[THE INVESTOR] Early this year, a consensus on sanctions on Pyongyang by Washington and Beijing were regarded as a benefit and relief to Seoul. China’s participation in the U.N.-led sanctions might be a substitute for the U.S.’s plan to deploy the Terminal High Altitude Area Defense system on the Korean peninsula.
Apart from possible geopolitical tension from isolation of North Korea, the U.S. and China-led reprimanding on the wayward North was assumed to help South Korea avoid clashing with China on the commerce front.
However, the U.S. it has eventually publicized its plan to deploy the Terminal High Altitude Area Defense system in South Korea by the end of 2017 after selecting a preferred region in the coming weeks or months.
Formerly, a Korean minister dismissed the possibility of Beijing seeking revenge against Seoul through trade, even if a THAAD battery was stationed on the peninsula. He predicted that the bilateral economic issues would be dealt with separately from political matters.
But the idea that political and economic considerations between the two countries will be kept separate may not be a valid assumption.
It would be naive to forecast that the Asian superpower would retaliate publicly or bluntly against South Korea, one of its core trading partners under the bilateral Free Trade Agreement, which took effect in late 2015.
Instead, there is a possibility that China could reinforce other trade barriers to hold back South Korean exporters. For example, it may target local manufacturers, especially those involved in steel production, in an antidumping crackdown. The FTA’s stipulations on antidumping and trade remedies remain ambiguous.
Its antitrust regulator could also proactively act against price-fixing or cartels among Korean firms, even without any substantial evidence. Another target could be Korean commercial banks operating there.
These actions could take place in a low-key manner to avoid overall friction in commerce. In this case, specific South Korean industries and firms could become victims of the scheduled THAAD deployment.
Another impact of the deployment is that it could cast a shadow over local tourism, lodgings and the airline industry. A political conflict may invite anti-Seoul sentiment among Chinese, who make up a dominant proportion of inbound tourists.
Likewise, the situation is applicable to South Korea-Russia relations involving their trade. Russia has also allegedly been sensitive to the THAAD deployment scheme over the past few years.
Nevertheless, Beijing and Moscow need to acknowledge that North Korea’s nuclear threat has reached a level where Seoul had no choice but to accept the THAAD system through a series of debates and fine-tunings with Washington.