[EAI Grand Debate on New Administration's Foreign Policy] Session 2: Trade and Advanced Technology Diplomacy

YouTube Link: https://www.youtube.com/watch?v=AEBIqyzKsHM

Video Script

This session aims to discuss the policy direction and tasks of the next administration in the fields of trade and advanced technology diplomacy. Briefly reviewing the understanding of Trump's trade policy, President Trump has a unique idea of emphasizing domestic production, viewing overseas investment and production by U.S. companies, and imports from abroad as taking away American jobs. This was emphasized during his election campaign and is reflected in the emphasis on domestic production, particularly in the manufacturing sector. Another peculiarity is the perception that the large U.S. trade deficit occurred because, despite the U.S. opening its markets, other countries did not purchase U.S. goods through tariffs and non-tariff barriers.

Economists do not agree with this view, but President Trump holds these two ideas. Based on this, he is implementing various tariff policies, which could lead to price increases and trigger interest rate hikes. With the current U.S. fiscal deficit reaching approximately $36 trillion and requiring annual interest payments of about $900 billion, interest rate hikes would be a significant burden on the government. Therefore, these tariff policies are unlikely to succeed. Furthermore, unless pursued without retaliation from other countries, tariff policies could cause significant damage to the countries involved, including the U.S., and the global economy.

Therefore, although currently controversial, a universal tariff of around 10% and tariffs on some items such as automobiles and steel may be maintained, but other tariff policies are expected to be abolished. Of course, this remains to be seen.

Tasks in Trade and Advanced Technology Diplomacy

In the trade sector, the most urgent task is the direction of the ongoing Korea-U.S. trade negotiations. If the current administration hands over the negotiations at a certain stage of progress to the next administration, the next administration can inherit and resolve them. I would like to hear any opinions on this. Another important issue for the next administration is the U.S.-China tech hegemony competition, or the overall hegemony war. Policies such as export controls on advanced technology products, bans on technology transfer and investment, and strengthening U.S.-centered supply chains, which have been ongoing since before the Biden administration, will continue. In this situation, the key task for Korea is whether to accept this as is or to seek other strategies.

In particular, how to maintain economic relations with China will be a crucial task. This session also aims to discuss our technology diplomacy strategy, focusing on AI technology. Building cooperative relationships with neighboring countries is important in establishing AI development strategies, and cooperative relationships with the Global South can also be a task for the next administration.

In summary, the current trade environment presents many disadvantages for Korea, which has achieved economic growth through exports. The future formation of the global trade order will be very important for us, and we need to explore our mid- to long-term role in this regard. I hope that today's discussion will address these issues, and that through the opinions and discussions of experts, we can identify the policy directions and tasks for the next administration in the fields of trade and advanced technology diplomacy. This is Son Yeol.

Building a New Trade Order and Korea's Strategy

Today, I would like to present some recommendations to the next administration regarding trade issues. The next administration must consider how to establish a trade and foreign affairs strategy until 2030. While the current Korea-U.S. tariff negotiations are a major issue, it is not sustainable to build a strategy centered on this for a five-year term. It is expected to be resolved within a month or two, and the real issue is the trade order that will be formed thereafter. The liberal international economic order that we have enjoyed since 1945 has been severely damaged by Trump's tariff bombshell.

There is considerable confusion at present, and a return to the past order is very difficult. At this juncture, fierce competition among major powers to create a new order has already begun. Therefore, my core message today is about Korea's positioning and strategy amidst this order change and the competition to build a new order. The existing order, the liberal international order, is an order of freedom and openness based on laws and rules, which has been created and maintained by the United States. If we call the countries that create and maintain this international order hegemonic powers, we have lived in the U.S. economic hegemonic order since 1945.

Within that order, Korea has consistently grown economically as a model student and top student, entering the ranks of developed countries. However, the U.S. hegemonic order is being shaken, and it is a reality that the U.S. itself is leading the shaking of the existing liberal economic order. President Trump's tariff policy stems from the view that the existing liberal order has transferred U.S. manufacturing jobs to China. The argument is that China's abuse of the existing order, by increasing exports and decreasing imports, has weakened the U.S. manufacturing base and created security problems. Therefore, due to Trump's tariffs, the WTO, which was the central pillar of the established order, can be considered effectively neutralized or given a death sentence.

Article I of the WTO, the principle of non-discrimination, has been brutally violated, and it is very difficult to restore it. Furthermore, the bilateral and multilateral FTA networks within the WTO order are also facing a crisis of ineffectiveness. In the Korea-U.S. FTA negotiations, it is impossible to mention the Korea-U.S. FTA at all. Therefore, in this chaos led by the U.S., the current order can be considered almost over, and a new order is now being sought. The most important variable in seeking this new order is, ironically, the U.S. trade strategy.

