Book Cover (Landscape).001

© June Park (2021). Proposed cover by the author.

Why do the export economies of Asia – China, Korea and Japan – respond differently to U.S. pressures in the digital economy under COVID-19?

Chips, data, and digital finance are shaping the global leadership into the post-pandemic era. During the COVID-19 pandemic, supply chains disruption compelled the U.S. and China to weaponize it, and under contactless economy the digital transition and tech became the centerpiece of hegemony. Efficiency based on interdependence no longer suffices and self-sufficiency matters a great deal under persisting geopolitical risk. The global chip shortage during the pandemic has prompted the U.S. to consolidate semiconductor production capacity within its own territory/alliance system, amid the continued global debate on equal access to COVID-19 vaccines (“chips for jabs” in the case of certain U.S. allies). Digitalization is accelerated in the contactless economy in the absence of a global regulatory framework on data governance. Cashless societies are emerging at a rapid pace, and central banks have shifted their policies to launch digital currencies within centralized finance, while declaring intent to regulate decentralized finance. All the while, cyberspace becomes a breeding ground for hacking of critical infrastructure and financial institutions (e.g., energy grids, banks) under the lack of regulatory measures.

At such a pivotal point of digital transformation, this book aims to explain the reasons as to why China, South Korea and Japan’s responses to U.S. protectionist pressures under COVID-19 are different. This book argues that the East Asian states responses have not been uniform, not merely owing to the geopolitical underpinnings of the bilateral relationships, but because of the institutional variance in policymaking regarding digital transformation in each jurisdiction. For the longest time, scholars have relied on the existence of bilateral security alliances in order to gauge policy responses from U.S. trading partners in times of U.S. economic pressures.

This book offers an alternative narrative of governance by institutions and technological capacity that is wielded as policy leverage, and suggests a framework for predicting state responses and argues through a three-step process:

  1. identifying the dominant policy maker on the digital economy based on the levels of bureaucratic autonomy, and deciphering its policy preference;
  2. investigating the triangular ‘statebureaucracyindustry’ dynamics per critical sector in digital trade and currency conflict;
  3. assessing industrial rigor and competitiveness via technological capacity in each critical sector (semiconductors and vaccines, EVs and batteries, data governance, digital finance)

Through the empirical findings and analysis using the institutional framework, this book argues that China has struck back, South Korea has hedged, and Japan has stood in line with the U.S. upon U.S. pressures in the digital economy since COVID-19. It argues that the varied responses are attributed to the nexus of the state-bureaucracy and industry.

This book manuscript is supported by the Individual Impact Grant for 2022 International Strategy Forum (ISF) Fellows by Schmidt Futures (G-22-63371) and has been enriched by the 2019-2020 Next Generation Researchers Grant of the National Research Foundation of Korea (NRF-2019S1A5B5A07106479). Built on the theoretical framework of institutional variance developed in my PhD dissertation based on-site research consisting of interviews with government officials, policy analysts, lawyers, academics, and business persons in addition to archival research in Tokyo, Seoul, Beijing, and Washington, DC (2010-20), the updated cases on digitalization during COVID-19 make the central thesis of the book a compelling argument for our time and provides a tool for policy projection into the digital economy in the post-pandemic era.

Chapter 0.

PREFACE: The U.S. and Them
U.S.-China Trade Wars continued: From Trump to Biden

Ecosystems of the Digital Future: Chips, Batteries, Data and Coins

Why East Asian economies are not the same
Chapter 1.
INTRO: The Global Leadership in AI Supremacy
Dealing with "The Elephant in the Room" with Pressures

The Puzzle: Why do they respond differently?

