US: Renewed action in the Korean Peninsula is a concern - BBH

In view of analysts at BBH, a potential destabilizing impulse may come from renewed action in the Korean Peninsula as the bellicose rhetoric has been silenced, but a new round of intimidating actions are about to start.  

Key Quotes

“On August 21 the annual Ulchi Freedom Guardian military exercises between the US and South Korean forces that are joined by other nations that reportedly include mock decapitation strikes where the leadership of North Korea, including Kim, are killed and the use of nuclear weapons.”   

“Estimates suggest that at least 80k troops participated in last year's exercise. Last year, North Korea responded by launching a ballistic missile from a submarine, demonstrating second strike capability.  In the 1990s, the some of the exercises were used as bargaining chips that were used to negotiate an agreement aimed to contain North Korea's nuclear development, which it violated.”

“It is difficult to see a military solution to the North Korea's acquisition of nuclear capability including delivery.   The broad strategy of deterring the proliferation of nuclear weapons has nevertheless been fairly successful.  Most countries do not have the nuclear capability nor are they striving for it.  Nevertheless, North Korea acquisition is the most threatening to the US perhaps since China itself acquired such capability.”

“The ultimate solution may not lie with bilateral talks between the US and North Korea, but between the US and China.  North Korea is spurring a response that is undermining China's nuclear capability.  South Korea, Japan, and the US are developing, deploying and upgrading missile defense.  It is a bit like a game of football, where sometimes what determines the outcome is offense and sometimes defense.  Ostensibly, the deployment of missile defenses by US allies could limit China's first and second strike capabilities.”

“The resolution of Pyongyang runs through Beijing.  Trump seems to recognize this and may help explain such tentative steps to address trade and currency issues.  Last week's executive order on intellectual property rights gave headline writers plenty of fodder about the coming trade war.  It does no such thing.  It is a small baby step.  It passes the issue to the US Trade Representative who has been asked decide whether to have an investigation.  Even if a decision to investigate is made, which is most likely will be, the investigation could take over a year.  And even if their investigation is completed, it does not mean action will be taken, as with steel.”

“New NAFTA negotiations just began, there are ongoing investigations into China’s practices (e.g., aluminum), and countless other ongoing efforts that are apparently being handled by under-staffed offices.  At the same time, on August 22, the US and South Korea will begin talks to re-open the five-year-old free-trade agreement.  The US complaint is that since the agreement US exports have actually fallen and the bilateral deficit has doubled.”