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Between Two Whales: Korea’s Choice in the Post-Crisis Era

Joon-Kyung Kim and Chung H. Lee

EXECUTIVE SUMMARY

This chapter examines the impact of the current global financial meltdown and China’s rising power on the South Korean economy and South Korea’s external relations with China and the U.S.

Main Argument:

Since 1945 South Korea has had a close relationship with the U.S., who has both been the country’s largest trade partner and guaranteed its security. This relationship has been changing, however, ever since China’s emergence as a global economic power. As the Korean economy grows, it will inevitably become more closely linked with China through trade, investment, and production networks. How close these links become will depend on the economic relations that evolve between South Korea and the U.S. following the current crisis.

Policy Implications:

  • If the U.S. economy recovers quickly and does not grow protectionist, Washington’s relationship with Seoul will remain strong.
  • The U.S.–South Korean relationship will be strengthened if the Korea-U.S. Free Trade Agreement is ratified.
  • A peaceful coexistence between the U.S. and China is the only way for South Korea to avoid being faced with the difficult choice of aligning with one or the other of these major powers.