hankyoreh

China’s economic measures in retaliation for THAAD deployment

China is expanding trade sanctions, including a ban on chartered plane travel to South Korea, in what is believed to be a form of economic retaliation against Seoul’s decision last year on deploying a Terminal High Altitude Area Defense (THAAD) missile defense system.

With Seoul signaling its readiness to hit back by raising the retaliation as a trade issue, the ostensibly diplomatic and security issue of THAAD is rapidly turning into a source of economic conflict between the two sides.

South Korea and China are planning to hold enforcement committee meetings in various areas in Beijing between Jan. 9 and 13, including their first joint FTA committee, non-tariff measure working group, service and investment committee, and economic cooperation committee. The joint committee meeting on Jan. 13 - the first since the two sides‘ FTA went into effect in Dec. 2015 - is drawing more attention now amid growing diplomatic and economic conflict between Seoul and Beijing, including the latter’s surprise year-end decision to ban chartered plane flights to South Korea and a unilateral South Korea visit by Chinese Foreign Ministry Asia affairs department deputy director-general Chen Hai to make threatening remarks about THAAD.

On the surface, the meetings are a setting for the two sides to check up on various areas of FTA enforcement. In actuality, they are very likely to include bilateral trade diplomacy negotiations over the THAAD conflict.

“Officially, Chinese authorities are denying any direct connection between things like battery subsidies or the Korean culture ban and THAAD,” said a senior official with the South Korean Ministry of Trade, Industry and Energy (MTIE) in a Jan. 8 phone interview with the Hankyoreh.

“But this is going to be an occasion for bringing up a wide range of complaints about things that South Korean businesses are currently experiencing,” the official said.

Trade authorities see the THAAD issue as impinging on a number of different trade issues involving China, together with China’s attempts to protect its own industries and businesses. This suggests the possibility that they could raise serious issues with the “economic retaliation” measures in response with the THAAD deployment as a trade restriction issue in connection with the FTA.

Since the THAAD deployment decision in July 2016, the Chinese government has raised non-tariff barriers in a number of areas: restricting broadcast appearances by Korean entertainers, disallowing charter plane travel to South Korea, auditing local affiliates of the Lotte Group (which provided land for the deployment), and reopening an investigation toward expansion of anti-dumping tariffs on South Korean polysilicon for use in solar power.

Some are now predicting Seoul could hit back with its own regulations on Chinese imports and anti-dumping investigation.

“When it comes to trade issues, the aims and factors behind the measures [such as retaliation to the THAAD deployment] aren’t important,” said another MTIE source. “What matters are the consequences, namely whether authorities on both sides are restricting the free trade that is the whole point of the agreement.”

“Even without the THAAD issue, anti-dumping and non-tariff measures are things we and China have each been bringing up and investigating before,” the source added.

The message hints that Seoul could adopt a more aggressive stance of pressuring Beijing by treating trade issues that are seen as possible THAAD retaliation as “discriminatory measures” in violation of FTA pledges. As of late 2016, China had a total of 13 regulations in place on South Korean imports, including 12 related to dumping. Most of them - seven in total - were related to chemical products.

By Cho Kye-wan, staff reporter

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