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Private-sector networks, democracy, and interstate relations: a case study of South Korea and Taiwan.

Since South Korea and Taiwan established diplomatic ties in August 1948, the relationship between Seoul and Taipei has expanded via public channels and private networks. The official relationship started in 1949 with an exchange of ambassadors. Taiwan president Chiang Kai-shek visited Seoul later in the year, while South Korean president Park Chung-hee returned the visit to Taiwan in 1966. In addition, the two countries codified their commitment to one another through such agreements as the Aviation Agreement (1952), the Trade Agreement (1961), the Cultural Agreement (1963), an Agreement on Maritime Transport (1983), and an Air Transport Agreement (1986). Throughout the Cold War these two anticommunist governments maintained an amicable relationship and supported each other in the international arena.

The end of the Cold War, however, had significant political implications for these two governments. In 1992 South Korea normalized its relationship with the People's Republic of China (PRC). (1) This move had significant political implications for the South Korea-Taiwan relationship because of the PRC's position that South Korea must cut its official relations with Taiwan before establishing diplomatic ties with Beijing. The PRC position was justified by the acknowledgment within the United Nations (UN) that Taiwan was a part of China and that only one China could be represented in the UN (Liu 1993). Thus, South Korea had to accept the one-China policy and could no longer recognize Taiwan as a separate nation.

The Taiwanese government felt betrayed, believing it had a close relationship with South Korea up to that point. Taipei harshly criticized the Korean government and abolished the Aviation Agreement. As a result, South Korean planes were not allowed to fly over Taiwanese airspace. Nearly all political and economic cooperation between them ended. Anti-Korean sentiment spread quickly in Taiwan, and a number of negative actions followed against South Korean companies and products. For instance, the number of antidumping lawsuits against Korean goods rapidly increased, and Taipei stopped South Korean companies from participating in subway construction projects. The relationship between South Korea and Taiwan deteriorated significantly.

However, due to their previous ties and economic interdependence, South Korea and Taiwan could not afford to completely sever the relationship. Therefore, they established unofficial relations in 1993 to resume contact with one another in the private sector. South Korea dispatched its representatives to Taipei in November 1993, and representatives from Taiwan went to Seoul two months later. The efforts to rebuild the relationship between them continued. Legislators in South Korea and Taiwan formed an association of goodwill in 1996, and the Korean government dispatched a rescue team to provide assistance to Taiwan when an earthquake hit the island in September 1999. In September 2004 Seoul and Taipei reestablished the Civil Aviation Agreement, allowing South Korean flights to pass through Taiwanese air space. In addition, approximately ten local governments in South Korea and Taiwan developed sister-city relationships (e.g., Seoul-Taipei, Pusan-Kaohsiung, Kwangju-Tainan, and Ulsan-Huaren). Moreover, trade between the two economies continuously expanded, as discussed below. But exchanges between them are not limited to

economic transactions. Many cultural and educational exchanges take place, and more than 600,000 people annually participate in these events. Overall, South Korea and Taiwan have developed a pragmatic and cooperative relationship that continues to expand.

What made South Korea and Taiwan revive and expand their informal relationship despite South Korea's having normalized its relations with the PRC and ended formal ties with Taiwan? We argue that the private-sector networks between South Korea and Taiwan developed through economic, cultural, and educational exchanges have played a key role. Although South Korea and Taiwan severed their political relationship, the private sector continued economic and cultural exchanges. (2) Transitions to democracy in both South Korea and Taiwan also enhanced the influence of the private sector on policymaking (Chan 1995; Roehrig 2004).

Moreover, their economies need each other despite competition in some areas. For these reasons, pressure from the private sector mounted, and the two governments became concerned about the cost of disruptions in the relationship. Hence, they had to find a way to put their relations back on track in spite of the political setbacks. (3) The Hanryu (Korean Wave) also made a significant contribution to improvement of ties between South Korea and Taiwan by enhancing cultural exchanges. Thus, the main contribution of this article is to show how private-sector networks can influence interstate relations by affecting governments' expected utility calculations in foreign-policy choices, using the South Korea-Taiwan relationship as a case study.

