Politics of East Asian Free Trade Agreements: Unveiling the Asymmetry between Korea and Japan 2020040760, 2020040761, 9780367278922, 9780367278854, 9780429298585

Table of contents :
Cover
Half Title
Series Page
Title Page
Copyright Page
Dedication
Table of Contents
List of Figures and Tables
Preface
List of Abbreviations
Chapter 1: Introduction
Economic perspectives on FTA politics
Domestic politics and FTAs
Supply-side factors: institutions and political leadership
Demand-side factors: interest groups and civil society
Argument in brief
International politics and FTAs
Chapter overview
Notes
References
Chapter 2: Asymmetric evolution of Korea and Japan’s FTAs, late 1990s–2020 1
The puzzle
Evolution of Korea and Japan’s FTAs in global context: the 1990s
Global context: FTA race in the 1990s
The Asian Financial Crisis of 1997: Korea and Japan joins the FTA race
The importance of agricultural liberalization in Korea and Japan’s FTAs
Patterns in Korea and Japan’s FTAs since the late 1990s
First period: late 1990s–2012
Second period 2013–2020
Economic explanations for Korea and Japan’s FTAs
Explaining divergences in Korea and Japan’s FTAs
Notes
References
Chapter 3: Trade policymaking institutions 1
Domestic trade governance
The first period of domestic trade governance: 1990s–2012
Cohesive domestic trade governance in Korea: 1990s–2012
KORUS FTA
Japan 1990s–2012: fragmented domestic trade governance
Korea–Japan FTA
The second period of domestic trade governance: reversals since 2013
Korea 2013–2020: weakening cohesion in domestic trade governance
Korea–China FTA
TPP
Japan 2013–2020: a shift toward more cohesive domestic trade governance
From TPP to CPTPP
Japan–Australia FTA
Conclusion
Notes
References
Chapter 4: Political leadership and trade policymaking
Introduction
Korea 2003–2012: strong political leadership in FTAs
Progressive president Roh Moo-hyun’s administration (2003–2007)
Conservative president Lee Myung-bak’s administration (2008–2012)
Korea 2013–2020: reversal to weak political leadership in FTAs
Conservative president Park Geun-hye’s administration (2013–2016)
Progressive president Moon Jae-in’s administration (2017–present)
Discussion
Japan 1990s–2012: weak political leadership in FTAs
LDP governments (Late 1990s–2008)
DPJ governments (2009–2012)
Japan 2013–2020: strengthening political leadership in FTAs
Coopting and weakening MAFF and the Norin Zoku
Reforming Japan’s farm group
Discussion
Conclusion
Notes
References
Chapter 5: Civil society, interest groups, and FTA politics
Introduction
Japan: institutionalized civil society–state relations on FTAs until 2012
Keidanren and FTAs until 2013
JA-Zenchu and the JA Group until 2013
Keidanren and JA-Zenchu since 2013
Weak presence of other civil society actors in Japan’s FTA politics
Korea: social mobilization and FTA politics until 2013
Anti-neoliberal coalition
Neoliberal coalition
Korean civil society and the KORUS FTA
Korea: failure to institutionalize civil society–state relation on trade
Korean civil society post 2013
Conclusion
Notes
References
Chapter 6: Geopolitics and changing Japan and Korea’s trade relations
Introduction
TPP 2013–2016: missed opportunity for U.S.–Japan–Korea economic alliance
Japan: Prime Minister Abe’s push for TPP
Korea: reluctance to join the TPP
Weakening incentives for trade cooperation
Post-2016: diverging trade positions of Japan and Korea vis-à-vis the U.S.
U.S. withdrawal from the TPP
2017 WTO Ministerial Conference
Section 232 on aluminum, steel, and auto
Understanding the diverging responses of Japan and Korea
The 2019 Japan–Korea trade conflict
Conclusion
Notes
References
Chapter 7: Conclusion
U.S.–Japan trade agreement
Japan–Korea trade conflict
The rise of China
References
Index

Citation preview

POLITICS OF EAST ASIAN FREE TRADE AGREEMENTS This textbook explains the politics of free trade agreements in Japan and South Korea. Examining free trade agreements in Japan and South Korea since the late 1990s, Choi and Oh analyze the role of institutions, political leaders, sectoral interests, and civil society in placing the two countries on alternate paths of free trade agreements at different points in time. Systematically approaching the politics of free trade agreements from each perspective, they expose the domestic political underpinnings of free trade agreements in a global trade order that is increasingly fraught with conflict. A valuable textbook for students of international political economy and international trade in East Asia, particularly those focusing on Japan and South Korea. It’s also a useful resource for scholars and policymakers looking to better understand trade politics in East Asia. Choi Byung-il is professor and the former Dean of the Graduate School of International Studies (GSIS), Ewha Womans University (Seoul, Korea). He is also the President of Korea Foundation for Advanced Studies. Most recently, he was the President of the Korea Economic Research Institute, a think tank representing the Korean business sector. He served leadership positions at several academic associations, including the President of the Korean International Economic Association, President of the Korean Association of Trade and Industry Studies, and President of the Korea Association of Negotiation Studies. He was a member to various advisory councils for the Korean government, including the National Economic Advisory Council for the President of Korea, Trade Negotiations Advisory Council, Inter-Korea Relations Council, and Advisory Council for the Ministry of Foreign Affair and Trade. Prior to joining the Ewha GSIS in as a founding faculty, he was the Korean chief negotiator for the WTO basic telecom negotiations (1994–1997). His service in the international area awarded him two medals of excellence from the Korean government. Jennifer S. Oh is an associate professor at the Graduate School of International Studies, Ewha Womans University (Seoul, Korea). She is a political scientist who specializes in comparative political economy and East Asian politics. Her main research areas are the political economy of Japan and Korea, trade politics, agricultural politics, and East Asian democracy. Recent publications cover topics such as FTA politics in Japan and Korea, agricultural reform and farm group politics in Japan and Korea, and Korean social mobilization.

Politics in Asia series Japan’s Cold War Policy and China Two Perceptions of Order, 1960-1972 Yutaka Kanda Japanese Democracy and Lessons for the United States Eight Counterintuitive Lessons Ray Christensen Governance and Democracy in the Asia-Pacific Political and Civil Society Edited by Stephen McCarthy and Mark R.Thompson Chinese People’s Diplomacy and Developmental Relations with East Asia Trends in the Xi Jinping Era Lai To Lee State Reconstitution in China, Japan and East Africa Graham F. Odell A Political Biography of Aung San Suu Kyi A Hybrid Politician Michał Lubina ASEAN as a Method Re-centering Processes and Institutions in Contemporary Southeast Asian Regionalism Edited by Ceren Ergenc Rising Islamic Conservatism in Indonesia Islamic Groups and Identity Politics Edited by Leonard C. Sebastian, Syafiq Hasyim and Alexander R. Arifianto Social Capital in Singapore The Power of Network Diversity Vincent Chua, Gillian Koh,Tan Ern Ser and Drew Shih Politics of East Asian Free Trade Agreements Unveiling the Asymmetry between Korea and Japan Byung-il Choi and Jennifer S. Oh For the full list of titles in the series, visit: https://www.routledge.com/Politics-inAsia/book-series/PIA

POLITICS OF EAST ASIAN FREE TRADE AGREEMENTS Unveiling the Asymmetry between Korea and Japan

Choi Byung-il and Jennifer S. Oh

First published 2021 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2021 Choi Byung-il and Jennifer S. Oh The right of Choi Byung-il and Jennifer S. Oh to be identified as authors of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Ch’oe, Pyŏng-il, 1958- author. | Oh, Jennifer S., author. Title: Politics of East Asian free trade agreements : unveiling the asymmetry between Korea and Japan / Byung-il Choi, Jennifer S. Oh. Description: New York : Routledge, 2021. | Series: Politics in asia | Includes bibliographical references and index. | Summary: "A textbook which explains the evolution of international political economy in East Asia. Examining the development of Free Trade policy in Japan and South Korea since the late 1990s, Choi and Oh analyse the role of political, institutional, sectoral, and civil society factors in placing the two countries on different paths at different points in time. Systematically approaching this issue from each perspective in turn, they expose the domestic political underpinnings of the free trade system. A valuable textbook for students of international political economy and international trade in East Asia, particularly those focussing on Japan and South Korea. It's also a useful resource for scholars and policymakers looking to better understand the dynamics of free trade policy in East Asia”-- Provided by publisher. Identifiers: LCCN 2020040760 (print) | LCCN 2020040761 (ebook) | ISBN 9780367278922 (paperback) | ISBN 9780367278854 (hardback) | ISBN 9780429298585 (ebook) Subjects: LCSH: Korea (South)--Economic conditions--21st century. | Japan--Economic conditions--21st century. | Korea (South)--Economic policy. | Japan--Economic policy. | Free trade--Korea (South) | Free trade--Japan. | Korea (South)--Commerce--Japan. | Japan--Commerce--Korea (South) | East Asia--Commerce. Classification: LCC HC467.965 .C4714 2021 (print) | LCC HC467.965 (ebook) | DDC 382/.71095195--dc23 LC record available at https://lccn.loc.gov/2020040760 LC ebook record available at https://lccn.loc.gov/2020040761 ISBN: 978-0-367-27885-4 (hbk) ISBN: 978-0-367-27892-2 (pbk) ISBN: 978-0-429-29858-5 (ebk) Typeset in Bembo by SPi Global, India

To Jiyoung, Stephen, Christine,Yon Sog, Frances, and Jerome.

CONTENTS

List of Figures and Tables viii Preface ix List of Abbreviations xi 1 Introduction

1

2 Asymmetric evolution of Korea and Japan’s FTAs, late 1990s–2020

15

3 Trade policymaking institutions

34

4 Political leadership and trade policymaking

58

5 Civil society, interest groups, and FTA politics

81

6 Geopolitics and changing Japan and Korea’s trade relations

100

7 Conclusion

117

Index 122

FIGURES AND TABLES

FIGURE 1.1 Framework TABLES 2.1 Korea’s FTAs and Share of Food Imports 2.2 Japan’s FTAs and Share of Food Imports 2.3 Overview of Argument 3.1 Domestic Trade Governance and Japan and Korea’s FTAs, 1990s–2020

9 20 21 29 35

PREFACE

“How could Korea negotiate an FTA (free trade agreement) with the U.S.? Aren’t you afraid of angry opposition from farmers?” The Japanese Vice Minister of Agriculture was puzzled. On April 2007, one of the authors of this book met with a team of high-level delegation from Japan. The purpose of their visit was to seek an answer or clue to understand the audacity of the Korean government in its pursuit of an FTA with the U.S., one of the biggest exporters of farm products. In early April 2007, Korea and the U.S. had successfully concluded their FTA negotiations. To the eyes of the Japanese delegation, the Korean government’s move was risky and tantamount to political suicide. One question haunted the Japanese delegation. What enabled the Korean government to embark on such a bold adventure, while Japan could not? “Do you think Korea will join the TPP (Trans-Pacific Parntership)?” Across the dining table, the Japanese Minister of Agriculture was beaming. It was June 2016 and the same author had a breakfast meeting with the Japanese Minister of Agriculture in Tokyo. Japan in 2016 was very different from the Japan the author had encountered in 2007. In early 2016, Japan had entered into the TPP with 11 countries including the U.S. Korea was not one of the 11 countries. In the time span of about a decade, Japan had become bolder and more adventurous in its pursuit of FTAs. Japan must have found its answer to the questions posed in 2007. Korea and Japan thrive on trade.Through trade, the two countries have emerged as global manufacturing powerhouses. To keep their manufacturing sectors competitive, securing and enhancing market access is critical. The global race for FTAs, which gained momentum in the late 1990s and became intensified at the dawn of the new millennium, pushed the two countries to an uncharted territory in trade policymaking. They were forced to seriously consider opening their heavily protected agriculture sectors. Otherwise, FTAs with major countries or a meaningful FTA with any country would be virtually impossible. Somehow, Korea stood up to

x  Preface

the challenge, while Japan was hesitant. The Korea-U.S. FTA (KORUS FTA) was the watershed. More than a decade later, Japan rose to the occasion as well. The TPP was Japan’s response to the KORUS FTA. These achievements were neither expected nor guaranteed. In fact, they were against all odds. What enabled the two countries to achieve these major trade feats against all odds? What obstacles did they overcome? This book attempts to show the evolutionary dynamics of FTA trade politics in Korea and Japan. The content of this book has been developed from the authors’ two previous articles on Korea and Japan’s FTAs. From the beginning, the main question driving the research was trying to understand why Japan and Korea’s FTA policies have not converged. In both countries, agricultural liberalization has been a sensitive topic that is considered a political and social taboo. And both are classic cases of export-oriented economies in East Asia that are competitive in exports of capital-intensive manufactured goods. Despite these similarities, FTA policies of Japan and Korea have been more different than similar. The first article was based on the observation of divergent patterns of FTA policies in Korea and Japan from the late 1990s to 2010. Korea was aggressively pursuing FTAs with large agricultural producing countries that led to substantial liberalization of its agricultural sector. Japan’s FTAs in this time period, however, were with small agricultural producing countries and have entailed limited agricultural liberalization. A few years after publishing the first article, the authors noticed that both Korea and Japan were drastically reversing their FTA policies. Korea and Japan’s FTA policies further diverged, but in reverse direction. This time, Japan, not Korea, was actively pursuing FTAs with major trade partners and agricultural producing countries even at the cost of opening up its protected agricultural sector. Korea, on the other hand, was much more reluctant in forging FTAs that could bring about substantial liberalization of its protected sectors such as agriculture.This new observation motivated the second article. After a decade of observing changes and reversals in Korea and Japan’s FTA policies, the authors decided to compare FTA politics in these two countries across a number of important variables. The earlier articles had focused almost entirely on the impact of the institutions of trade policymaking. But institutional changes in Korea and Japan were intricately intertwined with changes in political leadership. And changes in institutions of trade policymaking and political leadership inevitably had lasting impact on how societal interests played a role in FTA policymaking. Last but not least, recent changes in geopolitical conditions are having a growing importance in shaping FTA policies in Korea and Japan. By exploring these variables, the authors hope to bring together a more comprehensive examination and outlook on Korea and Japan’s FTA politics.

ABBREVIATIONS

Asia-Pacific Economic Cooperation Association of South East Asian Nations CPTPP   Comprehensive and Progressive Agreement for Trans-Pacific Partnership DPJ  Democratic Party of Japan EPA  Economic Partnership Agreement EU  European Union FTA  Free Trade Agreement GATT  General Agreement on Tariffs and Trade GSOMIA  General Security of Military Information Agreement HS-CODE  Harmonized System-code ISDS  Investor–state dispute system KORUS FTA  Korea–U.S. FTA LDP  Liberal Democratic Party MAFF  Ministry of Agriculture, Forestry and Fishery METI  Ministry of Economy, Trade and Industry MFN  Most Favored Nation MOA  Ministry of Agriculture MOTIE  Ministry of Trade, Industry and Energy MOFAT  Ministry of Foreign Affairs and Trade NAFTA  North American Free Trade Agreement NGO  Non-governmental organization OECD  Organization for Economic Cooperation and Development OIE  World Organization for Animal Health OMT  Office of the Minister for Trade TPP  Trans-Pacific Partnership U.S.  United States WTO  World Trade Organization APEC 

ASEAN 



1 INTRODUCTION

From December 13 to 18, 2005, Hong Kong hosted the World Trade Organization (WTO) Ministerial Conference. Trade ministers from 149 member states arrived in Hong Kong with hopes of progressing the first trade liberalization negotiation under the WTO known as the Doha Round. Launched 4 years earlier, the Doha Round was beset by difficulties as member states failed to narrow conflicting interests and opponents attacked from outside. Thousands of protesters from around the world also flew to the city to unleash their anger and frustration against free trade. The protestors marched from Hong Kong’s downtown Victoria Park to the government’s main office. The most conspicuous among them were the Korean farmers. Their banner said “‘This hamburger is made of people’s meat. Can you enjoy it?’ The sign showed a hamburger made of hands and feet” (The New York Times 2005). By the evening of the 17th, Korean farmers were at the forefront in leading violent protestors to the venue of the WTO Ministerial Conference. After violent confrontations between the police and the protestors, “about 900 protesters, mostly Korean farmers, were arrested and [faced] possible charges for offenses ranging from obstruction to criminal damage” (Greenlees 2005). The episode of the Korean farmers during the 2005 Hong Kong Ministerial Conference reflect the deep hostility toward agricultural liberalization among Korean farmers and more broadly the Korean public. Strong opposition to agricultural liberalization is also widespread among Japanese farmers and, to a large extent, the Japanese public. While not as conspicuous on the streets, Japanese farm groups have been active, in both the domestic and international arenas, in serving as an anti-free trade voice. The problem of agricultural liberalization posed and still poses a predicament for Japan and Korea. As countries that have been major beneficiaries of the global trade system, the economic fate of Japan and Korea are inevitably tied to securing more markets for their exported goods. But securing more export markets would require opening of Japan and Korea’s protected import markets such as agriculture.

2  Introduction

Beginning in the late 1990s, this dilemma became quite acute for the Japanese and Korean governments as they entered a new global trade system driven by free trade agreements (FTAs). Japan and Korea had strong economic interests in concluding FTAs with major trade partners, but major trade partners demanded access to Japan and Korea’s agricultural import market. Understanding the Japanese and Korean governments’ decisions on FTAs in the past two decades is a key objective of the current book. This book examines intracountry and inter-country variations in Japan and Korea’s FTAs since the late 1990s. Two major periods divide FTA politics in Japan and Korea. The first period ranges from the late 1990s to the end of 2012 and marks a time when the Korean government pursued high-level FTAs (i.e., wide sectoral coverage and deep scope of liberalization) with major trade partners, whereas the Japanese government pursued low-level FTAs (i.e., narrow sectoral coverage and limited scope of liberalization) with small trade partners. The second period, which started in 2013 and continues until the present time, is characterized by a reversed pattern of FTA negotiations in the two countries. Korea has not achieved high-level FTAs that can further trade liberalization but instead is shifting toward relatively low-level FTAs. In comparison, Japan is increasingly pursuing ambitious and high-level FTAs. Why do Japan and Korea enter upon FTAs that vary widely in terms of partner selection, sectoral coverage, and scope of liberalization? More importantly, why do Japan and Korea’s FTA patterns reverse from 2013? By March 2012, Korea had already signed FTAs with major trade partners including the European Union (EU) and the United States (U.S.).These two countries were not only Korea’s top trade partners, but also major agricultural exporters. In 2012, the EU and the U.S collectively accounted for about 30 percent of Korea’s total food imports (Korea Agricultural Trade Information 2013). Given strong domestic political opposition to agricultural imports in Korea, the Korea–EU, and the Korea–U.S. FTAs (hereon KORUS FTA) were also the most politically sensitive FTAs.Yet, the Korean government had successfully signed FTAs with both the EU and the U.S. that entailed comprehensive liberalization of its agricultural sector. In comparison, among the 13 FTAs that were in force by the end of 2012 in Japan, not one was with a major trade partner or major agricultural exporter.The 13 FTAs together accounted for a mere 20 percent of Japan’s food imports in 2013 (Statistics Bureau of Japan 2014). Moreover, Japan’s FTAs prior to 2013 did not entail comprehensive liberalization of Japan’s highly protected agricultural sector. Yet, in a striking departure from its past FTA strategies, the Japanese government has demonstrated a greater willingness to open its protected agricultural sector since 2013 as it joined the Trans-Pacific Partnership (TPP) negotiations. Since then, the Japanese government has successfully concluded FTAs with major trade partners and agricultural exporting countries such as Australia and the EU. Although the TPP never came into force due to the U.S. withdrawal in 2016, Japan managed to salvage the TPP minus the U.S. by concluding the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Australia and the EU accounted

Introduction  3

for nearly 20 percent of Japan’s food imports in 2012. This figure is roughly equivalent to the total share of food imports from Japan’s earlier 13 FTAs. Had the original TPP come into force, the TPP members would have accounted for over 40 percent of Japan’s food imports in 2012. Without the U.S., the CPTPP members accounted for 20.4 percent of Japan’s food imports in 2012 (Statistics Bureau of Japan 2014). Korea, on the other hand, has shifted away from its pursuit of high-level FTAs as indicated in its refusal to join the TPP negotiations. Instead, Korea has pursued FTAs that are much limited in scope and coverage. The most significant FTA for Korea since 2013 has been the Korea–China FTA. In 2012, China accounted for over 15 percent of Korea’s food imports (Korea Agricultural Trade Information 2013). China is also a top export destination for Korea’s manufactured products such as electronics. Despite the potential for substantial liberalization in goods, investments, and services, Korea’s FTA with China fell short of earlier FTAs in terms of coverage and scope. The Korea–China FTA excluded numerous sensitive items such as agricultural products and intermediate products (e.g., automobile components) from tariff concessions. The book explains these variations in FTA patterns across time and space through an analysis of the interactive effects of trade policymaking institutions, political leadership, civil society, and sectoral interests on FTAs. Important differences in the institutions of trade policymaking have placed the two countries on different paths of FTAs at different points in time. Prior to 2013, Korea’s institutions of trade policymaking exhibited centralized decision-making authority and strong coordinating mechanisms across various government bodies and agencies. These institutional traits significantly weakened the influence of protectionist sectoral interests and enabled Korea to embark on ambitious FTAs. On the other hand, the fragmented structure of Japan’s trade decision-making authority and weak coordinating mechanisms across government bodies strengthened the voice of protectionist interests, placing Japan on a path of low-level FTAs. In 2013, changes in political leadership brought about major changes in the institutions of trade policymaking in both countries. Trade decision-making authority became more fragmented in Korea while more centralized in Japan. Similarly, coordinating mechanisms across government bodies weakened in Korea while strengthening in Japan. These critical changes explain the reversed pattern of FTAs in Japan and Korea since 2013. Although domestic political institutions play a prominent role, they tell do not tell a full account of the diverging FTA patterns in Japan and Korea. In 2013, political leaders instituted major changes in Japan and Korea’s trade policymaking institutions. The reversed pattern of FTAs in Japan and Korea from 2013 until the present would not have occurred without political leadership. And once established, these institutions have worked to facilitate and constrain the capacities of societal interests and political leaders to influence FTAs. In sum, the book presents a dynamic and interactive, rather than a linear account of FTA politics in Japan and Korea since the late 1990s.

4  Introduction

Economic perspectives on FTA politics The divergent patterns of FTAs in Japan and Korea are puzzling given strong similarities in the economic rationale driving FTAs in both countries. Japan and Korea are both export-oriented economies, competing in high technology and higher value-added goods. In 2017, Japan and Korea’s world ranking for merchandise export was respectively fourth and sixth and their top three export destinations were the U.S., China, and the EU (WTO 2017). Manufactured products accounted for nearly 90 percent of exports in both countries, and their top exported items included automobiles and electronic integrated circuits (ibid.). Accordingly, Japan and Korea have an incentive to preempt each other in their preferred export markets since they face similar disadvantages in terms of trade diversion if the other secures an FTA with a major trade partner first. As Baccini (2019) notes, “countries are more likely to form PTAs [preferential trade agreements]1 if other competing countries have previously done so” (80). The North American Free Trade Agreement (NAFTA) is a good case to illustrate the similar trade diversion effects on Japan and Korea. Japanese and Korean multinational firms had been using Mexico as a platform to export manufactured products to the U.S. and Canada. NAFTA threatened to raise the price of Japanese and Korean goods entering the U.S. and Canadian market, placing them at a disadvantage vis-à-vis their American and Canadian counterparts. In response, Japanese multinational firms pressured their government for an FTA with Mexico (Manger 2009). Facing similar adverse trade diversion effects, the Korean government pursued FTAs with Mexico. But unlike the Japanese government, the Korean government also pursued FTAs with Canada and the U.S. (Choi 2016; Kim 2010).2 Economic rationale predicts a convergence not a divergence in FTA patterns between Japan and Korea. But as the case of NAFTA reveals, the two countries behaved differently in response to similar trade diversion effects. Traditional trade models predict that differences in the endowment and mobility of factors of production (e.g., capital, land, labor) create different trade preferences in societies. According to the Hecksher–Olin model, countries export products that require “intensive use of the factors with which it is abundantly endowed relative to other nations” while importing products that require “intensive use of factors that are relatively scarce” (Hiscox 2017, 80). Building on the Hecksher–Olin model, the Stolper–Samuelson theorem argues that owners of abundant factors benefit from and thus support trade as demands for their export-oriented products increase. Conversely, owners of scarce factors become protectionists as they face reducing demand for import-competing products. Rogowski (1987) empirically applies the Stolper–Samuelson theorem to show that with rising trade exposure, differences in factor endowments play a large role in shaping countries’ internal political cleavages.3 While the Stolper–Samuelson theorem assumes that factors can perfectly move between industries, the Ricardo–Viner model (or the specific factors model) assumes that factors are immobile between industries. For example, the skillset of workers making automobiles are not easily transferable to produce pharmaceutical

Introduction  5

products. In this model, export industries benefit from trade whereas importcompeting industries lose from trade. Recognizing that factor mobility varies by “economic, technological, and political conditions”, Hiscox (2002) predicts that societal cleavage on trade depends on the degree of factor mobility (9).When factors are mobile, societal preferences on trade divide along class lines (e.g., farmers versus businesses), whereas when factors are immobile, cleavages occur along industry lines (e.g., export-oriented versus import competing industries). When applied to Japan and Korea, these models predict similar patterns of societal trade preferences in the two countries due to strong similarities in their factor endowment and mobility. Capital is a relatively abundant factor while land and labor are relatively scarce factors. Both countries heavily export capital-intensive products such as electronics and automobile while heavily importing food and low value-added products that require cheaper labor. Moreover, interindustry factor mobility is low given that both countries have shifted to high value-added and high technology industries by the late 1990s. This fits Hiscox’s (2002) observation that interindustry factor mobility declines in later stages of development as “new innovations have generated more specific forms of human and physical capital and far greater complementarity between technology and labor skills” (10). In Japan and Korea, the strongest supporters of trade have been business interests that represent export-oriented industries whereas the staunchest opponents of trade have been farm interests. Herein lies the puzzle. The two countries have essentially pursued very different kinds of FTAs despite strong similarities in societal cleavages over trade policy preferences.

Domestic politics and FTAs FTAs are distributive in nature, generating clear losers and winners from trade liberalization. Even when the same set of economic actors organize to support or oppose trade liberalization, their impact on FTAs can be very different depending on domestic political institutions and the actors that shape these institutions. In other words, the political process shaping FTAs alter the extent to which the protrade or anti-trade interests exercise “voice” on trade policies. Depending on which of these interests become dominant, the choice of FTA partner selection, scope of liberalization, and sectoral coverage change as in the case of Japan and Korea. The following section examines the supply-side and demand-side factors that shape domestic FTA politics.

Supply-side factors: institutions and political leadership From a supply-side perspective, domestic political institutions and political leadership structure the political environment in which different societal actors compete over trade policies. In other words, these two factors shape why, when, and how countries pursue FTAs. In a comparative perspective, political regime types and the number of veto players explain when and why countries pursue FTAs. Mansfield

6  Introduction

and Milner (2012) demonstrate that democratic governments are more likely to pursue and conclude PTAs due to the “political benefits that leaders can derive from these agreements (14). The authors also argue that countries with less number of veto players—or institutions that can “initiate, amend, and block policies”— are more likely to enter PTAs as there is less opportunity for protectionist actors (e.g., opposition parties, judiciaries, interest groups) to constrain the executive (51). This approach can explain the proliferation of FTAs in Japan and Korea since the late 1990s. In fact, Mansfield and Milner (2012) describe Japan and Korea as cases where democratization and/or reduction of veto players have had a similar effect of increasing the number of FTAs since the 2000s (53–55). In order to explain qualitative differences in the types of FTAs pursued by Japan and Korea, this book takes a closer look at the trade policymaking institutions where the conflicting interests of the pro- and anti-trade interests are brought together. The importance of institutions in understanding FTAs is widely accepted among scholars of Japanese trade politics. Mulgan (2008) observes that the vertical segmentation of Japanese policymaking system “largely determines the delivery of public policy outcomes on FTAs” (172). Likewise Solis (2010) notes that “institutional rules that create a large number of co-equal bureaucratic agencies with veto power and lack hierarchical mechanisms for the reconciliation of bureaucratic differences” make the launching of FTA negotiations or substantial market opening difficult in Japan (220). Specifically, this book introduces the concept of domestic trade governance, which refers to the institutional mechanism that coordinates and translates varying domestic interests on trade policies into a concrete policy position. Domestic trade governance alters the extent to which societal and political interests opposing trade negotiations are involved in and influence trade policymaking. This, in turn, has a huge impact on government trade preferences, negotiation strategies, and ultimately trade negotiation outcome. Cohesive domestic trade governance weakens the voice of protectionist interests through two measures: First, by making the trade policymaking structure less permeable to societal interests, and second, by generating pressures for consensus-building among the various interests on trade policies. This in turn enables the government to formulate a unified trade agenda that takes into consideration national economic interest rather than narrow sectoral interest. As a result, trade negotiators have a higher chance of achieving a high-level FTA. On the other hand, fragmented domestic trade governance enables protectionist interests to serve as an effective veto player, allowing narrow sectoral interests to disproportionately influence the government’s trade agenda and negotiations. Such trade policymaking structure is more likely to produce low-level FTA agreements. When applied to Japan and Korea from the late 1990s to 2012, cohesive domestic trade governance enabled the Korean government to pursue high-level FTAs while fragmented domestic trade governance limited the Japanese government to lowlevel FTAs. Since 2013, however, weakening cohesion of domestic trade governance in Korea and strengthening cohesion of domestic trade governance in Japan explain the reversal in FTA patterns.

Introduction  7

Domestic trade governance explains both the long-term patterns in Japan and Korea’s FTAs as well as the reversal in FTA patterns. Considering that differences in domestic trade governance place countries on paths of FTAs that vary along partner selection, sectoral coverage, and scope of liberalization, it is important to understand how changes in domestic trade governance occur. In general, institutions are hard to change and moments of institutional change have far-reaching policy implications. Then why and how did Japan and Korea’s institutions of trade policymaking change? In Japan and Korea, political leadership played a critical role in bringing about major changes in the two countries’ institutions of trade policymaking. The role of political actors in independently impacting trade policy outcomes has not received much attention in the field of trade politics. Instead, the literature on trade politics has focused more on understanding the constraints that political leaders, politicians, and political parties face from political institutions and influential groups in society. Mansfield and Milner (2012) note that the “executive’s position ex ante reflects the influence of politically important interest groups” because the former needs the latter’s support to remain in office (52). Mansfield and Milner (2012) also recognize the constraints that veto players and political institutions place on political leaders when it comes to trade policies (51). In sum, political actors are often depicted as “intermediary mechanisms that translate social preferences into trade policy outcomes” (Camyar 2012, 398). Responding to the under-theorized role of political actors, Camyar (2012) demonstrates that party politics and competition have an independent impact on trade policy outcomes. Camyar (2012) also recognizes that political party preferences on trade are not mere reflections of societal preferences, but are based on strategic electoral considerations. Similarly, in his comparative study on Japan and Korea’s FTAs, Yoshimatsu (2012) identifies executive leaders’ preferences as a key variable explaining varying FTA commitment levels in the two countries. Korean executive leaders held stronger preferences to promote FTAs than their Japanese counterparts, enabling Korea to conclude FTAs with major trade partners while Japan concludes FTAs with small trade partners. This book recognizes the independent impact of Japanese and Korean political leaders on FTAs. Chief executives in the two countries were responsible for instituting major changes in their domestic trade governance structures. In Korea, President Kim Dae-jung directed the establishment of a cohesive domestic trade governance structure in the late 1990s. In 2013, President Park Geun-hye was primarily responsible for weakening the cohesion of Korea’s domestic trade governance through a major restructuring of the trade policymaking institution. Likewise in Japan, Prime Minister Shinzo Abe succeeded in what previous prime ministers had failed to do after he came into office in 2013. He created a single trade policymaking body to spearhead the TPP negotiations and FTAs with major trade partners. In sum, political leadership served as the catalyst for change in Japan and Korea’s trade policymaking institutions.

8  Introduction

Demand-side factors: interest groups and civil society From a demand-side perspective, interest groups and more broadly civil society pressure their governments for preferred trade policies. Business interests in advanced industrialized states have long been the strongest proponents of trade liberalization and FTAs (Baccini 2019, 76). Specifically, export oriented industries have generally been viewed as the strongest pro-trade interest. In postwar U.S., capital-intensive, export-oriented sectors represented the pro-trade lobby in Congress (Hiscox 2002, 65). Multinational firms have played a key role in driving the rise in North– South FTAs, as these firms sought access to less developed states with cheaper labor (Manger 2009). Manger (2009) describes North–South FTAs as a “contest between major economic powers to gain access to emerging markets and important product locations, to impede such access for competitors, and to restore it when others have moved first” (‘Introduction’). In contrast, import-competing industries that stand to lose from trade liberalization have often been described as opposing trade liberalization (Manger 2009, ‘Chapter 2’). Recent works on the political economy of FTAs have challenged the notion that firms in the same industry share similar trade preferences (Baccini, Pinto and Weymouth 2017; Kim and Osgood 2019). These new “firm-centered” explanations argue that larger, more productive, and more competitive firms in both export and import industries support trade liberalization whereas smaller, less productive, and less competitive firms across industries oppose trade liberalization. Essentially, the pro- and anti-trade coalitions (including both firms and workers) cuts across industries. Irrespective of these differences, the underlying message is that a core segment of business serve as a strong pro-trade interest. Non-business interests such as workers and farmers are the remaining major actors organizing on behalf of trade policies. Scholars are more divided on their depiction of labor’s position on trade policies. Kim and Osgood (2019) predict that workers’ closely align with the trade policy positions of their industries or firms. Hiscox (2002) argues that organized labor’s position on trade are largely dependent on factor mobility. When factor mobility is low, labor is internally divided on trade issues. When factor mobility is high, labor is more unified in their support or opposition to free trade (37–39). Manger (2009) depicts labor interests as a passive actor, unable to mount a strong support or opposition to FTAs (‘Chapter 2’). Farm interests in advanced industrialized states, on the other hand, are strong opponents of trade if they face competition from countries with cheaper food. Due to their dependence on government subsidies, support, and protection, farmers in advanced industrialized states have much to lose from FTAs that can lead to influx of food imports from countries with cheaper food (Manger 2009; Mulgan 2008). Farm interests in advanced industrialized states also wield significant influence over agricultural trade policies due to their small size, organizational coherence, and dominant role in agricultural policymaking and policy administration (Mulgan 2000; Sheingate 2001). Given these reasons, it is no surprise that farmers have played a

Introduction  9

critical role in derailing trade liberalization efforts in multilateral, regional, and bilateral trade negotiations (Haggard 1997; Manger 2009; Mulgan 2008). In Japan and Korea, organized business interests have been the strongest supporters of FTAs, while organized farm interests have been the strongest opponents of FTAs. Beyond this similarity, however, important differences mark the pro- and antiFTA trade coalitions in Japan and Korea. In Japan, organized business interests and organized farm interests have respectively led the pro- and anti-FTA coalitions. Both coalitions enjoy strong ties with related ministries and politicians and have access to trade policymaking institutions. In contrast, only the pro-FTA coalition— in other words organized business interests—enjoy access to institutions of trade policymaking and exhibit close ties with ministries and politicians in Korea. The anti-FTA coalition consists of a broad range of different kinds of civil society groups such as farm groups, labor unions, progressive citizens’ movement groups, and non-governmental organizations (NGOs). Due to their lack of access to the trade policymaking institution, anti-FTA activities occur as large social mobilizations and protests. The book makes the distinction between interest groups and civil society to highlight the different ways in which societal actors have tried to influence FTAs in Japan and Korea. Political leaders in Japan and Korea have faced very different forms of societal pressure on FTA issues.

Argument in brief The book’s theoretical framework brings together the supply-side and demandside perspective. As illustrated in Figure 1.1, institutions of trade policymaking (or domestic trade governance) serves as the primarily variable that explains long-term

Pro-FTA interests

Institutions of Trade Policymaking

Anti-FTA interests

FTA partner FTA type

FIGURE 1.1 

Framework

Political Leadership

10  Introduction

patterns in Japan and Korea’s FTAs. Periods of cohesive domestic trade governance is linked to high-level FTAs and periods of fragmented cohesive domestic trade governance is linked to low-level FTAs. Institutions, however, undergo major changes due to decisions made by political leadership. In other words, political leadership serves as the catalyst that can set Japan and Korea on alternate paths of FTAs. Given this context, interest groups and civil society exert pressure both on political leadership and the institutions of trade policymaking to impact FTAs. Ultimately, the end outcome is the product of the complex interaction among these variables. The book seeks to unravel the dynamic relationship among these variables and tell a comprehensive story of Japan and Korea’s FTA politics.

International politics and FTAs Although the focus of the book is largely on domestic FTA politics in Japan and Korea, international politics inevitably impact FTAs. For example, the failure of the WTO to conclude a successful multilateral trade agreement is often identified as a key reason behind the recent proliferation of FTAs (Mansfield and Reinhardt 2003). States seek FTAs as a means to gain export markets since the chances of multilateral trade liberalization are slim. States are further motivated to pursue FTAs for strategic reasons such as countering the emergence of a rival economic partnership, enhancing their international negotiation power, and strengthening security alliance with important allies (Urata 2015;Yoshimatsu and Ziltener 2010). Simply, domestic economic and political considerations are not the only factors that shape FTA politics. One only needs to look at the absence of a Northeast Asian FTA among China, Japan, and Korea to understand the importance of geopolitics. For the period under study, which spans from the late 1990s to 2020, international politics should have had a roughly similar impact on Japan and Korea’s FTAs. Stalled trade rounds in the WTO, the declining economic (and perhaps political) power of the U.S., the enlargement of the EU’s market, and, most importantly, the rise of China as a global economic power are common contexts against which both countries pursued FTAs. Moving forward, international politics is expected to have a larger role in shaping Japan and Korea’s FTAs. The escalating trade conflict between the U.S. and China places Japan and Korea in a predicament. Not only are the U.S. and China the top two destinations for merchandise exports for Japan and Korea, but the U.S. and China pose significant security implications for Japan and Korea (WTO 2017). This theme is considered more carefully in Chapter 6.

Chapter overview Chapter 2 overviews the empirical contexts that underpin the book’s comparison of Japan and Korea’s FTA politics. The chapter begins by situating Japan and Korea’s FTAs against a global typology of FTAs over time and across regions. The chapter

Introduction  11

then provides an in-depth examination of the diverging patterns of Japan and Korea’s FTAs from the late 1990s until the present, with a focus on the selection of FTA partner, sectoral coverage, and scope of liberalization. The diverging patterns of FTAs are then assessed through economic explanations. The chapter concludes that although economic factors can explain the proliferation of FTAs since the late 1990s, they cannot adequately account for the diverging patterns of FTAs between the two countries. Chapter 3 analyzes intra- and inter-country variations in Japan and Korea’s FTA patterns from an institutional perspective. From the late 1990s to 2012, Korea exhibited cohesive domestic trade governance, whereas Japan exhibited fragmented domestic trade governance.Then from 2013 to the present, the pattern has reversed. Administrative reorganization under President Park Geun-hye weakened the cohesion of Korea’s domestic trade governance. In contrast, Japan’s domestic trade governance became more cohesive as Prime Minister Shinzo Abe introduced new institutional forums for trade policymaking. Changes in the domestic trade governance explain Korea’s shift from high-level to low-level FTAs and Japan’s shift from low-level to high-level FTAs since 2013.The chapter demonstrates the linkage between domestic trade governance and FTAs through case studies of the KORUS FTA, the Korea–China FTA, the Korea–Japan FTA, the Japan–Australia FTA, and the TPP. Chapter 4 explores the role of political leadership in shaping Japan and Korea’s FTAs. While the institutions of trade policymaking provided the context that made high or low-level FTAs more or less likely, political leadership determined the timing and political momentum for FTA negotiations. More importantly, political leadership played a critical role in shifting the structure of Japan and Korea’s domestic trade governance in 2013, leading to the reversed pattern of FTAs since then.The role of political leadership in Japan and Korea’s FTAs is examined through case studies of the KORUS FTA, the Korea–China FTA, and the TPP negotiations. Chapter 5 shifts the focus to the demand side, examining the role of various societal interests in FTA politics. The chapter highlights two points. First, civil society–state relationship on trade policies is highly institutionalized in Japan, whereas such institutionalized relationship is absent in Korea. In Japan, interest groups that support and oppose FTAs have each formed close ties with politicians and ministries to push their desired trade agendas.These groups work within existing political institutions to shape FTA policies. In contrast, civil society has mobilized in favor and in opposition to FTAs from outside existing political institutions in Korea.These mobilizations have taken the form of candlelight vigils and mass rallies. Second, the main civil society actors involved in FTA politics vary between the two countries. In Japan, conservative interest groups such as business federations and farm groups play a dominant role, while labor unions and the broader public are largely disengaged on the topic of FTAs. In Korea, however, a large number of societal actors from various backgrounds come together to voice their preferences

12  Introduction

on FTAs. This is most apparent for the coalition opposing FTAs, which include unions (e.g., labor, teachers), farm groups, NGOs, and the general public. Chapter 6 situates the discussion of Japan and Korea’s FTA politics in the context of growing trade tensions between Japan and Korea in recent years. Shifting geopolitical conditions have altered the strategic priorities shaping Japan and South Korea’s trade decisions, ultimately weakening the incentives of Japan and South Korea’s political leaderships to cooperate on trade issues. As traditional East Asian security and economic allies of the U.S., Japan and South Korea have long worked to preserve cooperative economic relations despite continuing historical and political tensions. The rise of China as a global economic and political power, however, has led to a divergence in the trade policies of Japan and South Korea. The Japanese government has responded by reinforcing its ties with the U.S. against China and strengthening its commitment to multilateralism. In contrast, the South Korean government, irrespective of its political orientations, has pursued a strategy of appeasing China mindful of China’s important role in shaping interKorean relations (i.e., between North Korea and South Korea). The 2019 Japan and South Korea’s trade conflict is a culmination of growing divergences in their trade positions in the global trade regime, which has significantly weakened the incentives of the two countries to maintain cooperative trade relations. The book concludes with a discussion on the implications of East Asian FTA politics on future international security and relations. Particular attention is paid to changing trade relations among Japan, Korea, the U.S., and China.The rise of China in the global arena has now led to open U.S.–China competition on economic and security issues. In particular, U.S.–China trade conflict has deepened under the administration of U.S. President Donald Trump, who is president at the time of writing this book. The U.S. has dramatically shifted away from its prior reliance on conventional trade measures and mega-FTAs to secure its economic interests. Instead, the U.S. now openly embraces managed trade and reciprocity. This chapter examines the implications of these changing geopolitical conditions on recent issues such as the U.S.–Japan Trade Agreement, the Japan–Korea trade conflict, and China’s role in the global trade regime.

