between states. When this security architecture is in place, the liberal international order can be established, maintained, and developed.

Therefore, when discussing the security dimension that supports the liberal international order, we cannot overlook alliances. In this regard, openness, a rule-based order, and the institutional framework of the liberal international order, along with the security architecture, are crucial supporting elements. However, for these elements to function properly and interact organically, leadership is essential.

Specifically, in the context of liberal international cooperation, the provision of public goods and leadership by hegemonic powers or actors is often a prerequisite. The liberal international order has generally been implemented by states capable of and willing to provide global public goods. For a considerable period, the United States has been the country possessing both the willingness and the capability to exercise such leadership.

Therefore, while the term "international order" itself does not necessarily symbolize the United States, it is widely understood that the international order is led by the United States. In this context, the liberal international order was maintained through the organic interplay of U.S.-led security systems, the provision of public goods by the U.S., and the resulting openness and rule-based order.

Next, there are increasing assessments that the primacy of the liberal international order, or the rule-based international order, is being challenged. While challenges to the liberal international order have occurred multiple times, in recent years, particularly since the 2008 global financial crisis, there has been a significant and serious challenge to the liberal international order.

The 2008 global financial crisis, while originating in the financial sector, had a profound impact on the global economy and the international economic order. The impact and shock on the global economy were substantial, leading to significant changes. One of the notable outcomes during the global financial crisis was the stagnation of global trade growth.

This is significant because, as I mentioned earlier, the liberal international order has progressed through the globalization of trade. In other words, the growth rate of global trade has consistently exceeded the growth rate of global GDP for most periods. This implies that the economic growth of individual countries has been driven by trade. South Korea is a prime example, having achieved economic growth through exports. Many other countries, including developed nations, have experienced similar patterns. Consequently,

trade has played a role as a driver, or engine, of overall economic growth, although it is often said that trade creates economic prosperity. In this context, the stagnation of global trade growth can be understood as a significant factor contributing to the slowdown in the economic growth, or GDP growth, of individual countries.

This stagnation of trade growth, linked to the stagnation of individual countries' economic growth, has led to another consequence: the rise of protectionism. Following the 2008 global financial crisis, protectionism began to intensify. While the trade war initiated by the Trump administration against China in 2018 is a prominent manifestation, protectionism and de-globalization have been ongoing trends since the 2008 global financial crisis. The U.S.-China trade war can be seen as a specific event that has brought these broader trends to the forefront.

While we might dismiss these as temporary phenomena, it is worth considering how they differ from past trends. In the past, there were periods when global trade growth stagnated or protectionism intensified. This is not to say that these phenomena are entirely unprecedented. However, it is crucial to understand why the post-2008 period differs from previous instances of similar trends. In this sense, the current situation is different from the past. I have used the term "escalation" here. This means that in the past, challenges to the liberal international order or demands for its revision were often raised by developing countries or countries seeking revisionist changes. For example, in the 1960s, developing countries argued that the existing world economic order was unfairly designed and disadvantageous to them.

These developing countries demanded a fairer global economic order, which led to calls for a new international economic order, such as the New International Economic Order (NIEO) proposed by the Non-Aligned Movement. Additionally, groups like BRICS have also expressed dissatisfaction with the existing liberal international order. Despite these challenges, the liberal international order has managed to adapt and respond.

However, the challenges to the liberal international order since 2008 are distinct from past challenges. The reason I say this is that the challenges posed after 2008 are not primarily from developing countries like BRICS, but rather from developed countries, including the United States, which have historically led the liberal international order.

In this sense, the challenges posed by developed countries signify that the architects of the liberal international order, or the Bretton Woods system in the case of the economic order, are themselves raising certain issues. Therefore, it is important to note the distinction that these challenges are being led by the very countries that designed this system and order. This is a crucial difference from the past.

Therefore, the challenges posed by developed countries are different from the past. The reason I emphasize this difference is that the challenges to the liberal international order since 2008 are not primarily from developing countries like BRICS, but rather from developed countries, including the United States, which have historically led the liberal international order.

In this context, the challenges posed by developed countries signify that the architects of the liberal international order, or the Bretton Woods system in the case of the economic order, are themselves raising certain issues. Therefore, it is important to note the distinction that these challenges are being led by the very countries that designed this system and order. This is a crucial difference from the past.

