Papers: Choi Jang Jip, Lawrence Krause, and Lee Hong Koo: U.S.-KOREA RELATIONS
Date: 01-09-2003
The Future of U.S.-Korean Relations: A Reflection on the So-Called Anti-American Sentiment in South Korea
Choi Jang Jip, Professor of Political Science, Korea University
1) In order to envisage a more desirable future relationship between the US and Korea, we need to analyze important issues the two countries are confronting at the present and also to reflect on the US-Korean relationship in the past. In discussing these issues it seems necessary to have a brief overview of the two countries' relations. The two countries' relationship is unique. It is particularly unique if seen from the Korean side. First of all, without the US's commitment immediately after the end of WW II, a new democratic republic in the southern half of the Korean peninsula would not have been established. During the Korean War, without another strong US commitment, the new and fragile republic would not have survived the strong-willed and methodically prepared communist aggression from the North. In short, the US was the creator of the Republic of Korea, its institution-builder and its saver. Furthermore, the US has inculcated values and norms of democracy and liberalism in Korean people.
Now according to the most recent official statistics, leaving aside tens of thousand Korean students studying presently in the US, more than two million and one hundred twenty Korean immigrants are living in the US as American citizens or as permanent residents. The American influence is prevalent not only in Korea's cultural life and education but also in the entire Korean society, with the central role played by Korea's American-educated elite. For Korea, the US is not merely a foreign country in an external relationship upon which Korea has been to a great extent dependent: the US deeply internalized into all aspects of Korea's social life, entailing psychological dependence--namely Korean society is profoundly Americanized.
2) Nonetheless, Korea's unique relationship with the US has not been always smooth and completely free of problems. The mainstream view and image of the US among the Korean people as the benevolent superpower and the savior country for Korea has been intermittently challenged by the non-mainstream or the oppositional social forces from below during the tumultuous years of political crisis and social unrest like the traumatic post-WW II years and the Kwangju Incident of 1980. Throughout the Cold War years since the establishment of the First Republic the anti-American sentiments as such have hardly been found in Korea. In those days they said that Korea was the only country in Asia where there were no anti-American movements. The Kwangju Incident in 1980 was the first serious anti-American movement, and many Koreans at the time suspected that the US policy and the US army's action were more concerned about US security interest than democracy in South Korea. Throughout the years of the democratization movement in the mid-1980s and its aftermath until the current rise of the protest movement demanding a SOFA revision, we have hardly found any kind of anti-American sentiment or movement.
3) One of the main sources of tension between the US and Korea was the anti-communist ideology that underpinned the Cold War. South Korea, with a geopolitical location in the front-line directly facing the communist North, could not help but become an anti-communist bulwark with strong US commitment. Under such circumstances it seems to have been a natural consequence that anti-communism was reinforced as the ideological hegemony. However, the problem is that the ideology has been overstretched to play the role of force not merely to restrain democracy and liberalism. The ideology in practice has been prone to discourage democracy and encourage authoritarian situation or authoritarian rule. Conversely, the authoritarian political elites made use of the ideology as the chief pretext to excuse and justify their authoritarian rule. In terms of the reason-of-state that implies that there is no democracy without good security, the anti-communist ideology and democracy are mutually supportive. In practice, however, the two factors do often contravene. It is under these circumstances that when the US focuses on a stake in the security issue, thereby having much concerns about the political stability in South Korea, the two countries' interests tend to have begun to diverge. The different concerns between the two countries make a difference in how to understand and interpret a political situation and how to weigh democracy and security. Eventually, the anti-communism as an ideology and the authoritarian rule throughout the Cold War era have to some extent retained the elective affinity. From a Korean opposition's point of view during the military authoritarian rule when the US concentrates very narrowly on a strategic and security problem, such a US policy would be in fact in favor of the authoritarian rule. This is a condition under which an anti-American sentiment or movement arises.
4) As all of us know, a recent event-- a large scale, month-long but peaceful candle- light demonstrations in South Korea's cities demanding President Bush's official apology for an accidental deaths of two Korean girls by a US army's armoured vehicle and a SOFA revision--has widely drawn an exceptionally great concern about the powerful rise of the so-called anti-Americanism in South Korea. Moreover, the timing of the event is particularly important for two reasons. One is that the event coincided with the Presidential Election and can be interpreted to have exerted a great impact on the election result. The other is that the event has been taking place in coincidence with the emergence of the North Korean nuclear issue. The coincidence of the two separate events, separate issues is making the things enormously complicated. The candlelight demonstrations are most symptomatic of how much and to what extent the Cold War type anti-communist ideology and the dominant values and norms under its tutelage have been profoundly changed. In other words, they show how the Korean people's way of thinking about the anti-communist ideology as well as about the US has changed. Seeing the Presidential Election result and the protest demonstrations now we know in retrospect that, with their combined effects, the democratization and the demise of the Cold War have brought about profound changes in the Korean people's attitude toward communist North Korea and toward the US-Korean relations. Particularly, the central force in these changes is the younger generation in the 20s and the 30s. First of all, the voting for Roh Moo-hyun, the governing party's candidate by the substantial majority of younger generations roughly in the ratio of 6 to 4 made possible his winning over Lee Hoi-chang, candidate of the conservative Grand National Party. The candlelight demonstrations led by these young people merged with Roh's election campaign. The demonstrations interpolated into the campaign process furnished the campaigns with an unusual degree of vigor and helped the younger generations heighten their political concerns, turning those who had been passive citizens bearing political apathy and abstentionist tendency into active citizens and driving them to the ballot box. The movements had once strongly surged in the course of democratization movement during the 1980s but had almost disappeared since. Now they are resurging, rallying behind the protest movements. In the last presidential elections the generational difference was the most powerful factor in determining the election outcome. It was so strong that it overshadowed the regional cleavage, so far the strongest factor in shaping Korea's party system and in determining Korea's voting patterns since the democratization in the late 1980s. In the last summer the 2002 World Cup co-hosted by Korea and Japan tapped a nationalist sentiment of younger generations with collective energy, vigor and passion, mobilizing them in a massive scale. But those energy and sentiment can hardly be clearly defined. Now these collective passions turned out to be something very important with a clearer political character.
