2018 Korea-US-China Trilateral Conference “Northeast Asia and … · 2021. 2. 26. · 2018...

Chey Institute for Advanced Studies | 1

2018 Korea-US-China Trilateral Conference

“Northeast Asia and US-China Relations”

July 17, 2018

Keynote Address

PARK In-kook

Ladies and gentlemen, welcome to the Trilateral Conference on North East Asia and US-China

relations. This conference is jointly organized by Belfer Center at Harvard University, School

of International Studies at Peking University, and Korea Foundation of Advanced Studies.

Many people said this trilateral conference is highly timely considering the recent

developments surrounding the Korean peninsula. But dynamic changes happen every week so

any meeting held at any time would all seem extremely timely.

In seeking a path to resolve the North Korean nuclear issue, the recent and unprecedented

plethora of historic summits involving South-North Koreas, United States and China has

triggered a seismic shift in the world geopolitical structure with the Korean Peninsula as an

epicenter. On top of that, the Sino-US trade war is signaling another possible wag the dog

drama. Against such great changes at a dizzying speed, we cannot overemphasize the

significance of our US-China-Korea trilateral conference.

Our Foundation has hosted several trilateral conferences with major international think tanks

or institutes or universities since 2016. This is the third time we are collaborating with the

Harvard Belfer Center and Peking University.

Taking this opportunity, I’d like to share with the audience that this year marks the 20th year

since the passing of the founding chairman of this organization, the late chairman Chey Jong-

hyon who established this foundation 44 years ago. We are delighted that this meaningful of

occasion is taking place at the time of remembrance of his great vision and conviction.

Following the guiding philosophy of our Foundation, we will continue to promote peace and

prosperity of the Korean Peninsula, Northeast Asia and the world.

It is also our mission to become the bridge for future generations in sharing knowledge and

wisdom and expanding their horizons. As part of this effort, we have a Korea-China university

student exchange program every summer in the name of the Korea-China Leadership. I’m very

happy that this morning 70 students participating in this summer program have joined us. They

visit major cities in Korea and China while holding various workshops and engaging in hard

debate for 20 days. Can you please stand up? The students from Chinese universities: Peking

university, Tsinghua university, Renmin University, Fudan University; and Korean students

from various universities? OK, thank you.

Finally, I hope this unique gathering will continue to gain an invaluable momentum at a time

when there are very few chances for achieving denuclearization of Korean Peninsula and

lasting peace while minimizing uncertainties and ambiguities. Thank you.


CHEY Tae-won

Good morning, everybody. Ladies and gentlemen, distinguished guests and Excellencies. I’m

really pleased to have this event together with you. Since this forum opened in Korea, also as

the host of this event, please allow me the privilege of using the Korean language because this

is probably the only chance that we can use our own language at this type of event.

오늘 같은 이런 의미 있는 자리에 함께해주신 여러분한테 감사드립니다.

동북아정세가 매우 중요한 기로에 서있습니다. 25 년 계속되어오던 북핵 문제,

남북한과 미국의 지도자, 중국의 지도자까지 다 대화에 나서면서 새로운 국면에

접어들었습니다. 사실 이런 일이 언젠간 생길 거라고 사람들은 생각했었지만

이렇게 갑자기 다가오니까 막연한 기대는 있었지만 닥치면 어떻게 행동해야 할지

모를 때가 많습니다. 오늘 같은 이런 자리에서 미국의 이해가 필요하고 중국의

이해도 필요하고 한국의 자중과 이해도 필요합니다. 전문가들이 모여서 이런

미중관계와 한반도 문제에 관해 의견을 나누는 이 자리가 시기 적절하다고

생각합니다.

개인적으로는 아까 사무총장께서 얘기하셨지만 올해가 돌아가신 이 재단을

설립하신 선대 최종현 회장님의 20 주기가 되었습니다. 20 주기면 잊어질만도 한데

더 기억이 나는 이유는 이런 토대를 마련하기 위해서 우리가 여기까지 44 년간

학자를 양성하고 foundation 과 자리, 그리고 철학을 설립해주셨습니다. 이 자리가

있게 된 것에 대해 상당히 기쁘게 생각합니다.

기업 입장에서도 geopolitics 는 이제 상당히 중요해졌습니다. 기업이 geopolitics

자체를 해결할 수는 없다고 생각합니다만 기업의 롤도 바뀌었다고 생각합니다.

대학도 상당히 달라졌다고 생각합니다. 이제는 ‘어느 나라의 기업’이라는 개념을

뛰어넘어서 국경이 없는 – 미국도 중국도 일본도 대한민국도 국경이 없어지는 -

형태의 경제 문제가 활성화되기를 생각해보고 이런 입장에서 기업이 무엇을 해야

하는지 생각해 보는 자리가 될 것 같습니다.

저희 재단은 서로 입장이 다른 국가와 사람들간에 대화를 통한 이해가

중요하다라는 믿음으로써 오늘과 같은 이런 행사를 꾸준히 개최하고 있습니다.

이 분야의 전문가들이 솔직히 대화를 나누는 장이 되기를 바랍니다. 저희는

앞으로도 이런 다양한 지식나눔의 플랫폼을 열고 찾아뵐 수 있도록 하겠습니다.

다시 한번 참석해주신 연사분들과 청중 여러분께 감사드립니다. Thank you.


CHO Hyun

Good morning, ladies and gentlemen. I am delighted to be here at this conference this morning.

I thank Chairman Choi and Ambassador Park for inviting me to this conference. I also

congratulate Chairman Choi and Ambassador Park for having invited so many distinguished

scholars for the panel discussion and also such a big audience. But most importantly, three most

pertinent and important issues not only for Korea but also for region and beyond. As requested,

I’d like to kick off the discussion by sharing my personal thoughts on these three issues.

Let me start with the development of the Korean peninsula, your second session agenda.

Indeed, it’s a seismic shift for the peninsula. We had a great breakthrough thanks to Panmunjom

Declaration and Singapore Statements. There are many other complex issues, but let me point

out just three things.

First, let me emphasize the importance of prioritization. Of course, our primary objective is

to achieve complete denuclearization of North Korea and establish permanent peace on the

Korean peninsula. These two objectives should be pursued in parallel. There are many other

issues such as human rights, even abduction issues, but we cannot start our talks with North

Korea with these issues at the beginning. But we do not forget about them, and we do not

belittle them. It’s only a matter of priority.

Secondly, I want to emphasize the importance of CBMs – confidence building measures.

As you know, during the weekend we had talks on the return of American soldiers remains in

North Korea. We are going to have family reunion organized by the Red Cross. There will be

many more sports events. Small as they may be, but they are significant and important for

building confidence. Because we have to admit that there is lack of confidence and trust in the

current state of our relationship with North Korea. Some of you may recall that Mr. Tillerson,

then-Secretary of State, once said that he really wishes to have a small talk with North Korea.

Just small talk on weather. It was six months ago, and we see a sea change. When he said ‘small

talk on weather,’ it was the first step towards confidence building. However, I believe in

building confidence, it is very important to do it in a systematic way. That is, South-North

relationship should go in parallel with that of US-North Korea relationship. We should never

forget about that.

My final point is this. Can I just suggest that we all get on board, we all get engaged in this

important process? Not just the US or South Korea, but all the countries, all the stakeholders,

and the international community as proven by a numerous UNSC resolutions. However, at this

initial stage, we should also leave the leading players to do their job. It’s good time for us to

borrow the analogy of football. How the Korean team won the game vis-à-vis Germany.

Because Germany, even including the goal keeper, went to offense. We cannot let it happen in

this important process for denuclearization of North Korea.

Therefore, we might think about a proper division of labor that is not just for now, but for

the whole process of denuclearization of North Korea and establishment of permanent peace

regime. Nevertheless, I have to admit that there are some who are skeptical, some others very

cynical, still others even outright critical of what has been happening since the Panmunjom

South-North summit. But I am optimistic for a host of reasons, which I will not dwell on. I only

hope that scum concerns will transform into confidence in due course. So much for the first


issue and let me move on to the trade war for your third session.

Back in 1999 I was Director for WTO Affairs in the Foreign Ministry. The Uruguay Round

was over and Korea successfully opened its rice market for the first time and the WTO was

launched. We even had our candidate for the director-general of WTO. We made a deal and it

was deputy director-general but we didn’t come out empty-handed. It was Dr. Kim Chul-su at

the time. So, I was a happy man. But in May, only 5 months after the launch WTO, out of the

blue, the US government brought two cases to the dispute settlement body of the WTO without

any prior warning. That was customs processing of perishable goods and shelf life. We were

flabbergasted and it turned out that we were wrong, we lost the cases. But, when the US brought

this case to the WTO, it was shocking to us and the response not only from the Korean

government but also the Korean public opinion was equally shocking. Some argued that the

government should have done something terrible to our ally, that’s why the US government is

retaliating against us. Some other cabinet ministers even talked about the revisit of ally

relationship in the wake of this trade war at the time. I looked into the book of GATT and found

many cases of trade disputes brought to the GATT by allies from Canada against the US, EU

against the US and vice versa. I was successful in convincing them that we shouldn’t worry too

much about it, this is just a trade matter. It has nothing to do with our security. So, may I just

say that this is just a trade matter? I admit that the magnitude and even the method of this Sino-

American trade dispute are different and unprecedented. Indeed, you raised big concerns of

many trading nations including Korea. However, let’s not panic, let’s not dramatize it, and let’s

not overreact. After all, the US and China are the first and second largest trading countries in

the world. So why will they continue their self-inflicting measures? Furthermore, what is done

is done. We’d rather take this opportunity for mending the WTO rules. I’m reminded of a jargon

in management: ‘Creative Destruction’ by Joseph Schumpeter, a by-word for a quantum jump.

Maybe it’s good to start from this disruption. So far it is okay, now you strike a good deal

between the two, and wrap it up sooner than later, and the sooner the better.

Now let me move on to the last issue, which is the first session’s theme: US-China relations.

If you ask this question to any government official or diplomat of a third country, the typical

answer will be: I’m not in the position to talk about that. So, my caveat is that following is

absolutely my personal view. The title of the session is very provocative: “Destined for What?”

You insinuate that the two countries are destined for war. Indeed, there are some prominent

scholars who talk about the inevitability of conflict between the rising power and existing

power, so-called Thucydides’ Trap. As a practitioner, however, and with all due respect, I beg

to disagree. As I see the reality, the US and Chine are intertwined with each other very deeply

in many ways. How can a model of Greek city state fighting with each other from thousands

years ago can be applied to this 21st century relationship between great countries? I admit,

however, that human nature does not change easily. It is true. But we human beings are

constrained by things of the modern age. We are conscious of monitoring cameras, CCTVs

scattered all around the city. So is the case with nations, big powers: they have many constraints.

However, I do not want to be constrained by the geopolitical reality of today. I want to talk

about a dream, that is OSCE type of international organization in Northeast Asia. In 2011 I

landed in Vienna a Korean ambassador. The US government sends three ambassadors to Vienna.

One to the OSCE, one to international organization such as IAEA, and one to Austria. China

sends two ambassadors. As for Korea, I was the only one – still today. Among these three fronts,


I enjoyed attending meetings at the OSCE most. Though as an observer state we were relegated

to the corner of the big table and I got the floor only after speaking of 56 member states. What

was surprising to me was all the vitriolic words, statements exchanged by the US and Russia

in a very civilized manner. I thought: Why not in Northeast Asia? When we collaborate on this

important issue of denuclearizing North Korea and establishing permanent peace on the Korean

peninsula, we can move on to that direction.

Ladies and Gentlemen, President Moon is known for his sincerity. His highest priority to

people, prosperity, and peace. And he deserves some credit for what has been happening in the

past several months. If we make constant progress, I think Korea can play the role of linchpin

between the US and China. It is my dream, but I have just found after seeing the video here

this morning it is aligned with the vision of late president Chey Jong-hyun. Thank you.

YOON Young-kwan

Since we have great translators and many Korean audience, I’d like to make my brief speech

in Korean, if you don’t mind.

이렇게 귀한 자리를 마련해주신 최태원 회장님, 그리고 박인국 사무총장님께

깊은 감사의 말씀을 드립니다. 한 나라의 미래를 결정하는 것은 길게 봤을 때

교육의 질과 수준이라고 생각하는데 그동안 한국고등교육재단이 이 방면에서

기여한 바가 대단히 크다고 생각합니다. 저도 고등교육재단의 장학금을 받아

유학을 가고 싶었으나 그러지 못하고 국비유학으로 갔지만 요즘 이 재단이

배출한 수 많은 인재들 학계와 한국 사회 각 계에서 주도적인 역할을 하는 것을

잘 알고 있습니다. 오늘이 자리에 참석하신 미국에서 오신 하버드 대학의

벨퍼센터의 여러 교수님들, 그리고 북경대학의 국제관계학원에서 오신 여러

교수님들께도 환영의 말씀을 전합니다.

간단하게 오늘 논의가 될 이슈에 대해서 말씀드리자면, 싱가포르 정상회담에서

합의된 네 가지 항목 중에 맨 앞 조항이 바로 그런 내용입니다. 평화와 번영을

위해서 북미관계를 개선하겠다는 것이 첫번째 합의였습니다. 저는 이 합의가

대단히 중요한 역사적인 의미를 갖는다고 봅니다. 그 동안에 미국은 북한의 핵

문제를 다루어 오는데 있어서 군사 안보적인 접근법을 시행해왔습니다. 이것은

주로 우세한 미국의 힘에 근거해서 북한을 압박하면 북한이 테이블에 나오게

되어서 핵을 포기할 것이다라는 가설에 입각하고, 이른바 deterrence 라는 개념에

입각한 대북정책이었습니다. 안타깝게도 그 정책은 25 년이 지난 지금 성공하지

못했습니다. 물론 그러한 시도와 다른 일종의 정치적인 접근법을 시도한 경우도


있었습니다. 2000 년에 클린턴 대통령이 북한과의 관계 개선을 통해서 북한 핵

문제에 접근하려는 시도가 있었지만 너무 늦었고 타이밍을 놓쳤기 때문에 효과를

보지 못했습니다. 그러나 이번에 처음으로 트럼프 대통령이 과감하게 정치적인

접근을 시도하고 있다고 봅니다. 저는 그 접근이 상당히 의미 있는 전략의

전환이다, 이렇게 생각합니다.

이 접근은 기본적으로 북한이 작은 나라로서 가질 수 있는 안보위협에 대한

불안감을 해소시켜주는 것에서부터 핵문제를 해결해 나가겠다고 하는 발상의

전환입니다. 이것은 deterrence 라는 개념 보다는 오히려 security dilemma 라는

개념에 입각한 접근법이라고 생각합니다. 그 동안의 안보 군사적인 접근이

성과를 갖지 못 했기 때문에 저는 새로운 접근법이 정착되어 효과를 발휘할

때까지 지켜보며 시간을 줘야 한다고 생각합니다. 저는 미국 내에 그리고 한국

내에 많은 비관론이 이야기되고 있다는 것을 잘 알고 있습니다. 그럼에도

불구하고 이런 접근이 시도되어서 북한 김정은이 핵이 없어도 자기의 체제,

regime 과 정치적인 미래가 보장이 된다는 것을 믿을 수 있다면 이 핵문제는

해결의 방향으로 나아갈 수 있다고 봅니다. 다만 지금 현재, 정상회담이 지나고

한달이 지난 이 시점에서 보면 과연 그런 전략적인 접근에 상응하는 구체적인

플래닝과 세부계획이 마련이 되고 있는지에 대한 불안이 다소 있습니다. 그

부분을 어떻게 보강해야 될 것인지는 앞으로 지켜봐야 될 숙제라고 생각합니다.

저는 종종 그런 이야기를 듣습니다. 특히 올 초 이후의 - 외교 상황에 있어서의

큰 변화 이후에 - 벌어지고 있는 미중간의 무역분쟁 때문에 상당히 북한문제

해결에 좋지 않은 영향을 미칠 것이다라고 하는 이야기들이 들립니다. 일종의

미중간의 무역 분쟁이 북한에 대한 제재를 이완시키는 그런 인센티브로 중국

체제에 작용할 수도 있다는 걱정들은 들은 적이 있습니다. 저는 그런 의견에

찬성하지 않습니다. 합리적인 중국의 정책 결정자들은 이 두가지 어렵고 어려운

이슈들을 서로 링크 시키는 경우에는 두 개 중에 하나도 해결하기 힘들 것이라는

것을 이해할 것이라고 생각합니다. 현명한 일은 이 북한문제를 미중간의 여러

갈등의 이슈, 전략적인 경쟁의 이슈, 무역이나 대만 문제나 남중국해 문제나 이런

것들로부터 차단시키고 분리시킨 다음에 집중해서 협력을 통해 북한 문제를

해결하는 것이 중요하다고 생각됩니다.


한국 정부의 입장에서는 이 기회는 아주 중요한 기회라고 봅니다. 그동안 이

남북한 간의 약화되었던 교류, 왕래, 협력 이런 것들이 북한의 성의 있는 비핵화

조치로 경제 체재가 풀린다면 복원이 될 수 있는 가능성이 이론에서 남북한

주민들 간의 서로 통합을 위한 에너지가 생기고 그것이 강화된다면 이것은

한반도 평화뿐만 아니라 먼 미래의 통일로까지 연결될 수 있는 기회가 될 수

있을 것이라고 생각합니다. 그런 맥락에서 한국 정부가 많은 기여를 해야 될

것이라고 봅니다. 특히 트럼프 행정부와의 긴밀한 협조 하에 구체적인 여러

복잡한 이슈들과 관련해서 상호 소통하고 조정하고 협력함으로써 공통의 목적을

이뤄낼 수 있어야 한다고 생각합니다. 부디 오늘의 토론을 통해서 생산적인 많은

논의 아이디어가 나올 수 있도록 희망합니다. 감사합니다.

Gary SAMORE

Good morning everybody. First of all, I want to thank both Chairman Chey and Ambassador

Park and the Korea Foundation for Advanced Studies for hosting this third round of trilateral

discussions between the US, ROK and China. I think there have been two big changes since

the dialogue began more than a year ago.

First, on the North Korea issue, we’ve gone from maximum pressure and bloody nose and

“Little Rocket Man” to a remarkable diplomatic process which has been skillfully engineered

by President Moon Jae-in and Chairman Kim Jong-un with both the Panmunjom summit and

then the Singapore summit. I think the big question for our discussion today is whether this

diplomatic process can be sustained and whether it can produce concrete results toward

normalization of bilateral relations, establishment of a peace regime on the Korean Peninsula,

and concrete steps toward denuclearization. Or will the process stall and break down as it has

so often in the past.

The second big question is US-China relations. We’ve gone from the early friendly days of

Mar-a-Lago where Trump said Xi Jinping was his best buddy to what looks like a looming

trade war and a sharp deterioration of bilateral relations. Can this be avoided and what are the

implications for geopolitical issues like for North Korea. It seems to me that Beijing is looking

for an opportunity to negotiate a resolution to the trade deficit and other economic issues. But

it is less clear to me whether the Trump administration has a coherent negotiating strategy or

whether US actions are the result of erratic impulses from the White House and an expression

of disarray among various economic advisors with different views. To paraphrase Vice Minister

Cho, are we seeing creative disruption or are we seeing destructive disruption? I don’t know

the answer but I think our discussions today will be a good opportunity to try to tackle these

difficult issues with our usual candid and constructive conversation.

So again, thank you all very much for coming and I hope you find these meetings to be

interesting and informative. 감사합니다.


JIA Qingguo

Thank you. Good morning. I want to take this opportunity to thank Chairman Chey and

Ambassador Park and also the Korea Foundation for Advanced Studies for hosting this third

round of trilateral dialogue.

Since the last round, a lot of things have happened. China and the US are in a trade war.

Some say we are at the beginning of a trade war. President Trump and Chairman Kim Jong-un

met in Singapore and before that President Moon and Chairman Kim met at Panmunjom. Also,

Xi Jinping and Kim Jong-un met in China three times. Many things are happening. How are

we going to explain what’s going on? Are we going to have denuclearization in the Korean

Peninsula? Are China and the US heading for a Cold War? Also, what’s going on with the

North Korean government? How can Kim Jong-un persuade his comrades his new policy line?