The graph below illustrates the points I have made. The blue line represents the scale of global trade from 1990 to 2020, and the red line represents the growth of global GDP. As you can see, until 2008, with the exception of a brief period in the early 2000s, global trade growth exceeded global GDP growth. This indicates that trade has played a role in driving economic growth, as I mentioned earlier. However, after 2008, global trade experienced a sharp decline in 2009. Although it rebounded in 2010, this was a temporary recovery. Throughout the 2010s, in most cases, global trade growth has not significantly differed from global GDP growth. Particularly in 2019 and 2020, global trade experienced a sharp contraction. In this sense, openness, a crucial element of the liberal international order, particularly in trade, has sharply declined since the 2008 global financial crisis. This has led to a slowdown in the growth of individual countries' economies, prompting many countries, including major economies, to adopt protectionist measures. This has served as a major turning point. Furthermore, this trend has intensified, leading to the U.S.-China trade war since 2018, highlighting the escalating tensions between the U.S. and China.

The challenge to the multilateral order is a phenomenon that has emerged since 2008. Another significant event that has recently triggered this challenge is the strategic competition between the United States and China. While the U.S.-China strategic competition was primarily manifested in the trade war starting in 2018, strategic competition is not synonymous with trade competition. The reason it is called strategic competition is that it is not confined to specific areas but encompasses various domains. It is sometimes referred to as systemic competition, or even ideological competition. In this sense, it is strategic competition. However, it has emerged as a manifestation of the slowdown in globalization and the rise of protectionism since the 2008 global financial crisis. To reiterate, the trade war served as a trigger, a catalyst, for strategic competition.

Another change that has emerged from strategic competition is the escalation from trade disputes to strategic competition. We can see this more clearly if we examine the evolution. Trade disputes are primarily economic in nature, and conflicts related to economic issues have existed before. For instance, the U.S. experienced a trade war with Japan in the mid-1980s. In the late 1980s and early 1990s, there were trade disputes with countries like the former Soviet Union. Therefore, trade disputes have existed in the past. The reason we call it strategic competition is that trade disputes are no longer confined to the trade domain. They are spreading to other areas and exerting influence, hence the term strategic competition. In this context, we need to consider the interconnectedness, or nexus, of these issues. Trade disputes merely surfaced and exploded, but underlying this was a strategic competition between the two countries, a competition of systems, that had been building up.

Consequently, strategic competition is not confined to one area, but rather involves a complex interplay of various domains. As a representative example, we can point to the nexus between economy and security, particularly in technology. While the U.S.-China competition began with trade, many are now focusing on the technological competition between the two countries. Technology has a gradual impact, but it also has a profound and extensive impact across all domains. As you are likely aware, dual-use technologies, or dual-use technologies, are increasingly prevalent. These technologies have commercial applications but can also be used for military or security purposes at any time. They can be categorized as "spinner" or "dual-use" technologies. Overall, technology serves as a nexus linking economy and security, and this is becoming a key factor in the competition between the U.S. and China.

Another change that has emerged from strategic competition is the escalation from trade disputes to strategic competition. We can see this more clearly if we examine the evolution. Trade disputes are primarily economic in nature, and conflicts related to economic issues have existed before. For instance, the U.S. experienced a trade war with Japan in the mid-1980s. In the late 1980s and early 1990s, there were trade disputes with countries like the former Soviet Union. Therefore, trade disputes have existed in the past. The reason we call it strategic competition is that trade disputes are no longer confined to the trade domain. They are spreading to other areas and exerting influence, hence the term strategic competition. In this context, we need to consider the interconnectedness, or nexus, of these issues. Trade disputes merely surfaced and exploded, but underlying this was a strategic competition between the two countries, a competition of systems, that had been building up.

Consequently, strategic competition is not confined to one area, but rather involves a complex interplay of various domains. As a representative example, we can point to the nexus between economy and security, particularly in technology. While the U.S.-China competition began with trade, many are now focusing on the technological competition between the two countries. Technology has a gradual impact, but it also has a profound and extensive impact across all domains. As you are likely aware, dual-use technologies, or dual-use technologies, are increasingly prevalent. These technologies have commercial applications but can also be used for military or security purposes at any time. They can be categorized as "spinner" or "dual-use" technologies. Overall, technology serves as a nexus linking economy and security, and this is becoming a key factor in the competition between the U.S. and China.

Therefore, strategic competition is not confined to one area, but rather involves a complex interplay of various domains. As a representative example, we can point to the nexus between economy and security, particularly in technology. While the U.S.-China competition began with trade, many are now focusing on the technological competition between the two countries. Technology has a gradual impact, but it also has a profound and extensive impact across all domains. As you are likely aware, dual-use technologies, or dual-use technologies, are increasingly prevalent. These technologies have commercial applications but can also be used for military or security purposes at any time. They can be categorized as "spinner" or "dual-use" technologies. Overall, technology serves as a nexus linking economy and security, and this is becoming a key factor in the competition between the U.S. and China.

