[The 5th EAI Academy] ⑦ Changes in the Global Economic Order and South Korea's Economic Security Strategy

YouTube link: https://www.youtube.com/watch?v=LcRKfgPCibI

■ Lee Seung-joois a Professor of Political Science and International Relations at Chung-Ang University and the Director of the Center for Trade, Technology, and Transformation at the East Asia Institute. He serves as a policy advisor to the Ministry of National Defense, a member of the Ministry of Foreign Affairs' Economic Security Diplomacy Advisory Committee, and a board member of the Korean Political Science Association. He holds a Ph.D. in Political Science from the University of California at Berkeley and previously served as a professor in the Department of Political Science at the National University of Singapore.

His books and edited works include Korea’s Middle Power Diplomacy: Between Power and Network, Trade Policy in the Asia-Pacific, *The Political Economy of Cyberspace*, *The Political Economy of the Belt and Road Initiative*, and *US-China Competition and Digital Global Governance*. He has also published numerous articles, including “South Korea’s Economic Statecraft in a Risky High-Tech World,” “Changes in Interdependence, US-China Strategic Competition, and the New Dynamics of the East Asian Regional Order,” “Technology and International Politics: South Korea’s Strategy in the Era of Technological Hegemony Competition,” “The Networked Global Economy and US-China Strategic Competition: The Rise of Complex Geoeconomics,” “The Nexus of Economy and Security and the Evolution of US-China Strategic Competition,” “The Political Economy of Digital Trade Order,” “Institutional Balancing and the Politics of Mega FTAs in East Asia,” and “The Political Economy in an Era of Uncertainty: Crisis of the Liberal International Order?”

Video Transcript

Today, I would like to add a topic for discussion: the changes in the global economic order and South Korea's economic security strategy. You have likely encountered the term 'economic security' frequently in the media and other outlets recently. There are two keywords here: first, how is the global economic order changing? And second, what are the resulting challenges? We need to consider these questions.

And within this context, how should South Korea respond and what strategic direction should its policies take? I assume you received the lecture materials yesterday and had some time to think about these issues. Therefore, I would like to use this opportunity for Q&A to discuss these topics. For those who wish to delve deeper into this subject, I have provided some suggested readings, which I encourage you to consult. I would like to proceed with the session in a relaxed, interactive manner. When you hear 'changes in the global economic order,' what comes to mind?

Ah, you're asking me after I came to listen. That's a bit of a surprise. What do you mean? Yes, yes. In the original context, the domestic... yes, yes, yes, yes. Over the past two years, we have heard a lot about decoupling. There have been various debates about whether decoupling is possible or desirable. It is undeniable that it is a significant factor influencing changes in the global economic order, and we will briefly touch upon it. What other keywords come to mind? Ah, supply chains. What do you mean? Services, yes, yes, yes, yes, yes. But why is it important now?

As supply chains become more fragile, many weak points are exposed. Yes, yes. Supply chain fragility. Yes, yes. Decoupling and supply chains have been mentioned. What else? Yes, ah, yes. And why is that? In the past, security was not a factor, and economic efficiency was prioritized. Yes. It is related to changes in the international political structure. Yes. The issues you just mentioned, decoupling and supply chains, are indeed related to changes in the global economic order. The problems with the efficiency-centric paradigm are also related. We need to examine these issues more theoretically and analytically. In that regard, we should first consider the characteristics of globalization that have been unfolding over the past two decades. Regarding globalization, there is a fundamental tension that continues to exist. Globalization, in essence, is a process of forming a single global market.

You can think of it as such. We refer to this metaphorically as the 'world market.' The world, in economic terms, has been integrating into a single market until relatively recently. What do we call this? Sometimes globalization, sometimes economic integration, or the pursuit of an efficiency-centric paradigm. However, the political reality we inhabit is that we have had to pursue this economic integration within a system of sovereign states.

There is a fundamental tension. On one hand, there are various movements to reduce economic transaction costs, while on the other hand, there are strong forces seeking to maintain the sovereign state system. There has been a tension, a trade-off between the two, and we have not been able to fundamentally resolve it. The issues you mentioned can be seen as problems arising from this context. Until relatively recently, specifically before the US-China strategic competition, particularly the trade war, began in 2018, we believed that globalization, including deep integration, would continue. People like Thomas Friedman diagnosed the world as 'flat.' And we expected this world to continue. This was just four or five years ago. Perhaps it was a diagnosis that overlooked the political reality we inhabit.

It is precisely because this fundamental tension has surfaced that we are facing various problems today, and this is a driving force behind the changes in the global economic order. If this fundamental problem is not resolved, there will inevitably be limitations in resolving the various uncertainties in the current global economic order. Phenomenally, as you can see here, there are factors we call 'server risks'—risks that individual countries face. These cannot be resolved simply by pursuing a single, unified market. Furthermore, individual countries still maintain different regulatory systems, and from a certain perspective, the differences in regulatory policies among major countries are widening, as indicated by 'T' here. One of the fundamental reasons for this is the conflict between the economic forces driving towards a global market and the political forces seeking to maintain the sovereign state system.

Another aspect is the nature of globalization itself. We tend to speak of globalization in a broad sense. However, if we examine globalization closely, there can be various types of globalization depending on the level and scope. Our focus on globalization in the 21st century is precisely because of the negative effects created by this process. We also translate it as 'hyper-globalization.' What is a key characteristic of hyper-globalization? It is the pursuit of deep integration, as you can see here. What does deep integration mean? And what are the side effects of globalization and hyper-globalization? Integration, as I mentioned earlier, is the process of integrating into a global market.