What’s going to happen to the region? All of these important questions are for us to explore.

I trust we have a good group of people from the three countries - the best minds - and I think

we can make some progress in that regard. We are not going to solve all the problems but we’re

certainly going to help each other to clarify and understand the situation much better. I wish

this round of dialogue a great success. Thank you very much.

Session I: US-China Relations: Destined for What?

HA Young-Sun

The first session will discuss the topic of US-China relations for the KFAS trilateral conference

on Northeast Asia and US-China. For the discussion, we invited five globally eminent

specialists on this issue to my left. First Douglas Paal, Vice President of the Carnegie

Endowment for International Peace. Next, William Tobey, senior fellow of Belfer Center,

Harvard University. Next, Jia Qingguo, the dean of School of International Studies at Peking

University. And next, Hao Yufan, the dean of Faculty of Social Science at the University of

Macao. And next, Jae Ho Chung, professor of International Relations at Seoul National

University.

This session will try to cover three major questions. First, we need to clarify the basic nature

of relations between Trump’s United States versus Xi Jinping’s China. In comparison with

previous Obama administration’s evaluation of China as a potential partner, US President

Trump made it clear that China is a strategic competitor. In the case of Xi Jinping diplomacy

toward the United States, he’s still used the concept of a new type of major power relations for

stability and balanced development. We are now facing three possible scenarios of strategic

competition, stability and balanced development, and status quo. I would like to invite your

wisdom on this difficult question.

Second, we do need to discuss more specifically on the impact of US-China relation on East

Asia. US President Trump pursues in the Pacific a rebalance strategy based on two principles

of “America First” and “peace through strength”. In parallel, China’s President Xi Jinping


conducts the new type of neighborhood relations based on three basic principles – community

of common destinies as legitimacy diplomacy, One Belt One Road as mutual interest diplomacy,

and the pursuit of essential interest with the rising military capabilities. Under these

circumstances, we are facing the dilemma sought to solve the contending issues in three major

hotspots such as the Korean peninsula, East China Sea, and South China Sea.

The final question in the architecture of Asia Pacific regional order in long term perspective.

Chinese President Xi Jinping recently called the period between the 19th and 20th CPC

National Congress a historical juncture for realizing two centenary goals in China. If China

comes to successfully realize the two centenary goals for rejuvenation of the Chinese nation,

what kind of architecture of Asia Pacific regional order might we have in 2050?

As we are now running a little late than the original schedule about 20 minutes, I will

moderate the session roughly for 1 hour and 30 minutes. It means that each speaker will present

your views on US-China relations in less than 10 minutes for the first round, and then I hope

that we will have further discussions in the second round. Let me turn over the microphone to

Paal.

Douglas PAAL

Thank you, Chairman Ha, and thank you to KFAS for inviting me to join this distinguished

panel to talk about these issues this morning. I particularly will focus my comments on the US

side of this triangle. To get started, we will want to get into the important implications that

you’ve raised in your opening remarks as we get into the discussion.

I’ve been working in Washington on US-China relations and Asia relations for more than 40

years, and I have never in my lifetime been in a more difficult position to try to predict behavior,

to anticipate outcomes, and to describe internal processes. The US policy toward China is

turning profoundly and comprehensively negative. There are no bright spots on the horizon in

US-China relations these days.

My first observations will be that the new Trump administration is not the only reason we

have these set of issues as these have been developing over the recent decade and a half but it’s

coming to a sharp focus under the new administration. I describe this as an administration

which lacks the three Ps, the letter P. They lack policy, they lack priorities, and they lack process.

And if you lack these things it’s very difficult to grab onto where the policy, priorities, or

process are going. In anticipating behavior by the US, and if you’re a friend or neighbor of

China, how to react and prepare for it.

Now, as to why the US is in this position, it’s important to know that we’ve gone through

what international relations specialists talk about as a structural change. Everyone in this room

knows that the US economy is doing okay, or maybe even better than okay. But China’s

economy has been growing rapidly for the last 30 years and has caught up in many ways, and

will continue to catch up. And with time, China has applied a lot of its economic strength to

developing complimentary military capabilities. So, China’s a greater strategic factor. And

China’s also in a period of greater self-confidence led by a very self-confident leader. And this

has colored the interaction just as the US has been sort of basking in the past and not looking


to its future, assuming the things will continue in the post-Cold War mode of unipower, the

unipolar if you will, dominance especially in the Asia Pacific where we have not had a major

challenge for 70 years.

The areas where the United States and China are able to cooperate are falling off the map or

falling off the agenda. Everyone couldn’t agree a few years ago that we should cooperate to

prevent global climate change from damaging the global environment. The US doesn’t agree

with that anymore. There is tremendous competition in the Chinese maritime periphery. The

US has talked about a rebalance to Asia but never delivered that during the Obama

administration. And so, the relative strength of the US and China have been changing

dramatically, and for the US negatively over the last decade.

And one of the most important things to talk about has been that the significant deterioration

of the US economic and business relationship with China. The US firms, by and large, had

difficult times but nonetheless they felt it was worth staying in the China market. Its size, its

integration into the global supply chain meant it was something you had to be a part of if you

wanted to be a global competitor as an American firm. Increasingly, not entirely, but

increasingly, the American firms are finding themselves blocked out or subjected to intellectual

property theft or internal regulatory constraints that deteriorate the business environment. As I

said, maybe 50 to 70 percent of firms are doing well enough to want to stay in China. But if

you go from 10 percent to 30 to 40 percent of firms who are frustrated by it, it reflects itself in

the loss of the uniform support of the business community for the underlying nature of US-

China relations.

Second area beyond the political set of issues is institutional change. I have been astounded

at how the cultures within the various US relevant departments of government, whether it’s

defense department, or treasury, or USTR, or commerce department, have become much more

hostile and suspicious about almost everything Chinese. This is even more recently extended

to state department, where traditionally diplomats or civil servants wear striped pants and hand

out cookies and make things nice, but they’re becoming much more aggressive, and unwilling

to find points or even to look for points of compromise with China. The strategy reports issued

under Congressional Mandate in December and January by the new administration on China’s

strategic competition with the US and defense cooperation with the US, I think are not unique

to this administration although the language may be stronger than other administrations would

choose. But it reflects this growing institutional change within Washington as a whole, which

is why a multi-agency process can produce a document that is unwittingly bleak. China is now

viewed as an adversary.

I think it’s fair to say that speaking structurally, exemplified as recently as the Singapore

Summit, on the way to the summit, Donald Trump went to a G7 meeting in Quebec and

basically took the position that he wants to dismantle the post-war international trading system.

And then in the press conference after the Singapore summit, discussing security in the Korean

peninsula, ending exercises, indicated he’s pretty much determined to dismantle the US

international security system of the post-war period. So, institutions are under a broad challenge.

Along with this, we have a generational change. People like me and a few of us in this room

who were around for the three communiques between the US and China remember them pretty


well and what the constraints are. We also remember the origins and the terms of the Taiwan

Relations Act. People serving in the government today are unfamiliar with this, that process is

not there to remind them of previous commitments. And this is in stark contrast with the

Chinese way of doing diplomacy, which is to go back to foundational documents and try to

interpret them rigorously. The US is sort of saying tear those documents up and judge behavior

on current contemporary standards without respect to previous administration’s agreements.

The fourth position, I would say, is that the domestic politics in the US and China are both

headed in the direction of confrontation. In the absence of moderate policy leadership, on the

United States side, we have making America great again. We think we can stamp our feet and

recreate a world of one power domination. And in China we have the China dream, and

expansive thoughts about China’s model for global development, and for adjustments to the

international system, have put the two populations on a political collision course.

So, in summary, the outlook I think is quite grim for managing US-China relations. If I were

on the periphery of China, I look to the US to try to find a counterbalance to Chinese influence.

All of China’s neighbors are smaller than China, and so they look for outside balancing

capabilities. They’re going to be hard pressed to find that, they’re going to in fact more likely

be subjected to demands that you choose sides as opposed to being ambiguous or ambivalent

about what side you are on. The US and China will be increasingly saying you must line up

one way or the other.

Just to conclude the remarks, in talking to people within the Trump administration, all of

these factors which I’ve outlined are coming up with a kind of emotional, maybe it’s a

psychological, phenomenon where they, without thinking about what specifically we want to

see China change, whether it’s in its trading behavior, diplomatic behavior, or security behavior

in space or internet all these various areas, basically we want to put China to the test. The

judgment has been made, or the feeling has been adopted - because to say there’s a process

behind making a judgment would be too generous - that somehow if we throw enough tariffs

on Chinese products, we can stress their system and China is balanced on the precipice. It just

needs a small push to be knocked over, and then when the world wakes up from the

confrontation between US and China - and some would say US and Russia and others - then

these countries will realize that they are number two and three in the world and the US is still

number one. And they will acknowledge that and will proceed with the US at the dominant

position. I think this is a very unrealistic basis to proceed from and I’ll be happy to talk about

the implications of that as we move on the panel.

HA Young-Sun

Vice President Douglas Paal gave us a picture that was a little pessimistic view due to the

fundamental changes of US policy towards China. Second, Tobey, I think it is your turn.


William TOBEY

Thank you, Chairman, and thank you to KFAS. It’s a great pleasure to be back among old

friends. I’m going to take a more optimistic view than my friend and former colleague Douglas

Paal, which might be another way of saying I’m going to take a longer-term view.

I agree with minister Cho that the question “Destined for what?” is provocative. With respect

to the frameworks of the agenda and my mentor Graham Alison whose book the question echoes,

I don’t believe that America and China are destined for anything except to make choices that will

affect each other. It is a matter of choice. As an illustration of that, consider the choice that

America has made by the closest of margins between President Trump and Secretary Clinton.

We’d be facing a different world today had she been elected. But it's not only on the American

side. There is a difference between the “China dream” and the “harmonious world” as policies

are pursued by the People’s Republic. Of course, the matter of choice is why we are here today.

The second broad point that I’d like to make is that America has joined China in viewing

economic questions in social and political terms. In response to bloodless American economic

arguments that China should devalue its currency, Wen Jiabao pleaded in fairly emotional terms.

Quote: “You don’t know how many Chinese companies would go bankrupt. There would be

major disturbances. Only the Chinese Premier has such pressures on his shoulders.” Of course,

we now know that it isn’t only the Chinese premier who faces such political pressures. I think

such pressures can explain in large fact the fact why we have President Trump in office today.

So, in a way, convergence in approach has revealed a divergence of interests and that will be a

continuing source of friction between the United States and China. My hope is that cooler heads

will ultimately prevail, and we will find a way to reach a new balance that accompanies the

mutually beneficial trade that goes on between the two countries today.

My third point deals with military competition. I would argue that the extent to which military

competition or even conflict is a feature of the relationship will depend mostly on Beijing’s

choices. That statement may manifest an American bias but it really rests on the assumption that

two conflicting policies are most likely to lead to a conflict between the US and China. First, an

attempt to “contain” China will be resisted in Beijing. That is not US policy nor is it really

possible as my colleague Joe Nye argues “Only China can contain China.’ by incurring the enmity

of its neighbors. The second policy that can lead to conflict would be an attempt to expel the US

from the Western Pacific region. While some in China would harbor this goal, it is neither

possible nor realistic. But if the policy is pursued, it would be Beijing’s choice.

The fourth broad point I’d like to make in conclusion is that US-China relations are destined

to be the most important diplomatic interaction of the 21st century. Destined neither for war nor

peace but rather a complex political, military and economic competition. Eyre Crowe wrote in

1907 that Britain and Germany were destined for war. And there’s been an allusion already to

the Thucydides Trap but I believe there are serious differences between both of those situations

and in the present situation between China and the United States today. To name just three, the

obvious and well-known destructive power of nuclear weapons - deterrence matters -, an absence

of conflict over colonial interests, a very different geopolitical circumstances separating the two

countries. Therefore, while I acknowledge certainly the points that Doug made, I am optimistic

that US-China relations can succeed in accommodating China’s peaceful rise.


HA Young-Sun

Following the two views on the current US-China relations from the American side, we will

have a chance to hear from the Chinese side on the same issue. First, I would like to invite

professor Jia.

JIA Qingguo

Thank you. The question I want to answer is: are we getting ready for a Cold War? We see a

lot of negative developments in China-US relations. On trade, trade disputes are escalating.

Trade war has already begun. No deals so far. Instead, we hear clamors for escalation of the

trade war, especially on the part of the US. China wants to cut a deal but finds it difficult.

On security matters, we see security conflicts expanding. There are maritime disputes. The

US is sending warships there in the name of freedom of navigation patrols. And, of course,

China has made efforts to install some military facilities in the islands out of its own concerns

of security. And on Taiwan, we see legislations in the US Congress authorizing the US

government to dock US warships in Taiwan harbors to allow US government to send officials

to Taiwan, and also stories about possibilities of the US sending marines to defend the AIT, US

representative office in Taiwan. And the military relationship, despite the recent visit by the

Defense Secretary, there is no Chinese participation in this year’s Pacific Rim exercises. The

US protested over the Chinese military activities in South China Sea. And also, we see more

restrictions on trade and investment on technological issues for allegedly security reasons.

There are also stories about the administration considering or may be even practicing bans on

Chinese students studying in the US on certain subjects related to high tech, fearing this would

enable China to develop its own high tech. Also, there are visa restrictions on academic

exchanges in certain fields of study, also in the name of national security on the part of the US

especially.

And at a more broader level, we see a process of disengagement, measures have been taken

by both sides to disengage. On the US side, we are talking about trade, the sanctions for the

punitive measures. Tariffs launched by the US government are one effort to disengage with

China. Also, the investment, there are more restriction on Chinese investment in the US. Also,

there are clamors about the Confucius Institutes on the part of anti-China senators. We also see

people nervous, especially the think tank people using money funded by the Chinese sources.

More restrictions on student visas and restrictions on academic exchanges. The last time I was

in the US, I was quite surprised that a liberal think tank, I heard, they were sending policy

suggestions to the Trump administration calling for decoupling of the relationship. On the

Chinese side, the Chinese government has also taken some measures to disengage: restrictions

on access to Internet, NGO law, making it more difficult for foreign NGOs to engage with

Chinese counterparts. Also, there are visa restrictions for US scholars and then travel

restrictions for Chinese officials to travel overseas because of anti-corruption needs. So, the net

result is less interactions from the Chinese side. There was also an effort to push for ideological

disassociation, more emphasis on Marxism and China’s own part of development as an

alternative to the western model.


Are we heading for a Cold War? The so-called Cold War has three characteristics, one is

Ideological rivalry, the second is mutual economic independence, the third is military

confrontation. If these are the indicators of a Cold War, we are certainly heading in that

direction. Will we eventually get there? I hope not. History often does not unfold according to

people’s wishes. I hope that the intelligent people of all countries in the world will work

together to arrest and reverse this trend of development. So, I also send a cautious message

here. Thank you.

HA Young-Sun

Thank you, Professor Jia. The subtitle of this session is “Destined for What?” I’m sure there

will be more discussion between China and US sides.

HAO Yufan

Thank you. I’m so glad to be part of Qingguo’s team. It’s a pleasure and honor to be invited

here.

As for answering the question of where we are going in terms of US-China relations, are we

heading towards a new Cold War? I think it is true that US-China relations have deteriorated

recently into a critical moment. If we say we’re standing at a crossroads, it is quite accurate.

We may go in either direction. Some people are quite pessimistic, saying that we are almost

there. I tend to be seeing that that may not be necessary. I will give you a few reasons why the

new Cold War between US and China may be avoided, all depend, of course, on those

uncontrollable factors.

I’m going to say first, we have to look at what is going on. Indeed, the US is increasing its

military presence in the Asia Pacific region and China is also increasing its military expenditure

and trying to build more modern military power. However, I’m going to say on both sides, it is

defensive by nature. I don’t think that the United States would like to wage war with China at

this stage. And I don’t think China is going to invade the US. No one would say so. So, both

sides are doing some things that are defensive in nature. So here is the question of mistrust.

Both sides try to have a reason to be suspicious about the other’s intention.

Also, we have to recognize the fact that both sides - no matter Trump’s America First, or

President Xi’s Chinese dream - emphasize on reaching their own people, getting stronger of

their own country. In that sense, they may need each other to achieve the goal. For the United

States, I believe that American’s image of China, if we see a hundred years ago, is about

China’s market. China’s market is almost realized. Do you think at this stage, America is going

to give it up? I don’t think so. China also needs the US in many ways, say high tech, high

education and many other things. Also, we have to recognize the fact that the interdependence

and interconnection between the two societies are so deep at this stage. It is not like that of the

United States vis-a-vis the former Soviet Union.


If we’re talking about a new Cold War, that may be one alternative but it is not necessarily

the only alternative. Say, economically it might be opportunities that both sides view others not

necessarily as a present danger but maybe a competitor or a potential adversary but not

necessarily an enemy at this stage so there is still room to improve.

So, my understanding of the direction of US-China relation is that for a short period of time

maybe 3-5 years, the relationship will get worse. But then, both sides would feel the pain and

then the relationship would stabilize. So, I would say, in the longer run, I tend to believe that

the relationship may come back to normal. Maybe a few years from now, we might use the

word renormalization. In that sense I would say that If you have a sense of history, you can

think the relationship may not necessarily fall into a new Cold War.

CHUNG Jae Ho

Thank you. Let me also start by thanking the Korea Foundation for Advanced Studies for

having me as a panelist for this first session. It is a very timely occasion. I was in Beijing last

week and I think all the papers were pasted with trade war between the US and China. And

when I turned on the TV, the program would be on politics and national sanctions and

retaliations against China. The title of the session is indeed provocative: destined for what?

Before I answer that question, let me provide some backdrops against which we can calculate

which the most likely outcome of the short-term and the midterm.

First of all, I think the power gap between the US and China is narrowing down although the

pace has varied over time but there is no doubt that the power gap is actually narrowing down.

I think related to that is the perception. Perceptions of the people are getting far ahead of the

realities. According to Pew Global Research, 10% of Americans and 9% of Chinese think

Chinese already is surpassed the power of the United States, which is not a small figure. I think

it has a lot to do with what I call the shadow of history. China had been an empire on several

occasions while the US has risen only once so somehow people view the shadow of history of

China to be wider and bigger.

Second, I think the trade dispute we are witnessing right now is probably only a beginning

of what is forthcoming. It is not just trade in my view. It is probably a small sign that heralds

the beginning of the hegemonic competition.

Third, I think there has been a deep reflection on the part of American government that

Washington’s engagement policy for the last two or three decades with China has failed. I think

it’s not just about the Republicans but more of a bipartisan consensus from my point of view.

This has not been mentioned by other panelists but if you look at the Central Foreign Affairs

Commission’s work conference that took place about 3-4 weeks ago, which was held by the

way for the first time since 2014, I think there is a growing new confidence on the part of China

that history favors China, not the United States. I think the Chinese Communist Party regards

extending the so-called strategic opportunity period of China’s rise to be its critical mission for

the near-term.


And also, there is growing suspicion. I think Qingguo has mentioned a little bit. I think this is

a very critical issue in my view because that is very shocking. Because there is a growing

suspicion of non-traditional intellectual collectors: i.e. Chinese students and researchers in the

United States. I think the Higher Education Act is going to be revised, guided by Senator Marco

Rubio. I think there is a very active effort to watch and reduce the influence of the Confucius

Institutes, which have been established in the United States’ universities. There are also efforts

to restrict Chinese students’ visa to one year if they are in sensitive high-tech areas, so on and so

forth.

So, I think I’ve just listed 6 to 7 most currently important backdrops, which leads me to believe

that there is every potential for a serious hegemonic competition between the two countries.

