South Korea's beef with US business

Rows over diplomatic and business issues are roiling a longstanding alliance at an uncertain juncture.

It was a single bone fragment in nine tons of US beef. Yet the 0.4 centimeter sliver caused South Korea to reject the first US beef shipment in three years, following a "mad cow" disease ban – a ban that mainly maddened US diplomats and agriculture officials who felt the restrictions were a partisan "excuse" to toy with trade.

Symbolically, however, the bone sliver represents an ever-larger bone of contention between the US and South Korea on many fronts – highly emotional beefs ranging from investor confidence, a continuing drift of the military alliance, clashes over how to handle North Korea's nuclear accession, and free trade. Mutual trust is not high, with diplomats on both sides even using the phrase "deteriorating," depending on the issue.

The US and South Korea have all the ingredients for good relations – in the mid and long term. But in the crucial short term, relations are slipping worryingly, experts say.

US investors in the Korean market, for example, were badly shaken last month watching the case of a US private equity firm, Lone Star, the target of a wave of collective suspicion – created partly by Korean media.

The Houston-based Lone Star has been trying to sell, quite legally, but for a huge $4.5 billion profit, its share in the Korean Exchange Bank (KEB) to another local Korean bank, Kookmin. But the deal got scotched after a year of attempts by a Korean prosecutor to find a case against Lone Star. A record three separate indictments were rejected by Korean courts. The atmosphere became so emotionally negative – with Lone Star depicted every day as stereotypical foreigners bent on tricking Korea – that Lone Star Chairman John Grayken threw in the towel.

"A recent survey shows that Korea has the most negative perception, the greatest anticorporate sentiment in Asia, stronger than Japan or China," says Jeffrey Jones, a lawyer for the Kim & Chang firm here, which also handles the KEB account. Mr. Jones, a white American who is a naturalized Korean, rarely criticizes Seoul officials, which make his remarks "significant," his friends say.

Add the future of the US-South Korea military alliance to the list of emotional issues. South Korea's President Roh Moo-hyun has been playing to popular sentiments by stating bluntly that he wants Korean security dependence on the US to rapidly lessen.

Most serious, Seoul wants to take "operational control" of military forces for the first time, meaning a response to North Korean aggression would no longer be handled by the US. With little fanfare, the long period of the US as guarantor of South Korea's security appears to be waning. In fact, the main issue in a US-South Korean meeting in Washington in October was how quickly Seoul would take control – as early as 2009 or by 2012?

A US official points out that when Secretary of State Condoleezza Rice visited Seoul after the Oct. 9 nuclear test, gaps between the allies were so appreciable that "we even stopped bothering to try and raise our disagreements with Seoul."

"There is an increasing loss of confidence and trust in each other, the two governments, even the military relationship," says Han Sung-joo, former ambassador to the United States, and foreign minister in the 1990s. "We are working towards our own operational command without adequate preparation, within a period that is too short."

Typical of many comments heard in Seoul that chafe in Washington is that of new South Korean national security adviser, Soong Min-soon. Mr. Soong raised eyebrows among US allied brass when he called America the "most warlike country in history." Move over Genghis Khan, Roman empire, Napoleon, and Nazi Gemany, remarked one diplomat.

The abiding Washington-Seoul relationship is complicated, analysts note. Korea has outgrown its old identity as poor and uncompetitive through hard work, intelligence, and ingenuity. Pride is high. The smaller power is not as willing to simply take orders and sign on to American ideas and directions unquestioningly. Koreans love much about America and its culture, as witness a whole new spate of "Krispy Kreme" doughnut shops opening in Seoul that sport nostalgic photos of America in the 1950s. Hollywood films are loved. Yet Korea's "depth" of experience in global and regional diplomacy and security is still a work in progress, analysts say. There's a significant minority, especially among the so-called "386 generation" – intellectuals raised after the Korean War – that feels America was too willing to support the former military regime.

The beef issue is typical of South Korea's new attitudes. Korea used to be the third largest importer of US beef. Now, since lifting the mad cow ban, Seoul has rejected three American shipments, causing US Agriculture Secretary Michael Johanns to state on Dec. 6 that "the rejection of the third shipment clearly illustrates that South Korean officials are determined to find an excuse to reject all [US] beef products... This is unacceptable and certainly not the way trading partners should work with one another."

Lone Star is another example of South Korea's populist moodiness toward US influence. Emotions swelled in Korea due to an American-Korean, Stephen Lee. Mr. Lee was the Korean country manager of Lone Star, a job earned partly by arranging the KEB deal. Yet as the sale began, it became clear that Lee had embezzled some $12 million – not from the bank, but from Lone Star itself.

When news of Lee hit, Korean public opinion went ballistic. Yet so far, despite four separate government agency investigations, and now three failed indictments, no evidence against illegality by Lone Star has been unearthed.

A possible future for South Korea without its old ally is a serious issue that has received too little attention and thought, says Mr. Han.

"The lack of a decent alliance puts us alone in a rough neighborhood," he adds. "We might find that Japan, China, and Russia treat us differently, as we stand without the Americans."

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