East Asia

Don’t Discount Reunification

Conventional analysis of Korea seems to be incorrect in its view of the probability of North-South reunification. The conventional view is that reunification grows more unlikely as the disparity in wealth between the North and South (now far greater than that between West and East Germany in the 1980s) continues to increase, and as young South Koreans, who tend to be more opposed to reunifying with the North, come of age.

While we have no way of knowing what the odds of reunification are, we should recognize that the logic behind these conventional views is not sound. Most South Koreans are Baby Boomers or senior citizens, so the issue of young Koreans tending to oppose the idea of reunification may not be nearly as relevant as one might think, even if we do accept the premise that public opinion will help determine the relationship between the two Koreas.  An estimated 58 percent of South Koreans in general favour reunification.

As for the enormous economic disparity between the North and the South, it might actually make reconciliation between the two Koreas more probable, not less probable. This is because it makes opportunities available from economic arbitrage higher for both sides.

Unlike in previous decades, North Korea and South Korea today have complimentary economic resources and needs. South Korea’s primary resource is capital, which the North needs if it is to finally escape extreme poverty. The South’s primary need is to bolster its increasingly expensive and rapidly aging population (see Figure 1, below), as well as safeguard the imports of fuel and exports of manufactured goods upon which South Korea depends more heavily than does any other major economy (see Figure 2).

korea pop. pyramidsThe North’s resources are its cheap labour, coal reserves, and land bridge linking South Korea to China and to Russia.

Working together, either through a reopening of trade and investment channels or through eventual reunification, the South could provide capital while the North provides labour, energy, and direct access to the labour and energy of Northeast China and Pacific Russia. Given the vulnerability of South Korea’s existing trade routes to Europe and the Middle East, which pass the Straits of Hormuz, Malacca, Taiwan, Bab-el Mandeb, and Suez, none of which South Korea has any control over, it is not difficult to see why trading with the North might appeal to the South.

relative trade northeast asia

In this context, the current Olympics reconciliation between the two Koreas should not have taken so many people by surprise. (The Olympics reconciliation also should not have been such a surprise because it was preceded by South Korean officials announcing, in March 2017, their intention for South Korea to present a joint bid to co-host the football World Cup in 2030 with North Korea, China, and Japan). This is not to say that theOlympics indicate that a real push towards reconciliation will now occur, let alone a push for reunification. Still, these outcomes should not be ruled out, just as the thaw in the relationship that has taken place at the Olympics should not have been ruled out.

Let us take a brief look, finally, at the current politics/economics of the four outside powers that surround and influence the Koreas: China, Japan, the United States, and Russia.

China and Japan both have leaders who have recently gained in prominence: Xi since the Party Congress this past October, Abe since the Japanese election this past October. China and Japan are both scrambling for access to energy: China to replace coal in order to reduce pollution, Japan to replace nuclear power in order to avoid another Fukushima incident. Both countries are also scrambling for labour: Japan because of its elderly population, China because of wage inflation, the impact of the one-child policy, and the aging of Chinese Baby Boomers. South Korea, which is also increasingly in need of energy and labour, will find it difficult to compete with these two giants. The only place where South Korea may have an edge over China and Japan is its fellow Korean state, North Korea.

This competition among the Northeast Asian economies might increase even more if the United States follows through on President Trump’s pledges to reduce the US trade deficit, get tough on China, and prevent allied nations like South Korea, Japan, and Germany from “free-riding” on the global sea-lanes protection that has been provided by the United States navy. Meanwhile, with the number of US soldiers in Afghanistan having been reduced from around 100,000 in 2011 to only around 11,000 today, the US may now have the ability to threaten the North Koreans more than at any time since September 11, 2001.

Russia, in contrast, is now focused on its engagements in both Syria and Ukraine, which may limit its ability to aid its historic ally North Korea. Russia’s economy is limited too, as a result of the low oil, gas, and coal prices that began in 2015. Russia depends on exporting energy to Europe, but if those exports are imperilled, whether because of worsening relations between Russia and Europe or because of the US’s new transatlantic  exports of oil and liquified natural gas, Russia may have to diversify its trade patterns by exporting to East Asia. The Russians are, however, afraid of both China and Japan, and so prefer to trade with the Koreas instead. It is therefore increasingly in Russia’s interest to see reconciliation between the Koreas, so that Russian exports can reach the South via the North and so that the Koreas’ economies and demand for Russian resources can grow.

