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Steven Schrage is the Scholl Chair in International Business at the Center for Strategic and International Studies.
The financial crisis has become a tsunami that threatens to upend traditional assumptions and significantly alter dynamics ranging from trade to national security. The effects of the crisis on the U.S.-Republic of Korea (ROK) alliance could radically change the environment facing both nations as well as the relative importance of a relationship which has already faced significant adjustments following the Cold War and 9/11. Yet, both nations’ destinies are being reshaped by important factors—ranging from the financial crisis to the risk of proliferation by North Korea—that point to the need for a deepened and elevated alliance. These and other factors will place the U.S.- ROK relationship at the nexus of more critical global issues than at any point in decades. An important factor transforming the alliance was on bold display in London as the presidents of South Korea and the United States joined over twenty national leaders to tackle the economic crisis that has become the world’s top priority. This crisis and the G20 process are poised to further elevate the alliance’s importance as we head toward 2010.
Although questions remain about the timing and future of the G20 following the London Conference and its plan for a second meeting in 2009, South Korea is scheduled to chair the G20 in 2010. Korea’s chairmanship marks both a critical opportunity and challenge, and may be an action-forcing event placing critical outstanding issues—such as the passage of the Korea-U.S. FTA (KORUS)—on an accelerated timeline while dramatically increasing the costs of inaction. While the global economic storm has battered U.S. and South Korean economies, in less than twelve months it is poised to put these nations at the center of the world stage in a way not seen since the Korean War. Relatively unknown to the public only months ago, the G20 group was thrust from obscurity to the forefront of world affairs last November when President Bush and European leaders decided to convene its first ever leaders’ meeting and charged the G20 with resolving a once-in-a-generation crisis that risks devolving into a second Great Depression. The London Summit further cemented the G20’s central role. Yet, aside from significant actions to increase resources for the International Monetary Fund (IMF) and trade financing, it was clear that key issues at the heart of the crisis ranging from stimulus coordination to resolving bad bank assets require further action. While further G20 action will affect every nation, perhaps no two nations will have more at stake in the 2010 G20 than the United States and South Korea.
President Lee Myung-bak has called for a “Global” Korea, but he likely never imagined that the ROK would be taking center stage to deal with the world’s top economic challenge just over a year into his presidency. As South Korea prepares to chair the 2010 G20 Summit, it will be a matter of unprecedented international prestige and high stakes. South Korea, a nation that has never been part of the elite G8 club, could lead potentially the most important G8-style meeting in history. Success or failure could have lasting ramifications for both President Lee’s political future and the future role of South Korea on the world stage. It will be responsible not only for its own national ambitions, but for those of other rising nations. South Korea’s G20 chairmanship would mark the first time that a rising nation will chair a G8-level meeting; it could be the last time if a G20 failure in 2010 leads to a re-empowerment of the G8 process. Furthermore South Korea, a nation with high trade-dependency caught in the midst of an Asian export slowdown, has a deep stake in G20 efforts to revive the international economic system. It may never have a better opportunity to shape the world agenda. Both its international political and economic future could depend on a successful outcome.
Although the ROK may have the greatest national stake in the 2010 G20 Summit, U.S. success or failure will have the widest global ramifications. The United States is both the target of international blame for the crisis and the country that the world looks to for leadership in resolving the crisis. President Obama’s stake in next year’s G20 meetings may be as high as President Lee’s. Only weeks into his presidency, President Obama faced his first major multilateral test in London and signaled that the G20 will be a central forum for international economic action. European leaders, such as President Sarkozy, Chancellor Merkel, and Prime Minister Brown (who faces elections by 2010) have tied their political futures to bold plans for international regulatory reform that, depending on how they develop, may or may not ultimately prove to match U.S. interests. Presidents Obama and Lee and other leaders faced the ghosts of the London Conference of 1933— where failure to act was cited as leading to further depression and war during the last global turn down and committed to never repeat its failures. As we approach 2010, voters, experts, and markets will be watching to discern whether outstanding differences in areas like stimulus policies and the precise scope of international regulation can be bridged, or whether the bold statements in London were merely empty promises. Now that President Obama has personally declared the meeting to be a turning point and committed to advance the G20 process, he has both a huge policy and political stake in making sure the G20 achieves its goals in the months and years ahead.
With the United States as the world’s largest economy and South Korea scheduled as the 2010 chair and part of the “troika” of nations leading the G20 process, U.S.-ROK collaboration will be critical to G20 success. The high profile and priority given to the London bilateral meeting between Presidents Obama and Lee show how the U.S.-ROK relationship is being elevated by issues such as the financial crisis, North Korea, and most specifically, the G20’s new role. In recent years, many have highlighted the need to transform the U.S.- ROK relationship into a true twenty-first century alliance and advance outstanding issues like the KORUS FTA. The run-up to the 2010 G20 will provide the greatest opportunity yet to turn these goals into reality—while also magnifying the consequences of failing to act. It will be up to leaders in both South Korea and the United States to determine whether this opportunity is seized.