Notes 1 Preferential trade agreements (PTAs) offer preferential market access to member states. FTAs are the most common form of PTAs, involving removal of trade barriers between member states. 2 The testimonies of Choi and Kim are meaningful because both were top Korean trade officials. Kim was the Minister of Trade from 2004 to 2007, and Choi was the chief FTA negotiator from 2010 to 2012. 3 For example, in the first half of the 19th century, Britain was rich in capital and labor but scarce in land. An urban–rural cleavage ensued as capitalists and workers supported trade and landed sectors (e.g., farmers, land owners) opposed trade (Rogowski 1987, 1128).

Introduction  13

References Baccini, Leonardo (2019), ‘The Economics and Politics of Preferential Trade Agreements’, Annual Review of Political Science,Vol. 22, 75–92. Baccini, Leonardo, Pablo M. Pinto, and Stephen Weymouth (2017), ‘The Distributional Consequences of Preferential Trade Liberalization: Firm-Level Evidence’, International Organization,Vol. 71 (Spring), 373–395. Camyar, Isa (2012), ‘Party Politics and International Trade: Mainstream Parties, Niche Parties, and Trade Openness’, International Studies Quarterly,Vol. 56, 397–404. Choi, Seokyoung (2016), Choi Seokyoung ui FTA Hyupsang Notu [Choi Seokyung’s FTA Negotiation Memoir], Seoul: Park Youngsa. Greenlees, Donald (2005), ‘Hong Kong Police Struggle as WTO Protests Turn Nasty’, The New York Times, December 18, https://www.nytimes.com/2005/12/18/world/asia/ hong-kong-police-struggle-as-wto-protests-turn-nasty.html?searchResultPosition=3 (accessed August 11, 2020). Haggard, Stephen (1997), ‘Regionalism in Asia and the Americas’, in E.D. Mansfield and H.V. Milner, eds., The Political Economy of Regionalism, New York: Columbia University Press, 20–49. Hiscox, Michael (2002), International Trade and Political Conflict: Commerce, Coalitions, and Mobility, Princeton: Princeton University Press. Hiscox, Michael (2017), ‘The Domestic Sources of Foreign Economic Policies’, in John Ravenhill, ed., Global Political Economy, Oxford: Oxford University Press, 76–108. Kim, Hyunchong (2010), Hanmi FTAryul Malhada [Talks about Korea–US FTA], Seoul: Hongsungsa. Kim, In Song and Osgood, Iain (2019), ‘Firms in Trade and Trade Politics’, Annual Review of Political Science,Vol. 22, 399–417. Korea Agricultural Trade Information (2013), ‘2013 Nongrim Susanshikpum Suchulipdonghyang mit Tonggae’ [2013 Agriculture and Fishery Food Export and Import Statistics], http://www.kati.net/board/exportNewsView.do?board_seq=53667&menu_ dept2=35&menu_dept3=72 (accessed June 26, 2020). Manger, Mark (2009), Investing in Protection: The Politics of Preferential Trade Agreements Between North and South, Kindle edition. Cambridge: Cambridge University Press. Mansfield, Edward D. and Milner, Helen V. (2012) Votes, Vetoes, and the Political Economy of International Trade Agreements, Princeton: Princeton University Press. Mansfield, Edward D. and Reinhardt, Eric (2003),‘Multilateral Determinants of Regionalism: the Effects of GATT/WTO on the Formation of Preferential Trading Arrangements’, International Organization,Vol. 57, No. 4, 829–862. Mulgan, Aurelia. G. (2000), The Politics of Agriculture in Japan, London: Routledge. Mulgan, Aurelia. G. (2008), ‘Japan’s FTA Politics and the Problem of Agricultural Trade Liberalization’, Australian Journal of International Affairs,Vol. 62, No. 2, 164–178. Rogowski, Ronald (1987), ‘Political Cleavages and Changing Exposure to Trade’, The American Political Science Review,Vol. 81, No. 4, 1121–1137. Sheingate, A. (2001), The Rise of the Agricultural Welfare State: Institutions and Interest Group Power in the United States, France, and Japan, Princeton: Princeton University. Solis, Mireya (2010),‘Can FTAs Deliver Market Liberalization in Japan? A Study on Domestic Political Determinants’, Review of International Political Economy,Vol. 17, No. 2, 209–237. Statistics Bureau of Japan (2014), Japan Statistical Yearbook 2014, ‘Imports by Principal Commodity and Principal Country of Origin’, https://www.stat.go.jp/english/data/ nenkan/index.html (accessed July 9, 2020).

14  Introduction

The New York Times (2005), ‘Thousands Gather in Hong Kong for First WTO Protest’, The New York Times, December 11, https://www.nytimes.com/2005/12/11/world/asia/ thousands-gather-in-hong-kong-for-first-wto-protest.html?searchResultPosition=2 (accessed August 11, 2020). Urata, Shujiro (2015), ‘Postwar Japanese Trade Policy: A Shift from Multilateral GATT/WTO to Bilateral/Regional FTA Regimes’, in Aurelia G. Mulgan and Masayoshi Honma, eds., The Political Economy of Japanese Trade Policy, Kindle edition. Basingstoke and New York: Palgrave MacMillan. WTO (2017) ‘Trade Profiles’, http://stat.wto.org/CountryProfile/WSDBCountryPFReporter. aspx?​Language=E (accessed June 12, 2019). Yoshimatsu, Hidetaka (2012), ‘Political Leaders’ Preferences and Trade Policy: Comparing FTA Politics in Japan and South Korea’, Asian Politics & Policy,Vol. 4, No. 2, 193–212. Yoshimatsu, Hidetaka and Patrick Ziltener (2010), ‘Japan’s FTA Strategy Toward Highly Developed Countries: Comparing Australia’s and Switzerland’s Experiences, 2000–09’, Asian Survey,Vol. 50, No. 6, 1058–1081.

2 ASYMMETRIC EVOLUTION OF KOREA AND JAPAN’S FTAS, LATE 1990S–20201

The puzzle This chapter identifies puzzling divergences in the patterns and nature of Korea and Japan’s FTA since the late 1990s. First, Korea and Japan’s choice of FTA partners and scope of tariff concessions diverged greatly; and two, the divergences did not occur in one direction but reversed direction in 2013. In the first period from the late 1990s to 2012, Korea pursued FTAs with major trade partners that were also major exporters of agricultural products. Korea’s FTAs during this time period was marked with significant liberalization of its highly protected and politically sensitive agricultural sector. In contrast, Japan pursued FTAs with small trade partners that were not major exporters of agricultural products. Japan’s FTAs were limited in scope, with a substantial portion of its agricultural products exempted from tariff concessions. In the second period that started in 2013, however, this pattern has reversed. Japan successfully concluded FTAs with major agricultural exporters such as Australia and the EU. Japan even successfully concluded the TPP, which was a mega-FTA that included a large number of major agricultural exporters. Korea, on the other hand, has been taking a more protective stance in its FTAs. Unlike Japan, Korea refused to partake in the TPP. Moreover, Korea’s recent FTAs with major trade partners such as China have been much more limited in terms of scope and depth of trade concessions. The primary aim of the chapter is to examine these divergences and reversals through an in-depth examination of the content of Korea and Japan’s FTAs since the late 1990s. The chapter first overviews the contextual background of Korea and Japan’s FTAs from their very first FTAs. The chapter then compares Korea and Japan’s FTAs across two different time periods: From the late 1990s to 2012 and from 2013 to 2020. Finally, the chapter concludes by exploring possible economic factors that can explain the diverging patterns of FTAs in Korea and Japan from the late 1990s to the present.

16  Asymmetric evolution of Korea and Japan

Evolution of Korea and Japan’s FTAs in global context: the 1990s Global context: FTA race in the 1990s In the 1990s, the world was engaged in an FTA race. The North American Free Trade Agreement (NAFTA), connecting the markets of the U.S., Canada, and Mexico, went into effect. The 15 members of the EU created a single internal market, moving beyond the 12 member-based European Economic Community. In South America, Mercosur was formed among Argentina, Brazil, Paraguay, and Uruguay. In Southeast Asia, the Association of South East Asian Nations (ASEAN) FTA was signed among the six founding members of Brunei, Indonesia, Malaysia, Philippines, Singapore,Thailand, and the new members of Vietnam, Laos, Myanmar, and Cambodia. Bold and ambitious new initiatives on trade liberalization were declared one after another. The 18 members of the Asia Pacific Economic Cooperation, which accounted for half of the world output and included the then three largest national economies China, Japan, and the U.S., agreed on the future time frame for trade and investment liberalization in the region. Developed economies would liberalize by 2010 and the rest would liberalize by 2020.The EU and the Mediterranean countries (EUROMED) committed themselves to free trade by 2010. The 34 democracies of the western hemisphere met in Miami on December 1994 to work out a Free Trade Area of the Americas by 2005. Russia proposed free trade among some of the former members of the Soviet Union. The most ambitious and significant proposal was a Trans-Atlantic Free Trade Area that aimed to join Europe and North America. The end of the Cold War drove this global FTA race as countries sought ways to enhance their chances of economic success in a new global order that embraced neoliberal principles. Free trade, free flow of capital, and deregulation became the new mantra of the world economy. This was a period when the practice of development through import substitution gave way to export-oriented development policies. Countries were serious about enhancing their competitiveness in the global market place through lowering tariffs and removing investment barriers. The initial form of FTAs prior to the 1990s focused on the reduction of import tariffs. These were FTAs that were negotiated outside of the multilateral trading system of the General Agreement on Tariffs and Trade (GATT). As a matter of principle, FTAs aimed to achieve tariff eliminations for most goods with few exceptions. Negotiators pressed hard to secure immediate tariff eliminations for a substantial number of products, while striving to obtain longer-time frame for tariff eliminations on their sensitive products. In contrast, the wave of FTAs that began in the 1990s began to pay attention to services and investments as well as tariffs. Leading countries in the FTA race such as the U.S. and the EU pursued FTAs with comprehensive scope, with trade concessions going beyond trade in goods to include service sectors and investments. The U.S. and the EU also tried to achieve deep market opening, which meant tariff eliminations for substantial number of products in a short period of time with few exceptions. An FTA which combined comprehensive scope and

Asymmetric evolution of Korea and Japan  17

deep market opening was assessed as a high-level FTA. An FTA with limited scope and shallower market opening was assessed as a low-level FTA. Interestingly, Korea and Japan stood outside of this global race for FTAs for most of the 1990s. Neither country seriously considered FTAs as an integral part of its trade strategy. Yet, both countries were already under strong international pressure to open up their markets, especially their heavily protected agricultural market (Bartlett 2018; Davis 2003, 160–219). The U.S. was by far the strongest voice demanding access to Korea and Japan’s agricultural markets, but other large agricultural exporters such as the EU, Canada, and Australia also sought access. The problem was that domestic opposition to agricultural liberalization was strong in both countries. As a result, at the turn of the new millennium, neither Korea nor Japan had any bilateral FTAs. During the Uruguay Round negotiations of GATT (1986–1993), both the Korean and Japanese governments had experienced firsthand, the negative political backlash of negotiating on agricultural liberalization. In 1991, the GATT DirectorGeneral Arthur Dunkel issued the Dunkel Draft, which set the “principle of comprehensive tariffication without exception as the baseline for negotiations” during the Uruguay Round (Davis 2003, 188). In other words, all member economies had to replace non-tariff barriers on all farm products with tariffs. Yet, tariffication of agricultural products was a highly sensitive topic in Korea and Japan. Farm interests, politicians representing rural interests, and even consumers opposed tariffication for agricultural products (Bartlett 2018; Francks et al. 2002, 118; Karrbo 2012, 142–151; Wolff and Howell 2018). In particular, tariffication of rice, the most sensitive agricultural item in both countries, was considered a taboo. Eventually, Korea succeeded in negotiating a 10-year delay in rice tariffication with another maximum 10-year grace period, while Japan negotiated a 6-year delay in rice tariffication (Choi et al. 2016, 21–22; Mulgan 2006, 85). Rice liberalization proved to be politically costly, leading to the resignation of the Korean prime minister and the end of Prime Minister Morihiro Hosokawa’s government in Japan (Francks et al. 2002, 118; Karrbo 2012, 142–151).2 In the light of this negotiating history, jumping into the FTA race that potentially entailed agricultural liberalization was not palatable to Korea and Japan.

The Asian Financial Crisis of 1997: Korea and Japan joins the FTA race The 1997 Asian Financial Crisis served as a catalyst to join the FTA race for Korea and Japan. Both countries are classic examples of countries that pursued exportoriented development policies. Naturally, both countries saw increased exports as a way to overcome the economic slowdown caused by the Asian Financial Crisis. FTAs were an attractive solution to improve trade for a number of reasons. First, Korea and Japan could reduce their dependence on the U.S. and European markets, where competition was already quite high. Korea and Japan faced a shrinking export market and needed to find new markets. FTAs would address both needs

18  Asymmetric evolution of Korea and Japan

(Koo 2006; Pempel and Urata 2006). Second, FTAs could foster higher levels of foreign investments within Korea and Japan, while at the same time allowing both countries to increase their investments in other countries (ibid.). Third, the large number of FTAs that had formed among their trade partners had placed Korean and Japanese companies at a disadvantage vis-à-vis their competitors in other countries. Due to these reasons, the Korean and Japanese governments seriously began to consider FTAs as a core economic and trade strategy in the aftermath of the Asian Financial Crisis. This change in trade strategy, however, did not immediately accompany a strong drive to achieve high-level FTAs. The momentum created by the Asian Financial Crisis and the growing number of FTAs in the global arena was not strong enough to overcome domestic resistance to liberalization. In particular, agriculture was a major source of opposition. Other import-competing sectors voiced their concerns as well. Policy makers in Korea and Japan were keenly aware of resistance from protectionist-vested interests. The sensitivity of FTA is apparent in Japan’s usage of the term Economic Partnership Agreement (EPA) instead of FTA. While FTA implied negotiating tariff concessions on all goods, EPA signified exclusion of substantial portions of sensitive items in the agriculture sector from trade liberalization commitments. Nonetheless, both countries had joined the FTA race by the late 1990s. And since then, Korea and Japan’s FTAs have taken very different paths despite the similar starting point.

The importance of agricultural liberalization in Korea and Japan’s FTAs Agricultural liberalization has single handedly been the largest obstacle to Japan and Korea’s FTA endeavors. Although small in number, well-organized farmers mount a formidable opposition against agricultural liberalization. Japanese and Korean farms are not competitive in international standards. Small and inefficient family farms that average less than two hectares dominate the rural landscape of both countries (KOSIS 2019; Statistics Bureau of Japan 2017). As a result, farmers in both countries have survived on high levels of agricultural support. In the late 1990s, which is when the current study begins, various government support measures accounted for over 60 percent of farm receipt in Korea and over 50 percent of farm receipt in Japan (OECD 2020). These figures gradually declined throughout the 2000s and currently have reached 46 percent in Korea and 41 percent in Japan. In other words, government support for farmers is still very high in both countries, especially when compared to the Organization for Economic Cooperation and Development (OECD) average of 17 percent. Without substantial restructuring toward larger and more commercialized farms, Japanese and Korean farmers are highly vulnerable to foreign competition. Farmers in both countries have traditionally benefited from favorable public opinion and politicians who are reluctant to upset their rural electorates. Public opinion polls conducted in Korea in the first decade of the 2000s consistently

Asymmetric evolution of Korea and Japan  19

showed that over 60 percent of city respondents favored agricultural protection (Kim and Park 2007, iii; 2009, 61). Likewise, a 2008 September public opinion poll conducted by the Cabinet Office of Japan showed that the majority of respondents had a negative view on food imports mainly due to concerns over food safety and supply. Eighty-nine percent of the respondents said that they would select domestic products when given the choice between imported and domestic food (Cabinet Office, Government of Japan 2008). Only in recent years has consumer resistance to purchasing imported food weakened. In a 2019 Korean public opinion poll, 51.9 percent of the respondents declared they have no aversion toward purchasing imported food. 22.3 percent of the respondents identified low price as the main reason behind their purchase of imported food despite the negative perception on food safety (Kim and Park 2019, 38). Similarly, in a September 2018 poll by the Cabinet Office of Japan, 40.3 percent of the respondents cited imported food as their main concern over food safety (Cabinet Office, Government of Japan 2018). Clearly, consumers in both countries have become more open to purchasing food imports in recent years. However, this openness has not translated into strong support for agricultural liberalization against the wishes of farmers. Due to these reasons, the willingness (or unwillingness) of the Korean or Japanese government to liberalize its agricultural sector despite strong domestic opposition has factored largely in the selection of FTA partners and the content of FTAs. Greater willingness would lead the government to pursue FTAs with trade partners that are also major agricultural exporters. Such FTAs should entail comprehensive tariff concessions for its agricultural products. Less willingness would lead to the opposite behavior. More importantly, government position on agricultural liberalization largely determines whether the government can pursue high-level FTAs with major trade partners such as the U.S. and EU, which are large agricultural exporters. The following section examines variations in FTA partner selection and the content of FTAs in Korea and Japan from the late 1990s to 2020.

Patterns in Korea and Japan’s FTAs since the late 1990s First period: late 1990s–2012 From the late 1990s to 2012, Korea and Japan have diverged in their selection of FTA partners as well as in the scope and depth of their FTA content. First, in terms of FTA partner selection, the Korean government actively pursued FTAs with major agricultural exporting countries, while the Japanese government avoided FTAs with major agricultural exporting countries. By the end of 2012, Korea had eight FTAs in force with Chile, Singapore, the European Free Trade Association (EFTA), the ASEAN, India, Peru, the EU, and the U.S. (Table 2.1). Altogether, the eight FTA partners accounted for about 50 percent of Korea’s food imports in 2012 (ibid.). Moreover, Korea’s successful FTAs with the U.S. and the EU are noteworthy given the potential impact of these two countries on Korea’s agricultural sector. The U.S. and the EU are major agricultural exporters, respectively accounting for

20  Asymmetric evolution of Korea and Japan TABLE 2.1  Korea’s FTAs and Share of Food Imports

Status***

Partner

Entry into Force

Chile (04/01/2004) Singapore (03/02/2006) EFTA (09/01/2006) ASEAN (06/01/2007) India (01/01/2010) Peru (08/01/2011) EU (0701/2011) U.S. (03/15/2012) Turkey (05/01/2013) Australia (12/12/2014) Canada (01/01/2015) China (12/20/2015) New Zealand (12/20/2015) Vietnam (12/20/2015) Columbia (7/15/2016) Central America (10/1/2019) UK (08/22/2019) Israel (08/21/2019) Indonesia (11/25/2019)

Signed Completed

Share of Food Imports in 2012 (% of values) 2.5 0.46* 0.29* 14.2 2.2 0.19 8.9 20.1 0.21* 8.6 3.5 15.8 2.8 3.2 0.24* na na na 3.4**

* Note: Refers to data from Choi and Oh (2017). ** Refers to 2014 data. *** All data as of August 31, 2020. Source: Choi and Oh (2017); Korea Agricultural Trade Information (2013, 2015); Ministry of Trade Industry, and Energy (2020).

20.1 percent and 8.9 percent of Korea’s food imports in 2012 (ibid.).3 An FTA with one of these trade partners would imply even greater volumes of food imports. In the same time period, the Korean government also began FTA negotiations with other major agricultural exporting countries such as Australia, Canada, and New Zealand, which collectively accounted for about 15 percent of Korea’s food imports in 2012 (ibid.). What these figures indicate is that the Korean government did not shy away from pursuing FTAs with major agricultural exporting countries despite the unpopularity of agricultural liberalization at home. In contrast, since Japan’s first FTA with Singapore in 2002, the Japanese government has strategically favored FTA partners with small agricultural sectors. For example, Japan selected Singapore as its first FTA partner largely due to the latter’s small agricultural sector. With agriculture out of the picture, it was easier for Japan to comply with the WTO’s FTA rules and conclude an agreement that covered substantially all trade (Krauss 2003, 319). By the end of 2012, Japan had 13 FTAs in force with Singapore, Mexico, Malaysia, Chile,Thailand, Indonesia, Brunei, ASEAN, the Philippines, Switzerland, Vietnam, India, and Peru. With the exception of ASEAN, only Chile and Thailand contributed more than 2 percent to Japan’s food imports, respectively accounting for 2.9 and 6.3 percent of Japan’s food imports in

Asymmetric evolution of Korea and Japan  21 TABLE 2.2  Japan’s FTAs and Share of Food Imports

Status*

Partner

Entry into Force

Singapore (11/30/2002) Mexico (04/01/2005) Malaysia (06/13/2006) Chile (09/03/2007) Thailand (11/01/2007) ASEAN (12/01/2008) Brunei (07/31/2008) Indonesia (07/01/2008) Philippines (12/11/2008) Switzerland (09/01/2009) Vietnam (10/01/2009) India (08/01/2011) Peru (03/01/2012) Australia (01/15/2015) Mongolia (06/07/2016) CPTPP (12/30/2018) EU (01/02/2019) TPP (04/2016)

Signed

Share of Food Imports in 2012 (% of values) 0.9 1.3 0.7 2.9 6.3 13.2 0.0 1.7 1.9 1.1 1.7 1.2 0.4 6.4 na 20.4 13.3 43.2

* Notes: All data as of August 31, 2020. Source: Ministry of Foreign Affairs (2020b); Statistics Bureau of Japan (2014).

2012 (Table 2.2). Collectively, Japan’s FTA partners accounted for only 20.1 percent of Japan’s food imports in 2012.The figure for ASEAN is not included as it is generally the sum of the figures from ASEAN member states who have concluded FTAs with Japan (i.e., Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam). Cambodia, Laos, and Myanmar either do not export or export negligible amounts of food products to Japan. During the period from the late 1990s to 2012, the Japanese government was not able to conclude FTAs with major agricultural exporting countries. Moreover, the Japanese government’s efforts to pursue FTAs with major agricultural exporting countries such as Australia and the EU were not successful. Second, Korean FTAs from the late 1990s to 2012 have been characterized by substantial agricultural liberalization unlike Japanese FTAs that have excluded substantial portions of their agricultural products from liberalization measures. The Korean government adopted the negative-list approach on all sectors when negotiating on tariff concessions during FTA negotiations. As a matter of principle, with the exception of rice, all agricultural products were included in the FTA negotiations. In Korea’s FTA with major agricultural exporting countries such as Chile, the U.S. and the EU, tariff concessions respectively covered 98.9 percent, 99.2 percent, and 99.1 percent of total agricultural and fishery products (tariff concession rates measured by number of trade items according to the Harmonized System

22  Asymmetric evolution of Korea and Japan

(HS)-code4) (Choi and Oh 2011, 511). Korea’s tariff concession rates for agricultural and fishery products were not as comprehensive with smaller trade partners. For example, in the Korea–Singapore FTA the concession rate was 64.6 percent (ibid.). But given that Singapore accounted for less than 1 percent of Korea’s food imports, the small concession rate for agricultural and fishery products had economically marginal impact on Korea and Singapore’s trade (Table 2.1). Moreover, the Korean government agreed to immediately eliminate duties on large portions of its food imports. For example, according to the contents of the KORUS FTA, two thirds of food imports (by value) from the U.S. were to become duty-free upon entry into force while tariffs on the rest of the agricultural products were to be gradually eliminated within 10 years (USTR 2009, 305). In contrast, the Japanese government preferred the positive-list approach on agricultural products when discussing tariff concessions during FTA negotiations.5 Japan’s FTA negotiations generally excluded on average 40 percent of its agricultural products from tariff concessions (Kim 2009, 5). For example, the tariff concession rates for agricultural and fishery products were 53.5 percent in the Japan–Singapore FTA, 47.4 percent in the Japan–Mexico FTA, 61.7 percent in the Japan–Malaysia FTA, 64.1 percent in the Japan–Chile FTA, 63 percent in the Japan–Indonesia FTA, 60.6 percent in the Japan–Brunei FTA, and 59 percent in the Japan–Philippines FTA.The Japan–Thailand FTA had the highest tariff concession rate for agricultural and fishery products at 71.7 percent (ibid.). Still this figure excluded a third of agricultural and fishery products from tariff concessions. Considering that Japan’s FTA partners in this time period were with small agricultural exporting countries that did not contribute substantially to Japan’s food imports, the low tariff concession rates for agricultural and fishery products are even more surprising. Moreover, in all its FTA negotiations, Japan had excluded sensitive primary commodities such as rice, sugar, wheat and barley, beef and pork, and dairy products.The total number of these sensitive agricultural products were 586 according to the HS-code classification. Japan’s reluctance to liberalize its agricultural sector proved to be a huge stumbling block in negotiating economically meaningful FTAs. This was especially true for FTAs with major trade partners such as Australia, the EU, and the U.S. that had the potential to benefit greatly from an open Japanese agricultural market. For example, Japan’s attempt to forge an FTA with Australia was unsuccessful due to strong differences in Japan and Australia’s positions on agricultural market opening. Japan resisted opening up its agricultural market to Australian rice, beef and dairy products, whereas Australia refused to negotiate an FTA without gaining substantial access to Japan’s agricultural market (Ahearn 2005, 8). The EU expressed a reluctance to engage in FTA talks with Japan unless there were substantial reductions in Japan’s nontariff barriers such as regulations on government procurement and product safety screening. In particular, the Japanese ban on EU beef import due to food safety concerns was a contentious issue between both parties (Ajima 2010). Although the EU’s demand was not centered solely on Japan’s agricultural market, Japan’s food safety regulations played a large role in making Japan an unattractive FTA counterpart for the EU.

Asymmetric evolution of Korea and Japan  23

FTAs with major agricultural exporting countries are not likely to materialize unless accompanied by substantial liberalization in agricultural products. From the late 1990s to 2012, the Korean government successfully signed FTAs with major trade partners that contributed a substantial portion of Korea’s food imports and, in the process, did not shy away from substantially liberalizing its agricultural sector. The Japanese government, on the other hand, was reluctant to pursue FTAs with major agricultural exporting countries and successfully protected its agricultural sector during FTA negotiations. Many scholars observed during this time period that without substantial agricultural liberalization, Japan would not be able to negotiate FTAs with its largest trade partners—for example, Australia, China, the EU, and the U.S.—despite the potential for higher economic gains (Mulgan 2008, 164–165; Solís 2010, 210–214). Considering that these four trade partners accounted for 56.2 percent of Japan’s food imports in 2012, prospects for FTAs with any of these trade partners seemed low in 2012 (Statistics Bureau of Japan 2014).

Second period 2013–2020 Since 2013, however, there has been a reversal in Korea and Japan’s FTA patterns in terms of partner selection and scope and depth of FTA content. For Korea, the primary change lies in the government’s more protective stance in its FTA negotiations following the Korea–EU FTA. One clear indication of the Korean government’s shift in stance is its refusal to join the TPP negotiations despite the fact that most of its major trade partners were part of the TPP negotiations. In the time period from 2013 to 2020, eight Korean FTAs have come into force with Turkey, Australia, Canada, China, New Zealand,Vietnam, Columbia, and Central America. When looking at the share of food imports from these eight trade partners, Australia and China stand out as the top agricultural exporting countries to Korea. In 2012, Australia and China respectively accounted for 8.6 percent and 15.8 percent of Korea’s food imports (Table 2.1). Although other trade partners such as Canada and New Zealand are also large agricultural exporting countries, they respectively accounted for a meager 3.5 percent and 2.8 percent of Korea’s food imports in 2012 (ibid.).While Korea managed to conclude two FTAs with large agricultural exporting countries, a closer examination of Korea’s FTAs with Australia and China reveal that agricultural concessions in these two FTAs were much more limited compared to the commitments in the KORUS FTA and the Korea–EU FTA. The tariff concession rate for agricultural and fishery products in the Korea– China FTA was 70 percent in terms of tariff line (HS-code) and 40 percent in terms of import volume (Ministry of Trade, Industry, and Energy 2015). These figures fall short of Korea’s earlier FTAs with the U.S. and the EU where tariff concession rates for agricultural and fishery products were respectively 99.2 percent and 99.1 percent. More importantly, Korea maintains a list of politically sensitive agricultural products such as rice, pork, beef, chicken, powered milk, cheese, honey, apple, pear, grape, orange, barley, corn, soy bean, potato, red pepper, garlic, onion, and ginseng. Rice has always been excluded in Korean FTAs, including the KORUS FTA and

24  Asymmetric evolution of Korea and Japan

the Korea–EU FTA. Setting aside rice, the number of sensitive agricultural products is 38 according to the HS-code classification. Korea managed to exempt 33 agricultural products from tariff reductions in its FTA with China and 21 products in its FTA with Australia (Korea Rural Economic Institute 2019). On the other hand, Korea exempted only nine sensitive products from tariff reductions in its FTA with the EU, while none with the U.S. (ibid.). In other words, tariff concession rates for sensitive products (excluding rice) was 13.2 percent in the Korea–China FTA and 44.7 percent for the Korea–Australia FTA, whereas the equivalent figures were 76.3 percent for the Korea–EU FTA and 100 percent for the Korea–U.S. FTA. With the exception of rice, beef and pork are among the most politically contentious items when it comes to trade liberalization in Korea. The most favored nation (MFN) tariff for imported frozen pork is 25 percent and 22.5 percent for imported refrigerated pork. In the earlier KORUS FTA and the Korea–EU FTA, Korea had agreed to eliminate these tariffs. In the Korea–EU FTA, tariffs were to be eliminated after 10 years of the FTA entering into force while for the KORUS FTA, tariff eliminations occurred much earlier. In the Korea–Australia FTA and the Korea–China FTA, however, tariffs on frozen pork would remain the same as before. While Korea agreed to eliminate tariffs on Australian refrigerated pork after 10 years of the FTA going into force, Korea excluded pork from tariff concessions in its FTA with China. Moreover, under the KORUS FTA, and the Korea–EU FTA, Korea’s 40 percent import tariff on beef was scheduled to be phased out within 15  years after the FTAs’ entry into force. Although Australia managed to get the same tariff treatment on beef as the U.S and the EU, beef was altogether excluded in the Korea–China FTA (ibid.). These figures demonstrate that Korea’s FTAs since 2013 have been less comprehensive in scope and much shallower in depth in terms of tariff concessions. In a striking departure from its past FTA negotiations, Japan has concluded highlevel FTAs with major agricultural exporting countries such as Australia and the EU. These two FTA partners each accounted for 6.4 percent and 13.3 percent of Japan’s food imports in 2012 (Table 2.2). To put it differently, the share of imported food from these two trade partners were equivalent to the total share of food imports from Japan’s earlier 13 FTAs. More importantly, Japan successfully negotiated and signed the TPP agreement in 2016. The 12 member states of the TPP included large agricultural exporting countries—for example, the U.S., Canada, Australia, and New Zealand. The TPP member states accounted for 43.2 percent of Japan’s food imports in 2012 (ibid.). In other words, the signing of the TPP, the Japan–Australia FTA, and the Japan–EU FTA signaled a drastic shift in Japan’s selection of FTA partners. Japan is no longer eschewing trade partners that might have a negative impact on its domestic agricultural sector. Although the TPP did not come into force due to the U.S. withdrawal in 2017, Japan succeeded in leading and completing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) among the remaining 11 member states of the TPP. And the member states of the CPTPP accounted for a large share of Japan’s food imports at 20.4 percent in 2012 (ibid.).

Asymmetric evolution of Korea and Japan  25

In terms of FTA scope, Japan’s FTAs since 2013 have become much more comprehensive. In particular, the Japan–Australia and the Japan–EU FTAs are noteworthy in that the Japanese government agreed to significantly larger tariff concessions on agricultural and fishery products compared to FTAs that came into force prior to 2013.These tariff concessions also covered sensitive agricultural products that had been considered untouchable in previous FTAs. In the Japan–Australia FTA, Japan agreed to drastic reductions in tariffs for beef and beef products. Tariffs on frozen beef would be reduced from 38.5 percent to 19.5 percent over 18 years and tariffs on fresh beef would be reduced from 38.5 percent to 23.5 percent over 15 years (Department of Foreign Affairs and Trade, The Australian Government 2018). Japan also agreed to eliminate tariffs on barley for feed, making Australia “the only country that can export barley (for feed), duty-free to Japan” (ibid.). Japan also eliminated tariffs for high polarity raw sugar and provided an Australia-only duty-free quota for natural cheese. The Japan–Australia FTA gave Australia a competitive advantage vis-à-vis other agricultural exporting countries for some of its largest agricultural export products in one of its largest export market. Likewise, in the Japan–EU FTA, tariff concession rates for agricultural and fishery products were 82 percent (Ministry of Foreign Affairs 2020a). From the EU perspective, tariffs would be eliminated for more than 90 percent of its agricultural exports to Japan (European Commission 2019). Japan agreed to reduce tariffs on pork, which was the EU’s largest agricultural export item to Japan by value. Japan also reduced tariffs for beef, opened the cheese market by allocating quotas for soft cheese, immediately eliminated tariffs for wine, and increased quotas for dairy products such as skimmed milk powder and butter (ibid.). The increase in tariff concession rates for the Japan–Australia and Japan–EU FTAs are even more noteworthy when considering that both trade partners are major agricultural exporters. The TPP resulted in the greatest agricultural trade concession in the history of Japan’s trade negotiations. Japan’s tariff concession rates for agricultural and fishery products was 81 percent in the TPP. While this figure fell short of those of other TPP member states—the average tariff concession rate for the other 11 TPP member states was 98.5 percent—this was Japan’s highest tariff concession rate on agricultural and fishery products to date. Moreover, 51 percent of agricultural and fishery products were subject to immediate tariff elimination and another 27.5 percent were to have tariffs abolished within 11 years of the TPP coming into force (Kim 2018, 3). More importantly, the TPP also eliminated tariffs on 174 of the 586 sensitive agricultural products, and lowered tariffs or expanded import quotas on the remaining 412 sensitive agricultural products that were excluded from tariff concessions (The Japan News 2015). For example, Japan’s 38.5 percent tariff on imported beef will fall to 9 percent in 15 years. Japan’s agricultural trade concessions in the TPP carried over to the CPTPP that was concluded in 2018. The discussion above clearly illustrates the reversals in FTA patterns for both Korea and Japan since 2013. Korean FTAs in this period is marked by more limited trade concessions on agricultural and fishery products compared to earlier FTAs.The

26  Asymmetric evolution of Korea and Japan

Korean government also failed to take part in the TPP and eventually the CPTPP. In contrast, Japan not only concluded FTAs with major agricultural exporting trade partners but also drastically expanded its tariff concession rates for agricultural and fishery products. Most importantly, the Japanese government successfully concluded the TPP and CPTPP negotiations despite significant liberalization of its agricultural sector, including its sensitive agricultural products.

Economic explanations for Korea and Japan’s FTAs Similar economic rationales have driven FTAs in Korea and Japan given strong similarities in their economic and trade structures. However, similar economic rationales have not led to a convergence in the selection of FTA partners and content of FTAs between Korea and Japan. The main driving force for Korea and Japan’s FTAs was the hope of trade preemption and the fear of trade diversion. Trade preemption occurs when a country succeeds in concluding an FTA with a trade partner before other countries. The country has essentially preempted competing countries in gaining favorable access to a particular market. Due to the FTA, the country’s products become more competitive vis-à-vis like products from competitors in other countries. This in turn will lead to trade diversion for other countries that have not been able to conclude FTAs with the same trade partner. In other words, these competing countries will find trade diverted away from them to the country with an FTA. Choi (2018) illustrates this point for Korea and Japan using the case of automobile trade. Consider the case of automobiles from Japan and Korea competing in a developing country. As a member of the WTO, this country has a MFN [most favored nation] tariff—which is identical for all WTO members—set at 15 percent. So, all auto imports from Korea and Japan are levied 15% tariff for each auto. Suppose this country negotiates an FTA with Korea, and agrees to eliminate the 15% MFN tariff within 5 years from entry into force. This new situation would give rise to more favorable trade conditions for the Korean auto industry, and a disadvantageous situation for Japanese automobiles—trade preemption effect for Korean autos, while trade diversion effect for Japanese autos. (93) The duration of trade preemption effects depends on the trade strategy of competing countries. In the hypothetical example above, the trade preemption effect created through an FTA between Korea and the developing country will be short-lived if Japan negotiates an FTA with the same country. NAFTA (1994) and the Mexico-EU FTA (2000) are good cases to illustrate how Korea and Japan similarly responded to trade diversion effects. Both Korea and Japan used Mexico as an export platform to assemble their manufactured products and sell to the North American market. Korean and Japanese companies in

Asymmetric evolution of Korea and Japan  27

Mexico heavily relied on imported parts to assemble their final products. NAFTA and the Mexico-EU FTA, however, placed Korean and Japanese products at a cost disadvantage vis-à-vis their counterparts in North America and Europe (Kim 2010; Manger 2009). For example, NAFTA’s regional content requirement made Korean and Japanese products assembled in Mexico more expensive compared to their competitors’ products from NAFTA member states. Manger (2009) notes that U.S. automobiles had a cost advantage of about U.S. $500 to $600 over Japanese automobiles (‘Chapter 5’). The Japan–Mexico FTA enabled Japanese industries to counter the preferential treatment of their American and European competitors in one of Japan’s most important export platforms. Although Korea tried to pursue an FTA with Mexico in response to NAFTA, it failed to do so, prompting it to pursue FTAs with Canada, the U.S., and the EU (Choi 2016; Kim 2010). The same economic rationale drove the FTA race among Korea, Japan, and China with the ASEAN. In October 2003, Japan and ASEAN signed a framework agreement for FTA. This move prompted China and Korea to conclude an FTA with ASEAN due to fear of trade diversion effects. The Japan–ASEAN FTA came into force in December 2008, whereas the China–ASEAN FTA came into force in July 2005 for trade in goods, July 2007 for trade in services, and January 2010 for investment. The Korea–ASEAN FTA came into force in June 2007 for trade in goods, May 2009 for trade in services, and September 2009 for investment (Choi 2016). Korea and Japan also have similar economic conditions, which should lead to similar trade incentives. Both countries have strong manufacturing and heavy and chemical industries (e.g., automobiles, electronics, general machinery, and steel) that compete in large markets, such as the U.S., the EU, and China. In 1999, both Korea and Japan were top 10 global exporters of manufacturing products. Specifically, they were top 5 global exporters for iron and steel, top 12 global exporters for chemicals, top 10 global exporters of machineries and transport equipment, and top 12 exporters for automobiles (WTO 2000, 113, 119, 122, 125, 138). Throughout the 2000s, the manufacturing sector continues to be dominant in both countries. In Korea, manufacturing has contributed to nearly 90 percent of total exports (in values), with strong exports in electronic integrated circuits, automobile, petroleum oils, vessels for transport, and automobile parts. Similarly, manufacturing has contributed to over 85 percent of Japan’s exports (in values), with strong exports in automobile, automobile parts, electronic integrated circuits, machines and vessels for transports (WTO 2010, 89, 93; 2019, 186, 196). And during this time, the three largest trade partners for both countries have been the U.S., the EU, and China. Strong similarities in Korea and Japan’s economic and trade structures imply that FTAs that provide preferential access to any of these major trade partners greatly affect the competitiveness of the manufacturing industries in Korea and Japan. For example, Korea’s FTAs with the U.S. and the EU generated strong concerns about trade diversion effects from business executives, government officials, and politicians in Japan. In fact, Korea’s FTAs with the U.S. and the EU led to a decline in Japanese automobile exports to these markets (Yoshimatsu 2015).

28  Asymmetric evolution of Korea and Japan

Yet, these similarities have not led to a convergence in Korea and Japan’s FTAs. Despite concerns among Japanese businesses and officials in face of Korea’s FTAs with the U.S. and the EU, trade diversion effects were not sufficient to propel Japan to negotiate FTAs with the U.S. or the EU prior to 2013. On a similar note, possible trade diversion effects from Japan’s participation in the TPP were not sufficient to  push the Korean government to participate in the TPP negotiations. In sum, economic explanations cannot adequately explain divergences in Korea and Japan’s FTAs.