5) What happened to the anti-communism? It is not merely among the younger generations that the anti-communism as ideology has substantially been weakened. A strong indicator about this was found in the northern electoral districts of Kangwon Province in the last presidential elections which were contiguous to DMZ. Surprisingly Mr. Roh took a solid majority in those areas composed of virtually military towns and cities. He did well too in the Kangwon Province as a whole, the most conservative area in the nation. The Cold War in South Korea began to be dismantled through President Kim Dae Jung's "Sunshine Policy". In an effort to avoid a second fratricidal war on the soil of Korean Peninsula and build a more durable peace, it has been seeking a new relationship with North Korea based on reconciliation and peaceful co-existence. This reconciliatory policy has been fiercely challenged by the conservative opposition party, Grand National Party, which, representing the conservative opinions, has unswervingly supported a more hard-line policy toward the North. Moreover, the reconciliatory policy has been facing the fate of being abandoned as President Kim Dae Jung became politically ineffective because of the dramatic downfall of his popularity in his latter phase of presidency as well as because of the strong opposition by the conservative majority in the National Assembly. It was at this juncture that the presidential election took place. Mr. William Pesek Jr. of Bloomberg News incisively characterized the last presidential election in Korea "a referendum on the North Korea question" (International Herald Tribune, December 30, 2002). I completely agree on his view. In retrospect, although President Kim Dae Jung ended up as a politically ineffective president, the legacy of his "Sunshine Policy" was unmistakable as revealed in the election outcome.
6) From my point of view, "anti-Americanism" is a very loose term. Many foreign observers as well as many Koreans like to dub the protest demonstrations an anti-American movement. Particularly, Korea's mainstream newspapers tend to exaggerate negatively. Negative because it encourages and revive a crude dichotomy highly effectual during the Cold War era, either/or way of thinking. The other pole of anti-Americanism is pro-North, pro-Kim Ilsungism, pro-Kim Jung-il. This word also implies that the side of anti-Americanism is favoring for a strong nationalist coalition, say, the South-North Korea's alliance beyond the huge ideological gap and systemic difference in opposition of the traditional South Korea-US alliance. Under these circumstance where such dichotomous discourse and the way of thinking prevail, a wide range of policy alternatives have no place and a hard-line policy toward North Korea remains an absolute given, becoming the imperative from which all other things should be derived. This is too simplistic characterization.
The current dispute between the two countries centers on two issues: the SOFA revision and the nuclear crisis generated by the combined effects of North Korea's nuclear policy and the US's hardline policy toward North Korea. These disagreements, no matter how important they are, will be able to be solved through discussions and negotiations. Why can't I as a Korean disagree on a particular policy of the US's incumbent government. Moreover, why don't I? as far as the policy is concerned with the issue of Korean people's life or death. When I disagree on it, if I participated in a demonstration one night taking place in the Kwanghwa Moon Road, am I anti-American? I don't think so. The protests were aimed at reforming the US policy, regarded by Korean people as unreasonable, concerning the law and legal proceedings governing unlawful actions committed by the US army personnels. But while considering the US as most dependable friendly country, they have never cherished a sense of antagonism against the US. When we use a word like "ism" we refer to a general attitude and behavioral patterns rather than a specific action, attitude or opinion.
7) The candlelight demonstrations and the attitudinal change of Korean people in viewing the nuclear issue reflect that a profound change in attitude toward the US took place. Two elements are essential components in the attitudinal changes: one is the self-consciousness of sovereignty, namely the sense of horizontally equal relations, and the other is the value of peace and reconciliation rather than confrontation and aggressiveness. This is a symptom that the Cold War is virtually breaking down. The Cold War has been carried out by the vertical and hierarchical relationships of international system, such as Washington-Tokyo-Seoul axis on the one hand and Moscow-Beijing-Pyongyang axis on the other, and in the manner of very belligerent and quasi-war situation. Many Korean people, particularly the majority of the younger generations do realize that the vertical US-Korean relations are no longer natural and just, the relations that had never been questioned throughout the Cold War era. Also, peace and reconciliation came up to be a prime value in the Post-Cold War and the globalization age. In this respect, the recent events are substantially different from the previous criticisms merely about the American policy toward the emphasis on the security interest. Many critics and the younger generations might ask a question why the law and the legal procedure governing the US army personnels in South Korea differ from other countries with the US army stationing like Japan and Germany. They see that the legal procedures do not follow the principle of sovereignty but the hierarchy of importance within the US-governed alliance system. For instance, the law and procedures between the US and Germany has been in operation based on not only de facto but also de jure equality of law. Those between the US and Japan are not enacted according to de jure equality but practised according to something close to the principle of de facto equality. Meanwhile, South Korea has not yet attained a status at the levels similar to either Germany or Japan. Many Koreans, in increasing numbers, think that it is absurd. This is the source of tension to an increasing degree.