Now, let me answer the question: Destined for what? I would like to provide a lot more

components of the Cold War. I think there are at least 8 to 9 components characterizing the

Cold War. First, arms race. Yes, we do have arms race between the US and China and a very

serious one. Great power rivalry – yes, we do have it. And I think we see great power ego

fighting between the US and China. Maritime close encounters and airborne close encounters,

which might actually lead to very dangerous situations between the two. If you think about

how WWI came about, these kinds of events can be really significant. Third, espionage - there

is. Ideological conflict – maybe because people tend to focus too much on communism that

Soviet Union had instead of socialism that China has. If the current trend continues, I think

ideological conflict is definitely a defining component of what is to come. Particularly given

what has been happening, with America’s withdrawal from the Paris accord on climate change

and the agreement on human rights body, and so on and so forth, I think this would be a wide

opportunity for China to come up with its own norms and values. And economic embargoes –

not yet but if you can see what is going on between the two economies – the US and China –

and economic relations and counter retaliations as a form of embargo, there is also this

component. Standoffs at flashpoints - not much but increasing. Separation of military and trade

policies – as you all know, the Soviet Union and United states grew out completely different

and separate economic systems. But the US and China grew out of the same system. I don't

know how this will affect the outcome of the hegemonic competition between the two but I

think this is an important difference. Most importantly, I think proxy war. During the Cold War,

proxies of the US and proxies of the Soviet Union got involved in wars. But at this point, China

does not have proxies so there is no possibility for a proxy war. So, I think one fundamental

defining feature will be whether or not China will create and sustain its own loyal allies, which

are loyal enough to go to war for the sake of China just like many proxies of the Soviet Union

did during the Cold War I. I will stop here for the first round. Thank you.

HA Young-Sun

Before going into the second round discussions, let me introduce two small things. I also visited

Beijing last week and, as usual, I visited the National Museum. I was very much impressed and

also very much surprised that there was a huge exhibition for the 200th anniversary of the birth

of Marx. It was pretty impressive. I don’t know what kind of meaning that kind of special

exhibition has.


The second thing is as Professor Chung mentioned, last June 22-23, in special meetings on

foreign affairs in Beijing, I had dual feelings as the material showed China’s confidence. On

the other hand, it also shows a very cautious approach to the US-China relations as we think

about power relations.

As the main purpose of the trilateral conference is to promote a productive discourse, I would

like to invite the American speakers for a very cordial attack on the Chinese speeches and also

professor Chung’s speech.

Douglas PAAL

I started off on a very negative note and it’s meant to be not a prescription of how things should

be but a description of how things are. And I very much sympathize with Will and the other’s

comments about how there’s a better world out there somewhere but I’m afraid we’re going to

have a very rough patch between now and the point we get to that.

Our system, the US constitutional system has a way for overtime that people will ask for

correction of policies that are not working. And I fully expect that at some point, the current

feelings in the country reinforced by the administration’s behavior of negativity toward China

will start to realize that the actions taken to express those feelings are costing us in some way.

Real jobs, real money, real relationships around the world. But it’s going to take a while before

we get there.

I’ll give you a small example. We had a recent back-and-forth with China over a company

in the high-tech area called ZTE and this company makes cell phones and servers and things

like that. The United States sanctioned them for doing things and then not correcting them after

they promised to correct them. And the first sanction was putting them out of business,

essentially by denying all supply from American technical suppliers to this company. But the

special plea from Xi Jinping, Donald Trump reconsidered and said we’d keep the market open

for ZTE if ZTE took further remedial measures.

What was interesting though, you would expect the congress to reflect the interest of its

constituents in dealing with this issue. There are 517 American parts suppliers to ZTE and they

represent companies in all the different states. Let’s take one example, Idaho. As one big

technology exporter Micron, they are one of the biggest suppliers of semiconductors to ZTE.

Also, Idaho is very dependent on beef exports to China, other kinds of exports to China, so

it’s a sensitive state and you would think the policy makers would be watching for policy

influence on their jobs and their well-being in that state. Yet, the entire Idaho delegation voted

against reopening the door to ZTE and to reverse Donald Trump’s decision about reopening.

Something is not working in our system now and I think people are going to have to feel a lot

more pain and very directly before they’ll ask their legislators to try to influence the policy

process in a more correct direction.

And it’s not just the Americans who are going to suffer in the system. The question of the

new Cold War has been raised by colleagues. And I share the view that a new Cold War is going

be very difficult to start for the lack of proxies because there’s no strong ideological dividing


line. And I think it’s more likely, however, that Chinese efforts to keep their potential friction-

filled relationships with neighboring countries will be more successful when the US is itself

inflicting more friction on these countries than China is.

China will find the scope for its diplomacy as described in the recent Central Foreign Affairs

work conference, more fertile. And the Belt and Road initiative will have more success,

integrating China’s neighbors with China’s economy, opening markets, opening transportation

links. And the US will not have anything to compete with that. So, it’s going to be very hard to

form a coalition on the US side for a Cold War. It doesn’t mean we won’t go into a very deep

freeze, economic and other relations in the meantime. I won’t recite this but there are quite a

few steps that we can take today to put on the table between the US and China’s leadership.

Things would lead to better outcomes than that. I just don’t see them coming from the

administration.

William TOBEY

Listening to several of the speakers, I was reminded of an old adage that pessimists believe that

things couldn’t possibly get worse but optimists know that they could. And we may be in that

situation. I was struck by the fact that in many ways, the American and Chinese presentations

were similar. You heard one optimistic and one pessimistic viewpoint from each of us while

we probably differ over the particular substantive matters. My guess is that if we sat down in a

room for a reasonable period of time, we could probably hash it out. None of these differences,

in my view, rise to the level of existential interests. These are things that nations ought to be

able to work out with competent diplomacy. So, I guess I would leave my second round

comments there.

JIA Qingguo

I want to bring good news but the problem is, it’s difficult to find them. I do think that if you

measure Cold War in terms of ideological rivalry, military confrontation, economic

independence or economic separation, we are moving in that direction. And in both countries,

it seems to me that at least the politics is shifting in that direction. In the US, the hardliners - I

mean the containers - have become the dominant voice of the US politics on China. The

engagers who used to be the dominant voice of US policy on China, they are giving up their

belief that China is going to be more liberal and democratic as China’s economy develops, and

China’s economic integration with the outside world continues. So, they’re questioning their

previous belief. And the business community, who used to be strong supporters of engagement,

now they take a very ambiguous attitude. Some are also supporting tougher policies on China.

So, the atmosphere has become so poisoned that if you raise anything that is constructive in

policy suggestion in the US on China, you’re subject to criticism nowadays. And in China, it

is also difficult because you have a lot of people who take ideological approach or extreme

nationalistic approach. So, it’s difficult for the two countries to communicate. There was a time

when people-to-people exchange was regarded as the bright spot of the relationship. And that’s

the benign set of interactions but even that is in question nowadays. You know, we have


politicians in the US attacking the Confucius Institutes, and also people are trying to identify

scholars and think tanks who receive financial support from Chinese sources. There are all

kinds of suspicion and domestic attacks. So, it’s become quite risky to do something that is

supposedly pro-China. In China, we have a similar problem. If you raise anything positive

about the relationship, there are people who are waiting there to attack you. So, at the people-

to-people exchange level, we’re experiencing some increasing difficulties. I don’t know. We

are not in a Cold War yet. Probably we are still far away from a Cold War but we are heading

for that direction. If the trend is not arrested, we’re going to be there sooner or later. Sorry to

bring you the bad news instead of good news.

HAO Yufan

I would like to ask what exactly is US interest in China? I would say it seems that in the last

few years, people like [01:37:51] arguing that US interest in China is largely political because

they - American elite - would like China to change the way American like it to be. So, it is

more or less likely political. If China hasn’t changed the way that America wants it to be, it is

a crime. So, it needs to be punished. So, Steve Bannon and other hawkish people would like to

think that if we don’t do something now, US hegemony will be seriously challenged. So that’s

why it is not too late now to be not only tough but to be confronting China in all directional

way. But I would say that actually American interest in China may be economic. If China really

addresses those issues that were raised a moment ago, so if China makes its domestic market

more open, makes it more in line with international practice, maybe gradually American

companies and even American elites may gradually realize that the US fundamental interest in

China may be economic rather than political. If that can be achieved, I would say in maybe the

next three to five years, maybe even longer, and then the situation may be stabilized. And keep

in mind that China has already reached the level of being big enough to be resilient. There

might be tough efforts at this stage but I think I am cautiously optimistic about the bilateral

relations.

CHUNG Jae Ho

Having said in the first round that there is a growing likelihood that the US-China dynamics

are going to resemble that of the Cold War, there are three sources of frustration on the part of

Korea as a third party.

First, Northeast Asia is not like Southeast Asia. Southeast Asia has at least ASEAN and ARF.

Divided but they still have a voice. But in Northeast Asia, most of the member states are major

powers which compete with each other. And only those that are not major powers are South

Korea, North Korea, and Mongolia, which do not really have a united voice to be heard.

And the second one, I think, given the fact the United States and China, because of the

nuclear balance, will not and cannot engage in total war, and I think trade disputes would not

lead necessarily to a total war either. So, what they do want to do is come to the regional states

and pose a so-called exclusivity question: Are you with us or against us? I think we have gone

through so many different dilemmas. We were torn between TPP and RCEP, whether or not to


join AIIB, whether or not to support the Asian security by Asian people principle pronounced

at the CICA, V Day commemorations in 2015, deployment of THAAD, the position on the

South China Sea, and probably forthcoming issue of Indo Pacific.

I think, finally, there is an issue which is closely linked to what Minister Yoon Young-kwan

said in his congratulatory remarks this morning. I think there is a growing concern on the part

of Korea that there might be a possibility of issue swap between the US and China concerning

the issues related to the Korean peninsula and Taiwan, South China Sea issue, thereby sort of

creating a Korea passing. Most importantly, I think the job should be done by Korea using

smart leadership as well as prudent agency. Thank you.

HA Young-Sun

I think we will have roughly 20 minutes more. Before going into the final questions, I would

like to ask what’s the long-term perspective on the US-China relations, for instance in 2050.

I’m pretty sure you do not want to answer that kind of hypothetical question but, still, I would

like to hear a very brief response to that kind of difficult question.

Because I want to give some time to think over that, I will introduce some questions,

comments from the floor. There are many comments, questions from the floor. But some would

be responded to by the second and third sessions because two thirds of the questions and

comments are mainly related with Korea’s position and trade war issues. So, I would like to

pick up a couple of questions.

First one, how do you evaluate the domestic politics of US President Trump and also Chinese

President Xi Jinping on the relations between US and China? That is one question. Although

you already mentioned briefly but, in particular the question goes to the relations between

domestic and foreign policies.

Second one is, what is your thought regarding the US policy of “soft containment” of China

by organizing strategic partnership with democracies at its periphery?

And several others would like to ask the relations between major power and neighboring

countries as I originally asked as the second question. In particular, there are some questions

that mention a declining trend in the trust of the Republic of Korea towards China. How do you

consider this kind of changing trend, in particular from the Chinese perspective?

CHUNG Jae Ho

No specific question was posed to me so I’ll just say one comment to the question Professor

Ha raised. I think in the long run, nobody knows. Social science is not well equipped to make

long-term forecasts. But if history is any guide and given my understanding of China for the

last two millennia and the US for the last 300 years, I think it’s not that likely that they will

tolerate each other’s growing reach.

Back in 2013, President Xi Jinping met with Obama and he said over dinner or something


that the Pacific Ocean is very wide, wide enough to accommodate both the US and China. And

I think he meant it in a very benign way because in China there is an old saying: one mountain

cannot allow two tigers. So that means he was tipping that around so that he was saying we are

friendly so the Pacific can accommodate the both of us. But then again if you think it over, that

makes President Xi Jinping the first foreign president to say let’s share the Pacific in front of

the American president. So how is that going to play out? The Chinese government has never

officially abolished the principle of 韬光养晦 (taoguang yanghui) that means “don’t show

your strength, bide your time” but they nevertheless came up with alternative thinking,

奋发有为 (fenfa youwei), “you have to make efforts to do something good” as well as

主场外交 (zhuchang waijiao), “making China the center of world diplomacy” and so on and

so forth.

So, will this growing reaches of China’s influence regionally and globally go very well with

the so-called America’s dream? One more thing, I had a very interesting talk with an American

and he said there are three AIs to look for in the future: artificial intelligence, aerial influenza,

and American insanity. If what is going on right now continues, I think the US will lose a lot

of its appeal, which was the source of its attraction since the 1950s. Thank you.

HAO Yufan

It’s hard to predict what might be the relationship in 2050 but if I can boldly make a

prediction, it might be a situation of a real G2 that the United States and China may become

equal partners in dealing with global affairs issues. That would be very optimistic.

To answer your second question, I'd say that the how China manages its domestic issues may

be a crucial issue. At this stage, I tend to say that deterioration of US-China relations has

partially attributed to the domestic development in these countries and on China’s side too.

Some of the development in China may contribute to the negative view that Doug mentioned

a moment ago kind of poisoned the atmosphere within Washington DC. So, if China gradually

or successfully skillfully manages domestic development, and make China gradually close to

realize the China dream, I tend to think that the United States may be willing to give up some

of the so-called the influence atmospheres. The United States may gradually give up and give

something that China wants, and eventually we may see a world where China and the United

States may peacefully coexist.

JIA Qingguo

I think Xi Jinping wants to have a good China-US relationship. He believes that this

relationship is crucial for China’s development and for him to realize the China dream. He has

made a lot of effort in this regard, coming up with the term new type of great power relations

and also tried to accommodate President Trump and tried to make him happy, hosting him on

a grand scale the last time President Trump came to China. Clearing the Palace Museum just

for Trump, to give him this emperor’s feeling but it hasn’t worked. Donald Trump is determined


that the US did not get the better part of the bargain. Not just with China but also with the rest

of the world and he wants to get it back. But this is a problem. Also another problem is within

the US, it’s not just Donald Trump but it's the policy establishment. Most of the people are very

suspicious with what China is doing and advocating a tougher policy on China. So, there is not

much Xi Jinping can do now, it seems to me, to put the relationship on the right track. He is

still trying. Recently, according to a news story I heard, Wang Yang, a standing member of the

Chinese Communist Party, was in the US and said that the International order was established

by the US and China has accepted the rules and also American leadership. So, this is a goodwill

gesture on the part of China hoping that two countries can avoid a Cold War. But whether that

would eventually be realized is a question. I hope that this kind of gesture would be

reciprocated by the Trump administration but the chance for that to happen remains quite small

at the moment.

HA Young-Sun

Prof. Jia, how do you evaluate the decline in confidence building between ROK and China?

There has been a trend of declining trust between the two countries.

JIA Qingguo

I think our relationship is gradually moving back onto the right track. I think we are seeing

improvement of relations between China and its neighboring countries, including Japan. This

year is the 40th anniversary of the friendly treaty, and we’ll see significant movement to

improve the relationship. A lot of efforts are going to be put into this. And I think we are going

to see greater efforts on part of China to push for China, Japan, and South Korea collaboration

on negotiating a Free Trade Area, FTA. And I believe that China will also make a lot of gestures

to try to improve relationships with neighbors including the countries in the South China Sea.

So, in this broad context, I think China-South Korea relationship, I mean, the chance for

improvement is very high.

William TOBEY

The question of what things will look like in US-China relations in 2050, I think is an important

one not because any of us here can answer that question with any accuracy or definitiveness,

but because it stretches our imaginations and puts into perspective the problems that we face

today.

There was a US government official who came to Harvard and talking about how he sought

to use historical analysis in applying it to contemporary problems. And it was his view that in

order to predict the future, or however many years you want to look forward, you should look

back at least that long. So, if we want to look forward 32 years, we should be looking backward

at least to 1954 under his analysis. But go back even to 1986. The point has been made that we

have trade frictions, we have problems over student visas, we have other things. All of those


things would have been relatively unknown even as late as 1986 because we didn’t have more

than 100,000 Chinese students in America; we didn’t have huge trade flows back and forth.

The level of integration has grown mostly since then. And of course, if you go back to 1954,

there was virtually no interaction between the two societies. So, I think that puts into

perspective the shape of our problems. They’re significant and there are real differences. We

have differences of interest between the United States and China, but the level of interaction

and the level of accomplishment over the last either 32 or 64 years is enormous, and there is

no reason why we can’t aspire to that same level of accomplishment.

Douglas PAAL

In my personal work experience in the government, I had certain responsibility for US-China

relations during a very dark period before, during, and after the Tiananmen incident, and I

watched the dismantlement of the entire apparatus of US-China relations to the point where at

one moment the only person talking to the Chinese leadership through an intermediary was me.

The entire system had broken. We can get there and we can come back so I’m not permanently

pessimistic.

The question is, how bad is it going to get in the short term? Now I’ll go into the first question

from the audience: the political status of Trump versus China. It’s my impression - and it’s not

going to be reinforced by the usual information you’re exposed to - that Trump is much stronger

with ordinary voters in the US than if you watch the CNN, New York Times, Washington Post

coverage. People are really frustrated with the previous administration’s failures, and are giving

Trump time. Now, my own estimation is that the trade war alone is going to damage people’s

lives pretty palpably over the next couple of years. But they’re not going to change their vote

until they feel it. And so, we may not see Trump put under any electoral pressure for quite some

time.

To jump over to the Chinese side, I can’t comment knowledgeably on domestic politics but

I can say that despite the fact that China has been trying to strike a constructive posture with

the US and avoid conflict, China has been consistently for the last two years misreading this

administration in Washington. They’ve sent their best people over, the ones who speak the best

English, have the most contacts, and they’re going home and they’re not getting it right. This

combination of a willful leader in the US who’s got the people faithfully following him off the

cliff, as situation in China where one person makes all the decisions, and I think he’s being ill-

informed means it’s going to be a pretty expensive process.

Now, where should we be in 2050? I fully subscribe to the notion, and maybe controversial

for many, that the US has got to find a way to accommodate the rise of Chinese power in the

Western Pacific, and China has got to find a way to accommodate America’s abiding interest

in the Western Pacific. This is not an impossible task, and I’m doing a book on this now - by

step by step you’ll get there. If we don’t get on the track to lead to that outcome, then we do

face some pretty stark alternatives.


HA Young-Sun

If there are not any further comments from the panel, I would like to close the first session. As

William Tobey mentions, it seems that the organization of first section is rather successful

because among the American side, there were two different views on the same issues. At the

same time, two different views from the Chinese side. And also, there was another rather

balanced view from the Korean side. I hope this one is not just a representation of these sessions.

It should be repeated among the domestic policies of US, China, and neighborhood relations

including Korea. There should be pros and cons on this US-China relations and a new future.

And final words on the long-term perspective on US-China relations: it is my assumption

that there will not be real worries about the destined for new Cold War instead of the

renormalization or better relations. But it seems that there should be some differences between

before 2050 and after 2050 that we should discuss further up until 2050s, there might be pretty

good chances we can accommodate that relations between two big powers and also the

neighborhood relationships. But if we will face another round of the second round of the 21st

century, there should be a further, much more mutual effort to get away from the strategic

deterioration of the big two and also the old participants in this regional order.

Thank you very much for the interesting speeches and discussions, and also the many

comments from the floor. Thank you very much.

Session II: Seismic Shift of the Korean Peninsula

PARK In-kook

During the first session, we enjoyed the luxury of talking about the future and what will happen

in 2050. In our session, we don’t have such luxury. We are located almost at the end of a cliff

so we have to focus on near maximum mid-term future.

There were some different temperatures on the assessment of the Singapore summit,

especially in the US and Korea. In the US, my observation is that professional pessimism is

prevailing over cautious optimism. In Korean society, the majority of Korean people have a

personal belief that we will make something. There are many reasons why Korean people have

an optimistic view, relatively speaking, but my observation is that in contrast to previous

nuclear negotiations with North Korea, this time is quite different. Why? Because the top leader

Kim Jong-un himself showed up to the negotiation table. He cannot allow failures because he

cannot blame or execute himself so he will make some success at whatever level. So that is the

source of optimism. So, the question is: how we can implement what we agree upon? How

could we make such an agreement sustainable? Sustainability and concrete implementation are

the key questions we have to talk about today.

To save time, you don’t have to be bound by my questions but just for the purpose of an

interactive discussion, I will raise five or six key elements for the framework of our discussion.