This article consists of four parts. Following the introduction, we review the literature on the links between private-sector networks and foreign relations in order to provide a theoretical background. Then we provide evidence of private-sector exchanges between South Korea and Taiwan, such as in trade, culture, and education. Finally, we draw conclusions and implications for further research.

Theory on Private-Sector Networks and Foreign Relations

The Impact of Networks

Scholars specializing in international relations (e.g., Maoz et al. 2005; Hafner-Burton and Montgomery 2006; Dorussen and Ward 2008) have emphasized the importance of networks, mostly in the context of peace and conflict. The literature suggests that the network of relationships among nations in the international community can influence foreign-policy choices, including those over conflict or cooperation.

Different types of networks have been studied. For instance, Maoz et al. (2005) examined the relationship among international networks of ethnic similarity, alliance structure, and types of government. The authors found that alliance density in the system is positively related to the frequency of militarized disputes and wars; in contrast, democratic networks tend to reduce disputes and wars. On the other hand, Hafner-Burton and Montgomery (2006) contend that nations develop social networks through intergovernmental organization (IGO) memberships. National representatives develop personal ties by exchanging information and services and providing social support. These activities create networks and enhance international understanding while contributing to peace and cooperation. Dorussen and Ward (2008,190) also stress the importance of IGO memberships and international networks with respect to conflict. They argue that international networks and IGO memberships contribute to peace because "strong network ties encourage third parties to mediate and to do so more effectively."

However, these studies only examine social networks in international organizations, particularly intergovernmental organizations. Previous studies focused mostly on the government sector and overlooked the private sector. Nevertheless, social networks can also be developed through economic and cultural exchanges in the private sector, and they can influence foreign-policy choices. The reason is that the network relationship may lead to different interpretations by political leaders of the national interest at stake.

The Trade-Conflict Nexus

Turning to the effect of trade on international relations, numerous studies have reported an inverse relationship between economic interdependence and international conflict (Pollins 1989; Oneal et al. 1996; Doyle 1997; Oneal and Russett 1999; Mansfield and Pollins 2001; Oneal et al. 2003; Xiang et al. 2007). For instance, Polachek (1980,55) asserts that interdependence between two trading partners significantly increases the cost of conflict. Trade mutually benefits participating parties, giving each a stake in the economic well-being of the other. Thus, military disputes interrupt an importer's supply of needed goods and services while also harming the exporter's interests. Shifting to a second-best trading partner incurs high costs; therefore, governments do not want to disrupt private-sector economic exchanges (Keohane and Nye 1977, 8-13).

According to Oneal and Russett (1997, 270), "Even a relatively low-cost change in trading patterns may have significant political consequences by reducing the sensitivity and responsiveness of a state to the preferences of its former trading partner, because trade and foreign investment are media for communicating on a broad range of matters beyond the specific commercial exchange taking place." Through these communications, private-sector networks develop that can be a channel for averting interstate conflict (Deutsch et al. 1957; Russett 1998). Xiang et al. (2007, 646-647) summarize the liberal argument on the trade-conflict nexus as follows:
   First, trade encourages states to work cooperatively. This
   cooperation over time extends to all spheres of interstate
   relations, reinforcing a deeper state of peaceful relations among
   the partners. The second liberal argument is based on the expected
   utility model of trade and conflict, which emphasizes the potential
   economic fallout of a disruption in trade. Countries are deterred
   from initiating conflict against a trading partner for fear of
   losing the welfare gains associated with trade. In a leader's
   expected utility calculus, the cost of conflict is equated with the
   decline in welfare associated with the potential trade losses.

According to Oneal et al. (1996), mutual dependence is particularly beneficial when interdependence is combined with democracy, because economically powerful groups in democracies tend to be politically powerful as well (Papayoanou 1996). Moreover, democracies with market systems tend to promote trade. Since democratic governments must obtain the approval of their legislatures, they abide by their international commitments with respect to trade and other economic exchanges (Oneal and Russett 1997). As Oneal et al. (1996, 13) have written, "Political and economic freedoms allow individuals to form transnational associations and to influence policy in light of the resulting interests, inhibiting their governments from acting violently toward one another." (4) In other words, when trade is combined with democratic institutions, nations expand their cooperation. Disruption in these activities is likely to result in welfare costs. Therefore, leaders want to maintain cooperative relationships because of the benefits that flow from them.

