[EAI Commentary No. 25] The Changing Global Architecture and Korea

Professor Lee Seung-joo holds a Ph.D. in Political Science from the University of California at Berkeley and is currently a professor in the Department of Political Science and International Relations at Chung-Ang University.

Global/Regional Architecture and Sino-US Relations

November 3, 2011, the G20 (Group of 20) Cannes Summit; November 12-13, the Asia-Pacific Economic Cooperation (APEC) Summit in Hawaii; November 19, the East Asia Summit (EAS) in Bali... a series of summits. What is the reason for world leaders to undertake such a grueling schedule? Although these summits may appear separate due to differing memberships and distinct agendas, they are closely interconnected as arenas where major powers engage in fierce competition to secure advantageous positions in the formation of the rapidly changing global and regional architecture. The formation of the global/regional architecture involves a complex interplay of 21st-century elements of international politics, including the power-political nature of international relations, cooperation and conflict based on institutions and networks, and the importance of knowledge power in garnering consensus for a vision of a new order. In particular, the United States and China, through these three summits, have engaged in a three-round process of probing and grappling over the future direction of the global/regional architecture, testing each other's intentions and capabilities. As East Asian countries face the emergence of new leadership in 2012, it is crucial to carefully examine the outcomes of the summits held at the global and regional levels in late 2011 and consider South Korea's future response.

Round 1: G20 Summit

Entering the 21st century, the world has embarked on a 'G-x' process, exploring various alternatives from G2 to G33 in the formation of a new global architecture. Among these, the G20, which began as a meeting of finance ministers and central bank governors after the 1997 Asian financial crisis and transformed into a summit in response to the 2008 global financial crisis, has emerged as a strong contender for a new global governance framework. The G20's importance was further highlighted as developed countries and major developing countries utilized it as a platform for policy coordination in the face of the global financial crisis. The G20 grew through crises as a crisis manager, and in that sense, the G20 itself was both a product and a beneficiary of crises. The Cannes Summit, held amidst the Eurozone crisis, was an opportunity to reaffirm the G20's status as the undisputed center of global governance. However, with the announcement by Greek Prime Minister Papandreou on the eve of the Cannes Summit that a referendum would be held on the European proposal to resolve the Greek crisis, the G20 appeared to be engulfed by the crisis rather than managing it. While the Cannes Summit saw progress on certain issues such as social dialogue between businesses (G20 Business Summit: B20) and labor unions (trade union organizations of the G20 countries: L20), regulation of tax havens, and climate change, the lack of meaningful follow-up on development issues adopted at the Seoul Summit, as well as the marginalization of key issues such as the introduction of a financial transaction tax to regulate the excessive expansion of financial capitalism, strengthening social safety nets, and stabilizing agricultural prices to alleviate poverty in developing countries—all of which France had meticulously prepared—due to the Eurozone crisis, clearly revealed the limitations of the G20 as a forum for discussing new agendas.

Meanwhile, as Germany and France worked to find solutions for the potential defaults of Greece and Italy, the Eurozone crisis continued to spread. Ultimately, Europe, having lost a significant portion of its capacity for independent crisis resolution, began exploring the possibility of support from major emerging economies on October 26, just before the Cannes Summit. It was a natural consequence that China's role, as the largest holder of foreign exchange reserves, came to the fore in this process. The United States, lacking the capacity to proactively resolve the Eurozone crisis, had to observe China's rise. It is ironic that the US, which had used the G20 to pressure China on currency policy, including leading the introduction of quantitative criteria for current account balances after the Seoul Summit, could only stand by and watch European developed countries request financial assistance from China at the Cannes Summit just a few months later. China responded with a cool demeanor, stating that it does not hold foreign exchange reserves to resolve other countries' crises and diplomatically expressing confidence in European countries' self-resolution capabilities. Concurrently, China demonstrated strategic agility by hinting at an intention to link its support for the Eurozone with the acquisition of its status as a market economy trading partner. In the end, the Cannes Summit, without leaving any clear achievements, merely served to reaffirm the reality of China's rise as a global actor. Furthermore, it is undeniable that China's rise has had the unintended consequence of weakening the G20's standing, which was once hailed as a darling of global governance reflecting the new reality of international relations. Primary responsibility for this lies with Eurozone countries such as France and Germany, who focused on informal and formal consultations outside the G20 framework with major emerging economies like China to resolve Europe's crisis, rather than presenting the Eurozone crisis as a formal G20 agenda item and seeking solutions within it. The United States also bears secondary responsibility for not demonstrating a willingness to resolve Europe's crisis within the G20 framework.