The first question is the status of CVID. We believe North Korea already agrees on that

concept. We need a detailed roadmap to implement CVID. There are many elements. Actually,

CVID was coined by William Toby when he worked in the White House in 2003. So maybe

we will discuss why the concept was invented at that time during our informal discussion or in

the afternoon session. There might be some ramifications in implementing CVID. The first

thing is declaration of what they have. And then disablement, dismantlement, and verification.

So, what is the key element? That is my first question.

The second question is: how long will it take to achieve that milestone? We’re a little

confused because Pompeo has mentioned two years and also two and a half years. And Bolton

said it would take one year. Prof. Hecker mentioned it will take at least ten to fifteen years. But

I think Hecker’s argument is based on too much science. So how long will it take? That is my

second question.

The next question is what is the timing of the lifting of economic sanctions, which North

Korea is desperately looking for?

The next question is the role of China. The Wall Street Journal a few days ago mentioned

that the surprise beneficiary of the Singapore summit is not the US or North Korea but China.

If we agree with that argument, maybe such an unexpected benefit will lead to the resurrection

of the six party talks. That is my next question.

My last question will be on the Sino-US relations with North Korea in different aspects.

Why? Looking back on history, North Korea was a genius in enjoying the Soviet and China

split in the early 1970s. Maybe they will try to maximize exploiting the split between China

and US. What is the possible negative legacy of the Sino-US trade war?

For organizing of our timetable, I will give 10 minutes for everyone but will give a two-

minute bonus to the US team not because they are a superpower but because they flew more

than 15 hours. We will then have the second round based on questions raised. Then we will

open the floor to questions. I expect many questions. On the lobby floor, fifty to a hundred

people are watching by a large screen so if you raise your questions in writing, we will reflect

them.

Without further ado, I’d like to introduce my first speaker Gary Samore. Actually, he is

working as an executive officer for research at the Belfer Center at Harvard. He enjoyed almost

the top position to the president in the White House twice - amazing. First, during the Obama

administration, he served as the White House coordination for arms control and WMD. He is

the designer of many defense and nuclear policy during that time. He also worked as the senior

director for non-proliferation and export control during the Clinton administration. Gary and

myself worked during the first North Korean nuclear crisis in early 1990s. Since then, we

struggled fiercely, sometimes as friends and sometimes enemies. We invented KEDO, an

organization with many polemics on the merit, we did our best to improve the situation. I call

him a walking dictionary on North Korean nuclear issue.


Gary SAMORE

Well, thank you very much, In-kook. If I knew I had to fly 15 hours for two extra minutes, I

might have gone the other way and might have gotten one extra minute.

I want to talk about the implementation of the Singapore summit communique, which as you

know, had very vague commitments to normalize US-North Korea relations, to create a peace

regime on the Korean peninsula, and to work toward denuclearization. Now it’s no surprise

that the first effort to translate that into concrete action when Secretary of State Pompeo met

with the Vice Chairman Kim Yong Chol on July 6th and 7th, it’s no surprise that that effort ran

into big differences between the US and North Korea over the approach toward

denuclearization.

The US view is that North Korea should first take very significant steps toward

denuclearization whether it’s a full declaration of their nuclear missile capabilities, or

agreement to a verification protocol, and only then will North Korea get rewarded with political

and economic benefits. The North Korean view is the opposite. The North Korean view is they

have to get rewards and reassurances first in order for them to be able to denuclearize. So, to

put it in the simplest terms, the US says if you give up your nuclear weapons, we will be nice

to you, and the North Korean view is you have to be nice to us first so we can give up our

nuclear weapons.

So, no surprise that the first meeting between Pompeo and Kim didn’t produce any results

beyond a presentation of opening positions. But I see this as the first step in what will be a long,

complicated, difficult negotiation rather than a collapse of the process. In fact, I think both

President Trump and Chairman Kim are fairly happy with the status-quo. And neither are at

any hurry to declare the diplomatic process a failure.

President Trump is we know is already giving speeches saying that he’s dealt with the North

Korea problem. There’s been no nuclear and missile testing for months, the threat of war is

reduced, and Trump certainly doesn’t want to admit that his big diplomatic success is a failure

and a fraud, certainly not before the midterm elections in November. For Vice Chairman Kim,

he is beginning to get the benefits of sanctions relief as China and Russia ease their enforcement

of sanctions, and he hasn’t had to make any significant concessions on his nuclear missile

program.

So, my guess is that the diplomatic process started by the Singapore Summit will continue

for some time. With many working level meetings between Ambassador Sung Kim and Madam

Choi, occasionally there will be meetings between Pompeo and Vice Chairman Kim, and there

may be another summit between Trump and Kim Jong-un, or maybe even a trilateral summit

between Trump and Moon Jae-in and Kim Jong-un. In other words, I think this process is going

to continue.

And the only real question is whether the process will produce some concrete results. Or

whether the differences between Washington and Pyongyang will prevent any concrete

measures toward denuclearization.

Now if you look at the North Korean foreign ministry statement on July 7th, the North

Koreans have described what their idea of an interim step is of a first step. At what they say is,


in exchange for a public declaration ending the Korean war and “improved relations between

the US and DPRK”, which I assume is their code for lifting of sanctions, the foreign ministry

says North Korea is prepared to “dismantle the test ground of high thrust engine”. I assume this

means the Sohae test stand for testing large engines for liquid fueled missiles like the Hwasong

15 ICBM. And the North Korean statement claims that the dismantlement of this test stand

would “be a physical verification of the suspension of ICBM production”. I don’t think that’s

actually true because North Korea may have reached a point in their missile development where

they no longer need testing in order to build reliable ICBM engine, so they may no longer need

this test stand, which explains why they are willing to destroy it, just like they were willing to

destroy their nuclear test site.

Nonetheless I think this North Korean offer of an initial step really requires that the US make

a counteroffer, assuming that our more far-reaching demands like a full declaration or

verification protocol are just not realistic at this point. To me, the most significant step that

North Korea can take as an interim measure toward denuclearization is to end further

production of fissile material, both highly enriched uranium and separated plutonium. Now this

would be a very big step for North Korea to take because it would require that they declare and

allow access to all of their facilities to produce fissile materials. Not just the reactors and the

enrichment plant at the Yongbyon nuclear research center, but also the undeclared enrichment

facilities, which everybody believes exists and which North Korea has never been willing to

acknowledge.

Now, I don’t know whether North Korea is prepared to make such a significant step toward

denuclearization, but I would like the US, in consultation with both China and the ROK, to put

forward a counter proposal – what would we do for North Korea if they were prepared to end

production of fissile material in terms of steps toward normalization of US-DPRK relations,

toward ending the Korean war, and toward some partial sanctions relief. Maybe, letting some

of the North-South economic cooperation areas resume. And obviously, to make this proposal

effective, Washington would need to consult with Seoul, and Beijing, and as well as Tokyo and

Moscow before putting this proposal to North Korea.

So, in conclusion, I think the Singapore Summit was successful in terms of reducing the risk

of war, solidifying the test moratorium, and starting a long-term process for North-South nuclear

declaration. I think it’s very unlikely this process will actually result in North Korea giving up its

nuclear weapons and ballistic missiles, but it might produce some constraints on the program,

and I suggested one that I think would be the most important from the US standpoint.

PARK In-kook

Thank you, Gary. Your argument is that they don’t need missile tests anymore. It’s a very new

explanation on the US side. As we discussed, even nuclear test, it is a general and scientific

observation that they don’t need nuclear test anymore because they have already had six times

of testing. That’s enough for the miniaturization of their warhead. So, if nuclear tests and

missile tests are no longer needed, in that case, you just mentioned fissile material suspension

moratorium. In the case of plutonium, it is okay since it is easy to detect. But in case of uranium,

without declaration, how can we detect where they produce?


Gary SAMORE

Any moratorium on fissile material production would have to begin with a North Korean

declaration but this is not a full declaration of all their nuclear weapons and all their ballistic

missiles and production facilities. This is a declaration limited to plants for the production of

fissile materials. And if they’re not willing to declare the enrichment facilities outside of

Yongbyon, then we know that a free zone fissile material production is not possible. And it may

very well be that the North Koreans are only willing to allow inspectors to return to Yongbyon,

which was part of the Leap Day deal that the Obama administration negotiated, and they’re not

willing to declare and shut down those other facilities. That may very well be. My point is that

the only way to find out is to test their willingness by putting an offer on the table.

PARK In-kook

Thank you. My second speaker is Mr. Bruce Klingner, who specializes in Korean and Japanese

affairs as a senior research fellow for Northeast Asia at the Heritage Foundation. He has over

20 years of experience serving at the Central Intelligence Agency and the Defense Intelligence

Agency. From 1993 to 1994, he was the chief of CIA’s Korea branch, which analyzed military

development during the nuclear crisis with North Korea. Some of you may have frequently

seen him in US TV because he’s the most frequent commentator in the US and the foreign

media. Please welcome Mr. Klingner.

Bruce KLINGNER

It’s a pleasure to be here and thank you to KFAS for the invitation. It’s a wonderful venue. I

feel like I’m in a bookstore. Whenever my wife drags me out shopping, she knows that if there’s

a book store, she can just put me there for several hours and I’ll still be there when she comes

back so I feel very much at home.

Well, Dr. Park already pointed out that there is such a divergence between US and South

Korean thinking on what progress we have made, if any, with North Korea. And Gary Samore

has already made a lot of the same points that I was going to make but since I did fly 15 hours,

I figured I should probably say something instead of just handing the microphone over.

Recently, I hosted an all-day conference of US and South Korean experts in Washington and

at the end of the day, one of the South Koreans pointed out that he was surprised at how all of

Americans were very skeptical about progress with North Korea and very critical about the

Singapore communique. This was the same across all seven or eight US think tanks so it was

across the ideological spectrum. We were all very much in agreement. In return, the US thought

that the South Korean side was very euphoric, perhaps even a little bit naïve in its positive

thinking about progress.

So, kind of using that as a starting point, when we kind of collectively in the US look at the

Panmunjom Declaration, if Moon Jae-in and Kim Jong-un had prepared that document as

college students, they would be before the disciplinary board for plagiarism. Because all of the


Panmunjom Declaration was already contained in four previous agreements with North Korea.

There was nothing new and all of those were agreements that North Korea had violated. So,

not necessarily a very positive starting point. Once again, South Korea promised much more

than North Korea did. South Korea promised to reinvigorate the massive infrastructure projects

that they promised in the 2007 inter-Korean summit, most of which or all of which would be

violations of UN sanctions or US law. The North Korean promise to denuclearize was buried

very much at the end, almost in a sense of ‘oh yeah, by the way, North Korea promises to do

what it has promised in eight international agreements before.’ And the South Korean view was

that the order of the discussion of improving relations, mutual reduction of military activity,

and then denuclearization - the order doesn’t matter.

But as we saw in both the Panmunjom and Singapore communique, North Korea says ‘no,

the order is very important, we don’t implement denuclearization until we get through the first

two parts’. So, it’s a clear sign to diplomats that they have to be very careful in not only the

wording but also the order that the words are included. Looking at the Singapore communique,

it really is a very shaky foundation on which to try to build a comprehensive integrated

agreement with North Korea. Again, nothing was new, it was contained in previous agreements

and usually far stronger and more encompassing in the previous agreements.

Most importantly, the pledge by North Korea on denuclearization was weaker than what was

in the September 2005 six party talks joint statement. Contrary to the claims that President

Trump and Secretary of State Pompeo had made prior to the summit, there was no evidence

that North Korea was moving closer to the idea of embracing a CVID, which may have started

as a US statement but is now a requirement in numerous UN resolutions that the international

community has decided North Korea must abandon its nuclear missile and biochem warfare

programs in a complete verifiable irreversible manner.

The subsequent press conference by President Trump where he declared a unilateral

cessation of the joint military exercise, Freedom Guardian, was a mistake. It was a unilateral

concession. It was a surprise not only to our allies but to the Secretary of Defense and the

Pentagon. That’s not a sign of good alliance management. It was something that we gave a

concession on and received nothing in return. There was no formalization of the North Korean

nuclear missile moratorium in the Singapore communique nor did North Korea agree to a

similar constraint on its own annual exercises. We know they do a very large-scale summer

training cycle and a winter cycle but there was no reciprocal gesture by North Korea. Since

then, we’ve seen now a total of five military exercises that have been canceled and that number

will likely go up. Again, nothing in return from North Korea. Also, the praising of Kim Jong-

un afterwards undermines the US and the international community’s ability to confront North

Korea on its human rights atrocities. Remember the UN Commission of Inquiry concluded that

North Korea’s violation of human rights standards were so widespread and systematic that they

constitute crimes against humanity. And yet, here we have President Trump beautifying Kim

Jong-un as funny, who loves his people, and on and on.

The Pompeo trip was a very critical mission. It was trying to put meat on the very bare bones

of the Singapore communique. When Mr. Pompeo arrived in Pyongyang, there may have been

a very thin skeleton but as he left, we saw really a cadaver or the dead body of the communique.

He claimed that there was progress made but North Korea very quickly and very strongly


rejected categorically everything that Trump administration is advocating and indeed what the

international community requires. It was really striking at how vehemently and at length North

Korea was in rejecting a data declaration, verification, and the concept of CVID.

As Mr. Samore said, they're certainly putting the cart before the horse of having to prove

that we have no hostile policy towards them before they are willing to implement what they’d

promised in previous agreements and as required under eleven UN resolutions. North Korea’s

strategy is a bit like a criminal talking to the police saying ‘are you going to give me to convince

me to stop robbing banks?’ It's not the right concept; it should be the other way around. They

are in violation. The onus should be on them to prove what they are going to do to for

compliance. What we saw is that North Korea continues to defy the international community.

There really is no evidence that North Korea is willing to give up its nuclear weapons. Let me

repeat that. There is no evidence North Korea is willing to give up its nuclear weapons

programs.

What we have right now is the US administration - like previous administrations - is pulling

its punches on sanctions. Maximum pressure is not maximum. There are still many things we

are not doing. And President Trump really made that clear. Right before the summit, he said

there are 300 North Korean entities he is not sanctioning. These are not trade sanctions; this is

implementing the US law. So, we have 300 entities, which we have evidence for, that are

violating US law and we are holding back on implementing our laws. Just to put the number in

a context, in the eight years of the Obama administration, they had sanctioned 154 North

Korean entities. In the year and a half of the Trump administration, they implemented 156

sanctions. A few more, a lot of those were ships that racks up the numbers quickly. But right

now, what the President is saying is that he’s holding back on sanctioning the same number of

sanctions against what the US has implemented in nine and a half years. Also, there were

reports that we are holding back on at least three dozen Russian and Chinese entities that are

in violation of US law.

So, as we look ahead on where we are going, I think as Mr. Samore said, we are going to

continue the diplomacy, neither leader really wants to call this a failure, though I found it

surprising that North Korea didn’t just go along with the diplomatic niceties and say ‘we had a

really good meeting, Mr. Pompeo, we look forward to keeping diplomatic progress’ It made it

more clear that we are very far apart even on basic definitions of what is denuclearization and

even what is the Korean Peninsula. So I think what we’ll have is: on the US side - to use a

phrase from Mr. Trump’s 1987 book The Art of the Deal - truthful hyperbole, where it is as he

wrote in the book, everyone wants to believe they got the biggest and the best deal so why not

let them think that? It is sort of a truthful exaggeration. So, I think we are going to continue to

say that Singapore communique and follow-on agreements are going very well, that they’re

very successful but so far they have not been.

What we may have in the future is a US acceptance of sort of a minimalist deal or if we do

feel that it’s become a failure, then we may go to real maximum pressure. Or if it is a sense of

collapse, we may go back to where we were in the beginning of this year with some people

including in the Trump administration advocating a preventive attack. Right now, we don’t

know which path we’ll be going to go but that may be the topic for the next discussion here at

KFAS.


PARK In-kook

Bruce, it seems like you got a new job as the spokesman for the pessimistic group of the United

States. If I may give some additional questions, I was told that during the Pompeo-Kim

discussion, the North Korean side focused on the need of concluding the peace agreement. Why

is North Korea so desperate for a peace agreement? Hypothetically, is it possible for the US to

sign a peace agreement even before the complete denuclearization of North Korea? You may

respond during the next round.

The next speaker will be Dr. Zhang Tuosheng, Senior Fellow and Director of the Center for

Foreign Policy Studies, The China Foundation for International Strategic Studies. Previously,

he was deputy defense attaché at the Chinese embassy in the UK. That’s why he enjoys an

excellent British accent. And he worked as a research fellow at the Institute of Strategic Studies

of the PLA National Defense University. Now he is enjoying the status of the most popular

among Korean audience so let’s give a big hand.

ZHANG Tuosheng

I think in 2017, the DPRK had made a huge progress in nuclear weaponization and nuclear

crisis was on the verge of conflict and war. But since the beginning of 2018, the situation in the

Korean peninsula has changed dramatically. In a short time, the DPRK has improved relations

or resumed contacts with ROK, China, the USA, and other states concerned. The other parties

have also been interested in talks on the issue of Korean peninsula. Under this situation, the

US-DPRK Summit was held in Singapore. The two sides reached consensus. I think this

summit is a new joint effort for peninsula denuclearization, and this is an important step

towards the correct direction. How will the situation develop in the future? What opportunities

and challenges are ahead? And whether the denuclearization in the Korean peninsula is likely

or not, how can we strengthen the security cooperation?

So, I’d like to share with you several of my viewpoints.

First, I think at present, the denuclearization of the Korean peninsula is facing a rare

historical opportunity. Many factors have contributed to the emergence of this opportunity.

Number one, the DPRK top leader Kim has decided in a new circumstance to strategically

transform the national policy. Since the beginning of this year, Kim has announced on multiple

occasions that the DPRK is willing to give up its nuclear weapons and focus on economic

development and improving people’s livelihood so long as the security of its system is

guaranteed. Before that, he had vowed to never give up nuclear weapon or use nuclear weapons

as a bargaining chip. A U-turn has been made in his policy.

Number two, ROK President Moon is a staunch supporter of the sunshine policy. And his

policy fits well with the intended strategic transformation of DPRK. Since taking office, Moon

has made active efforts to improve relations with the North to relax very dangerous peninsula

situation. Believing that that the South and the North should play a leading role in the peninsula

peace and denuclearization process, his policy is markedly different from that of previous two

conservative presidents. Since January this year, South-North relations have significantly

improved, and ROK has acted as a go-between DPRK and the US, making a crucial


contribution to US-DPRK dialogue.

Number three, President Trump is an unconventional president in American history. His

ideological color is weaker, and he has a strong desire to make a big deal with Kim on

denuclearization.

Number four, China has all along firmly opposed to resolving the DPRK nuclear issue by

force, and strongly argue for realizing denuclearization, and establishing a peace mechanism

on the peninsula through peaceful talks. When the South and the North started to improve their

relations during the winter Olympic Games, China expressed clear hope that the South and the

North dialogue could drive toward a political dialogue, and a US-DPRK dialogue. Since the

US and DPRK decide to hold a summit, China has been very supportive, China has commended

the positive outcome of the Singapore summit, and encouraged the leaders of the two countries

to continue their efforts to take a substantive step to realize their basic agreement.

Number five, through the summit, US and DPRK top leaders have not only realized an

unprecedented meeting but also reached a principle consensus on the denuclearization of the

Korean peninsula. Before that, a common understanding had already been reached on the

comprehensive denuclearization at the China-DPRK summit and inter-Korea summit.

Nevertheless, the basic consensus between the US and the DPRK, the two principle counter

partners on the Korean peninsula issue, is actually irreplaceable. It represents important

progress towards peninsula denuclearization and opens the door for continued bilateral talks,

as well as finding a specific roadmap and measures for the denuclearization.

However, denuclearization is still confronted with many challenges.

