The US-South Korea Burden-Sharing Impasse
Huawei from bad to worse; Indian budget session; Japan and Aegis Ashore
The Big One.
Extra special measures?
The cost-sharing dispute between the United States and South Korea remains unresolved one month into 2019. The last Special Measures Agreement (SMA) between the two sides expired on December 31, 2018, and the lack of a new agreement underlines yet another Trump-era challenge to U.S. alliances. According to recent reporting, the White House’s demand is that South Korea up its annual SMA contributions by about 50 percent, an amount that no South Korean president, let alone a progressive like Moon Jae-in, could stomach.
As Kyle Ferrier explained in The Diplomat this month, “The SMA outlines South Korea’s contributions to the non-personnel costs of hosting the U.S. military and has been updated every five years since 1991 to ensure Seoul shares about half of the burden.” I wrote about some of my concerns about the ongoing impasse in an article for NK News. Particularly with a second summit between U.S. President Donald J. Trump and North Korean leader Kim Jong Un scheduled for the end of February 2019, the possibility that Trump may offer up new concessions to North Korea on the alliance with South Korea grows every day that an SMA remains unconcluded.
Based on my understanding, it appears that South Korea has effectively exhausted hope that the SMA impasse can be resolved short of a summit meeting between Trump and Moon to hammer out the issue at the highest levels. In this way, the SMA issue is beginning to resemble last year’s dispute over the 2012 KORUS free trade agreement. The two leaders signed a revised version of that agreement in September 2018, addressing U.S. concerns about the goods-related provisions.
The reason the North Korea summit is a cause of concern is because of Trump’s repeated statements that he’d like to save cash on U.S. alliances. Recall that former U.S. Defense Secretary Jim Mattis’ resignation letter was issued shortly after the 10th round of failed U.S.-South Korea SMA talks and the letter greatly emphasized the importance of U.S. alliances. Without addressing South Korea, Trump, shortly after Mattis’ resignation, tweeted out the following:
In this context, it’s not unimaginable that if Kim Jong Un says that it’ll take serious modifications to the U.S. posture in South Korea to get further movement on denuclearization gestures, including possibly access to the 5 megawatt gas-graphite reactor at Yongbyon, Trump listens.
Bottom Line: The cost-sharing dispute between the United States and South Korea persists and raises the odds of an adverse outcome for the alliance at the upcoming U.S.-North Korea summit.
East Asia.
Huawei’s troubles just went from bad to worse. U.S. prosecutors announced a range of criminal charges against Huawei last week; at the same time, the U.S. submitted a formal extradition request to Canada, where the company’s CFO and founder Ren Zhengfei’s daughter Meng Wanzhou remains under house arrest. With the unsealed indictment and the extradition request, the immediate question at the top of the minds of investors and analysts is just how will all this affect the ongoing U.S.-China trade talks?
Separately, analysts of the U.S.-China relationship have written about a probable “decoupling” of their two massive economies as a result of the ongoing confrontation. That appears to be in swing with Huawei at least; the company has instructed its suppliers to shift their production lines to China to avoid further disruption. To survive in this new environment, Huawei will compartmentalize its global operations inside China and in low-income economies that may be willing to overlook national security concerns, it appears.
As the above events played out, Liu He, Xi’s envoy on trade talks with the United States, arrived in Washington, where he met with Trump and senior U.S. officials in the White House.
I suspect both the Huawei and the broader trade issues will come to a head when Trump next meets Xi. The U.S. president has taken to Twitter to announce that he and Xi will meet “in the near future” to discuss these issues. One wonders if Xi will make a hail mary plea to Trump on Huawei as he had to do with ZTE last year. (Trump has already indicated that Huawei is likely to come up in additional talks with China—despite the issue being a Justice Depatment-led matter.) As for when the two leaders might meet, it’s likely that Trump may meet Xi on the same trip to Asia that’ll include his second summit with Kim Jong Un. Per the White House, that meeting will take place toward the end of February.
Don’t Miss It: An important angle to the Huawei story in the China-Canada context is the recent sacking of John McCallum, who served as Canada’s ambassador to China, after making statements that went against the Trudeau government’s position on Meng’s arrest. (Former diplomats underline the possibility that McCallum was the victim of a targeted influence campaign in Beijing).