In closing, we should perhaps begin to consider the Korean situation in the same way that an experienced investor views financial markets: aware of the significance of arbitrage, and aware of the maxim that past results are not a proper indication of future returns. In other words, we should not assume that the North’s isolation and totalitarianism will necessarily continue, and we should not think that the Koreas’ diverging paths means they are less likely to re-converge going forward. Of course we should not be naive about the character of the North’s regime, and we should not be overconfident in assuming it will change. But neither should we discount the possibility of reunification, whether achieved through diplomacy, assassination, or war. Not even in 2018.

 

 

 

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East Asia, North America

North Korea in the Next Five Years

The Korean War, fought from 1950-1953, was a result of two earlier wars in the 1940s: the US-Japanese War, which ended with the destruction and occupation of Japan in 1945, and the Chinese Civil War, which ended in a Communist victory (and Nationalist retreat to Taiwan) in 1950. With the Communists and Americans as the only powers in East Asia following these wars, the Korean peninsula was split in two, each side taking a piece for itself.

When the US triumphed over the Soviet Union around 1990, many expected the North Koreans to fix their broken ties with South Korea.  That this did not occur was partly the result of inertia, partly the result of Kim Il Sung’s living until 1994, and partly the result of the 1997 East Asian financial crisis, which kept the South Koreans too poor to want to incur the cost of investing in North Korean infrastructure or labour.

It was also partly the result of a miscalculation on behalf of North Korea in 1987, twenty-four months before the Berlin Wall came down. Seeking to ruin the South’s first-ever Olympics in 1988, the North blew up a commercial airplane. It was by far the deadliest attack on the South since the armistice began in 1953. South Korea’s anger and mistrust of North Korea as a result of this deed persisted during the ’90s.

When the 21st century arrived the situation changed again.  The US, after having fought the bulk of its four major 20th century wars in East Asia—in the Philippines, WW2, Korea, and Vietnam—shifted its focus elsewhere in 2001. This shift was mainly a result of US wars in Afghanistan, Iraq, and Libya. To a lesser extent, it has also been a result of recent Russian interventions in Georgia, Ukraine, and Syria .

In East Asia, meanwhile, China’s GDP surged, while Japan’s continued to stagnate like it had in the ‘90s. Between Chinese growth,  Japanese stagnation, and US distraction, East Asia became again a two-power region: the United States and China now dominate the region. But this may now be ending. In the years ahead, East Asia is likelier to become either a one-power region, like it was in 1990s, or a three-power region (the US, China, and Japan). The two-power status quo could remain in place, but is hardly certain to do so.

In a one-power or three-power region, the powers involved may have less to gain from the continuation of poor relations between North and South Korea. There will be much less reason to split Korea in two, as it has been for 67 years now, when East Asia as a whole is not split between two major powers, as it is today.

The move towards a one-power East Asia, or towards a three-power East Asia, is plausible for three reasons:

First, the US has been drawing down from the Middle East. It had 150,000 soldiers fighting in Iraq and Afganistan in 2011, but now has fewer than 15,000.  Unless it decides to wholly reverse this process — Trump has announced the addition of 4,000 soldiers to Afghanistan, but that is a far cry from the Obama-era surge—the US will have the ability to focus on other regions, like East Asia, more than it could during the 2000’s.

Second, China’s GDP growth has slowed, from 10-15 percent growth during the 2000s to 3-7 percent (depending on whether you believe its official growth rate, 6.7%) last year. In order to keep up with 2.5 percent US growth, China must grow around 4 percent. China’s challenge in doing this is that its labour is now much costlier and older than it used to be, while its resource wealth, most notably its coal, has led to pollution.

China may struggle to keep up with US power. As it is, the US economy is an estimated 1.6 times larger than China’s. [The US-Canada-Britain-Australia alliance, meanwhile – which, unlike China itself, more or less speaks a single language – has a GDP 2.2 times larger than China’s]. The US GDP alone is larger than that of East Asia as a whole.