What does deep integration mean? It infringes upon sovereignty. What does that mean? Yes, yes. To put it differently, globalization before the full-scale implementation of deep integration was about dismantling barriers across borders. Commonly, this refers to tariffs, etc. Tariffs are one of the significant barriers at borders. Thus, until relatively recently, before the 2000s, globalization was about lowering these cross-border barriers. This led to trade liberalization, and as trade became more active, national barriers were lowered, strengthening the movement towards a single market. However, deep integration since the 2000s involves dismantling other barriers beyond borders, as the English expression suggests. This was a process of lowering those barriers. While lowering cross-border barriers was primarily handled by the WTO, which you are well aware of,

the WTO is currently dysfunctional. Therefore, to lower these 'beyond-border' barriers, alternative means beyond the WTO began to be sought. These include FTAs and mega-FTAs, which you have likely heard of. Through these means, various regulatory policies, environmental policies, and labor rights policies that transcend national borders were brought into the scope of FTAs and mega-FTAs. These are issues that we previously considered to belong to the sovereign domain of individual countries, as mentioned in the previous slide. As we pursue integration, we have begun to address these issues. This is a matter of political sovereignty, and beyond political sovereignty, it is also a matter of social safety nets. Of course, the economic effects of deep integration are projected to be substantial as it progresses. Therefore, many countries and multinational corporations have strived to achieve it. However, the greater the effect, the greater the backlash and side effects that accompany it. Two representative problems arise from this: one is the 'race to the bottom.'

Yes. From the bottom up, so to speak. When there is a race to the bottom from within, various forms of 'race to the bottom' are bound to occur. What are they? If we consider this issue solely in terms of capital, the bargaining power of workers for wage increases will inevitably weaken. This is a 'race to the bottom' in wages. Capital is much more mobile than labor; it is mobile in terms of profit, so it can continuously move to countries with better labor conditions. Therefore,

This is because once disarmament begins from within, a race to the bottom in various forms is bound to occur. What are some of these? If we confine this issue to capital-labor relations, workers' capacity to demand wage increases will inevitably weaken. This means a race to the bottom in wages. Capital, being far more mobile than labor, can continuously move to countries with better labor conditions. Therefore,

labor's ability to counter capital becomes difficult. While there are certain means, this is generally the case. As capital mobility increases, the 'race to the bottom' in labor wages will inevitably accelerate. What else? There are also various attempts to attract capital. From a government's perspective, this leads to a 'race to the bottom' in tax rates. A very effective way to attract capital is to lower tax rates, especially corporate tax rates. There is also a 'race to the bottom' in regulations. Companies dislike regulations. In this way, various forms of 'race to the bottom' occur. And in the process, another accompanying change is the inevitable emergence of inequality. The changes in the global economic order are playing a role in disrupting the domestic political and economic balance that has been maintained for a long time.

In that sense, we can say that external globalization and internal political and economic changes have a certain correlation or a correlation at a certain level. As a result, backlash against globalization and other phenomena have been increasing. One manifestation of this is the various phenomena observed after the 2008 global financial crisis, particularly Brexit, the rise of protectionism in the United States, and the spread of protectionism in other countries. As you can see here, this is the globalization index. Of course, this is based on trade.

Based on trade, the global average is shown in green. Looking at the green line, the globalization index in 1970 was only 40%. By 2020, it approached nearly 60%, indicating that globalization has been continuously pursued. The blue line represents South Korea's case. In 1970, South Korea's level of globalization was significantly lower than the global average. This began to reverse around the mid-to-late 1980s, and South Korea's globalization index started to rise rapidly. As you can see, it reached around 80% in the 2020s. South Korea is perhaps a success story of globalization. It is a representative country that has succeeded in economic development and growth through globalization. From this perspective, and connecting it to what I have discussed so far, South Korea may also be a representative country where both the positive and negative effects of globalization are manifested. We need to have some awareness of this. The world on the left is from 1970, and the world on the right is from 2019. It is difficult to say that there was no globalization in 1970. The darker the shade of blue, the more globalized the country. However, comparing 1970 and 2019, globalization in 1970 was essentially localized globalization, and there were still many countries not integrated into globalization.

More narrowly, it was essentially globalization among developed countries. Because globalization was confined to developed countries, global inequality was not visible. However, in the picture on the right from 2019, globalization has become truly global. With the exception of a very small number of countries, you can barely see them here, but if you zoom in, you can find countries like North Korea. Thus, with the exception of a very small number of countries, the geographical scope of globalization has expanded globally. Not only has the geographical scope expanded, but the level of globalization has also significantly increased. As such, globalization has undergone a process of continuous expansion over the past 40 years, and as I mentioned again, it has generated both positive and negative effects. One of the negative effects is

precisely this. As of 2019, this shows the income share of the top 10% globally. Again, the darker the shade, the higher the level of inequality. Of course, it is clear that wealth inequality cannot be solely attributed to globalization. There are many other causes. As you can see, countries with high income inequality include many developing countries that we know of. They have their own domestic governance issues. However, excluding these domestic governance issues, globalization has contributed to accelerating income inequality. This data shows that in major countries like the US, France, Germany, and China, a common characteristic is observed. Around the mid-to-late 1940s, following the end of World War II, income inequality significantly decreased.

This is precisely the case. The data shows the income share of the top 10% as of 2019. The higher the concentration, the higher the level of inequality. Of course, it is clear that wealth inequality is not solely attributable to globalization; there are many other causes. As you can see, many developing countries that we know of have high income inequality. They have governance issues within their own countries. However, if we set aside these governance issues, globalization has indeed accelerated income inequality. Looking at the data from major countries like the United States, France, Germany, and China, we can observe a common characteristic. In major countries, around the late 1940s, with the end of World War II, income inequality was significantly mitigated.

