Patron to partner: reflections on the US-South Korean relationship.

Kotch, John Barry

JOHN BARRY KOTCH is Adjunct Professor of Political Science at the Graduate School of Asia-Pacific Studies at Hanyang University, South Korea.

Looking back on the past half-century of Korea's turbulent history, the United States can take considerable satisfaction from its accomplishments. While the results are not perfect by any means, there is a pervading sense that the United States "did right by the Korean people," instilling in them a sense of democracy. Now these values are widely accepted and practiced by the Korean populace and government to a degree not fathomable fifty years ago, when Americans first came to Korea in large numbers as liberators from a bitter 40-year Japanese occupation. South Korea has faced the numerous obstacles that threatened it at its birth to emerge as a stunning success story. The United States now stands ready to help transform South Korea's current chaebol-dominated, state-dependent economy into a genuine market economy.

South Korea has overcome the birth pangs attending its Cold War origins and the bitter legacy of political and ideological standoff between the United States and former Soviet Union to emerge as a stunning success story. Its economy now ranks among the world's top dozen, and before last year's financial crisis and economic downturn, its per capita GNP had reached US$10,000 in little more than a single generation from a starting point of US$100, an historically unprecedented turnaround. The challenge for the United States and South Korea in the next century will be to meet the economic and security challenges as full partners in creating an economically vibrant, politically secure Northeast Asia.

The Security Alliance

Unfortunately, the wartime goals of the Cairo Declaration--that "Korea should become free and independent"--have only partially been achieved. The northern half of the Korean peninsula remains in a state of neo-Stalinist terror. This threat has caused US policymakers to forgo any considerations of withdrawal of US forces (now numbering 37,000). In 1993, President Clinton laid down the yardstick: Americans troops would stay "as long as the Korean people want them to," and there is no sign that neither the American government nor the South Korean want them to leave any time soon. More recently, both Secretary of Defense William Cohen and his predecessor William Perry have advocated the continued presence of US forces even after the unification of North and South. Although some believe that the continued presence of US troops perpetuates Korea's division, the weight of evidence suggests that they provide a crucial safety net preventing a resumption of hostilities in what officially remains an unfinished civil war.

The Korean-American security alliance, centered around the UN Command and the US-Korea Security Treaty of 1954, has maintained peace on the Korean peninsula for more than four decades by serving simultaneously as a deterrent and a nexus of defense. Despite the North's numerical superiority in its armed forces, the South Korea of today is militarily more than a match for its neighbor should the North again be tempted to attack. Were the new US policy of constructive engagement with Pyongyang to succeed, the role of the US-Korea alliance could be broadened to include measures to reduce tensions and build confidence. Four-party talks continue in Geneva between the United States, China, and the two Koreas, aimed at reducing tensions and reaching a Korean peace treaty and peace mechanism. Progress in Geneva will be a key indicator that the alliance is paying political dividends.

The crucial test for the alliance came during the 1993-1994 North Korean nuclear crisis that was ultimately resolved by the 1994 Agreed Framework and the creation of the Korean Peninsula Energy Development Organization (KEDO). Not only did the idea of aiding North Korea by building twin nuclear reactors touch a raw nerve among many members of the US Congress and conservative members of the Korean government and military establishment, but the United States, for the first time since the Korean war, found itself forced to negotiate directly with the North--a regime it does not even recognize--without the South at its side. Even more grating for the South, the latter was left to pick up the lion's share of the tab for the reactors (70 percent of total costs), which it plans to pay for despite its current economic difficulties.

Predictably, both the negotiations for the Agreed Framework and the costs associated with its implementation soured US-South Korean relations, exacerbated by the fact that policy for the Korean peninsula originated with the United States. And although the scars have healed with the ascension a new South Korean president strongly critical of his predecessor Kim Young Sam, dealings with the North remain fraught with danger and difficulty for the two allies. Pyongyang seems willing to precipitate the collapse of the Agreed Framework in the hope of driving a wedge between Seoul and Washington on nuclear and humanitarian priorities. President Clinton recently appointed former Secretary of Defense William Perry as Policy Coordinator for North Korea with the task of recommending to the Clinton Administration and the US Congress an appropriate course of action. Whether Perry's proposals will come down on the side of a hard or soft policy line undercutting or dovetailing with Kim Dae Jung's "sunshine policy" vis-a-vis the North as the case may be is the question du jour.

