Import quotas have long been out of fashion among U.S. leaders in the age of free trade and globalization. However, on April 30th, the White House announced that the United States has now revived the practice, with South Korea being the first country subject to this harsh economic measure. The deal reached between the Trump administration and the administration of Moon Jae-In involves a quota of 2.63 million tons of steel from South Korea per year.
South Korea is the third largest foreign supplier of steel to the United States. The new quota is set at roughly 70% of the average import number for the past 3 years. The Wall Street Journal, noting the devastating impact of the new quota, reported that “nine out of 54 categories of South Korean steel exports to the U.S. have already had their annual quota filled.”
Why does South Korea have a steel industry?
The steel industry of South Korea was the result of a number of geopolitical maneuvers throughout the Cold War. Following the Korean War, the Soviet Union poured huge amounts of resources into industrializing and developing the Democratic People’s Republic of Korea (DPRK) in the northern part of the peninsula. Technicians from the Soviet Union helped the DPRK to begin exploiting the coal from its mountainous regions.
The steel industry of North Korea is considered to be one of the greatest accomplishment of the Korean Workers Party. “The Blast Furnace” (1950), the fourth film ever produced in North Korea, documents the birth of its domestic steel industry with Soviet and Chinese assistance. There are paintings of Kim Il Sung visiting the country’s first steel mills still being displayed in North Korea.
Between 1953 and 1956, North Korea tripled its gross domestic product. According to the BBC: “The mass mobilisation of the population, along with Soviet and Chinese technical assistance and financial aid, resulted in annual economic growth rates estimated to have reached 20%, even 30%, in the years following the devastating 1950-53 Korean war.” During the 1950s and 60s, not only was illiteracy wiped out in North Korea but universal housing and education was established.
Meanwhile, during the same period of the 50s and 60s, poverty and malnutrition persisted in South Korea. Many working class Koreans sympathized with their northern countryfolk. Despite the execution and torture of many leftists, including the infamous massacre in response to the uprising on Jeju Island, strikes and protests were abundant. In 1960, leftist students and activists staged what was coined the “April 19th Movement” and forced the U.S.-backed dictator, Syngman Rhee to step down.
In 1961, a top military officer named Park Chung Hee formed the Military Revolutionary Committee and ultimately seized power in a military coup. Park, unlike the previous military dictator, Syngman Rhee, depended on the loyalty of a solid base among the population and worked hard to maintain it.
In 1965, Park restored diplomatic relations between South Korea and its former colonizer, Japan. Park then arranged for Japan to finance the construction of a steel industry in South Korea. Park Tae-Joon was assigned the task of creating what would eventually become one of the largest steel corporations in the world, POSCO. The Import-Export Bank of Japan provided a loan of $54 million to enable South Korea to build the corporation. The Japanese government provided an additional $119 million. Diplomats from the United States were key in arranging the economic deals that gave birth to the steel industry of South Korea.
Stabilizing the Park Regime
The deal to create the South Korean Steel Industry was arranged because the continued unrest and protests were seen as a threat to the entire region. The bonapartist Park regime had promised to bring stability by creating a strata of well-paid Koreans who opposed Communism and supported the United States. In order for the Park regime to remain intact, a significant portion of the population needed to be loyal to it. This required economic development.
Throughout the developing world, various US aligned dictators were granted loans in order to develop domestic industries. The soon massive steel industry of South Korea mirrored similar development projects in Singapore, Iran, Chile, and Argentina. The Kennedy and Johnson administrations viewed this as a means to prevent revolutions and keep the various highly authoritarian, anti-communist regimes intact.
The policy of building up and industrializing aligned regimes was a staple of Cold War liberalism in the United States and was actively favored by the intelligence wing of US politics. Kennedy famously said, “Those who make peaceful revolution impossible make violent revolution inevitable.” Kennedy created the Peace Corps, a humanitarian organization, which also actively coordinates and collects information for the CIA.
The military regime in South Korea committed horrendous violations of human rights in addition to its economic successes. During the 1970s and 80s, the South Korean government had a policy of arresting “vagrant children” i.e. orphans and holding them in prison camps. Thousands of children died in custody after fatal beatings. The children held in the camps were also subject to routine rape, lack of adequate food, and torture.