This phenomenon persisted until the early 1970s. This period is sometimes referred to as the 'golden age' in political economy. Growth was accompanied by low income inequality. Everything was in a virtuous cycle. And we expected this to continue. However, from the mid-1970s onwards, wealth inequality has continuously increased. If you match this with the comparison of the world in 1970 and 2019 shown earlier, the continuous increase in globalization is somewhat aligned with the increase in inequality. Again, globalization has produced various positive effects. What are they?

It has increased overall wealth and generated wealth. However, we have not deeply considered the issue of how this wealth is distributed, and we have not found adequate answers. This can be described as the phenomenon of wealth concentration observed simultaneously in major countries. To summarize what I have said so far, this is sometimes referred to as the 'paradox of globalization' or 'the paradox of globalization.'

This concept was developed by Professor Dani Rodrik of Harvard University. Analyzing this from an analytical perspective, we are still living in a trilemma. This means that there are three values that we must pursue equally, but the problem is that it is practically impossible to achieve all three simultaneously. Look at each of these values; they are all important. Democracy needs no further explanation. And as I mentioned earlier, national self-determination within a sovereign state system is fundamental. As long as we do not abandon the sovereign state system, national self-determination must go hand in hand with it.

And our reality for the past 40 to 50 years has been the continuous pursuit of economic globalization. However, the trilemma implies that these three cannot coexist simultaneously. Therefore, according to Professor Rodrik's diagnosis, one of these is inevitably sacrificed. What might that be? What is it? You are good at multiple-choice questions. And this is not even a five-choice question, but a three-choice one. It is likely what you are thinking. Ah, there are differing opinions. Yes, yes, yes, yes. The tension between the two issues I mentioned earlier implies that we are not abandoning either of them. However, in the background, democracy is significantly regressing. When we talk about democratic regression, it doesn't sound unfamiliar. However, we used to think of democratic regression primarily occurring in newly democratized countries. The 'democratic regression' at that time referred to countries that had just succeeded in democratic transition and were unable to overcome the political, economic, and social turmoil that occurred during that process, thus regressing back to authoritarianism. The risk of this has always existed. Of course, this risk still exists for newly democratized countries. You have already encountered this through various news reports. However, democratic regression has now expanded its scope to include a qualitative decline in democracy even in mature, developed democracies. And the cause of this is not unrelated to what I am currently discussing. Another consequence of democratic regression is the rise of nationalistic populism and protectionism domestically. This, in turn, threatens the openness of the global economic order. We have always taken these things for granted during the golden age.

refers to countries that, after successfully transitioning to democracy, failed to overcome the ensuing political, economic, and social turmoil and regressed back to authoritarianism. This risk has always existed. It is not absent even now for new democracies. You have likely encountered such reports through various media. However, the scope of democratic transition has now expanded significantly to include a qualitative decline in democracy even in mature, advanced democracies. And the causes are not unrelated to the phenomena I have just described. Another consequence of democratic regression is the rise of nationalistic protectionism domestically, which in turn threatens the openness of the global economic order. We took all of this for granted during the Golden Age.

Globalization progressed smoothly, leading to increased efficiency and wealth creation. Income inequality was also significantly reduced, which in turn strengthened democracy. However, when economic globalization shifted from its previous form to hyper-globalization, which aims for deep integration, the tensions between these factors have become increasingly amplified. And as democracy has been undermined in this process, the ability of domestic governance, which is supposed to manage economic globalization, to solve problems has weakened. This is difficult to capture.

Therefore, individual countries have begun to rely on what is called 'populism' and 'demagoguery,' and are susceptible to this 'protectionism.' After the 2008 global financial crisis, the trend of spreading protectionism globally has strengthened. This is closely related to the changes in the global economic order and the weakening and regression of domestic governance and democracy. This is the first point I want to make. And this is ultimately acting as a significant factor undermining the global economic order, or the liberal international order that we have spoken of until recently. This is the first point.

Yes, the second point is that we cannot discuss this without mentioning COVID-19. When we talk about the global economic order and COVID-19, what comes to mind? We are not yet in a situation where masks are completely off. If I ask elementary, middle, and high school students, about 20% still wear masks. In elementary schools, some students are still absent, and teachers sometimes ask them to wear masks. So, it seems we haven't completely escaped the COVID-19 era. What is the relationship with changes in the global economic order? Ah, asking questions repeatedly makes you uncomfortable, doesn't it? Yes, yes, yes, yes. A different aspect of globalization has begun to emerge. This pandemic, of course, is unprecedented in history.

What actions did we take then? We need to consider the actions taken by individual countries. This is not just about pandemics like COVID-19; in a broader sense, these are factors that cause extreme uncertainty in international politics and international political economy, approached from the perspective of 'emerging security threats.'

We do not fully understand the mechanism by which these threats arise. There are still various discussions about their origins. And we do not fully understand how they amplify as threats. However, what is clear is that there is a certain inflection point. Once this critical point is crossed, there can be various systemic impacts, and there will inevitably be limitations in managing them with existing systems. However, what is commonly observed in the process of the spread of these emerging security issues, including pandemics, is the phenomenon of 'issue linkage.' Initially, as you recall, we thought of COVID-19 simply as a health issue. A public health and medical issue. At best, we considered it a public health security issue. However, once a certain critical point was crossed, we realized it was not merely a health issue. It could be a threat to human survival itself. In that sense, it began to be approached from the perspective of human security. And as the issue of human security was raised, another realization emerged: this could lead to the collapse of the entire global system, causing a systemic crisis. A broad consensus and awareness of this have formed. This has caused various changes as the situation transitioned through different phases. This is why COVID-19 cannot be approached simply as a disease or a pandemic. However, there is one thing we clearly know about the issues that go through this process: to solve these problems, transnational cooperation is literally required.