At the same time, those who are involved in trade or cultural exchanges develop personal networks by enhancing mutual understanding over the course of repeated transactions and communication. These unofficial social networks can affect foreign-policy decisions by lobbying or putting pressure on the government. Furthermore, disruptions in these relationships for any reason, such as military conflict and the severance of a relationship by a government, are likely to hurt the incumbent government politically because of the damaging effects on national interests. Hence, as the level of cooperation increases, the relationship between the two countries is likely to expand and overcome any potential political difficulties.

The relationship between South Korea and Taiwan is an excellent example. Through trade, private-sector networks developed between them, but political logic--the Taiwan government's decision to sever its relationship with South Korea because of South Korea's normalization with the PRC--interfered. With the networks in place, the governments in South Korea and Taiwan had to find a way to reopen the relationship and continue to improve their ties. Considering that they share the cultural legacy of Confucianism and emphasize similar values, it was quite natural for them to develop networks. The fact that both South Korea and Taiwan adopted export-oriented industrialization and promoted exports greatly increased the cost of completely severing their relationship (Chan 1993; Heo et al. 2008). For this reason, Roehrig (2007, 32) argues that there are two paradigms in East Asian relations: one economic and the other political/strategic. According to him, integration and cooperation at many levels characterize the economic paradigm, while the political/strategic paradigm still involves political and territorial disputes.

Next, we show how social networks between South Korea and Taiwan developed through economic, cultural, and educational exchanges.

Trade Networks Between South Korea and Taiwan

Once South Korea and Taiwan normalized their relationship in 1948, their governments put a great deal of effort into expanding their trade and economic cooperation. Trade ministers of the two governments regularly met to discuss trade issues. A number of efforts were made in the private sector to do the same. For instance, the Federation of Korean Industries (FKI) and the Taiwan Federation of Industry (TFOI) had yearly conferences to enhance Korea-Taiwan economic cooperation; also the Korea Trade-Investment Promotion Agency (KOTRA) and the China External Trade Development Council (CETRA) held annual talks until they stopped in 1991 (Yonhap News, August 21, 2001).

Even after their official relationship ended, the trade volume between South Korea and Taiwan continued to increase. South Korea is Taiwan's sixth-largest export market, and Taiwan is South Korea's eighth-largest market. (5) The total amount of trade between South Korea and Taiwan, which in 1977 was a mere $0.2 billion, had increased to $23 billion in 2007. (6) In 2009 Taiwan's trade with South Korea represented almost 5 percent of Taiwan's total trade, while South Korea's trade with Taiwan accounted for 3 percent of its total trade. Taiwan's exports to South Korea are approximately 3.6 percent of its total exports, and imports are about 6 percent of the total. Annual trade between South Korea and Taiwan since 1980 is summarized in Figure 1. Trade between South Korea and Taiwan increased in the 1980s but decreased slightly and stayed stagnant in the early 1990s due to the officially severed relationship between the two governments. Then, starting in 1995 trade increased sharply, showing that the two governments facilitated expansion of their informal economic ties due to the enhanced national interests at stake.

South Korea and Taiwan enjoy a large trade relationship because their level of industrial development is similar and a type of division of labor exists between the two economies. For instance, South Korea and Taiwan both compete and complement each other in the information technology (IT) industry. They compete in semiconductors and flat panel displays, but they also complement each other: South Korea supplies flat panel displays to Taiwan since Taiwan has a low self-sufficiency rate of semiconductor equipment (only 9.1 percent). Taiwan imports approximately 90 percent of its semiconductor equipment, and South Korea is one of its suppliers. According to the Economist Intelligence Unit (EIU), South Korea's exports of semiconductor equipment to Taiwan are expected to increase by 100 percent in 2010. (7)