Explaining divergences in Korea and Japan’s FTAs This book examines two supply-side factors and two demand-side factors to understand variations in Korea and Japan’s FTA partner selection and FTA content. The two supply-side factors are institutions of trade policymaking and political leadership. The two demand-side factors are interest groups and more broadly civil society. Among these four factors, institutions of trade policymaking is the primary factor responsible for the divergences in Korea and Japan’s FTAs across the two periods under study. Political leadership serves as the secondary factor that explains the timing of Korea and Japan’s FTA pattern reversal. These two supply-side factors shape the extent to which the demand-side factors play a role in FTA policymaking. This book introduces the concept of domestic trade governance to explain how institutions of trade policymaking have led to the observed divergences in Korea and Japan’s FTAs since the late 1990s. Domestic trade governance refers to the institutional mechanism that coordinates and translates varying domestic interests on trade policies into a concrete policy position. Domestic trade governance alters the extent to which societal and political interests opposing trade negotiations influence trade policymaking. This, in turn, has a huge impact on government trade preferences, negotiation strategies, and ultimately trade negotiation outcome. Main differences in domestic trade governance stem from the differences in the degree of concentration of trade negotiating authority and the degree of interministry coordination. Domestic trade governance is cohesive when the authority to set the negotiation agenda and negotiate over trade policies is centralized and effective at the working level. Additionally, formal and informal mechanisms exist to promote interministerial coordination. Domestic trade governance is fragmented when the decision-making authority on trade policies is decentralized into separate ministries. In addition, mechanisms to promote interministerial coordination is lacking. Cohesive domestic trade governance enables the government to pursue highlevel FTAs by weakening the voice of protectionist interests. Cohesive domestic trade governance makes the trade policymaking structure less permeable to societal interests and generates pressures for consensus-building among the various interests on trade policies. This in turn enables the government to formulate a unified trade agenda that takes into consideration national economic interest rather than narrow sectoral interest. As a result, trade negotiators have a higher chance of achieving high-level FTAs. On the other hand, fragmented domestic trade governance enables

Asymmetric evolution of Korea and Japan  29

protectionist interests to serve as an effective veto player, allowing narrow sectoral interests to disproportionately influence the government’s trade agenda and negotiations. Such trade policymaking structure is more likely to produce low-level FTAs. When applied to Korea and Japan from the late 1990s to 2012, cohesive domestic trade governance enabled the Korean government to pursue high-level FTAs while fragmented domestic trade governance limited the Japanese government to lowlevel FTAs. Since 2013, however, weakening cohesion of domestic trade governance in Korea and strengthening cohesion of domestic trade governance in Japan explains the reversal in FTA patterns. Domestic trade governance explains both the long-term patterns in Japan and Korea’s FTAs as well as the reversal in FTA patterns. Considering that differences in domestic trade governance place countries on paths of FTAs that vary along partner selection, sectoral coverage, and scope of liberalization, it is important to understand how changes in domestic trade governance occur. In this book, political leadership serves as the secondary factor that explains the timing of change in domestic trade governance. In other words, political leadership is the catalyst that brings about changes in domestic trade governance in a specific point in time. In 2013, the Korean President Park Geun-hye implemented changes in the institutions of trade policymaking that led to the weakening cohesion of Korea’s domestic trade governance. In the same year, Prime Minister Shinzo Abe strengthened the cohesion of Japan’s domestic trade governance by introducing a centralized body of trade policymaking under his leadership. These two political leaders were instrumental in bringing about major changes in the institutions of trade policymaking in Korea and Japan in 2013. Domestic trade governance and political leadership can work to reinforce or undermine one another.While strong political leadership cannot substitute for fragmented domestic trade governance, it can reinforce cohesive domestic trade governance to create momentum for high-level FTAs. On a similar note, under weak political leadership, high-level FTAs may be difficult even with cohesive domestic trade governance. Political leaders can simply choose not to pursue high-level FTAs even when the structural conditions are favorable for high-level FTAs. The nature of domestic trade governance and political leadership will determine which interests in society play a more dominant role in FTA policymaking. Proand anti-FTA interests in society are always present.Yet the ability of these interests to promote or counter FTAs depend on the institutions of trade policymaking. As illustrated in Table 2.3, protectionist interests in society that oppose FTAs are able to wield stronger influence over the FTA policymaking process when the TABLE 2.3  Overview of Argument

Domestic Trade Governance

Dominant Interests

Type of FTAs

Cohesive Fragmented

Pro-trade interests Protectionist interests

High-level FTAs Low-level FTAs

30  Asymmetric evolution of Korea and Japan

domestic trade governance is fragmented. The ability of protections interests to hamper FTAs weaken under cohesive domestic trade governance. Lastly, the nature of the institutions of trade policymaking and institutional access to trade policymaking vary depending on political leadership. In sum, this book provides a comprehensive examination of the both the demand and supply-side factors that shape FTAs through the cases of Korea and Japan. Chapters 3–5 carefully explore each of these factors in shaping Korea and Japan’s FTAs since the late 1990s.

Notes 1 The content of the chapter is a combined, modified, and updated version of the authors’ two previously published articles. Choi, Byung-il and Oh, Jennifer S. (2011), ‘Asymmetry in Japan and Korea’s Agricultural Liberalization in FTA: Domestic Trade Governance Perspective’, Pacific Review, 24:5 (December 2011), 505–527 and Choi, Byung-il and Oh, Jennifer S. (2017), ‘Reversed Asymmetry in Japan and Korea’s FTAs: TPP and Beyond’, Pacific Focus 32:2 (August 2017), 232–258. 2 Korea is a presidential system with the prime minister holding a role analogous to that of a vice president. Japan is a parliamentary system. 3 All commitments on tariff reductions and sectoral liberalization of the Korea–EU FTA went into effect in 2011. Some commitments, where the EU Commission does not have negotiating authority, became effective in 2015, after the completion of ratification from all the EU member states. 4 WTO defines HS-code as “an international nomenclature developed by the World Customs Organization, which is arranged in six-digit codes allowing all participating countries to classify traded goods on a common basis. Beyond the six-digit level, countries are free to introduce national distinctions for tariffs and many other purposes” (WTO 2020). 5 Interview with Korean Ministry of Food, Agriculture, Forestry and Fishery official involved in the Korea–Japan FTA negotiation, February 19, 2010 in Seoul, Korea.

References Ahearn, Raymond (2005), ‘Japan’s Free Trade Agreement Program’, CRS Report for Congress, RL 33044, August, Washington DC: Office of Congressional Information and Publishing. Ajima, Shinya (2010) ‘EU FTA Quest to Test Political Will’, The Japan Times, February 3, https://www.japantimes.co.jp/news/2010/02/03/national/eu-fta-quest-to-test-political-will/ (accessed July 9, 2020). Bartlett, Brent L. (2018), ‘South Korea’, in Thomas Howell et al., eds., Conflict Among Nations: Trade Policies in the 1990s, New York: Routledge, Kindle version. Cabinet Office, Government of Japan (2008), ‘Shokuryō Nōgyō Nōson no Yakuwari ni Kansuru Seronchōsa’ [Public Opinion Survey on the Roles of Food, Agriculture and Rural Areas], https://survey.gov-online.go.jp/h20/h20-shokuryou/index.html (accessed July 7, 2020). Cabinet Office, Government of Japan (2018), ‘Public Opinion Survey on Food, Agriculture, Forestry and Fisheries’, https://survey.gov-online.go.jp/h30/h30-shoku/index.html (accessed July 7, 2020). Choi, Byung-il (2018), Northeast Asia in 2030, Seoul: Asiatic Research Institute.

Asymmetric evolution of Korea and Japan  31

Choi, Byung-il and Oh, Jennifer S. (2011), ‘Asymmetry in Japan and Korea’s Agricultural Liberalization in FTA: Domestic Trade Governance Perspective’, Pacific Review, Vol. 24, No. 5, 505–527. Choi, Byung-il and Oh, Jennifer S. (2017), ‘Reversed Asymmetry in Japan’s and Korea’s FTAs: TPP and Beyond’, Pacific Focus,Vol. 32. No. 2, 232–258. Choi, Seokyoung (2016), Choi Seokyoung ui FTA Hyupsang Notu [Choi Seokyung’s FTA Negotiation Memoir], Seoul: Park Youngsa. Choi, Sunchul, Dyck, John and Childs, Nathan (2016), ‘The Rice Market in South Korea’, A Report from the Economic Research Service, RCS-161-01, September. https://www. ers.usda.gov/webdocs/publications/79794/rcs-161-01.pdf?v=42636 (accessed April 28, 2020). Davis, Christina (2003), Food Fights Over Free Trade: How International Institutions Promote Agricultural Trade Liberalization, Princeton: Princeton University Press. Department of Foreign Affairs and Trade, The Australian Government (2018), ‘Factsheet: Agriculture and Processed Food’, https://www.dfat.gov.au/trade/agreements/inforce/jaepa/fact-sheets/Pages/jaepa-fact-sheetagriculture-and-processed-food (accessed May 21, 2020). European Commission (2019), ‘EU-Japan: Economic Partnership Agreement’, https://trade. ec.europa.eu/doclib/docs/2017/july/tradoc_155715.pdf (accessed August 2, 2020). Francks, Penelope, Boestel, Johanna, and Kim, Choo Hyop (2002), Agriculture and Economic Development in East Asia: From Growth to Protectionism in Japan, Korea, and Taiwan, London and New York: Routledge. Karrbo, Juliet (2012), Coalition Politics and Cabinet Decision Making: A Comparative Analysis of Foreign Policy Choices, Ann Arbor: The University of Michigan Press. Kim, Hyunchong (2010), Hanmi FTAryul Malhada [Kim Hyunchong Talks about Korea–US FTA], Seoul: Hongsungsa. Kim, Dong-won and Park, Hye-jin (2007), ‘Nongeop Nongchonedaehan 2006nyeon Gukmin Uisik Josa Gyeolgwa’ [The 2006 Public survey on Agriculture and Rural Area], https://www.krei.re.kr/krei/selectBbsNttList.do?bbsNo=79&key=277 (accessed July 7, 2020). Kim, Dong-won and Park, Hye-jin (2009), ‘Nongeop Nongchonedaehan 2009nyeon Gukmin Uisik Josa Gyeolgwa’ [The 2009 Public survey on Agriculture and Rural Area], https://www.krei.re.kr/krei/selectBbsNttList.do?bbsNo=79&key=277 (accessed July 7, 2020). Kim, Dong-won and Park, Hye-jin (2019), ‘Nongeop Nongchonedaehan 2019nyeon Gukmin Uisik Josa Gyeolgwa’ [The 2019 Public Opinion on Agriculture and Rural Area], https://www.krei.re.kr/krei/selectBbsNttList.do?bbsNo=79&key=277 (accessed July 7, 2020). Kim, Gyu Pan (2018), ‘Japan’s TPP Strategy’, World Economy Brief,Vol. 8, No. 7, 1–6. Kim, Yang-hee (2009), ‘Ilbon EPA ui Sanupbyul Sangpumyanghuh Shiltaewa Shisajum’ [Analysis on Commodity Concessions by Industry in Japan’s EPA], World Economy Update, Vol. 9, No. 6, Seoul: KIEP. Koo, Min Gyo (2006), ‘From Multilateralism to Bilateralism? A Shift in South Korea’s Trade Strategy’, in Vinod Aggarwal and Shujiro Urata eds., Bilateral Trade Agreements in the AsiaPacific: Origins, Evolution, and Implications. New York: Routledge. Korea Agricultural Trade Information (2013), ‘2013 Nongrim Susanshikpum Suchulipdonghyang mit Tonggae’ [2013 Agriculture and Fishery Food Export and Import Statistics], http://www.kati.net/board/exportNewsView.do?board_seq=53667&menu_ dept2=35&menu_dept3=72 (accessed June 26, 2020).

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Korea Agricultural Trade Information (2015), ‘2015 Nongrim Susanshikpum Suchulipdonghyang mit Tonggae’ [2013 Agriculture and Fishery Food Export and Import Statistics], http://www.kati.net/board/exportNewsView.do?board_seq=53667&menu_ dept2=35&menu_dept3=72 (accessed June 26, 2020). Korea Rural Economic Institute (2019), ‘Nongchuksanmul FTA Yangheoan mit Hyubjungkwanseyul Charyojip’ [Agricultural Product Tariff Concession and Reduction Schedule under FTA], http://www.krei.re.kr/krei/researchReportView.do?key=67&pag eType=010101&biblioId=520062&pageUnit=10&searchCnd=all&searchKrwd=&pageI ndex=1&engView= (accessed August 11, 2020). Korean Statistical Information Service (KOSIS) (2019), ‘Survey of Agriculture, Forestry and Fisheries’, http://kosis.kr/statisticsList/statisticsListIndex.do?menuId= M_01_01&vwcd=MT_ZTITLE&parmTabId=M_01_01#SelectStatsBoxDiv (accessed July 7, 2020). Krauss, Ellis S. (2003),‘The US, Japan, and Trade Liberalization: From Bilateralism to Regional Multilateralism to Regionalism+’, Pacific Review,Vol. 16, No. 3, 307–329. Manger, Mark (2009), Investing in Protection: The Politics of Preferential Trade Agreements Between North and South, Cambridge: Cambridge University Press, Kindle edition. Ministry of Foreign Affairs (2020a), ‘Japan-EU EPA’, March 20, https://www.mofa.go.jp/ files/000013835.pdf (accessed August 2, 2020). Ministry of Foreign Affairs (2020b), ‘Free Trade Agreement (FTA) and Economic Partnership Agreement (EPA)’, July 7, 2020, http://www.mofa.go.jp/policy/economy/fta/index. html Ministry of Trade, Industry, and Energy (2015), ‘Hanjung FTA Sangsae Sulmyung Jaryo’ [Korea-China FTA Briefing Document], http://www.fta.go.kr/webmodule/_PSD_ FTA/cn/doc/1_description.pdf (accessed June 8, 2020). Ministry of Trade, Industry, and Energy (2020), ‘FTA Ganguk, Korea’ [FTA Strong Country, Korea], https://www.fta.go.kr/main/situation/kfta/ov/ (accessed July 9, 2020). Mulgan, Aurelia G. (2006), Japan’s Agricultural Policy Regime, New York: Routledge. Mulgan, Aurelia G. (2008), ‘Japan’s FTA Politics and the Problem of Agricultural Trade Liberalization’, Australian Journal of International Affairs,Vol. 62, No. 2, 164-178. OECD (2020), ‘Agricultural Support (indicator)’, doi:10.1787/6ea85c58-en (accessed July 7 2020). Pempel, T.J. and Urata, Shujiro (2006), ‘Japan: A New Move Toward Bilateral Trade Agreements’, in Vinod Aggarwal and Shujiro Urata eds., Bilateral Trade Agreements in the Asia-Pacific: Origins, Evolution, and Implications, New York: Routledge. Solís, Mireya (2010),‘Can FTAs Deliver Market Liberalization in Japan? A Study on Domestic Political Determinants’, Review of International Political Economy,Vol. 17, No. 2, 209–237. Statistics Bureau of Japan (2014), Japan Statistical Yearbook 2014, ‘Imports by Principal Commodity and Principal Country of Origin’, https://www.stat.go.jp/english/data/ nenkan/index.html (accessed July 9, 2020). Statistics Bureau of Japan (2017), Japan Statistical Yearbook 2017. ‘Chapter 8: Agriculture, Forestry and Fisheries’, http://www.stat.go.jp/english/data/nenkan/66nenkan/1431-08. html (searched date: July 7, 2020). The Japan News (2015), ‘TPP to Lift 95% of Tariffs on Farm, Factory Goods’, The Japan News by Yomiuri Shimbun, October 20, http://the-japan-news.com/news/article/0002506683. United States Trade Representative (USTR) (2009), ‘2009 National Trade Estimate Report on Foreign Trade Barriers’, https://ustr.gov/about-us/policy-offices/press-office/ reports-and-publications/2009/2009-national-trade-estimate-report-foreign-trad (accessed August 1, 2020).

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Wolff, Alan Wm and Howell,Thomas R. (2018), ‘Japan’, in Thomas Howell et al., eds., Conflict Among Nations:Trade Policies in the 1990s, New York: Routledge, Kindle version. WTO (2000), International Trade Statistics 2000, Geneva: WTO. WTO (2010), Trade Profiles 2010, Geneva: WTO. WTO (2019), Trade Profiles 2010, Geneva: WTO. WTO (2020), ‘Glossary Term’, https://www.wto.org/english/thewto_e/glossary_e/ harmonized_system_e.htm (accessed August 2, 2020). Yoshimatsu, Hidetaka (2015), ‘Locating Japanese Trade Policy in an Evolving Regional Context’, in Aurelia G. Mulgan and Masayoshi Honma, eds., The Political Economy of Japanese Trade Policy, Kindle edition. Basingstoke and New York: Palgrave MacMillan.

3 TRADE POLICYMAKING INSTITUTIONS1

Domestic trade governance How do institutions of trade policymaking in Japan and Korea impact FTA politics? FTAs are distributive in nature—import-competing sectors such as agriculture lose from liberalization, whereas export-competing sectors gain. The institutional structure of trade policymaking critically shapes how these conflicting interests are aggregated at the national level.Whether or not a government pursues agricultural liberalization, despite great political odds, depends on how effectively the institutions of trade policymaking generate a consensus among different actors engaged in trade policies. More precisely, institutions can force consensus among actors who otherwise have no incentives to make a compromise, thereby enabling these different actors to agree on a single trade agenda and take a more conciliatory stance on trade policies. This chapter introduces the concept of domestic trade governance to make meaningful comparisons between different institutional structures of trade policymaking. Domestic trade governance refers to the institutional mechanism that coordinates and translates varying domestic interests on trade policies into a concrete policy position. Main differences in domestic trade governance stem from differences in the degree of concentration of trade negotiating authority and the degree of interministry coordination. Domestic trade governance is cohesive when one ministry or government entity has undisputed jurisdiction on trade matters. This entity not only sets the overall trade agenda, but also assumes full responsibility over trade negotiations. In other words, the authority to set the negotiation agenda and negotiate over trade policies is centralized and effective at the working level. Additionally, formal and informal mechanisms exist to promote interministerial coordination under the broader goal of pushing forth the negotiation agenda. These institutional features facilitate the creation of a single trade agenda agreed upon by the different ministries involved in trade policies. The institutional setting thus makes it difficult for one ministry to

Trade policymaking institutions  35

oppose and undermine the overall negotiation agenda. As a result, cohesive domestic trade governance enables national interests to dominate over sectoral interests, creating a favorable condition for the government to pursue trade liberalization against the wishes of protectionist vested interests. When domestic trade governance is fragmented, on the other hand, the decisionmaking authority on trade policies is decentralized into separate ministries. Each ministry assumes negotiation authority on items that fall within its jurisdiction: for example, agricultural ministries negotiate on agricultural products, while economic ministries negotiate on industrial goods. The decentralized authority structure undermines coordination efforts among the ministries, since the ministries lack the incentive to create a single trade agenda. Fragmented domestic trade governance allows a single ministry to wield a disproportionately large influence over the negotiation agenda and outcome by enabling one ministry to dictate the terms of a specific segment of the negotiation. As a result, protectionist sectoral interests are more likely to wield influence over the trade negotiation process and outcome. Table 3.1 summarizes the main argument on domestic trade governance and provides an overview of changes in Japan and Korea’s domestic trade governance from the late 1990s to the present. In 1998, Korea centralized the trade policymaking structure through the creation of the Ministry of Foreign Affairs and Trade (MOFAT) and introduced formal coordination mechanisms at the ministerial level. Korea’s domestic trade governance remained cohesive until the dissolution of the MOFAT in 2013. On the other hand, Japan’s domestic trade governance remained fairly fragmented until 2013 when the current Prime Minister Shinzo Abe’s administration centralized the authority of trade policymaking and actively curbed the influence of powerful farm interests that oppose trade liberalization. The reversed pattern in Japan and Korea’s domestic trade governance structure plays an important role in explaining Japan and Korea’s reversed pattern of FTAs that was examined in the previous chapter. Korea’s cohesive domestic trade governance structure from the late 1990s to 2012 enabled the government to successfully conclude high-level FTAs such as the KORUS FTA and the Korea–EU FTA that were politically difficult due to opposition from protectionist interests (e.g., agricultural interests). Since 2013, however, weakening cohesion of Korea’s domestic trade governance has strengthened the voice of protectionist sectoral interests. As a result, TABLE 3.1  Domestic Trade Governance and Japan and Korea’s FTAs, 1990s–2020

Japan

Korea

Late 1990s–2012

2012–2020

Fragmented Domestic Trade Governance

Cohesive Domestic Trade Governance

Case: Korea–Japan FTA

Case: Japan–Australia FTA and TPP

Cohesive Domestic Trade Governance

Fragmented Domestic Trade Governance

Case: KORUS FTA

Case: Korea–China FTA

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the Korean government was not able to join the TPP negotiations and conceded to protectionist demands during its FTA negotiation with China. In Japan, fragmented domestic trade governance has persistently allowed protectionist sectoral interests, mainly agricultural interests, to stymie FTA efforts prior to 2013. Since then, the increasing cohesion of Japan’s domestic trade governance has weakened these protectionist interests, enabling the government to successfully conclude high-level FTAs such as the TPP and the Japan–Australia FTA. Given the strong similarities in their bureaucratic structures and practices, the comparison of Japan and Korea’s domestic trade governance is interesting. In both countries, bureaucrats are recruited from top universities and are trained as technocrats. Bureaucrats rarely transfer between ministries and enjoy lifetime employment. The following sections compare Japan and Korea’s domestic trade governance on the following two areas: the locus of authority on agenda setting and trade negotiations and the effectiveness of coordination mechanisms among the ministries. The effects of domestic trade governance on FTAs are then assessed through the cases of the KORUS FTA, the failed Korea–Japan FTA, the TPP and the Korea–China FTA. The main argument raised in this chapter is that cohesive domestic trade governance is a necessary and prior condition that enables governments to push through liberalization of sensitive sectors during FTA negotiations.While strong FTA initiative by a centralized political leadership greatly aids in the process of FTA negotiations, the government cannot achieve liberalization in sensitive sectors without cohesive domestic trade governance.

The first period of domestic trade governance: 1990s–2012 Cohesive domestic trade governance in Korea: 1990s–2012 Prior to 1998, Korea’s domestic trade governance was fragmented. Ministries planned and implemented trade policies that directly related to their sectoral interest.­For instance, the Ministry of Commerce dealt with automobile negotiations, the Ministry of Agriculture (MOA)2 dealt with agricultural negotiations and the Ministry of Finance dealt with the liberalization of the financial sector. The ­consequence was predictable resistance to market opening by ministries that mainly served the interests of import-competing sectors. When negotiating authorities overlapped due to the cross-cutting nature of trade issues, ensuing interministerial conflicts often resulted in a prolonged logjam in trade negotiations. From a foreign country’s perspective, it was difficult to identify the proper Korean ministry with which it could negotiate (Choi 2007). Korea’s fragmented domestic trade governance underwent a dramatic change in 1998, mainly in response to the government’s restructuring efforts during the Asian Financial Crisis. The Ministry of Foreign Affairs was reorganized as the MOFAT. The newly established Office of the Minister for Trade (OMT)—a subdivision of MOFAT—was now in charge of trade negotiations. The head of OMT held a minister-level position with the official title of Minister for Trade.

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The creation of a centralized authority to set agendas and negotiate on foreign­ economic policies (i.e., MOFAT) did not automatically eliminate conflicts among the ministries. MOFAT faced resistance from individual ministries that were reluctant­ to give up their traditional authority over trade policies. MOA negatively viewed Korea’s first FTA with Chile, largely reflecting the import-competing interests of­ farmers (Choi 2006, 430–434).The MOFAT’s initiative to have a Bilateral Investment Treaty with the U.S. was met by more daunting opposition from the Ministry of Culture and Tourism on the issue of screen quota. Even though MOFAT was in the­ driver seat, it could not overcome opposition of ministries that mainly represented import-competing sectors. Although the Office of the Prime Minister held the responsibility of coordinating on trade issues, there was no formal institutional arrangement which compelled a regular meeting among the ministries for the purpose of trade coordination. Besides, the Prime Minister himself did not view coordination on trade issues as an essential task. Without an effective mechanism to build consensus among the different ministries, interministerial conflicts continued to constrain MOFAT’s authority on foreign economic policies. In order to improve interministerial coordination, and thus strengthen the capacity of MOFAT to actually negotiate on behalf of all the ministries, the government created the Ministerial Meeting on External Economic Affairs in 2001. Basically, ministers from various ministries in charge of external economic affairs, including finance, agriculture and commerce, were now required to hold monthly meetings to mete out differences over the trade agenda.The Chair of the Ministerial Meeting was assumed by the Minister of Finance and Economy, who was also the Deputy Prime Minister, not by the minister of MOFAT. The Ministerial Meetings critically altered the negotiation leverage of individual ministries. Since ministries engaged in repeated discussions during the monthly Ministerial Meetings, it became difficult for one ministry to consistently oppose and thus stall trade negotiation efforts. Unless a number of ministries that represented import-competing interests formed a coalition, a single trade issue such as resistance to agricultural liberalization could not derail an entire trade negotiation agenda. For example, MOA would risk bearing the blame for sabotaging Korea’s FTA negotiations if they continued to oppose agricultural liberalization. The emphasis on consensus-building generated strong pressures for MOA to moderate its stance toward agricultural liberalization. This Ministerial Meeting gained in importance as Korea vigorously pushed FTAs with more countries. During controversial FTAs such as the KORUS FTA, the Ministerial Meeting played a key role in determining the final negotiating agenda that included liberalization of sensitive sectors such as agriculture.

KORUS FTA The KORUS FTA has been one of the most controversial cases in the history of Korean FTA negotiations. An opposition consisting of import-competing interests such as the farming sector, film industry, and anti-American civil society groups

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waged anti-KORUS FTA movements throughout the negotiation process. These opposition forces criticized the KORUS FTA as a neo-liberal policy that would worsen income distribution (Choi 2006). Although the prospect looked dim, the Korean government successfully concluded the FTA negotiations in the summer of 2007. The KORUS FTA included substantial liberalization of the agricultural sector. Tariff concessions covered 99.2 percent of agricultural and fishery products (see Chapter 2). The Korean government agreed to immediately grant duty-free status to two thirds of agricultural imports from the U.S. and gradually eliminate tariffs and import quotas on the remaining agricultural products within 10 years. Throughout the process of the KORUS FTA, MOFAT played a critical role in enabling the Korean government to forge an FTA with a major exporter of ­agricultural products against all odds. From the beginning, MOFAT was responsible for setting the KORUS FTA as a top priority in Korea’s trade negotiation agenda. In the summer of 2003, MOFAT came up with an “FTA roadmap” that envisioned wiring Korea with a global network of FTAs to improve Korea’s trading leverage vis-à-vis foreign countries. According to the roadmap, forging FTAs with Korea’s major trading partners such as the U.S., EU, China, and Japan were top priorities. It is important to note that among these four large trading partners, three are major exporters of agricultural products. Prior to the establishment of MOFAT in 1998, the chances of the U.S., EU, and China emerging as top priority FTA partners were very low. Strong resistance from MOA most likely would have prevented the Korean government from pursuing FTAs with any of these countries. Yet, by 2003, MOFAT acquired the capacity to set Korea’s trade agenda based on the broader national economic interest. Concerns over agricultural liberalization no longer dictated the selection of Korea’s FTA partners. Even though the Korean government designated the U.S. as a potential FTA partner, the prospect of a KORUS FTA seemed rather poor. First, the U.S. was suspicious of the Korean government’s ability to deliver, as was the case in the previous Bilateral Investment Treaty talks. Second, the Korean government would face severe domestic opposition, especially from farm interests. And third, President Roh Moo-hyun (2003–2007) was perceived as a left-wing and anti-American politician with a hostile stance toward neoliberal trade policy. MOFAT’s leadership proved critical in overcoming these obstacles. MOFAT spent the entire year of 2005 to create a fertile ground to launch the KORUS FTA. Foremost, MOFAT aimed to resolve pending bilateral issues between the U.S. and Korea (Cooper et al. 2008, 38).The two most important issues to the U.S. were reductions in Korean screen quota and resumption of U.S. beef import. Also, MOFAT was fully aware that the U.S. would not be interested in an FTA without substantial agricultural liberalization. In order to tackle all three issues, MOFAT first sought out the support of President Roh and actively convinced him of the economic rationale behind the KORUS FTA (Lee 2007). MOFAT argued that the potential benefit from the KORUS FTA was too big to squander, outweighing any negative effects from the comprehensive liberalization of the agricultural sector that excluded rice. Moreover,

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an FTA with the U.S. would dramatically enhance Korea’s negotiating leverage with other countries. In fact, as the KORUS FTA became a real possibility, concerns over trade diversion effects prompted the EU and China to express interest in FTA talks, with Korea. Likewise, the Japanese government raised the prospect of resuming the Korea–Japan FTA talks, which had suspended in 2004 (Choi 2010, 54). President Roh was persuaded by the logic behind the KORUS FTA and gave unwavering political support. Despite opposition from even his own ruling party, he agreed to cut the annual screen quota in favor of the U.S. as a precondition to the KORUS FTA talks (Cooper et al. 2008, 38; Sung 2006). The Korean government also lifted the ban on U.S. beef import. Most importantly, President Roh maintained the view that the Korean agricultural sector could not avoid market opening in Korea’s race to enhance global competitiveness. He believed that the KORUS FTA was a national agenda that should not be subject to myopic sectoral interests and partisan ideology (Government Information Agency 2008). Basically, MOFAT succeeded in setting the KORUS FTA as a top priority in Korea’s trade agenda and even gained the president’s support. Had it not been for MOFAT’s initiative, the government would have paid scant attention to the KORUS FTA. While the strategic vision and nimble execution of MOFAT was instrumental in launching the KORUS FTA, Korean negotiators confronted much more formidable obstacles during the negotiation process. The most difficult sector was agriculture; Korean negotiators were caught between strong U.S. demand for complete opening and vehement domestic opposition. The Korean negotiating strategy was to offer all agricultural products on the negotiating table except rice and negotiate to secure safeguards and longer phase-out periods. During the entire negotiating phase of the KORUS FTA, the Ministerial Meetings effectively ironed out internal differences and worked out domestically acceptable negotiating positions for the Korean negotiators.3 In theory, MOA could have voiced opposition at every session of the Ministerial Meetings. However, it would take enormous political capital for MOA to repeat opposition at every regular meeting, unless it forged a strong coalition with other sympathetic ministries. Given the high stake of the KORUS FTA, MOA could not risk taking all the blame for sabotaging the negotiations. In fact, MOA was quite cooperative in coordinating agricultural trade policies at the Ministerial Meeting. MOA focused its efforts on seeking longer time frame for tariff phase-outs and installing agriculture specific safeguards, seasonal tariffs, and tariff quotas. MOA also successfully pressured the government for trade adjustment assistance to farmers adversely affected by the KORUS FTA. Effective coordination by the Ministerial Meeting enabled MOFAT to pursue greater agricultural liberalization in order to gain improved access to the U.S. market and thus secure national economic benefits. Throughout the KORUS FTA negotiations, President Roh provided strong support and thus added political momentum to the negotiation process. In addition to reducing mandatory days for Korean screen quota and resuming U.S. beef import, he created the Presidential Committee on Facilitation of the KORUS FTA Finalization (Kim 2006). The main task of this Presidential Committee was to mitigate accusation from opposition groups and to assure the public that the KORUS

40  Trade policymaking institutions

FTA would help boost the living standard of average Koreans. For this purpose, the committee engaged in vigorous public diplomacy.Yet President Roh’s support was not the determining factor in the successful conclusion of the KORUS FTA. Given strong opposition from his own power base, President Roh’s capacity to propel the KORUS FTA negotiation was limited. His support gained significance primarily due to the prior presence of MOFAT and the Ministerial Meetings. MOFAT took the leadership in setting KORUS FTA as a top trade agenda and actively created a conducive environment for a successful negotiation. The Ministerial Meetings pressured MOA into taking a more conciliatory position and accept substantial agricultural liberalization for the benefit of the national economy. Without these institutional features, President Roh’s support would not have generated enough pressure to even start the KORUS FTA talks. Ultimately, the Korean and U.S. governments signed the KORUS FTA on June 2007. Korea’s cohesive domestic trade governance played a crucial role in every phase of the KORUS FTA negotiations. MOFAT’s strategic vision and spearheading and the Ministerial Meeting’s effective interministerial coordination enabled the successful conclusion of the KORUS FTA.

Japan 1990s–2012: fragmented domestic trade governance Until 2013, Japan’s institution of trade policymaking featured core traits of fragmented domestic trade governance. First, the authority to set agendas and negotiate on foreign economic policies was decentralized. Ministries controlled specific issues in foreign economic policies that fell within their jurisdiction. Trade policies in each sector were determined by “policy subgovernments” that consisted of both “demand and supply-side actors in each sector” (Mulgan 2008, 172). Specifically, the agricultural policy subgovernment included “farm politicians in the Liberal Democratic Party [LDP], MAFF [Ministry of Agriculture, Forestry and Fishery] bureaucrats, and key industry representatives (executives of the main peak agricultural organizations)” (ibid.). Likewise, the industrial policy subgovernment consisted of “bureaucrats from the Ministry of Economy, Trade and Industry (METI), LDP politicians with close ties to industry, and the executives of peak business organizations” (ibid.). Japan’s FTA negotiation structure clearly reflected these sectoral divisions: four key ministries—the Ministry of Foreign Affairs, the Ministry of Finance, METI, and MAFF—shaped Japan’s FTA agenda and negotiations (Solis and Katada 2007, 293). During actual negotiations, representatives of these four ministries served the interest of their respective ministries. The four representatives essentially served as independent negotiators with equal voice in the negotiation. As a result, foreign negotiators faced the prospect of negotiating with four separate bodies of equal power, but with different interests (Mulgan 2008, 175). Japan’s fragmented domestic trade governance allowed a single ministry to wield a disproportionately large influence over Japan’s FTA agenda and negotiation. Since ministries did not exercise veto over each other’s policy, opposition by one ministry could bring FTA negotiations to a halt. What this implied was that MAFF’s support

Trade policymaking institutions  41

was critical in order for the Japanese government to conduct FTA negotiations with countries that sought to open Japan’s agricultural market. For example, during Japan’s FTA negotiation with Mexico, MAFF essentially defined the upper limits of the liberalization package by placing restrictions on agricultural liberalization. MAFF’s resistance toward agricultural liberalization was a critical factor behind failed talks during the earlier stages of the Japan–Mexico FTA negotiation (Solis and Katada 2007, 293–294). More importantly, Japan’s administrative structure lacked effective interministerial coordination mechanism that could moderate the stances of different ministries during FTA negotiations (Ahn 1998; Mulgan 2008). In the first half of the 2000s, Prime Minister Junichiro Koizumi’s attempts to centralize the structure of FTA negotiation and strengthen coordination among the ministries met with moderate success. Prime Minister Koizumi actively took on the role of coordinating the positions of various ministries involved in Japan’s FTAs. From 2002 to 2004, the Koizumi cabinet created various committees, meetings and councils concerned with creating a uniform FTA agenda, promoting FTAs and facilitating consensus building among the four ministries involved in FTA negotiations (Mulgan 2008, 173–174; Solis and Katada 2007, 297). Solis and Katada (2007) observe that Prime Minister Koizumi’s leadership eventually made MAFF take a more accommodative stance on agricultural liberalization, which in turn greatly aided in the successful conclusion of the Japan–Mexico FTA (297).The Japan–Mexico FTA illustrates that leadership matters to some extent. Koizumi’s endeavor to facilitate interministerial coordination most likely contributed to MAFF’s flexibility in the later stages of the Japan–Mexico FTA negotiations. However, closer look demonstrates that MAFF’s concession was quite limited. Japan’s tariff concessions only covered 47.4 percent of agricultural and fishery products (see Chapter 2). Despite Prime Minister Koizumi’s top-down governing style and active intervention to promote FTAs, vertical divisions remained within the bureaucracy as ministries protected their jurisdiction over trade policies (Mulgan 2008, 173–176). Strong executive leadership alone could not break the impasse generated by ministerial conflicts. In conclusion, fragmented domestic trade governance was a dominant feature of Japan’s institution of trade policymaking. No single body spoke on behalf of Japan’s trade policies. As Mulgan aptly depicted, “Japan does not have one FTA strategy or policy; it has several” (Mulgan 2008, 173). MAFF continued to exercise great clout over the fate of Japan’s FTA negotiations due to its authority over agriculture-related trade negotiations. Due to MAFF’s opposition to agricultural liberalization, the Japanese government refrained from FTAs that entailed substantial agricultural liberalization. The failed Korea–Japan FTA is a good case to illustrate the challenges fragmented domestic trade governance posed to Japan’s FTA agenda during this period.

Korea–Japan FTA The issue of bilateral economic cooperation between Japan and Korea was first broached in 1998 amidst heightened interest in both governments for improved political and economic relations. Despite a flurry of joint study group reports

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on the prospects of a Korea–Japan FTA, not much progress was made until the fall of 2003 when President Roh and Prime Minister Koizumi officially agreed to start FTA negotiations. FTA negotiations formally began in December 2003 and unsuccessfully ended a year later in December 2004 just after six rounds of negotiations (Ahn 2006). Observers generally point out that the Japanese government’s refusal to liberalize its agricultural sector and the Korean government’s insistence on protecting its local small- and medium-sized enterprises led to the failure of the Korea–Japan FTA (Cho 2010; Kitazume 2004). Yet, surveys on Korean small- and medium-sized enterprises’ position on the Korea–Japan FTA indicate otherwise. According to a survey by the Korean Small Business Institute (KOSBI), 50.6 percent of the respondents said that they were not interested in the Korea–Japan FTA and 64.6 percent responded that the economic impact of the Korea–Japan FTA would be insignificant.The small- and medium-sized enterprises’ indifference to the Korea–Japan FTA largely stems from the small- and medium-sized enterprises’ lack of exposure to the Japanese market (Oh and Lee 2008, 48–49). More importantly, Korean small- and medium-sized enterprises lack the political clout to significantly shape the government’s FTA agenda. Rather, a major cause for the standstill in the Korea–Japan FTA was disagreements over the opening of Japan’s agricultural and fishery markets (Asahi Shimbun 2010). The failed case of the Korea–Japan FTA illustrates how Japan’s fragmented domestic trade governance enables farm interests to wield disproportionately large influence on Japan’s overall FTA agenda. From the onset, domestic trade governance had a clear impact on the negotiating strategies of both parties. Japan’s FTA delegates to Korea consisted of officials from each of the key ministries involved in foreign economic policies: Ministry of Finance, METI, MAFF, and Ministry of Foreign Affairs. The delegates were essentially independent negotiators with a mandate to represent and safeguard the interest of their respective ministries. The Korean delegates also consisted of delegates from key ministries, yet these delegates worked as a team under the leadership of the chief negotiator from MOFAT. The Korean delegates had already sorted out their differences during the Ministerial Meetings and had agreed to a single FTA agenda prior to engaging in actual negotiations with their Japanese counterparts. In particular, the MOA delegate came to the negotiating table with the understanding that the Korean government would negotiate on substantial liberalization of the agricultural sector.4 When the Korea–Japan FTA negotiations begin in 2003, the Japanese delegates requested that Japan and Korea separate out the negotiations by sectors. For example, agricultural items should be negotiated in a separate subworkshop involving only the MAFF delegate from the Japan side. Likewise, industrial products should be negotiated in a separate workshop. On the other hand, the Korean delegates insisted on a comprehensive structure that combined negotiations on agricultural and industrial goods together. Ultimately, the Japanese delegates agreed to go with the Korean demand. Despite the agreement to engage in comprehensive negotiation, both parties faced yet another obstacle. The Korean and Japanese delegates were unable to agree on the coverage of the negotiation, hence preventing the negotiation

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from actually starting. The Korean FTA delegates offered 95 percent coverage on industrial products and 90 percent coverage on agricultural products. The Japanese delegates were willing to offer 100 percent coverage on industrial products but refused to state a coverage figure for agricultural products. Back in Japan, MAFF adamantly refused to engage in an FTA negotiation that gave blanket coverage on a set percentage of agricultural products. As a result, the Japanese delegates requested that the Korean government specify the agricultural product of interest and then negotiate on these products item-by-item. The process of deliberating over the negotiation scope was extremely tedious. Although the Ministry of Foreign Affairs official served as the nominal leader of the Japanese FTA delegates, he exercised no real authority. The Japanese Ministry of Foreign Affairs official merely communicated the positions of each of the three remaining delegates depending on the item under negotiation. Moreover, all discussions conducted between the Korean and Japanese negotiators were reported back to their respective ministries in Japan for consultations. The lack of a central authority figure among the Japanese delegates made it increasingly difficult for the Japanese delegates to make critical concessions that would secure the Korea–Japan FTA. Without Japan’s MAFF’s approval, there was no recourse to resolve the standstill between the two governments. As a result, the voice of the MAFF official in the Japanese delegate played a decisive role in determining the Japanese government’s position in agriculture during the Korea–Japan FTA negotiations. In contrast, the Korean delegates led by the MOFAT official had the authority to accept difficult concessions, even in its sensitive agricultural sector, for the purpose of successfully concluding the Korea–Japan FTA. Ultimately, the Korea–Japan FTA negotiation broke down when the Korean government refused to negotiate without receiving a coverage figure for agricultural products. From the Korean government’s perspective, concluding an FTA with Japan that excluded a majority of agricultural items was politically unfeasible. While the Japanese government was interested in engaging in FTA talks over industrial products, it could not include agricultural products due to MAFF’s strong resistance. Given the lack of a central authority setting Japan’s FTA agenda and the lack of interministerial coordinating mechanisms, MAFF’s demands concerning agricultural products prevailed. None of the Japanese delegates had the authority to make concessions on agricultural negotiations to push forth the FTA negotiation. As a result, the two governments did not even reach the topic of sensitive items such as rice when the negotiation broke down. The fragmented structure of Japan’s domestic trade governance essentially enabled the interest of the Japanese MAFF to tie the hands of the Japanese FTA delegates from going forward with the Korea–Japan FTA negotiations.