Based on internal discussions, the Trump administration is expected to move in two scenarios. The first is the 'Strategic Readjustment Scenario.' This involves the second Trump administration securing short-term gains through tariffs or economic pressure, regaining strength, and then returning to a hegemonic order that is significantly adjusted to the past order. In other words, the foundation of the liberal order is restored, and it is adjusted to a more inclusive and resilient globalization. This is similar to the 1971 Nixon Shock, where order-disrupting policies were resolved in a short period and the U.S. returned to hegemony. The second scenario is that, as mentioned in the previous session, key groups such as Japan, Australia, Canada, the UK, and the EU pursue a kind of 'liberal order without the U.S.'

If these two scenarios converge, meaning the U.S.'s strategic readjustment and a liberal order without the U.S. meet, an adjusted liberal order can be formed. This scenario would be relatively favorable to Korea's national interests. The second scenario is when the U.S. embarks on a 'Strategic Redesign.' This is a redesign, not a readjustment, where the established order is discarded, and low-level, loose preferential trade agreements are made selectively with major U.S. allies or friendly nations. These would be in the form of Preferential Trade Agreements, not Free Trade Agreements (FTAs).

China will form its sphere of influence based on BRICS centered on China, and the CPTPP group and the EU will create regional spheres of adjusted liberal order. Therefore, we can anticipate a 'multipolarization' where the U.S., China, the CPTPP group, and Europe form three blocs, and these blocs are not closed and exclusive but loosely connected through various forms of preferential trade agreements, forming a multilateral network often referred to as a 'spaghetti bowl.' That is, an order where different orders coexist and are interconnected and superimposed.

If both scenarios 1 and 2 fail, we could eventually return to a state of disorder, similar to the 1930s. From our perspective, the core interest is a rules-based order. The order must be maintained by rules and laws, not by the arbitrary actions of great powers, for Korea's national interests to be served. Therefore, we must concentrate Korea's diplomatic efforts to foster the first scenario, an adjusted liberal order. This is order-building diplomacy; whereas in the past we tried to be model students within a given order, now we must take on a new role as rule-makers who shape the order. This is different from 2010, when the role of rule-maker was emphasized at the G20 Summit but yielded no substantial results. Now, Korea must truly contribute to rule-making, as it is critically linked to our national interests.

Therefore, I propose three prescriptions. First, Korea must play a role in helping the U.S. shift towards an adjusted liberal order. That is, we must support the U.S. in regaining its hegemony. Currently, the U.S. bears excessive costs for maintaining its hegemony and may seek to abandon it or shift it to other countries. In this situation, Korea must actively play a role in filling the U.S.'s hegemonic deficit. In various trade negotiations between Korea and the U.S., Korea must play a supporting role in the direction the U.S. moves to maintain the international order.

Second, solidarity with like-minded countries. Korea must actively strive to create a liberal order without the U.S., and for this, accession to the CPTPP must be a priority consideration. Furthermore, linkage with the EU is also important. At a recent meeting of a coalition of 25 think tanks, the establishment of a 'liberalism without the U.S.' was a key agenda item, and this will be achieved through cooperation between the EU, Asia, and similarly positioned countries in the Indo-Pacific region. It was discussed that if this happens, the U.S. will have no choice but to recognize its limitations and gradually change. Otherwise, the world will inevitably descend into disorder. Therefore,

In either of these two scenarios, our key partner is Japan. Japan argues that it must fill the gap in U.S. global leadership, considers the U.S.-Japan alliance a global public good, and actively seeks to play the role of a rule-maker. Furthermore, as Japan is a key player in the CPTPP, cooperation with Japan is very important. Finally, the issue of over-reliance on China has always been raised. A 'China risk management' strategy is urgently needed for this.

Since it is difficult to drastically change the government policy of shifting away from China dependence in the market, consultation and cooperation with the Chinese government in terms of de-risking are necessary. Second is diversification. The main targets for diversification are ASEAN and India. It is necessary to place the focus of the previous administration's Indo-Pacific strategy on this diversification. I will conclude my presentation by mentioning these points. Thank you.

The Importance of Technology Diplomacy and the U.S.-China AI Competition

I will speak specifically about the field of technology diplomacy. Technology has become so important as an independent category that it is discussed separately from trade, whereas traditionally discussions were divided into military, economic, cultural, etc. In the previous session, Professor Ha emphasized composite power over one-dimensional power such as military or economic in preparation for the civilizational transition of the 21st century, because technology lies at the foundation encompassing all aspects including military, economy, and soft power. Technology is involved in all areas of U.S.-China competition, including economic, military, and normative competition, which is why technology diplomacy is discussed independently. Therefore, there are now several trends in the global technological landscape that require attention for establishing technology diplomacy strategies.

As everyone knows, the trend of U.S.-China AI competition is well-known. A noteworthy point in this AI competition recently is that the competition, which was previously dominated by the U.S.'s overwhelming advantage, has seen some adjustment with the emergence of China's challenge and counterattack, represented by DeepTech, early this year. There can be debate as to whether this is an isolated incident or a series of ongoing Chinese challenges. I lean towards the latter, and indeed, such signs are appearing in various fields.