First, the US and the DPRK still have serious differences on the time table and road map. Of

denuclearization, the two interpreted denuclearization rather differently. This is made apparent

by the lack consensus on such concrete measures at both the Singapore summit and the recent

follow-up talk between the high-level officials. As is well known, the US demands to realize

denuclearization in a short time, a very short time. But DPRK demands to realize the goal step

by step, and action for action. As to the second disagreement, the US demands ‘DPRK’s

denuclearization’ while the DPRK wants ‘peninsula denuclearization’. If in the future

denuclearization process can start, it is quite predictable that DPRK will demand that the US

remove the nuclear umbrella for its allies. When the time comes, then the two sides will be in

a sharp contradiction.

Second, there is almost no mutual trust between these two countries. We shall see this again

and again in the following US-DPRK talks. As the denuclearization process starts, the two

issues of conducting denuclearization verification and materializing rewards for DPRK’s

complaints will bring serious test to the mutual trust of the two countries. It was on these two

problems that the 1994 Framework Agreement under the last later six party talks landed in

stalemate and ultimately failed.

Third, both Trump and Kim are constrained by domestic policies. Even though Kim enjoys

great authority in DPRK, military leaders may still resent the decision to completely abandon

the nuclear program and the military force policy. Trump faces much bigger domestic political

restraints. His solution to the DPRK nuclear issue may very well run into opposition in the


Congress and from the hardliners in the establishment forces. Moreover, some Americans have

always argued that the US should manage rather than fundamentally resolve the DPRK nuclear

issue, which they believe provide a ground for the US to maintain its military presence,

strengthen military alliances, and develop ballistic missile defense systems in Northeast Asia

in order to guard against and counterbalance China.

Fourth, there are some big uncertainties in Trump’s policy decision making. The President

has business background, but lack of political experience. He is rather self-confident, resolute

and expressive, and believes that he is the best at making deals. Often times, he acts beyond

common sense, and his decisions contain massive sways. Trump is bent on making a big deal

with Kim, and finding a fast solution. However, until now he could not get any concession from

Kim as he had expected. In the future, if he feels that the DPRK has no intention to fully

implement their consensus and that the denuclearization cannot be achieved in the short period

of time, will he suddenly change the policy direction, rush to end the dialogue, and even take

the risk of limited military strike against the DPRK?

Fifth, will history repeat itself? Is DPRK’s policy readjustment only a tactical one? This is

the question asked by many people. I tend to believe that policy change in DPRK is a strategic

one. At least Kim wants to have a try. But, at the same time, DPRK will still prepare itself for

two opposite eventualities. Once DPRK finds it difficult to realize a strategic transformation or

concludes that what America asks is too costly, and risk for itself, it may well change its strategy

again.

Sixth, there has been worsening trend in China-US relations. Judging from the current

situation, the possibility of China and the US going into a cold war is low. Making efforts to

stabilize China-US relations remains the basic policy of China. However, as the US has already

publicly defined China as a primary strategic competitor and made up its mind to exert pressure

on China, if the US gets increasingly engaged in trade war against China or even provoke a

crisis across Taiwan strait, the China-US relations may well worsen badly, producing seriously

negative implication on their cooperation to denuclearize the Korean peninsula. On the

occasion, if the DPRK makes a very big concession instead of CVID, would the US decide to

put aside the DPRK nuclear issue and even acquiesce in the DPRK’s nuclear stages, as similar

to that of India and Pakistan so as to wrestle with China? There are also people having opposite

concerns. According to them, for the situation described, DPRK may move even closer towards

China, leading to improved and strengthened bilateral ties and readjustment by China of its

relatively policies.

In short, denuclearization is still confronted with huge challenges. There are still a lot of

obstacles and difficulties for the negotiation and progress in the future.

In summary, there are three simple points of conclusion. First, at present, there are

opportunities and challenges for the denuclearization. Second, opportunities have emerged on

the basis of effort by the relevant parties, but the challenges mainly exist between the DPRK

and the US. Third, if we’re to seize the historical opportunity to denuclearize the Korean

peninsula, the key lies in the success of a strategic transformation in the DPRK. The other

relevant parties, the US in particular, should work hard to provide the condition for and to

support the transformation.


In face of the opportunities and the challenges, China and the US and South Korea must

strengthen security cooperation. I have several points about this. So about what should we do

in the future. First, to keep talks going and to make talks go forward from bilateral talks to

multilateral talks. Second, the US and DPRK should reach a consensus on the program of

package solution with basic time table and roadmap as soon as possible. Without this, the

denuclearization process cannot move on. Now, the US just hopes to solve this immediately,

but the North Korea hopes to solve this in a long, long time. So I think we should find a middle

point between the two extremes. Third, we should try our best to realize a verifiable nuclear

freeze in the North. It should be the first step, practical step. Fourth, we should strengthen the

cooperation and coordination among major parties concerned. Before North Korea takes real

actions to denuclearize its nuclear program, we should keep UN security sanctions. Finally, I

think we should prepare, make full preparation for overcoming all kinds of difficulties and

obstacles, especially the possible new deadlock between the US and DPRK.

PARK In-kook

The next speaker is Prof. Zhang Xiaomin, working as a professor in the International Relations

and Diplomacy at Beijing Foreign Studies University. He is also researching at the Institute of

International Strategic Studies at the Party School of the Chinese Communist Party. Let’s

welcome Prof. Zhang.

ZHANG Xiaomin

Good morning, ladies and gentlemen. When I was assigned the topic of ‘seismic shift on the

Korean Peninsula’, what came to my mind was what this ‘seismic shift’ means, what is the

essence of it, what drives this seismic shift, and can the related parties take advantage of this

shift to push forward to realize denuclearization on this peninsula to realize CVID?

My interpretation of the shift is: I borrowed words from a news report, that this is a paradigm

shift for the time being. What is the paradigm shift? It means that if there are changes in the

approaches or behaviors of the related parties, especially North Korea, South Korea, and USA.

In the past almost two decades, the peninsula was in a situation of a deadlock. I mean North

Korea continuously carried out nuclear tests and missile tests while the US and other parties

imposed sanctions on North Korea. It came to the critical moment in 2017 after the 6th nuclear

weapons test of North Korea because North Korea announced that it is a meaningful step in

completing their national nuclear weapons program. Each time they carried out their nuclear

and missile tests, there were more sanctions. More tests, more sanctions. I call this a diagram

of coercion.

In 2017, it came to the point of the edge of war because Donald Trump said that all options

were on the table, meaning military action was possible. Things changed sharply in 2018

because North Korea took a very sharp turn in its policy. It agreed to give up its weapons and

have talks with South Korea and USA. It did that as it is said. We witnessed a flurry of summit

meetings. Kim Jong-un came to China in March, and then he met with the president of South

Korea and then Trump. So, three meetings with Xi Jinping, two meetings with Moon, and one


meeting with Trump. This type of paradigm shifted to conversation - from coercion to

conversation for the time being.

What does this mean? Is it a fundamental change of the strategy or just a tactic of North

Korea mentioned by Prof Zhang Tuosheng? To me, for the time being, it is not a shift of strategy.

It depends on how we can push this kind of a shift forward. The problem is why North Korea

took a sharp turn. Is it because of the pressure from the international society especially the US?

Professor Bruce mentioned that the US has a lot of ways to apply more sanctions. Or is it

because of the domestic policy of North Korea? It is worth studying the real drive pushing NK

to change its behavior. May be both. Pressure externally and domestic changes. So, we need to

further the study.

To me, I think if we study the policies of North Korea, you can find that in April, North

Korea held an important conference of the Communist Party where it announced its policy. It

seems that North Korea is going to take a strategic change to focus on economic development

because it has achieved its mission of ‘economic development as well as nuclear development’.

So, we have to see what measures we can take for denuclearization.

There are probably three scenarios still existing.

Maybe the first scenario is still the stalemate or – if we use another word - the status quo.

We stop here without more progress.

The second scenario is further nuclearization. Many wonder whether North Korea is sincere

in giving up its nuclear weapons. For the past years, it was determined to develop the nuclear

weapons. How can it give up all its efforts in the past years?

The last scenario is denuclearization. For me, this is the ultimate objective of all the related

parties because it meets interests of each party but it’s going to take a long time. How are the

related parties going to improve the situation? I think the economic way is a good idea. I call

it aid for security, aid for denuclearization. This is not a new approach. In the 1990s during the

Clinton administration, they took approaches with such measures. But both sides did not keep

their promise. How, for the time being, can the related parties keep this going: the aid for

security? We need institutions or try to institutionalize cooperation like the South and North

cooperation that South Korea is trying to push now. We need institutions. Also, we need

multilateral talks. For now, we only have bilateral talks, talks between the two Koreas, talks

between China and DPRK, and talks between the US and North Korea. I mean multilateral

talks. Also institutionalize some kind of agreements to push forward the cooperation. Anyone

who violates this institution should be severely punished.

In conclusion, this is a critical moment for every side. We have this momentum at the time

being. Why not push this forward? I think North Korea has seized the opportunity of the

Olympic games and opened its first step. Before November is a window period for every party.

I think the related parties need to work together to figure out an institution to push forward this

denuclearization.


PARK In-kook

If I make a comment on the point of view of the Chinese side, it seems that you have a longer

term perspective. It would take much more time to achieve denuclearization. One of my

concerns is that – as Bruce already mentioned – Trump mistakenly exhausted too many cards

in the early stage, including a summit with the president of the United States and suspension

of military exercises, which should have come at the last moment of the negotiation process

according to conventional wisdom. If I buy Bruce’s idea, I wonder if there are any valuable

cards which could be provided by the NK side to the US side as of now. They already touched

on the status of the US ground forces in Korea including extended deterrence reliability. My

concern is that the situation may rekindle the nuclear option. Already, we’ve reached more than

60% even a couple of years ago. In that case, there will be a serious chain reaction of going

nuclear in Northeast Asia, which China would never want. In that case, your idea to have a

nuclear free zone on the Korean peninsula would bed evaporated. From our point of view, we

don’t have the luxury of time. What is your idea for the worst scenario?

Now, I’d like to invite Ambassador 안호영 who served as Korean ambassador to the United

States from 2013 to 17. He enjoyed most longevity as ambassador to the US. So he has probably

accumulated much knowledge and widsom.

AHN Ho-young

I and Ambassador Park, we joined the foreign services together back in 1978. He often teases

me about having served for a long time in Washington DC and I tease back by saying that I

stayed there for a long time because I didn’t speak up. These days, I teach at a university and I

came to learn that my students love it if I itemize things. So, today, I will make three points.

My first point: where are we now? I think there is a very high degree of consensus. That is,

we in fact could create a very unique momentum of the last 6 months. Of course, I've been

listening to all four of the distinguished panelists and I think of all four repeat the same thing,

which is that the momentum we created for the past 6 months is a unique momentum.

The second point: where are we going from here? This is the prospect. There are wide

ranging views. I don’t have to explain to you which the wide ranging views are. But i think it

comes down to this: how serious is North Korea about denuclearization? There are Two Prof.

Zhangs. The first Prof. Zhang said NK has already made a strategic decision of denuclearization

and there is no reason for questioning the sincerity of NK when it says it is ready to. But there

are many people in the Washington DC to start from Mr. Bruce Klingner and also many here

in Seoul, who are not so assured about the sincerity of NK. It was very interesting for me to

listen to second Prof. Zhang, in the sense that – over the past several months, I had the pleasure

of listening to a large number of Chinese intellectuals and specialists, and if I’m not mistaken

almost all of them were saying North Korea already crossed the line and it will be difficult for

NK to come back. That’s another way of saying that they made a strategic decision. But at the

same time, listening to Prof. Zhang, if I understood him correctly, that may not be the case. It

will depend on what we do in Korea, China, US. In fact, it will depend on what we do for North

Korea to implement what it has been saying. It may be, at the end of the day, NK may not


have crossed the line.

This in fact is something we heard earlier this morning. Prof. Tobey, I didn’t know he coined

this expression of CVID. I was listening to you and you said my mentor Graham Allison. And

I thought to myself well there are a large number of people who consider Graham Allison as

their mentor, which includes me as well. I've read his Essence of Decision so I, in fact, am

always impressed with what he has to say. You said ‘For Graham Allison, nothing has been

fixed but in fact it’s a series of choices we make which leads to the scenario’ that is mentioned

by the second Prof. Zhang. I think that must be the case. In the sense that between the strategic

decision or tactical decision which we have been discussing this morning and which we have

been discussing over the several past months, may be, even Chairman Kim would not have

made up his mind, but I think everything comes down to the choices that people have been

making.

If I had a chance to sit with Chairman Kim, my recommendation to him would be to seize

the moment and the momentum. That would be the one recommendation that I would make to

Chairman Kim. Why? There are at least three reasons. One: because this is a unique momentum.

We just heard from the first Prof. Zhang that President Trump is an unconventional president.

What does this mean? It will be difficult for Kim to have somebody like Trump as the president

of the US. The same thing with President Moon. He is a unique leader. It would be very difficult

to imagine that during the lifetime of Chairman Kim, that there will be this combination of

Trump and Moon in responsible positions. It will be very difficult that this kind of unique

momentum would be created.

I listened to Gary Samore very closely and he said there is a proposal coming from

Pyeongyang. Even if there’s something we cannot accept, we should come up with a counter

proposal. And If somebody asked me about the counter proposal, I’d say freeze production of

fissile materials. And Ambassador Park asked Gary Samore, how do we know this because we

know where plutonium is produced but it is not the case with enriched uranium. And Gary

responded by saying it will be part of the deal. Our counter proposal would be to cease

production of fissile materials and that will be a package including that NK must declare where

your production facilities for fissile materials are but that will not be a complete declaration.

Why? Because we’ve been leaving a lot of the things out of the declaration including nuclear

warheads. Some people say 16 warheads; others say 60 warheads. If I understood Gary

correctly, let’s forget about the warheads for the time being and just adopt small steps only. The

first small step will be to freeze production of fissile material. What are the chances of Pompeo

listening to you? Six months ago, that would have been impossible. I’m not saying Pompeo

would be favorably disposed to such an idea but, at the same time, there have been very

impressive degree of compromising positions which we observed in the official position being

taken by the United States. So, this is another reason why I’m saying that this is a unique

moment and momentum.

There’s a second reason why I think this momentum should be seized. That is what we heard

from Bruce Klingner and he said that while we call it sanctions, from the US point of view, it

is not sanctions. If you look into what is the basis of those sanctions. In fact, they are

implementation of US domestic law. And I think Bruce was referring to North Korea Sanction

Act which passed the United States Congress in February 2016. That is the law of the land and


any government should implement the law of the land.

The thing is, what we understand Chairman Kim wishes to have is this: Byungjin, which is

to have two things at the same time together. One: development of nuclear weapons or weapons

of mass destruction. Two: development of North Korean economy. We’ve already listened to

Bruce Klingner and it would be very difficult, almost impossible, to have both of them. It is

like the American idiomatic expression ‘eat the cake and have it too’. It would be very difficult

to have it. Why? Because of those domestic laws in the US and all those UN sanctions. It would

be very difficult for Chairman Kim to have satisfactory implementation of the Byungjin policy

and this is the second reason why in my view Chairman Kim must seize the opportunity.

There’s even a third reason why Chairman Kim should be doing it. Let’s assume that the

whole process collapses with a backlash. Against this collapse of the momentum would be

something we didn’t experience in the 1990s, something we didn’t experience in 2008. It will

be a very serious backlash. That will be the third factor that Chairman Kim would have to take

into consideration. Why? For the simple reason that it is the credibility of leaders themselves:

credibility of President Trump and credibility of President Moon. Because of it, if the present

momentum collapses, there will be something we never experienced back in the 1990s and in

2008. That will be the third reason why if in the most unlikely circumstance of me sitting with

Chairman Kim, I would advise him to seize this opportunity and seize the momentum.

My third point is something between the first session and the second session. In the first

session, we talked about bilateral relations between US-China, we call it bilateral relations but

it is not just bilateral relations. It is a strategic question of the relationship between China and

the US. And then moving on to the second session, I said to myself since we are coming down

from a strategic discussion to a regional discussion but let me - through this third point - bring

our discussion back to the strategic level. That is how the North Korea nuclear issue would be

related with the strategic relationship between the United States and China.

Earlier today, we heard Prof. Yoon Young-kwan making this point: the trade war between

China and the US is something we’ve never seen before. A 25% tariff on 34 billion dollars and

a 10% tariff on 200 billion dollars. This is something we’ve never seen before. Because of it,

this unprecedented trade war will have seriously negative impact on the United States getting

positive input from China. That is something I keep hearing and Prof. Yoon said this morning.

If you remember how Prof. Yoon concluded that particular point, it doesn’t have to be the point

because I believe in the wisdom of Chinese decision makers. If I paraphrase what we heard

from Prof. Yoon, they would be smart enough to think that they are two separate issues. If those

two issues are merged, the outcome would be very negative for China. That is what Prof. Yoon

said. The reason why I said to myself I should be repeating that is because I also believe in the

same thing.

When it comes to the strategic relations between China and the US, I often think about what

I call the ‘Kissinger principle of two baskets’. There are two baskets of issues between the

United States and China. In one basket are the issues of competition and confrontation. The

second basket is for issues for coordination and cooperation. At the risk of oversimplification,

what the Kissinger principle means is to try to remove as many issues from the first basket and

try to have as many as possible in the second basket. Unfortunately, this is something we kept


hearing during the first edition. Unfortunately, we’ve been observing continued depletion of

issues in the second basket. But I think the North Korean nuclear issue must definitely be in

the second basket.

PARK In-kook

Now, our last speaker will be Prof. Lee Geunwook. Actually, he’s teaching at Sogang

University. I specially invited him to our trilateral conference with Harvard because he’s a

product of Harvard Ph.D. On top of that, he’s specializing in conventional arms relations and

also military related strategy. So, I expect he will make some explanation on what kind of

possible mismatch between the priority of the Trump administration and the Korean side. You

know, there are some concerns in Korea that Trump is too much preoccupied with ICBMs while

we have more direct concern against any military threat from the North, especially in terms of

tactical nuclear weapon or missile, or conventional arms race. I think he will make some good

elaboration or enlightenment for us. Let’s welcome Prof. Lee.

LEE Geunwook

First, I’d like to appreciate KFAS for two things. First, I got the money from the foundation

almost 22-23 years ago. Without the money, I must have chosen a different career so that was

one thing. I never regretted being a scholar while being in the academia for the last 25 years.

So that was my great privilege to have it. And President Park In-kook made a joke that I was

invited because I’m a product of Harvard. Not only because of that but also I am invited because

in this panel, and the previous panel, I’m the only scholar recipient from KFAS. It is very rare

to see this kind of population occupying this podium.

Okay, let’s get started. The K-T impact – the Kim Jong-un and Donald Trump impact – of

the Singapore summit is kind of less than expected or anticipated, at least I believe that. But

the impact seems to produce a kind of longer lasting shift in the Korean peninsula. Donald

Trump committed his word, his policy to the CVID principle – Complete, Verifiable,

Irreversible Denuclearization – and also another rule, single-shot denuclearization. However,

since Singapore, Trump seemed to back down and agree to CD – Complete Denuclearization -

rather than CVID. And also, he agreed with the North Koreans over the sequential process, not

a one-shot process to denuclearization. In recent meetings between the United States and North

Korea, negotiators failed to hammer out an agreement to the problem. Pyongyang insists on

security guarantees by the Americans, and Washington is pushing for nuclear verification first

by the North Koreans.

Under the circumstances, in my opinion, the issues are two-fold. First, both prefer to

‘frontload’ items that they prefer. As I said, Pyongyang wants the Trump administration to lift

economic sanctions and provide security guarantees before it would disclose the nuclear

facilities and the number or the amount of nuclear facile materials or the nuclear device. In

contrast, Washington wants Chairman Kim to verify the nuclear items first. And then,

Washington would lift the economic sanctions and provide the security guarantee. In this

respect, a critical issue is which item would be the first thing put on the table. This is the first


mismatch that I understand.

The second mismatch or the second issue is that North Korea demands security guarantee

by the Americans, but the United States is not clear about the items in the package. Pyongyang

wants the Americans to sign a peace treaty, while Washington has been understandably cautious

over the items in the peace treaty. And as Prof. Zhang said in his presentation, North Korea has

insisted that a peace treaty would first dissolve and terminate the US-ROK alliance first, and

American troops should be out of the Korean Peninsula, and this withdrawal will be the integral

part of the peace treaty. That was North Korea’s decades-long demand.