Third, the economy of Japan, which today is an estimated 37 percent as large as China’s and 18 percent larger than Germany’s, is likely to benefit from the crash in oil and other natural resource prices that began in mid-2015. Unlike China, Japan has few resources of its own, and so depends on imports to fuel its economy.

relative trade northeast asia

While Japan’s aging population continues to be a challenge — Japan’s largest age cohorts are 40-45 year olds and 65-70 year olds — it may be able to address the challenge via automation, immigration, and a labour force dominated by technically skilled 50-80 year olds. Japan is already planning to advance its robotic prowess in the near term, as it wants to showcase them at the 2020 Tokyo Olympics.

Japan’s robot drive is likely to have consequences not just for the Japanese economy, but also for the Japanese military. Japan has already begun to rebuild its military of late, first in response to China’s rise and then in response to Donald Trump’s rhetoric that US allies should “stop freeloading, and pull their own weight”.  Already today the Japan ranks 8th in military spending, despite devoting just one percent of its GDP to it. Should Japan double this, to reach the 2 percent of GDP that France and Britain spend, it would then become the third largest military spender in the world, and move far ahead of the next largest, Russia. (Were Japan to spend 5 percent of GDP on its military like Russia does, it would move far ahead of China).

Even if Japan does not re-emerge, East Asia might not remain a two-power region. Rather, China could fall behind the US sufficiently that, in effect, it will be a one-power region again, like it was in the 1990s. US power is rising not only due to its withdrawal from the Middle East, but also because its rivals, most notably Russia, are being hurt by the fall in resource prices. As in the ’90s — when oil prices were at all-time lows — cheap oil works in the US’s favour. And if US power in the region does rise, the North Koreans might be less willing to resist its demands.

GDP.png

Source: http://gypsyscholarship.blogspot.ca/2013/06/bye-bye-north-korea.html

There is an additional reason for improving relations between the North and South: it may benefit the South’s economy.  Unlike in the 1990s, South Korea is now a relatively wealthy country. Yet because of its rapid growth, it has become dependent on imports of natural resources and exports of manufactured goods. South Korea has been importing resources mainly from the Middle East, and exporting mainly to China.

The Middle East, however, remains unstable. Qatar, for example, the world’s largest LNG exporter, sells more to South Korea than to any other country. But Qatar is now in open conflict with Saudi Arabia. Uncertainty of this kind threatens South Korea’s GDP growth. In addition, as China tries to shift from coal to gas, and as Japan tries to shift from human labour to fuel-powered robots, South Korea may have to deal with rising competition from its own enormous neighbours when importing fossil fuels from the Middle East.

Similarly, South Korean exports have been limited by the slowing Chinese economy. China accounts for a quarter of all South Korean exports, more than the US and Japan combined. South Korea has also been hurt by its own success: its labour is no longer so cheap like it was in previous decades, when it was still a poor country.  For these reason, South Korea has already grown more slowly in the past two years that at any time since 1997 (excepting the global financial crisis in 2009).

These economic troubles are occuring at a bad time for the South. South Korea will host the the first-ever Winter Olympics in continental Asia this year. It wants the world’s perceptions of itself—namely, that it is a remarkable country, with remarkable companies like Samsung and remarkable economic prospects in general—to endure. It also does not want the North to cause trouble this time, as occured in 1987.

Trading with North Korea could help address both these concerns. North Korea has an extremely cheap, Korean-speaking labour force; a labour force that includes cousins, and in some cases even siblings, of the South’s. It represents a potential Korean-speaking market for South Korean exports, both of media and manufactured goods. It even, if ties improve enough, offers opportunities in tourism. And it offers access to natural resources. The North Koreans are rich in coal; the South Koreans are top coal importers. More importantly, the North offers a land route by which South Korea can access resource-rich Manchuria and Siberia.

China_topo

It is possible, of course, that the Korean issue will be addressed by war rather than by trade. In the past year alone, the US has prepared for such a war. It is also possible that the North will not be addressed at all; that the tyrannical staus quo will endure. But for the reasons outlined above, I believe reconciliation is the most likely, and the status quo the least likely.