The U.S.-China AI competition continues to intensify in many areas, and while the U.S. still leads the competition overwhelmingly, China's challenge has begun to materialize. There are also movements that seem to be shifting slightly towards the Chinese side, which is noteworthy. The key question is whether this will continue or if the U.S. advantage will last longer. Another aspect is what other countries are doing amidst the U.S.-China competition. Each country is struggling to find its own position. Since AI is so important, it cannot be left solely to the U.S. and China. The European Union (EU) has taken the lead not so much in AI technology itself, but in securing leadership in terms of norms. The EU is pursuing the enactment of AI laws and continuing discussions on norms at the Paris AI meeting this year.

Examining the strategies of other nations, countries lacking technology are focusing on norms, while resource-rich Saudi Arabia is establishing sovereign wealth funds to build an independent AI ecosystem. Nations with advanced technology are leveraging it to position themselves within the AI ecosystem. Countries like Singapore are attempting to lead discussions on AI norms by acting as a balancer between the United States and China. In this manner, each nation's AI strategy is becoming visible. Currently, US AI policy has the most significant impact on the trajectory of AI development. The overall trend is adjusted according to US AI policy.

Since the Trump administration, U.S. AI strategy has broadly divided into two or three main approaches. The Biden administration, while pursuing its AI strategy, has emphasized safety and caution regarding regulation. Executive orders and legislation have been put in place to balance AI innovation and regulation. However, the Trump administration, immediately upon its inauguration, focused on deregulation, showing a shift towards emphasizing innovation.

Furthermore, the Biden administration's advanced technology policy has proceeded along three axes (3Ps): countering China, strengthening domestic competitiveness, and enhancing cooperation with other countries. Thanks to these partnerships and promotions, the U.S. has succeeded in countering China's technological advancements. The U.S. cannot do this alone, so it has attracted Korean and Taiwanese companies to induce investment. Moreover, without ASML and TSMC, it would have been difficult to defeat Huawei. It is important that these are implemented as a set.

The Trump administration will continue protectionism, but it takes a negative stance on promotion aspects such as attracting foreign companies and providing subsidies. The argument is, why give money when they will come willingly due to tariffs? Regarding partnerships, it takes a different approach than before, advocating 'America First.' Although there is much noise about tariffs recently, semiconductors have been spared so far. Semiconductors were excluded even during the negotiation of a 32% overall tariff. This is because U.S. national interests are at stake. Keeping these circumstances in mind, we must pay attention to what kind of technology diplomacy the new administration will pursue.

The science and technology community points to the lack of investment and human resources in AI promotion policies. From a technology diplomacy perspective, they emphasize the weakness of government-level AI promotion policies and the need for scaling up. With the launch of the National AI Committee last September, a private sector investment plan of 65 trillion won was announced, but the execution rate is currently low. Considering that the total domestic investment is around 2 trillion won, the investment of 65 trillion won by 2027 is unlikely to be realized. Therefore, it is important to build trust and secure execution capabilities so that these plans can be properly implemented. While each candidate is announcing AI policies, policies with execution capabilities are needed.

Technology diplomacy tends to be treated as a minor issue within the science and technology community. As technological innovation occurs within a global innovation system beyond the domestic level, and technology becomes a strategic asset, the science and technology community is approaching the alignment of international cooperation and diplomacy. Therefore, it is a time when a strategic diplomatic approach that goes beyond international cooperation is needed. The most important aspect of Korea's technology diplomacy is strengthening partnerships with the U.S. Although the U.S. hegemony is being readjusted, considering both internal and external technological circumstances, if cooperation with the U.S. is halted, Korea's technological innovation will almost stop. If cooperation with China is halted, it will enter a decline. When discussing what to focus on, partnership with the U.S. is important.

Furthermore, the adjusted multilateral order led by the U.S., i.e., the liberal order and the global innovation system, has been a very important environment for Korea's technological innovation. It is necessary to restore this. To this end, cooperation not only with the U.S. but also with countries led by the U.S. is important. For Korea to play a role, it must strengthen cooperation with the U.S. The AI cooperation of the previous National Security Office proceeded without linkage with the Ministry of Trade, Industry and Energy and the Ministry of Science and ICT, failing to lead to substantive cooperation.

Therefore, adjusting governance and scaling up to strengthen public-private cooperation will be a major pillar of technology diplomacy. To leave room for cooperation with China, we must exclude difficult areas such as export controls and find areas for cooperation within the scope of technology, such as basic science. Furthermore, Korea is focusing on shaping global AI governance. Through the Seoul Summit, we established principles of innovation, safety, and inclusivity, and inclusivity, in particular, is a unique aspect of Korea, which will contribute to combining and exporting Korean-style AI models with the Global South.

Finally, Korea needs its own 'Sovereign AI' strategy. This must be strengthened through platforms like Naver and Clova, and it is important not only technologically but also content-wise. It must embody new values such as 'symbiotic liberalism,' which are different from the U.S.-led big tech model or the Chinese authoritarian model. This involves building an order where competition and dynamic development are possible by embodying these values within AI and by aligning with countries that feel discomfort with the competition between the U.S. and China. Linking this with the Global South will also help strengthen Korea's diplomatic capabilities.