Another reason South Korea and Taiwan need to cooperate with each other is that both have export-oriented economies. Their industrialization was based on export promotion, and their economic performance depends on export growth (Chan 1993). However, many nations and regions have trade blocs that provide preferential treatment, and various forms of protectionism are still in place for some countries (Seo 1998). Despite a recent trend of regional economic cooperation via free trade zones, economic cooperation among Northeast Asian countries has been limited due to conflicts of interest. In isolated cases they have sometimes cooperated for mutual advantage. For instance, in 1992 when there was pressure to open agricultural markets at meetings of GATT (the General Agreement on Tariffs and Trade), the Agricultural Cooperative Association of South Korea, Taiwan, and Japan worked together. Many industries in South Korea and Taiwan still rely on Japanese parts and technology; therefore, as exports grow, so do their imports from Japan (Kim 1989). For this reason, South Korea and Taiwan experience large trade deficits with Japan. In order to improve their trade balance with Japan, South Korea and Taiwan need to strategically cooperate.

Foreign Direct Investment and Industrial Partnerships Between Korea and Taiwan

Since South Korea and Taiwan have similar industrial structures and costs of production, there is no incentive to invest in one another (Ahn 2007). Until the 1980s, there was no direct investment between South Korea and Taiwan. Even today, direct investment between the two economies is rather limited, although it has been increasing since the mid-1990s, just like trade. In other words, after the governments in South Korea and Taiwan facilitated unofficial relationships in the private sector, trade and direct investment both amplified dramatically. Investment statistics between South Korea and Taiwan are presented in Figure 2.

Taiwanese investment in South Korea concentrates on small-venture companies to enhance the export and import of electronic devices, while South Korean investment focuses on finance and insurance, wholesale and retail industries, and manufacturing. Although investments between them are small, South Korea was the ninth-largest foreign investor in Taiwan in 2008. (8) Approximately forty-six Korean companies, including Daewoo, GS Global, Korean Airlines, LG Electronics, Samsung Electronics, and SK Networks, have been doing business in Taiwan.

Taiwan has also increased its investment in South Korea since Seoul opened its markets in response to the 1997 Asian financial crisis. Since then, numerous Taiwanese enterprises, such as Tatung Company, Wan Hai Lines, China Airlines, and the China Development

Corporation have established local offices in South Korea. With this increased investment, South Korea and Taiwan have formed partnerships in electronics, computer software, and securities. The Taiwanese ASE Group and the China Development Industrial Bank are the two largest investors in South Korea through an industrial partnership. In addition, Promos Technologies, a Taiwanese memory manufacturing company, and Hynix Semiconductor, Inc., a Korean D-RAM manufacturing company, agreed to work together in research and development in 2003. The two leading memory manufacturing companies have announced that they would begin "a long term strategic alliance in technology licensing, foundry service, and development of new generation memory processes" (ProMOS Technologies 2003). Since technological progress is critical in continuing development, private companies do look for opportunities to cooperate (Hahm and Plein 1997). There are other cases of business cooperation between South Korea and Taiwan as well. The South Korean construction companies Hyundai Engineering and Construction, Samsung Construction, and Doosan Engineering and Construction have participated in building a high-speed railroad in Taipei, electric power stations, and the interior of the Taipei 101 Building, the tallest in Taiwan.


South Korea-Taiwan Free Trade Agreement

South Korea and Taiwan may discuss the possibility of a free trade agreement (FTA) in the near future because of the large trade flows between them. Taiwan has been generally positive toward an FTA with South Korea. In 2003 Li Tsai-fang, a former president of the Taipei mission in South Korea, said "a free trade pact between the two countries is expected to significantly bring a variety of benefits for the two economies" (Asia Pulse News 2003). He has also pointed out that since the two economies have international comparative advantages in the semiconductor and computer parts manufacturing businesses, their industries are complementary. Thus, South Korea and Taiwan should collaborate through an FTA. The current representative of Taipei liaisons, Cheon Yong-chwo, also said in June 2010, "We hope to sign a pact with Korea, Japan, and ASEAN." This statement implies that an FTA with Taiwan could act as a bridge for South Korea to mainland China.