Dennis Rodman, who played on the the 1990s Chicago Bulls (Kim Jong Un’s favorite basketball team) has lately met with Un. Do not be suprised if Rodman’s Celebrity Apprentice co-star, Donald Trump, follows suit.

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East Asia

North Korea and the Olympics Curse

Countries, or even entire regions, sometimes change dramatically soon after hosting major sports events like the Olympics or World Cup. For the next five years, these events will all be held in countries surrounding North Korea. The 2018 Winter Olympics will be in Pyeongchang, South Korea, the 2018 World Cup in Russia, the 2020 Summer Olympics in Tokyo, and the 2022 Winter Olympics in Bejing. This could, maybe, foreshadow a coming political change.

 

The Olympics Curse 

In the relatively common phenomenon known as the “Olympics Curse”, countries or even entire regions change dramatically soon after hosting major sports events like the Olympics or World Cup. Sometimes this change is for the better, but often it is for the worse. It is, typically, the result of boom-bust economic cycles: countries bid for the tournaments during periods of growth but, by the time the tournaments finally take place, leaner years have set in. 

The BRICS 

During the past decade the curse of the Olympics has been especially striking. It was felt most recently in the aftermath of the “BRICS” economic cycle, which had led to Olympics in Rio de Janeiro in 2016, Sochi in 2014, and Beijing in 2008, and to World Cups in Brazil in 2014, South Africa in 2010 and (for cricket) Mumbai in 2011. 

The BRICS boom first began to waver in 2008, the year of the Beijing Olympics, as the global financial crisis began and called China’s exports to the US and Europe into question. This forced the Chinese to rely instead on growing debt — and then on a new cult of personality, that of Xi Jinping —to keep their boom going. 

The slowing economic growth in Europe and China also took a toll on commodity prices, which in turn crushed the Russian, Brazilian, and South African economies. Russia responded to this economic threat by going to war with its neighbours, first in Georgia in 2008 (the day before the Beijing Olympics), then in Ukraine in 2014 (three days before the end of the Sochi Olympics).

Brazil, meanwhile, entered what has been perhaps the worst recession in the country’s modern history; its president, Dilma Rousseff, ended up being impeached last summer (ten days after the Rio Olympics) in a political scandal that just won’t end

While India escaped the BRICS slowdown relatively unscathed (and also never hosted the Olympics), it too has undergone a political shift in recent years, with the defeat of the Congress Party and success of Hindu-nationalist figures like Narendra Modi and, recently, Modi’s chosen leader for Uttar Pradesh, Yogi Adityanath

Even the Olympics in Vancouver in 2010 and London in 2012 were, in effect, extensions of the BRICS boom. Both cities are hubs of activity and investment for persons originating from China (in Vancouver’s case) or emerging markets in general (in London’s). Both have also experienced some trouble of late. Vancouver is experiencing a housing affordability crisis partly as a result of capital flight from China, while London — where housing prices are not exactly affordable either— suffered a harsh defeat in its country’s Brexit vote last year. 

Europe

Before the BRICS sports spree began in 2008, there was Europe’s. Athens hosted in 2004, Turin in 2006. Berlin too played host in 2006, to the World Cup. It was the year before the 2007-2008 financial crisis, which led to a “lost decade” in Europe that has, among other things, wrecked Greece, weakened Italy, and brought Germany nearer than it would like to becoming again the most decisive but reviled country in the region. 

And then, of course, there was the Communist era in Europe: the 1980 Olympics in Moscow and 1984 Olympics in Sarajevo. Neither the Soviet Union or Yugoslavia would be around within a decade of their hosting the games.

South Korea

For South Korea, which will be hosting the first-ever Winter Olympics in continental Asia at the beginning of 2018, in a city less that is than 100 km from the DMZ, the hope is that the worst of the curse has already taken place in the past year. South Korea’s economy grew more slowly in 2015 and 2016 than in any year since 1998 (with the exception of 2009, the year of a global recession), and its president was impeached in the closing days of 2016. 

Yet if the effect of the Olympics truly is a consistent phenomenon, then there is no reason to expect that Korea won’t continue to change. Not only is South Korea hosting in the winter of 2018, but all of the major sports events in the near future are going to be held in countries that surround the Korean peninsula. The 2018 World Cup will be in Russia, the 2020 Summer Olympics in Tokyo, and the 2022 Winter Olympics in Beijing.