8) At the present the most complicated problem is the nuclear issue. First of all, people in South Korea in support of the engagement policy toward North Korea think that North Korea's policy is a function of the US and South Korea's policy as well rather than being caused by North Korea's inborn evil character. I believe that this understanding is rational. Let me confine my discussions to the means not the ends, of the US's North Korean policy. Now many South Korean people are capable of rationally weighing which way, which means would be better in attaining peace and avoiding war. Under the present circumstances many people doubt whether the hardline policy would be really more effective rather than the reconciliatory one. If they had believed so, they wouldn't have given a majority to Roh Moo-hyun who has been in the firm support of Kim Dae Jung's policy. They believe that South Korea should be an independent actor in coping with the nuclear crisis in particular and in shaping its own fate. Becoming independent is not the product of an idea or ideology of such a leader as Kim Dae Jung and Roh Moo Hyun but by the people's pressure and demands which brought Mr. Roh to power. Contrary to conservative criticisms, becoming independent does not mean tilting toward North Korea or alienating the US. I think that the political leaders and policy makers in the South Korean governments, outgoing and incoming, are well aware how dangerous the brinkmanship diplomacy of North Korea by the means of the nuclear threats is. There is, I believe, a way, however thorny, out of the current dilemma to achieve a rational solution. That will be within the boundary in which North Korea's survival is secured and in which North Korea completely abandon the use of any kind of lethal weapon for a leverage.
9) In conclusion, the future relations between the US and South Korea will to a great extent depend on how well the two countries can keep their interests to run in parallel on the basis of democracy, justice, equal partnership and peace. The US-Korea relations are in need of change not merely to adjust themselves to the problem solving generated by a specific issue at a policy level but to accomodate themselves the structural changes at the systemic level the post-Cold War situation brought about. The post-Cold War situation has brought about profound changes in Korean people's consciousness and attitude about the two countries' relations. In accordance with this rapidly changing situation, the role of South Korean government is required to be newly defined in the context of a new North-South Korean relationship and a newly emerging international relations in the East Asian region. Under the circumstances the majority of Korean people seek to achieve an equal partnership in the US-Korean relations and also think this is reasonable and inevitable. And they aspire to play a central role in shaping a new North-South relations and also think that it will rather contribute to making the two countries' interests consistent. Now with firm confidence gained by the consolidation of democracy and economic development Korean people believe that they are capable of carrying out such an enhanced role of diplomacy in the East Asian region.
THE PARTNERSHIP BETWEEN KOREA AND THE UNITED STATES, THE NEW ECONOMY FROM A US PERSPECTIVE
BY
LAWRENCE B. KRAUSE
PROFESSOR EMERITUS
UNIVERSITY OF CALIFORNIA, SAN DIEGO
CONFERENCE ON BALANCING THE PARTNERSHIP BETWEEN KOREA AND THE UNITED STATES, EAST-WEST CENTER, HONOLULU, HAWAII
January 8, 2003
I INTRODUCTION
The challenge presented to me was to produce a forward-looking talk on the New Economy involving a partnership between Korea and the United States. This is both difficult and relieving. It is difficult because no one can foresee the future of such a complex phenomenon, but relieving because it is impossible to do research on the future. Hence, I had to rely on general knowledge and my own experience and hope for the best.
Clearly the relationship between Korea and the United States is changing as indicated by the recent election of Roh Moon Hyun as President of South Korea. Without question economic relations will be part of the changing landscape. But how will they change and how could the two countries fit together? Those are the questions addressed in this talk.
After a brief thumbnail characterization of the two economies, there is an overview of the existing linkages between the two countries, and then the main focus of the talk is addressed to corporate partnerships between Korean and US companies.
II ESSENCE OF THE KOREAN AND US ECONOMIES
An examination of the two economies reveals more differences than similarities, and that is a good start for productive economic interaction. First there is the size dimension. The South Korean population is only about one-fifth of that of the United States. The comparison of usable land is even more lop-sided as the US is continental in size while South Korea occupies only the southern part of a mountainous peninsula. South Korea has a homogeneous population and does not welcome immigration (except ethnic Koreans) whereas the US has a heterogeneous population that is constantly altered by immigration, including many ethnic Koreans – especially in Hawaii and Southern California. South Korea is a natural resource poor country and will always be heavily dependent on importing raw materials, whereas the United States has been blessed by nature.
In terms of economic development, the United States has been a rich country by global standards for some time. Its economy is mature and has been post-industrial for over thirty years. Since the mid 1990s, its growth has been driven by the New Economy with both its civilian and military production embracing high technology. The new economy is characterized by a strong rate of productivity growth driven by technological innovation, organizational changes in business, and public policy that limits the government via fiscal discipline (not always in evidence), investment in people and technologies, and opening of markets at home and abroad. The new economy is more than just information technology, although IT is obviously an important ingredient. It also involves intensive networking both within firms, and with other firms. The so-called B2B is an essential element made possible by use of the Internet. This is feasible only if two kinds of trust are present: Trust in the counter business party, and trust in the technology system. Hence partnerships between firms are essential, but difficult to arrange and sustain.
South Korea has had a rapidly transitioning economy since 1960. There are remnants still present of each of the stages gone through as seen in the composition of its exports. Korea still exports clothing from its labor-intensive period of the 1960s and early 1970s, steel and ships from its heavy and chemical industry program through the 1980s, and semiconductors and advanced electronics from its entry into the New Economy – especially after the 1997-98 Asian financial crisis. The role of the government in driving economic change has abated, but is still significant for a market-oriented economy.
III INTERNATIONAL TRADE AND ALL THAT
For most of the post-WWII period, economic relations between South Korea and the United States has been dominated by the international trade in goods. While US aid was important up until 1960, it declined into insignificance during the Park Chung Hee period. However trade has remained important throughout the period. Korea's rapid growth has been export-led and the United States has been the market most open to Koreans. The US has been the largest market for Korea and constituted 20.7% of Korean exports in 2001 (China was second with 12.1%). Trade constitutes 70% of the Korean economy. Thus trade remains critical in Korea planning for the future, As an example, the economic viability of a South Korean developed SEZ in Kaesong, North Korea is critically dependent on being able to export the output from Kaesong factories to the United States – an unlikely possibility unless the current nuclear stalemate is resolved.