In other words, it is different from existing international cooperation. International cooperation refers to cooperation between states, particularly between governments. However, these problems are difficult to solve through intergovernmental cooperation alone. As we experienced with COVID-19, we know how important voluntary cooperation from citizens and organizations is. And this cooperation transcends national borders. Only by responding in this way can we barely manage these issues. The answer is relatively clear. However, we are in an era of extreme uncertainty. So, when the situation is uncertain, what action does a state take? When you are uncertain, what do you do when you feel anxious? You close the door. What does closing the door mean? As uncertainty increases, egoism prevails. At the state level, it leads to national self-interest and protectionism: 'Me first.' The solution to the problem is clear:

We can handle this through transnational cooperation. However, the temptation we strongly feel is national self-interest: 'Me first.' What were the concrete choices that followed? Exclusion and closure, lockdowns, border closures, and so on. That is 'Me first.' Perhaps if we had responded with transnational cooperation, we would not have needed nearly three years to deal with COVID-19. We might have resolved this issue sooner. However, by prioritizing 'Me first,' the problem has been prolonged for three years. In that sense, COVID-19 has raised a question for existing globalization: that globalization can regress in times of crisis. What we newly learned is that the globalization that progressed for such a long time in normal times had a surprisingly fragile ideological and institutional foundation. And in times of need, cooperation between nations was absent.

transnational cooperation can address this issue. However, the temptation we strongly felt was 'nation first,' and the concrete choices that followed were exclusion and lockdown, border closures, and so on. This is the 'nation first' approach. Perhaps if we had responded with transnational cooperation, we might not have needed nearly three years to deal with COVID-19. We might have resolved this issue more quickly. However, by prioritizing 'nation first,' the problem has been prolonged for three years. In that sense, COVID-19 posed a question to existing globalization: that globalization can regress during difficult times. What we newly realized is that the globalization that had progressed for so long during normal times was built on surprisingly fragile ideological and institutional foundations, and that the cooperation between nations, which is so necessary, has disappeared.

Of course, the absence of leadership that should promote cooperation between nations is also a significant factor. Therefore, as you mentioned earlier, issues like supply chain problems and the weakening of the efficiency-centric paradigm have become prominent due to COVID-19. We often refer to the efficiency-centric paradigm as the Toyota Production System, which you have likely heard of. At the corporate level, it involves minimizing inventory and optimizing various costs.

This means maximizing efficiency. However, we have now shifted from 'just in time' to 'just in case.' In the past, during normal times, there was no need to seriously consider 'what if.' Now, we accept that 'what if' scenarios can occur regularly, and multiple 'what if' scenarios can occur simultaneously. This is a period of change from 'just in time' to 'just in case,' and COVID-19 was a decisive catalyst that brought this to the fore. The second point is that US-China strategic competition has acted as a factor that further amplifies these issues. Why is that? From the US perspective, where did COVID-19 originate? Yes, the theory of Chinese origin. Let's continue with the US perspective: when did it occur? It is known to have occurred in December 2019.

It is known to have occurred around late December. We will confirm the exact date later. And when did it arrive in the US? Early January 2020. It took less than a month. And after the first confirmed case of COVID-19 in the US in early January, within just over a month, some schools in the US began to switch to online classes. The COVID-19 that originated in China in December 2019 took only about a month and a half to cause US education to shift online. This is an incredible speed. This itself is a manifestation of globalization. If we were not globalized, the impact of an epidemic between two countries across the Pacific would not have progressed at such a rapid pace. COVID-19 itself shows that we are interconnected through globalization. However, these two countries happen to be in strategic competition. As I mentioned, when an unprecedented epidemic like COVID-19 occurs, everyone is tempted to take care of themselves first. What did you do? When COVID-19 first broke out, without anyone telling you, did you naturally buy masks, or perhaps buy more than you needed? Are you still wearing them now? Do you have no masks left at home? Do you still have some?

From the perspective of Americans, masks that were not normally needed became necessary for self-protection after the outbreak of COVID-19. Americans naturally assumed there would be American-made masks, given brands like 3M on the packaging. However, shortly after the outbreak of COVID-19, they learned that these masks were produced in China. A significant portion of them. However, the origin of COVID-19 was China. What happened? All 1.4 billion people needed masks. China is a country that produces masks, but when 1.4 billion people needed them, what measure did the Chinese government take? It imposed export restrictions on masks. Americans could not wear masks with the 3M brand. This issue then became perceived as a matter of personal survival. A matter of personal security. Consequently, these issues were no longer seen as merely health or security issues, but as threats to human security, and potentially to systemic crisis or national security, as the general public began to perceive them. This created an environment where the US and China, using this issue as a catalyst, could implement policies related to economy, technology, industry, and security. The public sentiment that relying on others, especially on an adversary or rival country with which one is in strategic competition, can be very dangerous was formed. This is the effect of COVID-19. Amidst this, as you mentioned earlier, the structural vulnerability of supply chains was added. This created an environment where we securitize various issues. However, while securitization is necessary, it is not always carried out at an appropriate level. Sometimes it is excessive. And the reality is that it is highly likely to be excessive. Just as you bought more masks than you needed. I am not criticizing you. What I am trying to say is that individual rational choices can create structural problems at the system level. At the individual level, one must respond rationally and take care of one's own safety. But this creates structural problems at the system level.

