Trade friction is the greatest concern in his attempts to head off economic issues, after six decades of transformation.
Sitting in Seoul, in one of the gleaming shopping malls that are a favourite meeting place in the summer heat, it is hard to explain Brexit. South Korean officials are incredulous that any country would inflict such disruption on itself – and break away from hard-won alliances. But as far as their own relations with Britain go, they will make the best of it, they say. They are happy to start talking about replicating with the UK the free trade deal that they have with the European Union.
There is much greater concern about US president Donald Trump. That has been fanned by revelations in Fear: Trump in the White House, the new book by Bob Woodward, the Washington Post journalist of Watergate fame. He reported that Trump nearly started a conflict with North Korea in a proposed tweet.
Trump might have withdrawn the US from its $145bn a year trade deal with South Korea if aides had not removed a letter waiting for signature from his desk, Woodward said. Trump seemed indifferent to the alliance between the US and South Korea, which rests on the twin pillars of defence and trade and which officials, since the 1950-53 Korean War, have been wont to refer to as “a bond of blood”.
Western diplomats acknowledge a fear that this new unreliability of Western allies may push South Korea quietly towards China’s embrace. No government in Seoul has wanted anything like that, but there is clearly immense public support for any action that can take the threat of conflict with North Korea away.
South Korean president Moon Jae-In managed that with his deft overtures during the Olympics and subsequent talks with North Korean leader Kim Jong-Un. But in the end, given that China has more influence over the north than any other country, it may be a prize that only Beijing can offer – in return, perhaps, for strategic investment.
All of this would be less of a concern if the economy were in better health. President Moon received much early praise for his “J-nomics”, as his team dubbed his economic proposals. These were intended to solve some of the newer problems that have beset South Korea, after six decades of an extraordinary transformation that has made it one of the phenomena of development worldwide.
In that time, it has changed itself from a poor country bearing the scars of war into an affluent, highly-educated country with an export machine (driven by steel and semiconductors) that is the envy of many. “K-Pop”, or Korean pop music, is now a global hit (where J-Pop – Japanese pop music – is not). Gangnam Style, by the singer Psy, was the first worldwide triumph, but Korean boy band BTS has just outstripped Taylor Swift in the downloads of its latest music video.
That gloss aside, economic concerns have been growing. Chinese steel has been undercutting its Korean competitors. The economy remains dominated by the big “chaebol” conglomerates, who tend to squeeze out innovation (one robot entrepreneur in Gangnam described his determination not to be bought out by Samsung, but said he was a rarity.
Lack of consumption at home has been a further worry; like many countries at a similar stage, South Korea is trying to make the transition from export-led growth to one also driven by domestic demand, but is finding it a bumpy road. Meanwhile, Koreans are aware of the failings of their high-pressure, high-stakes exam system, and the difficulty for children of ever securing jobs that repay their parents’ heavy investment in them.
Moon’s plan was, among other things, to help Koreans adjust their work-life balance, by shortening the maximum hours worked per week and raising the minimum wage. After years of right-wing governments, this was a tilt left. At first it was popular, but his ratings have dropped over the summer.
Latest figures are hardly terrible. The key semiconductor industry has been holding up exports and growth. The central bank’s growth projection for the year has been trimmed only a fraction to a still-healthy 2.9%. But the bank and economists worry that trade disputes could make that too optimistic. Their biggest fear might lie to the north; their second biggest is Washington. For them, Woodward’s book is aptly named.