China is South Korea's most important trade partner and a destination for 25 percent of its exports (the U.S. is a distant second, taking 13 percent of Seoul's export sales). In the first 10 months of this year, South Korea's sales to China, and its trade surplus with China, are running at annual rates that are virtually identical to those observed in 2016.
High-level contacts are also under way, following China-South Korea summit meetings on the sidelines of the APEC conference in Vietnam earlier this month, to stabilize the Sino-Korean ties "in accordance with the size of the bilateral trade."
Another encouraging development is a strong revival of the Japanese-South Korean business relations. Japan's exports to Korean markets soared at an annual rate of 21 percent in the first nine months of this year, after a 5.7 percent decline for all of 2016. Over the same period, South Korean exports to Japan increased 17 percent — a remarkable recovery from a 16 percent decline during last year.
All that is wonderful news, even though this surging trade in Northeast Asia cannot be explained by purely economic factors. There is no evidence, for example, of strong and sudden increases in domestic demand (which drives external trade flows) in any of those three countries, or in an unexpected discovery of their economic complementarities.
Take the case of Japan. The growth of its domestic demand in the first three quarters of this year increased at an annual rate of only 0.8 percent. And, from Tokyo's perspective, the economies of South Korea and China are also increasingly seen as credible competitors in many product and service lines.
Therefore, the reasons for the booming trilateral business have to be sought in improving political ties. These often estranged neighbors have been unsuccessfully talking for years about liberalizing their mutual trade relations — only to be sidetracked by a constant resurgence of bitter war memories, colonial humiliations, unsettled maritime borders and absurd rivalries.
Threats of a more difficult access to European and American markets could be another reason why these Asian neighbors may have decided to internalize larger segments of their trade flows.
Most people will now spring for Trump's tough trade talk as the main factor driving the countries to closer economic and political relations. That would be a wrong conclusion, but that seems to be the mood of the times. So far, Trump is largely innocent on that count; he has not done much, if anything, to stop lopsided trade rules and practices that cost hundreds of billions of dollars to the American economy every year. Chinese, Japanese and South Korean products are widely available in the U.S. at very competitive prices — often cheaper than in their markets of origin.
But, as any simple traveler and comparison shopper can discover, that is not the case of American or European products in Asian markets. Most of those products are either unavailable, or, when they are, they are subject to exorbitant customs duties that double and triple the prices charged in their home markets in Europe and America.