The second period of domestic trade governance: reversals since 2013 Korea 2013–2020: weakening cohesion in domestic trade governance On January 15, 2013, the incoming ROK President Park Geun-hye’s administration announced its plan to dissolve MOFAT and transfer its trade negotiating authority

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to the newly established Ministry of Trade, Industry and Energy (MOTIE, former Ministry of Knowledge and Economy). MOFAT’s overhaul reflected President Park’s long-held preference to include the trade policymaking body in the economics ­ministry. As early as 2001, she had voiced her dissatisfaction in having MOFAT deal with both diplomatic and trade affairs during the national audit of MOFAT by the National Assembly (Naeil Shinmun 2013). In fact, even the ruling party was not fully supportive of dissolving MOFAT, fearing that the manufacturingoriented MOTIE was ill-suited to deal with non-manufacturing trade issues in service, agriculture, and investment dispute (Lee and Lee 2013).Yet, the will of the incoming President Park prevailed. The newly created MOTIE was given the trade negotiating authority, while MOFAT was dissolved. At a quick glance, the institutional change does not appear to have undermined the cohesion of Korea’s domestic trade governance. Similar to its predecessor MOFAT, MOTIE has been given the whole trade negotiating authority. The Ministerial Meeting on External Economic Affairs, which is the main intergovernmental consultative mechanism, continues to exist within MOTIE.Yet, a closer look proves otherwise. First, the authority of Korea’s trade policymaking body has weakened considerably. Unlike in MOFAT where the OMT enjoyed policy autonomy under the supervision of its own Minister for Trade, MOTIE’s top official in charge of FTA policy making is the Deputy Minister for Trade who reports to the Minister and Vice Minister. Trade is now just one of the three sectors under MOTIE’s jurisdiction and competes with other sectors for the Minister’s time and attention. Trade policymaking is likely to become less efficient and less effective. Second, sectoral interests have a stronger voice in influencing trade policies in MOTIE than in MOFAT.The MOTIE is in charge of industrial policy in conventional heavy chemical industrial sectors, including automobiles, shipbuilding, electronics, and petrochemicals, in which the promotion of the domestic firms’ competitiveness­ takes priority. As a result, MOTIE faces conflicting interests on trade policies. Consider the case of automobiles. Korean automobiles compete with Japanese automobiles in both the domestic and global markets. While Korean automobile companies are gaining on their Japanese counterparts in the global market, Japanese automobile companies perform better in home market competition. A larger number of Japanese automobiles are sold in Korea than Korean automobiles in Japan.5 Considering Japan’s zero import duty on foreign automobiles in comparison to Korea’s 8 percent import tariff, the stronger performance of Japanese automobiles­ in the Korean market is striking. When the Korean government contemplates an FTA with Japan, the automobile sector becomes a major bone of contention between MOTIE’s trade policy section and its industrial policy section. The industrial policy section seeks to protect local automobile producers by maintaining the current tariff on Japanese automobiles, while the trade policy section pursues the elimination of the tariff. MOTIE cannot completely ignore protectionist demands from local industries within its policy domain.Yet, such demands make MOTIE vulnerable to other protectionist demands from other ministries, such as agriculture and culture ministries.

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Third, MOTIE failed to absorb the experienced trade experts of MOFAT during the bureaucratic restructuring. Most trade officials in MOFAT did not join MOTIE, but chose to remain at the new Ministry of Foreign Affairs which had lost its former international trade negotiating authority. The vast human resources, trained and harnessed through the 15 years of FTA negotiation under MOFAT, did not transmit over to MOTIE. As a result, the newly created MOTIE had to rely on its own officials who had spent much of their professional careers working on areas not directly related to international trade negotiations. The choice of many trade officials not to move over to MOTIE was largely due to the location of MOTIE and its consequence on employee lifestyle. MOTIE is located in the city of Sejong, which is about a 2-hour drive south from Seoul. Since 2012, most of the government ministries have started to relocate to Sejong from Seoul under the government plan of “Balanced Regional Development”.6 A few ministries remained in Seoul, including the Ministry of Foreign Affairs. Considering the education of their children and lifestyles, many trade officials at the MOFAT refused to transfer to MOTIE. They preferred to pursue their careers as diplomats at the Ministry of Foreign Affairs, rather than as trade negotiators at MOTIE. To ensure smooth transition in the bureaucratic restructuring process, former trade officials at MOFAT were loaned to MOTIE for the first 2 years. The expectation was that in addition to their industrial policy expertise, the new trade officials at MOTIE would acquire trade knowledge from former trade officials of MOFAT. In reality, there was not much transfer of MOFAT’s institutional memory to the newly created MOTIE. The creation of MOTIE marks Korea’s departure from an aggressive FTA policymaking environment, where national interest dominated over sectoral interest. The new domestic trade governance is still cohesive in the sense that a single ministry is in charge of trade policymaking. However, given the stronger role of sectoral interests, the trade policy trajectory under MOTIE will be less aggressive and more defensive. In short, Korea faces greater difficulties in engaging in highlevel FTAs that pursue comprehensive trade liberalization. The recent Korea–China FTA and Korea’s refusal to join the TPP negotiations provide empirical observations on the effects of the new domestic trade governance on Korea’s FTA strategies.

Korea–China FTA As Korea’s largest trade and investment partner, China was a logical FTA partner for Korea. Nonetheless, launching FTA negotiations between the two countries proved painstaking as reflected in the many years spent on background studies. The Korean and Chinese governments’ joint study for the feasibility of the Korea–China FTA dates back to September 2005. Bilateral negotiations started 7 years later in May 2012 during President Lee Myung-bak’s administration. MOTIE conducted the most substantial negotiations of the Korea–China FTA from 2013 until the conclusion of the Korea–China FTA negotiation in November 2014. From the outset of the negotiations, MOTIE was defensive about market access due to strong protectionist demands from small- and medium-sized industries in

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manufacturing sectors (e.g., light industries) that faced competition from lowpriced Chinese imports. According to a survey by the Korea Federation of Small Business, 46.7 percent of small businesses in shipping and automobile component industries opposed the Korea–China FTA (Kim 2013). Since MOTIE took a protectionist stance to reflect the concerns of its small- and medium-sized industries, MOTIE could not pressure MOA to be less defensive about the agricultural sector. Given that MOTIE, the main agency in charge of trade negotiations, was not eager to make major concessions on market access, the Ministerial Meeting on External Economic Affairs, was not helpful in pursuing high-level liberalization. In addition, political leadership created a negotiating environment that was unfavorable to secure a comprehensive FTA. President Park’s administration was anxious to expeditiously conclude its FTA negotiations with China. During a series of summit meetings in 2014, President Park and China’s President Xi Jinping agreed, confirmed, and renewed their pledge to conclude the Korea–China FTA talks within 2014 (Joo 2014; Ministry of Foreign Affairs 2014). Strong political pressure from the leadership to the negotiators worked against those who favored free trade. Under time pressure, the negotiators faced enormous difficulties in overcoming the protectionist bias at the negotiating table. Ultimately, the Korea–China FTA resulted in less market opening compared to Korea’s FTAs with other major trade partners, such as the U.S and the EU. Under the Korea–China FTA, 10 percent of products in terms of tariff line and 15 percent of products in terms of trade volume were excluded from negotiations for tariff elimination, whereas all products except rice were subject to tariff elimination negotiations under the KORUS FTA and the Korea–EU FTA (Ministry of Trade, Industry, and Energy 2015). Moreover, the Korean government did not make significant agricultural concessions in the Korea–China FTA. As detailed extensively in Chapter 2, the tariff concession rate of the Korean agricultural sector was 70 percent in terms of tariff line and 40 percent in terms of import volume in the Korea–China FTA, compared to 99.2 percent and 99.1 percent (in terms of tariff lines) respectively in the KORUS FTA and the Korea–EU FTA (ibid). In addition, the tariff concession rate for sensitive agricultural products in Korea was only 13.2 percent in the Korea–China FTA compared to 100 percent in the KORUS FTA and 76.3 percent in the Korea–EU FTA (see Chapter 2). As a result, Chinese farmers will continue to face higher tariffs compared to their U.S. and European counterparts. Korea’s smaller agricultural concessions came at the cost of smaller Chinese tariff concessions on industrial products. China agreed to eliminate tariffs for 71.7 percent of product line and 66.4 percent of import volume by the 10th year after the Korea–China FTA goes into effect (Ministry of Trade, Industry, and Energy 2015). The Korean government failed to secure preferential market access to China in several product lines of steel, petrochemical, automobiles, and automobile parts. Domestic response to the Korea–China FTA outcome was less sanguine on the grounds that it failed to create more jobs in Korea’s competitive sectors in order to protect its uncompetitive agricultural sector (Jung 2014). Of all the FTAs concluded

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by Korea, the Korea–China FTA may be the largest in trade terms, but is assessed to be far from the best in terms of the depth of liberalization and the scope of obligation (Schott et al. 2015). The agreement announced in 2014 did not include substantial improvements in trade rules on services and investments, which were high priorities for the Korea government. For service sector liberalization, China stuck to its conventional “positive list” (listing only sectors open for access to foreign service suppliers), while refusing to offer a “negative list” (all sectors will be liberalized unless specifically indicated on the list of exceptions). In investment, China maintained most of its regulations that were deemed as discriminatory by Korean companies. Korea has huge investments in major Chinese manufacturing sectors ranging from automobile, chemical, and electronics to semiconductor. And these sectors are increasingly threatened by Chinese companies that are encroaching on Korea’s market share through discriminatory regulations. For example, in 2015, Korean companies such as LG Chemical Ltd. and Samsung SDI were the dominant players in China’s lithium-ion battery market for electric cars, collectively accounting for over 30 percent of the market share. Both LG Chemical Ltd. and Samsung SDI built large lithiumion battery factories in China during the fall of 2015. By early 2016, however, the Chinese government restricted subsidies to electric buses that use lithium-ion batteries, thereby opening up space for domestic companies to catch up in their battery technology (Jung 2016). The Chinese government also introduced massive subsidies to electric vehicles that use batteries produced by domestic companies. Due to these regulation changes, Chinese companies such as Contemporary Amperex Technology (CATL) and BYD Company surpassed Korean companies in terms of the lithium-ion battery market share for electric cars by the end of 2019 (Jun 2019). In an effort to save the agreement, Korean trade negotiators agreed on a built-inagenda. As an integral part of the agreement, Korea and China agreed to commence negotiations on services and investment 2 years after the Korea–China FTA enters into effect on December 2015. In sum, the Korea–China FTA has been quite limited compared to Korea’s earlier FTAs with the U.S. or the EU. In 2018, the Chinese and Korean negotiators have started talks on service and investment negotiations. Yet, there has been no meaningful outcome from these talks so far. Essentially, the Korean government has lost its opportunity to gain entry to strategic sectors such as automobile.

TPP When the 12 Asia–Pacific economies, including the U.S. and Japan, accounting for 40 percent of the global economy and 25 percent of global trade, concluded the TPP in October 2015, Korea was absent.There were two windows of opportunity for Korea to join the TPP talks: The first during President Lee Myungbak’s administration (2008–2012) and the second during President Park’s administration (2013–2016). During President Lee’s administration, Korea was finalizing the KORUS FTA and the Korea–EU FTA negotiations, and also launching the Korea–China FTA. When

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the U.S. encouraged Korea to join the TPP in 2012, the Korean government felt it “had enough on its plate” (Lee 2015). Korea’s position is understandable because the TPP was not moving forward, and the U.S. did not have the fast-track authority. However, Korea’s position on the TPP should have changed when Japan joined the TPP negotiations in 2013. Korea and Japan have similar trade structure—Korean and Japanese firms use their factories in Southeast Asian countries as manufacturing bases to export to the U.S. Japan, as a member of the TPP, can capitalize on the supply chain of origin with other TPP members in Southeast Asia to further expand its exports market. Korea is bound to be disadvantaged if it relies mainly on FTAs (Choi 2015a). In April 2013, the U.S. once again encouraged Korea to join the TPP, but MOTIE could not decide. MOTIE had difficulties in creating a blueprint for Korea’s FTAs that was separate from that of its predecessor, MOFAT. The new trade negotiating authority in the newly created MOTIE meant a new vision and new action plan.Yet, MOTIE was not well-equipped to map out Korea’s TPP agenda in parallel to pursuing an FTA with China. MOTIE lacked trade policy officials with experience and expertise on these trade issues and also faced time pressure to conclude the Korea–China FTA. MOTIE’s hesitance in joining the TPP negotiations stems from sectoral interests that oppose a free trade pact with Japan. One of the largest opponents to Korea joining the TPP came from Korean automobile-makers who feared that Japanese automobiles would flood the Korean market while Korean companies could sell virtually none in the Japanese market (Choi 2015b). Foreign share in the Japanese automobile market is 6 percent—the lowest among the OECD member states— and the share of Korean auto is virtually nil (Choi 2016). At the public hearing on Korea’s participation in the TPP, the Korean automobile sector made a public complaint about its disadvantages vis-à-vis its Japanese counterparts (Kim 2014). The automobile industry is in the portfolio of the MOTIE. While MOFAT was able to conclude FTAs with large trade partners that had lower tariff levels than Korea, MOTIE was not able to push back against sectoral interests that feared foreign competitors. After a yearlong hesitance, MOTIE came to the conclusion that it would not join the TPP negotiations. In 2014, MOTIE announced that the Korea–China FTA was the top priority over the TPP (Jun 2014).

Japan 2013–2020: a shift toward more cohesive domestic trade governance On December 2012, the LDP returned to government under the leadership of Prime Minister Abe. From the onset, the TPP was an integral part of Prime Minister Abe’s plans to reform and revitalize the Japanese economy. He recognized the importance of a unified government stance to successfully take part in the TPP negotiations.When announcing the Japanese government’s decision to join the TPP negotiations in March 2013, Prime Minister Abe emphasized that the effects of the TPP were calculated “as a basis for the Government to be united, instead of unorganized efforts by each ministry” (Prime Minister of Japan and his Cabinet

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2013b).Accordingly, Prime Minister Abe introduced important institutional changes in trade policymaking to spearhead Japan’s TPP negotiations. First, Prime Minister Abe centralized the authority structure and the decisionmaking process for trade policymaking by establishing a TPP task force. This task force had the dual function of coordinating among domestic actors involved in trade policymaking (i.e., affected sectors and the ruling LDP) and heading international level trade negotiations among the TPP partner countries (Mulgan 2013).The taskforce consisted of over 100 officials from ministries involved in trade policies such as METI, the Ministry of Foreign Affairs, MAFF, and the Ministry of Internal Affairs and Communications.This was a striking departure from past practice where individual ministries independently negotiated on trade items with trade partners in a decentralized manner. With the creation of a single TPP task force, protectionist ministries had to work together with pro-trade ministries (e.g., METI) to come up with a unified TPP agenda. Ministries could no longer dominate the trade policy agenda that fell within their jurisdictions. This meant that protectionist ministries would have a harder time derailing trade negotiations by acting as a veto player. Second, the TPP task force was led by individuals who were committed to moving TPP negotiations forward. Amari Akira, the Minister of State for Fiscal and Economic Policy and Prime Minister Abe’s closest ally in spearheading “Abenomics” headed the TPP task force.7 Amari echoed Prime Minister Abe’s emphasis on having a unified government stance on the TPP. Amari noted “‘we will have the negotiators set aside their positions in their respective ministries and work hard to (safeguard the nation’s interests)’ as a united team” (The Japan Times 2013). In addition, the key negotiators came from the Ministry of Foreign Affairs, the ministry that was favorably disposed toward the TPP. The deputy foreign minister in charge of economic affairs served as the chief negotiator for the TPP and the former Ambassador to Pakistan assumed the role of deputy chief negotiator. Furthermore, Grimes (2014) notes that the “negotiating team members…were chosen by the prime minister’s team rather than by their home ministries”. In short, the TPP task force was largely comprised of officials who were seen to be cooperative to Prime Minister Abe’s TPP agenda. Altogether, these institutional changes generated strong pressures for the different ministries interested in trade policymaking to coordinate and build a consensus on a unified trade agenda. And the unified trade agenda was aimed at advancing the TPP negotiations. Protectionist voices such as MAFF were not able to dominate agricultural trade negotiations, which in turn had the effect of weakening the protectionist interest’s ability to stall and hinder the FTA negotiations. Moreover, since the members of the TPP taskforce were generally favorable of the TPP, there were less interministerial conflicts. The strengthening cohesion of Japan’s cohesive domestic trade governance enabled national rather than narrow sectoral interests to play an increasingly larger role in shaping Japan’s TPP agenda. The creation of the TPP task force and Prime Minister Abe’s strong push for the TPP had larger ramifications for Japan’s other FTAs with major trade partners. After joining the TPP negotiations, Prime Minister Abe’s administration actively sought

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to secure FTAs with major agricultural exporters, such as Canada and the EU and also hoped to salvage the ongoing FTA negotiation with Australia (Yoshimatsu 2015, ‘The LDP Cabinet’s Trade Policy’). The administration pursued FTAs with major trade partners under the assumption that Japan would agree to broader trade liberalization as a member of the TPP. Agricultural liberalization is an important litmus test to assess the impact of changes in Japan’s domestic trade governance. Prime Minister Abe’s administration resumed the Japan–Australia FTA negotiations and partook in the TPP negotiations in 2013 with the understanding that it would have to secure exemptions for sensitive agricultural products. In particular, the five “sacred” sectors of rice; barley and wheat; dairy; beef and pork; and sugar were to be excluded from trade negotiations. In 2012, tariff rates for products in these five sacred sectors were 778 percent for rice, 360 percent for butter, 305 percent for sugar, 256 percent for barley, 252 percent for wheat, 218 percent for nonfat dry milk, and 39 percent for beef (Obe 2013). Ultimately, however, the Japanese government agreed to far greater agricultural tariff concessions in both the Japan–Australia FTA and the TPP negotiations than it had done in previous FTAs, even including liberalization of major sensitive agricultural products.

From TPP to CPTPP In 2013, the Japanese government entered the TPP negotiations with a highly defensive position on agricultural liberalization.The government’s position reflected the strong domestic political concern toward the TPP’s impact on agricultural liberalization. In mid-2013, the committees on agriculture, forestry, and fisheries of both houses of the Diet had passed a resolution opposing liberalization of the five sensitive agricultural products. The Upper House’s Standing Committee on Agriculture, Forestry, and Fisheries stated that Sensitive agriculture, forestry and fisheries products—including rice, wheat and barley, beef and pork, dairy products, sugar and starch crops—are either to be excluded from the negotiations or to be subject to renegotiation in order to maintain sustainable domestic production. Even the gradual elimination of tariffs over a period of more than ten years is unacceptable. (House of Councillors, National Diet of Japan, 2013) In his 2012 lower house election campaign, Prime Minister Abe had even pledged not to join the TPP negotiations if involvement required prior commitment to remove tariffs on sensitive agricultural products (Soble and Dyer 2013). Likewise, in the 2013 upper house election and the 2014 lower house election, many LDP politicians pledged to exclude sensitive agricultural products from the TPP negotiations (Yamashita 2015, ‘Why Agricultural Reform is so Difficult for Japan’). In fact, Japan participated in the TPP only after U.S. President Barak Obama

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confirmed that Japan “is not required to make a prior commitment to unilaterally eliminate all tariffs upon joining the TPP negotiations” (Prime Minister of Japan and His Cabinet 2013a). Japan and the United States also recognized that both countries have trade sensitivities, namely “agricultural products for Japan” (ibid.). Clearly, Prime Minister Abe faced a tough political battle from both his ruling party and the opposition party. The new institutional setting for TPP policymaking, however, made it difficult for opponents of the TPP to exercise strong influence over the negotiation process. The newly created TPP taskforce formulated Japan’s TPP agenda and headed negotiations. And the negotiating team were not restrained by protectionist interests but “attended TPP negotiations with an offensive approach” (The Japan News 2015a). Opponents of the TPP would have to challenge Prime Minister Abe and the TPP taskforce to undermine the TPP negotiations. Public support for Prime Minister Abe and the TPP, however, curtailed the capacity of political opponents from challenging the prime minister and the taskforce (Yoshimatsu 2015, ‘The LDP Cabinet’s Trade Policy’). In sum, the TPP task force created a highly unfavorable environment for agricultural interests. The weakened position of agricultural interests is reflected in the TPP negotiation content, which resulted in the “greatest agricultural concessions Japan has made in the history of trade negotiations” (Takashi 2015, 11). Japan’s tariff concessions covered 81 percent of its agricultural products, which included immediate tariff elimination on nearly half of the agricultural products. Out of the 586 items categorized as sensitive products, tariffs were eliminated for 174 items (about 30 percent). For the remaining 412 items, the Japanese government agreed to tariff reductions and import quota expansions (The Japan News 2015a). For example, beef tariffs will be lowered immediately from 38.5 percent to 27.5 percent, and then further reduced to 9 percent over 16 years. The 4.3 percent tariffs on high-priced pork will be abolished over 10 years and the 482-yen/kg tariffs on low-priced pork will fall to 50 yen/kg in the same period. The Japanese government also agreed to eliminate and/or reduce tariffs on many of its dairy products (e.g., cheddar, gouda, cream cheese, ice cream, yogurt, and whole milk powder) whose tariffs range up to 40 percent (Takashi 2015, 12; U.S. Department of Agriculture 2020). Japan’s agricultural tariff concessions fall short when compared to other TPP member states that have agreed to abolish tariffs on over 90 percent of their agricultural products. Nonetheless, the TPP marks Japan’s greatest agricultural liberalization where most of its vegetables, fruits, and fishery products and a third of its sensitive products will become tariff-free in a decade or so. The TPP taskforce achieved a feat that would not have been possible under Japan’s previous domestic trade governance. Anti-TPP interests were significantly weakened within the newly created institutional structure of Japan’s trade policymaking. Chief Cabinet Secretary Yoshihide Suga noted that the agreement on the five sensitive agricultural sectors “are in line with the national interest” (The Japan News 2015b). Ironically, the biggest threat to Japan’s TPP did not come from protectionist interests within Japan but from outside. In 2017, the newly elected

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President Donald Trump of the U.S. decided to withdraw the U.S. from the TPP. Yet, Prime Minister Abe managed to bring together the remaining 11 countries (including Japan) to successfully conclude the Comprehensive and Progressive TPP (CPTPP).The negotiated tariff concessions for Japanese agricultural products remained in place under the CPTPP and went into force on December 2018.

Japan–Australia FTA The Japan–Australia FTA negotiations began in 2007 after the Australian government signaled a willingness to be flexible on agricultural trade concessions (Solís 2010, 211). Japan has been and continues to be a huge market for Australian agricultural exports, especially for sensitive products. In 2014, Australia’s top ten agriculture, fisheries, and forestry exports included beef, wheat, meat (excluding beef), barley, and sugar. Japan was the third largest market for Australian agriculture and food trade followed by China and the ASEAN (Department of Foreign Affairs and Trade, The Australian Government 2015). Japan was also the largest market for Australian dairy products (Australian Dairy Industry Council Inc. 2014). In the Japan–Australia FTA, the Australian government sought to gain tariff concessions for these sensitive agricultural products. Not surprisingly, the initiation of the Japan–Australia FTA produced strong opposition from Japanese farm interests and their political allies. Agricultural opponents were also concerned that a successful FTA with Australia would make it difficult for Japan to demand exclusion of sensitive agricultural products from tariff capping in WTO negotiations (Yoshimatsu and Ziltener 2010, 106–107). Due to strong political opposition, the FTA negotiations stalled until 2013 when Japan joined the TPP negotiations. Japan’s participation in the TPP negotiations and the increasingly centralized and coordinated trade policymaking structure under the TPP taskforce spurred the Japan–Australia FTA. Both the Australian and Japanese governments were eager to conclude the Japan–Australia FTA prior to the conclusion of the TPP negotiations (Honma 2015, ‘Japan–Australia EPA Agreement’). The Japan–Australia FTA led to significant concessions on many sensitive agricultural products. For example, Japan agreed to immediately reduce beef tariffs from 38.5 percent to 30.5 percent for frozen beef and 32.5 percent for fresh beef. In the course of the next 15–18 years, these tariffs will further reduce to 19.5 percent and 23.5 percent, respectively. The Japanese government also removed the “global snapback” safeguard mechanism that increased beef tariffs to 50 percent under conditions of rapid increase in beef imports. Australia had already been subject to the global snapback tariffs three times. Instead, the new safeguard would increase tariffs to the current 38.5 percent when imports exceeded an Australia specific trigger amount. Although grain products are highly regulated in Japan, Australia is the only country that can export duty-free wheat and barley for feed outside the existing quota system. Similarly, for dairy products, Australia obtained an Australia only dutyfree quota for Australia’s largest dairy export, natural cheese for processing. Lastly, for sugar products, Japan removed tariffs and reduced levy on high polarity raw sugar,

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which is a main sugar export product for Australia. This is a sector that has been out of reach for sugar exporters due to Japan’s prohibitively high tariffs and levies (Department of Foreign Affairs and Trade 2018). In sum, the Japan–Australia FTA led to the opening of Japan’s previously closed sensitive agricultural sectors. With the enactment of the Japan–Australia FTA in 2015, Japan became the second largest export market for Australia’s agricultural, forestry, and fisheries products (ibid.).

Conclusion In accounting for Japan and Korea’s reversed FTA strategies and patterns, this chapter has looked at changes in the countries’ domestic trade governance. Before 2013, Korea exhibited a cohesive domestic trade governance in which the authority to decide and negotiate on trade policies was centralized within the OMT in MOFAT and strong interministerial coordination mechanisms existed. The replacement of MOFAT with MOTIE in 2013, however, has weakened the cohesion of Korea’s domestic trade governance by introducing greater sectoral interests in the decisionmaking process of trade policies. MOTIE is vulnerable to protectionist demands from its main constituents, such as the heavy and chemical industries and smalland medium-sized enterprises. As a result, although MOTIE still carries the full negotiating authority for FTA policies, it is less inclined to pursue ambitious FTAs at the expense of liberalizing import-competing industries. In contrast, Japan’s domestic trade governance is increasingly becoming more cohesive under the leadership of Prime Minister Abe. Specifically, the creation of the TPP taskforce in 2013 has centralized the authority and decision-making process for trade policies, replacing its prior decentralized system where independent ministries negotiated separately on trade policy items.The institutional change has significantly weakened the voice of protectionist interests, such as agriculture. As a result, Prime Minister Abe’s administration was able to successfully conclude high-level FTAs that involved substantial liberalization of Japan’s highly protected agricultural sector.

Notes 1 The content of the chapter is a combined, modified, and updated version of the authors’ two previously published articles. Choi, Byung-il and Oh, Jennifer S. (2011), ‘Asymmetry in Japan and Korea’s Agricultural Liberalization in FTA: Domestic Trade Governance Perspective’, Pacific Review,Vol. 24, No. 5 (December 2011), 505–527 and Choi, Byung-il and Oh, Jennifer S. (2017), ‘Reversed Asymmetry in Japan and Korea’s FTAs: TPP and Beyond’, Pacific Focus, Vol. 32, No.2 (August 2017), 232–258. 2 Currently called Ministry of Agriculture, Food and Rural Affairs (MAFRA). 3 Information on the Ministerial Meeting on External Economic Affairs during the negotiation process of the KORUS FTA is from author interview with Korean high-ranking government officials. Interview conducted at various times during 2008–2010, Seoul, Korea. 4 Information on the Korea–Japan FTA process obtained from author interview with the Korean trade negotiator during the Korea–Japan FTA. Interview conducted on February 19, 2010, in Seoul, Korea.

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5 In 2009, Hyundai-Kia, the largest Korean automobile manufacturing company, announced its withdrawal from the Japanese market after years of struggle. See Choi (2016). 6 The Balanced Regional Development plan was originally conceived during President Roh’s administration (2003–2007). In an attempt to encourage regional development outside of the capital city (Seoul), the government built a new city, Sejong, to accommodate the relocated government ministries. Yet, some government employees were reluctant to relocate to Sejong given its more rural and less developed environment. 7 Reflecting his central role in Prime Minister Abe’s cabinet, Akira was also “responsible for ‘economic revitalization’ and ‘total reform of social security and tax’” (Grimes 2014).

References Ahn, C. S. (1998), ‘Interministry Coordination in Japan’s Foreign Policy Making’, Pacific Affairs,Vol. 71, No. 1, 41–60. Ahn, Seyoung (2006), ‘Korea’s FTA Policy: Focusing on the Japan–Korea FTA and U.S.– Korea FTA’, RIETI’s Brown Bag Lunch Seminar, July 13, https://www.rieti.go.jp/en/ events/bbl/06071301.html (accessed June 8, 2020). Asahi Shimbun (2010), ‘Editorial: Free Trade Talks’, August 21, http://www.asahi.com/ english/TKY201008200278.html (accessed August 28 2010). Australian Dairy Industry Council Inc. (2014), ‘Australian Diary Industry’, https://www. google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwi14Iabrc TpAhUmGKYKHcGNAvoQFjABegQIBBAC&url=https%3A%2F%2Fwww.aph.gov. au%2FDocumentStore.ashx%3Fid%3D3e78a6be-9dad-454b-800c-a9dce812a5f7%26su bId%3D299150&usg=AOvVaw0leBsNUw_cc66EvgDEbbmV (accessed May 21, 2020). Cho, J. (2010), ‘Korea, Japan Remain Poles Apart on FTA’, Korea Herald, August 16. Choi, Byung-il (2006), Han-Mi FTA YeokJeon Sinario [The KORUS FTA: Against All Odds], Seoul: Random House Korea. Choi, Byung-il (2007), Tongsang Gubuonunse [Trade Governance], Seoul: KIEP. Choi, Byung-il (2010), ‘Whither the KORUS FTA: the Moment of Truth’, in Navigating Turbulence in Northeast Asia: The Future of the U.S.–ROK Alliance, Joint U.S.–Korea Academic Studies,Volume 20, pp. 45–58, Washington, DC: KEI. Choi, Byung-il (2015a) “TPP Duh Isang Gang Gunnuh Buli Ahnida [TPP, No Longer Fire on the Other Side of the River],” Donga Ilbo, April 28. Choi, Byung-il (2015b), “Han-Il FTA neun Hangukui ‘Shin ui Hansu ga Dwelsu Itda [Time for an FTA with Japan],” Joongang Ilbo, November 6. Choi, Byung-il and Oh, Jennifer S. (2011), ‘Asymmetry in Japan and Korea’s Agricultural Liberalization in FTA: Domestic Trade Governance Perspective’, Pacific Review, Vol. 24, No. 5, 505–527. Choi, Byung-il and Oh, Jennifer S. (2017), ‘Reversed Asymmetry in Japan’s and Korea’s FTAs: TPP and Beyond’, Pacific Focus,Vol. 32. No. 2, 232–258. Choi, Seokyoung (2016), Choi Seokyoung ui FTA Hyupsang Notu [Choi Seokyung’s FTA Negotiation Memoir], Seoul: Park Youngsa. Cooper, W. H., Manyin, M. E., Jones, V. C., Cooney, S. and Jurenas, R. (2008), The Proposed U.S.–South Korea Free Trade Agreement (KORUS FTA): Provisions and Implications, CRS Report for Congress, RL34330, January 22, Washington, DC: Office of Congressional Information and Publishing. Department of Foreign Affairs and Trade, The Australian Government (2015), ‘Trade at a Glance 2015: Agriculture and Food Trade’, https://www.dfat.gov.au/about-us/

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publications/trade-investment/trade-at-a-glance/trade-at-a-glance-2015/Pages/ agriculture-and-food-trade (accessed May 21, 2020). Department of Foreign Affairs and Trade, The Australian Government (2018), ‘Factsheet: Agriculture and Processed Food’, https://www.dfat.gov.au/trade/agreements/in-force/ jaepa/fact-sheets/Pages/jaepa-fact-sheet-agriculture-and-processed-food (accessed May 21, 2020). Government Information Agency (2008), Chamyeo Jungbu Gyungje 5 Nyun [Economic Policy Uunder President Roh], Seoul: Hans Media. Grimes, William W. (2014), ‘Japan and the United States in the Transpacific Partnership: Costs, Benefits, and the Politics of Getting to Yes’, Asan Forum, January 27, http://www. theasanforum.org/tpp-1/ (accessed May 14, 2020). Honma, Masayoshi (2015), ‘To TPP or Not TPP: Interest Groups and Trade Policy’, in Aurelia G. Mulgan and Masayoshi Honma, eds., The Political Economy of Japanese Trade Policy, Kindle edition. Basingstoke and New York: Palgrave MacMillan House of Councillors, National Diet of Japan (2013), ‘Resolution on Japan’s Participation in the Trans-Pacific Partnership (TPP) Negotiations’, http://www.sangiin.go.jp/eng/ report/report.htm (accessed May 14, 2020). Joo, Jin (2014), ‘Hanjung Jungsang Gongdongsungmyung Chaetaek…Hangjung FTA Yonnae Tagyul’ [Heads of Korea and China Issue Joint Statement...Korea-China FTA Should Conclude Before Year End], Ahju Economy, July 3, https://www.ajunews.com/ view/20140703181127487 (accessed June 6, 2020). Jun, Kwanwoo (2014), ‘Seoul Affirms Interest in Joining TPP’, Wall Street Journal, January 13. Jun, Sooyoung (2019), ‘Jaepdo Ahndeodun ee Hwesa, CATL Soonshikganae Jungicha Battery Saegae 1wi…Ge Duien Joongguk GOngsangdang Itsuttda’ [CATL’s Sudden Rise as Top Global Producer of Batteries for Electric Cars] Chosun Ilbo, October 24, https://biz.chosun. com/site/data/html_dir/2019/10/24/2019102400077.html (accessed June 5, 2020) Jung, Jinwoo (2016), ‘Joong Jungichabattery Bojogum Jungchaek Byunkyung, Hankuk Giup Younghwangeun’ [China Changes Regulation Electric Battery Subsidies, Impact on Korean Cars], Korea Trade-Investment Promotion Agency, February 5, https:// news.kotra.or.kr/user/globalAllBbs/kotranews/list/2/globalBbsDataAllView.do?dat aIdx=153969&column=&search=&searchAreaCd=&searchNationCd=&searchTrad eCd=&searchStartDate=&searchEndDate=&searchCategoryIdxs=&searchIndustryCateIdx=&page=80&row=80 (accessed June 5, 2020). Jung, Wonsok (2014), ‘HanJung FTA Hyupsang, Igae Chesunippnigga’ [Korea-China FTA: Far from the Best Possible Deal], Chosun Ilbo, November 13, https://biz.chosun.com/site/ data/html_dir/2014/11/13/2014111303053.html (accessed June 8, 2020). Kim, Jae-hyun (2006), ‘Han-mi FTA Jiwonwi’ Daetongryung Jiksok Gigu Sulchibaekyung’ [Background of establishing Presidential Committee on facilitation of the KORUS FTA Finalization], The Hankyoreh, July 24, http://www.hani.co.kr/arti/economy/economy_ general/143709.html (accessed May 10, 2020). Kim, Jae-hyun (2013), ‘Joongso Kiup 32% HanJung FTA Chaegyul Bandae’ [32% of SMEs Oppose Korea–China FTA], JoongAng Ilbo, October 8, https://news.joins.com/ article/12804492#none (accessed June 8, 2020). Kim, Jihwan (2014), ‘Hyundaicha, FTAehsuh Neul “Namnun Jangsa”’ [Hyundai Motors Always a Winner in FTAs], Weekly Kyunghyang, December 9. Kitazume, T. (2004), ‘Journalists Cautious on FTA Talks: Japan Must Open its Market Before Taking Asia Leadership Role’, The Japan Times, March 31, https://www.japantimes. co.jp/community/2004/03/31/events/journalists-cautious-on-fta-talks/#.Xtu0fy2caqA (accessed June 6, 2020).

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Lee, Jungmin (2007), ‘Daetongryung Sarojapun Kim Hyunjong Bonbujang’ [Trade Minister Kim Hyunjong Captivates President Roh], JoongAng Ilbo, April 6, https://news.joins. com/article/2685802#none (accessed June 8, 2020). Lee, Jaechul and Lee, Kichang (2013), ‘Jungbujojik Gaepyunnotgo Dangnaebu Sseunsori Yeojun’ [Ruling Party Critical of Government Reshuffles], Maeil Kyungjae, February 6, https://www.mk.co.kr/news/politics/view/2013/02/96108/ (accessed June 8, 2020). Lee, Jessica (2015),‘The Truth about South Korea’s TPP Shift’, The Diplomat, October 23, https:// thediplomat.com/2015/10/the-truth-about-south-koreas-tpp-shift/ (accessed June 8, 2020). Ministry of Foreign Affairs (2014), ‘Daetongryong, Haekahnbojungsanghweui Gaegi Xi Jinping Joonguk Gukga Jusukgwa Jungsanghwedam Gweche’ [President Holds Nuclear Security Summit with Chinese President Xi Jinping], http://www.mofa. go.kr/www/brd/m_3976/view.do?seq=349871&srchFr=&srchTo=&srchWord=&sr chTp=&multi_itm_seq=0&itm_seq_1=0&itm_seq_2=0&company_cd=&company_ nm=&page=55#btnPrint (accessed June 6, 2020). Ministry of Trade, Industry, and Energy (2015), ‘Hanjung FTA Sangsae Sulmyung Jaryo’ [Korea-China FTA Briefing Document], http://www.fta.go.kr/webmodule/_PSD_ FTA/cn/doc/1_description.pdf (accessed June 8, 2020). Mulgan, A. G. (2008), ‘Japan’s FTA Politics and the Problem of Agricultural Trade Liberalization’, Australian Journal of International Affairs,Vol. 62, No. 2, 164–178. Mulgan, A. G. (2013), ‘Japan’s Entry into the Trans-Pacific Partnership: Domestic Priorities and Regional Dynamics’, National Research Bureau of Asian Research, July 12, http:// www.nbr.org/research/activity.aspx?id=349 (accessed May 19, 2020). Naeil Shinmun (2013), ‘Waegyo Tonsangbunlineun Park Geun-hye Oren Soshin’ [Foreign Affairs is Park Geun-hye’s Conviction], Naeil Shinmun, February 1, http://m.naeil. com/m_news_view.php?id_art=77526 (accessed June 8, 2020). Obe, Mitsuru (2013), ‘Japan’s Farm Minister Walks Line Between Free Trade, Protectionism’, Wall Street Jou rnal, April 8. https://blogs.wsj.com/japanrealtime/2013/04/08/japansfarm-minister-walks-line-between-free-trade-protectionism/ (accessed August 13, 2020). Oh, Dongyoon and Lee, Hongbae (2008), ‘Korea–Japan FTA and SMEs: Survey and Economic Effect Analysis’, Basic Research 08–13, Seoul: Korea Small Business Institute. Prime Minister of Japan and His Cabinet (2013a), ‘Press Conference by Prime Minister Shinzo Abe during His Visit to the United States of America’, February 22, http://japan. kantei.go.jp/96_abe/statement/201302/22kaiken_e.html (accessed May 14, 2020). Prime Minister of Japan and His Cabinet (2013b),‘Press Conference by Prime Minister Shinzo Abe’, March 15, https://japan.kantei.go.jp/96_abe/statement/201303/15kaiken_e.html (accessed May 14, 2020). Schott, Jeffrey J., Jung, Euijin and Cimino-Issacs, Cathleen (2015), ‘An Assessment of the Korea-China Free Trade Agreement’, Policy Brief 15-24. Washington: Peterson Institute for International Economics. Soble, Jonathan and Dyer, Geoff (2013), ‘Abe Seeks to Win US Confidence’, Financial Times, February 24, https://www.ft.com/content/7b77ab48-7ea7-11e2-a792-00144feabdc0 (accessed May 14, 2020). Solís, Mireya (2010),‘Can FTAs Deliver Market Liberalization in Japan? A Study on Domestic Political Determinants’, Review of International Political Economy,Vol. 17, No. 2, 209–237. Solis, Mireya and Katada, Saori (2007), ‘The Japan–Mexico FTA: A Cross-Regional Step in the Path Towards Asian Regionalism’, Pacific Affairs,Vol. 80, No. 2, 279–301. Sung, Kihong (2006), ‘Hanmi FTA, Jeohangttaemunae Motganeuniljeoldae Upsuhya’ [KORUS FTA Should Not Be Delayed by Opposition], The Hankyoreh, February 16, http://www.hani.co.kr/arti/PRINT/102956.html (accessed June 6, 2020).

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Takashi, Terada (2015), ‘Japan and the TPP Conclusion: Regional Order, Negotiations, and Domestic Adjustment’, Asan Forum, October 23, http://www.theasanforum.org/ japan-and-the-tpp-conclusion-regional-order-negotiations-and-domestic-adjustment/ (accessed May 21, 2020). The Japan News (2015a),‘TPP to Life 95% of Tariffs on Farm, Factory Goods’, The Japan News by Yomiuri Shimbun, October 20, http://the-japan-news.com/news/article/0002506683 . The Japan News (2015b), ‘Government, LDP Take Steps to Ease TPP Concerns Ahead of Polls’, The Japan News by Yomiuri Shimbun, http://the-japan-news.com/news/ article/0002508974. The Japan Times (2013), ‘19 Officials Tapped to Help Handle 21 TPP Issues’, The Japan Times, June 29, https://www.japantimes.co.jp/news/2013/06/29/business/19-officials-tappedto-help-handle-21-tpp-issues/#.XsPEZUxuLaI (accessed May 19, 2020). U.S. Department of Agriculture, ‘Factsheet’, Release No. 0322.15, http://www.usda.gov/ wps/portal/usda/usdamediafb?contentid=2015/11/0322.xml&printable=true&contenti donly=true (accessed May 21, 2020). Yamashita, Kazuhito (2015), ‘The Political Economy of Japanese Agricultural Trade Negotiations’, in Aurelia G. Mulgan and Masayoshi Honma, eds., The Political Economy of Japanese Trade Policy, Basingstoke and New York: Palgrave MacMillan, Kindle edition. Yoshimatsu, Hidetaka (2015), ‘Locating Japanese Trade Policy in an Evolving Regional Context’, in Aurelia G. Mulgan and Masayoshi Honma, eds., The Political Economy of Japanese Trade Policy, Basingstoke and New York: Palgrave MacMillan, Kindle edition. Yoshimatsu, Hidetaka and Ziltener, Patrick (2010), ‘Japan’s FTA Strategy Toward Highly Developed Countries: Comparing Australia’s and Switzerland’s Experiences, 2000–09’, Asian Survey,Vol. 50, No. 6, 1058–1081.

