by Shihoko Goto*
South Korea has been winning over international public opinion as a successful role model in keeping the coronavirus outbreak under control. It achieved this with its extensive testing and monitoring policies.
Indirectly battling with China
But now, by agreeing to sell 500,000 COVID 19 test kits for $9 million to the state of Maryland last week, Korea’s relations with the United States may have reached an unprecedented public opinion high.
As nations grapple with the prospect of establishing a new trade order as they climb out of the post-pandemic economic slump, Seoul will undoubtedly be able to capitalize on its special relation with the U.S. East Coast state and beyond.
Personal diplomacy matters
Maryland Governor Larry Hogan’s decision to reach out directly to the government of South Korea and strike a deal with LabGenomics to purchase their kits has been heralded as a success by governors across the United States, including New York Governor Andrew Cuomo.
But while other states will likely follow in Maryland’s steps and look to strike deals with specific countries on their own, it is worth noting that Hogan’s Korean-born wife Yumi Hogan played a critical role in reaching out to Seoul and acted as a bridge between the two sides.
Protectionism on the rise
The fact that personal relations played such a pivotal role in securing much-needed medical supplies is worth bearing in mind as governments look increasingly inward to protect themselves.
Since the outbreak of the pandemic, nearly 80 countries — including member nations of the European Union as well as the United States — have introduced some kind of restrictive measures.
Their goal is to keep healthcare devices such as ventilators and medical-grade masks for their own domestic needs. This happens much to the dismay of long-standing allies.
Medical supplies: The new “influencer game”…
With medical supplies becoming the most sought-after commodity amid a health crisis, countries that are opening up to exporting medical supplies are beginning to yield a new form of influence on the international stage.
It has certainly been an effective way for Asian governments to expand diplomatic as well as commercial ties.
… that can backfire
Granted, China’s initial overtures in exporting medical equipment have actually backfired. Its suppliers have shipped too many defective ventilators, masks and other supplies to European markets.
This has reinforced prevailing views of the unreliability of Chinese products – a reputation which the PRC had labored hard to overcome.
Taiwan’s moment in the global sunshine
Taiwan, on the other hand, has elevated its standing on the international stage as it donated 10 million masks worldwide, including 2 million to the United States.
Like South Korea, Taiwan’s ability to keep the spread in check and make use of big data in particular to monitor infections has been seen as one of the few successes in tackling the COVID 19 outbreak.
Rethinking supply chain principles
New economic values are emerging as a result of the pandemic. Governments and businesses alike have been forced to reconsider what the priorities of the future global supply chain should be.
This has become necessary because their inclination to focus too heavily on cost effectiveness and depending too much on the Chinese market has now backfired.
Japan: Moving beyond China
Japanese Prime Minister Shinzo Abe, for instance, has taken one of the most notable steps to date to stave off the trend of over-dependence on China.
As part of its stimulus package to jump-start the Japanese economy from the fallout of the COVID 19 outbreak, Tokyo has earmarked $2.2 billion to encourage Japanese manufacturers to shift production out of China and return to Japan or to move outside of China’s borders.
From off-shoring to near-shoring
Even though multilateral corporations begin to focus on hedging risks and enhancing resilience as much as possible, keeping costs low also remains an important priority.
In all likelihood, though, they will look increasingly towards sourcing closer to home rather than across continents.
That will incentivize Asian companies to base more of their production sites in North America, if not the United States itself, to meet the demands of the U.S. market.
In that race, some U.S. states will be more attractive than others for Asian companies.
A total of 10 states — California, Texas, Illinois, Colorado, Missouri, Massachusetts, Connecticut, New York, Virginia and Florida — currently account for over three-quarters of FDI into the United States.
The race for lucrative FDI deals will intensify
It is a well-known fact that international companies on average provide high-paying jobs. At a time when the United States is confronting severe unemployment, the race among U.S. states to attract lucrative FDI deals will likely intensify.
States like Maryland with a strong connection to specific countries may be able to help foreign investors feel more confident and certainly more welcome in doing business in the United States than dealing with the federal government.
Asia’s long game in the U.S.
The long game for Asian companies will be to reposition themselves in a global trade landscape that has already changed significantly since the coronavirus outbreak.
As they seek to hedge their risks in operating in the U.S. market, how they are welcomed by individual states may well be as significant a factor as tax breaks and other financial incentives that may be offered.
For U.S. governors, the race to attract the most lucrative deals from Asia may have only just begun.
COVID 19 will likely also change trade relations among Asian countries themselves, as well as between the United States and Asia. This won’t just apply to dealing with China or the export and import of medical equipment.
*senior associate for Northeast Asia at the Woodrow Wilson International Center for Scholars
**first published in: www.theglobalist.com