Round 2: APEC Summit in Hawaii

Just ten days later, the stage shifted from Europe to Asia. If the Cannes Summit was a probing match between the US and China over Europe, the APEC Summit was a direct grappling match. The spark was Japan's declaration of its intention to join the Trans-Pacific Partnership (TPP) negotiations. On November 11, the day before the summit, Japanese Prime Minister Noda officially announced Japan's participation in the TPP negotiations, citing the need to "rebuild the Tohoku region from the great disaster and pioneer the future of the Asia-Pacific region." Canada and Mexico followed suit. Although not a formal agenda item, the TPP quickly became a central issue at the APEC Summit. From the US perspective, Japan's decision to join the TPP has two significant implications. First, the TPP negotiations currently involve small countries such as Brunei, Chile, Peru, New Zealand, and Singapore. It is difficult to expect significant economic gains even if a highly advanced trade liberalization agreement is reached with these countries. Japan's participation offers a highly effective way to immediately realize tangible economic benefits if the TPP is successfully concluded. However, concerns and opposition regarding the TPP's impact on agriculture, healthcare, and finance are mounting, not only from the opposition Liberal Democratic Party but also within the ruling Democratic Party. Therefore, it is not inconceivable that Japan's participation could delay the TPP negotiation schedule and narrow the scope of liberalization.

Second, despite the above, the US welcomed Japan's participation because the TPP possesses strategic value beyond its economic implications. While the TPP is an economic issue aiming for pure trade liberalization, it is being utilized as a blueprint for the future Asia-Pacific regional order. In this sense, the TPP serves as a link for the Obama administration, which has consistently declared itself a Pacific power, to reconnect with Asia. This is precisely where the conflict between the US and China intensifies. In response to Japan's TPP participation announcement, Chinese Vice Minister of Commerce Wei Jianguo immediately stated, "China has not been invited to the TPP by any country, and economic integration in the Asia-Pacific region must be transparent." This clearly conveyed China's stance that the TPP does not align with its vision of regional architecture centered on the Association of Southeast Asian Nations (ASEAN). Based on their respective shares of the global economy, the proportion of ASEAN+3, favored by China, is approximately 23 percent, while the proportion of the nine TPP countries before Japan's announcement was about 27 percent. Considering that the European Union (EU) accounts for approximately 26 percent, there was a possibility that the global economy would be divided into three economic blocs centered around the US, China, and the EU. However, Japan's participation in the TPP is sufficient to disrupt this power configuration. Including Canada and Mexico, which announced their participation after Japan, the economic weight of the TPP increases to 39 percent. This significantly hinders China's plan to form a China-centric regional architecture by drawing in Japan and South Korea based on Free Trade Agreements (FTAs) in the form of 'ASEAN+1'.

Round 3: EAS Bali Summit

A week later, the stage moved to the EAS. Externally, the EAS appeared to be proceeding smoothly, with the adoption of the "Declaration of the East Asia Summit on the Principles for Mutually Beneficial Relations," which defines the relations and conduct among EAS participating countries, and the "Declaration of the 6th East Asia Summit on ASEAN Connectivity," pledging efforts to enhance ASEAN connectivity. However, the EAS holds significance as an official channel for the United States to influence the East Asian regional order. And as the stage narrowed, the war of nerves and strategic maneuvering between the US and China became even more intense. In 2010, the US, upon joining, declared its intention to make the EAS a "foundational security and political institution for the region." This signaled the full-scale containment of China through the EAS. Indeed, disregarding China's repeated warnings, President Obama raised the issue of the South China Sea at the EAS, prompting most countries, except Myanmar and Cambodia, to discuss the matter. The US also pursued strategic moves that heightened China's sensitivities, such as agreeing to Myanmar's hosting of the EAS Summit in 2014, despite economic sanctions against Myanmar. In response, China employed a dual strategy of hard and soft tactics: announcing a 3 billion yuan aid package to Indonesia for maritime industry cooperation, establishing the China-ASEAN Connectivity Committee to strengthen ties with ASEAN, and issuing warnings to some countries, such as Australia, that sided with the US.

It is true that the US-China competitive dynamic was repeated at the EAS, following the APEC Summit. However, the EAS was not solely utilized as an arena for US-China competition and conflict. China has consistently expressed its preference for ASEAN+3 regarding regional architecture platforms. Yet, a fact that is easily overlooked is that China agreed to the launch of the EAS, consented to the participation of India, Australia, and New Zealand, and did not oppose the US's participation in 2010. Therefore, it is more reasonable to view the EAS as an arena where competition and cooperation coexist, albeit within a limited scope. At its core lies China's flexible approach to alternative proposals, rather than exclusively adhering to its preference for ASEAN+3. The future East Asian regional architecture is likely to be determined not by a choice between one of the US's or China's preferred designs, but by how to coexist or harmonize various designs.