Reorganization of the Liberal International Order and Korea's Response

I would like to focus my discussion on Professor Son Yeol's presentation. While I agree with some points, I have a different perspective, so I will first present a few different viewpoints. As I understand it, the liberal international order is composed of four main factors. First, connecting states through markets since 1945 to form an international market. Second, engaging in free trade within the international market. Third, making the free trade order 'rules-based.' Fourth, the method of resolving problems when they arise within this framework.

Third, 'rules-based' also includes institutionalized military alliances. NATO and the Korea-U.S. alliance fall under this category. Fourth, problem-solving mechanisms within the order include economic solutions like the IMF and World Bank, sanctions or retaliation for unfair trade, and military intervention for non-economic issues. Therefore, the liberal international order is not a separation of economic, security, and cultural orders, but a complex interplay. The current problem lies in the cracks in the third and fourth aspects, namely the 'rules-based' system and the malfunctioning of the problem-solving mechanism. Not only are the IMF and World Bank issues, but sanctions or retaliation are not functioning properly, and military intervention lacks deterrence, as seen in the Russia-Ukraine war.

Many people believe the liberal international order is ending, but as long as the consensus on connecting states through markets and prosperity through free trade (first and second factors) continues, I do not believe the liberal order will end, even after undergoing adjustments in the third and fourth factors. The biggest problem in the current adjustment process is the excessive reliance on U.S. leadership. As U.S. power weakens, figures like Trump emerge, and our leadership does not function as it did in the past. We are arguing that we must restore the mechanism through other forms of cooperation until we become strong again.

When the mechanism does not function properly, the U.S., centered around Trump, is pursuing 'rewiring' and 'reshoring.' 'Rewiring' is due to the China issue; since retaliation or problem-solving with China is not working, it means supply chain reorganization. 'Reshoring' is the part where the U.S. seeks to become strong again.

The biggest problem in the 'rewiring' process is China. Since joining the WTO in 2001, China has grown rapidly, contrary to expectations, evolving from a developing country to an advanced industrial nation. In particular, it has overcome the middle-income trap and is producing cutting-edge materials, impacting the entire world with overproduction. Unfair trade has occurred in this process. Because China has become so large, from the U.S. perspective, if immediate retaliation is not taken, the U.S. itself and the liberal international order will face problems.

However, as dependence on China has increased in various areas, including supply chains, Europe, Korea, and Japan are hesitant to cooperate. This has led to a situation where strong pressure is applied at the bilateral level. The current adjustment phase is a process of resolving the problems of the liberal international order and 'rewiring' the 'rules order' with new rules. Korea's position here is twofold. First, we must cooperate with the U.S. The China issue is too large and unexpected, and it could disrupt the international market order. Second, in the 'rewiring' process, together with the U.S., within the newly formed U.S. market platform...

We have weakened. Therefore, I believe the current situation is that we are being told very ruthlessly that we must restore this mechanism through other forms of cooperation until we become strong again. When this mechanism itself does not function well, the U.S., centered around Trump, is, to put it simply, rewiring and reshoring. Rewiring is occurring due to the China issue, which I will discuss shortly; since retaliation or measures against China are not working well, they are rewiring. Reshoring is the part where the U.S. seeks to become strong again.

However, the biggest problem we are currently facing in rewiring is precisely the China issue. A very peculiar China issue has arisen, different from the China issues I had previously considered. When China, after joining the WTO in 2001, grew at a very rapid pace, I expected that this would not pose any problem to the liberal international order, as the market was expanding. Instead, I thought it would bring more wealth and stability to the order through free trade. However, in just 30 years, it has transformed from a country that produced toys and clothing cheaply to one that can now produce everything, including AI, quantum, and semiconductors.

It has become an advanced industrial nation from a so-called developing country. If China had remained in the middle-income trap, the current problems would not have arisen. However, contrary to our expectations, it has escaped the middle-income trap in 30 years and is now producing cutting-edge materials. It is supplying these to the world through overproduction due to its internal economic system. Furthermore, it has engaged in much unfair trade during its growth. If it had remained in the middle-income trap, there would have been no need to correct it through retaliation or sanctions. However, because China has become so large, from the U.S. perspective, if it is not corrected through immediate retaliation and sanctions, the U.S. itself will face problems, and the liberal international order will also face problems. As China suddenly grew so large,

Due to the high dependence on China in various areas, including supply chains, the retaliation mechanism did not work. Therefore, Trump pushed very hard, demanding cooperation, but as Europe, Korea, and Japan did not cooperate due to excessive dependence on China, it seems to have become a situation of strong pressure at the bilateral level. The current adjustment phase is seen as a process of correcting the problems of the liberal international order and rewiring the rule-based order with new rules. Regarding Korea's position here, I would say two things: First, we must cooperate with the U.S. The China issue is too large and unexpected, and it could disrupt the international market order. Second, in this rewiring process, together with the U.S., within the newly formed U.S. market platform...