From the perspective of the United States, Korea is just one among several important markets – a reflection of the difference in size. Korea accounts for 6% of US exports and 7% of US imports. The imbalance of trade that in most years yields a trade surplus for Korea which occasionally becomes an issue, but is currently being ignored by the U.S. What is important to the U.S. is the fact that Korea is a natural market for US agricultural products – an enduring comparative advantage of the US. This has led to some nasty trade disputes in the past, but have mainly been resolved. The last hurdle was a reform in the beef market in Korea, which has permitted US beef exports of all kinds to rise rapidly from a low base. From the Korean side, U.S. efforts to protect a declining steel industry have been an irritant from time to time.
Looking forward, the most important development in world markets is the proliferation of free trade areas – much more important than multilateral negotiations under the aegis of the WTO. The United States was not among the first to go down this road, but has now made the important NAFTA arrangement with Canada and Mexico, has special relations with the Caribbean countries, a free trade agreement with Israel, and has just concluded a negotiation with Chile for an FTA. The announced US intention is to form a Free Trade Area of the Americas, but this has been resisted by Brazil, the largest country in South America. While there has been some academic interest in a FTA between the US and Korea, it has not become official policy in either country. At one time the US advocated a hub and spoke system in which it would make a number of bilateral agreements with the US benefiting from being the hub.
Korea, on the other hand, has not been quick to enter FTAs and is notable in this respect along with Japan. However, Korean interest in FTAs has increased as it contemplated its international position. It feels squeezed by the ever-increasing competitiveness of China in all labor-intensive goods, and some higher tech goods as well and Japan with its demonstrated prowess in technology intensive products and services. This has made South Korea more interested in forming FTAs to improve its market opportunities. The Chinese effort to form a special economic relation with ASEAN countries is also a factor, as Asia in general has become increasingly important to Korea. The only successful Korean negotiation of a FTA to date has been with Chile. This creates the ironic phenomenon of Chile implementing the hub a spoke system itself!
Other traditional economic interchanges such as tourism have not been of great importance between the two countries. When restrictions were lifted and Koreans were permitted to travel abroad, many came to the US to see the sights and visit with relatives. However, Europe, China and Southeast Asia have become the more desired touring target of many Koreans recently. Korea has never been a major tourist destination for Americans. Korean-Americans travel to their ancestral home regularly as do some American military veterans from the Korean War, but the numbers are relatively small.
IV FOREIGN DIRECT INVESTMENT: AN AGENT FOR CHANGE
What has become increasingly important in the bilateral relations of the two countries is foreign direct investment. FDI has been recognized as the most important market phenomenon for creating economic change in a country. The United States has long been the most open country to incoming FDI as historically its original development was driven by FDI from Europe. While the US maintains some restrictions for national security purposes and as an offshoot of its anti-monopoly laws, it does not prevent even 100% foreign ownership. In recent years, the United States has attracted the most FDI of any country – in excess of $50 billion per year -- with only China as a close rival.
Koreans have made direct investments in the US. At first they were directed to marketing efforts to support exports. Subsequently, some strategic investments were made to avoid US protectionism such as POSCO's investment in steel finishing facilities in California. Koreans also invested in Baja California to take advantage of Mexico's lower wages and privileged access to the US. However, in more recent years, Korean investment with government initiatives, have been motivated to obtain technology in the US and to help small high-tech companies of Korea become acquainted with the US market. Each of the major chaebol companies made investments in Silicon Valley to stay abreast of current developments in semiconductors. Quite recently, the Korean government has sponsored overhead investment in the US in the Boston area and in California to help incubate smaller companies. In order to sustain and expand its market share, Hyundai Motors has begun the largest Korean investment ever in the United States. Korean entrepreneurs along with those of many other countries recognize the US as the cradle of many ideas for the New Economy and have made efforts to tap into them.
For many years American companies complained bitterly about the difficulty of doing business in Korea through direct investment. They were hemmed in on all sides by restrictions and regulations. Even when legally able to operate, they were often discriminated against and discourage by government action or inaction. However, all of that changed with the Asian Financial Crisis of 1997-98. President Kim Dae Jung recognized that Korea could not recover and enter the New Economy without foreign entrepreneurship. Hence, Korean laws were changed and the government reversed itself from being opposed to a foreign presence to being a supporter of the entry of foreign entrepreneurs. While there have been many bumps along the road, American firms have re-entered the automobile business in Korea, expanded their position in the financial service industry, and in general have become the largest foreign investor in Korea. Total FDI increased markedly in Korea after the Asian Financial Crisis and peaked at over $10 billion in 2000, and only declined slightly since then. FDI is clearly one of the factors that has made the Korean recovery from that crisis the most successful of any of the most seriously impacted countries.
V PARTNERSHIP BETWEEN AMERICAN AND KOREAN COMPANIES
It is well recognized that entering a new market by a foreign firm is extremely difficult if it tries it on its own. Even if regulations permit a wholly owned foreign enterprise to invest and operate in a country, firms find it hugely expensive and almost impossible to do it that way. The difficulty of being unfamiliar with the market and being seen as a foreign intruder is monumental. Difficulties appear in setting up a legal entity that conforms to the peculiarities of commercial law as practiced in the country; in purchasing land and easements, in constructing new facilities or retrofitting old ones, in obtaining permits to construct, occupy and operate, to register products, and to hire labor at the going wage. There is also a problem in hiring skilled and loyal managers. Foreign firms need to have an edge in technology and know-how if they are going to compete successfully against existing local companies. Disloyal managers can dissipate that advantage very quickly. That is why many foreign firms rely on ex-pat managers drawn from within their own organizations to a large degree. However, this is not a lasting solutions because ex pats are expensive, have to be rotated, and are often not accepted by local business.
