Gyeongju and the Fragile Future of Global Cooperation

Later this month, Gyeongju will host the 2025 APEC Leaders’ Meeting, the first time in twenty years that South Korea has served as chair. The timing is significant. The global economy is no longer defined by expansion and integration but by fragmentation, protectionism, and geopolitical rivalry. What was once an engine of openness has become a field of contest.

APEC’s founding logic — that trade and interdependence can stabilize the Asia-Pacific — faces its hardest test since the group was created in 1989. Supply chains are being reorganized along political lines, and governments now treat technology and minerals as instruments of national strategy. China’s restrictions on rare-earth exports, Washington’s tariff threats, and renewed industrial subsidies in Japan and South Korea all point to the same shift: efficiency has been replaced by control.

For Seoul, this year’s summit is not simply ceremonial. President Lee Jae-myung wants to use the occasion to define a more pragmatic form of middle-power diplomacy, one that keeps space open between the United States and China. The government’s focus on digital governance, demographic change, and inclusive innovation reflects an attempt to maintain relevance in a system increasingly shaped by blocs and rivalry.

Whether APEC can still deliver meaningful cooperation is uncertain. But in an environment where even dialogue has strategic value, the Gyeongju meeting will serve as a measure of how much multilateralism remains possible — and how much has already been lost.

The Slow Unraveling of Globalization

For three decades, globalization shaped policy and profit alike. Trade expanded faster than output, production networks spanned continents, and foreign investment was treated as a sign of stability. That rhythm broke after the 2008 financial crisis and collapsed further during the pandemic. Since then, the recovery in global trade has stalled even as demand returned.

According to the IMF, the ratio of trade to world GDP has been flat for more than a decade, and Cross-border investment remains about 60–70 percent of its pre-crisis peak. Analyses by the IMF and other institutions indicate that trade among politically aligned blocs is now growing faster than trade between strategic rivals— a clear indicator that politics, not price, determines flow. APEC’s own Policy Support Unit projects regional export growth of just 0.4 percent this year, the weakest since the forum’s creation.

The debate over whether globalization is ending misses the point. The volume of exchange remains high, but its direction has changed. Supply chains are being redesigned around risk management rather than cost. Multinationals are adding redundancy, splitting production between “trusted” partners, or shifting operations to Southeast Asia and Mexico in what investors call “China + 1.”

The cost of this transition is visible but uneven. The IMF estimates that a severe form of fragmentation — a permanent split into rival trade blocs — could reduce global output by as much as 7 percent over time. That loss would fall heaviest on developing economies and on low-income consumers in rich countries. Efficiency is no longer a global good; it has become a negotiable risk.

The slowdown is not a pause but a structural adjustment. States are no longer integrating for growth; they are reorganizing for control. What once tied the world together — trade, investment, technology — now divides it into competing systems of dependence. The question that will confront APEC in Gyeongju is whether managed interdependence can replace the open globalization that defined the past generation.

From Interdependence to Leverage — The Age of Blocs

The global economy no longer functions as a single network of efficiency. It is increasingly organized around alignment — who can be trusted, who controls what, and who supplies whom. Trade policy has become an extension of national security, and every major supply chain now carries political meaning.

Nowhere is this clearer than in technology and materials. The United States has tightened export controls on advanced semiconductors and lithography equipment to limit China’s technological reach. Beijing has responded by restricting the export of gallium, germanium, and a wider range of rare-earth elements essential for magnets, defense systems, and clean energy technologies. The effect has been immediate: costs have risen, uncertainty has spread, and firms are re-mapping production away from both superpowers.

Industry data underline the scale of the change. A study by the Boston Consulting Group estimates that a full technological decoupling between the U.S. and China would erase nearly 18 percent of global market share for American chipmakers and raise semiconductor prices by up to 65 percent worldwide. China’s countermeasures — especially its new export permits for key magnetic materials — have already delayed shipments to Japan and Korea, exposing the fragility of high-end manufacturing networks.

This reordering extends beyond technology. Japan, the European Union, and South Korea are expanding subsidies for domestic manufacturing, while the United States and China compete through industrial policy rather than open trade. The language of globalization — efficiency, specialization, comparative advantage — has been replaced by new terms: resilience, sovereignty, and security.

In practice, the world is not fragmenting into isolation but reorganizing into selective blocs. The Indo-Pacific alone now hosts overlapping frameworks: the U.S.–Japan–Korea trilateral, the Quad, AUKUS, and the Indo-Pacific Economic Framework on one side; the Regional Comprehensive Economic Partnership and China’s Belt and Road on the other. None of these are formal alliances, but all serve strategic functions. Economic interdependence is being nationalized — managed through the lens of rivalry rather than mutual gain.

For middle powers, this transformation narrows room for maneuver. States like Korea and Australia depend on open trade but must navigate between protectionist partners. Their task is not to choose sides but to ensure that the system remains functional enough to serve their interests. That is the quiet diplomacy now shaping Asia’s balance: survival through adaptation, not through alignment.

Inside the Summit — What Korea Wants

When the APEC leaders meet in Gyeongju at the end of October, South Korea will not only act as host but as a test case for how middle powers navigate a divided system. President Lee Jae-myung has described his foreign policy as “pragmatic diplomacy” — a phrase that signals less ambition for visibility than for balance. His government’s approach seeks stability at home and maneuvering space abroad, avoiding sharp alignments while staying relevant to both Washington and Beijing.

The summit agenda reflects that logic. Seoul has chosen three main priorities: digital governance, demographic change, and inclusive innovation. None are ideological or easily weaponized, yet all matter to every economy in the region. The strategy is deliberate — focus on issues that allow cooperation without forcing confrontation. For Korea, it is an exercise in keeping dialogue alive in a period when even neutral topics risk becoming political.