Even the host of the 2022 World Cup, Qatar, has Korean connections: South Korea is the number one destination for Qatar’s exports. 

North Korea 

For North Korea, the changes in the region that these upcoming sports tournaments may foreshadow are, if anything, only one more indication that the status quo on the peninsula is becoming less and less likely to hold. 

Whether through rapprochement, reunification, or regime change, it seems that the country and the region are headed for a significant change in political conditions.

It is possible that sports will play even a direct role in this change. Sports diplomacy, after all, has a long history in the region. The US and China played ping-pong in 1971, just months before Nixon’s infamous trip to Beijing; the ping-pong players were at the time among the first Americans to officially visit China since the end of the Korean War two decades earlier. 

More recently — just this past week, in fact — South Korea’s Chung Mong-gyu, the first Korean to hold a seat on FIFA’s council since 2001, announced that he and FIFA’s president Gianni Infantino both support the idea of a proposal for South Korea, North Korea, China, and Japan to co-host the football World Cup in 2030.

Even Dennis Rodman, who played on the 1990’s Chicago Bulls (Kim Jong Un’s favourite basketball team), used a sport trip to North Korea in 2014 as an opportunity to reach out to the isolated, tyrannical regime.

If war is to be averted, we can hope that Rodman’s Celebrity Apprentice co-star, Donald Trump, will now follow suit.

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East Asia

Expect the Unexpected: 10 Reasons North Korea Could Soon Change Course

1. Russia’s economy is currently in disarray as a result of falling natural resource prices, slow economic growth in Europe, and its rivalry with the United States. Russia has been an ally of North Korea because it sees North Korea as a counterweight to the Chinese, Japanese, and US-backed South Koreans, the other powers in Northeast Asia. If Russia’s economy does not bounce back, North Korea will need to adapt to the weakening of one of its only friends in the world.

2. Russia has been looking to export commodities to South Korea, as Russia worries that Europe and Japan will reduce their imports of Russian oil and gas as a result of the Ukraine conflict, the American fracking boom, the end of Western sanctions on Iran, and the possibility of Japan turning its nuclear power plants back on. Though Russia is obviously not thrilled about South Korea’s close relationship with the United States, it might nevertheless be happy to see a more united Korea serve as a counterweight to China and Japan in the Pacific.

In addition, the most direct way for Russia and South Korea to trade with one another is via the 800 km of North Korean territory that separates Seoul from Vladivostok. This is particularly true of gas exports, which travel cheapest through overland pipelines rather than by undersea pipelines or LNG ships. It is also true of many other types of goods, however. Politics aside, it would often make more sense to cross North Korea rather than to load and unload ships in order to sail the 600 km of sea between Russia and eastern South Korean ports (which are themselves 150 km or so from Seoul).

map_vostok_eng.jpg

 

3. The youngest generation of the North Korean leadership, embodied by 33-year old Kim Jong Un, was raised during the 1990s, after the Soviet Union had fallen, after China’s economic miracle had begun, and after the Internet and satellite television had become common. Kim Jong Un himself went to school in Switzerland, a stark contrast to his father Kim Jong Il who may have been educated in China during the Maoist era.

Today Kim must be looking at Bashar al-Assad with fear. Like Kim, Assad took over at a fairly young age from a father who had been a larger than life figure. Assad lasted for one decade before the Syrian Civil War got underway; Lil’ Kim is now in the middle of his fifth year in office. Meanwhile, the number of North Koreans living today who were alive during the reign of the first Kim, Il Sung, is quickly falling.

4. Unlike most other poor countries, North Korea’s population is not young. Its population pyramid has two main bulges: one between 40-50 years old, the other between 15-25 years old. A decade from now, then, much of the older bulge will have become too old for manual labour, while the number of young people entering the workforce for the first time will have begun to drop off. At this point, North Korea may be more inclined to move away from a labour-based economy, which in turn will require it to import capital from abroad, perhaps from the South Koreans.

north-korea-population-pyramid-2014.gif

This aging also raises Korea’s family reunification issue: North Korea’s 40-50 year old cohort are in many cases the children of families who were divided by the peninsula’s split in the Korean War. The coming decade will be the last chance for many of these sundered families to get back in touch before their elderly parents pass away — and before this generation becomes old itself.