Therefore, strategic competition is not confined to one area, but rather involves a complex interplay of various domains. As a representative example, we can point to the nexus between economy and security, particularly in technology. While the U.S.-China competition began with trade, many are now focusing on the technological competition between the two countries. Technology has a gradual impact, but it also has a profound and extensive impact across all domains. As you are likely aware, dual-use technologies, or dual-use technologies, are increasingly prevalent. These technologies have commercial applications but can also be used for military or security purposes at any time. They can be categorized as "spinner" or "dual-use" technologies. Overall, technology serves as a nexus linking economy and security, and this is becoming a key factor in the competition between the U.S. and China.

Furthermore, within the context of strategic competition, we can consider why this constitutes a challenge to the multilateral order. In the course of strategic competition, the Trump administration prioritized American interests. While engaging in bilateral negotiations, it emphasized American interests. Moreover, the State Department urged allies to cooperate with the U.S. in containing China. In response, China, while outwardly promoting itself as a supporter of globalization and multilateralism, has adopted an aggressive diplomatic stance in areas crucial to its core interests, sometimes referred to as "wolf warrior diplomacy." This posture by both the U.S. and China during their strategic competition demonstrates a challenging stance towards the multilateral order. While U.S.-China strategic competition is primarily an issue of relative decline for the U.S., it has a profound impact on the global order and the multilateral system. In this context, the emergence of a "new Cold War" is a notable development.

In this context, the strategic competition between the U.S. and China, and the resulting shift towards protectionism, can be seen as a manifestation of the challenge to the multilateral order. As shown in the graph, many countries around the world are pursuing protectionist policies. The darker the color, the more pronounced the protectionist tendency. Generally, since the global financial crisis, protectionism has been on the rise. Particularly, major powers, which designed the liberal international order, are increasingly adopting protectionist measures. The U.S. and some European countries are implementing more protectionist policies. In contrast, as the map indicates, China is pursuing a more proactive and extensive protectionist policy. This differs from the protectionism seen in the past, driven by a few revisionist states or developing countries. Consequently, other countries are also adopting protectionist measures. Countries like India, Brazil, and Russia, which hold significant weight in the global economy, have also joined the protectionist trend.

This graph illustrates the spread of protectionism following the global financial crisis and the emergence of U.S.-China strategic competition. As you can see, many regions worldwide are exhibiting protectionist tendencies. The darker the color, the more pronounced the protectionist tendency. Generally, since the global financial crisis, protectionism has been on the rise. Particularly, major powers, which designed the liberal international order, are increasingly adopting protectionist measures. The U.S. and some European countries are implementing more protectionist policies. In contrast, as the map indicates, China is pursuing a more proactive and extensive protectionist policy. This differs from the protectionism seen in the past, driven by a few revisionist states or developing countries. Consequently, other countries are also adopting protectionist measures. Countries like India, Brazil, and Russia, which hold significant weight in the global economy, have also joined the protectionist trend.

This trend is evident on the map, where major economies that form the backbone of the global economy are exhibiting protectionist tendencies, creating a mechanism for the spread of protectionism. Consequently, the challenge to the multilateral order is ultimately leading to a crisis of the multilateral system. This can be understood from two perspectives.

First, global challenges are expanding. This means that issues that were once considered localized or regional are now having global implications. For example, climate change is a global challenge. While individual countries or actors face significant challenges, many issues require solutions at the global level. Consequently, this is leading to significant uncertainty in the world order. Some scholars refer to this as the era of "polycrisis," characterized by increasing uncertainty. In response to this uncertainty, various efforts are needed, but the failure to effectively implement these efforts is contributing to the crisis of the multilateral system, which is the existing order.

Second, in addition to polycrisis, another characteristic of the current era is the rise of emerging security issues, also referred to as non-traditional security threats. Unlike traditional security threats, these include issues such as climate change, pandemics, cyber threats, and recent developments in biotechnology. These are increasingly becoming global challenges.

While natural disasters have always existed, they are now having a greater impact and shock, extending beyond local or regional levels to global repercussions. Pandemics are similar. Furthermore, the interconnectedness of issues is becoming increasingly apparent, with impacts spreading across various domains. Consequently, we are facing new global challenges that we have not encountered before. To address these global challenges, a global response is necessary. However, the current crisis of the multilateral system is characterized by the lack of a well-organized global response.