The Taiwan Issue and Korea's Diplomatic Choices

We must create an industrial and export trade structure that can best utilize the platform. The aspect I am watching more closely is the Taiwan issue. The Taiwan issue was mentioned in the first session, but I think we tend to view it as a separate issue, a security issue. However, the Taiwan issue is not a separate issue; it is part of a complex order. Assuming a Taiwan contingency occurs, the Taiwan issue will be resolved in some form. Then, looking at the international order after the Taiwan issue is resolved, the relationship between the U.S. and China will reach the final stage of decoupling. If a Taiwan contingency occurs, rewiring will proceed even more strongly, and Korea will literally be in a situation where it must choose between the U.S. and China.

If a Taiwan contingency occurs, our problem is not to consider what we will do after the contingency occurs, but to prevent it from happening. Therefore, strengthening deterrence is important. Strengthening deterrence may involve strategic risks, and various concepts may emerge, such as the Korean military focusing on Korea and the U.S. military focusing elsewhere, or the U.S. military in Korea focusing on Korean issues. However, measures or directions that undermine deterrence should be maximally restrained diplomatically and domestically. Thinking 'If a Taiwan contingency occurs, it's their problem, not ours' is due to not viewing the international order in a complex way. In the past, if it were a geopolitical issue, it would be resolved geopolitically and end there, but that is not the case now. Furthermore, since it is an issue that enormously affects our survival, we must think differently about the Taiwan contingency issue. Finally, regarding AI and

related issues, although presidential candidates are presenting various policies, the most regrettable part is that they are not paying enough attention to issues like semiconductors, platform issues, the SKT incident, and energy issues. If a hacking incident like SKT occurs, that company essentially has to shut down. If security is not properly established, which country will come to develop AI together? As you know, AI data centers consume enormous amounts of energy, and it is not right to aim to become an AI powerhouse without considering issues like nuclear power. Since time is limited, and we are currently in the process of rewiring the international order, we should view this adjustment process from a broader perspective, rather than focusing solely on quantitative gains and losses in a one-on-one comparison with Trump's U.S.

I will conclude by saying this. Thank you. First, I largely agree with Professor Song's statement about 'liberalism without the U.S.' However, I believe it is too hasty to say that multilateralism has ended due to the recent actions of the U.S. Rather, what we should pursue is as follows: First, it is acceptable to make some deals with the U.S. Second, however, if we agree among ourselves not to do this, then multilateralism without the U.S. is completed and not ruined. The recent treaty between the U.S. and the UK, which occurs weekly, already violates MFN (Most Favored Nation) treatment.

So, instead of saying it's ruined, I think an agreement is needed, such as 'Let's not do that between us and the UK.' The problem is where to have such discussions. Creating new frameworks like RCEP (Regional Comprehensive Economic Partnership) is possible, and existing frameworks like APEC (Asia-Pacific Economic Cooperation) could also be used. However, it is said to be difficult to have such discussions in forums where the U.S. participates. Listening to someone who attended the recent APEC Trade Ministers' Meeting, they mentioned that it is difficult to say 'let's exclude the U.S.' in a forum where the U.S. is present, so there is a need to consider creating new frameworks.

De-risking China and Managing U.S. Dependence

As you mentioned, the fact that the phrase 'liberal order without the U.S.' was uttered in 25 countries aligns with my thoughts. Above all, it is unlikely that the U.S. would oppose this. Does the U.S. like the spread of protectionism? Not necessarily. Even if the U.S. practices protectionism itself, it may not want other countries to do so. Therefore, I believe that we can more actively attempt a 'liberal order without the U.S.' or 'American exceptionalism.' Second, I would like to discuss de-risking with China. Although it was for a short period, I served as an advisory member of the Economic Security Committee of the Ministry of Foreign Affairs last year, and Professor Bae Woo-jeong was also there. We reported on the efforts of Korean companies to de-risk with China. For example, there was a story about a company trying to develop its own graphite mine because too much graphite was being imported from China, and the conclusion was this: they avoided geopolitical risk but took on business risk.

De-risking China, while conceptually easy to say it should be done, what does it actually mean? While geopolitical risk may be avoided, it entails enormous risks such as mine development or the emergence of new monopolies. It is very convenient for us to buy from China. If we buy what China has already developed, it is dependence on China, but it is convenient. The moment we decide to break this, we have to undertake a huge new plan and bear greater risks, so it can easily become a goal that remains merely conceptual. Looking at recent U.S.-China deals, the 'Project 2025' agenda for China's decoupling came out before the Trump team took office. Based on that alone, it seemed like there would be a U.S.-China decoupling, but looking at recent U.S.-China agreements,

it seems that the past agenda has been set aside, to the point where one might wonder if the U.S.'s goal was rather to open up the Chinese market. Furthermore, President Trump recently described the relationship with China as a 'total reset,' and while I am unsure whether that means it is getting closer or further away, his actions suggest he is pressuring China by imposing tariffs while trying to open up the Chinese market. Therefore, we must consider that de-risking or decoupling between the U.S. and China may not occur as strongly.