Therefore, the reason we say we must not approach this as a matter of restoration, but beyond restoration, is that even with vaccines, for example. This is a picture of Chinese vaccines. These issues are matters of health and life, and are therefore typical issues that should be approached with humanitarianism. It concerns human life. Ideology, political systems, and other values should be excluded. However, in the early stages of the COVID-19 spread, relatively quickly, vaccines became available. Look at the countries where these vaccines were initially distributed, the countries where Chinese vaccines were distributed. What kind of countries are they? Developing countries, non-aligned countries.

This is a matter of humanitarianism, and the intervention of political systems and ideologies is involved. You understand this if you consider which vaccine you received. This issue, even this, is now being securitized. That is what I am trying to convey. Now, for the third point. When we talk about interdependence, what other keywords come to mind? Ah, no more. Just say it. You have heard about interdependence so much, haven't you? Let me mention a few points. Interdependence is not a 21st-century phenomenon. It existed in the past and still exists. It exists in different forms. Therefore, its impact on the global economic order, economic security, or international politics is differentiated.

is possible through transnational cooperation. However, the temptation we strongly felt was 'nation first,' and the concrete choices that followed were exclusion and lockdown, border closures, and so on. This is the 'nation first' approach. Perhaps if we had responded with transnational cooperation, we might not have needed nearly three years to deal with COVID-19. We might have resolved this issue more quickly. However, by prioritizing 'nation first,' the problem has been prolonged for three years. In that sense, COVID-19 posed a question to existing globalization: that globalization can regress during difficult times. What we newly realized is that the globalization that had progressed for so long during normal times was built on surprisingly fragile ideological and institutional foundations, and that the cooperation between nations, which is so necessary, has disappeared.

is possible through transnational cooperation. However, the temptation we strongly felt was 'nation first,' and the concrete choices that followed were exclusion and lockdown, border closures, and so on. This is the 'nation first' approach. Perhaps if we had responded with transnational cooperation, we might not have needed nearly three years to deal with COVID-19. We might have resolved this issue more quickly. However, by prioritizing 'nation first,' the problem has been prolonged for three years. In that sense, COVID-19 posed a question to existing globalization: that globalization can regress during difficult times. What we newly realized is that the globalization that had progressed for so long during normal times was built on surprisingly fragile ideological and institutional foundations, and that the cooperation between nations, which is so necessary, has disappeared.

First, I would like to mention 'hyper-connectivity.' Interdependence, in other words, refers to the increase in connectivity between countries. Connectivity has become very high. I also talk about hyper-connectivity. When I say 'hyper' this and 'hyper' that, people say I overuse 'hyper' and 'super' and 'ultra.' Yes, I do use 'hyper' a lot. Connectivity has increased dramatically compared to the past. I am primarily speaking from a national perspective, but compare yourselves now to yourselves just 10 years ago.

In terms of connectivity, how much has it increased? Are you not constantly shopping overseas now? That is an action that increases connectivity between countries. Is that all? Communication, digital trade, and what else? Payment systems, right? These payment systems are representative examples that increase connectivity between countries. Compared to just 10 years ago, connectivity has reached an unprecedentedly high level. This is 'hyper-connectivity' in the sense that it is causing a qualitative change.

Furthermore, this is not a phenomenon occurring only in specific sectors. It is not limited to trade and investment. It includes the internet that you use every day, the financial transactions you make every day, the financial transactions you make when shopping overseas, and global value chains, etc. Connectivity has dramatically increased in all these areas, causing a qualitative change in interdependence. What kind of qualitative change is it? Traditionally, interdependence has been understood as follows: at the bottom, there is the 'dovish effect.' As countries become highly interdependent, the relationship between countries becomes more peaceful, and their interests align.

This is not to say that conflict disappears. When countries are interdependent, conflicts can also increase. However, in the traditional international political economy order, how was this interpreted? Conflicts do not disappear, but they can escalate. However, the tendency to resolve these escalated conflicts through non-military means increases. This is what we have traditionally understood as the effect of interdependence. Countries with low levels of interdependence, what options do they have when conflict arises?

You can end the relationship, right? Think about when you are dating casually. You have a low level of interdependence. You can break up at any time. But when the relationship deepens, it becomes much harder, doesn't it? Even if there are other conflicts, you try to resolve them in different ways. In that sense, there is a 'dovish effect.' And that is one aspect of reality. It is undeniable that it is a part of reality. The theoretical resources to explain this include 'complex interdependence,' etc. Those who have taken introductory courses like 'Introduction to International Politics' may be familiar with this content. If not, it is not a problem, so let's move on. However, on the other hand, interdependence is being re-examined. Does interdependence only have this 'dovish effect,' the effect of bringing peace? This question is being asked again. If there are other effects, what are they?

The traditional perspective focused on 'asymmetric interdependence.' The level of interdependence has continued to rise through globalization, the IT revolution, and supply chains. This is undeniable. However, what more accurately describes the reality we face is 'asymmetric interdependence between countries,' meaning that countries do not depend on each other equally. When this asymmetry is revealed, what phenomenon occurs? One country can use it as leverage to pressure another country. It is used as leverage. And sometimes, as seen in historical examples, scholars like Albert Hirschman have argued that countries strategically create interdependence, as Germany did. To gain a negotiating advantage.

It does not stop at strategically utilizing the situation; it even proactively creates asymmetric interdependence. It is the strategic use of interdependence. Traditionally, these two perspectives have clashed. Therefore, the view that interdependence should be guarded against has not been absent. It is also true that both aspects still exist in our reality. Therefore, even though interdependence can generally lead to various positive effects, we cannot help but consider the policy implication that we must always be wary of asymmetry. One of the things I am trying to convey now is that asymmetry also exists within networks. You mentioned connectivity. When countries are connected, a network is formed. When a network is formed, it can take various structures, but among them, there are those with asymmetric characteristics.

