Fran O'Sullivan: Winston Peters' North Asia visit comes at a sensitive time

Deputy Prime Minister Winston Peters. Photo / File

COMMENT:

Winston Peters' visit to North Asia takes place in the midst of heightened sensitivity due to a trade war between South Korea and Japan sparked by a court decision relating to wartime sexual slavery and forced labour from 75 years ago.

The genesis of the trade war is disturbing.

There has long been tension between these two North Asian neighbours. But President Moon Jae-in upset the bilateral equilibrium when he failed to make use of his political powers to make amends after a Korean court awarded damages against Japanese companies for using forced labour during World War Two. Japanese Prime Minister Shinzo Abe - incensed that the Korean decision went against a 1965 treaty which was supposed to settle all wartime claims - retaliated by slapping export controls on rare chemicals which are vital to Korea's semi-conductor industry.

The economic consequences of the trade dispute are already apparent. Seoul's major electronics companies are being punished.

At ground level in Seoul, many Koreans are now refusing to drink Japanese beer and buy their products.

Peters is obviously not in a position where he can step in and bang heads – ever so diplomatically of course – between his South Korean and Japanese counterparts.

For one thing, Peters was seeing Foreign Ministers Kang Kyung-wha and Toshimitsu Motegi in consecutive visits to Seoul and Tokyo. But for a politician with an acute sense of history – which Peters certainly has – it will not have escaped notice that the current trade war between Japan and South Korea has almost as much potential to further disrupt regional harmony and drive global growth down even further as the US-China clash.

S&P Global Ratings has already said as much warning that it will disrupt global supply chains leading to potential global economic damage to equal that of the US-China dispute.

President Moon Jae-in. Photo / AP

Some persuasive words from Peters into the ears of his South Korean and Japanese hosts would not go amiss. Particularly, some honest truth that weaponising trade to solve disputes on quite different issues is a dangerous game. And that the global order – built out of the ashes of World War Two – is worth preserving including the World Trade Organisation which is where this matter would end up if it was purely based on protectionism.

Peters' personal approach to foreign affairs can produce results.

It was his own diplomacy which has brought New Zealand to the verge of opening (finally) free trade negotiations with the US.

In his prior period as foreign minister he acted as a intermediary with North Korea during the six-party talks.

Small independent 'powers' - of which New Zealand is one - are listened to.

But when I visited Seoul mid-year, there was a palpable air of gloom among the think tankers and business people I spoke with.

This was in the same week as a triumphalist Donald Trump held his historic meeting with Kim Jong Un at Panmunjom across both sides of the North-South border in the Korean demilitarised zone. South Korean president Moon Jae-in was almost a bit player.

But there were two major issues gripping the business sector.

First, the impact on existing technological supply chains from the China-US trade wars. South Korea's economy was already facing a slowdown in semiconductor demand as electronics production slowed. The upshot was that South Korean orders from China were down affecting the economy and profits.

Second, the added pressure from the US. Trump used his meeting with South Korean leaders at the Blue House to try and persuade some of them to shift production out of China to the US.

The dispute has since escalated with no end in sight.

Kristalina Georgiev, incoming IMF managing director. Photo / AP

As Kristalina Georgiev, the incoming IMF managing director recently warned, even if growth picks-up in 2020, the current rifts (of which the Korean-Japanese 'trade' war is one) could lead to changes that last a generation — broken supply chains, siloed trade sectors, a "digital Berlin Wall" that forces countries to choose between technology systems.

Peters hopes to reignite Japanese interest as a Pacific Partner contributing to the economic stability of that region.

Yesterday, Peters and Kang also confirmed New Zealand and the Republic of Korea intend to work together on capacity-building projects in the Pacific."We welcome Korea's interest in increasing its engagement with New Zealand and Pacific Island countries," said Peters.

"New Zealand reiterates its commitment to working with South Korea, the US and other partners to achieve long-lasting peace and stability on the Korean Peninsula including through denuclearisation of North Korea in a complete, verifiable and irreversible manner and elimination of all weapons of mass destruction."

If Peters is similarly successful in Tokyo, it will provide another neutral theatre for cooperation between Japan and South Korea and another useful step towards pulling these two advanced economies back from an unnecessary brink.

Fran O'Sullivan visited South Korea earlier this year at the invitation of the NZ Ministry of Foreign Affairs and Trade. Her visit was facilitated by a grant from the Asia New Zealand Foundation.