In my opinion, we also need to de-risk from the U.S. Over-reliance on the U.S. market is as dangerous as over-reliance on the Chinese market, as has been clearly demonstrated. We don't know when another president like Trump might emerge, but if things fluctuate so unstably, we cannot invest with peace of mind. Therefore, I believe there is a need to reduce dependence on both the Chinese and U.S. markets simultaneously, whether it be through the Global South or elsewhere. Furthermore, when we talk about de-risking from China, we tend to overlook the importance of China's economic and technological advancements. China is where new technologies are being born and applied the most right now, and to dismiss it and only think about distancing ourselves could be a major misstep for our country. Therefore, if we start thinking in a mutually exclusive way, like U.S. or China, there is no answer for us. As many have said before, a complex strategy is needed, addressing how to deal with the U.S. while also dealing with China. In that regard, I strongly agree that Japan is a very important partner. However, at the same time, I believe we must hold a card that the U.S. fears, and I think that card is cooperation between Korea, China, and Japan. When the U.S. made an agreement with the UK, it said, 'We've been lenient with the UK because they are on our side.' On the other hand, with Ukraine, whom they thought was an ally, they pressured them by asking, 'What cards do you have?' Similarly, even though the U.S. is an ally, we should have at least one card that we can play which would be burdensome to the U.S., and I believe that card is cooperation between Korea, China, and Japan. When the Korea-China-Japan trade ministers' meeting was held earlier this year, a U.S. senator remarked, 'This is surprising. Isn't this the result of Trump's pressure?' In other words, isn't this something the U.S. fears? Therefore, although I don't know how far cooperation between Korea, China, and Japan will actually go, at the very least, we should utilize the framework of Korea-China-Japan as a signal to the U.S., as pressure on the U.S.

If we begin to think in terms of the United States and China, we will find ourselves without solutions. As many have stated previously, it seems a complex strategy is necessary, addressing how to engage with both the United States and China. In this regard, I strongly agree that Japan is a very important partner. However, at the same time, I believe we must possess a card that the United States fears, and I consider that card to be cooperation among South Korea, China, and Japan. When the United States reached an agreement with the UK, they stated, 'We have been quite lenient with the UK because they are on our side.' Conversely, they pressure Ukraine, whom they considered an ally, by asking, 'What cards do you hold?' While it is good that the United States is an ally, we should have at least one card that we can play to create leverage for the United States, and I believe that card is cooperation among South Korea, China, and Japan. Earlier this year, when the trade ministers of South Korea, China, and Japan held a meeting, a US senator remarked, 'This is quite surprising. Could this be a result of Trump's pressure?' This suggests that the United States fears such a development. Therefore, although I do not know how far cooperation among South Korea, China, and Japan will actually progress, I believe we need to utilize the framework of South Korea, China, and Japan, at the very least, as a signal to the United States, as leverage against the United States.

The Future of AI Development and Korea's Strategic Utilization

Yes, I have considered that. Yes. The artificial intelligence discussed by Professor Bae Woo-jeong was a very interesting topic, and I learned a lot. Although I am not very knowledgeable about artificial intelligence, I feel that the evolution of artificial intelligence itself may overshadow all international cooperation issues related to artificial intelligence. For example, consider this question: Who would win if ChatGPT and AlphaGo played Go? Can ChatGPT drive autonomously or not? Is ChatGPT better at Korean-English translation, or is Naver better?

What this means is that as artificial intelligence develops, it can develop beyond certain domains. In the industry, they say it progresses from ANI (Artificial Narrow Intelligence) to ASI (Artificial Super Intelligence). Narrow AI, which performs only specific functions, is gradually evolving into AGI (Artificial General Intelligence), which is universal. If AGI is achieved, what significant meaning will 'yours' and 'mine' have? In that sense, I question the long-term feasibility and necessity of a uniquely Korean AI.

Does artificial intelligence eventually converge, or does it develop infinitely? A person's IQ will not exceed 300, no matter how high it gets. Will artificial intelligence develop to 300 or 400, or will it converge? If it eventually converges, then the U.S., China, and Korea can each have one, but if it continues to develop, won't our efforts to develop our own become meaningless if they simply adopt what we have? In fact, Korean companies these days, for example, Hyundai Motor Company, are investing heavily in China, precisely to learn from China's autonomous driving technology. Beyond the level of technology an engineer possesses, the question of how much data is available and processed is more important for artificial intelligence. In terms of data quantity and quality, no country other than the U.S. and China can create superior AI. Therefore, rather than developing something on our own, it is better to...

We should adopt a strategy of effectively utilizing what is available or borrowing the best from others. In this context, a smart manufacturing strategy that combines Korea's strengths in manufacturing with artificial intelligence could be our AI utilization strategy. Developing our own superior AI might be an unnecessary endeavor. As time seems to permit, and as was mentioned in previous presentations, we often discuss strategies related to the ROK-US alliance.