The policy of rounding up vagrant children fit into the Park regime’s policy of building up an urban middle class, while “purifying” the cities of unwanted elements. Thousands of dissidents were also tortured, held in prison camps, or extrajudicially killed by the military regime.
Neocons Move Against the Iron Silk Road
Following the domestic political crisis of 1968-1972, Cold War liberals of the Kennedy ilk began to fall out of favor in Washington. Richard Nixon’s presidency was seen as a pivotal moment in the birth of Neo-conservatism, a new brand of right-wing leadership and geopolitical strategy for the United States.
In 1973, Nixon oversaw the economic demolition of Chile. Socialist President Salvador Allende, was toppled in a bloody, military coup. Like South Korea, the United States had previously enabled Chile to develop a large industrial middle class. With the rise of the Pinochet dictatorship, Milton Friedman and Chicago School economists destroyed the Chilean middle class and domestic industries. The middle class in Argentina was subject to a similar demolition following the 1976 coup against populist, Isabel Peron.
The US-Japanese policy of building up a strong economy in South Korea as a way of holding back Communism came to an end in the 1980s. Without active US support and subsidization, the economy of South Korea worsened. Amid the economic downturn, protests and strikes erupted and in 1987, the military regime was brought down by the June Democracy Movement.
The fall of the Soviet Union resulted in catastrophe in North Korea and a crisis of malnutrition. In the midst of this crisis, a liberal administration in South Korea enacted the famous “Sunshine Policy” of reconciliation with North Korea. Even fanatical anti-Communist Reverend Sun Myung Moon met with Kim Il Sung, in this very optimistic atmosphere.
Plans were made for the Iron Silk Road or the Trans Asian Railway that would connect South Korea and North Korea to Russia, China and western Europe. The Trans Asian Railway would have enabled North Korea to join the world economy, import needed food and petroleum, and export more of its steel and coal. It would have also enabled the steel industry of South Korea to export more diversely, and not be so closely tied to the United States. During the same period, the Clinton administration agreed to provide heating gas and food relief to North Korea in exchange for the country not proliferating nuclear weapons.
The infamous “Axis of Evil” speech given by George W. Bush in 2002 ultimately terminated the bright hopes of the1990s. The US Congress had already refused to fund the agreement North Korea had reached with the Clinton administration. The Iron Silk Road was put on hold, and right-wing political factions moved ahead in South Korean politics. North Korea withdrew from the Nuclear Non-Proliferation Treaty and tested its first nuclear weapons in 2006.
Moon’s “Economic Map” Memory Stick
Although the U.S. abandoned its policy of building up the South Korean economy during the 1990s, South Korea’s economic ties with another country have expanded. China, now the second largest economy in the world, is closely tied to both North and South Korea, and favors peaceful reconciliation between the two countries.
Park Geun-hye, the daughter of the military dictator was elected President in 2012, and aligned herself with the Neoconservative faction in Washington. President Park presided over austerity cuts in public spending and installed the Terminal High Altitude Air Defense (THAAD) Missile System in coordination with the US military. This strike enabling missile system involves radars monitoring not just North Korea, but also Russia and China.
After the first parts of the THAAD system were unloaded, China responded with swift economic moves against South Korea. Shortly afterwards, Park was impeached for corruption, and the liberal President Moon Jae-In was elected to take her place.
At the recent meeting between Moon Jae-In and Kim Jong-Un, the south Korean leader handed the DPRK’s President a USB flash drive. On this flash drive was a proposal for the economic development of North Korea.
According to the New York Times, “In charts and video clips, Mr. Moon’s memory stick laid out a “new economic map for the Korean Peninsula,” including new railways and power plants for the impoverished North, should Mr. Kim abandon his nuclear weapons, according to South Korean officials.” Such a plan, if implemented, would result in an expansion of steel exports from both North and South Korea.
It seems the vision of the Iron Silk Road, and the policies of the Cold War liberals, as well as China’s vision of “One Belt, One Road” connecting countries and creating peace through economic development has resurfaced in recent Korean negotiations.
However, the neoconservative faction that openly favors crushing other nations’ economic development in order to maintain U.S. economic dominance seems to have the upper hand in Washington, DC. The recent decision to punish the South Korean steel industry, which was created for specific geopolitical reasons, breeds many questions about what could result from the upcoming meeting between Trump and Kim Jong-Un.
Originally published in New Eastern Outlook