The COVID-19 pandemic is a type of pandemic, and thus has characteristics of a global challenge. As you can see, COVID-19 originated in Wuhan, China, but it has spread globally, transforming from a localized outbreak to a human-to-human transmission. Furthermore, at the global order level, it has led to a systemic crisis, posing a risk of a systemic crisis. These are typical characteristics of complex issues: they do not end with a single challenge or crisis. In this context, we can examine the impact of COVID-19 on the multilateral order. To address these issues, what is needed is "transnational cooperation."

The need for cooperation is increasing. For example, with COVID-19, it is not a problem that can be solved by any single country. Even if one country manages the pandemic relatively well, there is a risk of new cases being imported and re-emerging at any time. This is not just a problem for Korea; it is an issue where it is difficult to assume that any single country has the capacity to solve it. Therefore, transnational cooperation is necessary. In this regard, the impact of COVID-19 on the multilateral order and the global order is profound. Furthermore, we can learn something from COVID-19, which is that...

You have likely heard this often: the problem cannot be solved by any single country. You know, even if one country manages COVID-19 relatively well, there is a risk of new cases being imported and re-emerging at any time. This is not just a problem for Korea; it is an issue where it is difficult to assume that any single country has the capacity to solve it. Therefore, transnational cooperation is necessary. In this regard, the impact of COVID-19 on the multilateral order and the global order is profound. Furthermore, we can learn something from COVID-19, which is that...

Furthermore, when viewed from the dimension of global order, it is fraught with the risk of reaching a stage of systemic crisis, which requires us to focus and lead once again. These are the characteristics of typical issues: they do not stop at being a challenge or crisis at one stage or level. Therefore, it is necessary to consider what areas are most affected by these issues, and what is needed in the process of issues transforming into new crises and new challenges at different junctures is, as you can see, a trans-sectoral approach.

The need for such cooperation is growing. As you know, we are currently facing a pandemic. No single nation can solve this problem. Even if one country manages COVID-19 relatively well, it can be re-infected at any moment by new imported cases. This is not just a problem for one country, and it is difficult to assume that any single country has the ability to solve it. These are issues that require transnational cooperation. From this perspective, the impact on the global order is immense. We also know from the "Great Influenza" that...

Based on this, as COVID-19 progressed, vulnerabilities in what are called hobbies or supply chains became starkly apparent. Of course, as Korea is a country with a strong manufacturing base, this issue was relatively less severe. Nevertheless, we are currently experiencing supply chain disruptions in some business sectors, such as automobiles and semiconductors. If handled well, this can be overcome. However, other countries have experienced more severe direct damage from structural issues in their supply chains. For example, in the early stages of the pandemic, the US and some European countries experienced shortages of masks, which might seem like a simple personal protective equipment. However, these were also produced within global supply chains. Therefore,

Normally, production and distribution within global supply chains proceed without any issues. However, when an unprecedented event like COVID-19 occurred, even in countries with strong supply chains, it became difficult to procure necessary personal protective equipment from the required locations. This led to supply shortages. This pandemic clearly revealed the vulnerabilities of global supply chains. Furthermore, regarding the politicization of international organizations, there have been numerous controversies surrounding the WHO. For instance, President Trump notably criticized the WHO and its handling of the pandemic. It was pointed out that the WHO is excessively reliant on China's funding, leading to accusations of being too pro-China, or a 'China-centric' organization.

This suggests that COVID-19 has had a profound impact on the existing international order. Various forecasts have emerged regarding how this will unfold in the future. One such forecast concerns the relationship between great power competition and COVID-19, specifically how the pandemic will influence the environment in which great power competition unfolds. While it is difficult to make definitive predictions as COVID-19 is an ongoing event, various perspectives are emerging. This itself indicates the profound impact of COVID-19 not only on great power competition but also on the international order.

From this perspective, some predict that the US-led international order will continue, despite issues such as the US failing to exercise its global leadership effectively during the pandemic. However, others argue that China is not yet in a position to replace the US. Many scholars, including scholars like Michael Pillsbury, believe that the US-led international order will persist. They argue that the US is not exercising leadership as it did in the past, is overly influenced by China, and lacks the ability to organize global cooperation to address issues like the rise of protectionism worldwide. Therefore, the problem lies not only in capability but also in the perception of leadership itself.

Some scholars, like Stephen Walt, hold this view. Conversely, scholars who view the situation from China's perspective suggest that COVID-19 has provided China with an opportunity to address issues related to its global standing. They believe China has seized this opportunity to reshape the international order.