Policy Relevance

Argument: ‘State-Bureaucracy-Industry’ Dynamics per Political System

Research Design, Data and Methodology

Contributions and Avenues for Further Research

Outline of the Book
Chapter 2.
HISTORY: How the Old, the New, and the Final Target came to Respond

U.S. Pressures 2.0: Geopolitics mixed with Geoeconomics - Trump's 'America First' with Tariff Wars

U.S. Pressures 3.0: Geopolitics mixed with Geoeconomics - Biden's Unilateral Multilateralism with Export Controls via the Entity List

The Old Target Responds: Japan 
The New Target Responds: South Korea 
The Final Target Responds: China
Playing the Game of Geopolitics with Geoeconomics in the Digital Economy

STAKES: Inside Today’s Trade Wars on the Path to Digitalization 

Tariffs as the Baseline Scenario, Export Controls as the New Normal

Tech – Chips, Vaccines, Batteries, and Connectivity with Data 

Energy – From fossil fuel and nuclear to renewables and electrification

Cyber - Digital finance and the upgraded warfare of data breach and crypto theft
Chapter 3.
ARGUMENT: Predict Policy Moves by Institutional Variance

Theorizing Institutional Variance in Digital Policymaking and Responses

Limitations of Existing Explanations on Bureaucratic Decisionmaking

The Framework of Institutional Variance in Responses

-Political Systems

-Bureaucratic Autonomy

-State-Business Relations

-Dominant Players

-Policy Preferences

The Key to Utilizing Institutional Variance for Policy Prediction
Chapter 4.
RESPONSES: Varying Degrees in Retaliatory Measures

China: “Strike back.”

-Political System: Authoritarian

-Bureaucratic Autonomy: None, only empowered

-State-Business Relations: Business gripped by the State

-Dominant Players: The Party - the CFEAC and the CNSC

-Policy Preferences: Escalation & Desperate resistance

South Korea: “Hedge.”

-Political System: Presidential

-Bureaucratic Autonomy: Some but subservient
-State-Business Relations: Business bargaining with the State
-Dominant Players: The V.I.P. and presidential aides 

-Policy Preferences: Rebuttal & Defensive Refutation 

Japan: “Stand in line.” 

-Political System: Parliamentarian 

-Bureaucratic Autonomy: High as a technocracy 

-State-Business Relations: Business at arm's length from the State

-Dominant Players: The Technocrats of MOF & METI supported by the PM 

-Policy Preferences: Acquiescence & Selective adjudication
Chapter 5.
CASES: Digital Trade Wars 

The Chip War: The Race for Supremacy in Semiconductors
(Subsidiary case: COVID-19 Vaccines and Semiconductor Supply Chains)
China: The Revitalization of Huawei through partnership with SMIC

South Korea: Samsung rivaling TSMC and Intel, with foundry operations in U.S. and China

Japan: In line with the U.S. on Huawei ban, and hosting TSMC plant in Kumamoto
Electric Vehicles and Batteries toward Net-Zero and Rare Earths

China: Lion’s share of the critical minerals and battery market by CATL

South Korea: LG Energy Solutions at CATL’s tail and joint partnerships/factories with U.S. automakers

Japan: Late in the game, Toyota partnering with Panasonic
Data Governance and Digital Trade Agreements
(Subsidiary case: 5G/6G Connectivity and Electric Vehicles for Autonomous Driving)

China: Personal Information Protection Law (PIPL) and Data Security Law, CPTPP accession application (to fend off Taiwan)

South Korea: Personal Information Protection Act (PIPA) and DEPA (CPTPP?)

Japan: Act on the Protection of Personal Information (APPI), CPTPP Chapter
Chapter 6.
CASES: Digital Currency Wars 
Digital Currencies in CeFi (CBDCs) and DeFi (Cryptocurrencies/Stablecoins)

China: Crackdown on DeFi and everything non-CeFi

South Korea: Between regulating Cryptocurrencies (DeFi) and launching a CBDC (CeFi)

Japan: Studying a CBDC (CeFi) but not outlawing DeFi in line with the U.S.
Chapter 7.
TAKEAWAYS: The ‘So What?’ Question

Recognizing the New Normal of U.S. Pressures

Utilizing Institutional Variance as the Policy Move Predictor

Strategies for the Future based on Anticipated Responses
Chapter 8.
CONCLUSION: It’s 'Who Decides' and 'Who Has' that matters.

The Dominant Players in Digital Trade wars and Currency Conflict of our Time