Primary Sources: Chinese Vice President Wang Qishan’s full speech at the World Economic Forum’s meeting in Davos, Switzerland, is worth a read for any China-watcher. Read the English translation here. On the Huawei front, this quote seems to jump out: “We need to respect the independent choices of model of technology management and of public policies made by countries, and their right to participating in the global technological governance system as equals."
Bottom Line: Tensions between the United States and China over Huawei are expected to come to a head with a Trump-Xi encounter planned for the “near future.”
South Asia.
Political news out of India in recent weeks has been squarely focused on the upcoming general elections, which will see some 800 million Indians all over the country vote in a new set of legislators. For the ruling Bharatiya Janata Party (BJP), the 2019 elections will be a greater challenge than once anticipated.
But, in the meantime, regular politics haven’t come to a halt. On the first day of February, the BJP-led government will present its interim budget. Interim budget presentations in the pre-general election period are usually written off as unimportant, but that might be a mistake. As Aman Thakker writes, a look back at the 2009 and 2014 interim budgets shows their ability to move the needle on important reforms.
What can be expected out of the 2019 session? Thakker writes:
Going into the 2019 interim budget session, the government is facing political pressure on several fronts. The specter of Prime Minister Modi’s election promises of good days to come and the creation of 10 million jobs per year continues to hang over the BJP. Moreover, farmer protests around the nation against the government are largely seen as the reason behind the BJP’s losses in three state elections in December 2018. These factors raise the likelihood of the government pursuing significant initiatives during the coming interim budget session.
Expect to see vote bank politics in full play. Ruling Indian parties, as with parties elsewhere in the world, turn to populist handouts in the period preceding major elections. The Modi government may look to shore up its share of the rural vote by raising subsidies for farm supplies, including fertilizer, and expanding food subsidies. We’ll know soon enough.
Bottom Line: The 2019 interim budget session in India should not be written off just yet.
Lessons Learned? 2019 is a tough year for Sri Lanka as it looks to service its tremendous public debt. One solution to ease the burden? Taking on additional Chinese loans, which continue to be on offer at attractive rates.
Southeast Asia.
For the first time since the May 2014 military coup, Thailand has set and announced a general election day. On March 24, 2019, Thai citizens will have an opportunity to make their political preferences heard at the polls, but that doesn’t mean the country will immediately be converted into a fully fledged democracy. Indeed, under the recent constitution, the military will retain massive political control. The Diplomat’s resident Southeast Asia watcher Prashanth Parameswaran and I discussed the importance of the Thai election declaration and reasons to temper expectations on democratic reform in a recent podcast. You can listen to that here.
Parameswaran also writes on the meaning of the elections in the broader context of Thai history at The Diplomat’s ASEAN Beat channel:
The designation of Thailand as a “democracy” in terms of regime type and the focus on contemporary developments such as the May 2014 coup that brought the current junta-led government to power can obscure the more complex realities in the country’s politics. In fact, Thailand has been no stranger to democratic disruption and political instability. Following the establishment of democracy after centuries of monarchy in 1932, Thailand has had 19 attempted coups (12 of them successful) and 20 constitutions, which is an average of one of such changes in just over four years. More fundamentally, these coups, constitutional changes, and other markers of regime transition have masked wider and more fundamental political struggles at play.
The story as always is the collision between Thailand’s “old” institutions—the monarchy and the military—and its “new” populists, the ones who thrust Thaksin Shinawatra to power in the early 2000s. The elections this year will take place amid Thailand’s chairmanship of the Association of Southeast Asian Nations, too. There’s little doubt that 2019 is set to be a big year for the Southeast Asian country.
Bottom Line: Thailand will be holding general elections after a long period of exclusive military rule, but don’t expect it to remove the military from the country’s power equations altogether.
Central Asia.
We’re barely into 2019, but in this world, that means 2020 is just around the corner. The year will be politically significant in at least one Central Asian state: Tajikistan. The country is slated to hold both presidential and parliamentary elections next year and, while no date is set so far, the country’s president, Emomali Rahmon, no doubt already has his eyes on a comfortable reelection.
“It is highly unlikely that a domestically-based opposition force would be allowed to seriously contest the presidency,” The Diplomat’s Catherine Putz observes. Indeed, the prospects for a free and fair election in Tajikistan appear remote, especially given the continued ban on parties based on religion in the country.