In contrast, the South Korean government has yet to show much interest in the issue. According to Ahn (2007), South Korea may be interested in an FTA with Taiwan, but to avoid conflicts with the PRC, Seoul has not responded to Taiwan's desire to discuss the issue. (9) That said, once South Korea and China conclude a free trade agreement, Beijing might be more accepting of a Taiwan-South Korea FTA since its economic ties with Taipei have improved over the past few years.

The Educational and Cultural Dimensions

Cultural and Educational Exchanges

In spite of the severed official relationship, the Taipei government has promoted cultural and educational exchanges between South Korea and Taiwan to enhance mutual understanding. To provide government-level assistance, the cultural division of Taipei's mission in Korea established the Office of Cultural Exchange (Munhwajo) in March 1994. The office actively promoted cultural exchanges, especially at the youth level (Taipei Mission in Korea 2010a). Since then, many exchange programs have been developed, and the number of exchange students between South Korea and Taiwan has risen significantly.

In addition to efforts to promote cultural exchanges, the Taiwan government also facilitates educational exchanges. The education division of the Taipei mission in South Korea provides assistance to South Korean students to pursue their studies in Taiwan. In addition, they facilitate Korean academics' doing research in Taiwan and sponsor academic conferences to encourage scholarly exchanges.

The history of educational exchanges between South Korea and Taiwan goes back to the 1950s. In 1956 the first group of twenty-seven South Korean students went to Taiwan for study. Since then, the number of Korean students going to Taiwan for their studies has consistently increased, and by 1991 the number reached 2,242. However, South Korea's normalization with the PRC and Taiwan's severance of the official relationship with South Korea led to the decline of Korean students going to Taiwan. For instance, in 2000, only about 1,315 South Korean students studied in Taiwan, almost a 50 percent decline compared with nine years earlier (Whang 2002). Currently, about 400 South Korean students are studying in Taiwan. The total number of Korean students who studied in Taiwan since 1948 is over 35,000. Though South Korea-Taiwan student exchanges have fallen, the numbers do constitute another important piece in the overall network of their relationship.

In contrast, the total number of Taiwanese students who have gone to South Korea for study was only 1,500 by 2002, and only about 1,300 from 2007 to 2010. The reason may be China's importance in Korean foreign relations; South Korean students are very interested in studying China and mainland Chinese culture, and now that they have the opportunity to travel there, Taiwan's attractiveness has gone down. Regardless of the motives of South Korean students who study in Taiwan, their experience in Taiwan has surely improved their understanding of the country. Personal networks have developed between South Korean students and their Taiwanese professors and fellow students. However, among Taiwanese students, studying in South Korea has been less important because of Korea's relative unimportance to them.

Turning to other types of academic networks between South Korea and Taiwan, fifty-five Taiwanese universities have sister relationships with ninety-two Korean universities and colleges. Through these relationships, cultural and scholarly exchanges regularly occur. For example, Hankuk University of Foreign Studies and the National Taiwan Normal University have a 2:2 student exchange program. With this program, students of the two universities can earn bachelor's degrees from both universities by studying in each university for two years. Hanyang University and the National Political University (NPU) in Taipei have had an exchange program since 1975. NPU annually sends a group of students to Hanyang University; they stay in South Korea for a month to learn Korean and experience Korean culture (Whang 2002).

The Taiwan government also offers many programs to facilitate cultural and educational exchanges between South Korea and Taiwan. Some examples are the Taiwan Government Scholarship, (10) scholarships for short-term language training, a visiting scholar program in Taiwan, Taiwan's higher education fairs, Chinese language proficiency tests (TPO), and high school scholarship programs (Taipei Mission in Korea 2010b).

In addition, many academic organizations in South Korea and Taiwan hold conferences and forums for academic exchanges. Some examples are the Korea Society for Chinese Studies, the Korea-China Education Fund, the Comparative Literature Association, the Taiwan Culture and Education Fund, and University Mobility in Asia and the Pacific (UMAP). Approximately thirty-five academic associations in South Korea and twenty-five organizations in Taiwan have been regularly involved in scholarly conferences (Whang 2002).