4 POLITICAL LEADERSHIP AND TRADE POLICYMAKING

Introduction Does political leadership matter in FTA politics? While the institutions of trade policymaking provide the context that make high- or low-level FTAs more or less likely, political leadership determines the timing and political momentum for FTA negotiations. Political leaders in Japan and Korea have also contributed to introducing changes in the domestic trade governance of their countries. Korea’s cohesive domestic trade governance emerged in 1998 under the leadership of President Kim Dae-jung (1998–2002). Strong FTA leadership in subsequent administrations reinforced Korea’s cohesive domestic trade governance to enable Korea to pursue high-level FTAs until 2012. Ironically, political leadership has also played a key role in undermining Korea’s cohesive domestic trade governance since 2013. In Japan, Prime Minister Shinzo Abe is responsible for Japan’s shift to more cohesive domestic trade governance since 2013, which has allowed Japan to engage in mega FTAs such as the TPP. In both countries, strong political leadership in FTA policies has entailed major institutional changes in the trade policymaking system, the weakening of political opponents, and the overcoming of opposition from protectionist sectoral interests. The following sections trace the respective role of Japan and Korea’s political leadership in shaping their countries FTA policies since the late 1990s.

Korea 2003–2012: strong political leadership in FTAs From 2003 to 2012, Korea emerged as a front-runner of the FTA race in Asia due to the combined efforts of two different governments with opposite political orientations. Specifically, President Roh Moo-hyun’s left-wing administration (2003–2007)

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and President Lee Myung-bak’s right-wing administration (2008–2012) were critical in advancing Korea’s FTAs. Under the leadership of these two ideologically opposed presidents, Korea achieved the feat of successfully concluding the KORUS FTA, which is Korea’s largest FTA to date and the most controversial. In this one decade, Korea negotiated FTAs with the U.S. and the EU, the two largest economies in the world. These two trade partners were also the most politically difficult to negotiate an FTA with due to their large agricultural export sectors. Korea increased the coverage of economies under its sphere of FTA network, thereby improving trading opportunities for Korean businesses and expanding Korean consumer choices. Prior to 2003, political leaders have had a difficult time pushing forward FTAs against strong public outcry to agricultural liberalization. President Kim Dae-jung (1998–2002) initially opened the opportunity to have stronger political leadership on FTA policymaking through the creation of MOFAT in 1998 (see Chapter 3). Although President Kim succeeded in centralizing the authority over trade policymaking, he could not drive trade liberalization. As a left-wing opposition candidate, President Kim had won the presidential election in the middle of the Asian Financial Crisis. The sense of urgency created by the unprecedented financial crisis pushed the left-wing President Kim to move out of his political comfort zone to embrace trade liberalization. However, he could not move far beyond the constraints of his power base, which was built around small- and medium-sized enterprises, farmers, workers, and left-wing media, intellectuals, and civic groups. For example, it took President Kim’s entire presidency to conclude Korea’s very first FTA negotiation with Chile, a rather small trading partner, due to persistent and consolidated demonstrations by farmers and left-wing NGOs (Choi 2005a). More importantly, President Kim’s attempt to negotiate the Bilateral Investment Treaty with the U.S. faced stonewalling opposition from the film sector, ultimately resulting in failure. Korea had a screen quota, which required the mandatory screening of Korean local films for 144 days or 40 percent of the year. The Bilateral Investment Treaty meant the abolishment or significant reduction of the screen quota, to which the Korean film sector vehemently opposed (Choi 2005b). Ultimately, what President Kim achieved by the end of his presidency was just one FTA with Chile.

Progressive President Roh Moo-hyun’s administration (2003–2007) The biggest moment of Korean FTA policy came when Korea decided to launch an FTA with the U.S. In the “New Year Address to the Nation” in January 2006, President Roh Moo-hyun proclaimed: Market opening is an irreversible trend. We should take this trend as an opportunity to advance our economy…. For the future of the Korean economy, we should enter into a Free Trade Agreement with the U.S. As soon as agenda is set, we will launch the negotiations. (Roh 2006)

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President Roh’s decision to start the KORUS FTA is shocking when considering his ideological orientations and core constituents. President Roh not only shared the same constituents as his predecessor, but he was more radically left in his ideological orientation. During his election campaign, he had positioned himself as anti-American and anti-establishment. His enthusiastic supporters such as left-wing labor unions (e.g., Korean Confederation of Trade Unions) and teacher’s unions (Korean Teachers and Education Workers Union) viewed the U.S. as the emblem of evil. Many of President Roh’s core supporters demanded the withdrawal of U.S. troops in Korea. In their eyes, the American soldiers, not the North Korean ones, caused tension and threatened peace in the Korean peninsula. In their minds, Hollywood was the symbol of American imperialism. The fight to defend the Korean film industry was, hence, a heroic battle to preserve cultural identity against Americanization. And their ardent support was instrumental to his successful presidential election in 2002 (Choi 2006, 44–52). In his first year in office, the U.S. continued to press for reductions in the screen quota. President Roh asked his administration to come up with options to resolve the differences between the two countries. The whole year was consumed with the screen quota controversy. The film sector successfully mobilized against any reduction of the quota (Choi 2005b). On the other hand, the voice supporting the reduction of the screen quota was virtually inaudible (ibid.). Although a sizable share of the public seemed to favor reducing the screen quota to improve the consumers’ right to choose, they stayed silent (ibid.). In 2003, President Roh did not adopt a strong position on the screen quota issue but chose to observe the unfolding debate. However, in 2006, President Roh openly supported reducing the screen quota. What was more striking was the way in which the reduction was made.The Korean government agreed to cut the screen quota into half as a condition for launching the KORUS FTA talks (Kim 2010, 270; Choi 2006, 86–90). The film sector was taken by complete surprise. From the moment the government announced the launching of the KORUS FTA negotiations talks in February 2006, the entire nation erupted in opposition rallies from left-wing groups. Gathered under the coalition title “National Front Against KORUS”, these opposition groups organized daily rallies decrying the KORUS FTA. The National Front Against KORUS even sent organized groups of demonstrators to KORUS negotiation venues in the U.S. When the KORUS FTA negotiations were held in Korea, the National Front Against KORUS formed a human wall in front of the venue to block the movement of negotiators (see Chapter 5 for details on anti-KORUS FTA social mobilization). Left-wing media reported on the negative side effects of the KORUS FTA and the devastating consequences of NAFTA on Mexico and Canada (Choi 2006, 139–159).1 In sum, President Roh had become a traitor to his own power base and faced formidable political opposition from his own supporters. President Roh also faced opposition to the KORUS from within his ruling party. Several politicians with leadership position in the ruling party denounced the idea of the KORUS FTA as a neoliberal agenda, which would wreak havoc on the

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economically disadvantaged. Some senior-level staffs, who had worked for President Roh in his first year in office, were also critical of the KORUS FTA. What they had in common were their anti-neoliberal and anti-American ideological positions. Faced with party rebellion and the impossibility of communicating his rationale for the KORUS FTA to the opposition, President Roh decided to empower the supporters of the KORUS FTA. In August 2006, President Roh established a highlevel committee named the KORUS Facilitation Committee. The committee consisted of seven ministers and six top leaders from business associations, media, and civic groups. Han Duk-soo, the former Deputy Prime Minister until the mid-2006 and a well-known neoliberal technocrat, was appointed to chair the committee. The objective of the committee was to demonstrate the Korean government’s strong resolve for the KORUS FTA through propaganda and cooperation with the private sector. President Roh also gave his unwavering support to his negotiators and encouraged them to push forward with the national interest in mind. On the negotiation front, one of the most contentious issue was the import of U.S. beef. The Korean government had agreed to resume the import of U.S. beef, which had been prohibited in the wake of the mad cow disease outbreak in December 2003 (Jurenas and Manyin 2010). Specifically, the exact words of the negotiation was that the Korean government would agree to import “de-boned skeletal muscle meats of cow under 30 months” (Choi 2016b, 185). The Korean inspection authority interpreted this language as “bone-free”. When the first shipment of U.S. beef arrived in Korea after the lifting of the ban, the Korean MOA inspected all boxes of U.S. beef. After finding a few boxes of beef with bones, all the other boxes without bones were rejected. The second and the third shipments of U.S. beef met the same fate (Kim and Hong 2006). The U.S was furious about the Korean government’s rejection of even boneless beef. The Korean and U.S. trade negotiators could not make any advances on the beef issue even though the deadline was approaching. On March 2007, President Roh called U.S. President George Bush and reassured that Korea would open the beef market at a reasonable level, pursuant to the recommendations of the World Organization for Animal Health (OIE) (Kim 2010, 202–206).2 When Korea and the U.S. clinched the deal in April 2, 2007, President Roh stated in a televised speech that he had personally promised President Bush to “‘uphold the recommendations’ of the World Health Organization (OIE)…and ‘open the Korean [beef] market at a reasonable level’” (Jurenas and Manyin 2010, 4). A month later, OIE found U.S. beef to be a “‘controlled risk’ country for the spread of mad cow disease”, thus giving it tradable status (ibid.). Based on this development, the U.S. demanded that Korea change its inspection condition so that all cuts of boneless and bone-in U.S. beef, irrespective of age, can be imported. This issue, however, was not resolved at the end of President Roh’s presidency. Although President Roh did not succeed in completely resolving the U.S. beef import issue, the KORUS FTA would not have made so much progress without his visionary and bold leadership. The KORUS FTA is a prima facie neoliberal right-wing agenda that was adopted by a left-wing president. Considering the sharp

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ideological fault line and partisan politics in Korea, such an action was nothing short  of miracle. Despite the enormous political burden, President Roh was determined to make the KORUS FTA happen (Kim 2010, 92–93, 103). Unlike the previous President Kim, President Roh gave his trust to his trade negotiators even on politically sensitive issues, and if necessary, intervened to clear the path for troubled negotiations. As president, he prioritized his national vision and dared to move beyond his power base for the greater national interest. The critical difference between the two left-wing presidents from 1997 to 2007 was whether or not they stayed within the constraints of their power base.

Conservative President Lee Myung-bak’s administration (2008–2012) On December 2007, the conservative right-wing candidate Lee Myung-bak was elected in a landslide victory. The following spring, President Lee’s conservative party regained the majority party position in the National Assembly. President Lee’s administration prioritized the Korea–U.S. alliance in foreign policy and the ratification of the KORUS FTA. Korea and the U.S. finally reached a beef agreement that virtually allowed the free import of U.S. beef into Korea except for specified risk materials. Previous limitations of age and bone-in and boneless were removed. The outcome was essentially what Washington had been demanding (Jurenas and Manyin 2010, 5). Even though the agreement was in line with the recommendation of the OIE, opponents of U.S. beef lambasted the agreement as a “humiliating and miserable diplomacy” (Park 2008). Several days after the beef agreement, an influential media aired a program that showed the detrimental impact of eating beef infected with mad cow disease (Heo and Lee 2017). The program spread through Korean society like wildfire. From the first week of May 2008, left-wing and antiAmerican political and civic groups organized a rally that brought out up to 10,000 citizens, including school kids, to protest against the beef agreement (Kim 2008). More and more citizens joined the rally, the number of people ultimately reaching more than 1 million. Soon, the rally became a candlelight vigil—the symbol of civic protest. At night, the downtown of Seoul became a sea of candlelight and the protests continued unabated (Reuters 2008). The massive and persistent protests against U.S. beef wreaked havoc on President Lee’s administration. To take responsibility for the U.S. beef fiasco, President Lee made several of his senior staffs at the Presidential office resign, including the Chief of Staff (Lee 2015). Less than half a year into power, President Lee confronted a major political crisis. All of a sudden, the left-wing political force which was adamantly against the KORUS FTA was gaining grounds. President Lee, however, did not cave in and decided to renegotiate the beef agreement instead of revoking it altogether (ibid., 124). More importantly, his trade negotiating team survived the political crisis and remained intact. The renegotiation proved tough. Korea demanded the restriction of U.S. beef import to cattle under 30 months of age (Choi 2016b, 191–196).The U.S. was adamant on keeping the original agreement.3 Ultimately, Korea managed to secure its demand and the amendment helped allay

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public concerns about the safety of U.S. beef. The KORUS FTA narrowly escaped capsizing. The next significant hurdle in the KORUS FTA was the auto issue, which mainly emerged due to the change in government in the U.S. The newly inaugurated President Barack Obama had been critical of the KORUS FTA since his campaign. The United Auto Workers of the U.S., which was a core constituency of the Democratic Party, alleged that auto trade between Korea and the U.S. was lopsidedly unfair to the U.S. During his campaign, President Obama repeated the same narrative as the United Auto Workers and promised to attain equal access to the Korean market for auto producers (Schott 2008, 87).4 President Obama’s administration spent almost 2 years to study and prepare for renegotiating the KORUS FTA with Korea. In late 2010, the U.S. approached Korea to renegotiate the auto provision of the KORUS FTA. After several rounds of negotiations, in December 2010, the two countries came to an agreement to modify the auto provision of the KORUS FTA. Under the renegotiated agreement, the U.S. tariff reduction schedule for Korean auto import would be delayed for a few years. In return, the U.S. agreed not to request the lifting of the “younger than 30 months” limitation of beef export to Korea (Choi 2016b, 107–117; Lee 2015, 232–234) A key factor that allowed the KORUS FTA to survive the arduous process of multiple renegotiations was the decision by President Lee to maintain the key personnel in charge of FTA negotiations from the previous administration. Despite the political power change from a left-wing to right-wing government, President Lee did not change the top leadership positions in MOFAT. The Minister for Trade Kim Jong-hoon, who was the chief negotiator for the KORUS FTA and later promoted to the post of Trade Minister during President Roh’s administration, kept his position under President Lee’s administration.The Korean Ambassador to the U.S. Lee Tae-shik, who was appointed to the post during President Roh’s administration, also kept his post after the government change. Such a decision reflected the pragmatism of President Lee, who spent his lifetime in the business sector before becoming a politician. The technocrats in MOFAT had conducted in-depth studies on complicated trade issues and had deep insight on these matters. Moreover, as discussed extensively in Chapter 3, they were not captured by sectoral interests. President Lee’s decision to maintain the key people involved in trade policymaking reinforced the cohesiveness of the domestic trade governance structure. And this in turn, enabled President Lee to successfully conclude the KORUS FTA despite the many challenges. It took another full year before the KORUS FTA was ratified in the National Assembly of Korea. The opposition party, which was the party of the former President Roh who initiated the KORUS FTA talks, opposed the ratification to the very end. Outnumbered in the National Assembly, the opposition party aligned with anti-American civic groups and left-wing media to oppose the KORUS FTA (Choi 2016b). Relying on filibustering and physical blocking of the venue, the opposition party tried to block every step of the decision-making process at the National Assembly (Lee 2015, 474). An opposition lawmaker exploded a tear gas

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canister at the plenary session where the final voting for the ratification approval of the KORUS FTA was being held (The Guardian 2011). President Lee paid a visit to the National Assembly to persuade the opposition party leaders (Lee 2015, 470–474).The final step to the ratification of the KORUS FTA was long and winding, arduous, and even violent. When the KORUS FTA finally went into effect on March 15, 2012, it was the final year of his presidency.

Korea 2013–2020: reversal to weak political leadership in FTAs Conservative President Park Geun-hye’s administration (2013–2016) On January 2015, President-elect Park Geun-hye decided to dissolve MOFAT, which had functioned as Korea’s main trade policymaking body since its creation by President Kim Dae-jung in 1998. Without much discussion, MOFAT’s trade negotiating functions were transferred to the newly created MOTIE. The MOFAT, now known as the Ministry of Foreign Affairs, witnessed its function shrinking after 15 years of existence.This sudden change was not even anticipated or hinted during her campaign. No one in her administration offered a full account behind the major shuffling of trade negotiating authority. Rumor has it that MOFAT was blamed for causing the U.S. beef fiasco. President Park’s new government did not intend to tolerate the political embarrassment of another beef fiasco.5 Creating MOTIE turned to be a problem, not a solution. As discussed in Chapter 3, MOTIE opened up the trade policymaking process to sectoral interests, thereby making it difficult for the government to pursue trade policies with the national interest in mind. President Park had essentially undermined her ability to pursue more ambitious trade agenda against the wishes of protectionist sectoral interests. President Park’s trade decisions were largely colored by geopolitical considerations. Specifically, Korea’s trade agenda was sacrificed for the sake of maintaining good relations with China. Her desire to curry China’s favor is most apparent during Korea’s FTA negotiations with China. During President Xi Jinping’s visit to Seoul during the summit of 2014, he did not hide his wish to conclude the Korea–China FTA negotiations by the end of the year. President Xi was hosting the Asia-Pacific Economic Cooperation (APEC) Leaders Summit in Beijing later that November and he wanted to announce the Korea–China FTA at the APEC Summit.6 In reality, the Korea–China FTA negotiations were far from complete. There were many unresolved issues on service and investment over which the Korean and Chinese trade negotiators were not willing to make concessions. Without much consultation with her trade negotiating team, President Park gave the mandate to her trade negotiators to conclude the Korea–China FTA during the Beijing APEC Summit.7 This mandate essentially meant the total loss of negotiating leverage for Korean trade negotiators who were forced to make concessions in order to meet the mandate from their top leader. In contrast, Chinese trade negotiators had no reason to make concessions. For example, a key trade issue for the Korean negotiators

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was securing a non-discrimination treatment in investment given China’s blatant discriminatory policy favoring its domestic firms (Choi B. 2016a). Yet, due to the premature deadline imposed from the President, the Korean negotiators could not effectively address this prime concern. The most the Korean negotiators obtained from their Chinese counterpart was an agreement to negotiate the issue later. Korea and China would enter negotiations on investments and services 2 years after the Korea–China FTA enters into effect (Choi 2015). Also, protectionist sectoral interests had gained stronger influence over the trade policymaking process due to the creation of MOTIE. As discussed in Chapter 3, Korea managed to carve out most of the agricultural sector from tariff concessions during the Korea–China FTA negotiation due to opposition from farmers. The cost of defending the agricultural sector was quite high. In return, China agreed to limited trade concessions on industrial products. Tariff eliminations would apply to 71.7 percent of industrial products measured by product lines and 66.4 percent of products measured by the import volume within the 10 years of the Korea– China FTA implementation. The corresponding number is 98.3 percent and 92.5 percent in the case of the KORUS FTA (MOTIE 2015). Substantial part of the Chinese market such as auto and auto parts, steel, petrochemical, and service sectors will remain out of touch for the Korean businesses and investors (see Chapter 3). And unfair trade practices such as subsidies and discriminatory standards remained. Given these limitations and constraints, Korea failed to preempt trade creation in China through its FTA. In sum, Korean achievement at an FTA with China was very much limited. While the Korea–China FTA negotiations were going on, the U.S. was spearheading the TPP negotiations with like-minded countries in the Pacific Region. In response to the TPP, President Park’s administration framed the decision to join the TPP negotiations as a binary choice: Choose China or the U.S. China had accused the TPP as a U.S. conspiracy to block China (Choi B. 2016a). In fact, President Obama envisioned the TPP as a measure to isolate and contain China’s economic and political rise in Asia (The White House 2016). Consistent with her position during the Korea–China FTA, President Park decided not to provoke China by staying out of the TPP negotiations. President Park’s decision went unchecked due to the weakness of the newly established MOTIE on trade policymaking. As the ministry responsible for industrial and energy policies, MOTIE could not solely focus its attention on trade issues. Moreover, the top officials of the MOTIE were not experienced on trade issues and had limited perspective on the unfolding FTA race and strategic competition between the U.S. and China. For instance, the two people in charge of Korea’s trade policymaking were Minister Yoon Sang-jik of the newly created MOTIE and chief trade negotiator Woo Tae-hee. Both had built their professional careers in the field of industry and energy public policies. Their approach to trade policy was cautious and prudent. Mindful of the U.S. beef fiasco during the previous administration, they tried to stay away from politically sensitive decisions. Hence, trade policy

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became less proactive and less entrepreneurial compared to that of the previous administration. Had President Park or any key member of her administration been more strategic on trade issues, they would have opted to join the TPP negotiations while pursuing the Korea–China FTA negotiations at the same time. Pursuing both simultaneously would have enhanced Korea’s leverage in the Korea–China FTA negotiations while also increasing the attractiveness of Korea to the TPP participants. Unfortunately, because President Park had decided to remain out of the TPP negotiations, Korea was absent when the TPP was concluded on October 2015. Under strong criticism, President Park signaled Korea’s intention to accede to the TPP, by stating “Having already signed trade agreements with 10 of the 12 TPP member countries, I believe Korea is a natural partner for the TPP as well” (Kang 2015). However, President Park got impeached in 2016 and was forced to leave from office before turning her pledge into reality.

Progressive President Moon Jae-in’s administration (2017–present) President Moon Jae-in came to the power through a snap election in May 2017 at the wake of President Park’s impeachment. Under the new President, the performance of MOTIE was reviewed. After the rather dismal performance by MOTIE during President Park’s administration, a significant number of experts demanded that a more consolidated domestic trade governance should be established. One suggested option was to restore MOFAT (Kim 2017a). As a matter of fact, President Moon himself recognized that “Transferring trade negotiating authority to the MOTIE was mistake. It did make Korea’s trade diplomacy worse. I think it is reasonable to restore the MOFAT” during his campaign trail (author translation, ibid.). The presidential transition committee reviewed the case and almost came close to restoring MOFAT. But in the end, the committee decided to leave MOTIE as it was, most likely due to strong lobby from incumbents. President Moon had missed the chance to strengthen Korea’s domestic trade governance.While President Moon did not dissolve MOTIE, important decisions on trade policy would be directly run from the Presidential Residence, the Blue House. To a much larger degree than the previous administration, President Moon saw trade policy as a direct extension of foreign relations and policies. In particular, he prioritized favorable relations with China over any foreign policy matter, including trade issues. President Moon clearly communicated his pro-China position during his visit to Beijing for a summit meeting with President Xi Jinping. In a speech at Peking University on December 2017, President Moon remarked: I hope China’s dream is not just China’s but a dream shared by all of Asia, and even the entire humanity… Albeit a small country, Korea, as a responsible middle power state, shall join the China dream. (author translation, Kim S. 2017b)

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Ironically, President Moon’s pro-China position did not protect him from China’s trade retaliation, which had begun during the previous administration in response to Korea’s deployment of Terminal High Altitude Area Defense (THAAD). The previous President Park’s administration had approved the deployment of THAAD, a U.S.-developed anti-ballistic missile system, as a defensive measure against the ever-escalating nuclear threat from North Korea. The Chinese government, however, viewed THAAD as a threat, arguing that it could be used to spy on China’s missile program. China saw THAAD as a way for the U.S. to strengthen its military position in East Asia at the cost of China. As a result, Korea’s largest trading partner turned to trade retaliation to put pressure on Korea. The Chinese government embarked on shadow trade sanctions and boycotts. The number of Korean food export shipments rejected by Chinese customs in March and April of 2017 increased by 280 percent compared to the same months in the previous year (The Korea Herald 2017). Sales of Hyundai Motors fell by more than half (Jin 2017). Small- and medium-sized Korean businesses faced greater frequencies of delays in customs clearance, delays (or cancellations) in contracts, and delays in payments (Cho 2017). In addition, a number of Korean products and services, better known as K-cosmetics, K-pop, and K-drama, were the target of boycotts in China (Yoon 2017). Lotte, a Korean company that offered a location for the installation of THAAD, became the target of severe public boycott in China (Huang 2017). Deteriorating business environment forced the company to exit its supermarket chain Lotte Mart in 2018 after 11 years of business. By 2019, Lotte shut down all operations from China (Straits Times 2019). Korea’s tourism sector also suffered a huge blow. In protest against Korea’s decision to deploy THAAD, Chinese travel agencies prohibited selling package tours to Korea, resulting in a sudden and complete halt of all Chinese group tours to Korea. President Moon did not confront China on the trade retaliation issues. Instead, he turned to low-key diplomacy. Under his direction, the Blue House, not top trade officials, announced that Korea would not bring the case to the WTO dispute settlement process (Kim and Suh 2017).The President Moon’s decision not to pursue the WTO case against China took everyone by surprise. Just a day prior to his decision, the MOTIE publicly declared its intention of using the WTO to press China. This episode showed who was in charge of Korea’s trade policy. Without doubt, there was no effective communication and coordination between the Blue House and the MOTIE. The Blue House overruled MOTIE’s decision just within a day. The Blue House’s rationale can be seen from its statement: “It is critically important to maintain cooperation with China in the light of North Korean nuclear and missile provocation” (author translation, Kim and Suh 2017). President Moon also had to confront U.S. President Donald Trump’s threat of terminating the KORUS FTA. Pointing to increasing U.S. trade deficit (especially trade deficit in automobile trade) against South Korea, President Trump demanded a renegotiation, otherwise threatening to terminate the agreement (Campbell 2018; Paletta 2018). During the KORUS FTA ratification, President Moon had been at the forefront of opposing the ratification as the leader of the opposition party.

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During his presidential campaign, President Moon criticized the investor–state dispute system (ISDS) in the KORUS FTA and demanded renegotiation (Ryu 2012).8 Now, as the President, he was given a chance to revisit ISDS. In the actual renegotiation, the auto provision was changed to meet the U.S. demands while the ISDS was kept intact. Under the renegotiated agreement, the U.S. import tariff of 25 percent on pickup trucks would remain for another 20 years until 2041, well beyond the original phase out date of 2021 (The White House 2018). By agreeing to this revision, President Moon’s administration deprived the Korean auto companies of their access to the most lucrative segment of the U.S. auto market. At 25 percent, the U.S. import tariff is virtually prohibitive, giving the Big Three U.S. automakers virtual dominance of this highly profitable market. Under the original KORUS FTA, South Korean auto companies could have exported pickup trucks to the U.S. without any tariffs within a few years. Now, the only commercially viable option for South Korean auto companies would be to produce vehicles in the U.S. The renegotiation for amending the KORUS FTA came to an earlier conclusion than expected. In late March 2018, Korea and the U.S. announced that they had reached a deal. In giving President Trump his first trade deal, which he was selling as fulfilling his promise of “Buy American, Hire American”, President Moon was expecting something in return. What President Moon had in mind was President Trump’s active engagement with North Korea to advance President Moon’s rapprochement with North Korea (Campbell 2018). President Moon wanted to use the amendment of the KORUS FTA as his leverage to persuade the U.S. to declare peace with North Korea. The timing of signing ceremony of the renegotiated KORUS FTA was arranged only after President Trump agreed to meet again with the North Korean leader Kim (ibid.).

Discussion The global race for bilateral and regional FTAs since the late 1990s implied a highrising wall from trade diversion if Korea did not join the race. Nonetheless, Korean political leaders were wary of joining the race mainly due to vehement opposition from import competing sectors, which served as an important voting bloc. Strong political leadership would play a large role in overcoming the political deadlock that ensued from domestic opposition to FTAs. President Roh was up to this challenge. His relentless pursuit of the KORUS FTA led to a watershed in Korea’s FTA policymaking. He transcended from a politician from the left-wing party with strong anti-American bias to become a trade entrepreneur. His successor, President Lee, championed FTA as a top priority of his right-wing government.The KORUS FTA naturally led to the Korea–EU FTA. Both FTAs were examples of high-level FTAs, something unthinkable for Korea at the turn of the new millennium. The high tide of high-level FTA making has receded since the presidency of Park. Instead of pursuing the economically logical course of joining the TPP, she instead opted for the Korea–China FTA. Despite the political hype, the Korea–China FTA was not up to the standard of a high-level FTA. With intensifying trade confrontation

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between the U.S. and China, the two major markets and sources for technology, the Korean leadership stumbled. Leadership lapse continued in the presidency of Moon. Strong political leadership enabled Korea to forge ahead in the FTA race until 2012, whereas weak political leadership left Korea stuck in the middle of geostrategic competition between the U.S. and China.

Japan 1990s–2012: weak political leadership in FTAs From the late 1990s to 2012, Japan exhibited weak political leadership in its FTA politics. Irrespective of the party in government, Japanese prime ministers during this time period recognized the importance of expanding Japan’s FTAs. However, as described in Chapter 2, Japan’s FTAs from the late 1990s to 2012 were low-level FTAs with small trade partners that did not pose a threat to Japan’s highly protected agricultural sector. Japanese prime ministers during this time period were unsuccessful in achieving their FTA agendas. Weak political leadership on FTA policies is largely expected given Japan’s fragmented domestic trade governance (see Chapter 3). By definition, fragmented domestic trade governance signifies the lack of centralized leadership on trade policymaking. Whether the institutional fragmentation of trade policymaking and weak political leadership on trade policies are causally related is not clearly established. However, what is clear is that these two reinforced one another by the time the Japanese government began to actively pursue FTAs in the late 1990s. Japan’s fragmented domestic trade governance critically undermined the capacity and ability of political leaders to make and implement FTA policies. And weak political leadership, in turn, perpetuated and reinforced the institutional fragmentation of trade policymaking.

LDP governments (Late 1990s–2008) Japanese prime ministers were well aware of the institutional barriers that limited their capacities to direct and guide FTAs. In particular, Prime Minister Junichiro Koizumi (2001–2006) actively attempted to strengthen his role in directing and guiding FTAs. Examples of Prime Minister Koizumi’s efforts include the creation of a party committee on FTA to facilitate cooperation between the METI and the LDP on FTA policies and the creation of a cabinet council to coordinate FTA policies among the relevant ministries (Mulgan 2005, 276–277). This cabinet council— called the Council of Ministers on the Promotion of Economic Partnerships—was chaired by Prime Minister Koizumi and reflected his intention to exercise stronger leadership over the FTA policymaking process. Moreover, Japan produced an FTA policy agenda under Prime Minister Koizumi’s leadership. In 2006, METI mapped out a vision for a comprehensive FTA in East Asia that involved the ASEAN member states, Northeast Asian states, India, Australia, and New Zealand (Yoshimatsu 2015, ‘Japan’s FTA Policy and Regional FTA Development’). Later the same year, Prime Minister Koizumi’s Cabinet produced numerical targets for its FTAs, stating

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that trade with FTA partners should account for “25 percent or more of Japan’s total trade value by the year 2010” (quoted in ibid.). Despite these efforts, Prime Minister Koizumi was not able to substantially weaken the decision-making authority of individual policy subgovernments in trade policies. The main reason was that the existing institutions of trade policymaking remained. For example, Mulgan (2005) notes that the Council of Ministers Concerned with the Promotion of Economic Partnership “cannot override the authority and autonomy of the ministries they represent” (288). While the Prime Minister and the cabinet came up with high-level frameworks, actual polices continued to be decided and implemented by the traditional policy subgovernments. In other words, the executive branch did not gain meaningful decision-making power on the actual trade policymaking process. The executive branch succeeded in assuming the role of “initiator of policy” but failed to become the “decider of policy” (ibid.). Traditional actors in the policy subgovernments continued to dominate trade policies in their respective sectors. Subsequent LDP prime ministers that served after Prime Minister Koizumi faced even greater constraints given their short tenure in office. Following his predecessor’s FTA agenda, Prime Minister Shinzo Abe (2006–2007) pushed to expand Japan’s FTAs and was personally invested in concluding an FTA with a major food exporting country, Australia. And similar to Prime Minister Koizumi, he utilized cabinet councils to intervene directly in the FTA policymaking process (Mulgan 2008, 171, 175; Solis 2010, 228). Prime Minister Abe even considered creating a “Trade Representative Office that would merge the FTA headquarters of the [Minister of Foreign Affairs], METI and MAFF” (Solis 2010, 231) as a means to bolster centralization and coordination in the FTA policymaking process. These efforts, however, never reached fruition as Prime Minister Abe abruptly resigned less than a year into office. His successor Prime Minister Yasuo Fukuda (2007–2008) also shared his predecessors’ enthusiasm for FTAs and once again committed to the 25 percent target set by Prime Minister Koizumoi’s cabinet in 2006. Prime Minister Fukuda’s cabinet even envisioned FTAs with the U.S. and the EU (Yoshimatsu 2015, ‘Japan’s FTA Policy and Regional FTA Development’). Yet, when Prime Minister Fukuda resigned within a year, Japan had not initiated FTA negotiations with a single major trade partner such as the U.S., the EU, and China. Japan’s FTA with Australia, which was initiated during Prime Minister Abe’s administration, was also not making much progress. And Japan’s FTA talks with Korea, which had started farther back during Prime Minister Koizumi’s administration, was in a muddle. In 2009, FTAs accounted for less than 17 percent of Japan’s total trade in terms of value (Yoshimatsu 2012, 195).

DPJ governments (2009–2012) The historic change in ruling party from the LDP to the DPJ in 2009 signaled possibilities for a stronger role of political leadership in Japan’s FTA policymaking.

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Trade liberalization had been a key platform of the DPJ since its inception in 1998 (Yoshimatsu 2015, ‘Japan’s Trade Policy During the DPJ’). All three prime ministers during the DPJ led government announced their intentions to accelerate and deepen trade liberalization through FTAs. In 2009, the first DPJ Prime Minister Yukio Hatoyama (2009–2010) declared that his administration would “accelerate EPA negotiations with the Republic of Korea, India and Australia” (Prime Minister of Japan and His Cabinet 2009). His successor Prime Minister Naoto Kan (2010– 2011) deliberated on the prospects of joining the TPP negotiations and resumed FTA negotiations with Australia that had started during Prime Minister Shinzo Abe’s administration (Yoshimatsu 2015, ‘Japan’s Trade Policy During the DPJ’). And shortly after taking office, Prime Minister Yoshida Noda (2011–2012) announced his intentions to “enter into consultations toward participating in the TPP negotiations” (Prime Minister of Japan and His Cabinet 2011). The generally pro-FTA attitude of the three DPJ prime ministers did not lead to noticeable changes in Japan’s FTA policies. Besides concluding FTAs with India and Peru, both of which had started during the previous LDP government—the DPJ prime ministers were not able to initiate new FTAs. The FTAs with India and Peru both exhibited traits of low-level FTA. India and Peru were small trade partners for Japan, collectively accounting for less than 2 percent of total trade in terms of value. With the addition of India and Peru, Japan’s FTAs accounted for less than 19 percent of total trade in value in 2012 (Urata 2015, ‘Shift to a Multi-layered Trade Policy: Increased FTA Activity’). The Japan–Australia FTA and the Japan–Korea FTA negotiations, which had also started under the LDP governments, were essentially deadlocked. And, most importantly, none of the DPJ prime ministers made the final decision to participate in the TPP negotiations. The DPJ prime ministers’ leadership suffered on multiple fronts. First, DPJ prime ministers, similar to their LDP counterparts, suffered from short tenure in office. They just did not have the time to follow through on their FTA agendas. Second, DPJ prime ministers did not commit to their FTA agendas. Faced with strong opposition from agricultural interests, Prime Minister Kan quickly watered down his intentions to participate in the TPP negotiations and left the issue undecided (Mulgan 2011).Third, since Japan’s fragmented domestic trade governance remained intact, the agricultural policy subgovernment continued to serve as a powerful veto player opposing FTAs from within the trade policymaking system. The DPJ prime ministers lacked the institutional means to override these protectionist interests. One way to counter the veto players would have been to appoint pro-FTA members to the Cabinet, including the minister of MAFF. Ironically, Prime Minister Kan did the exact opposite, and appointed ministers who opposed the TPP to key ministries such as MAFF and METI (Mulgan 2011).This essentially meant that the agricultural policy subgovernment and the industrial policy subgovernment were represented by ministers who were anti-TPP. Lastly, the DPJ prime ministers faced opposition to trade liberalization from within their own party (Yoshimatsu 2015, ‘Japan’s Trade Policy During the DPJ’). When Prime Minister Noda finally appointed pro-TPP ministers to core positions in the cabinet, strong opposition from DPJ legislators

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prevented Prime Minister Noda from entering the TPP negotiations. Opposition from within the DPJ was largely driven by electoral considerations. The DPJ’s victory in the 2009 lower house election was largely due to the switch in rural votes from the LDP to the DPJ (Mulgan 2011). Hence, DPJ politicians were reluctant to pursue FTAs that countered the interests of the rural communities. In sum, from the late 1990s to 2012, prime ministers of both the LDP and DPJ governments failed to strengthen the influence of the executive branch over FTA policies. A major reason behind these failures is the lack of significant institutional changes in Japan’s domestic trade governance. Significant institutional changes, in turn, cannot occur without strong and strategic interventions from political leaders. In order to overcome the fragmented nature of Japan’s FTA policymaking, prime ministers need to establish a centralized trade policymaking entity that can comprehensively draft and implement FTA policies. Prime ministers also need to weaken opposition from the policy subgovernments that oppose trade liberalization since creating a new institutional entity on trade policymaking will not automatically guarantee trade policymaking authority. Lastly, prime ministers need to stay in office longer and also mobilize their parties behind a coherent FTA agenda. All of these changes are politically difficult.

Japan 2013–2020: strengthening political leadership in FTAs When Prime Minister Abe took office again in 2013, he departed from his electoral campaign platform and announced that joining the TPP negotiations would be a key agenda of his new administration. In order to push through his TPP agenda, Prime Minister Abe had to simultaneously strengthen domestic trade governance and weaken resistance from protectionist actors. Prime Minister Abe first centralized the trade policymaking structure through the creation of the TPP task force. As examined in Chapter 3, the task force shifted trade policymaking authority away from separate policy subgovernments and centralized authority under the Prime Minister’s leadership. This section pays closer attention Prime Minister Abe’s efforts to weaken resistance from the agricultural policy subgovernment, which was the main opponent to the government’s FTA agenda. The agricultural policy subgovernment consisted of MAFF, politicians (mainly LDP) representing farm interests, and farm groups. Prime Minister Abe coopted MAFF and key farm politicians. In addition, he undertook an unprecedented reform of JA-Zenchu (Central Union of Agricultural Co-operatives), which serves as the peak association for Japan’s powerful farm group, the JA Group (Japan Agricultural Cooperatives Group).

Coopting and weakening MAFF and the Norin Zoku Japan’s vertically segmented bureaucracy has led to the formation of policy subgovernments that dominate the policy formation and implementation over separate policy areas. Although Prime Minister Abe managed to centralize the trade policymaking institution, policy subgovernments remained for the different policy

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areas. In other words, key actors of the agricultural policy subgovernment would continue to resist the government’s TPP agenda from within the TPP taskforce, although not as effective as before. MAFF officials and politicians representing farm interests are two key actors of Japan’s agricultural policy subgovernment. In particular, the latter, known as norin zoku (agricultural policy tribe), are Diet members who are “part of the LDP’s inner circle of specialist agricultural policymakers who are well connected to outside interests in the agricultural world” (Mulgan 2000, 477). MAFF ministers were often appointed from senior members of the norin zoku, reflecting the close-knit community of members of the agricultural policy subgovernment. Prime Minister Abe sought to weaken opposition from MAFF and the norin zoku by strategically appointing pro-TPP Diet members who were also members of the norin zoku to key positions in the agricultural policymaking process. His first agriculture minister Yoshimasa Hayashi was a “well-known advocate of free trade” (Obe 2013). In 2014, Prime Minister Abe appointed the head of the LDP’s TPP Affairs Committee, Koya Nishikawa, as the new MAFF minister. Although he was an influential member of the norin zoku, Nishikawa had actively supported the TPP in his previous position as head of the LDP’s TPP Affairs Committee. Nishikawa had worked to facilitate Japan’s FTA negotiations with Australia (Nikkei Asia Review 2014a), was well acquainted with the ministers involved in the FTA policymaking process (Nikkei Asia Review 2014b), and attended TPP negotiation sites as a “political conduit for Abe” (Terada 2019, 1051). Terada (2019) notes that Nishikawa’s appointment as MAFF minister was a political reward for his loyalty (ibid.). Shortly after being appointed as minister of MAFF, Nishikawa commented in an interview that “the Japanese economy will prosper if there’s a TPP agreement” (Nikkei Asia Review 2014c). Japanese politics experts view this appointment as a strategic move by Prime Minister Abe to control the norin zoku through Nishikawa (Terada 2019, 1051). In other words, Nishikawa had the task of bringing both MAFF and the norin zoku—two key actors in the agricultural policy subgovernment—to the TPP bargaining table with the goal of moving the TPP negotiations forward. Nishikawa was expected to use his influence within the norin zoku to mitigate opposition to the TPP. After Nishikawa’s resignation due to a political scandal in 2015, Prime Minister Abe appointed Hiroshi Moriyama as minister of MAFF. Similar to Nishikawa, Moriyama was an influential member of the norin zoku who had succeeded Nishikawa as head of the LDP TPP Affairs Committee in 2014. Moriyama was a vocal supporter of the TPP and believed it would open up growth opportunities for Japanese farmers (The Japan Times 2015). Basically, Prime Minister Abe strategically used “key norin zoku to restrain other zoku” (Yoshimatsu 2016, 1160). And Prime Minister Abe’s strategy led to the weakening of norin zoku opposition to the TPP and more broadly to agricultural structural reforms. As discussed later in this chapter, when Prime Minister Abe targeted the JA Group for reform, the norin zoku did not actively intervene to prevent the reform. Moreover, members of MAFF and some senior members of norin zoku actually supported the Prime Minister’s

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agricultural structural reform agenda (Honma and Mulgan 2018, 138). After the conclusion of the TPP negotiations at the end of 2015, Japan’s new MAFF minister Yuji Yamamoto, who was a known reformer, assumed the role of implementing agricultural structural reforms.