5. Back when China was run by committee, consensus, compromise, etc.,
it liked being compared to North Korea because it could say, in effect, “we may not have a liberal democratic political system, but at least we’re nothing like the government in North Korea”. Today, though, as China has been moving back in the direction of a more traditional persona-led dicatorship embodied by Xi Jinping, the last thing that the Chinese leadership wants is for Xi to be compared with Kim Jong Un.

Xi has yet to visit North Korea, even though Xi has been perhaps the most well-travelled leader in Chinese history, and the first ever to visit South Korea before North Korea. Kim Jong Un, in turn, has not yet travelled the 800 km from Pyongyang to Beijing. (In fact, Kim Jong Un has never officially left North Korea since taking over as its leader in 2012). This may soon change, however: Kim Jong Un may finally visit Beijing in the next few months.

6.  Japan could be coming back in a big way: Shinzo Abe’s revivalism – including the end of formal military pacifism and the symbolic 2020 Tokyo Olympics may just be the start. The Japanese economy is far less exposed to the Chinese economic slowdown than are those of South Korea and Taiwan. Japan might benefit more from Russia’s troubles than China will, given that China has often allied itself with Russia. Japan is also more dependent on energy imports than China, and so may be more likely to benefit from the fall in energy prices than China will.

Japan may benefit more than any other country from the coming era of robots, given its uniquely aged workforce and technological expertise — and given that robots might make China’s enormous human workforce less of an economic advantage over other countries than it is today. Whether Japan addresses its aging workforce dilemma by importing more energy to power robots or by continuing to outsource more of its industrial activity to countries like Thailand and Taiwan, however, it will have to become more active in the region, and thus potentially more aggressive in the region, in order to ensure its access to foreign markets.

If Japan’s reemergence causes the Chinese to want to create a rift in the US-Japan alliance, Korea is the best place for China to try to do so. The US loves its alliance with Korea, while Japan does not. The Japanese and Koreans have quite a tortured relationship, a legacy of Japan’s historical domination of the peninsula. The US would be thrilled by a more unified Korea, whereas the Japanese might be wary of one even in spite of their current rivalry with the North.

Consider the context for the Korean War (1950-1953): Japanese power had just been decimated in World War Two, so China helped to divide the Korean peninsula because it feared the American-allied unified Korea that had emerged at Beijing’s doorstep following the invasion of the North by America and the South. China did not have to consider using Korea to create a rift between the US and Japan, since Japan was not a player at the time. A somewhat similar situation occurred in 1990, when American power surged again as the Soviet Union fell and as Japan’s economy suddenly began its “lost decades” of slowing growth.

If Japanese power grows, however, China may want a more unified Korea as a buffer against the Japanese and as a prime way of splitting the American-Japanese alliance. Alternatively, if China and Japan can finally mend fences with one another politically, it may cause the United States (and/or Russia) to want a more unified Korea to serve as a counterweight to both China and Japan.

7. More so than during the 1990s,
when Russia and China were weaker than they are now and 9-11 had not yet occurred, the US has a lot to worry about today other than North Korea’s military programs. North Korea’s first nuclear tests were in 2005, possibly in order to win back American attention that had shifted to the Greater Middle East. Now, though, with the US still worried about the Muslim world and also concerned with Russia and China, there may be diminishing returns to this strategy of gaining aid and prestige by nuclear saber-rattling.

The move by North Korea in 2010 to kill 46 South Korean navy soldiers in the Cheonan ship attack, which was by far the most casualties the South’s military has experienced in decades, suggests that the North Korean leadership may be aware of these diminishing returns. More recently, so does the announcement by North Korea this past winter that it has successfully developed a hydrogen bomb.

8. South Korea’s economy is slowing because of China’s economic slowdown and because South Korea has now basically become a “developed” economy (its per capita income is estimated to be $28,000, in nominal terms). While South Korea does not want to pay the financial burden of resuscitating theNorth Korean economy, it could nevertheless see some opportunities for itself in engaging the North in trade.