There were many youth exchanges between South Korea and Taiwan before their official relations ended in 1992. Various youth organizations, such as the Korea Youth Association (KOYA) and the Korea Saemaul Undong (New Village Campaign) Center, had visiting programs. However, these activities were discontinued with the severance of official relations. Several youth exchange programs are currently in place, including regular exchange activities between the

Korean Boys' Group and the Chinese Boys' Group and between the Korean National Commission for UNESCO and the China Youth Corps. Some fellowship programs also provide financial assistance for South Korean students to visit Taiwan for the cultural experience. For instance, the Seoul International Youth Fellowship covers all the expenses for South Korean youngsters between the ages of nine and seventeen to visit Taiwan's historical places, experience Taiwan's culture, and explore Taiwan's landscape and foods.

Hanryu (The Korean Wave)

Hanryu is a recent cultural phenomenon in which Korean entertainers and other elements of pop culture such as Korean TV shows and games have gained tremendous popularity in East Asia, particularly among teenagers (Korea Trade-Investment Promotion Agency: 2007). However, the term "Hanryu" in Taiwan initially meant the flood of South Korean products to Taiwan at cheap prices due to the 1997 financial crisis, which led to the extreme devaluation of the Korean won. Due to high exchange rates resulting from the low value of the won, the price of South Korean goods was lowered significantly, causing imports to Taiwan from South Korea to increase dramatically. For example, Taiwan's imports from South Korea in 1996 prior to the financial crisis were $4 billion; they increased to $8 billion by 2000 and to $9.5 billion in 2009. Among the goods imported from South Korea were Korean cultural products, including Korean TV shows and movies.

These products gradually became popular in Taiwan. More and more South Korean TV shows aired in Taiwan, and Taiwanese fans idolized some Korean entertainers. As the Korean cultural products become very popular, a TV channel for South Korean programs called Entertainment K first aired in 2006. Competition among Taiwan broadcasting companies to acquire certain South Korean TV programs became stiff and drove prices sky high. For example, a TV show called A Tale of Autumn aired in South Korea in 2000 and sold for $2,000 per episode. Another TV show, Lovers in Paris, sold for $22,000 per episode in 2005, eleven times the previous price.

The popularity of South Korean TV shows also has had a significant impact. The fashion styles and accessories of South Korean TV stars became popular in Taiwan. In addition, a popular Korean TV show, A Jewel in the Palace, the story of a royal cook during the Chosun Dynasty, led to heightened interest in Korean food in Taiwan. After the South Korean TV shows A Jewel in the Palace and Winter Sonata began airing in Taiwan, interest in visiting South Korea increased significantly, resulting in numerous tour packages that included visiting the locations where those shows were filmed. As a result, about two-thirds of Taiwanese visits to South Korea were for sightseeing, and among them about 60 percent of the visitors were women (Korea Tourism Organization 2005, 2008). Since then, the number of Taiwanese tourists visiting South Korea has generally increased substantially, as shown in Figure 3. More than 225,000 South Koreans visited Taiwan in 2007 alone. By 2010, more than 400,000 Koreans were visiting Taiwan annually. As a result, South Korea be came Taiwan's eighth-most-visited foreign country in 2003, then sixth in 2004 and fifth in 2006.


To cope with the demand for traveling to South Korea, the number of flights between South Korea and Taiwan has also increased. The reestablishment of the Civil Aviation Agreement in 2004 made this change easy. Currently, there are ten flights between major cities in South Korea and Taipei and Kaohsiung every day, transporting approximately 700,000 people a year.

The rising number of visitors is a good example of the importance of soft power, showing the positive impact of nonstate actors on international relations (Nye 2004).

Residents Abroad

As of 2009 there were about 2,800 Koreans living in Taiwan, including short-term residents, students, and short-term visitors. (11) The majority of these Koreans live in the northern part of Taiwan, although the rest are spread all over the island. For Korean residents, there are two Korean schools in Taiwan: one in Taipei and one in Kaohsiung. Due to strict regulations on immigration by the Taiwanese government, immigration from South Korea has been limited.