Reforming Japan’s farm group The third key actor in the agricultural policy subgovernment is Japan’s powerful farm group, the JA Group. From very early in his administration, Prime Minister Abe recognized that reforming Japan’s agricultural cooperatives would be imperative to a successful TPP negotiation. The JA Group, politically represented by its peak association JA-Zenchu, is a dominant actor within the agricultural policy subgovernment. When Japan entered the TPP negotiations in 2013, JA-Zenchu led the anti-TPP coalition. Mulgan (2015) notes that “agricultural interest groups are spearheading the campaigns….in opposition to the TPP” and that JA-Zenchu represents the anti-TPP campaign (‘Introduction’). Without weakening opposition from JA-Zenchu, Prime Minister Abe faced formidable resistance to the TPP negotiations. In May 2014, an advisory council to the prime minister, the Regulatory Reform Council, proposed a radical reform of the JA Group that “included the abolition of the centralized system of agricultural cooperatives” (Yoshimatsu 2016, 1161). The JA-Zenchu sits at the apex of the JA Group, and assumes the function of guiding and auditing the local cooperatives (at the municipal level), the prefectural federations, and the national federations (see Chapter 5 for details on the JA Group and the JA-Zenchu). The reform proposal aimed to get rid of JA-Zenchu altogether. The proposal also suggested limiting non-farmers’ use of the JA Group’s services, which would lead to a significant decline in the in the JA Group’s membership (Honma 2015, ‘Agricultural Reform under the Abe Administration’). A month later, Prime Minister Abe’s administration made the unprecedented move of including these reform measures in the administration’s “ten year plan for revitalizing agriculture and regional areas” (ibid., ‘Introduction’). Prime Minister Abe had decided to change an organization that had not been subject to change for 60 years. JA-Zenchu harshly criticized the proposed reform measures. The President of JA-Zenchu, Akira Banzai responded that the “organization’s autonomy should not be  threatened” and that “the JA Group will make every effort to realize its own management reform plan by calling for lawmakers’ support with the aim of increasing farmers’ incomes” (The Japan Agricultural News 2014a). Due to the appointment of  pro-TPP politicians to key positions in the cabinet, however, JA-Zenchu faced considerable difficulties in finding an ally from within the agricultural policy subgovernment. As discussed previously, MAFF Minister Nishikawa, who was a senior member of the norin zoku, supported Prime Minister Abe’s TPP agenda. Nishikawa also believed that reform of the JA Group was “necessary to gain international competitiveness in the agricultural sector” (Yoshimatsu 2016, 1161). When approached with JA-Zenchu’s self-reform plan, Minister Nishikawa noted

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that  “‘a gap exists’ between the agricultural co-op group’s self reform plan and the  government’s stance” (The Japan Agricultural News 2014b). In particular, the two differed on the auditing authority of JA-Zenchu and the access of JA Group’s services by non-farmers (ibid.). Even the norin zoku, although critical of the JA Group reform, did not take serious actions to stop the reform bill from passing the Diet in August 2015 (Yoshimatsu 2016, 1161). The Agricultural Cooperative Reform Act that passed the Diet in 2015 was a watered down version of the original bill, largely due to the efforts of the norin zoku. Nonetheless, the Agricultural Cooperative Reform Act succeeded in undermining JA-Zenchu’s legal authority. JA-Zenchu’s status changed to general incorporated association, essentially making it a voluntary association similar to other interest groups. JA-Zenchu also lost its authority to audit local cooperatives. Instead, local cooperatives will be audited by a certified public accountant (Prime Minister of Japan & His Cabinet 2015). These changes implied sizable revenue loss considering that JA-Zenchu’s income from auditing and other services to local cooperatives in the fiscal year 2014 amounted to approximately 8 billion yen (Yamashita 2015). Also, with its change in legal status, JA-Zenchu will be subject to taxation and face restrictions in its political activities (Harris 2015). More importantly, these reform measures pointed to JA-Zenchu’s weakened authority over its member cooperatives. Local cooperatives now have more freedom to set up independent businesses and they can choose not to be audited by JA-Zenchu. Prime Minister Abe was essentially declaring his willingness to go against a traditional political ally for the sake of the TPP. Introducing greater decentralization in the JA Group would inevitably weaken the ability of the JA Group to act in unison as powerful political actor. And that in turn would weaken a key opposition to the TPP. Instead, Prime Minister Abe opted to reach out to the farmers directly by sending the message that reform of the JA Group would benefit the farm sector and bring revitalization of the agricultural sector from the grassroots (Honma and Mulgan 2018, 135–136). Terada (2019) notes that the Agricultural Cooperative Reform Act strongly signaled Prime Minister Abe’s intention not only to “negotiate Japan’s greater concessions concerning agricultural products, but also to sustain the prospects of TPP” (1052). Whether the reform has led to a fundamental weakening of the JA Group’s political clout remains to be seen. Agricultural politics scholars are divided in their assessment of the reform effects (Terada 2019; Honma and Mulgan; Yamashita 2015). The reform, however, led to the resignation of the President of JA-Zenchu, Akira Banzai, for his failure to block the Agricultural Cooperative Reform Act. The passing of the Agricultural Cooperative Reform Act symbolized Prime Minister Abe’s victory—albeit smaller than intended—over an organization that had remained untouched and seemed untouchable for 60 years.

Discussion The strength of political leadership over FTA policies has strengthened considerably between the two periods under study: From the late 1990s to 2012 and from 2013

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to 2020. Throughout both periods, prime ministers from different ruling parties all recognized the importance of pursuing FTAs as a way to expand Japan’s trade and improve business conditions.Yet it was only after Prime Minister Abe assumed control of government in 2013 that Japan began to exhibit strong political leadership over FTA policies. Prime Minister Abe succeeded in weakening resistance from protectionist interests by first strengthening the cohesion Japan’s domestic trade governance. At the same time, Prime Minister Abe weakened the strong linkages among the key actors of the agricultural policy subgovernment by coopting key members of MAFF and the norin zoku. He then directly targeted Japan’s powerful farm lobby for reform at a time when both the MAFF and key members of the norin zoku were more cooperative with the government. Altogether, these efforts had the effect of weakening concerted opposition to trade liberalization by the agricultural policy subgovernment. Strengthening political leadership over FTA policymaking has positively contributed to Japan’s pursuit of high-level FTA since 2013.

Conclusion This chapter examined the role of Japan and Korea’s political leaders in shaping FTA politics in their respective countries. Political leaders determine the timing of major institutional changes in a country’s trade policymaking structure as well as the strengthening or weakening of political momentum in favor of greater trade liberalization. Prior to 2013, Korea exhibited strong political leadership in FTA politics while Japan exhibited weak political leadership. In Korea, strong political leadership from both major parties (of differing political orientations) enabled the shift to cohesive domestic trade governance, which ultimately led the government to secure ambitious FTAs with major trade partners. In Japan, political leaders were unable to overcome strong resistance to trade liberalization, especially agricultural liberalization. Since 2013, however, the observation has reversed. In Korea, prioritization of relations with China have hampered political leadership over FTA policies, resulting in less favorable political environment to pursue high-level FTAs. In contrast, Japan has seen a drastic strengthening of political leadership over FTA policies under Prime Minister Abe, which have enabled the Japanese government to pursue high-level FTAs such as the TPP.

Notes 1 The opposition group blamed Mexico’s economic crisis and corruption on NAFTA. They also blamed the sorry state of some public services in Canada on NAFTA. 2 OIE “is the international scientific body recognized by the World Trade Organization as the reference for matters of animal disease and health” (Jurenas and Manyin 2010, 4). 3 The U.S. negotiators thought changing the beef agreement in April 2008 would impair the image of U.S. beef being safe regardless of age. Some U.S. politicians were of the same view. They were also worried that renegotiation would set an undesirable precedent in future negotiations with other countries (Jurenas and Manyin 2010, 7).

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4 When he was campaigning in Iowa, the venue for the first Democratic Party caucus, Obama said that he would “demand equal access to markets abroad for our producers so that centralized discrimination against our auto producers in Korea through taxes and regulation is not repeated in other markets with American goods and services” (Schott 2008, 87). 5 Interview with a Korean government official (anonymous). March 2013, Seoul 6 Interview with a Korean government official (anonymous). October 2015 Seoul 7 Interview with a Korean government official (anonymous). October 2015, Seoul 8 The investor–state dispute settlement system (ISDS) is the legal system where a private investor can challenge a sovereign state in order to resolve his/her investment-related dispute. The ISDS has an established international institutional arrangement. Most Bilateral Investment Treaties and FTAs have adopted the ISDS as an integral part of the agreement. Korea is no exception to this trend. The position of President Moon on the ISDS has reversed on the ISUD. When he was the Chief of Staff for President Roh, he was supportive of the ISDS. Once he became the leader of the opposition party, he became negative of the ISDS.

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Mulgan, Aurelia G. (2015), ‘To TPP or Not TPP: Interest Groups and Trade Policy’, in Aurelia G. Mulgan and Masayoshi Honma, eds., The Political Economy of Japanese Trade Policy, Kindle edition. Basingstoke and New York: Palgrave MacMillan. Nikkei Asia Review (2014a),“At Odds With US, Japan Reaches Out to Other TPP Partners”, March 4, https://asia.nikkei.com/Economy/At-odds-with-US-Japan-reaches-out-toother-TPP-partners (accessed February 20, 2020) Nikkei Asia Review (2014b), ‘New Cabinet, Same Challenges for Abenomics’, September 4, https://asia.nikkei.com/Politics/New-cabinet-same-challenges-for-Abenomics (accessed February 20, 2020). Nikkei Asia Review (2014c), ‘Japan Eager for TPP Deal: New Farm Minister’, September 5, https://asia.nikkei.com/Economy/Japan-eager-for-TPP-deal-new-farm-minister (accessed February 20, 2020). Obe, Mitsuru (2013), ‘Japan’s Farm Minister Walks Line Between Free Trade, Protectionism’, Wall Street Journal, April 8, https://blogs.wsj.com/japanrealtime/2013/04/08/japans-farmminister-walks-line-between-free-trade-protectionism/ (accessed February 20, 2020). Paletta, Damian (2018), ‘Trump Preparing Withdrawal From South Korea Trade Deal, a Move Opposed By Top Aides’, The Washington Post, September 2, https://www.washingtonpost. com/news/wonk/wp/2017/09/02/trump-plans-withdrawal-from-south-korea-tradedeal/ (accessed March 5, 2020). Park, Si-soo (2008), ‘Students Protest Imports of US Beef in Candlelight Rally’, The Korea Times, May 2, http://m.koreatimes.co.kr/pages/article.amp.asp?newsIdx=23569 (accessed July 16, 2020). Prime Minister of Japan and His Cabinet (2009), ‘Address by H.E. Dr. Yukio Hatoyama Prime Minister of Japan: Japan’s New Commitment to Asia - Toward the Realization of an East Asian Community’, November 15, https://japan.kantei.go.jp/hatoyama/ statement/200911/15singapore_e.html (accessed February 13, 2020). Prime Minister of Japan and His Cabinet (2011),‘Press Conference by Prime MinisterYoshihiko Noda’, November 11, https://japan.kantei.go.jp/noda/statement/201111/11kaiken_e. html (accessed February 13, 2020). Prime Minister of Japan and His Cabinet (2015), ‘Policy Speech by Prime Minister Shinzo Abe to the 189th Session of the Diet’, February 12, http://japan.kantei.go.jp/97_abe/ statement/201502/policy.html (accessed February 13, 2020). Reuters (2008), ‘Anti-U.S. Beef Protest Draws 100,000 S. Koreans’, May 31, https://www. reuters.com/article/us-korea-protest-idUSSEO21734120080531 (accessed July 16, 2020). Roh, Moo-hyun (2006), ‘2006nyun Shinnyun Yonsul’ [2006 New Year Address], January 18, http://archives.knowhow.or.kr/m/record/all/view/87379 (accessed July 16, 2020). Ryu, Sung-yul (2012), ‘Park vs Moon Hanmi FTA Jaehyupsang?’ [Park vs Moon: Renegotiation of the KORUS?], Donga Ilbo, December 12, https://www.donga.com/ news/article/all/20121211/51513828/1 (accessed July 4, 2020). Schott, Jeffrey (2008),‘Implementing the KORUS FTA: Key Challenges and Policy Proposals’, in Flake, Gordon L. and Ro-byug Park, eds., Understanding New Political Realities in Seoul: Working toward a Common Approach to Strengthen U.S.-Korean Relations, Washington, DC: The Maureen and Mike Mansfield Foundation. Solis, Mireya (2010),‘Can FTAs Deliver Market Liberalization in Japan? A Study on Domestic Political Determinants’, Review of International Political Economy,Vol. 17, No. 2, 209–237. Straits Times (2019), ‘South Korea’s Lotte Seeks to Exit China After Investing $9.6 Billion’, March 13, https://www.straitstimes.com/asia/east-asia/south-koreas-lotte-seeks-to-exitchina-after-investing-96-billion (accessed March 8, 2020).

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Terada, Takashi (2019), ‘Japan and TPP/TPP-11: Opening Black Box of Domestic Political Alignment for Proactive Economic Diplomacy in face of “Trump Shock”’, The Pacific Review,Vol. 32, No. 6, 1041–1069. The Guardian (2011), ‘South Korean MP Lets Off Teargas in Parliament’, November 22, https://www.theguardian.com/world/2011/nov/22/south-korean-mp-lets-off-teargas (accessed July 16, 2020). The Japan Agricultural News (2014a), ‘Agricultural Cooperative Union Head Criticizes Panel’s Agricultural Reform Proposal (May 15, 2014)’, May 15, http://english.agrinews. co.jp/?p=2086 (accessed February 20, 2020). The Japan Agricultural News (2014b), ‘Agricultural Co-ops’ Self-Reform Differs from Government Stance: Agriculture Minister (Nov. 8, 2014)’, November 8, http://english. agrinews.co.jp/?p=2920 (accessed February 20, 2020). The Japan Times (2015), ‘New Farm Minister Spins TPP as Chance for Exports’, The Japan Times, October 1. The Korea Herald (2017), ‘Korean Food Rejected by Chinese Customs Surge 280% Amid THAAD Row’, The Korea Herald, June 25, http://nwww.koreaherald.com/common/ newsprint.php?ud=20170625000092 (accessed July 15, 2020). The White House (2016), ‘Statement by the President on the Signing of the TransPacific Partnership’, February 3, https://obamawhitehouse.archives.gov/the-pressoffice/2016/02/03/statement-president-signing-trans-pacific-partnership (accessed March 8, 2020). The White House (2018), ‘President Donald J. Trump is Fulfilling His Promise on the United States–Korea Free Trade Agreement and on National Security’, September 24, at https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-fulfillingpromise-united-states-korea-free-trade-agreement-national-security/ (accessed March 8, 2020). Urata, Shujiro (2015), ‘Postwar Japanese Trade Policy: A Shift from Multilateral GATT/WTO to Bilateral/Regional FTA Regimes’, in Aurelia G. Mulgan and Masayoshi Honma, eds., The Political Economy of Japanese Trade Policy, Basingstoke and New York: Palgrave MacMillan, Kindle edition. Yamashita, Kazuhito (2015), ‘A First Step Toward Reform of Japan’s Agricultural Cooperative System’, http://www.nippon.com/en/currents/d00169/ (accessed December 30, 2018). Yoon, Ja-young (2017), ‘China Bans Imports of 19 Korean Cosmetics’, The Korea Times, January 11, http://www.koreatimes.co.kr/www/news/nation/2017/01/488_221794. html# (accessed July 15, 2020). Yoshimatsu, Hidetaka (2012), ‘Political Leaders’ Preferences and Trade Policy: Comparing FTA Politics in Japan and South Korea’, Asian Politics & Policy,Vol. 4, No. 2, 193–212. Yoshimatsu, Hidetaka (2015), ‘Locating Japanese Trade Policy in an Evolving Regional Context’, in Aurelia G. Mulgan and Masayoshi Honma, eds., The Political Economy of Japanese Trade Policy, Basingstoke and New York: Palgrave MacMillan, Kindle edition. Yoshimatsu, Hidetaka (2016), ‘US-Japan Negotiations on the Trans-Pacific Partnership: Domestic Societal Interests and International Power Developments’, Asian Survey,Vol 56, No. 6, 1145–1167.

5 CIVIL SOCIETY, INTEREST GROUPS, AND FTA POLITICS

Introduction How do civil societies in Japan and Korea impact FTA politics? Despite strong farm resistance to FTAs in both countries, the nature of civil society participation in Japan and Korea’s FTA politics is markedly different.This book broadly defines civil society as all “organizations and associations that exist outside of the state (including political parties) and the market” (Carothers and Barndt 1999–2000, 19). In Japan, civil society’s participation in FTA politics largely evolves around interest groups. Organized farm groups and organized business interests are the most vocal and influential actors spearheading civil society participation in Japan’s FTA policymaking. These interest groups attempt to shape FTA policies from within the existing political institutions. In Korea, civil society participation in FTA politics takes the form of large-scale social mobilizations and protests that involve the broader public and various civil society actors.These differences do not necessarily point to weaker or stronger influence of civil society in either Japan or Korea. But the differences do highlight important distinctions in civil society’s participation in FTA politics in the two countries. First, civil society–state relationship on trade policies is highly institutionalized in Japan, whereas such institutionalized relationship is absent in Korea. In Japan, interest groups that support and oppose FTAs have each formed close ties with politicians and ministries to push their desired trade agendas. These interest groups influence FTA policies by working within policy subgovernments such as the agricultural policy subgovernment and industrial policy subgovernment (see Chapter 3). Interest groups that fall outside of these policy subgovernments have few means to influence FTA policies. Until recently, Korea lacked such institutionalized relationship between state and civil society on trade policies. Instead, two broad coalitions have existed in society, each representing the anti- and pro-trade interests.

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On the one side is the neoliberal coalition of export competing industries, rightwing NGOs, right-wing media, and right-wing politicians that support FTAs.1 On the other side is the anti-neoliberal coalition of import competing industries, leftwing NGOs, left-wing media, and left-wing politicians that oppose FTAs. Both coalitions attempt to influence trade policies from outside of the existing political institutions (e.g., social mobilization). Second, the main civil society actors involved in FTA politics vary between the two countries. In Japan, conservative interest groups such as business federations and farm groups play dominant roles, while labor unions and the broader public play substantially weaker roles in FTA politics. In Korea, however, civil society participation in FTA politics involves a wide variety of actors from across the political and socioeconomic spectrum. In addition to organized business and farm groups, left-wing citizen movement groups and labor unions have actively mobilized public sentiments to shape the FTA agenda. Lastly, the anti-neoliberal coalition in Korea exhibits strong anti-American sentiments while in Japan, such sentiments are lacking. The following chapter closely analyzes the impact of such variations on Japan and Korea’s FTA politics in the two periods under study, from the late 1990s to 2012 and from 2013 to 2020.

Japan: institutionalized civil society–state relations on FTAs until 2012 In Japan, civil society–state relationship on FTA politics is highly institutionalized. A select number of interest groups have formed close ties with like-minded ministries and politicians to collectively achieve their desired trade agendas. This is largely the product of Japan’s fragmented domestic trade governance. As extensively discussed in Chapter 3, Japan’s institutions of trade policymaking was highly decentralized until the end of 2012, with decision-making authority divided along sectoral lines (i.e., industrial goods and agricultural goods). Separate policy subgovernments (e.g., agricultural policy subgovernment and industrial policy subgovernment) dominated trade policymaking for different sectors. And interest groups have been key actors in these policy subgovernments. The two most dominant interest groups in FTA politics are business and farm groups, each respectively led by Keidanren (Japan Business Federation) and JA-Zenchu (Central Union of Agricultural Cooperatives) (Mulgan 2015, ‘Introduction’). Keidanren is the peak association for Japanese businesses and JA-Zenchu is the peak association for the Japan Agricultural Cooperatives Group (JA Group). Keidanren has shaped industrial trade policies in close collaboration with METI and LDP politicians representing pro-FTA industry interests. Likewise, JA-Zenchu has dominated agricultural trade policies along with the MAFF and LDP rural politicians who represent anti-FTA interests (Mulgan 2008, 172; Solís 2010). Keidanren and JA-Zenchu are respectively key actors in the industrial and agricultural policy subgovernments, exercising strong voice over trade policies on industrial and agricultural goods.

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The formation of these policy subgovernments in different trade policy realms have enabled a few number of interest groups to gain privileged access to trade policymaking relative to other civil society actors. In other words, the institutional structure of trade policymaking did not favor the broad inclusion of other civil society actors. Given their dominant positions in trade policymaking, Keidanren and JA-Zenchu have served as the de-facto leaders of the pro- and anti-FTA coalitions. The pro-FTA coalition represents export-competitive manufacturing industries such as automobile, electronics, and machineries, whereas the anti-FTA coalition consists of import-competing sectors such as primary food producers and processed food industries, and, in recent years, medical services.

Keidanren and FTAs until 2013 Keidanren has consistently conveyed a strong economic rationale for pursuing FTAs since Japan’s early FTA initiation efforts in the late 1990s. In a July 2000 policy statement, Keidanren strongly urged the Japanese government to promote FTAs and exhibit leadership on the issue, lamenting that Japanese businesses are “placed at a competitive disadvantage in doing business with countries that have already concluded FTAs elsewhere” (Keidanren 2000b). On April 2000, Keidanren issued a joint statement with their counterpart in Mexico (the Mexican Council for Foreign Trade), calling for a comprehensive Japan–Mexico FTA that “would include tariff elimination as well as rules on investment, government procurement, anti-dumping and intellectual property, together with effective dispute settlement mechanisms” (Keidanren 2000a). The joint statement also pointed out the need to level the playing field for Japanese companies who faced a cost disadvantage compared to their competitors in NAFTA and the EU. Later in the fall of the same year, Keidanren issued a policy statement strongly supporting the initiation of FTA negotiations between Japan and Singapore, and asked for greater degrees of trade liberalization, improvements in business environment, and domestic structural reforms in both countries (Keidanren 2000c). Existing studies on the role of Keidanren in Japan’s bilateral trade negotiations indicate that Keidanren has played a critical role in promoting and shaping Japan’s FTAs. For example, in Japan’s first FTA with Singapore, the Japanese government faced the arduous task of creating an FTA model that would serve as a precedent for future FTAs. Keidanren gathered information from Japanese businesses to help the government determine the “scope and content for the agreement” (Yoshimatsu 2005, 265). Yoshimatsu (2005) further documents that 31 out of 46 points from Keidanren’s proposal for the Japan–Singapore FTA were included in the final FTA agreement with Singapore (ibid.). While 31 points account for a small portion of the total agreement, from Keidanren’s viewpoint, many of its demands were successfully incorporated into the FTA agreement. In Japan’s second FTA with Mexico, Keidanren played a critical role even before the inception of formal FTA negotiations. In the late 1990s until 2000, the Japanese government did not prioritize an FTA with Mexico, but instead prioritized

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concluding FTAs with Singapore and South Korea. Mexico was a small trade partner for Japan and Japanese foreign direct investment in Mexico was also limited (Manger 2009, ‘Chapter 5’; Yoshimatsu 2005). For Japanese firms that had invested in Mexico, however, an FTA with Mexico was imperative. Due to NAFTA and the EU-Mexico FTA, Japanese firms operating in Mexico faced cost disadvantages visà-vis their U.S. and EU competitors that enjoyed preferential access to the Mexican and North American markets. Japanese electronics and automobile firms in Mexico heavily relied on imported parts to assemble their products in Mexico, which were then exported to a third country such as the U.S. An FTA with Mexico would enable the import of intermediate capital goods (i.e., input parts) at a low cost, leveling the playing field for Japanese firms relative to their competitors (Manger 2009, ‘Chapter 5’). Keidanren actively represented the interests of these exporting firms that had invested in Mexico. Keidanren issued the “Report on the Possible Effects of a Japan–Mexico Free Trade Agreement on Japanese Industry” in 1999 and issued a joint statement with their Mexican counterpart in 2000 to pressure the government to initiate FTA negotiations with Mexico. In addition to compiling studies and reports on the necessity of a Japan–Mexico FTA, Keidanren also directly lobbied senior government officials in Japan and Mexico to propel the FTA negotiation forward (Yoshimatsu 2005, 269). Once the Japan–Mexico negotiation began, Keidanren’s role was to “muster enough political support to help METI prevail in the interministerial rivalry with MAFF, and to offer a counterweight to the protectionist forces of rural constituencies…” (Manger 2009, ‘Chapter 5’). Given strong resistance from protectionist farm interests (e.g., JA-Zenchu and the JA Group), Keidanren also actively lobbied and met with MAFF officials and politicians representing farm interests (ibid.). Strong farm resistance led the negotiations to the brink of failure. It would not be an exaggeration to say that without Keidanren’s strong efforts to propel the Japan–Mexico FTA, farm resistance would most likely have derailed or substantially delayed the Japan–Mexico FTA. Keidanren’s role in the Japan–Singapore and Japan–Mexico FTAs illustrate the important role of Keidanren as a pro-FTA voice throughout the 2000s. As examined in Chapter 2, Japan’s FTAs until 2013 were with relatively smaller trader partners that did not pose a significant threat to Japan’s protected agricultural sector. While protectionist agricultural interests contributed to excluding major agricultural exporting countries as potential FTA partners, business interests represented by Keidanren played an important role in driving FTAs with remaining trade partners and shaping the content of the FTAs. As Pekkanen et al. (2007) comment, “bilateral FTAs allow selective control over partners and issues, enabling Japanese officials to score significant diplomatic gains that are directly responsive to the concerns of powerful business communities” (962). Given the heavy bias in favor of protectionist interests in Japan’s trade policymaking until 2013, Keidanren continued to play an important role in subsequent FTA negotiations with Chile, Thailand, and Malaysia (Manger 2009).

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JA-Zenchu and the JA Group until 2013 JA-Zenchu, representing the JA Group, is without doubt the most powerful protectionist lobby group in Japan’s trade policymaking. Organizationally, the JA Group has a dominating presence in rural communities. The JA Group penetrates deeply into rural communities through cooperatives at the municipal, prefectural, and national levels. Nearly all farmers and a large number of rural residents are regular or associate members of the JA Group through their local cooperatives. In 2017, the JA Group had 4.3 million regular members and 6.2 million associate members (JA-Zenchu 2019). In terms of functions, the JA Group provides a comprehensive range of services that include marketing and purchasing of agricultural products, “financial, management, service, technical, social, educational, advisory, welfare, social and cultural activities relating to agriculture and the farmers’ lives as well as those of non-farmers” (Mulgan 2000, 51). In other words, the JA Group services nearly all needs of the rural residents in Japan. Given its extensive and intensive presence in rural communities, the JA Group is in a strategic position to act as a key political actor in rural communities. As the peak association of the JA Group, JA-Zenchu’s dominant position in agricultural policymaking (including domestic and trade issues) has a legal and political basis. Legally, JA-Zenchu is the “‘sole and supreme national body that unifies the intentions, represents the interests and determines the directions of the whole [cooperative] movement’” (Mulgan 2000, 63). The official role of the JA-Zenchu is to represent the political interests of farmers, which enabled it to become a core actor shaping agricultural policies. Due to its legal status, JA-Zenchu also has the authority to audit local cooperatives and thus exert influence over local cooperatives (ibid., 61). Politically, JA-Zenchu has served as a vote mobilizer for the dominant LDP throughout the post-World War II period. LDP rural politicians have largely benefited from JA-Zenchu’s organizational and financial support during election times.The JA-Zenchu has also proactively recommended candidates during election times, successfully helping candidates who are favorable to the JA Group get elected to the Diet. In return, the LDP has rewarded JA-Zenchu and rural voters with favorable agricultural policies such as subsidies and protection (Mulgan 2000, 380–473). Although the share of rural voters have dropped significantly over the years, it is no secret among Japan’s major parties that rural votes help win elections. And gaining the support of JA Zenchu is an effective way to gain rural votes. For example, Scheiner (2006) notes that strong LDP support in rural districts have enabled the LDP to reign as ruling party for more than half a century despite declining popularity among urban voters. In fact, the LDP lost its position as ruling party in 2009 when rural votes swung to the Democratic Party of Japan (Yoshimatsu 2015a). Mulgan (2013) observes that rural voters punished the LDP for their inability to protect Japan’s agricultural market. In the 2012 lower house election, rural votes swung back to the LDP, playing a role in the LDP’s return to government. Given its organizational strength and electoral clout, the JA Zenchu has played a critical role in shaping Japan’s FTAs prior to 2013. JA-Zenchu’s initial position

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was that agricultural liberalizations should be “exclusively” discussed in the WTO, not in FTAs (Solís 2010, 225). Agricultural liberalization first became a major issue during Japan’s FTA negotiation with Mexico. The Mexican government hoped to increase pork and citrus exports to Japan since these two products made up about 12 percent of Mexico’s exports to Japan. However, from the very beginning, JA-Zenchu had extracted a concession from MAFF to prevent further market opening (Manger 2009, ‘Chapter 5’). Manger (2009) notes that “MAFF officials repeatedly stated that they could not compromise on the issue of pork, even at the risk of failure of the negotiations with Mexico” (ibid.). In addition to pressuring MAFF officials, JA-Zenchu staged public campaigns, sit-ins in front of government buildings, and pressured key LDP politicians to align with farm interests. Eventually, JA-Zenchu accepted some degree of agricultural liberalization, albeit very moderate. JA-Zenchu succeeded in limiting tariff concessions to only 40 percent of Mexico’s agricultural exports to Japan and maintaining quotas on citrus and pork. Tariffs on pork were set at 4.3 percent “only if sold at the equivalent of the price demanded by Japanese farmers”. Tariffs for the remaining pork was set at a high 49 percent (ibid.). Since the Japan–Mexico FTA, JA-Zenchu’s position has been to exclude sensitive agricultural products—specifically, rice, barley and wheat, sugar, dairy, and beef and pork—from FTA negotiations (Manger 2009, ‘Chapter 7’; Solís 2010, 226). For example, Japan’s FTA negotiation with Thailand was equally contentious as the Thai government sought to export agricultural goods such as rice, sugar, and flour to Japan. JA-Zenchu staunchly opposed agricultural liberalization, even sending representatives to Bangkok to strongly impress the need of excluding rice from the FTA negotiations (ibid.). Eventually, Ja-Zenchu succeeded in removing rice from the negotiation table during the Japan–Thailand FTA negotiation. The exclusion of sensitive agricultural products from FTAs imply that a large portion of Japan’s agricultural items would be excluded from tariff concessions. In fact, Japan’s FTAs prior to 2013 have excluded on average about 40 percent of agricultural items from tariff concessions (Kim 2009, 5).Trade partners that do not have substantial agricultural exports, especially exports in sensitive agricultural products, have had a much easier time negotiating FTAs with Japan. An example is Malaysia, which did not have sensitive agricultural exports to Japan and quickly agreed to exclude rice, wheat, several dairy products, beef, and pork from the FTA negotiation. The Japan–Malaysia FTA concluded with ease, the negotiation taking a little more than 1 year from start to end (Manger 2009, ‘Chapter 7’). On the other hand, however, JA-Zenchu’s position has effectively prevented FTAs with major agricultural exporting countries such as Australia. Even without an FTA, Japan already imported large amounts of agricultural products from Australia. Following the U.S., the EU, and China, Australia was Japan’s fourth largest supplier of agriculture and food imports in 2006. In particular, Australia’s major agricultural exports to Japan were sensitive items. Australia supplied “half of its [Japan’s] beef needs, one third of its cheese requirements and about one fifth of its wheat and sugar consumption” in 2006 (Ministry of Foreign Affairs 2006). As a result, when

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the government launched FTA negotiations with Australia in 2007, JA-Zenchu responded with staunch opposition, organizing farmer’s protests in downtown Tokyo (Solís 2010, 226). Solís (2010) insinuates that farm displeasure with the launching of the Japan–Australia FTA played a role in the LDP’s 2007 upper house election defeat (ibid.). Ultimately, it would take another 7 years for the Japanese government to conclude the Japan–Australia FTA.

Keidanren and JA-Zenchu since 2013 The strengthening domestic trade governance of Japan since 2013 has had opposite effects in the ability of Keidanren and JA-Zenchu to shape FTA policies. Keidanren now works in an FTA policymaking environment that is biased in favor of greater trade liberalization and high-level FTAs. In 2014, a Keidanren poll conducted among member companies revealed that Japanese businesses perceived stalled TPP negotiations as a “roadblock” to overseas expansions (Nikkei Asian Review 2014a). After the withdrawal of the U.S. from the TPP, Keidanren issued a statement urging the 11 remaining countries in the TPP to “move forward to conclude the TPP” and “minimize changes to the original agreement” (Keidanren 2017). Keidanren has also used its “funding power” and “strategic position of business in the economy” to directly communicate with Prime Minister Shinzo Abe’s administration to lobby on behalf of its trade agenda (Mulgan 2015, ‘Interest Group Political Strategies’). In contrast, the FTA policymaking environment has turned relatively more hostile toward JA-Zenchu. When Japan joined the TPP negotiations in 2013, JA-Zenchu put up a strong fight. JA-Zenchu organized an anti-TPP rally that brought together over 4,000 participants and 184 Diet members (The Japan Times 2013). The President of JA-Zenchu, Akira Banzai even threatened to withdraw support if Prime Minister Abe’s administration entered the TPP negotiations (Yoshimatsu 2015b, 1152). This was no small threat as the farm lobby, led by JA-Zenchu, has been a powerful voter base for the LDP. When Japan first joined the TPP negotiations in Kota Kinabalu, Malaysia on July 2013, officials of JA-Zenchu were present to “‘monitor’ the government’s negotiations” (Asahi Shimbun 2013). A Japanese lawmaker present at the negotiations further commented that “the monitoring activities were necessary to pressure the government” (ibid.). JA-Zenchu continued to organize anti-TPP rallies throughout Japan’s TPP negotiations and also clearly reminded LDP politicians (and Prime Minister Abe) of JA-Zenchu’s support of the LDP during its successful 2012 lower house elections (Nikkei Asian Review 2014b). JA-Zenchu also engaged in other anti-TPP campaigns such as collecting 11 million signatures for an anti-TPP petition, using media outlets to spread antiTPP messages, and seeking support of Diet members with agricultural ties (Mulgan 2015, ‘Interest Group Political Strategies’). Despite these efforts, however, JA-Zenchu was not able to overcome the new institutional structure of Japan’s FTA policymaking under Prime Minister Abe. The strengthened cohesion of Japan’s domestic trade governance limited JA-Zenchu’s ability to veto the FTA policymaking process. JA-Zenchu’s reform in 2015 also

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seemed to symbolize the political demise of the farm lobby group (see Chapter 4).As of yet, the reform has not significantly reduced the political influence of JA-Zenchu. Although JA-Zenchu is now a general incorporated association, prefectural unions that comprise the membership of JA-Zenchu still retain their cooperative status. And prefectural unions collect member ship fees from their local cooperatives, which will ultimately channel into JA-Zenchu. Moreover, membership fees collected at the local cooperative level are unlikely to reduce unless the government prevents local cooperatives from accepting associate members, who are part-time farmers that do not depend on farming for their livelihood (Yamashita 2015). In the long run, however, the reform of JA-Zenchu signifies a break in the key actors that have dominated agricultural policymaking. The fact that JA-Zenchu could not stop the reform indicates that their interests are not entirely aligned with those of MAFF and LDP rural politicians.Yamashita (2015) notes that JA “seems to be pitted in an all-out confrontation with MAFF, which it has sharply criticized for ‘betraying’ it on the reform issue”. Furthermore, he observes that “cracks have appeared in the strong and solid ties binding MAFF, the JA [JA-Zenchu], and the legislators” (ibid.). The weakening relations among JA-Zenchu, MAFF, and LDP rural politicians portend the further weakening of the farm lobby group in the future.

Weak presence of other civil society actors in Japan’s FTA politics Keidanren and JA-Zenchu are not the only civil society actors interested in FTAs. As mentioned briefly, Keidanren and JA-Zenchu are de-facto leaders of the proand anti-TPP coalitions that include a myriad of different interest groups. These other interest groups, however, play a significantly weaker role in Japan’s FTA politics. Since they do not enjoy institutionalized inclusion into the decision-making process of FTA policies, their roles are limited to stating or submitting their policy preferences on FTAs and participating in government organized information sessions.The presence of multiple policy subgovernments that dominate different trade policy areas enable peak associations such as Keidanren and JA-Zenchu to play a dominant role while at the same time excluding the vast majority of civil society actors from partaking in the trade policymaking process. The Japanese Trade Union Confederation (Rengo), which is the peak labor association, is possibly the only other interest group that could potentially play an important role in FTA politics. Rengo, however, has generally failed to adopt a strong stance either in support of or in opposition to FTAs. For example, during Japan’s earlier FTAs with developing countries such as Mexico and Thailand, labor unions were concerned over possible increase in foreign workers (Manger 2009, ‘Chapter 5’ and ‘Chapter 7’). But Rengo did not mobilize strongly against the FTAs. Likewise, during the TPP negotiations, Rengo adopted a “cautious” stance toward the TPP due to reservations over foreign workers and labor standards (Mulgan 2015, ‘Winners, Losers, and the Cautious in Between’). In its 2013 statement on the TPP, Rengo announced that “[they] can understand the decision to participate in the TPP talks” but asked for more information and proper measures for sectors hit hard by

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the TPP (Rengo 2013). In 2015, Rengo recognized the need to create employment through the Japan–EU FTA and raised similar concerns over labor standards and transparency of information (Rengo 2015). In short, Rengo has been an ambivalent actor in Japan’s FTA politics, providing neither strong support or opposition. Given the lack of meaningful participation from civil society actors other than business and farm interests—specifically Keidanren and JA-Zenchu—the strength of these two actors have a huge impact on the direction and nature of Japan’s FTAs.

Korea: social mobilization and FTA politics until 2013 In contrast to Japan, civil society participation in FTA politics in Korea is less institutionalized and occurs outside the existing political institutions. Social mobilization of neoliberal and anti-liberal interests is an important feature of Korean civil society’s participation in FTA politics. The neoliberal coalition, or pro-FTA coalition, consists of export competing industries, right-wing NGOs, right-wing media, and right-wing politicians. The anti-neoliberal coalition, or the anti-FTA coalition, consists of import competing industries, left-wing NGOs, left-wing media, and leftwing politicians (Choi 2006, 65–79). In Korea, there are four issues that distinguish between right-wing and left-wing political orientations. These are positions toward the alliance between Korea and the U.S., the appeasement policy toward North Korea, big business (chaebol or conglomerates), and labor. Right-wing political orientation is pro-Korea–U.S. alliance, anti-appeasement policy toward North Korea, pro-chaebol (i.e., pro-business), and anti-labor. Left-wing political orientation is the opposite on all four issues.