The preferred solution to overcoming entry barriers is to have a local partner. A local partner can bring many assets to the table to make entry into the market possible. Being a local person, it may well have access to government officials and can initiate a dialogue with regulators. It can share its experience in working under the on-going legal system, its knowledge of the labor market, suggest managers, and make contacts for borrowing local currency. It also brings capital into the enterprise, but that is often not the most important ingredient. Hence the local partner is instrumental in setting up a new enterprise and seeing to its successful operation in its early years. Of course, there must be a meeting of minds as to what the objective of the enterprise is, how business is to be conducted, and how to share the equity. Experience suggests that 50-50 enterprises often lead to difficulties as new conditions arise and the interest of the partners diverge. That is why foreign firms will insist on a majority ownership.
A local partner may be essential at the beginning, but its contribution may ebb over time. Once the new enterprise becomes established it may become accepted as a legitimate player in the market and obtain a local personality. The foreign firm may find the local partner more trouble than its contribution. Earnings must be shared, allocation of expenses may become contentious, and major decisions – such as large capital expenditures – may require a super-majority vote, which may be bothersome to obtain. Hence foreign firms often choose to buy out the local partner after the new enterprise becomes established and is successful. Since both partners are well aware of the value of the firm, arriving at a fair price is not difficult and the deal can be consummated with good feelings. The foreign firm has now established itself in the market with complete management control, and the local partner has made a handsome return on its capital and efforts. This is truly a win-win situation, but the partnership has ended.
For a partnership to be sustained over time, it must not only be successful, but over time each partner must continue to make new contributions to the success of the enterprise.
Sometimes this is access to new sources of capital, or it may be assistance in diversification of markets and the like, but most often in the New Economy it is contributions in new technology. Tehnology is rapidly changing, and firms that do not stay at the cutting edge soon find that their markets are lost. A good partnership with staying power in the New Economy is one where both firms have capacity to create and improve on technology.
VI PARTNERSHIP BETWEEN AN AMERICAN AND A KOREAN FIRM: A CASE STUDY OF QUALCOMM AND SAMSUNG
To illustrate the general issues involved in an on-going partnership, I have examined the relationship between Qualcomm and Samsung Electronics. Qualcomm is headquartered in San Diego and was started in 1985 by a former professor at UCSD. It has specialized in wireless telecommunications technology and is best known as the company that pioneered Code Division Multiple Access (CDMA) technology. While CDMA is its core technology, its cash cow has been a system for keeping track of vehicles called OmniTracs and OmniExpress used in over 400,000 vehicles. While a 'step-child' within the company, the growth prospects for this product are enormous as the U.S., as a security matter, is insisting that firms maintain constant control over any shipments to the United States.
It is in cell phones that CDMA technology is primarily employed. The first generation of cell phones used analog technology, which had serious limitations. Once digital systems – which can be provided by several different technologies -- became available (the second generation), they rapidly replaced analog. The third generation (3G) improved digital technology mightily by increasing the data transmission capabilities of traffic for any given amount of spectrum, by allowing high speed data transmission able to accommodate even motion video capabilities, and facilitates the emergence of true global roaming using a single standard on common radio spectrum. All 3G development has CDMA as its core technology.
Since telecommunications were historically provided by government or by a government regulated private monopoly, wireless communications have come under comprehensive government regulations in all countries even though provided by private enterprises. The use of government regulations to institute protection for domestic companies began with 1G and led to a serious trade dispute between Japan and the United States. This carried over in spades with 2G as the European Union had regulations which required the technology that European companies developed (GSM) and Japan had its PDC technology which together captured 70% of the world market, leaving CDMA technology with a 30% share –- still over 100 million end users. As indicated above, however, 3G has elevated CDMA to the dominant position as the core technology.
Qualcomm clearly recognized that it had developed a world class technology, but that it was going to need major help from other companies to make it commercially viable. To navigate through the regulatory thicket, to provide the huge amount of capital required to make the capital investment to implement service, and to improve on the technology itself, Qualcomm needed help. It implemented a diversification strategy. It negotiated over 100 CDMA licenses in dozens of countries.
Korea was clearly of major interest to Qualcomm. Its citizens had taken massively to cell phones. It had major electronic companies that had both capital and R&D capabilities. The government had established a research facility, the Electronics and Telecommunications Research Institute (ETRI), for this industry. And Korea was not in Europe. Among Korean electronic companies, Samsung was the obvious leader and thus was of special interest for Qualcomm.
Samsung is a much older and larger enterprise than Qualcomm. It is the oldest of the original five chaebol that have long dominated the Korean economy. It had some of the same problems as other chaebol stemming from excessive control of the founding family through the chairman's office. Its worst crisis was an ill-conceived effort to enter the automobile industry. However, unlike some of the other chaebol, it adjusted rapidly to the new environment created by the Asian Financial Crisis. It jettisoned its automobile venture and concentrated on its greatest skill, which is in electronics. Samsung Electronics is diversified across four fields; products for the home, for mobile communications, for office networks, and for core components. It is a pioneer in the development of flat screens for computers and television, and is the world's largest producer of semiconductors having a 30% share of the world memory chip market. Wireless communications is a natural area of interest for Samsung, and it looked to obtain the best technology that it could implement.
Samsung and Qualcomm were drawn to one another, but negotiating a partnership was not a simple matter. Qualcomm had the technology, but Samsung controlled the gate to entry into Korea. The licensing agreement evidenced the strength of both sides. Samsung got use of CDMA and would benefit from improvements it made in the technology, and Qualcomm would earn royalties. The royalty rate was 5.25% of revenues on products sold in Korea and 5.75% on products exported. However, Qualcomm agreed to a 'most favored royalty rate' that guaranteed that Samsung would not be treated worse than other licensees, and Qualcomm also agreed that it would give 20% of royalties earned under the agreement to ETRI to further its research in this field.
The partnership has been sustained because both companies have made contributions to improving CDMA technology. 3G technology has dominated thinking in wireless communications for the last several years because of the various new and improved functions that it makes possible. Samsung was the first company anywhere to roll out 3G technology with its CDMA 2000 1x system, which it has been able to export to Indonesia. It thus demonstrated that Qualcomm's CDMA technology could be raised to the next level. Both companies were clearly benefiting from a most productive partnership.