The number of Taiwanese living in South Korea is limited but has increased in the recent past, probably because of the Korean Wave. The number of Taiwanese residents is approximately 24,400, which accounts for 2.1 percent of the total foreign residents in South Korea, following the Chinese, Southeast Asians, Americans, South Asians, and Japanese (Ministry of Public Administration and Security, Republic of Korea 2010).

Other Networks

There are other examples of South Korea-Taiwan cooperation to improve their relations. The National Health Insurance Corporation (NHIC) in South Korea and the Bureau of National Health Insurance (BNHI) in Taiwan signed a memorandum of understanding (MOU) in 2005 to promote mutual cooperation in health-care services and future cooperation between the organizations. The MOU includes holding a conference annually in both South Korea and Taiwan to improve the training of employees and the quality of health insurance services. In addition, the two organizations agreed to share statistics and research materials related to national health insurance, payment program reform, and insurer groups to learn from each other's experiences (Daily Medi 2005).

The Seoul Pharmaceutical Association and the Taipei City Pharmacists Council have been connected to one another since 1979. Even after the official relationship between South Korea and Taiwan was severed in 1992, these two organizations maintained their relationship, sharing their knowledge and experience. In March 2009 the two associations celebrated their thirtieth year of cooperation and agreed to extend their relationship for five more years (Yakup Daily 2009).

There have also been exchanges in religious leadership between South Korea and Taiwan. For example, in 2004 a Taiwanese Buddhist monk, Master Singwin, visited the Korean Jogye Order, the main Buddhist order in Korea. In return, Beop-jang, the executive chief of the Korean Jogye Order, went to see Master Singwin at the Bulgwang temple in Taiwan in 2005. During the visit, he also met with President Chen Shui-bian and discussed ways to enhance amicable relations between South Korea and Taiwan (Aura Corea 2010).

Another example of cooperation between religious leaders is the Korea-Taiwan Federation of Christian Parliamentarians, which was established in May 2001. Christian politicians in South Korea and Taiwan agreed to strengthen their ties. They also agreed to work together to correct the distortion of history in Japanese textbooks, reinforce their cooperation in performing missionary work, and lead agricultural and stockbreeding product exchanges (Union Press, May 23, 2001).

Transition to Democracy

Students of international relations have noticed the importance of trade in maintaining peace (Polachek 1980; Gasiorowski and Polachek 1982; Oneal and Russett 1997). The logic behind this argument is that since individuals do not produce everything they need, they tend to specialize and trade what they cannot produce efficiently. This socalled international comparative advantage enables trade participants to increase their welfare through trade. For this reason, any disruption of trade will result in welfare losses, significantly harming traders and consumers (Polachek 1980, 57). Since politicians are elected by voters in a democracy, politically unpopular policies tend not to be adopted.

South Korea and Taiwan experienced the transition to democracy when they held their first direct presidential elections in 1987 and 1996, respectively. Both experienced power shifts to the opposition party, showing the importance of voters. Although both countries display many signs of the lack of mature democratic institutions, politicians in South Korea and Taiwan realize they need to reflect voters' desires in their policymaking to stay in power. Due to the high volume of trade and personal networks developed between South Korea and Taiwan, complete severance of the relationship was politically risky. Seoul and Taipei needed to find a way to expand their private-sector exchanges in the economic and cultural spheres, and they did so.


Recent international relations literature has emphasized the importance of networks. Scholars have shown how national representatives may develop social networks through activities in intergovernmental organizations. Such networks help nations avoid military conflict. Furthermore, the dampening effects of trade on interstate conflict have been well established: disruption of economic exchanges damages national interests. Hence, trade participants do not want conflicts, and political leaders have less incentive to use force given the negative expected utility.

In this article we further developed liberal theory on the relationship between trade, international networks, and conflict. We argued that trade and private-sector networks developed via economic and cultural exchanges help governments overcome political difficulties and maintain cooperation in spite of conflicting interests that remain between them. Economic and cultural exchanges raise the costs of disrupting these activities.