There can be countries that possess network names and those that do not. What do we call the actor node that holds a central position within a network? It's what you've all heard of: a hub. If there is a hub in the network, the hub country can hold a very advantageous position in many respects, especially in negotiations, compared to countries without a hub. Therefore, the asymmetry of interdependence we discussed earlier is not solely about total power. It's about asymmetric status within the network. If the former is a difference in material power, the latter is about positional power – how a position within the network can be converted into power.

If we apply this to reality, it's like a supply chain. A company or country that holds a central position within a supply chain can exercise positional power. As you saw in the previous slide, this is sometimes referred to as a country holding a bottleneck point. After discussing this, we can think about why we need to view interdependence differently from the traditional perspective, which I will discuss in more detail later. Considering these factors, the actions taken by individual countries can be termed economic security strategy, or sometimes 'economic statecraft' in English. It is translated as 'economic governance' and also commonly translated into two terms in Korea: 'economic strategy' or 'economic governance.' Personally, I prefer the term 'economic governance' because terms like 'strategy' might imply too strong an element of strategic maneuvering, which may not be ideal for countries like Korea. 'Economic governance'

is a term I personally prefer because of the specific characteristics of countries like Korea. As you saw in the graph, we grow through globalization; we are a country that has grown when the system is open. We must have a fundamental preference for open systems. This should be the underlying principle of Korea's foreign policy and national strategy. Therefore, while 'economic governance' must naturally pursue Korea's national interests, I personally prefer this term because I believe it incorporates openness more fundamentally. Traditionally, economic governance included things like:

imposing sanctions on other countries or controlling exports. As mentioned earlier, this involved leveraging the asymmetry of material power between countries. Not all countries can take such actions; it is the relatively more powerful country that can. In that sense, traditional economic statecraft was the exclusive domain of great powers or developed countries, as it required leveraging asymmetry. Therefore, weaker countries or developing countries were considered to have no capacity to pursue such economic statecraft. However, whether it was sanctions or controls, these were not without problems or limitations. Even now, in the context of the Russia-Ukraine war and other events, sanctions and controls are becoming our reality. Therefore, one of the news items you encounter daily is about additional sanctions, additional controls, or expansions.

However, we are closely tracking the effectiveness of these sanctions and controls. It is time to consider the cost-effectiveness. Are they yielding the expected results? And what were the expectations? What is the sanctioning country expecting? We need to understand their expectations to assess the effects. What do you think? If these are unclear, it becomes difficult to rationalize the sanctions. Why are they being imposed? And it becomes difficult to gain legitimacy from the public. What are we doing this for? Therefore, I am here to tell you that new economic statecraft is emerging.

This is closely related to the emergence of a third perspective on interdependence, which views it differently, as I mentioned earlier. This is a groundbreaking concept introduced in 2019 by two political scientists, Farhi and Man. It's called 'weaponized interdependence.' In terms of strategically utilizing interdependence, it does share some common ground with the asymmetric interdependence mentioned earlier. However, 'weaponized interdependence' does not solely refer to the utilization of material power. It discusses two different aspects: the Panopticon effect and the Chokepoint effect. Both are predicated on the connectivity between countries and the formation of networks. Have you heard the term 'Panopticon'? Do you recall the image? What are its characteristics? A single guard can efficiently monitor multiple prisoners. Where is the guard in a network? At the hub of the network. We can see from the image how advantageous that position is. A country in such a position can survey the world. The advantages of surveying the world are immense. Of course, one cannot survey the world physically. In today's era, how does one survey the world? A country that controls communication networks has a much superior position in surveying the world. Thinking this way, you can understand why the competition between the US and China in advanced technologies, rather than other fields, began with 5G, even if you have attended lectures on advanced technology. It's not simply a conflict over the competitiveness of the individual communication technology called 5G. While that is included, it ultimately comes down to who can survey the world, who can secure a more advantageous position for surveying the world.

In other words, it's a competition related to the Panopticon effect. Therefore, it's an essential element of hegemony. The 5G competition is like that, do you understand? That's what's going on. Now, what about the Chokepoint effect? All networks have such bottlenecks. A country that controls a bottleneck can, as the name suggests, hold the reins of the other party. In Korean, we call this the 'chokemok effect' (조인목 효과), like tightening a noose. Whether they actually tighten it is another matter. However, securing the means to tighten it itself provides a significant strategic advantage. How much will they tighten it if they do? And the supply chain, which is a hot issue between the US and China, has a very strong network structure that can exert this Chokepoint effect. The semiconductor network. Then, why? It's explained again. Why does the US, among many other things, use semiconductors as a means to pressure China? If you consider it, the US has only a 12% market share in global semiconductor production. So why can the US pressure China with semiconductors? It's related to the Chokepoint effect. In other words, the US pressuring China with semiconductors is not because it has superior material power in the semiconductor industry. It is an application of its position within the network, leveraging that advantage for pressure on China. This is the third perspective, 'weaponized interdependence,' through which we view these things again. Network sanctions are formed like this. Network sanctions are not about blocking everything.

Network sanctions are about severing the core links of the network. I will conclude by briefly mentioning a few points due to time constraints. The US-China strategic competition is unique, as you are well aware. The history of hegemonic competition has unfolded in this manner: from trade to industrial technology, finance, currency, and military power. Based on this historical pattern, you can roughly gauge where the current competition between the US and China stands. In that sense, the competition between the US and China is in its very early stages. In English terms, it's 'the beginning of the beginning.' For you, the younger generation, your lives will likely coincide with the era of US-China strategic competition. You will always carry it with you.