Seeking a Grand Strategy Beyond the ROK-US Alliance

It is true that East Asia developed based on the ROK-US alliance in the past. However, if we consider that we might experience what Japan has gone through in the last 30 years, we could become a declining nation within the ROK-US alliance. Where can we find new momentum for Korea's genuine development? While it might seem easy to focus solely on ROK-China and US-China relations, excluding other possibilities, and think in that framework, I question whether the ROK-US alliance will continue to drive development in the future as it has in the past. Our potential largest economic partners in the future could be North Korea or China. Excluding these possibilities leads us down the path Japan has taken, becoming a nation slowly declining within the ROK-US alliance. Do we truly desire such a future? I believe a grand strategy that transcends this is necessary. The two speakers...

Crisis in the Trade Order and Rule Redefinition

I have listened to the comments with great interest and thank you. Professor Lee mentioned the liberal international order, and I agree that security and economy are not separate but are a complex order. What I have argued throughout is not that the liberal international order is in crisis, but that the order governing trade relations, as a layer of the liberal international order, is in a significant crisis. Whether this crisis will have a major impact on the overall order and consequently shake the broader framework of the liberal international order remains to be seen, but I do see the current trade order heading into a significant crisis.

In that sense, you have raised the issue of rules. As you mentioned, the rules-based order, which includes concepts like 'rewiring,' is a crucial element of the liberal international order. It is not that free markets and free trade do not require rules; rather, rules are necessary to establish them. In other words, just as 'more market, more rule' suggests, deregulation is accompanied by continuous re-regulation, necessitating rules to ensure the proper functioning of the market. This has been the case so far, and the breakdown of that order means that a portion of the existing old rules is in crisis. The question is, what will replace them?

The term you use is 'rewiring.' Therefore, in replacing those rules, we need to see whether the newly emerging new rules will be more liberal or embody the values of freedom and openness, or whether they will be of an illiberal nature. If we hope for the former, then the question arises: who will make those rules? Ideally, we would want the United States to participate. However, if that is not possible, then a process of various countries, without the US, creating those rules will be necessary going forward. Yet, a crucial element missing from much of the discussion here is 'What is the content?'

If, for example, MFN is broken, what will replace it? What China is thinking, what the US is thinking, what Trump wants in terms of rules are areas that are continuously discussed and analyzed. Although our presentation did not delve that far, I believe the real contest going forward will be about who will create those new rules and with what content. And then, what role we should play will be a matter of concern. I have listened to the comments from both speakers with gratitude. Professor Lee Geun always provides systematic and original interpretations that are very helpful, and I fully agree with the point that liberalism has not completely collapsed, but rather that there are aspects that are fundamentally maintained and aspects that are challenged in their management. When I explain this to students in class...

I do so.

Comparisons are often made between the current situation and the periods just before World War I and World War II. According to data from institutions like the RAND Corporation, the share of exports and imports in global GDP did not exceed 15% at that time, whereas it now exceeds 60%. In this context, an adjustment of about 5% is causing significant repercussions. While some assess that the global economy has retreated from liberalism, exports and imports are still highly dependent, and the global economy is integrated to an extent incomparable to the past. The problem is that many countries are suffering even from this level of adjustment. Therefore, even if the consensus on liberalism remains strong, the extent to which it will be eroded and the suffering will persist is a critical issue.

It does not seem like a time to assume that liberalism will not break. We need to consider ways to adjust with minimal cost, and we must explore such strategies. Furthermore, when discussing AI, there is no disagreement that energy and information security must be considered together. This aspect is significantly overlooked, and I, too, did not mention it, so I feel compelled to do so now. Discussions on AI are bound to become diplomatic cards. We have endured this period thanks to our semiconductor process technology, but as our semiconductor technology, accumulated over 30-40 years, weakens, it is crucial to determine what cards we can prepare with AI.

We must build our AI card in this critical situation. I fully agree with Professor Choi Pil-soo's statement that the current discussions could become meaningless depending on the direction of AI technology development. I, too, used the expression 'the sea does not ask for the depth of the well' in my writing, implying that discussions on AI may be exaggerated, lack substance, or face uncertainty in technological development direction. Nevertheless, like the discussions among American scholars who emphasize utilization rather than possession of cutting-edge technology, we must consider how to strengthen the diplomatic card of AI amidst this uncertainty and thereby enhance Korea's diplomacy and international standing.

The Direction of Trade-Security Convergence and Technology Diplomacy

You have well pointed out that strengthening and contributing to the creation of a global order of symbiosis or co-evolution is a crucial task for technology diplomacy. My name is Choi Sang-jun, a citizen. I would like to ask the panelists whether they consider trade important or security more important. Also, I am curious whether you view technologies like AI as falling under the domain of trade or from a technological security perspective. If you believe trade is more important and thus cooperate with China, are you prepared for Korea to be incorporated into China's hegemonic influence and align with China's order if China surpasses the US in technological and economic power? I would like to hear the panelists' thoughts.