On the one hand, Washington and Seoul have effectively coordinated their responses to North Korean provocation, whether the threat has been in the form of submarine landings or missile launchings. Cases of the former have been brought before the Military Armistice Commission meetings in Panmunjom for an explanation and the UN Security Council in New York for the imposition of sanctions. Reports of the latter resulted in vigorous protests by Washington and Tokyo over the lack of prior notification and has brought Japan on board as a full planning partner and prompting consultation among the three allies over the development and deployment of a theater anti-missile defense system.

On the other hand, the United States and South Korea do not share all of the same security concerns. The former is preoccupied with nuclear proliferation and the control and delivery of weapons of mass destruction worldwide, while the latter is primarily concerned with developments on the Korean peninsula and the policies of adjacent Asian states (China, Russia, and Japan). Moreover, South Korean relations with each of these powers carries a different historical, political, and economic weight than its rapport with the United States. Nevertheless, the importance of the United States in South Korea's security interests cannot be overemphasized.

Democracy's Antagonists

Besides the overall US support for South Korean security, the United States should feel proud about the democratic election of Korea's new president, Kim Dae Jung, in December 1997. Fifty years ago, the government of the Republic of Korea was a thinly disguised right-wing dictatorship led by Syngman Rhee, later toppled by a student-led revolution in April 1960 after more than a decade of misrule. For the next three decades--from Park Chung Hee's coup in 1961 through Kim Young Sam's election in 1992--the United States fought an "internal war" against three Korean military leaders, whose democratic credentials ranged from slim to none. The most cathartic part of that struggle was Chun Doo Hwan's seizure of power in December 1979, following Park Chung Hee's assassination at the hands of his own intelligence chief--and his subsequent bloody suppression of political opponents in Kwangju in May 1980. Hundreds of innocents lost their lives. Seven years later, US pressure, in the person of the late Assistant Secretary Gaston Sigur, was crucial in forcing a reluctant Chun to agree to free elections for president--ironically won by his hand-picked successor, Roh Tae Woo. This was primarily because the two leading Korean dissidents--both future presidents, Kim Young Sam and Kim Dae Jung--refused to unite around a single opposition candidate, again demonstrating the pervasive impact of factionalism on Korean politics.

It was not until the elections of 1992 and 1997, however, that history came full circle and Korea's promise of democracy was fulfilled. South Korea's political leaders no longer had to seek political legitimacy from an outside power; they had earned it the eyes of their own people. Yet democracy in the fullest sense of the word remains elusive; politics are still driven by personality rather than party mechanisms. The political arena is beset by bitter rivalry, intrigue and corruption, making Washington impeachment politics look tame by comparison. In Seoul, political parties are transient while political personalities endure. Parties shop around for candidates, while individuals offer themselves to the highest bidder--just the opposite what is found in American and western European politics.

Moreover, despite a veneer of fairness, the shortcomings of South Korean democracy were exposed with recent allegations that the ruling party used the Korean Intelligence Service to spy on opposition members, setting up shop in the National Assembly building itself. The new development comes on the heels of the "North Wind" scandal, over a plan hatched during the previous Kim Young Sam administration by the Agency for National Security Planning in which Korean businessmen residing in the United States were paid to stage a news conference allegedly linking Kim Dae Jung to political contributions from North Korea. Both incidents go well beyond the run-of-the-mill bribery and corruption endemic to a political culture rooted in personal relationships, quid pro quo, and only a dim awareness of the rule of law.

The latest scandal to rock South Korea brings allegations of a pattern of clandestine contacts between South Korean political operatives and North Korean agents in Beijing and elsewhere. The North Koreans allegedly sought to influence elections in the South through the staging of incidents in exchange for payoffs and economic aid. This included a bizarre plot orchestrated by a "dirty tricks" contingent of Grand National Party (GNP) operatives to induce North Korea to stage a firefight in the Demilitarized Zone on the eve of presidential elections in order to swing votes toward the more conservative GNP standard-bearer.

The price of such nefarious acts can be high--especially by virtue of the automatic American involvement triggered by the bilateral security treaty--and could include needless loss of life should they get out of hand. Such machinations are a sobering commentary on the state of Korean politics and the willingness of some to jeopardize the peace for partisan political purposes. What confidence can the US military have in its ability to maintain peace on the Korean peninsula when political leaders are prepared to act irresponsibly?

The Next Challenge

A different kind of crisis befell Korea in December 1997--almost a decade after the first nominally free presidential elections. This time, the threat was economic, brought on by the financial collapse of the won. Once again, the United States was forced to intervene in the name of the international community, helping to craft a US$58 billion IMF rescue package. Preventing Korea from defaulting on its international obligations was the economic equivalent of what the UN Command had done almost a half-century earlier--forestalling South Korea's military collapse on the field of battle.