Future Prospects and South Korea's Response

A careful observation of the three summits allows for a general outline of the future global architecture. There are three points to watch. The first is the implication of China's rise for the G20 and, by extension, for future global governance. The Cannes Summit revealed that China's rise is not necessarily positive for strengthening the G20's standing. The G20's emergence as a strong contender for new global governance was based on the expectation and belief that it would not merely reflect the power-political dynamics of international relations but would also encompass the network aspects and complex nature of international relations. However, from a global governance perspective, the Eurozone crisis resulted not in triggering network-based responses at the G20 level, but rather in an increased reliance on China, the world's second-largest economy and largest holder of foreign exchange reserves, a somewhat disappointing outcome. The future of the G20 hinges on how effectively emerging economies, including China as a global actor, can be organically integrated within the G20 framework, moving beyond the power dynamics of US versus China or existing developed countries versus emerging developing countries.

Second, the complex nature of the TPP, the central issue at the APEC Summit, is also a crucial point to observe. It is undeniable that the TPP is part of a long-term strategic plan by the US and Japan, extending beyond trade liberalization. However, how the US and Japan will shape the Asia-Pacific order through the TPP is paradoxically inseparable from the degree of trade liberalization. Ultimately, the extent to which the US adjusts the level of liberalization in the TPP, taking into account Japan's domestic political situation, will serve as a barometer for how much strategic element of China containment the US and Japan can incorporate into the TPP in the future.

Third, narrowing the focus to East Asia, the concrete establishment of the relationship between APT and EAS, and further, how EAS can be harmonized with APEC or the TPP, will be the practical concerns facing East Asian countries. For this, knowledge power—the ability to weave together the complex interests of various countries and make them understandable to others—is crucial. The nature and content of the future East Asian regional architecture will likely be determined by which country, the US or China, acquires this knowledge power. This is the third point to watch.

Given the rapid developments in international politics in 2012, what response strategies should South Korea prepare? First, South Korea needs to establish its global governance strategy based on an accurate understanding of the G20's status and role. When the G20 was launched, it seemed poised to realize 'the rise of the rest,' with developing countries, including China, India, Brazil, and South Korea, actively participating in the establishment and operation of global governance. However, the Cannes Summit made us realize that while China's rise has materialized, the rise of the rest has not yet. Furthermore, although the G20 has indeed emerged as a central pillar of the new global architecture, its standing has been shaken by the unexpected situation arising from the prominence of China's rise. This is an unwelcome development for South Korea, which has gained experience in actively participating in global governance operations through hosting the Seoul Summit in 2010. At the Seoul Summit, South Korea successfully produced the 'Seoul Development Consensus,' and through this, the G20 also served as a forum for discussing new agendas such as development, sustainable growth, and the environment. These agendas were not highlighted at the Cannes Summit. South Korea needs to seek cooperation among member states to ensure that these established agendas continue to be discussed within the G20 framework and to continuously identify new agendas. While striving to revitalize the G20, it is essential to clearly recognize that the current global architecture is in a G-x process and to cautiously begin considering other alternatives.

South Korea also needs to establish a networking strategy that complements its existing strategy centered on bilateral FTAs. As evidenced by the APEC and EAS summits, competition is underway to secure advantageous positions in the future global/regional architecture, driven by strategic considerations and networking strategies aimed at drawing various countries into the architecture. South Korea has successfully secured its position as a central FTA country by concluding FTAs with the US and the EU. This is undoubtedly a significant achievement of South Korea's FTA policy. The South Korean government currently plans to continue its strategy focused on bilateral FTAs, aiming to become the only country to have FTAs with the four major economic blocs by concluding FTAs with China and Japan in addition to the Korea-US FTA and the Korea-EU FTA. However, as Japan's TPP participation announcement indicates, South Korea's FTA strategy is at risk of being subsumed within larger regional architecture designs. While pursuing its existing bilateral FTA strategy, South Korea needs to demonstrate greater proactivity in engaging with a wider range of designs related to the global/regional architecture. In this context, the decision to finalize South Korea's stance on the commencement of a Korea-China-Japan FTA by May 2012, when the trilateral summit is scheduled to be held, is commendable.

Finally, South Korea needs to establish an economy-security nexus strategy. The agendas of the recent series of summits were clearly economic issues, but it was confirmed that strategic considerations lay beneath the surface. In other words, while the game is economics, the actual play is closely linked to security, making it highly strategic. Considering the rapid and complex evolution of 21st-century international politics, the economy-security nexus will only accelerate. Particularly for South Korea, which maintains its traditional alliance with the US in terms of foreign policy and security while rapidly deepening its economic interdependence with China, the economy-security nexus is an extremely realistic issue. To this end, establishing an integrated strategic system that breaks away from fragmented policy-making is imperative. ■

The East Asia Institute (EAI) is a core research institution for the MacArthur Foundation's "Asia Security Initiative" program and receives financial support. [EAI Commentary] aims to provide in-depth analysis and practical alternatives through a balanced perspective on major domestic and international issues. Please cite the source when quoting [EAI Commentary]. The views expressed in this manuscript are solely those of the author and do not represent the official position of the East Asia Institute.