North Korea, for example, has one of the world’s largest reserves of high-quality anthracite coal, while South Korea is one of the world’s leading importers of coal and of fossil fuels in general. And of course, North Korea has a cheap, Korean labour pool (and potential consumer base), at a time when South Korea’s workforce is no longer cheap or youthful by global standards.

relative trade northeast asia.png

Trade figures, adjusted for overall GDP size

9. Coal prices have plunged of late in China and in most of the rest of the world. This could put a lot of pressure on the North Korean economy, which has become the third largest supplier of coal to China in recent years. China accounts for more than 90 percent of all North Korean international trade. According to Reuters, “last year, North Korean coal deliveries to China surged 26.9 percent, making North Korea China’s biggest supplier behind Australia and Indonesia. Coal deliveries from Australia plunged 25 percent, indicating the increase in [Korean] imports may have been to help support this”.

10. With China and the wider Northeast Asian economy struggling after years of rapid expansion, ending North Korea’s isolation could be a good last-ditch attempt to stimulate regional growth. China, for instance, could try to use its position as the North Korea whisperer in order to gain economic favours from the United States. China also has an incentive to engage North Korea — and to have South Korea engage North Korea — because the last thing the Chinese want to deal with right now is a refugee crisis emerging on their border with North Korea in the unlikely but not impossible event of a state collapse occuring there. A few million Koreans already live in China near the North Korean border.

korea north.png

Finally, North Korea could benefit the regional economy by serving as a land route between China and South Korea. Seoul is just 500-600 km from significant Chinese cities like Shenyang and Dalian by way of the North, and 1150 km from Beijing. In the longer-term, the North Korean trade route could become even more commercially important if fixed links are built across the Yellow Sea between North Korea and China, across the Gulf of Bohai between the Chinese provinces of Liaoning and Shandong, or across the Korea Strait from Japan to the Korean peninsula.

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So, could the era of extreme North Korean isolation from the world be reaching its final days? Certainly, from the US point of view, North Korea is something of a last man standing these days: of the six countries that the Bush government named as the “axis of evil” – Iraq, Iran, Syria, Libya, Cuba, and North Korea – Kim is now the only leader not to have been either toppled (Iraq and Libya), besieged (Syria), or moving towards warmer relations with the US (Cuba and Iran). Given the changes occurring all around it in Asia and the world, North Korea’s position no longer seems like an easily sustainable one. Reunification with the South or not, it still makes sense to guess that North Korea under Kim Jong Un will end up being very different from that of his father.

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East Asia, Images, North America

East Asian Trade – Image of the Day

From Finally Passing Gas: 10 Winners and Losers of the Panama Canal Expansion:

trade asia

A typical assumption has been that China and Japan will be the primary beneficiaries of the canal. China, after all, leads the world in importing commodities and exporting bulk goods, and Japan has accounted for 40% of the world’s LNG imports – far more than any other country – in recent years.

Yet while China and Japan lead the pack in terms of the value of their absolute trade, they lag far behind both South Korea and Taiwan in the more relevant category of relative trade; that is, the value of their trade relative to the overall size of their economies. As can be seen in the chart above, the economies of China and Japan are generally not as trade-oriented as those of South Korea and Taiwan. As such, they might not benefit as much from the canal, which is intended to ease trade — in particular LNG trade, which the pre-expansion canal could not facilitate.

Of course, none of this means that South Korea and Taiwan are risk-free investments. They are not. Both, for example, have significantly more exposure to China’s economy, which has been struggling of late, than Japan does. All else being held equal, though, South Korea and Taiwan appear likely to be two of the greatest beneficiaries of the new canal.

 

 

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East Asia, Europe, Images, North America

Image of the Day – December 2, 2015 – Motor Vehicle Production

Motor Vehicle Production

The non-per capita vehicle production stats came from wikipedia: https://en.wikipedia.org/wiki/List_of_countries_by_motor_vehicle_production

Note: there are countries which have higher per capita motor vehicle production than some of the countries on this list. Belgium, for example, which is not shown on this list, has a much higher per capita motor vehicle production than many of the countries that are shown on this list. The countries on this list were simply the ones with the highest overall motor vehicle production as of 2013, according to the source above.

 

 

 

 

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