On the other hand, some argue that China's response to COVID-19 has exposed numerous problems. For example, issues related to transparency in handling the pandemic and statistical transparency have been raised. Internally, problems concerning the management of power and human rights have also been highlighted. These criticisms suggest that the pandemic has revealed structural weaknesses, and China may consequently face relative decline.

Consequently, China's attempt to portray itself as a global leader in response to COVID-19 has failed to gain the trust of many countries regarding its capabilities. In this sense, it is difficult for China to fulfill the role of a global leader. Furthermore, the pandemic has highlighted issues related to the openness and inclusivity of international organizations, particularly the WHO. It has also sparked discussions about the backlash against globalization and the potential for deglobalization.

While it is not yet definitively decided whether we will maintain the current form of globalization or pursue deglobalization, it is clear that new reforms are needed to promote globalization. Many experts believe that a new version of globalization is necessary. Some propose finding a new balance, such as 'Globalization 4.0'. Additionally, international cooperation needs to move beyond mere discussion and become more proactive. There is a growing consensus that the current model of international cooperation is insufficient to address the global challenges we face.

This has led to a leadership vacuum in responding to COVID-19. The data presented here illustrates this point. As you can see, the response to COVID-19, regardless of how it is evaluated, is not the only factor. However, the survey results from Pew Research Center in 2020 show that the blue line represents negative perceptions, and the green line represents positive perceptions.

Globally, there is a generally positive view of how countries handled the pandemic, including measures taken to curb the spread and mitigate economic damage. This includes countries that have been severely impacted. Considering this, there is a high level of trust in how governments responded to the pandemic. Despite controversies, the WHO also enjoys a considerable level of trust. Conversely, on the right side of the graph, perceptions of the US and China's responses are largely negative. This could be interpreted as a negative perception of their respective pandemic responses. However, it also reflects the perception that the US, in particular, has failed to exercise leadership in addressing these issues, demonstrating its limitations. This aligns with the points made earlier regarding the leadership vacuum.

The COVID-19 pandemic has created a leadership vacuum in the US, which can be inferred from the survey results of major countries. Furthermore, COVID-19 has created a new dynamic in the international order, intertwined with great power competition. It has also created a new dynamic in the global supply chain and trade. From this perspective, there are several diplomatic considerations we need to address.

First, we need to consider how the concept of the supply chain has become intertwined with COVID-19. We also need to consider how it is linked with great power competition. Ultimately, COVID-19, great power competition, and the supply chain are not separate issues; they interact and influence the international order, particularly the future of the liberal international order.

Conversely, the existing global supply chain has been criticized for its vulnerability. Globalization, in general, has been questioned. As I mentioned earlier, the free flow of goods is a key indicator of openness in the liberal international order. However, upon closer examination, there is a qualitative difference between trade in the past and trade in the 21st century. Past trade was primarily state-controlled. Textbooks still describe trade in this manner: if country A has a surplus, it exports to country B, which has a deficit. This is a form of controlled trade. However, 21st-century trade is characterized not by control, but by interconnectedness. In other words, it involves intra-industry trade and trade within specific industries.

This refers to trade that occurs within a single company, across different countries, with different production stages. This is possible because global supply chains have been systematically formed. The formation of these global supply chains has been facilitated by technological advancements and innovation. Technologies that enable efficient management of supply chains spread across the globe have been crucial. In this sense, the global supply chain has been recognized as a highly effective means of increasing efficiency in trade and production for companies and countries.

From this perspective, global supply chains have continuously expanded. Second, regarding great power competition, as I have already elaborated, the issue revolves around the relationship with global supply chains. More narrowly defined, the US-China trade war is a direct manifestation of this competition. The stated reason for the US trade war was the trade deficit with China and China's trade practices. From the US perspective, these were issues that China needed to address. This was presented as a justification for trade sanctions.

The US's trade policy has fundamentally shifted. Previously, the US advocated for free trade, but it has now shifted to prioritizing fair trade, focusing on the interests of its own country. This shift is directly related to the trade imbalance between the US and China. While superficially it appears to be a trade imbalance between the US and China, the underlying issue is global imbalances.

This is because trade between the US and China largely consists of goods produced within global supply chains. Ultimately, the trade imbalance between the US and China is a reflection of the trade occurring within global supply chains. In this sense, it represents a facet of the relationships between countries participating in global supply chains. Therefore, it is a global imbalance.

Let's connect COVID-19 with global supply chains and US-China strategic competition. As I mentioned earlier, COVID-19 has exposed the vulnerabilities of global supply chains. These vulnerabilities have inherent characteristics. Vulnerabilities can be exploited. This concern exists not only at the national level but also at the corporate level. On the other hand, vulnerabilities can also be a source of leverage. Particularly, certain nodes within the global supply chain, acting as hubs, possess significant power. Because the global supply chain is complex and interconnected, controlling these hubs grants considerable influence.