It is uncertain. This uncertainty, this 'hyper-uncertainty' I mentioned, how will we live in such a time? This may be a concern that our generation did not have, or perhaps it is your unique privilege to be living in such a special era. You don't seem very welcoming of this idea. That's how it is. So, it proceeds through these stages. I will mention one or two unique aspects. The existential threat and interdependence mentioned at the top are symbolic expressions of the uniqueness of US-China relations.

Right. Cutting off the core links of the network is what we call network generation. I'm going to briefly conclude as time is running short. You are all well aware that the US-China strategic competition is unique, aren't you? Looking at the history of hegemony competition, it has proceeded like this: from trade to industrial technology, finance, currency, and military. This is how past histories unfolded. Right? Then you can roughly gauge at what stage the competition between the US and China is currently at. Viewed this way, the competition between the US and China is in its very early stages. In English, it's the beginning of the beginning. You, the younger generation, will likely experience your lives alongside the US-China strategic competition. Right? You will always carry it with you.

risk assessment itself is not easy. And even if risk assessment is successful, implementing it specifically requires considerable collective effort. It is a very difficult strategy to execute. We need to have some understanding of that. From a somewhat abstract perspective, Korea's economic security strategy should be about integration, balance, and linkage. I am saying these things a lot now. In this era, the basic policy direction and strategic direction should be risk management, not maximization of interests. As I mentioned earlier, in such times, just as you manage risks by wearing masks, it is also a national task. A strategy of maximizing interests can be risky and may fail to realize profits. Managing risks well is very important. So, how do we achieve integration, balance, and linkage? It means not relying on a single policy. It means integrating various policies. Balance has various meanings. We should not be solely focused on pursuing short-term interests; we must also consider long-term interests. We must also consider national interests and private interests. Balance is needed. The state should not be too dominant; it should not intervene too much in the private economy in the name of economic security. However, pursuing corporate efficiency while disregarding security aspects is also risky. Balance is needed between these two. That is the balance. Linkage is necessary. As mentioned earlier, to link economics and security, it is important to secure as many nexus points as possible. The debate has moved beyond whether linkage is necessary; it is now about how much linkage is possible. We must become a country that can achieve that. Regarding universality and particularity, Korea certainly has its particularities. However, instead of rigidly adhering to unique policies, we need to consider how to integrate those particularities into universality.

I want to emphasize this. Interdependence, as I've mentioned, is no longer something I need to elaborate on. The US and China are highly interdependent. However, the reason US-China relations are unique is that it is rare in history for countries that are interdependent to compete for hegemony. If they compete for hegemony, they are either not interdependent, or if they are interdependent, as we discussed with the pacifying effect, they should be getting along well. This is unique. For example, consider the US and the Soviet Union during the Cold War. They competed fiercely, and therefore, they were not interdependent. The West referred to the Soviet Union at the time as being behind the 'Iron Curtain,' implying it was surrounded and isolated. This metaphorical expression accurately described the Soviet Union at the time. But when the West sought to open up China, how did they describe it? They used the term 'Silk Curtain.' This is also a metaphor. But if you think about the Silk Curtain, what image comes to mind? There are undoubtedly divisions and boundaries.

However, exchanges continue to occur across them. This is what represents the relationship between the US and China. They have different systems and values, and there are divisions and boundaries in that sense. However, while they conflict and compete, they are also interdependent. This is the uniqueness of US-China relations, and it is one of the fundamental reasons why the US and China find it extremely difficult to determine how to approach each other. Therefore, based on this reality, the US's strategy towards China or China's strategy towards the US has aspects of inconsistency. At times, they must contain each other, and at other times, they must pursue commercial interests. Therefore, inconsistencies or even conflicts are found in the reality of US-China relations. And we must live in such a world. In that process, many issues are beginning to be securitized. I used the term 'securitization' earlier. But one thing I am focusing on is that to securitize, economics and security must be linked. We use the term 'linkage' for this. To link them, we need a nexus, a means of connection. Who possesses more of these means is very important now. The reason the US and China are shifting the arena of competition to technology, advanced technology, is related to this. To link economics and security more effectively, securing superiority in advanced technology is important. There is a tendency to focus on advanced technology as a nexus.

Consequently, economics, technology, and industry are inevitably undergoing a process of securitization. This is the complexity of US-China relations, which I have just discussed. Therefore, why do we call it strategic competition or hegemonic competition? It is because it possesses these characteristics. It is not a competition over a single issue. Nor is it a bilateral game played from a single perspective. They compete broadly across numerous issues and on various stages—bilateral, regional, and global. Because it is complex and multidimensional, we also refer to it as strategic competition. It is a factor that constitutes a crucial pillar of the current world economic order. Regarding technology, I will not go into detail as you have already attended excellent lectures on the subject. The US perception is that economic aggression is a factor that threatens national security. From the US perspective,

due to China's technological rise, the technological gap with the US is narrowing at a very rapid pace. In fact, many reports from the US consistently point out that not only is the technological gap shrinking, but in some technological fields, China is surpassing the US or is at a comparable level. Why is this the case? Because security is being securitized. Consider this: the US has made various efforts to upgrade its independent ecosystem, its industrial ecosystem. However, these efforts have not been very successful.

