(53) Big Nation Twists Small Trader’s Arm

By Yang Sung-jin

Last week the U.S. announced it would revive the “Super 301” trading provision, which has been used to threaten trade sanctions against any country Washington deems to be an unfair trader. Other countries (which are likely to be affected by the revival of the provision) promptly labeled the U.S. decision “protectionist.” Is this the beginning of another bitter trade war?

International trade is, after all, a boiling pot of conflicting interests among nations. It has a long history. Back in 1499, the Choson government noticed an influx of Chinese imports into the domestic market, a trend that was severely undermining the national economy.

Official Han Chi-ryong reported to King Yonsangun, “Chinese goods have a different price system. Last year alone, we imported 3,700 rolls of ramie and hemp cloth, which is amounting to 18,000 rolls of Choson cotton. Given that the coffers is now almost empty due to the imports, international trade of unnecessary goods should be curtailed.”

Choson had two main international trading counterparts: Japan and China. Starting in an earlier period, Japan imported cotton cloths, rice, books and medicine from the Korean peninsula. In the 16th century, Japan underwent a civil war amongst its local lords, which prompted a large-scale import of rice and cotton from Choson.

The relatively healthy economy of Choson, however, was shattered by the Japanese Hideyoshi Invasion (1952-58). The war turned farmlands into wastelands and countless people were killed as a result. Worse, natural disaster hit the nation at a very critical moment, sending the national economy into a dismal tailspin.

Desperate to secure basic goods needed in everyday life, the Choson government turned to its longtime ally, China. That was the beginning of international trade at a private level between Choson and China in a departure from the traditional tributary trade.

Triangular Trade Structure

The sharp increase in private trade with China subsequently affected trade with Japan, an area which had long been regulated by the Choson government. Smuggling played a key role in private trade deals struck across the East Sea.

Meanwhile, a number of farmers, deprived of arable land in the wake of the war, migrated to cities where a demand for commerce and trade was on the rise. Many of the farmers became merchants, injecting fresh energy into the fledgling domestic market.

With international trade and domestic business booming, Choson had yet to introduce a reliable anchor currency at the time. Instead, silver was widely used, a practice dating back to the Hideyoshi Invasion.

As the national economy was in tatters due to the devastating war, the Choson government called for aid from Ming China. The Chinese army duly joined the war to rescue Choson and brought silver with them in order to buy necessary goods.

The massive influx of silver from China led to a new economic trend that was noted in the Annals in April of 1598: “Trifle goods such as liquors, meat and tofu are now traded in silver. Initially, the silver had been used when the government traded with the Chinese army. But as time went by, it became a solid custom. When trading, the first question a merchant ask is whether the counterpart has silver.”

In fact, China demanded gold and silver as a tribute from Choson in the early 16th century. The threat disguised as a diplomatic exchange was inevitable in the eyes of Chinese officials.

At the time, gold and silver reserves in China were funneled to repair and maintain the Silk Road and as a result were almost depleted. Top Chinese officials had no other option but to dig up diligently in southern provinces in mainland China while bullying Choson to bear the bizarre burden.

To meet China’s demand (or to avoid dreadful diplomatic sanctions), the Choson government made efforts to conserve every ounce of gold and silver available. It prohibited gold plating and banned Buddhist statues made of gold or sliver. Still, the precious metals were chronically in short supply.

Hush-Hush Gold Business

King Sejong, determined to address the issue, suggested offering horses and hemp cloths to China instead of gold and silver. He even issued a special executive order banning the development of gold and silver mines in Choson.

But King Sejong’s far-sighted measure did not terminate the profitable mining business completely. In May of 1516, official Park Yuk appealed to King Chungjong: “People headed for China are said to carry much silver mined from Tanchon, Hamkyong-do. And Chinese people greatly appreciate the quality of Tanchon silver, a fact which is likely to force us to pay tribute in silver. Therefore, the silver mining in Tanchon should stop right now.”

The king replied, “I know the possible defects of the silver mining. At present, however, Hamkyong-do administration’s military budget is in deficit and I want to help them secure needed money through silver mining.”

In 1540, the nation was hit severely by a bad harvest and prolonged famine. The much-dreaded possibility of paying silver to China was raised and debated by court officials.

Official On Pil reported, “In 1429, our nation was exempt from the duty of paying tribute in silver to China, a formal acknowledgment that silver was scarce in our land. The items required by China before we got the exemption were almost unbelievable. Dozens of gold and silver vessels were sent to China several times a year.”

The ranking official argued that if China reviews past practices and decides to resume the tributary system under which Choson should offer silver to China, it would be impossible to collect enough silver.

On Nov. 7 of 1602, the Ministry of Taxation called for the development of silver mines to increase the tax revenues, a request that sparked another round of dispute on the issue.

King Sonjo said, “The suggestion of producing salt and mining silver in order to make people’s lives better is understandable. But there has been a reason behind the strict ban on silver mining. If we develop silver mines, it can leak to enemy nations, which means we may end up with a war we incited.”

The king expressed his strong will to maintain control over mining, citing the situation in China: “All the available mines in China have been developed and officials dispatched from the central government are hellbent on collecting silver. And the news that Choson has silver mines will definitely lead to a Chinese delegation with a mission to collect silver from our nation. How can the Ministry of Taxation deal with this situation?”

Evidently, Choson kings and officials accurately understood the prime rule of realpolitik: A superpower never hesitates to twist the arms of smaller nations in order to get what it wants. No wonder “Super 301” is looked upon suspiciously by smaller traders.