In such cases, countries controlling these hubs can leverage their position to pressure other nations. In this sense, the global supply chain has become a new means of mutual coercion, a reality that has emerged post-COVID-19. Several countries are exhibiting such trends. This is also evident in the context of US-China strategic competition. For example, the US has imposed various restrictions on Huawei, citing national security concerns. These actions are not merely trade disputes but are aimed at disrupting the global supply chain.

For instance, the US's strategy of targeting Huawei by disrupting its semiconductor supply chain has had a significant impact. This characteristic is not limited to specific companies like Huawei but is increasingly expanding. Furthermore, this trend is not confined to the US and China but is also observed between other countries. For example, in 2018, Japan imposed export restrictions on South Korea concerning certain high-tech materials.

This can be seen as Japan leveraging its position to pressure South Korea. In summary, since the 2000s, there have been structural changes in global supply chains. These changes have both positive and negative aspects. The key question is how we can capture these changes.

There are various ways to analyze global supply chains and their implications. Today, I will not go into specific details. However, I will broadly categorize them into two types. First, there is trade based on supply chains. That is, we can observe trade flows based on supply chains.

These include service trade, trade in intermediate goods, and trade in final goods. These can be broadly categorized into network-based trade and team-based trade. The patterns and characteristics observed in these networks indicate that value is created within these networks. As you know, we have seen the emergence of global production networks and overlapping production.

From this perspective, new products are emerging from traditional network structures and simple trade networks, particularly in China. The resulting phenomenon is global and regional imbalances. This is because, in the context of US-China trade, China imports raw materials and intermediate goods from other countries, particularly developing countries, to produce goods for export to the US. In essence, China imports inputs, produces them, and exports them to the US. This is what manifests as the trade imbalance between the US and China.

However, from another perspective, China has a trade surplus with developing countries. In this sense, it is also a trade imbalance. In the context of complex supply chain networks, we observe changes. While there are similarities to the patterns mentioned above, if we examine these networks more closely, we see the formation of highly hierarchical structures. As these hierarchies form, China's centrality is significantly strengthened. We will examine the specific consequences of this concentration of power and network structure later.

This diagram illustrates how the production and trade structures within these supply chains have changed. It shows the evolution from the early 2000s to 2017 and highlights the differences. Furthermore, as shown in the graph, the production and trade structures within these supply chains are reflected as imbalances between the US and China. This shows a persistent trade imbalance between the US and China since the 1990s.

While there have been periods where the trade imbalance has narrowed, it has generally shown a widening trend. During the trade war, particularly in 2018-2019, the trade imbalance did narrow somewhat. However, it has since widened again. This raises questions about the effectiveness of the US-China trade war in correcting the trade imbalance. Specifically, whether it has led to qualitative changes or significant progress is debatable.

This chart shows countries with significant trade surpluses with China. These are primarily developed Western countries, along with some Asian countries like South Korea and Japan. Conversely, countries with trade deficits with China are those that import raw materials and intermediate goods, such as Saudi Arabia and other resource-rich nations. Additionally, countries like South Korea and Japan also have structural trade deficits with China in terms of manufacturing, intermediate goods, and raw materials.

In this context, the trade imbalance between the US and China is not merely a bilateral issue but reflects a broader phenomenon involving many Asian countries. Therefore, framing this issue solely as a US-China problem is a simplification. The US tends to view it as a bilateral issue, while China attempts to downplay its structural nature and frame it as a broader global issue.

Furthermore, global supply chains are increasingly intertwined with national security. As mentioned earlier, the nexus between economy and security is crucial in the 21st century. Technology serves as a bridge between economy and security, and global supply chains also play a similar role, a trend that has become even more evident after COVID-19.

Post-COVID-19, the vulnerabilities of global supply chains have become apparent not only to businesses and governments but also to the general public. People now recognize the interconnectedness of the global economy. This aligns with the idea that the global economy has a complex and interconnected structure. When subjected to external shocks, this interconnectedness can lead to vulnerabilities. However, during normal times, this system maximizes efficiency. When external shocks occur, it can also lead to vulnerabilities.

From this perspective, these issues are not merely economic shocks or impacts on specific industries or items but are increasingly perceived as security threats. For example, in the US, individuals directly experienced mask shortages. This led to the realization that this is a systemic problem, a supply chain issue. This applies not only to masks but also to other essential goods like personal protective equipment and even pharmaceuticals. The production of these items is often concentrated in global supply chains, leading to shortages when needed. This has led to the recognition that this is a security issue. Consequently, global supply chains have once again garnered attention as a nexus linking economy and security.