As Putz notes, the Tajik opposition has been on a steady downward trajectory since 2013:
The opposition is in worse shape, at least domestically, than in 2013. The IRPT (Islamic Renaissance Party of Tajikistan), after losing its only two parliamentary seats in early 2015, were by the end of the year blamed for the defection and short-lived mutiny of a deputy defense minister and declared an extremist group. The party’s leaders who were in the country at the time were rounded up and packed off to prison, convicted in sham trials (after which their lawyers were also arrested and jailed).
Still, Putz underlines the potential for surprises. At least one individual has declared his intentions to run against Rahmon—if he’s even allowed to register to run, that is. One name to watch might be Quvvatali Murodov, who’s so far a total nobody but has been talking big game about challenging Rahmon and changing the nature of Tajik politics altogether—though don’t expect to actually see him make it to the race, let alone topple Rahmon.
Bottom Line: Tajikistan’s 2020 elections are expected to deliver more of the same and keep Rahmon firmly in place.
Asia Defense.
On January 29, Japan received expected good news from the U.S. State Department regarding the future of its missile defense plans. State approved the possible sale of two Aegis Ashore batteries, the land-based variant of the Aegis combat system for defense against ballistic and cruise missiles, to Japan for an estimated $2.15 billion, the Pentagon’s Defense Security Cooperation Agency (DSCA) said in a January 29 statement. The foreign military sale is still subject to congressional approval, as my colleague Franz-Stefan Gady explained.
In 2017, Japan made a determination to pursue the land-based version of the ship-based Aegis combat system. Capable of using the very same Standard Missile 3 Block IIA/IB interceptors used on Aegis destroyers at sea, Aegis Ashore will provide Tokyo with the capability to conduct exoatmospheric midcourse intercepts of incoming medium- and intermediate-range ballistic missiles—with North Korea being the adversary in mind.
2017 was the first year that North Korea overflew Japanese territory not once, but twice, with systems it had identified as ballistic missiles designed to specifically carry thermonuclear payloads. The 1998 overflight of the Taepodong-1 no doubt had shocked Japan back in the day, but that was a satellite launcher. The Hwasong-12s that North Korea launched over Japanese territory in August and September 2017 were a notification to Tokyo that the development it had feared since 1998 had now become a reality. Accordingly, Japan is stepping up its missile defense capabilities. While the deployment is all about North Korea, new Aegis Ashore sites in Japan will be of concern to China and Russia, who fear efforts by the United States to network ballistic missile defense capabilities in Northeast Asia.
Bottom Line: The U.S. has approved a sale of Aegis Ashore components to Japan, bringing Tokyo’s future missile defense plans closer to fruition.
Don’t Miss It: In addition to his coverage of the Aegis Ashore sale approval, Gady underlines the Indian Navy’s torpedo shortcomings: “For the time being, subs of the Arihant class and Kalvari class are expected to be armed with older less effective torpedoes leaving India’s underwater force more vulnerable to enemy actions in the event of a conflict in the near future.”
Action-reaction: Pakistan has conducted two tests of its Nasr close-range ballistic missile, which is designed to deliver low-yield nuclear warheads early in a conflict with india. The development comes shortly after the release of the U.S. Missile Defense Review and after India’s conclusion last year of a deal with Russia to purchase the S-400. The second test, conducted on the 31st, emphasized ballistic missile defense in particular, with Pakistan’s Inter-Services Public Relations noting that the test was “aimed at testing the extreme inflight maneuverability, including the end flight maneuverability; capable of defeating, by assured penetration, any currently available BMD system in our neighborhood or any other system under procurement / development.”
Extras.
I spent the final few days of January in Berlin, where I had an opportunity to share my feedback on German Foreign Minister Heiko Maas’ idea for the country to lead an “alliance of multilateralists.” On the surface, the idea looks like the birth of a middle power-led coalition to hold the international status quo together as the United States steps back under the Trump presidency, but there’s a little more to the idea. I’ve published an edited and extended version of my prepared remarks on the German concept in an Asian context at The Diplomat here.
Also, don’t miss the newly published February 2019 issue of The Diplomat’s magazine. This month, we take a deep dive into “Made in China 2025” and the extent of Beijing’s technological ambitions. We also analyze the ramifications of Japan’s coming aircraft carriers, visit the deadly coal mines of Pakistan’s Balochistan province, and explore how Malaysian civil society is adjusting to its new role under a new government. And, of course, we offer a range of reporting, analysis, and opinion from across the region.
Please do feel free to reach out with comments, tips, and feedback at ankit@thediplomat.com and follow me on Twitter at @nktpnd and The Diplomat at @Diplomat_APAC.