China is waging economic war against S. Korea. We must stand by our ally.

Less than two years ago, I wrote of the coming Korea missile crisis. That crisis has now arrived. As I’ve documented at this site, that crisis is, in large part, a crisis of China’s making. North Korean missiles are made in part from Chinese technology, in large part from components purchased in or smuggled through China, and that are almost always procured by North Korean agents who operate more-or-less openly on Chinese soil. North Korea’s missiles ride on Chinese trucks. North Korea’s nukes and missiles were paid for by dollars laundered through Chinese banks, by commerce (much of it illicit) that passed through Chinese ports. 

Now that those missiles have matured into a grave threat to our allies in South Korea and Japan, and to the Americans (and their family members) stationed on allied soil, the U.S. has deployed defensive missiles to both countries. Now, China has the unmitigated gall to object to South Korea defending itself against a made-in-China threat from North Korea, presumably because missile defense weakens China’s own capacity to bully those allies, Taiwan, and perhaps even the United States.

Since 2006, China has voted for seven U.N. Security Council resolutions (1695, 1718, 1874, 2087, 2094, 2270 and 2321) and proceeded to violate all seven of them almost immediately. Why? Probably because China’s long-term strategic objective was to use North Korea to intimate South Korea, drive a wedge into the U.S.-South Korean alliance, push U.S. forces out of Korea, and then apply the same strategy to Japan. China probably realizes that by backing Kim Jong-un it’s riding a tiger, but it still prefers coddling a Caligula with nukes to allowing one free Korea to arise on its border. China’s grand strategy stands a strong chance of succeeding. Many South Koreans would sacrifice some of their personal freedom and national independence for fear of war or recession. Right now, the people of South Korea are looking to us. They wonder if they can still count on us.

That’s because China, which is opposed to unilateral sanctions except when it isn’t, has just started a trade war with South Korea to disarm the wrong Korea — the one that’s trying to defend itself against the missiles it helped North Korea build. China is closing South Korean stores on administrative pretexts, canceling group tours by Chinese tourists to South Korea, imposing pretexual inspections on South Korean agricultural products, and disrupting other South Korean investments in China. Militarily, we are standing by our ally. THAAD, though by no means a defense against all of North Korea’s threats to Seoul, can stop the largest missiles that carry the most dangerous (read: nuclear) warheads. Diplomatically, we’re saying we stand behind South Korea, and the Secretary of State has just announced a visit to Seoul. Those are good first steps toward showing U.S. resolve in standing by its ally. But if the U.S. isn’t just as prepared to stand by its ally economically as it is militarily and diplomatically, South Korea may well be finlandized as a Chinese satellite under a future President Moon Jae-in, who is no friend of America. 

To prevent this, the U.S. must send Beijing a strong message of economic deterrence. A trade war with China would be bad for both countries, but worse for China, with its heavy reliance on exports to the U.S. and the dollar economy. Beijing is using its economic power to attack U.S. security interests and those of our allies. We can’t stand for this. As with any other war not of our choice, economic war would come with costs. The question is whether the costs of not fighting back exceed the costs of fighting back. In this case, the cost of not fighting back could include the breakdown of the security system that has freed and enriched billions of people in northeast Asia, the U.S., and (indirectly) around the world. It would include a significant setback in our efforts to prevent North Korea from irreversibly defeating the cause of global nonproliferation. Measures to mitigate the impact on South Korea are only a partial answer. We must also deter a China that is testing a new president’s resolve with a strategy that is at least as dangerous as anything it has done in the South China Sea. That is worth bearing significant economic costs. And there are ways we can, and should, respond.

1. The first and most obvious target should be the Chinese banks that are breaking U.S. law to finance Kim Jong-un’s proliferation. That’s something we should be doing regardless of China’s bullying of South Korea, so arguably, it doesn’t belong on this list at all. Still, China’s bullying might affect the strategy we use and the aggressiveness with which we implement it.

2. U.N. Security Council resolutions require all ports to inspect cargo going to or coming from North Korea. China’s ports clearly aren’t doing that. Under section 205 of the NKSPEA, Customs and Border Protection has the authority to increase inspections of cargo coming from those noncompliant ports. Ports in China’s economically depressed northeast, particularly those that import coal in violation of U.N. sanctions, should be at the top of our target list (but only one or two smaller ports, initially). The effect of such a sanction would be greatly magnified if the South Korea and Japan join it; after all, the U.S., South Korea, and Japan are China’s three largest trading partners. As they might say in New Jersey, it’s time for some traffic problems in Dandong. 

[Hey, it’s Donald. I think I have a job for you after all.]

3. China’s protectionism, censorship, and hacking make its IT companies good targets for sanctions, particularly through a more aggressive posture by the Committee on Foreign Investment in the U.S. and the aggressive policing of technology transfers. Yesterday’s actions against ZTE industries, which included the imposition of a $1 billion fine, are an example of the actions the U.S. could take to prevent China from stealing and selling U.S. technology to our enemies. Importantly, those actions suggest that the Trump administration has revoked China’s de facto immunity from the consequences of breaking U.S. law. As with our money laundering laws, we should enforce our export control and intellectually property laws regardless of how China treats North Korea, but China’s behavior against South Korea can influence our prosecutorial discretion in how aggressively we enforce those laws.

4. As mentioned, the U.S., South Korea, and Japan are China’s top three trading partners. Does China really want a trade war against all three of those economies when its banking sector is teetering under mountains of debt, when it’s trying to deflate a real estate bubble, and when it’s struggling to retain control of its currency and its stock market? Again, a trade war would be bad for everyone; the strategy is to deter China and force it to retreat by making sure it knows it would get the worst of one. The three allies share a strong interest in keeping the U.S.-Korea alliance strong to protect them from a common North Korean threat. For Japan, joining that economic alliance would have the advantage of balancing its villainous image in South Korea with the reality that it can also be a strong ally for South Korea’s security. By identifying appropriate targets in China for sectoral sanctions and combining their economic weight, the three allies can force China to back down and behave reasonably. Some of those targets might include products that include North Korean labor or materials, including seafood, textiles, and precious metals. Targets should be chosen to cause the maximum amount of economic and social unrest in China.

South Korea’s response to China has a political component, too. Its political right should play the anti-China nationalist card as shamelessly the political left played the anti-American nationalist card in 2003. It has criticized the left for cozying up to China in the midst of China’s economic bullying, and should intensify that criticism, making any preemptive capitulation to China an election-year liability for the political left. Both sides in Korea have long played the anti-Japan nationalism card, which continues to put distance between two natural allies over events that concluded 72 years ago. Not one comfort woman can still be saved from the predations of imperial Japan, but thousands of (North) Korean women who are sold as sex slaves in China still can be. I wonder if it might finally occur to Beijing that its bullying is backfiring if human rights activists put a statue of one of those trafficked women in front of the Chinese Embassy in Seoul. At the very least, it might make a few South Koreans stop to think about how China treats North Korean women, and whether that treatment is a metaphor for what China thinks of Koreans generally.