Under the circumstances, South Korea, right now, kind of aims to broker a deal between the

two fundamentally different approaches to the issues. In this respect, the Moon Jae-in

administration aims to split the issue into smaller pieces in my opinion. Instead of the one-shot

game and instant denuclearization and instant security guarantee, Seoul persuades Washington

to declare first ‘peace’ and, second, to negotiate details with the North Koreans over a number

of other related issues including nuclear problem, and then finally at the end of the tunnel or

the phase or the process, Washington, Pyongyang, and Seoul, and probably Beijing, would sign

a peace treaty. This is different approach.

We are going to split the issues into smaller pieces. In these days, unfortunately, I'm afraid

the bargaining is stuck and going nowhere, which is not good. And, therefore, we need another

initiative by the Americans or by the North Koreans, by the Chinese, and, most of all, by the

South Koreans. And Gary Samore said that American interest lies in freeze or the limit in the

ballistic missile program and nuclear fissile material production or the production of pumping

out more nuclear warheads. In contrast, South Korea’s interest is a little bit different. South

Korea aims to jump start the process, which is good, and also aim to maximize its security.

Right now, as everybody knows, Seoul is faced with Pyongyang’s numerical superiority in

terms of the number of soldiers and needs to settle the security threat. A solution, in my opinion,

can be found in the conventional demobilization by North Korea. Seoul can and should demand

Pyongyang to reduce the number of soldiers. Right now, we have 1.3 million men in uniform,

which is too much, and the North Koreans can, I believe, demobilize substantial part of their

soldiers - let’s say half a million. Still, they have nuclear and numerical superiority over South

Koreans. For instance, numerical control is verifiable. If North Korea demobilizes, then it is

much easily verifiable and inspections by the IAEA are not necessary. We can just simply count

and we have more accessible items, and more accessible than eliminating the nuclear warheads,

which is what people are talking about.

And demobilization might be good idea for Kim Jong-un in three ways.

First, clearly, 1.3 million in uniform is too much of a burden for a country like North Korea

whose economy is barely functioning. People talked about North Korea changing their strategy:

instead of Byungjin or Songun, they aim to build their own economy. Then, Kim Jong-un would

say that “Okay, we need to mobilize resources to invest our economy out of somewhere”. KPA,

Korean People’s Army, the manpower might be the best place to start.

Second, if denuclearized - however likely or unlikely it might be - North Korea can get the

money, the capital from the outside world. But it needs to find labor - the manpower - to


produce something. With money, North Korea cannot hire foreign labor; that is a hard fact. As

long as it keeps 1.3 soldiers in the army, then Pyongyang cannot develop its economy. This is

another hard fact. In order to develop its economy, then North Korea should demobilize.

And third, demobilization would boost Kim’s chance to stay at power. In the previous panel

presentation, we heard that KPA, Korea People Army, is a political challenger to Kim Jong-un,

and still we have a conservative and die-hard faction within North Korea’s leadership that

might present a political challenge. Then, Kim Jong-un needs to undermine its influence of the

KPA’s leadership by many other measures for example, appointing loyal guards in top positions,

replacing the leadership quite often. And this is what we have observed in the past.

Demobilization might be a good idea for Kim Jong-un to survive at Pyongyang and to get

untrustworthy generals retired.

As I said at the beginning of my presentation, I call the Singapore summit the K-T impact:

the Kim Jong-un and Trump impact. However, the original K-T impact of 65 million years ago

killed the dinosaurs and opened a new stage for another species including ourselves. However,

some of the dinosaurs survived and evolved into birds. Given that the seismic shifts are things

that we cannot avoid but we have to go through in years to come, South Korea has to figure

out some ways to survive the shifts and to guide the changes into the desirable direction that

South Korea would prefer, and most of all, to adopt ourselves and to evolve into different

species.

President Moon did his best to get things started in the first half of the year and has been

successful in putting K-T together. As the driver of denuclearization diplomacy, South Korea

deserves its fees in diminishing military threats and enjoying new political environments. The

shifts are better than the previous status-quo, because the old reality has been painful in political,

economic, social and military dimensions.

In this respect, China’s role is very important. As Yoon Young-kwan indicated in his speech

this morning, the Sino-America conflict or the confrontation might provide a wonderful

opportunity for Pyongyang to keep its nuclear weapons in hand. However, this chance would

contaminate the strategic relationship as Ambassador Ahn Ho-Young indicated in his previous

presentation. If things go worse, we will have a vicious cycle — vicious cycle between the

Sino-American dimensions on the one hand, and inter-Korea relationship and nuclear

diplomacy on the other.

What we have to do, what China and the Americans - at least on the level of global strategy

- these two countries and their leaders should be extremely cautious not to make things toxic

or poisonous. As Jia Qingguo said in his previous presentation, things are already poisonous.

We have to detoxicate the whole issue.

And also, we have the concerns about the Thucydides Trap between the rising China and the

relatively declining United States. We have to bridge this gap and make sure the world would

not fall into the gap.

Sarah Connor, the character in ‘Terminator 3’, said “there is no faith but what we make for

ourselves”. I believe this is true. Are we destined for what? Confrontation and conflict or

cooperation and coordination? Personally, I’m one of the optimists and I want to be an optimist.


I hope to remain in this optimistic camp. However, my confidence is being undermined almost

every day, which is not good, I believe. South Korea paid a price and the old strategy was not

so enjoyable. The old strategy of confrontation, economic sanction, military preparedness,

deterrence - that is kind of painful and not enjoyable. However, if we have to, I believe, we will

return to the original strategy. Personally, I don’t want to pay the price. But South Korea will

pay the price if it has to. Seoul has paid the price for the last six and a half decades, and Seoul

will pay the cost for another six and a half decade. We have to. Personally, I don’t want to pay

the price and I believe nobody in this room would be willing to pay the price. But if that is our

fate, then we will make it ourselves. Let me stop here.

PARK In-kook

Following are questions from the floor:

⚫ US could make some concession including peace agreement even before complete

North Korean denuclearization. What is the future of US-North Korea nuclear deal

after Pres. Moon’s tenure is over?

⚫ Private companies’ role to promote further progress and the timing of sanctions lift.

⚫ Any similarity btw Kim and Deng Xiaoping?

⚫ What would be the clear evidence from which we can perceive as a genuine North

Korean decision to give up nuclear program?

⚫ Any additional request by North Korea other than peace treaty and lifting of economic

sanctions?

⚫ What about human rights issues?

⚫ What is Korea’s leverage, if any?

Gary SAMORE

On peace agreement: There is a difference btw declaration which could be made by Trump,

Moon, Kim, and maybe Xi. That could be done at a summit meeting and that is a political act.

A peace treaty is very different. In the US, a treaty needs ratification by the Senate 2/3 vote. I

don’t think the Senate will ratify a peace treaty unless it is accompanied by CVID. Since I don’t

believe CVID is possible, I would put the peace treaty off to the very end of the process.

But making a declaration that the Korean War is over is something that the US and South

Korea can do. Why that’s important to North Korea? I don’t really understand. Because the

North Koreans know that a declaration is meaningless. It doesn’t change the balance of forces

on the Korean peninsula.

And I agree with Prof. Lee that if we are going to have a peace treaty, it should be

accompanied by some changes in the disposition of conventional forces to reduce the threat to

Seoul. That could mean fewer troops in the North Korean military, it could mean redeployment


of long range rocket and artillery, but these are all long term measures that could be negotiated

between North Korea and South Korea and be part of a peace treaty.

Amb. Ahn asked me whether the Trump admin is considering the kind of interim measures

that I talked about. I think that’s probably premature, now the Trump admin will continue to

have a series of meetings seeking that North Korea make a full declaration of its nuclear and

missile inventory and infrastructure, or agree to a verification protocol that would be necessary

to accompany any kind of a nuclear agreement. And there’s not really any pressure on the

Trump admin to compromise their position because right now Pres. Trump is very happy.

There’s no testing, the risk of war is reduced, he’s able to speak in all of his speeches that

everything is fine. So, any decision by the Trump admin to take a different approach, something

different from full, immediate denuclearization, will probably be months away only after the

talks continue to produce no result.

My fear is that Kim Jong-un may at some point become impatient and threaten to resume

testing unless the US puts forward some proposals that are more realistic. Not likely in the real

term, but it would be very typical of North Korea if they are frustrated with the pace of

diplomacy to threaten do something to pressure the other side. That’s something I would look

for toward the end of this year and early next year as a possible way in which the whole process

could unravel.

Bruce KLINGNER

During discussion, there tends to be an underlying theme of what can we do first. What can we

offer up to North Korea to get them to obey the law and the UN Resolutions. And I think that’s

got it exactly backward. North Korea is the one in defiance of the international community,

North Korea is the one who violated its eight of its previous agreements promising to never to

build nuclear weapons and then promising to give up the weapons which they had promised

never to build up in the first place. They are in violation of eleven agreements. So, the onus is

on them to prove to us that they are willing to turn over a new leaf and abide by all things, as

opposed to us getting together and thinking of what are the goodies that we can give to them.

The role of private companies in promoting progress is too soon. There can be ideas of what

things can be done, but South Korea needs to restrain itself from its desire to resume catapulting

bags of cash north of DMZ. The Kaesung experiment was on for 10 years, it did not prevent

NK from continuing its plutonium and uranium programs, it didn’t induce economic reform, it

didn’t induce political reform. So, we shouldn’t be so eager to repeat the mistakes of the past.

If we are going to do economic engagement, after some period of proven denuclearization, we

need to make sure that we do it in ways that induce economic reform in North Korea rather

than just giving direct benefits to the regime. So that would be things such as giving wages to

the workers not to the regime, as was done in Kaesung, requiring North Korea to abide by the

rules and the requirements of international financial institutions, including transparency of

government actions, etc. My common theme is let’s have North Korea prove through some

steps that it’s willing to denuclearize before it actually starts getting rewards rather than trying

to give them rewards first as a way of inducing them to behave.


ZHANG Tuosheng

Firstly, who is the winner of the Singapore Summit? Trump believes he’s the winner. But US

establishment believes that Kim is the winner. Others say China is the winner. I think it is a

win-win. It’s not just a joke. It’s really a win-win because, even though it was not as good as

we expected, at least it opened a door for foreign talks and we can continue to make efforts.

Some said China’s proposal of suspension for suspension is finally realized so China is the

winner. But in fact, North Korea and the US refused China’s proposal. This time it is North

Korea who took unilateral suspension of its tests. Then the US gave a response to suspend its

joint military exercise. So, the result is similar to China’s proposal, but in fact it’s not.

Secondly, I agree that we can give North Korea what it asks for – a joint declaration of ending

the War. We can give this to them because now they need some kind of reward. Of course, he

hopes to relieve the sanctions but that’s very difficult. So, this is something we can give to

North Korea that could be a kind of security assurance. Of course, it’s different from a peace

treaty. I agree with Gary’s point.

Thirdly, there are many suspicions on why North Korea tries to change its policy. DPRK

made a huge progress in nuclear weaponization. Ability to deter US and its allies. However, if

it moves forward further, the risk will be very high. So, it is reasonable for North Korea to stop

here. Also, increasingly harsh international sanctions played a significant role. The North

Korean economy has met a serious problem so the DPRK leaders realized that if they persist

in possessing nuclear weapons, it would be impossible to for them to stand in economic

construction under the Byungjin line. Third, with nuclear weaponization realized, DPRK

believes a possibility of exchanging its nuclear arsenals for security and development has

emerged. When we started the Six-Party Talks, North Korea only had nuclear programs in hand.

But now they have real nuclear weapons – much bigger bargaining chip. So, if I were him, I’d

like to have a try.

Fourthly, Kim Jong-un’s view about the West and the world may be very different from those

of his father and his grandfather. After all he had experience of studying at western schools and

he was very young. He should think about the future of his country. If he continues to develop

nuclear weapons, there will be no future for North Korea.

Finally, DPRK believes that its strategic transformation will surely enjoy the full support of

China, ROK and Russia. Of course, I agree that whether he can succeed or not depends on

interaction.

ZHANG Xiaomin

Just now, Ambassador Ahn said that Kim Jong UN should seize the momentum, not only for

himself but for all the parties. But whether we can reach an agreement for peace for the time

being – I am not so optimistic.

We can do things, take small steps. For example, we can list things we can do that are

possible to accomplish then the timeline and roadmap for the progress and procedure for

denuclearization. Well, Rome is not built in one day. So small steps could lead to a big leap.

This is my idea.


Anyway, for the time being, we have freeze-to-freeze in reality but not institutionalized.

North Korea announced it decided to stop nuclear tests while Trump said the US will suspend

military exercises. That is exactly what China proposes. So, the two sides have made some

steps for the time being. Making progress and institutionalizing these steps are important. I

emphasize institutionalization of these steps and institutionalization of achievements that every

side accomplished.

On the question asked by the host on the worst scenario, frankly, I am optimistic so I always

hope for the best. But the situation now is not so optimistic. The worst scenario would be further

nuclearization, a chain reaction. An example would be the case between China and South Korea

in 2016. Also, reactions of Japan. Maybe a kind of unimaginable, disastrous scenario.

AHN Ho-young

The question raised by Ambassador Park for me was what would be Korea’s leverage. On

that question, I think there would be three issues that could be raised.

1. The content of leverage. Leverage for what? That would be for negotiation. The

definition of negotiation would be to move the other party from point A to point B.

Point A is a point where the other party is comfortable. Point B is the point where you

would be comfortable. In other words, you are moving your counterpart from the

position of his comfort to the position of my comfort.

2. The second issue is on pressure – who should be exercising this pressure? It really

depends on the nature of the leverage or the pressure. We’ve been talking about

diplomatic pressure, military pressure, and economic pressure. By nature, economic

pressure wouldn’t work unless everyone participates. If only a couple of countries

engage in economic pressure, there would be a balloon effect. So, by the very nature

of certain types of sanctions, the important question would be who participates.

3. The most important issue is the one raised by Bruce, which is sequencing. When

should in fact the suspending the sanctions. For the time being, that is at the crux of

the matter.

LEE Geunwook

I’m the last in the panel so all of the answerable questions were stolen by the other panelists.

So, I’d like the address the issue of Kim Jong Un and Deng Xiaoping. Somebody raised this

from the audience.

I think this is not a proper argument because Kim’s role model is not Deng Xiaoping or the

Vietnamese leader but Lee Kuan Yew, who built a city state, made it rich, and inherited the

country to this son rather than becoming a democratic leader. You should think about the

implications.


PARK In-kook

As a conclusion, first, we should not lose the very rare opportunity. If we lose this opportunity,

we will be faced with another cliff or catastrophe. Second, we have a good chance to

consolidate solidarity among US, China, Korea. A very rare opportunity to make historical

result.

In detailed format, almost everybody converged on the idea that the role of the maximized

and continued sanctions for the time being, which will be one of the remaining or unexhausted

cards that we can still exercise.

Session III: US-China Trade War: How Far will it Go?

SUNG Taeyoon

This is Taeyoon Sung, the moderator of this session. I am very pleased to have this chance to

talk on the trade relationship between US and China. Based on that, I think we can have many

implications on Korean economy’s current situation and the future prediction.

Let me introduce our speakers. First Evan Feigenbaum from Paulson Institute, John Park

from Harvard Belfer Center, Zhang Yunling from Chinese Academy of Social Sciences, Zhang

Qingmin from Peking University, Choi Byung-il from Ewha Womans University, and Ahn

Dukgeun from Seoul National University.

Let me begin the session by asking a question to Evan: can you define current situation as

‘war’ between China and US if we characterize war as statement of how being serious, extreme

aggression and destruction?

Evan FEIGENBAUM

Let me first say that it’s terrific to be back in Seoul. Thanks to the sponsors. I’m not talking

about the North Korean nuclear situation but talking about something else.

I’m going to back up a little bit but I’ll say it’s whatever you call it. Our Treasury Secretary

Mnuchin once said ‘The war is off’, implying that it was a war and then he testified on the

Capital Hill the other day and said ‘No, no, no. It’s just a dispute’. Whatever you call it, it’s

not good. And it reflects a lot of structural and other tensions that I think have been building

up in the relationship for a while.

Let me make a macro observation. And I’ll tick through four bites of this. Macro

observations. We’re about 18-19 months into the Trump administration. So, about a year and a

half ago, I wrote a big article on US-China relations for the National Interest magazine. There

is a lot going on in the piece but one thing I said was that the consensus that had seemed to

exist for a long time through quite a few presidencies that a successful China would be a good


thing for the US was breaking down and potentially collapsing. The other thing I said was that

building a coalition either for relentless confrontation – much less for new forms of cooperation

- was going to be very difficult because there are - just after a couple decades - a lot of

stakeholders now in the US-China economic relationship. We don’t have a unitary view either

of what makes sense or based on being in the same line of business or sector. There is just a lot

of diversity now for the stakeholders. We’re a year and a half later. Basically, both of those

things I said at the time have come into being. The consensus is coming apart but it's turned

out to be harder - I would argue - than the conventional wisdom presumes to assemble a united

coalition in the Unites States among business and Washington – at the state level - around a

singular and coherent approach to the US-China economic relationship. That’s part of what we

are facing.

There are four things you ought to pay attention to. The first is: it’s worth asking ourselves

what it is that the Trump administration is trying to do? What are they concerned about? Why

haven’t they had more successful up until now? And then, second, third, and fourth, I just want

to talk about a few coalitions between markets and politics, between people who actually run

businesses in the United States and government, and, last, between our federal system in

Washington and what's happening at the local level.

On the first, I would argue that part of the administration’s problem is that they are focused

on not one, not two, not three, not even four but my count is – I’m just going to rattle these at

the top of my head - at least six things with China. The first is the bilateral trade deficit, which

hit 375 billion dollars in 2017 and is a particular focus of the president’s. For a lot of reasons

and in a lot of constituencies, it really was not politically sustainable. The second thing is

Intellectual Property practices in China - past tense. Theft, forcible technology transfers, joint

ventures that have the net effect of transferring, if not technology, business processes and

knowhow – past tense. Third, technology policy and dominance - future tense. So, this is the

focus on Made in China in 2025. I’d argue this is a lot of what is at the core of the competition

between the US and China. But that's not all, I’ve got more. Fourth, there are all of the across

and behind the border Regulatory and non-tariff barriers that US companies face every day.

Equity caps, standardization, the way policies are set, these are things that particularly are

focused in the minds of multinational companies. And then fifth and sixth. Fifth: inbound

investment from China, acquisition through M&A deals of publicly traded US companies

particularly by state-owned enterprises from China rather than rather murky corporate

governance. And then, sixth: things that are below the threshold of control. Technology

investments Epithets that are below the strength of control would be the sixth. Technology

investments, venture capitalist funds - thing like that. They may be looking for yield or they

may be looking for the technology. These are things that didn’t really get captured in our

investment screening traditionally. So that is a pretty full agenda.

For any administration, if you were designing a negotiation strategy with China, you would

need to sort through how to prioritize among those six - by the way, there are more - develop a

strategy for trading off what is more important, what you have to have, what is just nice to have.

I would say to you this is part of the problem. It’s not that any of those are not important or

legitimate concerns, they are, but designing a strategy requires in the first instance that key

parts of the president’s economic team actually agree on what the priorities are. They don’t.

The president seems very focused on the bilateral trade deficits; Lighthizer our trade minister


is focused on Made in China 2025. There are others who are focused on their investment side.

So, it's hard to get a strategy, it’s hard to get prioritize, it’s hard to decide on tradeoffs, even

though the concerns over all of these things are pretty well founded. American businesses have

argued to Chinese government and Chinese regulators for a long time and it was simply not

sustainable over the long term to sustain Chinese access to US market without reciprocal access

in many areas in Chinese market. And the fact that Chinese government has not been moved

on many of those concerns, began to run into political realities.