Anti-neoliberal coalition Between the two competing coalitions, the anti-neoliberal coalition is more prominent and has a longer history. The anti-neoliberal coalition first emerged during Korea’s first FTA negotiation with Chile during President Kim Dae-jung’s administration (1998–2002). Angry farmers, militant labor unions, and anti-trade NGOs formed a united front to oppose the FTA. Among the various organizations, Junnong (Korean Peasants League), Minnochong (Korean Confederation of Trade Unions), Hannochong (Federation of Korean Trade Unions), Jungyojo (Korean Teachers and Education Workers Union), Coalition for Cultural Diversity in Moving Images, People’s Solidarity for Participatory Democracy, and Minbyun (Lawyers for a Democratic Society) spearheaded the anti-neoliberal coalition.These groups launched a campaign to disrupt and halt the government’s FTA negotiations with Chile from the very beginning. Junnong, along with Minnochong and Hannochong, mobilized their resources to stage anti-FTA rallies in front of the government complex. With the help from agricultural economists and pro-agriculture government think tanks, they mounted an intellectual attack on the very logic of negotiating an FTA with Chile. In particular, they argued that an FTA with Chile would only harm Korea’s

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uncompetitive agriculture sector in return for measly gains in Korean exports (Choi 2005a). They claimed that cheap Chilean farm products would wipe out pricey Korean products and called for a stop to the Korea–Chile FTA.Their opposition was also strategic in the sense that an FTA with Chile would set a precedent for future market openings to foreign farm products at preferential tariffs. The Korea–Chile FTA negotiations were completed on October 2002. After many months of preparation, which included a compensation package for farmers who would be adversely affected by the FTA, the new government of Korea submitted the ratification bill to the National Assembly on July 2003. However, due to vehement opposition from the anti-neoliberal coalition outside of the National Assembly and partisan division within the National Assembly, the ratification decision was delayed. The anti-neoliberal coalition organized a series of massive rallies in front of the National Assembly. In the early rounds of mass demonstrations in the summer of 2003, farmers from rural areas drove their trucks and tractors to join the rally in Seoul. Some farmers lied down in the middle of the road and some drove intentionally slowly, causing serious traffic jams in many parts of the highway (Yoon 2003). As time passed, the anti-FTA rallies became more violent. Some farmers tied themselves with chains and demanded the withdrawal of the bill.When the National Assembly attempted to vote on the ratification bill in early February of 2004, the anti-neoliberal opposition staged a massive demonstration with 10,000 farmers from all over the country on 300 buses (Lee 2004). They marched to the National Assembly and tried to cross the police line. When faced with police blockade, the protestors threw empty bottles, stones, and eggs, and wielded wood clubs.They even attempted to turn the police buses upside down. Demonstrators broke the windows of police buses and set nearby construction sites on fire. The police tried to disperse the demonstrators by shooting water cannons. Ultimately, the Korea–Chile FTA was only approved after three dramatic failed attempts. In the same time period, the anti-neoliberal coalition also mobilized to oppose the Korea–U.S. Bilateral Investment Treaty. During the Bilateral Investment Treaty negotiation, Korea’s screen quota, which mandated the screening of Korean films for 144 days a year, emerged as a deal breaker. The U.S. demanded the abolishment or substantial reduction of the screen quota, arguing that such a measure would put foreign investors at a disadvantage vis-à-vis local investors. Under the leadership of the Coalition for Cultural Diversity in Moving Images, the Korean film sector mounted a vehement opposition to any reductions in the screen quota. On June 1999, a renowned film director Lim Kwon-tack shaved his head in a defiant act of protest in downtown Seoul. He claimed, “We try to defend not just the film sector, but cultural sovereignty” (Jung 1999). He argued that the Korean government was giving up on cultural sovereignty for economic gains. Ultimately, the opposition succeeded in derailing the Korea–U.S. Bilateral Investment Treaty (Choi 2005b). When the subsequent Korean government under President Roh Moo-hyun (2003–2007) announced the launching of FTA negotiations with the U.S. in 2006, the Korean government preemptively reduced the screen quota from 144 days to 72 days. Such a move reflected

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the strategic calculation of the Korean government, which learned from the failure of the earlier Korea–U.S. Bilateral Investment Treaty talks (Choi 2006). An interesting trait of the anti-neoliberal coalition is that a strong undertone of anti-Americanism ties together the different groups. In fact, the key activists of the Coalition for Cultural Diversity in Moving Images are those who organized the anti-American rally in 2002. The anti-American rally occurred in response to an accident in which an American military vehicle killed two Korean middle school girls in 2002. Members of the anti-neoliberal coalition not only took part in the 2002 anti-American rally, but also led two other major anti-American demonstrations:The protest over the KORUS FTA in 2006–2007 and the candlelight demonstrations against the importation of U.S. beef in 2008 (Mo 2011). Korea’s anti-neoliberal coalition is able to generate strong pressure on the government due to its ability to organize massive social demonstrations and persuade public opinion. As previously mentioned, the anti-neoliberal coalition has the capacity to organize massive social demonstrations that brings together a wide array of civil society groups and also the general public. In addition, the anti-neoliberal coalition is greatly strengthened by the support of progressive media. During the KORUS FTA negotiations, major left-wing newspapers such as Hankyoreh and Kyunghyang allocated significant resources and pages to report that the KORUS FTA would threaten the sovereignty of public policymaking in areas such as public health, environment, intellectual property right, real estate, and the financial sector. The Korean government felt that the report was biased and did not portray the KORUS FTA in its entirety. The government made strong efforts to respond to progressive media outlets and correct these reports.The government also established ad-hoc high ranking committee, the KORUS Facilitation Committee, that would help spread a more positive and affirmative outlook of the KORUS FTA. The KORUS Facilitation Committee consisted of several ministers and leaders from business associations, media, and civic groups (see Chapter 4).

Neoliberal coalition The neoliberal coalition in Korea, however, did not emerge as quickly. Korean big business—for example exporters of automobile, consumer electronics, ICT (information and communications technology, including semiconductors and display), petrochemical, and shipbuilding—were slow to mobilize to express their interests in securing FTAs. Their lobbying organization, such as the Federation of Korean Industries and the Korea International Trade Association, were rather passive in pushing forward the commercial interests of their members against the cohesive anti-neoliberal coalition (Choi 2006). The neoliberal coalition emerged several years after the establishment of the anti-neoliberal coalition, only when the Korean government announced its intention to negotiate an FTA with the U.S. in 2006. The neoliberal coalition was slow to form for a number of reasons. First, in the case of Korea, the economic benefits from Korea’s earlier FTAs were not strong

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enough to justify lobbying efforts by the so-called winners of the FTAs (i.e., big businesses in export-competing industries). For example, when Korea’s FTA negotiations started with Chile, the latter accounted for only 0.3 percent of the Korean export in 1999. Singapore accounted for a slightly larger share of Korean exports at 2.2 percent in 2004, which was the starting year for the Korea–Singapore FTA negotiations. Moreover, Singapore did not impose any tariffs on Korea’s main export items such as semiconductors and mobile communications devices, due to the WTO agreement. In other words, Korean businesses were already gaining favorable access for their major exported products to Singapore. As a result, the emergence of the neoliberal coalition was delayed until the economic benefits from a particular FTA became large enough to compensate for the costs of collective action. On the other hand, the costs of FTAs were more specific and concentrated on a few easily identifiable sectors such as agriculture. Hence, the anti-neoliberal coalition was quicker to mobilize against Korea’s FTAs. In addition to the lack of economic benefits, political circumstances contributed to the reluctance of big businesses to mobilize in favor of FTAs.When Korea attempted to negotiate its first FTA with Chile, the ruling government under President Kim Dae-jung was extremely critical of big business. President Kim openly declared that corrupted big business should be dismantled (Lim 1999). Even during Korea’s FTA negotiation with Chile and the Bilateral Investment Treaty negotiation with the U.S., President Kim did not throw his weight to the Korean trade negotiators when negotiations faced fierce domestic resistance. Under this political climate, Korean big businesses were extremely reluctant to voice its advocacy for the Korea–Chile FTA and the Bilateral Investment Treaty.They were afraid of provoking the administration.

Korean civil society and the KORUS FTA The KORUS FTA negotiations, however, changed the incentives of big businesses in export competing industries. The KORUS FTA represented the biggest FTA Korea had ever negotiated. The U.S. was the single largest economy in the world. For Korean exporters of automobile, consumer electronics, semiconductor, steel, and petrochemical, securing a stable and preferential market access to the U.S. ahead of their competitors in Japan, China, and Germany, would significantly enhance Korea’s trade preemption effect (Choi 2006). Big businesses had strong incentives to mobilize in support of the KORUS FTA. Moreover, given the positive government attitude toward the KORUS FTA under President Roh Moo-hyun’s administration (2003–2007), big businesses faced more favorable political environment. With the initiation of the KORUS FTA negotiations, big businesses mobilized through the Federation of Korean Industries and the Korea International Trade Association in order to counter the anti-neoliberal coalition. Right-wing NGOs, which advocated free market principles, liberal democracy, and the rule of law, joined the coalition.The Citizens United for Better Society and the New Right Union were the most active NGOs in support of FTAs. In particular, the leaders of the Citizens United for Better Society were mostly academics and mainly economists. They

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campaigned aggressively to advance the KORUS FTA (Mo 2011). The neoliberal coalition actively engaged in public seminars with intellectuals and business sectors. The Federation of Korean Industries and the Korea International Trade Association ran massive media advertisements to counter claims and accusations by the antineoliberal coalition (Choi 2006). The neoliberal coalition argued that the KORUS FTA would benefit the Korean economy and strengthen the Korea–U.S. alliance. In particular, it accused the anti-neoliberal coalition of being led by a group of hardline anti-American ideological activists and claimed that opposing the KORUS FTA would only help North Korea and endanger the Korea–U.S. alliance. In response to the KORUS FTA negotiations, the anti-neoliberal coalition staged an even more explosive opposition movement. Sectors vulnerable to import competition with the U.S. such as agriculture, fishery, small businesses, pharmaceutical, education, medical service, and film joined the opposition. Left-wing intellectuals also joined the anti-neoliberal coalition. Left-wing media assumed the role of spreading the voice of the anti-neoliberal coalition in its resistance to the KORUS FTA. The anti-neoliberal coalition formed to oppose the KORUS FTA was called the National Front Against KORUS. The anti-neoliberal coalition raised slogans such as, “Korea will fall to the 51st State of the U.S.”; “the price of water will increase 100 times, the price of dental care will explode by 100 times, and the life of ordinary citizen will be miserable”; “the Korean agriculture will cease to survive”; and “the Korean film sector will be conquered by the mighty Hollywood” (Lee 2006; National Front Against KORUS 2006, 2007). The anti-neoliberal coalition sent their demonstrators to every negotiation venue, whether it was inside or outside of Korea. When negotiations were taking place in Korea, the opposition organized massive demonstrations of thousands of protesters. For example, during the October 2006 negotiations in Jeju, the largest island off the South Sea of Korea, thousands of trade union members from all over the country joined farmers from Jeju. By forming a human chain, they encircled the negotiation venue and even tried to break in. They threw rocks and wielded iron pipes, and the police countered with water cannons, causing several injuries (Yonhap 2006b). The Korean chief negotiator, Kim Jong-hoon, arrived in the airport of Juju and found it impossible to leave the airport by himself due to chaotic confrontations between the demonstrators and the police. Eventually, he had to be lifted out by a helicopter and was taken to the negotiation venue at night.2 In the final round of negotiations, which was held in Seoul on March 2007, a tragic incident occurred. A taxi driver by the name of Huh Se-wook, who was a member of the Taxi Trade Union and the Labor Party, burned himself in front of the negotiation venue. Despite efforts to extinguish the fire, he was fatally wounded (Oh 2007). Moreover, the National Front Against KORUS dispatched their anti-KORUS demonstrations to the Washington, DC, Seattle, and Montana, which were respectively the venues for the first, third, and fifth round of talks. The number of dispatched demonstrators was small. They rallied in front of the negotiation venues shouting anti-KORUS slogan and marched with candles. What contrasted their demonstrations in the U.S. with those in Korea was the lack of violence.

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One important caveat when discussing the motivations driving the anti-neoliberal and pro-neoliberal coalition on FTAs is that the coalitions are not entirely driven by economic rationale. Anti-Americanism underlies the anti-neoliberal coalition whereas pro-Korea–U.S. alliance sentiment underlies the neoliberal coalition. As mentioned earlier, the anti-neoliberal coalition raised concerns of becoming the “51st state of the U.S.” while the neoliberal coalition emphasized the importance of maintaining and strengthening the Korea–U.S. alliance. One telling example of the extent of anti-neoliberal coalition’s anti-Americanism is that they did not mount any significant opposition to Korea’s FTA with the EU, which was projected to affect the South Korean economy more than the KORUS FTA (Mo 2011).

Korea: failure to institutionalize civil society–state relation on trade As the discussion above illustrates, civil society actors in Korea attempt to influence trade policies outside the existing institutions of trade policymaking through social mobilizations and various media outlets. The Korean government has been slow in institutionalizing the participation of civil society in the FTA policymaking process. In the initial phase of Korea’s FTA policymaking, the government is required to hold a public hearing prior to the official announcement of launching an FTA. The purpose of the public hearing is for the government to take into account public opinion. These public hearings, however, have come under attack by the anti-neoliberal coalition as lacking transparency. During the public hearing for the KORUS FTA on February 2006, members of the anti-neoliberal coalition stormed the public hearing and halted the hearing process through physical confrontations, accusing that the government had already decided to launch the KORUS FTA regardless of the outcome of the public hearing (Yonhap 2006a). They challenged the legitimacy of the KORUS FTA, alleging that due process was not complied. The government was forced to conduct another round of public hearing on June 2006. The June public hearing, however, was muddled by continued disruptions by the National Front Against KORUS (Choi 2006). Amid chaos and confusion, the National Assembly took charge of the consultation process by requesting the government to report the negotiating process and disclose information. The antineoliberal coalition, however, refused to come forward and partake in this process. They deemed participation in the due process as surrendering to the neoliberal trade agenda. A thorny issue between the government and Korean civil society (mainly antineoliberal coalition) was information disclosure. The anti-neoliberal coalition demanded that the government disclose all information related to the on-going trade negotiations. The government rejected the request on the grounds of protecting sensitive information. Civil society criticized this response as hiding and lying (Lee 2006; National Front Against KORUS FTA 2006, 2007). During the KORUS FTA negotiations, the government was forced to disclose sensitive information due to the incessant request by the National Assembly. Some sensitive

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information disclosed only to the members of the National Assembly leaked to the anti-neoliberal coalition and then to online media. As a result, mistrust ran deep between the government and the anti-neoliberal coalition. In recent years, efforts to institutionalize civil society participation in trade policymaking has made some progress. Recognizing the necessity of hearing and reflecting the views of various stakeholders, the government and political parties came up with the Trade Treaty Act in 2011. This treaty was the result of a deal between the government and political parties in the run up to the ratification of the KORUS FTA at the Korean National Assembly. The Trade Treaty Act requires the submission of the intention of negotiating trade agreement by the government, public hearing, the filing of comments, an impact analysis of proposed trade agreement, and the establishment of a trade negotiation advisory group (Lee 2012). Through this institutional arrangement, the Trade Treaty Act of 2011 ensured more inclusive stakeholder engagement. If they chose to do so, the anti-neoliberal coalition could intentionally slow the FTA policymaking process within an institutionalized setting and make demands on the government to share information and report to civil society.The government has allocated more time to engage with civil society to get feedback in its agenda setting. Despite the Trade Treaty Act, however, the anti-neoliberal coalition still favors street demonstrations and online protests as their main tools to influence trade policies.

Korean civil society post 2013 In recent years, the anti-neoliberal coalition has been relatively passive in voicing their opposition to FTAs. Especially under the current left-leaning government of President Moon Jae-in, the anti-neoliberal coalition has been remarkably quiescent even during the renegotiation of the KORUS FTA. In 2017, President Donald Trump of the U.S. threatened to terminate the KORUS FTA, which was in its 5th year of implementation. President Trump’s threat to terminate the KORUS FTA represented an opportunity to renegotiate the KORUS FTA according to the preferences of left-leaning President Moon and the anti-neoliberal coalition. During his days as the opposition party leader, President Moon was openly critical of the KORUS FTA as infringing upon the sovereign right of the state. In particular, he demanded the abolishment of the ISDS (Ryu 2012). The anti-neoliberal coalition opposes the ISDS on the ground that it deprives the sovereign state of legitimate public policy. The position of President Moon on the ISDS has reversed. When he was the Chief of Staff for President Roh, he was supportive of the ISDS. Once he became the leader of the opposition party, he became negative of the ISDS.3 Curiously, President Moon did not pursue renegotiations to reflect his or the antineoliberal coalition’s interests. In fact, the amended KORUS FTA in the spring of 2018 came at the cost of Korea’s trade interests. Export of Korean pickup trucks to the U.S. was further delayed for another 20 years. This amendment was a major blow to the Korean auto industry and workers. Nonetheless, the news of such outcome met no outcry from the auto-workers, labor unions, and the anti-neoliberal

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coalition. During the amendment negotiations from the fall of 2017 to the spring of 2018, not a single rally was organized by the anti-neoliberal coalition. Clearly, the political orientation of the government has an important impact on the activities of the anti-neoliberal coalition. In addition, weakening domestic trade governance in Korea since 2013 is expected to strengthen the voice of protectionist domestic interests in import competing sectors. As discussed in Chapter 3, the dissolution of MOFAT and the creation of MOTIE enabled small- and medium-sized industries in import-competing manufacturing sectors (e.g., automobile parts) to exercise stronger influence over Korea’s FTA negotiation with China. As a result, the Korea–China FTA excludes most agricultural products and a significant number of manufacturing goods, such as automobiles, electronics, steel, and petrochemical products, from tariff reductions. China and Korea agreed that automobiles and auto parts would either be excluded from tariff concessions or subject to long phase-out schedules. The Korea–China FTA illustrates that protectionist domestic interests in import competing sectors are gaining grounds during the FTA policymaking process.

Conclusion The comparison of civil society participation in FTA policymaking in Japan and Korea reveal interesting differences. In Japan, civil society participation in FTA policymaking takes the form of institutionalized interest group lobby, whereas in Korea, civil society mainly attempts to influence FTA policies through large-scale social mobilizations and protests. These differences have huge implications for how protectionist interests in both countries attempt to thwart FTAs. For protectionist interests in Japan, anti-FTA rallies are largely symbolic and supplementary to the JA-Zenchu’s lobby efforts. In contrast, large-scale social mobilizations are the primary means through which the anti-neoliberal coalition resist the Korean government’s FTA agenda. Such differences also point to important distinctions in the type and nature of civil society actors involved in FTA politics. In Japan, organized business and organized farm groups are the dominant actors that respectively lead the pro- and anti-trade interests in society. Both the Keidanren and the JA-Zenchu utilize their organizational and political resources to influence FTA policymaking from within the existing political institutions. Keidanren and the JA-Zenchu are also conservative interest groups that have traditionally supported the LDP. Korean civil society actors involved in FTA politics, however, exhibit more diverse backgrounds. The anti-neoliberal coalition is an amalgamation of left-wing NGOs, left-wing unions, left-wing farm groups, left-wing politicians, and left-wing media. These groups are united not only by their protectionist interests but also by their strong anti-American sentiments. The neoliberal coalition, which is a much smaller coalition, is a grouping of right-wing NGOs, business interests, right-wing politicians, and right-wing media. While civil society participation in FTA politics has not undergone drastic changes, there are some important trends in recent years that are worth noting. Japan’s

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main protectionist force, the JA-Zenchu, faces a more hostile political environment. The strengthening cohesion of Japan’s domestic trade governance has weakened the ability of JA-Zenchu to effectively oppose FTAs from within the existing political institutions. In other words, the JA-Zenchu cannot exercise as strong a voice over FTA policymaking unless it finds new strategies and channels to pressure the government. On the other hand, pro-trade interests in Japan such as Keidanren face a more hospitable trade policymaking environment. In Korea, weakening domestic trade governance has created a more favorable environment for protectionist interests. Small- and medium-sized industries in import-competing sectors now have an ally in the main institution of trade policymaking, MOTIE.Yet, social mobilization continues to be the dominant form of civil society participation in FTA politics. And given the relative dominance of the anti-neoliberal coalition in Korea, the political orientation of the administration will have an impact on how strongly the antineoliberal coalition acts in response to the government’s FTA agenda.

Notes 1 In the Korean media and public discourse, the jargons “conservative” and “progressive” respectively refer to right-wing” and left-wing political inclinations of a group. 2 The author’s interview with Kim Jong-hoon, Seoul Korea, June 25, 2020. 3 The ISDS is the legal system where a private investor can challenge a sovereign state in order to resolve her investment-related dispute.The ISDS has an established international institutional arrangement. Most bilateral investment treaties and FTAs have adopted the ISDS as an integral part of the agreement. Korea is no exception to this trend.

References Asahi Shimbun (2013), ‘Abe Seeks Malaysia as an Ally as Japan Ends First Round of TPP Talks’, July 26, http://ajw.asahi.com/article/business/AJ201307260073 Carothers, Thomas and Barndt, William (1999–2000), ‘Civil Society’, Foreign Policy, No. 177, 18–29. https://doi.org/10.2307/1149558 Choi, Byung-il (2005a), ‘A Long and Winding Road: Ratification of Korea’s First FTA’, in Choi, Byung-il, ed. Korea and International Conflicts: Case Studies, Vol. 1, Institute for International Trade and Cooperation. Seoul: Ewha Womans University. Choi, Byung-il (2005b), ‘When Culture Meets Trade: Screen Quota Conundrum’ in Choi, Byung-il ed. Korea and International Conflicts: Case Studies,Vol. 1, Institute for International Trade and Cooperation. Seoul: Ewha Womans University. Choi, Byung-il (2006), Hanmi FTA Yeokjun Scenario [Korea-US FTA Against All Odds], Seoul: Random House Korea. JA-Zenchu (2019), ‘JA Zenchu towa' [About JA Zenchu], https://www.zenchu-ja.or.jp/ organization/ (accessed June 25, 2020). Jung, Jae-wal (1999), ‘Screen Quota Bandae, Lim Kabdok Sakbal’ [Against the Screen Quota Reduction, Director Lim Shaved His Head], Joongang Ilbo, June 25, https://mnews.joins. com/amparticle/3793706 (accessed June 25, 2020). Keidanren (2000a), ‘Joint Statement Recommending an Early Commencement of Negotiations Leading to a Free Trade Agreement Between Japan and Mexico’, Policy

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Proposals, April 10, http://www.keidanren.or.jp/english/policy/2000/016.html (accessed June 24, 2020). Keidanren (2000b), ‘Urgent Call for Active Promotion of Free Trade Agreements - Toward a New Dimension in Trade Policy’, Policy Proposals, July 18, http://www.keidanren.or.jp/ english/policy/2000/033/index.html (accessed June 24, 2020). Keidanren (2000c), ‘Expectations for Japan-Singapore Free Trade Agreement’, Policy Proposals, October 2, http://www.keidanren.or.jp/english/policy/2000/049.html (accessed June 24, 2020). Keidanren (2017), ‘Seeking the Swift Conclusion of the TPP11’, Policy Proposals, http:// www.keidanren.or.jp/en/policy/2017/085.html (accessed December 3, 2018). Kim, Yang-hee (2009), ‘Ilbon EPA ui Sanupbyul Sangpumyanghuh Shiltaewa Shisajum’ [Analysis on Commodity Concessions by Industry in Japan’s EPA], World Economy Update, KIEP,Vol. 9, No. 6. Lee, Gwang-chul (2004), ‘Nongmin 1 Manyeomyung, FTA Bijoon Bandae Gyukryul Siwi’ [Ten Thousand Farmers, Vehement Opposition Rally], Hankyung, February 9, https:// www.hankyung.com/society/article/2004020978168 (accessed June 25, 2020). Lee, Haeyoung (2006), Nathan Shikminji, Hanmi FTA [Unknown Colony Called the KORUS FTA], Seoul: Mayday. Lee, Jaemin (2012), ‘Woori Nariui Tongsang Chulcha Bupkwai Hyangwhoo Kwaje’ [Korea’s FTA Drive and Enactment of Trade Treaty Conclusion Procedure Act of 2011 -Its Legal Implications and Practical Consequences], Seoul International Law Review, Vol. 19, No. 1, 31–62. Lim, Gyu-jin (1999), ‘Kim Daetongryung, Chaebol Haeche Sonun’ [President Kim, Announcing Break-Up of Chaebol], Donga Ilbo, August 15, https://www.donga.com/ news/article/all/19990815/7462232/1 (accessed June 25, 2020). Manger, Mark S. (2009), Investing in Protection:The Politics of Preferential Trade Agreements Between North and South, Cambridge: Cambridge University Press, Kindle version. Ministry of Foreign Affairs (2006), ‘Joint Study for Enhancing Economic Relations Between Japan and Australia, Including the Feasibility or Pros and Cons of A Free Trade Agreement’, https://www.mofa.go.jp/region/asia-paci/australia/joint0612.pdf (accessed July 10, 2020). Mo, Jongryn (2011) ‘Grassroots Influences on the U.S.-ROK Alliance: The Role of Civil Society’, EAI Asia Security Initiative, Working Paper 15, http://www.eai.or.kr/data/bbs/ eng_report/201105261444564.pdf Mulgan, Aurelia G. (2000), The Politics of Agriculture in Japan, London and New York: Routledge. Mulgan, Aurelia G. (2008). ‘Japan’s FTA Politics and the Problem of Agricultural Trade Liberalisation’, Australian Journal of International Affairs,Vol. 62, No. 2, 164–178. Mulgan, Aurelia G. (2013), ‘Farmers, Agricultural Policies, and the Election’, in Pekkanen, Robert et al. (eds.). Japan Decides 2012:The Japanese General Election, Basingstoke and New York: Palgrave Macmillan, 213–224. Mulgan, Aurelia G. (2015), ‘To TPP or Not TPP: Interest Groups and Trade Policy’, in Aurelia G. Mulganand Masayoshi Honma, eds., The Political Economy of Japanese Trade Policy, Basingstoke and New York: Palgrave MacMillan, Kindle version. National Front Against KORUS (2006), Hanmi FTA Kookmin Bokoseo [KORUS Report for the People], Seoul: Greenbee. National Front Against KORUS (2007), Hanmi FTA nun Woorieu Miraega Anipnida [KORUS is not our Future], Seoul: Gang.

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Nikkei Asian Review (2014a), ‘Japanese Companies Unhappy with High Taxes, Stalled TPP Talks: Poll’, April 3, http://asia.nikkei.com/Politics-Economy/Policy-Politics/ Japanesecompanies-unhappy-with-high-taxes-stalled-TPP-talks-poll Nikkei Asian Review (2014b), ‘TPP Talks Make Farm Reform Doubly Urgent for Japan’, April 28, http://asia.nikkei.com/Politics-Economy/Policy-Politics/ TPP-talksmake-farm-​reform-doubly-urgent-for-Japan Oh, Soo-ho (2007), ‘FTA Bandae Bunshin, Huh Sewook Samang’ [KORUS Protester Huh Sewook Dead], KBS News, April 16, http://mn.kbs.co.kr/mobile/news/view. do?ncd=1338115 (accessed June 25, 2020). Pekkanen, Saadia M., Solis, Mireya and Katada, Saori N. (2007), ‘Trading Gains for Control: International Trade Forums and Japanese Economic Diplomacy’, International Studies Quarterly,Vol. 51, No. 4, 945–970. Rengo (2013), ‘Government Decides to Join TPP Free-Trade Talks’, http://www.jtuc-rengo. org/updates/index.cgi?mode=view&no=348&dir=2013/03 (accessed January 5, 2019). Rengo (2015), ‘RENGO Calls for Job Creation and Better Working Conditions Through Japan-EU EPA: RENGO & ETUC Joint Action’, http://www.jtuc-rengo.org/updates/ index.cgi?mode=view&no=362&dir=2015/05 (accessed January 5, 2019). Ryu, Sung-yul (2012), ‘Park vs Moon Hanmi FTA Jaehyupsang?’ [Park vs Moon: Renegotiation of the KORUS?], Donga Ilbo, December 11, https://www.donga.com/ news/article/all/20121211/51513828/1 (accessed July 4, 2020). Scheiner, Ethan (2006), Democracy Without Competition in Japan: Opposition Failure in One-Party Dominant State, Cambridge: Cambridge University Press. Solís, Mireya (2010),‘Can FTAs Deliver Market Liberalization in Japan? A Study on Domestic Political Determinants’, Review of International Political Economy,Vol. 17, No. 2, 209–237. The Japan Times (2013), ‘Rally Staged in Tokyo to Protest Japan’s Entry into TPP Talks’, The Japan Times, March 13, https://www.japantimes.co.jp/news/2013/03/13/national/ rally-staged-in-tokyo-to-protest-japans-entry-into-tpp-talks/#.Xx44ki2caqA (accessed July 27, 2020). Yamashita, Kazuhito (2015), ‘A First Step Toward Reform of Japan’s Agricultural Cooperative System’, http://www.nippon.com/en/currents/d00169/ (accessed July 10, 2020). Yonhap (2006a), ‘Hanmi FTA Kongchunghwi Pahaeong’ [KORUS Public Hearing Halted], February 2, https://m.yna.co.kr/view/AKR20060202004900002 (accessed January 3, 2019). Yonhap (2006b), ‘Hanmi FTA Kyukyol Bandae Siwi’ [Violent Anti-KORUS Rally], October 24, https://blog.naver.com/ebinpa/80030260963 (accessed July 1, 2020). Yoon, Chang-hee (2003),‘Han-Chile FTA Bijun Bandae Gosokdoro Nongmin Siwi Momsal’ [Opposition Rally against the Korea-Chile FTA Jams Highway], Joongang Ilbo, June 20, https://mnews.joins.com/article/189222#home (accessed June 25, 2020). Yoshimatsu, Hidetaka (2005),‘Japan’s Keidanren and Free Trade Agreements: Societal Interests and Trade Policy’, Asian Survey,Vol. 45, No. 2, 258–278. Yoshimatsu, Hidetaka (2015a), ‘Locating Japanese trade policy in an evolving regional context’, in Aurelia G. Mulgan and Masayoshi Honma, eds., The Political Economy of Japanese Trade Policy, Kindle edition. Basingstoke and New York: Palgrave MacMillan. Yoshimatsu, Hidetaka (2015b), ‘US-Japan Negotiations on the Trans-Pacific Partnership: Domestic Societal Interests and International Power Developments’, Asian Survey,Vol. 56, No. 6, 1145–1167.

6 GEOPOLITICS AND CHANGING JAPAN AND KOREA’S TRADE RELATIONS

Introduction On July 2019, the Japanese government announced that it would restrict exports of three semiconductor production materials to Korea due to security concerns.1 The announcement came amidst rising tensions between the two countries since the previous fall over wartime labor disputes. In the fall of 2018, the Korean Supreme Court had ruled in favor of Korean forced laborers in Japanese companies during World War II, requiring Japanese companies to compensate the workers. Failure to comply could result in the seizure of company assets (Choe 2018). Since July 2019, trade tensions between Japan and Korea have escalated, resulting in Japan removing Korea from its white list of preferred trading partners in August and Korea preparing to exclude Japan from its white list in September. Although political tensions have been constant features of Japan and Korea’s relations, such open outbreak of trade conflict has been rare. How do you explain the deteriorating trade relations between Japan and Korea since 2019? This chapter situates Japan and Korea’s FTA politics in the broader geopolitical context. In particular, the chapter examines recent tensions in Japan and Korea’s trade relations as well as growing divergences in Japan and Korea’s trade positions in the global trade regime. As traditional East Asian security and economic allies of the U.S., Japan and Korea have long worked to preserve cooperative economic relations despite continuing historical and political tensions. The underlying assumption shaping Japan–Korea trade relations was that they would cooperate within a broader global trade framework with the U.S. at the lead. Shifting geopolitical conditions, however, have altered the strategic priorities shaping Japan and Korea’s trade decisions, ultimately weakening the incentives of Japan and Korea’s political leaderships to cooperate on trade issues. Specifically, the rise of China as a global economic and political power has led to a divergence in the trade policies of Japan and Korea. In face

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of growing trade tensions between the U.S. and China—which has worsened under President Donald Trump’s administration—the Japanese government has decided to reinforce its ties with the U.S. against China, while the Korean government has been reluctant to take a stance against China. In particular, the Korean government, irrespective of its political orientations, has pursued a strategy of appeasing China, mindful of China’s important role in shaping inter-Korea relations (i.e., between North Korea and South Korea). Such diverging positions of Japan and Korea are most apparent in three recent events: The 2017 U.S. withdrawal from the TPP, the 2017 WTO Ministerial Conference, and the 2017 U.S. imposition of Section 232 on aluminum, steel, and auto. Moreover, the 2019 Japan–Korea trade conflict should be interpreted as a culmination of growing divergences in Japan and Korea’s trade positions in the global trade regime, which has significantly weakened the incentives of the two countries to maintain cooperative trade relations.

TPP 2013–2016: missed opportunity for U.S.–Japan–Korea economic alliance From 2013 to the end of 2016, prospects for a formal economic alliance among the U.S., Japan, and Korea rose due to the successful negotiation and conclusion of the TPP. Despite positive economic outlooks, the TPP did not succeed in bringing Japan and Korea under a mega FTA. The Japanese and Korean governments had varying strategic priorities when making the decision to join the TPP. The Japanese government sought to strengthen its alliance with the U.S., whereas the Korean government was reluctant to harm its relation with China. The TPP marks a moment of missed opportunity for the U.S., Japan, and Korea to come under a historic mega FTA.

Japan: Prime Minister Abe’s push for TPP When Prime Minister Shinzo Abe entered into office on December of 2012, he lost no time in announcing his intentions to join the TPP negotiations (Prime Minister of Japan and His Cabinet 2013). Japan’s participation in the TPP negotiations signaled a clear departure from Japan’s previous bilateral trade agreements, which were negotiated with small trade partners that did not require substantial market opening of Japan’s agricultural sector (Solís 2010, 211–212). The TPP, in contrast, promised greater trade liberalization (and deregulation) than those brought by the WTO (Terada 2019, 1042). The TPP’s 12 member states accounted for roughly 40 percent of the global economy and one third of the global trade (Prime Minister of Japan and His Cabinet 2015). Japan’s heavily protected agricultural sector would not be able to avoid market opening as before. Prime Minister Abe referred to the growing trend of FTAs among its major trade partners to justify his decision. Specifically, Prime Minister Abe pointed to Korea’s free trade agreements with the  EU and the U.S., and warned that “If Japan alone should become inwardlooking, we would have no chance of growth” (Prime Minister of Japan and His

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Cabinet 2013). Clearly, Prime Minister Abe was aware of the trade diversion effects that would arise from Korea’s FTAs with Japan’s major trade partners. Japanese companies would become uncompetitive vis-à-vis Korean companies if Japan failed to secure comparable access to the markets in the U.S. and the EU. From a geopolitical standpoint, the TPP signified an economic alliance under the U.S. leadership that would counter China’s growing economic and political influence in the Asia-Pacific region (Kawase 2017;Terada 2019, 1045–1046). In his opinion piece to The Washington Post, President Barack Obama declared that the “world has changed. The rules are changing with it. The United States, not countries like China” should write the rules of the new global trade order (Obama 2016). Clearly, the U.S. intention was not lost on Japan. Terada (2019) notes that Prime Minister Abe saw the TPP from a strategic perspective, as a means to strengthen the Japan– U.S. economic alliance and more broadly political and security alliance (Ibid., 1047). In fact,Terada (2019) argues that Prime Minister Abe saw the TPP as a way for likeminded states to strengthen economic, political, and security cooperation against countries that do not share similar values such as China (ibid.). During his visit to the U.S. in 2015, Prime Minister Abe clearly communicated his views to the U.S. congress stating that the TPP “goes far beyond just economic benefits” and that it was “also about our security”. Prime Minister Abe further declared that Japan supported the “‘rebalancing’ by the U.S. in order to enhance the peace and security of the Asia-Pacific region” (Prime Minister of Japan and His Cabinet 2015).

Korea: reluctance to join the TPP Compared to Japan’s enthusiasm for the TPP since 2013, Korea’ approach to the TPP has been lukewarm and reluctant. Even when Japan announced to join the TPP negotiations in early 2013, thereby increasing the economic stake of the TPP, Korea reaffirmed its decision to stay outside of the TPP negotiations. One major reason is that Korea did not share Japan and the U.S’s interest in promoting the TPP as an anti-China strategic alliance. From Korea’s strategic perspective, negotiating an FTA with China was a greater priority. As Korea’s largest trade and investment partner, China was a logical FTA partner for Korea. Korean businesses wanted to preempt other competitors in China by creating trade preferences through an FTA. Moreover, Korea thought that increasing trade ties with China would enhance Korea’s strategic profile in the mindset of China’s foreign policymakers vis-à-vis North Korea. After 7 years of the Korean and Chinese governments’ joint study on the feasibility of a Korea–China FTA, the Korea–China FTA negotiation was launched in May 2012 during the final year of President Lee Myungbak’s administration (2008–2012). In 2013, the newly elected incoming right-wing administration of President Park Geun-hye (2013–2016) continued to pursue the Korea–China FTA. Although joining the TPP negotiations would have enhanced the Korean leverage vis-à-vis China to demand better terms, Korean trade policymakers did not pursue such a strategy. Ultimately, on November 2014, Korea and China declared an agreement on their bilateral FTA.2

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Another important reason behind the Korean government’s reluctance to join the TPP negotiations was that the TPP essentially implied a de-facto Korea–Japan FTA. The Korean government has always been sensitive to worsening trade imbalances with Japan, especially in the automobile sector. Japanese and Korean automobile companies compete in both the domestic and global markets. Globally, Korean automobile companies have been gaining grounds against their Japanese competitors. In home market competition, however, Japanese automobile companies have been faring far better in Korea than the other way around. This discrepancy is striking considering that Japan imposes zero import tariffs on foreign automobiles, whereas Korea imposes an eight percent import tariff (Choi and Oh 2017, 250). In fact, Hyundai-Kia, Korea’s largest automobile manufacturer withdrew from Japan in 2009 after failing to penetrate the Japanese automobile market (Choi 2016). Nonetheless, when the TPP agreement was announced on October 2015, the Korean government came under enormous criticisms from the business sector and the public in general. Fearing trade diversion effects and the broader implications of being left out in the largest trade agreement in the Asia-Pacific region, the Korean government announced its intention to accede to the TPP. During her visit to the U.S. in October 2015, President Park clearly signaled the Korean government’s intention to seek membership in the TPP when she said, “‘Having already signed trade agreements with 10 of the 12 TPP member countries, I believe Korea is a natural partner for the TPP as well’” (Kang 2015). President Park did not have a chance to deliver on her words as her presidency was shortened due to her impeachment in 2017.

Weakening incentives for trade cooperation For the first time, the TPP raised the real possibility of bringing Japan and Korea together under a mega FTA, something that the two governments had failed to accomplish since the late 1990s. From 1999, the Japanese and Korean governments had initiated numerous meetings at various government levels (e.g., ministerial, cabinet-minister conferences, Japan Korea Public Private Joint Investment Promotion Council) to promote economic cooperation and discuss the possibility of a Japan– Korea FTA. And by 2000, both governments had launched studies on the effects of a Japan–Korea FTA (Yamazawa 2001, 5–6). While these efforts substantially increased private level economic cooperation, the two governments were not able to secure an FTA. The TPP essentially would serve as a de-facto Japan–Korea FTA and the two governments would be bound to cooperate under a common trade framework. From a geopolitical standpoint, joining the TPP would mark the reaffirmation of Japan and Korea’s traditional partnership with the U.S. on political and security affairs. As such, the TPP would increase the political cost of open trade conflict between Japan and Korea. By the end of 2016, however, Korea had not joined the TPP. In other words, Japan and Korea failed to secure an institutional framework that would jointly bind them to cooperate on trade issues. Instead, the two countries had already begun to diverge in terms of their trade positions in the global trade regime.

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Post-2016: diverging trade positions of Japan and Korea vis-à-vis the U.S. Shifting geopolitical conditions have had a major impact in altering the strategic priorities shaping Japan and Korea’s trade positions. In turn, diverging strategic priorities have led the Japanese and Korean political leaders to make different decisions in face of three important trade events: the U.S. withdrawal from the TPP in 2017, the U.S.–Japan–EU trilateral statement against excess capacity during the WTO Ministerial Conference in 2017, and President Trump’s imposition of import tariffs on aluminum and steel. In each of these events, the Japanese government reinforced its strategic ties to the U.S. and commitment to multilateralism, whereas the Korean government refrained from taking actions that could harm relations with China.

U.S. withdrawal from the TPP In 2017, the incoming U.S. President Trump decided to withdraw the U.S. from the TPP, which the U.S. had championed under the previous President Obama’s administration. The U.S. withdrawal from the TPP was a devastating blow to the other 11 participating countries. Despite this major setback, the other 11 countries commonly decided to salvage the TPP among themselves. As a result, the TPP minus the U.S. turned into the CPTPP. Although the TPP was saved in the form of the CPTPP, the U.S. withdrawal from the TPP significantly undermined the institutional framework that was to bring Japan and Korea together in a common economic alliance. The positions of the two countries on trade issues began to openly diverge. Initially, Prime Minister Abe did not envision a TPP without the U.S. Prime Minister Abe even flew to the U.S. right after Trump’s electoral victory in November 2016 to persuade Trump to let the U.S. remain in the TPP. Following the joint summit between Prime Minister Abe and President Trump in February 2017, however, Prime Minister Abe realized that the U.S. sought to negotiate a bilateral FTA with Japan and had no intentions to remain in the TPP. As the largest economy in the TPP after the U.S., Japan actively assumed the leadership position in bringing together the remaining 10 member states to conclude the CPTPP (Terada 2019, 1055–1058). Even without the U.S., Japan’s decision to support the CPTPP was driven by the same strategic calculation of countering China and the expectation that the U.S. would return to the TPP in the future. The CPTPP represents the highest possible trade liberalization to date. Japan reasoned that the U.S. would reconsider the economic and strategic value of the TPP in its strategic competition with China. Reflecting this reasoning, the CPTPP is essentially the same as the TPP, while leaving some elements open for negotiations when the U.S. decides to return (ibid., 1058–1059). In fact, on April 2018, a little over a year after withdrawing the U.S. from the TPP, President Trump commented on the possibility of the U.S. joining the TPP (Bradsher 2018).

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In contrast to Japan, the Korean government was hesitant to join the CPTPP. One major reason was the change in government in May 2017. Due to the impeachment of President Park, President Moon Jae-in came to power through an early election in 2017. The change in government signified a re-examination of the former administration’s decision to join the TPP. President Moon’s administration spent the whole year of 2018 brainstorming the merits and demerits of acceding to the CPTPP. A key point of contention was the trade-off between suffering possible trade diversion effects from not joining the CPTPP and the possible trade damages from forming a de-facto FTA with Japan (Nam 2019). Fearing trade diversion effects, the Korean business sector supported the idea of joining the CPTPP. According to a survey by the Korean International Trade Association, 56.2 percent of its member companies said that the effects of joining the CPTPP would be positive (Yim 2018). Economy and trade-related ministries tried to highlight the benefits from consolidating the global value chain. On the other hand, some feared the negative repercussions to the small- and medium-sized companies arising from their lack of competitiveness vis-à-vis Japanese companies. Some key policy makers of President Moon’s administration were of the view that as a de-facto Korea–Japan FTA, the CPTPP would only bolster Korea’s economic dependency on Japan (Choi 2019). Eventually, Korea’s self-imposed time frame to make a decision by the end of 2018 expired without any definitive conclusion.