At the policy level, the Lee administration views APEC as a platform to demonstrate what it calls strategic coexistence. Officials describe this as maintaining engagement across rival blocs while reinforcing domestic resilience. Korea’s export dependence on semiconductors, batteries, and materials ties it to both the American and Chinese markets; its national interest lies in keeping those arteries open. Hosting APEC provides a chance to signal that position clearly: global stability remains inseparable from open regional exchange.

The government’s diplomatic focus is matched by its economic calculus. Seoul has sought progress on a Korea–U.S. trade adjustment package, including tariff relief and investment guarantees, while pursuing cooperation with ASEAN and RCEP members on digital trade standards. These moves form part of a broader effort to diversify risk — not to replace one dependency with another, but to maintain functional access across competing systems.

In practice, the success of APEC 2025 will not be judged by joint statements or final communiqués. What matters is whether the meeting avoids open confrontation and produces a minimal consensus on supply-chain transparency or digital ethics. That would be enough for Seoul to claim a measure of success: proof that coordination, however limited, is still possible.

For President Lee, that outcome would validate his government’s foreign-policy doctrine — that in an age of confrontation, restraint is strategy, and survival lies not in dominance but in balance.

Washington, Beijing and the Missing Dialogue

The geopolitical focus of this year’s APEC meeting rests on the relationship between the United States and China. Both economies are sending full delegations, and officials in Washington and Beijing have confirmed that a potential bilateral meeting between Donald Trump and Xi Jinping is reportedly under discussion.
If it happens, it would be their first direct contact since new tariff threats earlier this year unsettled markets across the Pacific.

American officials describe the goal as a “reset of communication,” not a negotiation. The White House wants to show that its trade actions—particularly the new uniform tariff proposal—do not foreclose diplomacy. Chinese officials, meanwhile, view the meeting as a gauge of political stability in Washington ahead of the U.S. election cycle. Both sides understand that any symbolic gesture, even a short handshake, could ease tension without altering policy.

The prospect of a Trump–Kim Jong Un meeting has been mentioned in passing, but officials view it as unlikely for now. U.S. advisers concede that such an encounter is unlikely but note that even limited contact could help temper risk perceptions in Northeast Asia. Pyongyang continues to reject talks conditioned on denuclearization, and Seoul has signaled that it will not broker a meeting without prior agreement on terms. The idea remains a contingency, not a plan.

For most APEC members, the value of these side meetings lies in what they prevent rather than what they achieve. A public confrontation between the major powers could overshadow the summit’s agenda and reinforce the narrative of irreversible bloc formation. Diplomats from Japan, Australia, and Indonesia emphasize the need for “predictable competition” — a phrase that now serves as shorthand for managing instability rather than eliminating it.

In this setting, APEC functions less as a negotiating table than as a stabilizing mechanism. Its informal structure forces adversaries to share space, to exchange minimal assurances that rules still exist. Whether Trump and Xi actually meet is secondary. What matters is that the world’s two largest economies still acknowledge a forum where conversation, however constrained, remains possible.

Korea’s Balancing Act

South Korea’s foreign policy now operates on a narrow line between economic necessity and strategic pressure. The country’s prosperity still depends on open trade, yet its two largest markets— the United States and China—are increasingly in conflict. That tension has turned diplomacy into risk management: the art of maintaining flexibility without appearing neutral.

President Lee Jae-myung’s government defines this posture as pragmatic middle-power diplomacy. The approach seeks to extract value from both systems while committing fully to neither. Seoul supports U.S.-led frameworks such as the Indo-Pacific Economic Framework, yet remains an active participant in the RCEP and maintains working channels with Beijing. The goal is continuity, not alignment.

In practice, the policy is sustained through diversification. Korea has expanded trade with ASEAN, accelerated semiconductor partnerships with Japan and Europe, and explored mineral cooperation with Australia and Canada. It is also investing heavily in domestic capacity — from chip fabrication to critical-material recycling — to reduce exposure to external shocks. Officials describe this as layered engagement: building multiple, overlapping networks to prevent any single failure from becoming systemic.

The balancing act, however, is politically fragile. At home, industrial leaders warn against jeopardizing access to U.S. technology markets, while progressive lawmakers caution against deepening dependence on American defense and energy frameworks. Lee’s administration must reconcile both views while keeping growth intact. In economic terms, that means treating every alliance as conditional; in diplomatic terms, it means saying less, but showing up everywhere.

What Korea demonstrates is not neutrality but endurance. Its strategy recognizes that in an era of fragmented interdependence, influence comes from participation rather than power. By staying indispensable to both sides, Seoul preserves its room to act — a rare advantage in a region where most choices now come with a cost.

Dialogue as Discipline

APEC’s weakness has always been its lack of binding authority; its strength, the space it gives for contact when other channels close. In the present climate that distinction has become its purpose. The forum’s value lies less in agreements than in endurance—the ability to keep twenty-one economies at the same table when trust is scarce.

For Korea, hosting the summit is a test of whether middle-power diplomacy can still function inside a polarized order. If the Gyeongju meetings conclude without public confrontation, and if members can frame even limited cooperation on digital standards or supply-chain transparency, Seoul will count that as success. The measure will not be the communiqués but the tone of the room.

More broadly, the summit will reveal how far economic regionalism can stretch before it breaks. The United States and China will continue to define opposite poles of technology and trade; Japan, Australia, and ASEAN will work to stabilize the space between them. The rest of the world will watch whether Asia’s pragmatic balancing can provide a model for coexistence rather than confrontation.

Gyeongju offers no illusion of consensus. It offers continuity—the modest but necessary act of keeping dialogue open. In a fragmented system, that discipline may be the last form of cooperation still available.