That brings me to my last point about collisions. I think the central issue is that markets and

politics are really in collision. That’s not just because politics are around US-China trade

continues to confound market expectations. It’s also because the people in the markets and

people in the government have a different view of drivers and ultimately many of the preferred

outcomes. To illustrate that for you, let’s just take bilateral trade deficits. You’ve probably read

a hundred articles Written by economists about why the president and his team are wrong to

focus on the bilateral trade imbalance, especially in goods. This makes no sense to economists.

But if you look at it through a political lens, not just through the lens of an economist, it begins

to look a little different. If you want to reduce 375 billion dollar bilateral trade deficit through

purchases by China, your eye instantly goes to three sectors: agribusiness, energy like LNG,

and technology - not the cutting-edge sensitive technology that’s motivated people in

Washington – things like clean water technology, clean energy technology, medical devices,

things that China is deploying to scale in ways that are not seen anywhere else. If you look at

it through that political lens, this implicates states that are frankly critical to the president’s

electoral coalition into that of the republican majorities and the senate of the house.

Agribusiness its solid republican voting states, also states like Iowa that voted twice for

President Obama. But President Trump won by nine and a half votes. Energy LNG that’s

Alaska and Louisiana, the kind of tech I’m talking about is Michigan, Ohio, and Wisconsin. So

politically, purchases can matter. And that's not the only collision. There’s also the collision

between people that actually run businesses for whom expansion into China is a critical part of

their growth strategy. A more political Washington centric view of things.

I can tell by the way you’re looking at me that you are getting antsy, so I’ll just conclude by

saying that how these disconnects get resolved or not will determine the question of how much

of a strategy the US develops over time as opposed to doing what it is doing now, which is

throwing a lot of stuff up at the wall and trying to see whether China would open. I would

predict that that strategy is not necessarily going to have a lot of success. If the US wanted a

lot of success, an alternative way to do it would be to get together with other big market

economies, the European Union and Japan, and to pursue a quadrilateral investment agreement.

Pursuing structural changes that increase and facilitate access to China’s market in areas that

are critical to American competitiveness while withholding access to our three markets in a

coordinated way. But that’s not in the offing and that’s not what we are.

In the meantime, the administration is pursuing this strategy with China but we have to

contend, as I said at the beginning, with this very diverse set of interest groups and business

interests with China. That includes even governmental interest at the local level. The week that

Congress was debating a new legislation to bring our CFIUS, our investment screening process,

up to date, the governor of Michigan, republican governor, Rick Snyder, former CEO of

Gateway Computer, was holding something called Michigan China Week. Hundreds and


hundreds of Chinese business people especially in technology sectors talking about all of the

things that CFIUS was trying to address or redress: co-innovation, joint licensing of intellectual

property, accelerators, incubators - all of this stuff was happening. The same with governors

and mayors. Everyone all over the country is chasing investments from China, trade with China.

These disconnects make it harder to forge a workable political coalition over time. That’s

against the backdrop of this multi-prong strategy that doesn’t have a very clear sense of

prioritization and there’s not a very good chance of success.

ZHANG Yunling

The first question I think was mentioned by the previous speaker, which was whether we are

now in a war. We see a trade war with not just unilateral action but bilateral with retaliation.

We don’t know this kind of a vicious cycle, and how long it will last. However, it will continue

for some time so I think we’re already in a war. But this war is not because of China or because

of the United States, the Trump administration. So unilateral assertion of this war on China. So,

it forces China to retaliate. But also, it’s not a war between China and the United States, but

also with many others. The reason I think the Trump administration has a different believing

philosophy or principle because this group of people, they do not trust the existing multilateral

system. They just believe what I call their ‘extreme unilateral approach’. So, they believe only

this way can solve the problem.

But actually, the trade imbalance in a global wise market, what we see is natural. It’s also a

result of post second world war system. If you liberalize the market and competition from each

country is different, then you have a trade imbalance. So, we have two kind of balance, one is

called comprehensive trade imbalance, that means among many. Another one is dynamic

balance, so gradually move from one to another, from one group to another. So, it is a very

dynamic process. But the trade war stopped at this point. They think everything should start

now, will solve everything by this way. This is against the economic rule, I think. So, I think

everybody understands that China’s trade imbalance or trade surplus is based on this

internationalization, based generally on the supply chain. So, moving from Korea, from Taiwan

and many other places including the United States. So, China is at the end of the supply chain

and a representor of exports to the United States and other markets. So, this is a very clear story,

and also China now acts the stage to restructure, to change, and it is already happening. China

does not like this kind of structure because according to recent study, I’ll take iPhone 7, China

only gets 8.45 US dollars, and Apple gets by sale 243 US dollars, and Japan gets 80, and Korea

gets 40. So, this is a whole story and many others similar supply chain. That’s one. So, this

chain, I think China does not like it because at the end China gets the smallest part and

representing all the big group.

And the second thing, I think, is the US side of the story – why do you have a trade deficit?

And you understand because you have a special right of US dollar. You can spend more, you

can save more, you can buy more, consume more. So, this, if you want to solve this trade

imbalance, you have to change yourself, not to change this way because everybody understands

that if you levy the tariff and then you raise the cost of production, raise the cost of consumption.

And then finally, however people need goods and factories need supplies, so you only raise the


cost. Finally, you have economic recession. We have the 1930 - last century 30 years lessons,

but according to economic prediction and study, next year or so, the world economy will plunge

into a recession. That’s the situation we are now facing.

And, finally, how to stop it? Politically, we are not so optimistic, and economically also, I

think. It seems because nobody can stop. Before, every side feels we really should stop and

then let’s sit together to change. And first, sit down with President Trump and he realized,

according to the optimistic study by the late of this August, maybe some come back to the

negotiation table. But if you put the trade issue on the negotiation table, it’s not just simply

deficit and surplus. It is relating to many other things and that’s starting from WWII. And also,

the WTO system itself needs to restructure, need to change. So, we have to, how to change it?

And like trade statistics, already, you know, they tried. The theory is already finished. So, how

to change from the current statistic to the new one is very complex and need probably 15 or 20

years to change it from the old to the new one because the current one does not represent the

real story - the fact of the trade.

And when it started, this supply chain was very minor, very small. But now it has become a

common phenomenon. So, if globalization continues, we need to change the system. And, also,

it’s possible since it’s time when… I don’t think it’s time for us to sit together and discuss how

to create an inter-balanced dynamic system within WTO, not just trade because the existing

WTO system solved the problem of trade dispute although President Trump does not believe.

However, we need to change. So how to create what I call the “dynamic balance” because more

countries join this production process and liberalization. So, I think it’s relating not just a war

between China and the United States, but the war fighting mostly now seems to be between

China and the United States because they’re number one and number two trading countries in

the world.

So, I personally wrote an article - it’s probably time to think and collectively, when how we

will sit down under the multilateral system to discuss openly this kind of current issue. I hope

that increasingly because if the current trend continues, several months is okay, but if it lasted

one year, the world economy will surely go to recession and suffering will come back. But the

lesson is too serious, too big to us. So, I stop here.

Finally, China is really preparing, willing to negotiate because this retaliation is not the end,

it’s not the solution for China’s problem of imbalance. We surely should solve it. But, also,

additionally, the current is not just trade, also relating many others. Investments, for instance,

and many many others. IPR and all these kinds of issues. And I think it’s time probably to put

on the table to overall comprehensive discussion among the international community. Thank

you.

SUNG Taeyoon

Zhang Yunling has just argued that current state can be defined as a war, and this war has been

initiated by the US. Then, John, do you agree with his argument? And if you agree with that

argument, until when this war would continue? Can you give the idea?


John PARK

The part that gravitated my attention was the points raised regarding the change and

restructuring that are long overdue. A couple of points I would start off with: one is, catching

all of us by surprise is how quickly these events are enfolding. And the second point I wanted

to mention is the way that these events are unfolding, this ties back to Dr. Paal’s comments on

the first panel here, this whole idea of what he framed on the US side is the lack of a 3Ps – so

we have missing policy, lack of priority, and lack of process. But comparing and contrasting,

clearly between the United States and China, the Chinese perspective is that we do have the

3Ps, we have a game plan. And I think that is something that plays out. But with respect to the

whole notion of what comes next, as we’ve heard the US view and the Chinese view as well

right now, the whole notion of how this is broadening out as an issue.

And right now, this is fortuitous that we are in Seoul because as third countries are involved,

these are the types of issues that can be somewhat calibrated in a US-China context but

countries like South Korea are immensely affected. And so, the two points related to South

Korea, the adverse effect, and the colleagues from South Korea will go into more detail, but

with South Korea very much focused on intermediary products, the notion of being affected in

terms of its trade with China and the United States being very crucial here. And so, the other

component though, is that this is a widening effort by the United States. It is not only focused

on China. So, the point that I conclude with is this notion that South Korea is waiting for

announcement about next month related to US tariffs on autos and auto parts. So, this isn’t

narrowly defined within the context of US-China but the implications to third party countries,

specifically South Korea, I think is a big concern when we think about what’s next.

SUNG Taeyoon

So, John has mentioned that this is just not just a war between the US and China. The US has

trade policy not just for China but even for other countries including Korea. Professor Choi

Byung-il, so then you think the US can continue this kind of policy for future? Then, what can

be an impact on the US economy and also the Korean economy?

CHOI Byung-il

Thank you, moderator. First of all, I would like to appreciate KFAS to host several rounds of

the trilateral.

Regarding your questions, well, I think in this trade war which is provoked by Mr. Trump,

there are two elements. Not only bilateral aspect between the US and China, but Trump doesn’t

discriminate between allies and non-allies. So, for instance, he is resorting to so-called Section

232, security clause, which was enacted a long time ago, probably most people in this room

were not existent at that time, 1962. That was a legacy of the cold war. And the idea was, the

US, if they like, they could restrict trade from some suspicious countries for security reasons.

Now, Trump is exercising on steel and after one year of investigations, US government under

the leadership of Donald Trump imposed a 25 percent non-discriminatory tariff for security


reasons, regardless of them coming from an ally country or non-ally country. And that is

catching a lot of countries like Korea by a great surprise because the prevailing notion was that

the US had a problem with excess capacity of China. But they are not directly targeting China.

And then, as John mentioned, this week in Washington, they were a public hearing relating to

a possible similar 25, 20 percent tariff bomb, I call, on auto and auto parts for all countries.

And what are those five biggest exporting countries order to the US? That is Mexico, Canada,

Japan, Germany, and South Korea. Those are so-called all allies. But trump is targeting and

ready to hit all those countries. And recent time, he was quoted as saying that when it comes to

trade and trade deficit, EU is as bad as China. So, I think this is something, you know,

unexpected, uncharted territory no one has dreamed of. So, it is very much dangerous.

And coming back to US-China trade war, first of all, I think this is ‘war’ because no proper

words like this kind of conflict can justify what is happening because in memory of modern

history, we have never seen the two biggest economies exchanging heavy blows at the same

time. And then, the number one country promises will hit double down in a two months’ time

frame. Obviously, that is sort of open invitation to negotiate but I think when you consider

whole issues as Evan mentioned, there’s growing even in a consensus within Washington - so-

called power elite - we should stop China, maybe this is less time. And although this is

economically probably incorrect, even unwise, but I think you know, when that is coming from

right wing populism, which is fueling all these, I think when you consider political

undercurrents. Perhaps, I’m not going to be surprised that we will have - after Trump is gone -

we may have Trump Two, Trump Three, even though the rhetoric and the approach might be

different, but they will try to deal with China more confrontationally.

And when it comes to Chinese opposition in the US, who actually provoked this war first, I

don’t necessarily agree with this. Because when you consider what China’s doing these days,

I think China’s behaving very much different from what it did even 10 years ago. For instance,

Made in China 2025 is a very open recipe for state driven industrial policy, and I’m not just

talking about China’s growing ambitions to be technologically self-reliant. I think there’s

nothing wrong with it. But the way they’re doing it, for instance, we have experience of several

Korean companies for instance some key Korean companies doing battery on electric car, they

invest in China with hidden, or even open promise to Chinese government to get huge subsidy.

But so far, during two or three years of operation in China, they failed to mount any single

battery on any electric car sold in China. So, what does that mean? The Chinese showing all

these non-documented or documented so-called “non-tariff barriers” to the detriment of foreign

investors who made investment in China with their promise. So, I think both number one and

number two, they are equally responsible for causing this problem.

SUNG Taeyoon

Thank you, Choi Byung-il. So, Zhang Qingmin, Choi Byung-il just mentioned that this war

has not been just initiated by US because China might have some responsibility for the

misbehavior or whatever the trade traditions something like that. So, what about your response

to that kind of criticism on China’s behavior?


ZHANG Qingmin

Thank you very much. First of all, let me start by thanking KFAS. This is not the first time I’ve

been here for similar dialogues. Once, we got here, we always tried to find a solution for the

problem we are facing. But we see that the world is facing more and more problems, so I expect in

the future that KFAS will sponsor more such events so that we can come back to discuss ideas.

First, I think I would like to define the current situation by putting it in a global and historical

context. And many people discuss trade disputes as war and compare it with the disputes the United

States used to have with Japan. But if you look at it from a historical perspective, it’s the fifth time

China and the United States have come to this point. The first time was 1991 and 1992, the second

time was 1994 and 1995, and the third one was 1996, and the fourth one was 2005. Each time the

United States threatened to impose sanctions on Chinese exports to the United States but, in the

end, China did not give in principle by the China always made technical compromise and, in the

end, lead to final resolution of the disputes.

But if you look at it from that perspective, I think today’s situation is unprecedented in a sense

that global context has changed. Or we can say that gap between the United States and China is

narrowing and, more importantly, I think we have a very different President in the United States.

So, I think to predict the future of the China-US trade war or dispute, is just like, is as difficult as

predicting Trump’s foreign policy, or as easy as predicting how Trump will mix its foreign policy.

So, in this regard, I think we don’t know where it will go, but we have to look at the impact of trade

dispute or war - whatever you call it - and China-US relations and the global trade system at large.

So, this is the first point: I think it is an unprecedented dispute from a historical perspective.

Secondly, if you look at the trade disputes at this moment, first of all, China will suffer and there

has been a lot of reports recently. One report released by Tsinghua University recently says that

China’s GDP will reduce from 0.1 to 0.4 percent if those five hundred exports are levied high tariff.

And Morgan Stanley also has a report which has similar estimates on how much China will suffer.

But just before this morning, I read another article which says that has not considered taking into

consideration the impact of their trade uncertainty on foreign investment in China. We took that

into consideration, they say that negative impact on China will be to reduce China’s GDP growth

by 2 percent.

But does that mean that China is the only country that will suffer from the disputes? No, that’s

not. I think if we look at the disputes, this is a war that no one will win. We are talking about a win-

win situation but this is a lose-lose situation. The US will suffer. Morgan Stanley and the Tsinghua

University reports all discussed how much the US will suffer. You can reduce China’s deficit by

imposing sanctions, imposing high tariffs. But you will not solve the (fundamental) problem.

Secondly, most of China’s exports to the United States are products that are produced by

foreign investment including US foreign investment, and Korea and Japan. I think in addition

to the point Professor Choi made, it’s not just the world that has launched a war against China.

I think it’s a war nobody will win. Nobody will escape, everybody will suffer. China will suffer,

the US will suffer, and Korea, Japan all would suffer. This is the second level.

The third level is that the WTO system will also suffer. The US policy for a long time has

tried to integrate China into their global system so that China will abide by the rules. But now


China is trying to do so, but the US has basically given up this system, and this is the third way

how the world will suffer.

The fourth is how this trade disputes will negatively affect China’s relations with the United

States from a political perspective. Because in the past, we always call that the US trade - the

great volume of US trade - is stabilizing the bilateral relations. Whatever conflicts our two sides

had, there’s always a big trade which benefitted the two sides. But now we see that this

stabilizer is becoming a destabilizer. So, you cannot expect that China will cooperate or China-

US will cooperate coherently on North Korea issue, or on terror issue, or on many other global

issues if China and the United States are having a trade war. So, this is impossible. So, I think

this will be a war nobody will win, all will suffer, and will have big impact. This is the second

point I want to make.

The third point, I think, since my field is on Chinese foreign policy, I would discuss how this

will impact China’s domestic politics. I have a view that even though it’s true that US relations

with China is asymmetrical – US is more powerful – but in the long past, the role of China in

shaping the bilateral relationship has been underestimated. How China will domestically

develop and where it will go, will greatly impact the bilateral relations. I think once the trade

war or trade disputes between China and the United States happened, I think first, a large group

of elites in China has been reading articles to reflect Chinese domestic policy and foreign policy.

Some began to think and propose that we should change ambitious ideological strategies, we

should abandon their old strategies, and some people wrote that the ZTE case has taught

Chinese a lesson that we are by far lagging behind the United States’ high technology. So, this

group of people are calling China to return to keeping low profile and bide our time to focus

on economic development so that we can develop good relations with the United States.

But, on the other hand, we see gradually a trend is changing in Chinese domestic politics.

We have seen that mainstream media, and it has discussed that this trade war or dispute is

inevitable because this is a strategy of the United States to continue to check China. And I think

Evan, I agree with you when you say that America does hope to see a more powerful,

prosperous China, and we see this very often. But when this trade war happens, it provides the

excuse or reasons for the Chinese to think whether that is sincere. If you really hope to see a

free China, why do you restrict high-tech exports to China? So, this group of people is now

gaining momentum in Chinese domestic politics. So, I think, if this group of people won in

Chinese domestic politics, it will further impact the future of US-China relations.

We can say there’s a cyclical pattern – economic disputes is, first of all, a reflection of the

political disputes. And in return, the economic disputes will further deteriorate the political

bilateral relations. So, this will be very dangerous. So, looking into the future, I compared how

the five disputes in the past have been solved. I think in the first dispute between China and the

United States in 1991 and 1992, it took 9 months. The second dispute took 8 months. The third

one in 1996 took 2 months. And the fourth one, and it lasted for three months. So, I think taking

into consideration that destructive implications for the US for China, and I trust and I also hope

that this disputes could be solved. And to a large extent recreate wisdom from both sides. With

that, I will stop. Thank you.


SUNG Taeyoon

Ahn, What’s your opinion on the impact of this war between China and the US on Korean

economy in terms of that war or on the dispute itself? And the Trump’s administration’s general

trade policy toward other countries? There might be two aspects on Korean economy.

AHN Dukgeun

Thank you, of course, a lot of countries are suffering now. Normally, from the economists’ or

business point of view, we can describe the situation as competition. Normally, we think fierce

competition is good because it promotes efficiency. But the current situation is beyond that

threshold. Many people worry about almost war kind of confrontation between the two largest

economies.

Of course, in Korea, as mentioned earlier, many people think we suffer a lot because we

export a lot of parts and components to China and those products are integrated into the final

product and they will be blocked in the USA. Actually, that is not completely true. That was

actually decades ago. Recent studies show that China has accomplished significant import

substitution. So, from the Korean point of view, parts and components that we export to China

less than 15% will be re-exported to other countries and much less than 4% is destined to US

market. That is why the Korean government is trying to calm down our industry sector. Because

the direct economic implication may not be that significant in the short run.

But that is not the end of the story. What we worry is that this protectionism will be spread

to other countries. Now, EU is following suit and probably other countries will try to follow

the protectionist sentiment. The third direction we worry is if more countries are blocking the

market, we cannot export to many other countries and a significant amount of Chinese exports

to other countries will be diverted to our markets which is right next door. As Korean trade

commissioner, we actually have a lot of concern about how to protect our industry sectors in

the coming months. These kind of indirect commercial implications are quite serious now. How

to address this situation? Normally we go to the WTO. As mentioned, though, the WTO is in

big trouble. For example, China’s ‘Made in China 2025.’ All the countries can implement their

own industrial policies so doing that is not a problem. But the way they do things – we have a

lot of concerns on how to handle the SOEs, state-owned banks, and many other things that have

originated from non-market economic system were not completely resolved in the WTO system.

