The Korea Herald


Korea-US alliance worth up to 3,000 trillion won for South Korea: KERI

By Yim Hyun-su

Published : Nov. 17, 2021 - 16:13

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(Yonhap) (Yonhap)
The Korea-US alliance has been estimated to possibly be worth over 3,000 trillion won ($2.53 trillion) for South Korea, according to a new study by the Korea Economic Research Institute.

The Seoul-based think tank estimated in a report that the bilateral alliance has generated an economic value of between 923.82 trillion and 3,041 trillion won during the 21 years since 2000.

“For the stability and continued prosperity of South Korea, maintaining a strong alliance with the US is critical,” the institute asserted.

The Mutual Defense Treaty between the two countries was signed on Oct. 1, 1953 and took effect on Nov. 18 the following year.

The estimate comes after the KERI looked into the additional defense cost that would result if the Korea-US alliance were to fall apart and US troops be withdrawn, leaving a vacuum in the country’s military power.

The withdrawal of US troops could highlight the country’s geopolitical risk and result in a drop in its credit rating by international credit rating agencies, the study also claimed, which would end up hurting South Korea’s gross domestic product.

When defense spending rises by 1 percent, the GDP will suffer a short-term drop of 0.12 percent and a long-term drop of 0.09 percent.

When Moody’s credit rating is translated into economic impact, a 1 percent drop would see the GDP decrease by 0.22 percent in the short term and 0.17 percent in the longer term.

The estimate is based on three scenarios in which the South Korean government would spend 36 trillion won and set aside an additional 3.3 trillion won each year to cover the gap left by the United States Forces Korea.

The other two looked at the economic costs with the military budget increased by 50 percent or 100 percent.

More military spending would mean a less severe drop in credit ratings, the study noted.

For the US, the alliance brings an economic value of 2.416 trillion won, the KERI said, citing a 2019 estimate by Kyle Ferrier, a fellow and director of academic affairs at the institute.

The estimate takes into consideration the cost and economic impact of another war on the Korean Peninsula as well as South Korea’s contributions and the economic loss generated from deploying the US Terminal High Altitude Area Defense anti-missile system.