Please state your name before asking your question. Yes, hello. I am a student from the Graduate School of International Studies at Seoul National University. I would like to ask whether we should focus more on AI technological innovation or on norm-setting efforts. The US has established a National AI Commission, and China has an AI Leading Group, adopting strategies focused on innovation. Based on my experience at last year's event, major powers like the US and China were absent, and many of the distinguished guests were from less critical departments within the EU or NATO. This suggests that even major powers are focusing on innovation rather than norms. Therefore, which area should Korea concentrate on, and from a technology diplomacy perspective, should we focus on norm diplomacy or innovation diplomacy?

Since two questions have been raised, Professor Lee and Professor Sohn, could you please divide and answer the first question? While there is a tendency to think of trade and security separately, if Korea has no trade relations with the US, there is no reason for the US to protect Korea. If Korea's economic sphere belongs to China, the ROK-US alliance cannot exist. China would likely offer an alliance. The market must be secure for it to function well, and as economic power grows through trade, security capabilities also increase. Therefore, rather than trying to separate these two, it is more important to consider their cyclical process and interconnectedness.

The question of whether to view technology from a purely technological perspective or from a technological security perspective has similar aspects to the question of the importance of trade versus security. Strategic technologies have existed historically, and even before the US-China tech conflict, they were partially controlled under regimes like the Wassenaar Arrangement. However, with AI and semiconductors, their strategic nature has deepened and expanded in scope, making the distinction almost impossible. In the past, the boundary between strategic and general technologies was relatively clear and could be regulated by systems like the Wassenaar Arrangement, but currently, the strategic nature and scope of technology have expanded, making differentiation very difficult. Therefore, it is difficult to answer by saying AI should be viewed from one perspective. The security aspect is emphasized to such an extent that one of the five divisions when the National AI Committee was established was the security division.

Balancing AI Innovation and Norm Formation

Regarding whether AI norms should focus on safety or innovation, I would like to draw attention to Korea's inclusion of the concept of 'inclusiveness.' Korea's current AI Basic Act emphasizes innovation, and discussions on innovation are much more active within the AI Committee and other bodies, while discussions on safety are conducted partially. I believe that considering these elements in a complex manner is Korea's role. Professor Choi, could you briefly address the first question? Regarding the question of whether Korea is prepared to align with China, mentioning trade versus security, I will provide a brief response.

If past ROK-China economic relations were based on vertical division of labor, the current situation is, or should be, evolving towards horizontal division of labor. It's not about who does better, but how we can support what China needs through joint discussion. Time is running out, so we must conclude the session. As the moderator, I will share two personal reflections before concluding.

Korea's Trade Strategy Amidst US-China Relations

Currently, discussions are ongoing regarding the US and China, but as raised in the question, the distinction between security and trade is becoming less meaningful. This is because the concept of national security has expanded to encompass technology, economy, and environment, merging with trade. China also expresses dissatisfaction with trade being restricted due to US security concerns, while desiring free exchange in other areas. Therefore, as an ally, Korea must support US policies while also seeking free exchange in other areas with China. Although Korea has a high dependency on China for materials and components, there are also aspects where the Chinese market cannot be utilized. It may be difficult to produce within China, but due to rising labor costs, we might need to produce elsewhere and target the Chinese market. This will deepen ROK-China relations.

Professor Lee mentioned the US reshoring policy; however, former President Trump seemed to pursue such policies without much consideration. The Biden administration attempted to raise issues regarding China's subsidies and its developing country status at the WTO with the US, EU, and Japan, but ultimately abandoned this and provided its own subsidies. Therefore, the Biden administration's policy adopts an individualistic approach rather than a multilateral rule-based one. Even if China accepts the US's demands and improves its unfair trade practices, it is uncertain whether it will apply them to other countries. With the WTO functions suspended, a plurilateral approach, where a small group of countries reaches agreements and expands membership, could become important.

If such plurilateral agreements increase, we can emphasize 'fairness and openness' and strengthen the rules. This could be similar to the CPTPP approach. As Professor Choi Pil-soo mentioned, the reason Korea attracts attention from the US, China, and the EU is not solely due to its economic development but rather the competitiveness of Korean companies. While global companies are catching up to China, the manufacturing capabilities of Korean companies are still difficult to match. We must leverage these strengths.

Similarly, while self-development of AI is important, it can possess strong competitiveness when linked with manufacturing capabilities. For this purpose, cooperation with foreign countries in the AI field, joint R&D, etc., can also be considered. I believe I have strayed too far from the topic. We will now conclude this session. Please give a round of applause to the discussants and presenters. Thank you.

Introduction of Participants

■ Park Tae-ho_Director, International Trade Institute, Lee & Ko.

■ Sohn Yeol_Director, East Asia Institute; Professor, Yonsei University.

■ Bae Young-ja_Professor, Konkuk University.

■ Lee Geun_Professor, Seoul National University.

■ Choi Pil-soo_Professor, Sejong University.

■ Managed and Edited by Song Chae-rin_EAI Research Fellow

Inquiries: 02 2277 1683 (ext. 211) | crsong@eai.or.kr