Korea's current crisis has raised a number of critical obstacles to progress. The first has been successfully traversed; the won has stabilized and interest rates have fallen dramatically. Ahead, however, lies the need for fundamental corporate restructuring and financial reform. The traditional modus operandi of Korea's heavily indebted dinosaurs, the chaebol, was at the root of Korea's problems in the first place. These tightly controlled, sprawling corporate conglomerates, who benefit from unlimited loans and cross-guarantees for their myriad subsidiaries, have operated without providing financial statements or accountability to shareholders. Although dynamos of growth in the past, they must now bear the brunt of change or be doomed in an age of globalization.

Understandably, however, with the chaebol in control of almost half of the Korean economy, the government can do no more than point the way to reform. Indeed, as the newly anointed Federation of Korean Industries (FKI) chairman and Daewoo guru Kim Woo Chang has made clear, they will do so on their own timetable and in their own way. Therein lies the danger. A year-end agreement for asset swapping involving subsidiaries of Hyundai, Daewoo, and LG is off the ground, but has already left bitter conflict in its wake over the fate of affected workers and the future of the merged entities. Although its purpose--to create more efficient and competitive corporate structures--cannot be questioned, the method and absence of market-driven reform certainly can. The government's resolve to force change and the market's ability to adapt will be severely tested over the coming year. Foreign investors are the necessary ingredient for successful recovery and are, according to Korean Trade Minister Han, "the only group that really counts in the end." However, these foreign investors have not been impressed with the raft of new legislation designed to make Korea the model of an open and fully transparent market economy. While Korea's banks have shut off the credit spigot to fifty-five companies, they constitute only a minute fraction of chaebol-subsidiary assets. Similarly, only five of the weakest banks, comprising a mere seven percent of the financial sector, have been put out of business. Finally, pooling labor force redundancy in merged entities instead of purging it and pairing weak banks with stronger ones are perils plaguing both the corporate and financial sectors. Synergistic corporate and financial reform and labor market flexibility remain priority concerns for foreign investors.

While the sheer concentration of power that constitutes the chaebol empire makes reform imperative, the adoption of Western-style business practices would cut deeply into the sinews of a corporate culture based on personal relationships and traditional business practices rather than profitability. Swaps, equity offerings, asset sales, and spin-offs can set the stage, but they cannot change mindsets. Similarly, in the financial sector, the implementation of alien business practices such as credit risk analysis and loan evaluation must be learned and absorbed over time. Profitability cannot be insured in the marketplace in the same way that security can be secured through alliance.

The Partnership's Role

Where does the United States fit in this society-wide problem? Koreans tend not to distinguish between the US government and US businesses; they confuse the role of a benefactor, aid donor, and security provider with that of a market-driven capitalist system. While security threats will likely persist as long as the North Korean threat does, the Clinton administration has embraced trade and foreign economic policy to an extent unparalleled in recent American foreign policy. Conflict is inevitable with a country like Korea, which has in the past practiced protectionism, lacked transparency, and resisted market opening. And the inertia of the status quo remains strong despite the open market principles espoused by the new Korean administration of Kim Dae Jung. As a result, Korea and the United States have engaged in a bitter tug of war over trade during the last decade, with World Trade Organization (WTO) disputes pending in several sectors, from television sets to computer chips to spirits.

Koreans tend to understand that the Clinton administration is not so much beholden to corporate America as constrained to see that the principles of free market economics are respected and practiced by the key US trading partners. Reciprocity, not revenge, is the goal, but it is in conflict with a Korean culture that sees the United States as a "big brother." In the popular conception, the United States should be able to absorb Korean exports while Korea plays by a different set of rules. Although the new Korean government is in the process of changing those rules through administrative channels, it has encountered bureaucratic trouble and softened in the face of corporate resistance, labor militancy, and political opposition.

There are now signs that an upswing is underway, fueled by a year-end stock market surge, higher levels of foreign direct investment in 1998, and a full year of hefty trade surpluses. To ease Korea back onto a growth path and sustain its forward momentum, US assistance will again be indispensable. As President Clinton, Secretary of the Treasury Robert Rubin, and Ambassador Stephen Bosworth have all made clear, the United States is willing to do more to help. But Korea must expect support of a different kind than that it has received in the past, with the United States a partner helping a partner, not a patron serving a client. Maintaining the momentum of this unique and multidimensional partnership in a changing political and economic environment is the next great challenge facing South Korea as it moves into its second half-century and onward into the next millennium.