That is probably why the US government tries to raise a lot of legal issues there. So, there may

be some problems on the Chinese part, but the problem is that the US tried to address this

questionable industrial policy with egregious trade retaliation that is outright violation of the

WTO system. So, the two most important WTO members are showing terrible example to

entire WTO members by violating and doing other inconsistent actions. Technically, WTO

dispute settlement procedure is almost about to be completely devastated because of the

impasse over the Appellate Body system. And then FTA can be the solution. We have a lot of

concern. We have FTA with the US and China. We just finished renegotiation of KORUS FTA.

Then Korea should be seen as one of the examples of having escaped from all these strange

trade problems. But we still have two or three exemptions. In Korea, our industry sentiment is

that we don’t know if this is blessing or burden. So, we do not have a clear idea whether having


this FTA is helping us or burdening us. And now we are doing the second round FTA

negotiation with China in terms of services and investment part. Whether that part will be useful

to us to resolve the current situation will be a very interesting issue to see. This is a reality for

many countries in the world in the WTO system. So, we should find a way to address this

problem.

SUNG Taeyoon

So Ahn has emphasized the importance of US trade policy not just for South Korea but also to

other countries. So, let me go back to Evan’s point. Let’s suppose that the Trump administration

is over, for some reason. Do you think US’ policies of protectionism would continue?

Evan FEIGENBAUM

I think the more structural concern that US businesses have about China would not go away,

because they didn’t begin with Trump administration, and they're not going to end with the

Trump administration. What's peculiar to the Trump administration is, first, its focus on

bilateral deficit and we talked about this. The president seems to think of it as negative net

income. It’s a funny way to think about it. And then the use of tariffs and then the way they use

them. But the structural issues are much more long standing. In fact, people in China are

reflective about that and understand that it comports with many of the debates about the

structural reform that China has been having internally for years. Let’s just take SOEs. Lots of

countries have state owned enterprises – Statoil in Norway is an SOE. But in the US nobody

doubts that Statoil runs like a commercial firm. Chinese SOEs are different because they really

don’t run as commercial firms. External supervision has always been a problem for state-owned

enterprises in China. So, if you ran a state-owned enterprise in China like a commercial firm

and you wanted to deal with the problem of external supervision, one thing you might do is

strengthen a corporate board. And have board oversight of management. But other than a

handful of pilots with corporate boards in state-owned enterprises, that really hasn't come into

fruition. In fact, the trend we see now is not to strengthen boards but to strengthen the

Communist Party committees. Which reinforces a lot of the view that’s widely held in the US

that state owned enterprises in China are not normal commercial entities in the way they are in

other countries. There are agents of the state that are very closely tied to the political structure.

So, if you go back to what I said on investment, when you have a publicly traded US company

being acquired by a state-owned enterprise from China, in that kind of situation it raises a lot

of flags around investment. And that’s before you even get to the competition rules in China.

So, I think these issues – SOEs, competition policies, China’s comparative openness to

investment in areas where economies like the US – because we are an open economy and have

been very open to investment from China – and this includes European economies, too, like

Syngenta, a company acquired by a Chinese state firm. Can you imagine a seed company in

China being acquired the same way? I can’t. So those issues don’t go away with President

Trump because they are structural and of longer term in nature. But some of these peculiarities,

the use of instruments of trade laws like 232s in the way they’ve been used, the emphasis on

tariffs. I think that changes. But if you haven’t read the 301 report I really urge you to do so.


It’s really about structural competition in technology and industries of the future and the way

in which China is pursuing its national policies in those areas, which is a concern to US

companies.

SUNG Taeyoon

John, do you agree with Evan’s point that Chinese industrial policy like Made in China 2025

can be an underlying concern behind this current US trade policy issue?

John PARK

Yes.

SUNG Taeyoon

Then let me go back to Zhang Yunling. So, there are arguments against the current Chinese

industrial policy and also the competition policy, and they might work as some cause of current

US trade policy. Can you give your idea on that issue?

ZHANG Yunling

I think really there is a dispute on this economic system. So, I don’t think China, at least in the

near future, would change into a Western style market economy. So, we’re keeping its own

character. It’s not just China because China is big. It’s competitive. But each country has its

own different structures. That’s one thing.

Another thing, if we see this current trade dispute, as mentioned by another Professor Zhang,

and really has caused a debate, a discussion within China. China has made some big change in

the past because of outside pressure. Some people even said that in our long history, only big

outside pressure could force China to change quickly. Although change by China itself is

needed. So, number one big pressure is WTO – it has really, totally changed China’s economic

system, the foundation. The second is current trade war or pressure. In recent months a lot of

government documents have been issued, focusing on quicker, bigger liberalization, which in

the past would have been difficult to happen and involved a lot of trade process. So, it’s very

very difficult. When we call each ministry together, they all argue that they need protection

rather than liberalization. But this time, the State Council has really made a lot of big efforts.

And another thing is, China still is a developing country. It needs a long time. So, there are

two Chinas. One is media China – all our achievement makes people more confident and makes

China look so great. Another one is real China. Now people discuss what we will witness in

technology and what else. I think China needs time for transition. And there is not a therapy,

once for all, even with this trade dispute. Take the example of a negative list of liberalization

and pre-national treatment principle, the two basic principles in current trade negotiation. China


refused for a long time. But now, it’s a generally accepted principle, but first experimented in

14 free trade zones and then extended to the others. The negative side is that it makes

nationalists’ voice become stronger. But positive side is that decision makers know where they

are. All leaders have assured that China will not close the door, will open, and I think China

will be committed more than President Xi committed in Davos probably at this time.

So, as a developing country, there are some necessity from outside, but not hostile pressure.

I’d call this benign pressure or rule-based pressure.

SUNG Taeyoon

Zhang Qingmin, do you agree with the argument that China is still a developing country and it

might need some time?

ZHANG Qingmin

A lot of Chinese, I think 90 percent of the Chinese will say yes. But let me respond to your

point about the structure issue – whether things would have been different if it was not Trump

but some other president like Hillary. I think the problem will be still there. But I think Hillary,

the Democrats, will pursue a different roadmap and they might join the other country to have

a multilateral approach rather than a unilateral approach. This is the first. The negotiation will

also be very tough, but it will be different from the situation we have today. That’s the first

point.

Second, about the state-owned enterprise. And I think this has two kinds of impact, both

within China and globally. Within China, the government has more privilege for state-owned

enterprises. The section which is suffering is not American enterprise but private enterprises

within China. The Chinese private enterprises suffer a lot. And because of that, the US and EU,

and Japan, all those big economies declined to recognize China’s market economy status. That

has also further deteriorated our bilateral trade relations.

And the third, if China does have those kinds of problems, there are many means including

the WTO, and you can sue China using multilateral mechanisms. China has been sued more

than 20 times, and 14 of those have been [01:00:49] right? But the United States has also been

sued more than China has been sued. So, there’s a mechanism we can go to.

The last point I want to add is that if you look at the trade issue, it’s not state-owned

enterprise which plays a role here. It’s the issue within the US domestic economic structure.

The problem first erupted not between China and the United States, it’s between United States

and Japan, United States and Europe. Even though they have similar economic system, even

though they did not have state owned enterprises, but the trade deficit still rise. I think this is

the problem, but this is not the very key of the trade disputes that we have today.


SUNG Taeyoon

Then to Byung-il: even though there are some concerns about China’s industrial policy,

competition policy, and initiatives like Made in China 2025, if the US has this kind of trade

policy, not just for China but other countries around the world, the Trump administration and

the US might lose their leadership in the world system. What do you think of this?

CHOI Byung-il

My personal idea is that US has already lost. Unlike in the past, they like to address ‘problem

of China’ and conventional wisdom is you need to resort to two things: one thing is to utilize

your best networks, so allies. But Trump simply ignores either because he is ignorant or

uneducated.

Second is US needs to rely on existing rules, like rule-based free trade system. But he simply

ignores. In Trump’s mind, the US is still the biggest economy in the world, so they can defeat

all this one by one. I think this is very much a kindergarten mentality. So, the US has already

lost. But it is causing all kinds of problem, and because of his very unconventional manners

and tactic, it is not China but the US who is taking all these blames. So, he is losing in that way.

We used to talk about US soft power, being very inclusive for ideas and foreign students. I

think most of you in this room either have been to the US to study or as an exchange student.

Joseph Nye, who has spoken in this podium a few years ago, said that that is the biggest reason

why the US is not going to lose. But in Washington they are debating if the US system is going

to survive Trump. If he is staying for one more term, I don’t know what is going to happen.

Going back to the issue we are discussing, as economists, we are trained to figure out in given

situations what would happen in the future. So perhaps new equilibrium is when China

becomes a developed country. But China is trying to be the biggest economy as a developing

country. The problem is, in the meantime, there will be so much chaos, confusion and there

will be no effective mediators, arbitrators like the WTO.

In this world, Trump is achieving 3 things. A number behave structure. He may be achieving

numbers because the offer is already there – in June in Beijing promised to buy as much as 100

billion amount and Trump was asking 200 billion. The numbers are out there. Trump may be

pressed to declare an early victory when the election time is coming, and then he will be willing

to take what is already on the table and tweet ‘I got victory’.

The second thing is, he wants to change behaviors and structure. It will never happen. We

are not talking about typical normal economies. China has certain aspects of market economy,

of course. If you go to Shenzhen, it’s the darling of all these startup entrepreneurs, but it is

based on imitation and innovations. Imitation is coming from what? Breaking all the existing

rules. I had an interesting conversation with a very renowned Chinese economist in the US. He

showed me some graphs which had all the countries in the development path, they ignored or

violated IPR. His benchmark was countries that are reaching per capita GDP 20,000 USD. He

had numbers for the US, Great Britain, Korea, Japan. All these countries trying to reach that

level did these villain things. China has a long way to go. Taking his reasoning, then are you

willing to say that China will repeat those terrible things until you hit that level? I think this


issue will stay there even after Trump retires into history. China is not going to change its

political system, and you have a very interesting relationship between state and economy, not

only just single state but monopolistic state. So, we’ll be ready for some very interesting

phenomena.

SUNG Taeyoon

Evan, do you agree with his agreement that the US has already lost the world leadership and it

is reasonable for the US to focus on domestic structural issue?

Evan FEIGENBAUM

US concerns about China is broadly shared by a lot of countries. I was in Berlin a few weeks

ago, Germans are talking about a lot of the same issues that the US is talking about. Some of

this question of strategy is also question of tactics. But there’s a course set of structural issues

that China’s been facing for a while. It’s the point you made about economic system. Let’s not

pretend there’s no debate in China about what the future of the economic system should look

like. It’s been going on for a while. There’s more than one view of the roles states owned

enterprises should play in their economy. There’s more than one view of competition reforms.

So, the presumption in the United States for a long time was that reform and opening went

together, partly because Chinese leaders always talked about reform and opening together. It

was always 改革开放, they went together. And I think the view in the US is increasingly

suspicious that reforms may happen in China but not in a way that is necessarily conducive to

opening, in a way that implicates the interest of foreign companies.

At the end of the day, what a lot of this is going to come down to is how China chooses to

address its own structural reform issues, which have been apparent to Chinese leaders. It’s not

an intellectual problem, it’s a political problem for a long time. And I don’t have the answer to

that. And I’m not even sure Xi Jinping has the answer to that. There’s a debate about that. But

I do know that when China’s leaders talk about reform, they don’t mean exactly the same thing

as American government officials mean when we talk about reform. We mean one thing by

reform – market liberalization and openness to foreign firms. Chinese leaders, in my view,

sometimes mean market liberalization but they mean at least two other things.

The second thing is administrative measures designed to increase operational efficiency in

the economy. And the third thing is getting the balance of enforcement, decision, and fiscal

powers right between the central and local government. Things like enforcement power, fiscal

power, taxation, all of this. So, there’s a lot of reform happening in China but a lot of it doesn’t

necessarily implicate the interest of our companies, our workers, our farmers, our ranchers, and

that’s ultimately the core of the problem. So, you’re right. If the US goes and says your entire

economic system has to be thrown out the window, you need to turn the Chinese economy into

a carbon copy of the American economy. Which is a non-starter. But competition reforms, state

owned enterprise reforms, liberalizing reforms, openness to best in class firms and practices

from overseas, those things have been part of the Chinese debate for a while, and ultimately


only China can resolve that.

But I do agree with you that a little external pressure can be a good thing. I mean, look what

WTO accession did for reform in China, including state owned enterprises – 30, 40 million

people laid off. So, if the US had a strategy that was designed to maximize pressure for

domestic change in China, that would cross cut economic reform debates in China that might

not resolve this thing by next Tuesday, but in time, might align objectives in a negotiating

process that would have more realistic chance of success than where we are now.

SUNG Taeyoon

So, it’s time for us to wrap up this session. Before we wrap up this session, let us have the

concluding remark from Ahn Duk-geun. Each panelist would have two minutes to conclude

the session.

AHN Dukgeun

In the first session, we had discussion about where the current conflict between US and China

is destined for. Whether it heads for any kind of war situation. But for our session, it has the

title of trade war and how far it will go.

Actually, what I believe is this is the beginning of trade cold war. If you see the way US

government tried to do all this current protectionism is, even after the current issue against

China is somehow resolved, then President Trump’s administration’s protectionist policy will

be completely changed? I don’t think so. And also, as the panelists repeatedly explained, we

have structural issue between US and China about many economic policy matters. So, probably

what we have to prepare for in the coming years is the beginning of unprecedented trade cold

war for some period. Also, then, the sector that the current measure will inflict will become

much larger. Now we have started from steel and moving to automobile, probably we will move

to energy or other sector. So, sooner or later we will have much more complicated situations.

And as mentioned earlier, probably we should get together again to talk about this issue later.

CHOI Byung-il

What is happening right now in front of our eyes is which I call “new normal”, and a lot of

international scholars they even name “illiberal international order”. And the distinction

between old normal and new normal is that we are experiencing transition from rule-based

system to power-based system. And also, we’ve been witnessing transition from multilateral

institution to unilateral institutions – even that is called institution. Also, from free trade to

many trade.

But among all this, what is really remarkable is that even during the Cold War years, we

have enjoyed a so-called firewall between trade and security, by which I mean even if there

was serious trade dispute among allies, they could go all the way without worrying about


consequence to security issues. But that firewall has disappeared and is unlikely to be replaced

by something else. If I borrow a phrase from the Wizard of Oz, we’re not in Kansas anymore.

I don’t think we’ll back to Kansas in any time soon.

ZHANG Qingmin

Let me say three things. Firstly, we are facing a critical moment with a lot of difficulties in

bilateral relations. But that does not reduce the significance of it. It’s become more and more

important.

Secondly, we are celebrating the 40th anniversary of China’s opening up. Since 1978, China-

US relations have accomplished a lot. Those were not accomplished with small difficulties.

Ever since the late 1980s and early 1990s, first is most favored nation status. Today’s market

access, and there’s intellectual property rights, Renminbi’s devaluation. All those things have

kept affecting China-US relations. But we have seen that US-China trade has always been on

the rise. If you compare it with China’s trade relations with Russia, which we enjoy very very

good political relations, for the last ten years, the two leaders have met very often. Every time

they met, they promised by the end of the year, their trade volume will reach to 100 billion.

But for 10 years, it still almost one third of that of US and China. So I think we should look at

US-China trade disputes from historical, global perspective.

Thirdly, US-China relations have a very very big impact on China’s domestic development.

We should not forget that in 1978, when China decided to open up to the outside, that decision

was made exactly at the same time with China deciding to normalize diplomatic ties with the

United States. We mainly opened to the US-led Western system. We were open since 1949 but

mainly to developing countries. And only after China opened to the West and joined the

Western-led system was China able to develop economy and reach this current status as the

world’s second largest economy. So, if China wants to continue to develop on this road, good

China-US relations are very important. But China is not the only country that has benefitted

from good bilateral relations. I think US also benefitted from that. From that perspective, I do

hope that the two countries could overcome the difficulties and further push for their better

relations. Thank you.

ZHANG Yunling

I think the trade war will continue for some time. We don’t know how long. Hope we can use

our bullets as soon as possible. As I mentioned, China will continue to do reform and opening.

This year we celebrate China’s 40th anniversary of opening and liberalization. Leaders have to

show to people and outside world that China will continue to do more. I remember Vice Premier

Wang Yang saying that US and China are like married couple – you may have disputes but

have to live in one house, though not necessarily in the same bed, and divorce is not possible.

Disputes on many things will continue. Each side understands the importance of this

relationship and knows where the redline is – which they shouldn’t cross, even half step.

Finally, on industrial policy, Made in China in 2025, we learned it from the German case –


Industrie 4.0. So why can’t China adopt an industrial policy? Do not mention too much about

industrial policies. China’s economy is basically running on the market. Key issue is not

whether it’s state-owned or not. Nordic countries have a high proportion of SOEs but they

follow market rule. This can be discussed and made together through negotiation.

John PARK

I wanted to highlight the challenge of management going forward. These are very complex

issues and they are going to become more complex. We are going to get into the area where

measures are not particularly focused on tariffs – things along the lines of what South Korean

companies are experiencing in Chinese marketplace: regulatory measures, or safety procedures

disrupting very critically business operations. I think these can be scaled up and make these

issues more complex.

The point I wanted to highlight is the indicators. How will we know these trade issues are

becoming more serious? Some have looked to the US stock market. There really hasn't been

much change. Some believe that if you look at the stock market, the whole notion of

distinguishing between the headwind and the tailwind. Clearly the trade issues do represent the

headwind, but the tailwind right now is the United States are earnings. These companies are

coming up with earnings that are very very healthy. The idea that this is a trade war that is more

political in nature that doesn’t have any substance is what I worry about. The notion of a crisis

that can creep up on us in other areas as well.

The final point is that when it comes to management in China, we have heard a lot about the

challenges with debt situation there, and a trade related capital outflow that triggers something

like a financial crisis. These are the type of issues that are very concerning. As we look at

something narrow as a US-China trade dispute certainly escalating to something more serious,

how it could trigger other crises that we really are not prepared to manage right now.

Evan FEIGENBAUM

I’ll just say two things and I’ll let you go. First is that trade wars are not good and they are not

easy to win. I’m very fatalistic about this now. I think a lot of people are going to get hurt. We

talk about trade wars and trade disputes in very macro terms. I’m a Washington guy but I live

out in the Midwest now, the heartland of the United States. The average Joe in the US is not

just a steel worker. The Average Joe runs a business that depends on intermediate inputs from

China and other countries, the average Joe is looking to export his or her products to China,

the average Joe is looking to expand overseas, the average Joe is a soybean farmer, and soybean

prices has hit their lowest level since 2008. So, there are people in my part of the country that

are hurting, because, among others, we put a tax on intermediary goods that are necessary

inputs for the supply chain of a lot of companies that re-export. That’s before we even get to

the farmers.

The first point I’d make is, I think it on a very human level. You are going to hear a lot of

stories of a lot of people who are affected by this in ways that are very tangible for their


businesses, their families and lives. That’s not just true in the United States – that’s true in

China and in other countries as well.

The second thing is, the diversity of experience in the United States in terms of how people

touch and feel China’s impact is much greater than it's ever been before. The US-China

economic story for a couple of decades was basically large multinationals and financial services

firms. It is not so any more. It is family farms, it is small and medium sized businesses, it is

tech, it is cities, it is states. At Paulson Institute we have an initiative called ‘Macropolo,’ you

can check this at the website Macropolo.org. Among other things we have a map about not just

the flow of Chinese investment but the stock. There are 113,000 Americans working for

Chinese owned entities now. Living, breathing, working human people reach out and touch

Chinese entities in ways that are different than a way multinational companies did in the 1990s

and the 2000s. In time, this is going to hit home for people in ways that may or may not have

political effect but in any case absolutely have tangible business effects and human effects.

That’s what I worry about with this because it is not an abstraction for a lot of people. I don’t

think there are easy answers. That’s why even prior to this administration we were dealing with

all these structural impediments in China. That’s why we say that even we have a new president

and a new administration a lot of these things will remain. There are no easy answers but, in

the meantime, but the road we are on is going to end up with a lot of people having tougher

time in quite a few countries.

SUNG Taeyoon

This has been a very impressive discussion. Please give our panelists a big hand.

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2018 Korea-US-China Trilateral Conference “Northeast Asia and … · 2021. 2. 26. · 2018...

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