Nevertheless, the partnership has not been all peaches and cream, and might even be characterized as contentious. First of all, in addition to Samsung, Qualcomm also negotiated CDMA agreements with other Korean companies including, LG Information Communication, Hyundai Electronics Industries, SK Telecom and Maxon Electronics. Qualcomm also contributed to a fund with the Korea Technology Investment Corporation to further new IT companies. Samsung, on its part, also negotiated agreements with many electronic companies around the world as part of its diversification strategy. This included agreements with Nokia and Ericsson in Europe. Samsung was prepared to implement any technology that would sell. Probably the most difficult issue was over royalty payments. How much value was there in Samsung's contribution to the technology? Furthermore, it was not clear to Samsung that Qualcomm was living up to its most-favored-rate commitment as the "Chinese rate" is 2.65% for domestic usage and 7% for exports. Moreover Qualcomm was taken to court by ETRI claiming that it was not receiving its due under the original royalty agreement and won a judgement of over $100 million with more to come by 2008.
Moreover, two other developments would cloud the relationship between the two companies. First of all, the Europeans were not giving up their protectionism, and to sustain their control of the 2G market, they pushed a different variety of CDMA for 3G. It is called wide CDMA or WCDMA and calls into question the CDMA2000x1 system of Sumsung. NTT DoCoMo has also endorsed the WCDMA technology. Samsung may be forced to shift its focus to WCDMA. Furthermore, the dot-com bubble burst and the billions of dollars that many firms paid at auction to obtain a piece of the radio spectrum to implement 3G technology weighed down on many of them. 3G technology that was supposed to take off like a rocket is still on the launching pad. Economic recovery in 2003 may improve its prospects, but it is yet to be proven that consumers will want to pay for the many new features that 3G technology can bring to their cell phones.
Most likely the partnership between Qualcomm and Samsung will be sustained. They both have fundamental interests in keeping it going. On the other hand, they are separate companies with a variety of interests that may not be identical or even compatible, so their relationship is bound to be buffeted by various developments which will require statesmanship on the part of both parties to keep the productive partnership on-going.
VII CONCLUSIONS
Some observers might be tempted to conclude that the relationship between Qualcomm and Samsung is identical to the overall relationship between the United States and South Korea. I would make no such claim, although there may be lessons worth noting. No matter how similar and overlapping may be the interests of two parties, if they are truly independent – meaning that they can survive without help of the other party – then there will be times when serious disputes will arise because of changed conditions which leads to a divergence of interests.
The U.S. economy is committed to a path of knowledge-based development. It must continue to be creative and live on royalties, other earnings, and capital from abroad if it is to sustain its growth of productivity and correct such structural problems as its excessive borrowing from abroad. Korea, on the other hand, has not yet become a post-industrial country. While it may contemplate a role in the New Economy such as being a logistics hub for Asia, it will have to continue to be competitive in the production and especially in the exporting of goods. Given the squeeze between China and Japan previously noted, South Korea will still require access to new technology from abroad, and the United States will remain an important provider.
What then will mark the future economic relationship between the two countries? It will most likely display growing commercial numbers along with serious disputes that will ebb and flow over time. There may be a FTA in the future, but even that would not guarantee a dispute-free relationship as evidenced by U.S.-Mexican disputes even after NAFTA was implemented. We may quarrel over pharmaceuticals and steel, over government help to failing companies, and to discrimination in bidding, but the fundamental interests of the United States and South Korea are mainly overlapping and compatible. Our diplomats will no doubt be crossing swords over market entry, but there are obviously more serious matters than trade and royalty disputes to worry about.
Reflections on a Century of Korean-American Relations
Lee Hong-Koo
In 1982, a number of conferences were convened in commemoration of the 100th Anniversary of the opening of diplomatic relations between Korea and the United States. Several volumes resulted from those meetings, and they contained a rather comprehensive review of the history and character of the relations between Korea and the United States.* Twenty years have passed since, and we are gathered here to commemorate the centennial of the Korean immigration to the United States. Analyses and assessments given in those volumes are still relevant and valid, and events and developments of the last twenty years have only accentuated the main themes.
* Sung-Joo Han, ed.,
, Asiatic Research Center, Korea University (Seoul, 1982)
한미수교 1세기의 회고와 전망 , Academy of Korean Studies, The Wilson Center (Seoul, 1983)
한미수교 100년사 , Korea National Committee Historical Sciences (Seoul, 1982)
One of the recurring themes on the Korean-American relation is that the two nations came from not simply different but almost diametrically opposed backgrounds and inclinations. Korea was not only one of the oldest nations in the world but also prided itself as preserver of the old values and institutions. The United States, on the other hand, was one of the newest nations-merely 103 years old in 1982 – and proclaimed itself a champion of new values and pioneer of new world. While the Hermit Kingdom of Korea tried to close its doors to outside world, the United States as a nation of immigrants carried the flag for an open-door policy. Given these diverse backgrounds, the Korean-American relations contained inherent elements of tension from the time of its initial encounter. The 120 year history of the Korean-American relation is, in retrospect, a remarkable success story of two radically different societies achieving a common understanding and bond through ups and downs of turbulent modern history. The Korean immigration to the United States in 1903 was perhaps a fortunate historical accident which began to provide an important adhesive element necessary for such a bond.
Perhaps a prudent way of advancing a historical overview of the Korean-American relations is to consider it as a part of general flows and dynamics in the world history instead of as a particular and unique process. To advance such an overview, we could review, first, development of the bilateral relations in the temporal dimension of modern history from the industrial revolution to the information revolution. Second, the relation between Korea and the United States can be analyzed in the spatial dimension with the balance of power as the central dynamics operating in it. If we were to juxtapose analyses from those two dimensions of time and space, we might be able to have a fairly balanced understanding of the nature of the Korean-American relations in the last 120 years.