2017 WTO Ministerial Conference The 11th WTO Ministerial Conference that was held in Buenos Aires in December 2017 ended in failure, raising doubts on the feasibility of reaching a multilateral trade agreement. From the beginning, the U.S. adopted a critical position toward the WTO and emerging economies such as China and India. In the opening plenary statement, the U.S. Trade Representative Robert Lighthizer openly criticized that “there is something wrong, in our view, when five of the six richest countries in the world presently claim developing country status” (Office of the United States Trade Representative 2017a). Further directing his criticism toward China, Lighthizer further emphasized the need to address “chronic over capacity” and the “influence of state-owned enterprises” (ibid.). The U.S.’s position raised observations on whether the U.S. “might be happy if the multilateral talks foundered” (The Economist 2017).While the U.S. was not cooperative in helping the WTO member states reach a multilateral agreement, it actively sought for smaller plurilateral agreements with the objective of countering China’s unfair trade practices. During the conference, Lighthizer and the EU Trade Commissioner Cecilia Malmstrom expressed support for plurilateral agreements among “like-minded” countries (Cohen and Lawder 2017). Ministers of the U.S., Japan, and the EU held a trilateral meeting, where they agreed to achieve “global level playing field” (METI 2017). Their joint statement observed that “severe excess capacity in key sectors exacerbated by government-financed and supported capacity expansion, unfair competitive conditions caused by large market-distorting subsidies and

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state  owned enterprises…are serious concerns for the proper functioning of international trade…” (Office of the United States Trade Representative 2017b). The three ministers also vowed to “enhance trilateral cooperation in the WTO and in other forums…to eliminate these and other unfair market distorting and protectionist practices by third countries” (ibid.). Although the statement did not explicitly identify China, it was clear to trade officials that the statement targeted China (Cohen and Lawder 2017). Once again, Japan clearly allied with the U.S. in the 11th WTO Ministerial Conference, sending a strong message to China that they will not tolerate China’s “unfair” trade practices. Given Korea’s position as a traditional security and economic ally of the U.S. in East Asia, and the fact that Korea was adversely affected by China’s excess capacity, the absence of Korea in the trilateral statement is noteworthy.3 A key reason is that the newly elected President Moon’s administration of Korea did not want to be seen as siding against China. The 11th WTO Ministerial Conference occurred at a time when China was imposing trade retaliations against Korea after the Korean government agreed to the deployment of THAAD (Terminal High Altitude Area Defense, anti-North Korean missile defense system) in 2016. The Chinese government retaliated by leading boycotts against Korean products including cars, entertainment, cosmetics, and retail products. Group tourism to Korea was also banned. Korean conglomerates such as Hyundai (auto), Kia (auto), Lotte (retail products), and Amore Pacific (cosmetic) saw their sales and operating profits in China cut in half (Hancock and Wang 2017). Initially, President Park’s administration adopted a non-confrontation and low-key diplomacy strategy and did not take strong actions against China. In March 2017, the Korean government finally brought the case of China’s THAAD-related trade retaliation to the WTO council meeting, taking the first step toward formal dispute settlement process. However, this process was stopped prematurely when the newly elected President Moon’s administration came into office in May 2017. President Moon’s administration decided not to seek WTO dispute settlement against China’s trade retaliation (Jang 2017). In another surprising move, President Moon’s administration conceded to a so-called “3 Nos”: No additional THAAD deployment in Korea, no participation in the U.S.–Japan–Korea anti-missile system, and no U.S.–Japan–Korea military alliance (Weekly Donga 2017). In short, the Korean government’s position during the 11th WTO Ministerial Conference was largely shaped by its position to appease China at a time of China’s trade retaliation against Korea. Moreover, the Korean government’s behavior in the 11th WTO Ministerial Conference is very similar to its position toward the CPTPP. The Korean government has been reluctant to take actions that could be interpreted as hostile or antagonistic to China.

Section 232 on aluminum, steel, and auto On April of 2017, the U.S. Department of Commerce initiated a Section 232 investigation on steel, automobile, uranium, and titanium sponge. If confirmed as affirmative, the Section 232 of the Trade Expansion Act of 1962 allows the President

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to impose import restrictions on products that are being “imported in such quantities or under such circumstances as to threaten to impair the national security” (Williams and Hammond 2019, 2). In response to the investigation report, President Trump imposed a 25 percent tariff on select steel products and a 10 percent tariff on select aluminum products on March 2018. Two months later, the Department of Commerce initiated a Section 232 investigation on automobile and automobile parts (ibid., 3). President Trump has directed the U.S. Trade Representative to negotiate with trade partners to resolve the threat from automobile and automobile parts imports. The negotiation is currently ongoing. President Trump’s usage of the Section 232 authority reflects the current administration’s protectionist trade stance and its weakened commitment to multilateral trade institutions. In fact, the last time import tariffs were imposed under Section 232 was in 1986, prior to the establishment of the World Trade Organization and its dispute settlement system (ibid., 1). As major steel exporters to the U.S., Japan and Korea were among the countries targeted by the Section 232 investigations on steel and aluminum. In 2017, Korea and Japan were respectively the 3rd and 7th largest import sources of the U.S. for steel for domestic consumption (measured in metric tons). In 2017, the U.S. imported 2.57 million tons of steel from Korea and 1.82 million tons of steel from Japan (U.S. Department of Commerce 2018a, 28). Japan and Korea were also important import sources for aluminum. In 2016, Japan was the third largest and Korea was the fifth import source of aluminum tubes and pipes (U.S. Department of Commerce 2018b, 69). For other aluminum products such as plates, sheets, strips, and foil, Japan and Korea were consistently among the top 15 largest import sources (ibid., 72, 73). However, due to large volumes of intra-industry trade, the U.S. also exports large amounts of aluminum products and actually ran a trade surplus of $126 million with Korea and $31.9 million trade surplus with Japan in 2017 (ibid., 85). Immediately after the imposition of import tariffs on steel, the Korean government negotiated an exemption with the U.S. government. Within a month, the Korean government agreed to “reduce excess steel production and excess steel capacity, and…a quota that restricts the quantity of steel articles imported into the United States from Korea” (Presidential Documents 2018, 20683). Japan, on the other hand, did not take any measures to negotiate an exemption with the U.S. on Section 232. Similar to the EU, Japan resisted negotiating a quota arrangement and instead accepted the 25 percent tariff on steel. Ironically, Japanese companies have been quite successful in applying for and obtaining tariff exemptions.4 Half a year after the steel tariffs became effective, Japanese companies have obtained tariff exemptions for over 500,000 tons of steel products, making it the country with the largest number of exemptions (Crooks and Fei 2018). The Japanese government’s response is aligned with the broader response by major trade partners of the U.S. that continued to seek trade conflict resolution through the WTO. Japan joined trade partners such as the EU, Canada, and Mexico in filing a WTO complaint against the Section 232 tariffs on June 2018 to seek consultations with the U.S. government (Fefer et al. 2019, 21–23). In this regard,

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the Korean government’s decision to seek a quota exemption is quite puzzling. The Korean government chose not to ally with Japan, the EU, and Canada in challenging Section 232 within the existing multilateral trade framework, but instead opted for a quota exemption, which violates the WTO rules. Similar to its decision on the TPP and CPTPP, the Korean government decided not to take the multilateral route and instead chose to bilaterally resolve the trade problem with the U.S.

Understanding the diverging responses of Japan and Korea The three cases examined above clearly illustrate that Japan and Korea’s trade positions have been growing farther apart in major international forums. China is a critical factor dividing the trade positions of the Japanese and Korean governments. The Korean government, irrespective of its right-wing or left-wing political orientations, has consistently resorted to an engagement policy toward China for economic and security reasons. In fact, Korea was the first major economy to grant China a “market economy status” at the WTO in 2005.5 China is Korea’s largest trading partner as well as a critical security partner for North Korea. The Korean government has pursued an engagement policy toward China hoping that deepening trade ties with China would make the Chinese government more favorably disposed toward Korea. Improved China–Korea relations, in turn, would help improve inter-Korea relations. This strategic consideration has shaped the Korean government’s major trade decisions in recent years. As noted earlier, the Korean President Park’s administration (2013–2016) pursued an FTA with China as priority, instead of using the TPP as a leverage against China. Similarly, the Korean President Moon’s administration (2017–present) was hesitant to confront China over the THAAD issue, fearing that escalating tensions would complicate inter-Korea relations. More importantly, Korea’s conflict with China over THAAD further restrained the Korean government from issuing a statement with the U.S., EU, and Japan on excess capacity at the 11th WTO Ministerial Conference. As such, the Korean government has taken repeated decisions to refrain from joining other allies of the U.S. (e.g., Japan) in containing China. The Japanese government, however, has maintained a strong position of supporting U.S. efforts to counter China’s rise in Asia. Prime Minister Abe’s decision to move forward with the TPP-11 to conclude the CPTPP and its joint statement with the U.S. and EU on excess capacity should be interpreted as measures taken to counter China. In sum, diverging strategic priorities have made it difficult for Korea to ally with the U.S. and Japan against China on trade issues. An equally important trend is the weakening of institutional ties binding Japan and Korea under a common trade regime. Unlike Japan, Korea has decided not to join the TPP and eventually the CPTPP. Even when faced with the Section 232 on steel and aluminum, the Korean government chose to resolve the problem bilaterally rather than resort to the WTO. In contrast, the Japanese government has consistently shown greater commitment to multilateralism. What this implies is

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that the institutional ties that should bind Japan and Korea under a common trade regime are also weakening. Simply put, the institutional constraints containing open trade conflict are weakening between the two countries.

The 2019 Japan–Korea trade conflict The growing gap in Japan and Korea’s trade positions in the global trade regime has had an adverse effect on Japan–Korea trade relations.The short-term catalyst for the recent Japan–Korea trade tension is the 2018 Korean Supreme Court’s rulings on victims of forced laborers in Japanese companies during the Japanese colonial rule (1910–1945). On October 2018, the Korean Supreme Court ruled in favor of four Korean men who had been forced laborers from 1941 to 1943 in the Nippon Steel Corporation. The Supreme Court’s ruling required the Japanese company to pay 100 million Korean won (about US$88,700) each to the four men. The following month, in a similar case of forced labor in the Mitsubishi Heavy Industries of Japan, the Korean Supreme Court asked the Japanese company to monetarily compensate Korean forced labor victims (Choe 2018). The Supreme Court’s rulings have huge implications for Japanese companies in Korea. First, about 300 Japanese companies accused of wartime-forced labor now face potential legal actions by other surviving victims and their relatives (Choe and Gladstone 2018). Second, Japanese companies risk having their assets seized in Korea if they fail to comply to the Supreme Court’s rulings (Choe 2018). Third, the Supreme Court’s rulings clearly signal that the “1965 Agreement on the Settlement of Problem Concerning Property and Claims and Economic Cooperation Between the Republic of Korea and Japan” that normalized relations between the two countries and settled wartime compensation issues do not prevent individual victims from seeking redress. The 2018 Korean Supreme Court’s ruling in favor of the forced labor victims is the culmination of nearly two decades of legal battle.The Nippon Steel Corporation case started in 1997 when two victims unsuccessfully sued the company in Japan. The two victims then joined two other former forced laborers to sue Nippon Steel Corporation in Korea in 2005. Once again, the outcome was unsuccessful. In 2012, however, the case was sent back to a lower court by the Korean Supreme Court, and this time, the lower court ruled in favor of the victims (Choe and Gladstone 2018). Similar rulings in favor of the forced labor victims came in 2013 and 2014 against Mitsubishi Heavy Industries and other Japanese companies. The Supreme Court’s rulings in 2018 was the final decision against appeals from Japanese companies accused of forced labor. Since then, relations between Japan and Korea have rapidly deteriorated. Prime Minister Abe’s administration has denounced the Korean court rulings and accuses it as a violation of the aforementioned 1965 Agreement and of international law. Eventually on July 1, 2019, Japan’s METI, citing national security concerns, announced new export licensing policies and procedures on the export and transfer of controlled items (i.e., three chemicals used in semiconductor production) and

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their relevant technologies to Korea. On August 2019, Japan formally removed Korea from its so-called white list of countries that benefit from streamlined export screening procedure. The decision meant that Japanese exporters would need government approval each time they export a shipment of strategic items, which include 1,115 types of parts and materials to Korea (METI 2019b). Japan’s decision to downgrade Korea’s status from the white list was a stunning and unexpected move. Japan claims that its decision was not related to the wartime labor issue and was made on national security grounds. According to the Minister of METI Hiroshige Seko, “We are reviewing our export controls with the goal ensuring national security…it is not a countermeasure (to the row)” (Japan Times 2019). According to Japan, weak oversight of export controls of Korea allowed inappropriate exports to inappropriate countries. Japan maintained that Korea’s poor export control system of dual civilian–military use materials exposed national security risk to Japan (Furukawa and Sneider 2019).6 Against these accusations, the Korean government argued that it strengthened its export control system to prevent the unintended diversion of its products for military use abroad. On July 24 2019, the Korean government sent an official rebuttal to the Japanese government, arguing that Japan’s criticism of Korea’s export control system was incorrect, unjustifiable, and a serious violation of the WTO rules (The Government of Republic of Korea 2019). On the same day, the Korean Minister of MOTIE, Sung Yun-mo, called Japan’s actions unjust and demanded their withdrawal. He insisted that Japan “confront the fact that the Japanese amendment is a short-sighted measure which, if implemented, will have a negative impact not only on Korean businesses but also Japanese ones” (Choi and Shin 2019). The Korean government swiftly pursued a WTO dispute settlement case against Japan. The Japanese government claims that the trade sanctions reflect its loss of trust in Korea’s export control system of dual-use materials and further argues that such a measure is justified under the Article 21 of the GATT, which allows securitybased exceptions. Members can regulate the import and export of materials such as military armaments and fissile materials in order to protect their key national interests.This is the very article that was invoked by the U.S. President Trump when he applied Section 232 of the Trade Expansion Act to imports of steel, aluminum, and automobile. This is also the basis for China’s trade retaliatory measures in response to the deployment of the THAAD missile defense system in Korea. Japan’s Prime Minister Abe also abruptly brought up the security exception to justify Japan’s trade restrictions on Korea. The government of Japan has not yet provided any specific evidences for Korea’s inappropriate export controls. Invoking security exception on Korea contradicts Japan’s stance earlier in 2019 on the same issue. As a third party member to the WTO dispute settlement between Ukraine and Russia concerning the latter’s restrictions on traffic transits (DS512), Japan argued that a member invoking Article XXI(b) bears the burden of showing why its measures are justified by the provision (WTO 2019, 92). What Japan did constitutes a classic example of geoeconomics—using trade

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sanctions to achieve political purpose. The security exception of the GATT has been seldom used. Article 21 is drafted as a self-declaring nature to allow a wide scope of exception. Hence, invoking security exception too often would undermine and threaten the legitimacy of the global trade system. Being keenly aware of this inherent risk, countries have excised their restraints not to abuse Article 21 of the GATT. The ruling party of Korea denounced Japan’s trade sanction as an act of economic aggression and declared to take strong actions. The Korean government also pushed hard for the localization of Japanese materials. Further, Korea announced that it would not renew the General Security of Military Information Agreement (GSOMIA), a bilateral arrangement that facilitates exchange of sensitive intelligence, including those on North Korea’s nuclear and missile programs. At the societal level, boycotts of Japanese products under the slogan of “Don’t buy, Don’t sell, Don’t travel” gained momentum. Popular Japanese distribution outlets, Japanese beers, and automobiles were the main targets of the boycott. The boycott has rendered some damages to Japan. Koreans’ expenditures on Japanese products dropped by 60 percent in August from a year earlier. According to the Japan National Tourism Organization, the number of Koreans visiting Japan dropped by 48 percent from a year earlier (Yonhap News Agency 2019). A key feature of the 2019 trade dispute is the growing mistrust between the two countries. The Japanese government unilaterally imposed export controls and removed Korea from its white list. Likewise, the Korean government responded by unilaterally declaring to terminate GSOMIA. Until around 2015, Korea’s MOTIE used to have regular policy dialogues with Japan’s METI in order to consult on matters relating to export controls, including sensitive information on specific transactions or companies of concern. Since 2016, however, the export control dialogues were effectively discontinued. Japan argues that Korea repeatedly postponed the dialogue. Responding to Japan’s claims that mutual trust has been damaged by the failure to hold meetings, the Korean government stated this had to do with scheduling conflicts of both sides. The Korean government provided a chronological list of continued communications between the two sides to schedule a seventh meeting following the sixth one hosted by Korea in June 2016 (The Government of the Republic of Korea 2019). The Korean government also noted that Japan “understood the situation”. However, this claim was flatly denied by METI as being not true (METI 2019a). On November 22, 2019, 6 hours prior to the termination of GSOMIA, President Moon’s administration reversed its decision to terminate GSOMIA. This sudden reversal was largely due to mounting pressure from the U.S., which saw the termination of GSOMIA as benefiting the rise of China (Kim and Denyer 2019).7 In terms of formality, the termination of GSOMIA was temporarily stopped under the condition that Japan would negotiate with Korea to restore Korea’s status on the whitelist. Now, the ball is in the court of Japan. And Japan’s decision will ultimately be related to the issue of forced labor.

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Conclusion The outbreak of a major trade conflict between Japan and Korea since July 2019 is the culmination of years of drifting trade relations. Since 2013, when Prime Minister Abe started to push Japan toward the TPP, Korea and Japan have missed several key opportunities for enhancing and further institutionalizing their trade relations. Japan and Korea had different approaches to the rise of China.The Korean government, right-wing and left-wing alike, has been hesitant and reluctant to align its trade interests firmly with the U.S. and Japan, thinking that such a maneuver would provoke China and would push China toward North Korea. On the other hand, the Japanese government has tried to cope with the rise of China through its alliance with the U.S. On July 23, 2019, five of the U.S.’s largest tech industry groups sent an open letter to the ministers of Japan’s METI and Korea’s trade ministry, calling for a swift resolution of the trade conflict between Japan and Korea. They were fearful that the trade conflict would lead to significant disruptions in the global value chain. In the letter, they warned: “Non-transparent and unilateral changes in export control policies can cause supply chain disruptions, delays in shipments and ultimately longterm harm to the companies that operate within and beyond your borders, and the workers they employ” (Kim 2019). The on-going trade dispute between Korea and Japan runs the risk of escalation, if both countries continue to weaponize trade for domestic political gains. The economic consequences of such an escalation are unambiguous. In the light of the deeply connected global value chains, the impact is quickly going to spill over into the region and the rest of the world. If the conflict continues without resolution, the value chain connecting Korea and Japan will undergo transformation and lead to declining reliance of Korea on Japan’s materials and parts. Eventually, trade conflict between Korea and Japan may push Korea more to the side of China, which would tip the geopolitical and geoeconomic balance in the Northeast Asia.

Notes 1 These three materials are photoresists, hydrogen fluoride, and fluorinated polyimides. 2 The Korea–China FTA as agreed on November 2014 was not a comprehensive deal. Service and investment were relegated to the second stage of negotiations, which would begin after 2 years from the implementation of the first-stage agreement. The first-stage agreement itself failed to achieve tariff elimination in substantial sectors in China (Schott, Jung, and Cimino-Issacs 2015). 3 Korean private companies compete with China’s state-owned enterprises in sectors such as cement, steel, and aluminum. 4 Companies exporting steel to the U.S. can apply for a tariff exemption through the U.S. Department of Commerce if they can demonstrate that their steel products are not manufactured in the U.S. 5 In 2001, China acceded to the WTO under the condition of ‘non-market economy’ at least for the next 15 years. The U.S., the EU, and Japan, the three largest market economies continue to refuse to grant China “market economy status”.

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6 Of the three chemicals that came under export control, hydrogen fluoride (HF) is the most sensitive. It is used not only to produce semiconductors, but also in the enrichment of uranium and production of the lethal gas sarin. Concerns have grown in Japan about roundabout exports of Japan-made hydrogen fluoride to North Korea via Korea. 7 Mark Esper, the U.S. Secretary of Defense, visited Seoul a week prior to the termination of GSOMIA, and met the Korean President and his counterpart in the Ministry of Defense. During his visit, Esper stated “The only ones who benefit from the expiration of GSOMIA and continued friction between Seoul and Tokyo are Pyongyang and Beijing” (Choe 2019).

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Office of the United States Trade Representative (2017b), ‘Joint Statement by the United States, European Union and Japan at MC11’, December 12, https://ustr.gov/about-us/ policy-offices/press-office/press-releases/2017/december/joint-statement-united-states (accessed October 6, 2019). Presidential Documents (2018), ‘Proclamation 9740 of April 30, 2018: Adjusting Imports of Steel into the United States’, FR 2018-09841, Federal Registrar Vol. 83, No. 88, May 7, pp. 20683–20705, https://www.govinfo.gov/content/pkg/FR-2018-05-07/pdf/201809841.pdf (accessed October 5, 2019). Prime Minister of Japan and His Cabinet (2013),‘Press Conference by Prime Minister Shinzo Abe’, March 15, https://japan.kantei.go.jp/96_abe/statement/201303/15kaiken_e.html (accessed October 5, 2019). Prime Minister of Japan and His Cabinet (2015), ‘Toward an Alliance of Hope-Address to a Joint Meeting of the U.S. Congress by Prime Minister Shinzo Abe’, April 29, https:// japan.kantei.go.jp/97_abe/statement/201504/uscongress.html (accessed October 20, 2019). Schott, Jeffrey J., Jung, Euijin and Cimino-Issacs, Cathleen (2015), ‘An Assessment of KoreaChina Free Trade Agreement’, Policy Brief 15-24, December, Peterson Institute for International Economics, https://www.piie.com/publications/policy-briefs/assessmentkorea-china-free-trade-agreement (accessed December 3, 2019). Solís, Mireya (2010),‘Can FTAs Deliver Market Liberalization in Japan? A Study on Domestic Political Determinants’, Review of International Political Economy,Vol. 17, No. 2, 209–237. Terada, Takashi (2019), ‘Japan and TPP/TPP-11: Opening Black Box of Domestic Political Alignment for Proactive Economic Diplomacy in Face of ‘Trump Shock,’ Pacific Review, Vol. 32, No. 6, 1041–1069. The Economist (2017), ‘The WTO Remains Stuck in its Rut-The Art of the Impossible’, The Economist, December 14, https://www.economist.com/finance-andeconomics/2017/12/14/the-wto-remains-stuck-in-its-rut (accessed October 31, 2019). The Government of the Republic of Korea (2019), ‘Regarding Japan’s Planned Amendment to Export Trade Control Order’, Letter sent to the Government of Japan, July 30, http:// english.motie.go.kr/en/pc/pressreleases/bbs/bbsView.do?bbs_cd_n=2&bbs_seq_n=725 (accessed November 15, 2019). U.S. Department of Commerce (2018a), ‘The Effect of Imports of Steel on the National Security: An Investigation Conducted Under Section 232 of the Trade Expansion Act of 1962, As Amended’, January 11, https://www.commerce.gov/sites/default/files/the_ effect_of_imports_of_steel_on_the_national_security_-_with_redactions_-_20180111. pdf (accessed October 5, 2019). U.S. Department of Commerce (2018b), ‘The Effect of Imports of Aluminum on the National Security: An Investigation Conducted Under Section 232 of the Trade Expansion Act of 1962, As Amended’, January 17, https://www.commerce.gov/sites/ default/files/the_effect_of_imports_of_aluminum_on_the_national_security_-_with_ redactions_-_20180117.pdf (accessed October 5, 2019). Weekly Donga (2017), ‘HanJung ‘THAAD 3 Bu Hapui’…‘Jabaljuk Jokswe ’ Dalahtda’ [Korea-China ‘Agree on 3 Nos on THAAD’… ‘Voluntarily Enslaved’], November 12, http://www.donga.com/news/article/all/20171112/87218625/1 (accessed October 31, 2019). Williams, Brock R. and Hammond, Keith E. (2019), ‘Section 232 Investigations: Overview and Issues for Congress’, Congressional Research Services April 2, Index No. R45249, https://crsreports.congress.gov (accessed October 2, 2019).

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7 CONCLUSION

This book’s narrative starts in the late 1990s when Japan and Korea joined the global FTA race. The late 1990s was a time when major economies were optimistic about driving economic growth through further trade liberalization. All forms of bilateral, regional, and cross-regional FTAs were proliferating in different parts of the world. As East Asian economies that heavily exported manufactured goods in heavy industries and chemicals, Japan and Korea competed in major markets such as the U.S., the EU, and China. In other words, similar economic rationale drove Japan and Korea’s pursuit of FTAs. Both Japan and Korea also faced strong domestic opposition to agricultural liberalization, making FTAs with major agricultural exporting countries politically costly. Despite these similarities, Japan and Korea’s FTAs showed interesting variations. From the late 1990s to 2012, Korea pursued high-level FTAs with major trade partners such as the U.S. and the EU while Japan pursued low-level FTAs with small trade partners. A key distinction between Korea and Japan’s FTA partners during this period was that Korea signed FTAs with major agricultural exporting countries, while Japan did the opposite. Starting in 2013, however, the FTA patterns of Japan and Korea reversed. Since then, Japan, not Korea, has been pursuing high-level FTAs even at the cost of opening up its highly protected agricultural sector (This reversed pattern between the two countries does not mean that Japan’s FTA coverage is larger than Korea. Due to Korea’s high-level FTAs with the U.S. and the EU, Korea still enjoys more trade coverage through FTAs vis-à-vis Japan). The book identified the institutions of trade policymaking and political leadership as the two factors that set Japan and Korea on different paths of FTAs at different points in time. The institutions of trade policymaking explain long-term trends in Japan and Korea’s FTAs. Specifically, centralization of trade policymaking authority and the presence of interministerial coordination mechanisms led to high-level FTAs in Japan from 2013 to 2020 and in Korea from the late 1990s to

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2012. Decentralization of trade policymaking authority and the absence of interministerial coordination mechanisms led to low-level FTAs in Japan from the late 1990s to 2012 and in Korea from 2013 to 2020. Changes in FTA patterns across time were largely due to changes in the institutions of trade policymaking in both countries. Political leadership explains the short-term changes in institutions of trade policymaking in Japan and Korea. Specifically, it explains why institutional change occurred at 2013. Moreover, the book’s analysis shows that while political leadership cannot substitute for institutions of trade policymaking, political leadership can reinforce or undermine the effects of institutions.These two factors largely shape which societal interests (i.e., pro- or anti-trade interests) play a more dominant role in the FTA policymaking process. As the book enters the final stages of writing in the summer of 2020, the world has become less hospitable to free trade. The rise of an assertive China, claiming for a new type of great power relations and aiming for technological leapfrogging through protective industrial policy, has led to open U.S.–China competition on economic and security issues. In particular, U.S.–China trade conflict has deepened under the current U.S. President Donald Trump’s administration. The U.S. has dramatically shifted away from its prior reliance on conventional trade measures and mega-FTAs to secure its economic interests. To the great dismay of Japan, President Trump withdrew the U.S. from the TPP on his first day in office. Hence, all efforts Japan had made to forge ahead in the FTA race became all of sudden less fruitful. President Trump also threatened Korea to terminate the KORUS FTA, while accusing it as an unfair deal for the American auto industry. As a result, the KORUS FTA was renegotiated and amended. So what do these new developments mean for Japan and Korea? As discussed extensively in Chapter 6, changing geopolitical conditions have adversely affected Japan–Korea trade relations and have led to divergences in the trade positions of these two countries in the global trade regime. Japan is reinforcing ties with the U.S. whereas Korea is opting to maintain favorable relations with China. Clearly, the international economic and political environment presents serious complications to Japan and Korea’s future trade policies and FTAs. Japan and Korea can no longer secure their economic future by simply signing more FTAs with their trade partners. Let’s take a closer look at ongoing and future trade issues that Japan and Korea face in this changed geopolitical environment.

U.S.–Japan trade agreement Japan’s signing of the CPTPP (entered into force on December 2018) and the Japan–EU FTA (entered into force on February 2019) had an immediate impact on U.S. exporters to Japan. U.S. exporters had to compete with the CPTPP and EU member states that had preferential access to the Japanese market. This was particularly true for U.S. farmers who faced steep tariffs in their third largest agricultural export market, while their counterparts in the CPTPP and the EU faced substantially lower tariffs on key products such as beef, pork, barley, and wheat. By the spring of 2019, U.S. farmers were already facing substantial export losses—for

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example U.S. pork export to Japan declined by 35 percent. U.S. farmers also suffered from trade diversion effects. Japanese imports of beef from TPP member states “had surged 150 percent year on year in January [of 2019]—another sign that a big shift in trading patterns was under way” (Politi 2019). U.S. farm groups and the Wine Institute sent a joint letter to the U.S. Trade Representative Robert Lighthizer stating “‘U.S. exporters of wheat, beef, pork, dairy, wine, potatoes, fruits and vegetables and other products are facing collapse of their Japanese market share as these lucrative sales are handed over to their competitors’” (Lee 2019). Under President Trump’s administration, the U.S has dramatically shifted away from its past FTA practice. Instead of pursuing high-level FTAs that aim for comprehensive tariff concessions across a wide range of sectors (e.g., goods, services, investments), the U.S. has opted to pursue bilateral trade negotiations in stages with Japan. Stage one of the negotiation resulted in the U.S.–Japan Trade Agreement that “provides for limited tariff reductions and quota expansions to improve market access” and the U.S.–Japan Digital Trade Agreement that “covers rules on digital aspects of International commerce” (Cimino-Isaacs and Williams 2020). The U.S.– Japan Trade Agreement is a mini-trade agreement that covers only 5 percent of bilateral trade between the U.S. and Japan. Tariff reductions for Japanese automobiles and automobile parts imported into the U.S., which was an issue of key interest for Japan, was not even included in the agreement. For U.S. farmers, however, the gains from the U.S.–Japan Trade Agreement are substantial since over 90 percent of U.S. food and agricultural imports into Japan will face tariff eliminations or preferential tariff rates. Tariffs on U.S. agricultural products that are imported into Japan—including sensitive products such as beef, pork, barley, and wheat—will now be lowered to the levels of the CPTPP and EU member states. For example, tariffs on U.S. beef imports into Japan will be reduced from 38.5 percent to 9 percent in 15 years (Office of the United States Trade Representative 2019). The implications of the U.S.–Japan Trade Agreement is mixed for Japan. Clearly, the trade agreement with the U.S. falls short in terms of scope and depth compared to Japan’s FTAs that have been concluded in the post 2013 period. As noted earlier, only 5 percent of bilateral trade (in value) is covered under the U.S.–Japan Trade Agreement. On the other hand, Japan has opened up its highly protected agricultural market to U.S. farmers. From Japan’s point of view, the U.S.–Japan Trade Agreement is the price for maintaining the Japan–U.S. alliance in face of China’s economic and political rise. China surpassed Japan in terms of total GDP in 2010 and aspires to replace the U.S. in Asia as the regional hegemon. By agreeing to a lopsided trade agreement that favors the U.S., Japan has signaled loudly to China that Japan is willing to put economy behind security, if such a move helps contain China.

Japan–Korea trade conflict Prospects for resolving the Japan–Korea trade conflict that began in 2019 do not seem so bright (see Chapter 6 for background details). On August 3, 2020, a local Korean court received the right to order the sales of seized Nippon Steel Corporation’s assets. This decision has now moved forward the 2018 Korean Supreme Court’s

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decision that Nippon Steel Corporation compensate four Korean men for their time of forced labor from 1941 to 1943. Nippon Steel Corporation’s assets in Korea were seized when it failed to comply with the 2018 Supreme Court’s compensation order. In response, the Japanese government is said to be considering retaliation measures such as “tougher visa requirements for South Korean visitors, temporarily recalling its ambassador for Seoul, imposing addition al tariffs on South Korean products and restricting remittances to South Korea” (The Japan Times 2020). This latest decision reflects the failure of the two countries to bridge their positions on the issue of compensating past victims of forced war-time labor. The on-going trade skirmish between Japan and Korea throws the existing regional value chain into disarray. Decades of globalization have given rise to a regional division of labor, under which Japan concentrates on the upstream product, Korea focuses on the intermediate product, and China excels on the final assembly. Japan’s weaponization of its upstream product—in this case, semiconductor production materials—pushes Korea to seek for alternative suppliers. Korea will try to localize the production of materials used in semiconductor production and also seek more secure sources from other countries. It may not be in the interest of Japan if Korea successfully comes up with rather secure upstream products outside of Japan. The increasing uncertainty due to the Japan–Korea trade friction may play to the advantage of China, which aspires to be more technologically competitive and sophisticated.

The rise of China China aspires to be a technological powerhouse in the region. On-going digital transformation is the inflection point for China’s strategic game with Korea and Japan in the region. “Made in China 2025”, unveiled in 2015, is China’s industrial policy to catch up and leapfrog in key technology sectors. The sheer size of China’s market alone—its per capita income comparable to a middle-income country— combined with public procurement is a formidable asset. Relying on its heavily subsidized state-owned enterprises, China has increased its production capacity far beyond the market demand. Japan and Korea are increasingly finding that their companies and investors are at a huge disadvantage when competing with China’s manufacturing sector in the global market. There is room for Japan and Korea to work together and develop a common template to level the playing field vis-à-vis China in trade and investment. Cooperation on trade could help Japan and Korea compete with China’s dominant manufacturing sector. The stalled Korea–Japan FTA could be the missing piece that can improve Japan and Korea’s trade position in the region. In 2003, Japan and Korea had rounds of negotiations before agreeing to suspend the talk citing irreconcilable differences (see Chapter 3 for details). In particular, Japan’s unwillingness to open its agricultural sector served as a huge impediment. Since then, Japan’s domestic trade governance and political leadership have changed in favor of trade liberalization. Currently, Japan has agreed to substantially open its agricultural sector through

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various high-level FTAs such as the Japan–Australia FTA, the Japan–EU FTA, and the CPTPP.There is still room for Japan and Korea to come to the negotiating table if both countries can overcome their historical tensions and if Korea can introduce greater cohesion in its domestic trade governance. At the present, the political leadership on both sides is not up to the challenge. However, as we have witnessed and analyzed at a great length in this book, leadership is not something fixed, but fluid. Political leadership can make huge differences in trade relations between Japan and Korea. Will the political leaders of Japan and Korea rise to the occasion to meet the trade challenges of a changing geopolitical environment?

References Cimino-Isaacs, Cathleen and Williams, Brock (2020), ‘U.S.-Japan Trade Agreement Negotiations’, Congressional Research Service, January 16, IF11120. Lee, Don (2019), ‘Trump’s Withdrawal From TPP Trade Deal is Hurting U.S. Exports to Japan’, Los Angeles Times, April 25, https://www.latimes.com/politics/la-na-pol-trumpabe-us-japan-trade-tpp-20190425-story.html (accessed August 4, 2020). Office of the United StatesTrade Representative (2019),‘FACT SHEET onAgriculture-Related Provisions of the U.S.-Japan Trade Agreement’, https://ustr.gov/index.php/about-us/ policy-offices/press-office/fact-sheets/2019/october/agriculture%E2%80%90relatedprovisions-of-us-japan-trade-agreement (accessed August 4, 2020). Politi, James (2019), ‘US Farmers Being Cut Out of Japan After TPP Withdrawal’, The Financial Times, March 19, https://www.ft.com/content/07d14730-4831-11e9-bbc96917dce3dc62 (accessed August 4, 2020). The Japan Times (2020), ‘South Korean Court Moves Closer to Sale of Japanese Steel-Maker Assets’, The Japan Times, August 4, https://www.japantimes.co.jp/news/2020/08/04/ national/south-korea-japan-nippon-steel-assets-wartime-labor/#.Xyl9zS2caqB (accessed August 4, 2020).

INDEX

Abe, Shinzo 49–52, 70–73, 101–102 agricultural liberalization 1, 17–19, 41 agricultural structural reforms 74 anti-neoliberal coalition 82, 89–91, 93–95 ‘anti-TPP rallies’ 87 automobile 3–5, 26, 27, 36, 44, 46–48, 67, 83, 84, 91, 92, 96, 103, 107, 110, 111, 119 beef 22–25, 38, 39, 50–52, 61–65, 86, 91, 118, 119 Bilateral Investment Treaty 37, 38, 90–92 civil society, Japan and Korea: Bilateral Investment Treaty 90–91; failure to institutionalize civil society 94–95; institutionalized civil society–state relations on, FTAs until 2012 82–88; interest groups 81; Keidanren and FTAs until 2013 87–88; Keidanren and JA-Zenchu, since 2013 87–88; Korean civil society and KORUS FTA 92–94; Korean civil society post 2013 95–96; ‘labor unions’, ‘JA Group’ 72–75, 82, 84–88; large-scale social mobilizations 81; social mobilization and FTA politics until 2013 89–94 Comprehensive and Progressive Agreement for Transpacific Partnership (CPTPP) 2, 3, 24, 52, 104, 105, 108, 118 Democratic Party of Japan (DPJ) governments (2009–2012) 70–72

domestic trade governance 6, 7; cohesive domestic trade governance in Korea (1990s–2012) 36–37; fragmented domestic trade governance, Japan (1990s2012) 40–41; interministerial conflicts 37; Japan–Australia FTA 52–53; Japan in (2013–2020) 48–50; Korea–Japan FTA 41–43; KORUS FTA 37–40; TPP 47–48; from TPP to CPTPP 50–52; ‘strengthening cohesion’, Japan (2013– 2020) 48–50; ‘weakening cohesion’, Korea (2013–2020) 43–45 East Asian FTA politics 12 Economic Partnership Agreement (EPA) 18, 71 European Free Trade Association (EFTA) 19 export markets 1, 4, 10, 17, 25 factor mobility 5, 8 food safety 19, 22 free trade agreements (FTAs): coordinating mechanisms 3; domestic politics and; demand-side factors, interest groups and civil society 8–11; pro-trade/antitrade interests 5; supply-side factors, institutions and political leadership 5–7, 9–10; European Union (EU) 2; highlevel FTAs 2, 3, 19–21, 24–25; low-level FTAs 2, 20–24; trade policymaking institutions 3

Index  123

Geopolitics, Japan–Korea trade relations 100–101; aluminum, steel and auto, Section 232 on 106–108; diverging responses of 108–109; economic alliance,TPP (2013–2016) 101; export control system 110; 2019 Japan–Korea trade conflict 109–111; Korea’ approach to TPP 102; U.S. withdrawal from TPP 104–105; weakening incentives, for trade cooperation 103; 2017 WTO Ministerial Conference 105–106 General Security of Military Information Agreement (GSOMIA) 111 “global snapback” safeguard mechanism 52 global trade system 1, 2 Hecksher–Olin model 4 import-competing sectors 37 interministerial coordination mechanism 41, 43 investor–state dispute system (ISDS) 68, 95 Japan and Korea: agricultural liberalization 117; FTA politics 10–11; trade tensions 12; global FTA race 117; high-level FTAs 117; interministerial coordination mechanisms 117; intra-and intercountry variations 11; low-level FTAs 117; political leadership 11, 117, 118; pro-/anti-trade interests 118; protective industrial policy 118; reversed pattern of FTAs in 3; rise of China 120–121; societal trade preferences 5; trade conflict 119–120; trade policymaking institution 117, 118; trade relations, geopolitics (see Trade relations, Japan-Korea) Japan–Mexico FTA 22, 27, 41, 83, 84, 86 Kim Dae-jung, 7, 58, 59, 64, 89, 92 Korea and Japan’s FTAs 3; agricultural liberalization 17–19; agricultural markets 17; Asian Financial Crisis of 1997 17–18; automobile trade 26, 27; economic explanations 28–30; share of food imports 20, 21; substantial agricultural liberalization 23; tariff concessions 15, 22; TPP 15, 23, 25; Uruguay Round negotiations of GATT (1986–1993) 17 Korea–U.S. FTAs (KORUS FTA) 2, 23, 24, 35–40, 60, 94, 95, 118 Lee Myung-bak 45, 59, 62, 64–69 Liberal Democratic Party (LDP) 40, 50, 69–70 lithium-ion battery market 47, 50

Ministry of Agriculture (MOA) 36–38 Ministry of Agriculture, Forestry and Fishery (MAFF) 40, 41, 43 Ministry of Economy, Trade and Industry (METI) 40 Ministry of Foreign Affairs and Trade (MOFAT) 36–38, 53, 60 Ministry of Trade, Industry and Energy (MOTIE) 48, 53, 60 Moon Jae-in 66–68, 95, 105 negative-list approach 21 neoliberal coalition 91–92 North American Free Trade Agreement (NAFTA) 4, 26–27 Office of the Minister for Trade (OMT) 36 Organization for Economic Cooperation and Development (OECD) 18 Park Geun–hye 7, 11, 29, 43, 64–66, 102 plurilateral agreements 105 “policy subgovernments” 40 political leadership and trade policymaking 3; coopting and weakening MAFF and the Norin Zoku 72–75; DPJ governments (2009–2012) 70–72; high-or low-level FTAs 58; LDP governments (Late 1990s–2008) 69–70; protectionist sectoral interests 58; reforming Japan’s farm group 74–75; Roh Moo-hyun 59–62; strengthening political leadership on FTAs 72–76; weak political leadership on FTAs, Japan (1990s–2012) 69–72 positive-list approach 22 preferential tariff rates 119 preferential trade agreements (PTAs) 4, 6, 12n1 protectionist sectoral interests 58 public opinion polls 18 reforming Japan’s farm group 74–75 rice 17, 21–24, 38, 39, 43, 46, 50, 86 Ricardo–Viner model 4 screen quota controversy 60 Stolper–Samuelson theorem 4 Terminal High Altitude Area Defense (THAAD) 67, 106, 108 trade decision-making authority 3 trade policymaking institutions. see domestic trade governance

124  Index

trade relations, Japan-Korea 100–101; aluminum, steel and auto, Section 232 on 106–108; economic alliance, TPP (2013–2016) 101; export control system 110; 2019 Japan–Korea trade conflict 109–111; Korea’ approach to TPP 102; U.S. withdrawal from TPP 104–105; weakening incentives, for trade cooperation 103; 2017 WTO Ministerial Conference 105–106

Trade Treaty Act 95 Transpacific Partnership (TPP) negotiations 2, 3, 15, 23, 25, 47–48; economic alliance, (2013–2016) 101 U.S. beef, 24, 38, 39, 61–65, 91, 119 U.S.–Japan trade agreement 118–119 World Trade Organization (WTO) 1, 107