However, when this is linked with interstate conflict, it can also be used as a tool for one country to pressure another. As mentioned earlier, countries with significant influence within certain networks can leverage these networks to pressure other nations. This can be broadly termed 'network power'. More specifically, it can be divided into 'panopticon power' and 'chokepoint power'.

Panopticon power, as you know, stems from the idea that the world is interconnected through networks. These networks can be used for information flow, but more importantly, they allow for the direct observation and control of key nodes. This enables the monitoring of the movements of countries and actors worldwide. If one party can observe the other, but not vice versa, the observing party gains a significant advantage in preparedness.

From this perspective, the ability to observe the other party is crucial. However, it's not simply about having more power; it's about controlling key nodes within the network. The country that controls these key nodes can observe others more effectively. For the panopticon effect to work, several enabling factors must be present.

These include normative factors and the willingness of other countries to be observed. Without these, the effect is limited. Chokepoint power, on the other hand, involves blocking the flow of goods or services at critical junctures. This is a different approach compared to traditional economic sanctions. Traditional economic sanctions, as seen in the US-China trade war, involve imposing tariffs or import restrictions. These sanctions can impose significant costs on the sanctioning country as well, and they must be willing to bear these costs.

Therefore, implementing sanctions over the long term can be difficult, and the costs must be managed. The ability to impose sanctions with minimal damage to oneself while still impacting the target country makes it a powerful tool in the 21st century, demonstrating a form of network power. In this context, the formation of global supply chain networks allows for the exercise of state power and pressure, which is becoming increasingly evident. In this sense, COVID-19 has exposed the vulnerabilities of global supply chains, and major countries, including the US, have learned a valuable lesson: vulnerabilities can be exploited as a means of pressuring adversaries. This new awareness has grown.

However, a significant problem accompanying this weaponization is its high transmissibility. When the US and China use these tools to pressure each other, they can also affect other countries. As mentioned earlier, Japan has also used this approach against South Korea. This poses a risk.

In this regard, it can be said that global supply chains not only serve as a nexus for economy and security but are also being weaponized. This has led to new phenomena such as 'geoeconomic warfare' and 'digital warfare'. In the past, when conflicts arose between countries, military means were primarily used. However, in the 21st century, there is a clear trend towards using economic means rather than military means.

In this context, economic means are being weaponized, and global supply chains serve as a crucial tool for this. These developments pose a significant threat to global stability.

Consequently, there are efforts to prepare for and respond to the vulnerabilities and weaponization of global supply chains. This is occurring at the corporate level, with companies focusing on strengthening resilience. Various strategies are being employed, primarily through diversifying supply chains.

This is not limited to corporate strategies but is also manifesting as national strategies in the context of economic security and the restructuring or reconfiguration of global supply chains. You may have heard of the US administration's 'reshoring' policy. This policy aims to bring back manufacturing from overseas to the US. From this perspective, it is a form of 'national security' policy. The core principles of this 'national story' pursued by the US government include resilience, reliability, and diversity.

Specifically, at the national strategy level, diversification is a key approach. This manifests as reducing dependence on China. The rationale is that excessive reliance on any single country, especially China, creates vulnerabilities. The US, in particular, can leverage this dependence on China as a tool, employing strategies such as decoupling or 'friend-shoring'.

Reshoring, as mentioned earlier, involves bringing production back to the home country. While this can enhance self-sufficiency, it may not always be the most efficient or effective approach in the long run, potentially harming corporate competitiveness. Therefore, as an alternative to reshoring, 'near-shoring' is being pursued, where production is relocated to allied countries. The USMCA (United States-Mexico-Canada Agreement) is an example of this effort to strengthen supply chains between North American countries.

However, this may not be sufficient. To address the remaining issues, 'friend-shoring' or relocating supply chains to allied countries is another direction. This is also driven by the US-China strategic competition. The US's economic security strategy, mediated through global supply chains, is thus multifaceted.

So far, we have discussed the crises in the international order since the 2008 financial crisis, the impact of COVID-19, and the dynamics of US-China strategic competition. Now, let's briefly discuss how the international order should evolve, considering COVID-19 and US-China competition.

First, there is a need to establish a system for managing global challenges. This can be broadly understood in four categories. First, these are closely related to the economy. We often face situations where we prioritize short-term gains over long-term investments, whether in business or in responding to global challenges. This applies to natural disasters as well.