Firs, in the temporal dimension, the United States has epitomized the global development from the industrial revolution to the information revolution. The industrial revolution had drastically changed not only the mode of wealth production but also the nature of nation-states and the relations among them. The birth of the United States was closely followed by the French Revolution, and together they have inaugurated the model of nation-states based on citizen participation. At the same time, the progress of industrialization had brought the new type of international power competition, namely the age of imperialism, The United States was the front-runner among the first wave of democracies, and Washington, Jefferson and Lincoln became household heroes around the world. In the meantime, however, as a rising great power, she had become a participant in the power games of the age of imperialism. These two conflicting elements in the United States foreign policy tended to produce mixed, if not confused results. President Theodore Roosevelt had left the White House in 1909, and Woodrow Wilson became president only four years later, but they had quite different, if not opposed philosophy in regard to the role of the United States in the world.
Until the end of the 19th century, Korea was strictly an agrarian society and had no exposure to the epochal changes brought by the industrial revolution. Although a few elites began to notice the threats of imperialistic competition in Asia in the second half of the 19th century, the Korean leadership had only a vague understanding for the character of the young American Republic and its foreign policy. Thus without an adequate understanding of the strength and objective of the United States in the new era, Korea -particularly King Kojong- was persuaded to open the country and rely on the friendship of America to protect its national interest. The diplomatic ties with the United States provided some benefits but not enough to prevent Korea from losing her independence in 1905.
In both World Was I and II, the United States played the pivotal role in securing the victory for the allied powers and found itself in commanding position to shape the post-war settlements. From the Korean perspective, the outcome of the two wars were either less than satisfactory or outright disappointing and thereby left a lingering feeling of wanting in the Korean-American Relations.
The end of the World War I was welcomed by many Koreans as a golden opportunity for Korea to recover the independence which was lost to Japan in 1910 through an annexation treaty forced upon her. Propagation of the doctrine of self determination by Woodrow Wilson excited the Koreans and raised their expectations. The March 1st Movement and subsequent formation of the Korean Provisional Government in Shanghai were concrete manifestations of such a high expectation. The failure to actualize such hopes and expectations of the Korean people in 1919 and the following three decades was not mainly due to the policy choices of the United States. After all, the period between the two world wars was marked by juxtaposition of the dynamics of the age of imperialism and the age of ideology, and the United States was not immune to such dynamics. With the Bolshevik Revolution in Russia in 1917, ideological mobilization of mass had begun to complicate the character of imperialistic competition. In a sense, the world at the end of the World War I was already destined to have another war before too long.
By ending the Second World War victoriously, the United States became among others the liberator of Korea from the colonial rule of Japan. Yet the liberation was not immediately linked to an independence, and the Koreans had to go through a series of bewildering experience. First, Korea was divided without their knowledge into two halves along the 38th parallel. Second, the United States Military Administration was set up in the southern half of the divided country. Third, there was a serious discussions among the allied powers about a possibility of imposing a trusteeship to Korea. These developments were well recorded in history, and we need not go over them again. We can note, however, the world in general and the United States in particular were not adequately prepared to cope with the dynamics of the age of ideology which was quickly jellying into a new form of global conflict, the Cold War. Furthermore, there was glaring lack of understanding in the United States towards aspiration and destiny of the Korean people.
Korea people in the twentieth century was victimized not only by the colonial force of imperialism but also by exposure to a number of mutually exclusive contending ideologies. This was price to pay for not having an enlightened leadership and keeping the country closed to the outside world and thereby dwelling in a false security based on ignorance. The Korean independence movement was divided into several groups along the lines of ideologies each group had embraced in constructing their blueprints for nation-building. These ideological divisions persisted in the period following the liberation from the Japanese rule and almost naturally fitted into the global confrontation of the Cold War era. Establishment of two separate states in Korea in 1948 signaled the fact that the Korean peninsula became one of the most volatile frontiers of the Cold War. In retrospect, the outbreak of the Korea War in 1950 was also a predestined course of events, given the intensification of the East-West confrontation in Europe and the victory of the communist over the nationalist in China in 1949. In the Korean War, the United States as the captain of the Free World paid a tremendous sacrifice – 34,000 dead in the battlefields – to defend the freedom and the very existence of South Korea and thereby forging a strong Korea-American alliance. In fact, this year marks not only the centennial of the Korean immigration to the United States but also the 50th anniversary of the Korea-United States Mutual Defense Treaty.
While the world as a whole and the Korean-American relations in it have been constantly going through changes, geography in the spatial dimension remained unchanged. The simple geographical fact that Korea is surrounded by three neighbors – China, Japan and Russia – and all three are much bigger than Korea furnished a constant base in shaping the international relations in the Northeast Asia. Given the permanence of geography, geopolitical considerations played a key role in foreign policy choices of every notion including Korea and the United States. Perhaps the most influential conceptual frame in geopolitical considerations on the part of many nations is the idea of balance-of-power, and the Korean-American relations of the past 120 years would not be fully understood apart from such notion of balance-of-power.
A foreign policy guideline for Korea suggested by a Chinese scholar-diplomat, Huang Tsun-hsien, in 1880 is a prime example of the balance-of-power notion entertained by the Korean leadership of the time: "Remain friendly with China, strengthen ties with Japan, and form an alliance with the United States." *Huang's suggestion was of course based on an alarmist position against the growing strength of Russia. Such a notion of strategy for national security seemed to be rather prevalent at the time. For example, when Li Hung-chang, a powerful Chinese leader, recommend Korean leaders to come to terms with the United States, he had purportedly the dual purpose of "playing one barbarian (i.e., the United States) off against the other (i.e., Russia)" and to neutralize the monopolistic Japanese position after 1876.