A great example is the South Korea-Taiwan relationship. South Korea and Taiwan started their formal relationship in 1948 and cooperated throughout the Cold War. They shared a common interest in the anticommunist struggle. However, the end of the Cold War led South Korea to normalize its relationship with mainland China in 1992. Taiwan immediately severed its official relationship with South Korea. However, both governments resumed their unofficial relationship in 1993. Since then, relations between South Korea and Taiwan have developed considerably.

Seoul and Taipei were able to expand their cooperation because of extensive private-sector networks developed between them using various forms of exchanges. As shown earlier, trade between the two economies led them to be interdependent, and cultural and educational exchanges enhanced mutual understanding. The Korean Wave amplified Taiwanese interests in South Korea in general, leading to a significant increase in Taiwanese tourism in Korea. In addition, relationships between various organizations in the health industry as well as religious leaders in both countries enhanced cooperation. Through these cooperative activities, private-sector networks made a significant contribution to an amicable relationship between the two countries.

Because of the lack of available public information on lobbying, we were not able to explicitly show evidence of pressure by private-sector networks on the governments in South Korea and Taiwan. That said, these government efforts to expand their relationship point to how trade and cultural exchanges can affect foreign-policy choices. This finding has an important theoretical implication: cooperation in the private sector can influence foreign-policy choices and international relations. Previous studies have focused primarily on how trade and networks in the international community, such as international organizations, affect the likelihood of war. Considering the evidence of the nexus between private-sector networks and international relations in the South Korea-Taiwan relationship, further studies of other cases are needed to draw general conclusions about the influence of private-sector networks on international relations.


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Uk Heo is professor of political science at the University of Wisconsin-Milwaukee and international scholar at Kyung Hee University in Seoul. His research on international relations and Korean politics has appeared in the Journal of Politics and the British Journal of Political Science, among many others. His coauthored book, South Korea Since 1980 (with Terence Roehrig), was published in 2010. A

new book, South Korea's Rise in the World: Power, Economic Development and Foreign Policy (also with Terence Roehrig), is forthcoming. He can be reached at Hayam Kim is a graduate student of political science at the University of Wisconsin-Milwaukee. Her research interests are in international relations with an emphasis on international political economy and East Asia. She can be reached at

An earlier version of this paper was presented at the conference "Taiwan at the Center" at the University of South Carolina, Columbia, October 1-3, 2010. We would like to thank Dennis Hickey, W. Dean Kinzley, and participants in the conference for their helpful comments and suggestions. This work was supported by the National Research Foundation of Korea Grant funded by the Korean government (NRF-2010-330-B00031).

(1.) South Korea and the PRC, former adversaries during the Cold War, established formal relations because Seoul was an economic power too large for Beijing to ignore, and Seoul wanted Beijing to play a greater role in dealing with North Korea (Ye 2008).

(2.) For theories on the public-private sector relationship, see Hahm (1996).

(3.) For crisis decision making, see Ye (2007).

(4.) See also Domke 1988; Russett 1993, 26; and Risse-Kappen 1995.

(5.) Chen Young-Cho 2008. Chen was the Taiwanese representative to South Korea.

(6.) Due to the global financial crisis, trade between the two economies has declined. In 2009 it was approximately $19.5 billion.

(7.) The EIU also reports that the 2008 ranking of Taiwan and South Korea in terms of their competitiveness in the IT industry is, respectively, second and eighth.

(8.) Korean investments in Taiwan in 2011 accounted for 2.92 percent of the total foreign investment in Taiwan.

(9.) There is a different view on the South Korea-Taiwan FTA. According to the Taipei Times, Taiwan has not been able to sign a free trade pact with its closest trade partners, Japan, South Korea, and the United States, because it does not bring about enough benefits for these countries. See Japan-Thailand Economic Partnership Office 2006. For regionalism in East Asia, see Chan 1999.

(10.) The Taiwanese Government Scholarship for master's and doctoral students aims to advance a cooperative relationship between South Korea and Taiwan through educational exchanges. The government offers $900 a month for two years to master's students and for three years to doctoral students.

(11.) These statistics were last updated in 2009. See Ministry of Foreign Affairs and Trade, Taiwan 2010.
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Date:Mar 22, 2012
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