While preventive measures are difficult to implement in reality, the focus should be on preparedness rather than reactive responses. This is a necessary response strategy when considering factors like the current pandemic and potential future shocks. The immediate priority is managing the impact of COVID-19. The pandemic has exposed various problems, including the weakening of international cooperation, fragmentation, and the rise of protectionism.

Revitalizing the dynamism of the international order is crucial. The global effort to distribute vaccines, for example, can serve as a model. The immediate focus is on responding to COVID-19, but we must also proactively identify and address the global challenges that will emerge after the pandemic, as it is likely to continue in some form.

These challenges include climate change and biodiversity loss. These are considered among the most critical factors that will shape future international cooperation. There is a growing consensus that these issues require collective action and will likely intensify in the future.

Therefore, there is a need for reform within international organizations. Currently, organizations like the WHO are facing internal challenges, such as politicization. To enable faster and broader responses, international organizations need to be strengthened. This is a recurring point.

This can be achieved through two approaches. First, inclusive multilateralism is necessary. Traditional international order has been state-centric. However, the future requires a multilateralism that includes not only states but also non-state actors and stakeholders. This inclusive and participatory approach is crucial for enabling effective responses to global challenges.

This is a departure from the traditional interstate system. We need a system that can respond to global challenges. One aspect of this is the formation and management of global governance. Second, an upgrade in response capabilities is needed.

This is not merely about restoring the status quo but about innovation. This involves developing adaptive capabilities, such as timely and appropriate responses. This aligns with the idea of preventive measures, as the costs and damages of reactive measures are bound to increase. Therefore, response capabilities must be enhanced. The concept of 'response effectiveness' also relates to the accountability of international organizations. How can we ensure accountability?

While the autonomy of international organizations is important, it is also crucial to consider who they are accountable to. This requires innovation in systems that foster a sense of ownership. These efforts are essential for addressing global challenges and preventing the escalation of problems. Regarding South Korea's approach, I will conclude with a few brief remarks.

First, while not the most important, there is an opportunity to exercise leadership in addressing global challenges. As mentioned earlier, the international order is in flux, and this creates a vacuum in leadership. Therefore, a diplomacy that can fill this leadership gap is needed. Furthermore, unlike major powers, this diplomacy should not be unilateral but should involve alliances and partnerships, particularly with like-minded countries.

From this perspective, there is an opening for leadership diplomacy. This is often referred to as a 'window of opportunity'. However, this window is not wide open; it is narrow and fleeting. Therefore, seizing this opportunity is crucial, but it also presents a challenge. It is a critical juncture. Second, we must acknowledge the changing reality and the need to adapt to the new normal. This applies to both domestic and foreign policy.

Externally, as discussed extensively, there are issues related to global interdependence, competition, and the management of social cohesion. The COVID-19 pandemic has brought about significant changes not only in the economic and industrial spheres but also in the social and political spheres. Economically and industrially, we are witnessing digital transformation and the rise of the platform economy. Social changes are also occurring concurrently.

Therefore, addressing these issues requires not only industrial solutions but also strategies that consider social factors. We need to enhance our adaptability to the new normal. Furthermore, it is essential to consider how to incorporate emerging issues into global governance and establish norms and rules. Particularly in the context of digital issues, we need to take a leading role in integrating them into the global framework.

This includes digital trade, which many of you are familiar with. The rise of the platform economy and digital transformation are significant trends. These need to be linked to global governance. This is a crucial process for shaping future global governance. A dual approach is necessary.

We often talk about this, and it seems necessary to include conditions and supplements for the initial quantum aspects. This is what we believe is the most important point of our final discussion: for this to happen, we must be prepared for offensive situations. If we face difficult problems or have meetings about such issues, our efforts will likely remain cyclical. The public must be sufficiently prepared, and in that sense, we need to establish a connection between public policy and external affairs.

Thank you very much for attending the lecture for three hours. I am also grateful to be able to see some faces online. You might not recognize me when we meet outside, but humans have the ability to recognize patterns. AI also seems to possess this ability now. If you have pattern recognition skills, you might recognize me if we meet again.

If you greet me, I will be happy to greet you back. This is also a connection, a precious connection. I hope we can maintain this connection and greet each other outside. Today's lecture is part of the EAI Academy, which has been held several times. I hope this will be an opportunity for you to gain something and for your growth to blossom or bear fruit. Therefore, I hope you will complete the EAI Academy.

I hope you will leave with the thought that you have gained a lot from this academy. While it is important for the instructors to provide lectures, your active participation is also crucial. Therefore, I ask for your active participation. I will now conclude. Thank you.