They have encountered various domestic political and institutional barriers. However, there are several conditions for overcoming these, one of which is establishing a basis for bipartisan consensus at the political level. But US politics today, like the discussion of polarization, is highly polarized. However, one of the most important issues that connects the Republican and Democratic parties is the issue of China. Through this, a common understanding of the threat posed by China is being established. This tends to manifest in emphasizing the threat from China, which is insecurity. The threat to the US's current international standing is insecurity. The way to respond to that insecurity is to strengthen the US's internal industrial and technological capabilities. Enhancing creativity stems from this creativity security, not from a state of comfort. But one of the factors that greatly triggers that security is China. Conversely, for China, innovation is the only way. There is no alternative but innovation. You are well aware of how the US is currently pressuring China. Without fostering its own internal innovation capabilities, it is difficult to overcome this predicament. These perceptions and response strategies are currently in a synergistic process. There are various public opinions regarding the Biden administration's foreign policy. Overall, due to the phản ứng effect of the Trump administration, it is very positive. However, as you can see at the bottom, its approval rating is relatively low regarding its approach to China. They believe China should be dealt with more forcefully.

This is the case. Here, you can see that when asked about the high tariffs imposed on China, which began during the Trump administration, 44% of Americans say the US economy is not doing well. However, 56% say it is manageable and they can endure it. This can be considered the view of individual Americans towards China. So, what should Korea do? US-China relations involve interdependence amidst existential threats. We must clearly recognize this duality. Viewing it from a biased perspective will make it difficult to formulate a systematic and effective national strategy in this era. We must always keep this duality in mind. Therefore, we tend to perceive the US-China relationship as a choice between the two, but we must break free from that frame. Cooperating with the US should not be linked to severing ties with China, or decoupling from China.

And vice versa. Therefore, we must first break free from framing it as a choice. Because US-China relations have duality. And within the duality of US-China relations, there is a worst-case scenario and a relatively optimistic scenario, a very wide spectrum. We need to understand that spectrum well. Also, there are various systemic effects caused by US-China competition. One of the concerning scenarios is the fragmentation of the world order, known as 'fragmentation.' This is not a favorable environment for Korea. Therefore, cooperation with countries that share these concerns is crucial. This is about positioning. The issue of decoupling was mentioned earlier. Recently, in many countries, especially in the EU and the US, there has been much talk about 'de-risking.' How to mitigate risks.

However, we need to deeply consider how to position ourselves on this issue. Because while de-risking is certainly perceived in Korea as a considerably milder strategy than decoupling, and there are aspects of that, the de-risking strategy requires a much higher level of sophistication. This is one point I want to make. Decoupling, while difficult, can be implemented relatively easily with a decision. However, identifying risks itself is very difficult. Therefore,

risk assessment itself is not easy. And even if risk assessment is successful, implementing it specifically requires considerable collective effort. It is a very difficult strategy to execute. We need to have some understanding of that. From a somewhat abstract perspective, Korea's economic security strategy should be about integration, balance, and linkage. I am saying these things a lot now. In this era, the basic policy direction and strategic direction should be risk management, not maximization of interests. As I mentioned earlier, in such times, just as you manage risks by wearing masks, it is also a national task. A strategy of maximizing interests can be risky and may fail to realize profits. Managing risks well is very important. So, how do we achieve integration, balance, and linkage? It means not relying on a single policy. It means integrating various policies. Balance has various meanings. We should not be solely focused on pursuing short-term interests; we must also consider long-term interests. We must also consider national interests and private interests. Balance is needed. The state should not be too dominant; it should not intervene too much in the private economy in the name of economic security. However, pursuing corporate efficiency while disregarding security aspects is also risky. Balance is needed between these two. That is the balance. Linkage is necessary. As mentioned earlier, to link economics and security, it is important to secure as many nexus points as possible. The debate has moved beyond whether linkage is necessary; it is now about how much linkage is possible. We must become a country that can achieve that. Regarding universality and particularity, Korea certainly has its particularities. However, instead of rigidly adhering to unique policies, we need to consider how to integrate those particularities into universality.

It is multidimensional. I have discussed this extensively so far. The US-China strategic competition itself is multidimensional, and we also need a multidimensional response. Externally, it involves diversification, which is a very difficult task. Nevertheless, we must achieve it. Internally, economic security is not a single issue, so we need governance and institutional innovation that can encompass the whole. And we must cooperate with countries that share our interests. Korea, while possessing various strengths and capabilities, is a middle power.

Therefore, cooperation with like-minded countries is crucial. Regarding positioning, decoupling was mentioned earlier. Recently, especially in the EU and the US, there has been much talk about 'de-risking.' How to mitigate risks.

However, we need to deeply consider how to position ourselves on this issue. Because while de-risking is certainly perceived in Korea as a considerably milder strategy than decoupling, and there are aspects of that, the de-risking strategy requires a much higher level of sophistication. This is one point I want to make. Decoupling, while difficult, can be implemented relatively easily with a decision. However, identifying risks itself is very difficult. Therefore,

It means that policies must be combined. Right? There are various meanings. We should not be preoccupied with pursuing only short-term gains; we must also consider the long term. We must also consider national interests and private interests together. A balance is needed. Right? The state should not lead too much, nor should it excessively intervene in the private economy in the name of economic security. Right? Likewise, pursuing corporate efficiency while disregarding security dimensions is also dangerous. A balance is needed between these two. Right? It's about the balance of linkage. Earlier.

It is multidimensional. I have discussed this extensively so far. The US-China strategic competition itself is multidimensional, and we also need a multidimensional response. Externally, it involves diversification, which is a very difficult task. Nevertheless, we must achieve it. Internally, economic security is not a single issue, so we need governance and institutional innovation that can encompass the whole. And we must cooperate with countries that share our interests. Korea, while possessing various strengths and capabilities, is a middle power.

Therefore, cooperation with like-minded countries is crucial. Regarding positioning, decoupling was mentioned earlier. Recently, especially in the EU and the US, there has been much talk about 'de-risking.' How to mitigate risks.