* A good survey of the early Korean-American relation can be formed Young Ick lew, "The Shufeldt Treaty and Early Korean-American Interaction, 1882-1905," After One Hundreds Years, Sung-Joo Han, ed.(Seoul, Korea University, 1982)
As noted earlier, the United States in the age of imperialism was an active participant in the international power politics of the time and therefore subjected to the prevailing notion of the balance-of-power. The united States had been trying to protect her national interest in Asia by preventing any single power becoming a predominant or hegemonic power in the region. As far as nurturing a bilateral relations with Korea was concerned, it had only secondary importance. Only three years after the Shufeldt Treaty and the opening of diplomatic relations, the rank of the American legation in Seoul was downgraded, reflecting the margined interest of the United States for Korea. In spite of the rather positive potential in the "good offices" clause of the treaty, the United States adhered to an "impartial and strict" neutral in the Sisso-Japanese War and a position of disinterested bystander in the Russo-Japanese War of 1905. Theodore Roosevelt was the leading figure in shaping the American policy of checking the Russian advance with a Japanese cooperation which can be rightly characterized as an American opportunism for a balance of power in Asia in the age of imperialism. This American tendency to give overwhelming priority to the relations with major powers and pay minimum attention to a smaller country like Korea had persisted even to the final stage of the World War II and allowed undue and excessive rewards to the Soviet Union, thereby creating a long-lasting problems of significant magnitude. The agreement to divide Korea along the 38th parallel and to let the Soviet Army to occupy the northern half of Korea was the classic example of high cost for short sight a nation has to pay.
With the end of the Second World War, the age of imperialism came to an end and the age of ideology was transformed into the Cold War between the East and West. The United States became the champion of the Free World and helped the launching of the Republic of Korea in the southern half of Korea and defended it during the Korea War paying great sacrifice. In the matter of a mere hundred years, the United States had won a triple crown in her relation with Korea as the "opener"(1982), "liberator"(1945) and "defender"(1950). Yet these accolades should not overshadow certain abnormalities residing in the Korean-American relations, to be more exact, the relations between the Republic of Korea and the United States.
First of all, Korea is a truly exceptional case in the modern world in the sense that altogether ninety two years out of last hundred years have been spent as either a foreign colony (35 years) or a divided nation (57 years). Therefore bilateral relations with Korea had to be inherently tense and difficult, and the Korean-American relation is not an exception. Second of all, the relationship between Korea and the United States has been largely asymmetrical in terms of military, economic and cultural strength. For many years, the relationship could be characterized as provider-recipient and patron-client. Such one-directional relation cannot foster satisfactorily a high degree of mutual confidence needed between the two allied nations. It has been pointed out rather frequently that there emerged a serious gap between Korea and the United States in terms of mutual perceptions and expectations, and those diagnoses seem to be valid. The challenges facing the two nations today is how to avoid these gaps from becoming legacy of distrust and to engage in a common search for better understanding and fresh vision.
Both Korea and the United States in the post Cold War era should make conscious effort to understand the changed status of each other. Korea no longer is a poor, and helpless nation of fifty years ago. In a single generation of industrialization campaign, Korea has grown from less than 100 dollar per capita GDP to 10,000 dollar – a hundred fold increase – and became the twelfth largest economy in the world. At the same time, Korea has achieved a successful transition to and consolidation of democracy. In short, Korea has attained a sufficient national strength to be a full and equal partner of the United States. Yet the Republic of Korea still remains as the last chapter to be written in the history of the Cold War and struggles along with the daily pains of confrontation with North Korea. It is therefore inevitable that the Korea-United States alliance is heavily colored by such confrontation.
The end of the Cold War has elevated the United States to the unprecedented position of single global superpower. As such, the United States has to deal with numerous problems around the world and , consequently, has to spread its attention and resources rather thinly around the world. Furthermore, the September 11 attack had dramatically exhibited the vulnerability of the United States as superpower, and it has resulted in complex state of mind on the part of the American people and their leadership. Only through a major effort to understand these developments in America, Korea could make a headway in providing a fresh energy to the Korea-United States alliance.
With the end of the Cold War, the heydays of the age of ideology is gone. Nevertheless, it might be useful to reconsider the dynamics operating between democracy and nationalism. While it is true that no war had broken out between democracies, the operating patterns of stable democracies around the world seem to show that democracy in itself doesn't automatically tie itself to internationalism. Depending upon events and circumstances, a democratic state can mobilize a strong nationalistic sentiment and choose policies accordingly. In the case of Korea, the democracy movement of 1970s and 1980s was heavily saturated with nationalism, and subsequently, furnished a ground for critical review of the Korean-American relations. In the case of the United States on the other hand, the September 11 attack had ignited a new nationalistic fervor, and an intense debate is going on as to which is the better way in combating the threats to America between unilateralism and multilateralism. The future of the Korea-United States relations will be partly influenced by the dynamics of nationalism in the two friendly democracies.
As we noted earlier, geography doesn't change; therefore, it might be useful to search a new vision for the Korea-United States relations through geopolitical perspective. The United States has and will continue to have a vital interest in keeping the Northeast Asia free from a single power dominance, be it China, Japan or Russia. The power and influence of the United States in the region is substantial, but the United States remains to be an "outside power". To achieve a stable balance of power in Asia, the United States needs a reliable "inside power" as a partner. Historical experience has shown that to make a major power in the region the American partner tended to disrupt the balancer of power itself. In the first hundred years of the Korean-American relation, Korea was not considered to be sufficiently equipped to play the role of an "inside balancer" in the region. As we come to the centennial of the Korean immigration to the United States in the first decade of the new millennium, we sense a good prospect for developing a productive inside-outside balancer relationship between Korea and the United States which will make a major contribution toward a peaceful Pacific Century.