The Impact Of International Political Conflicts On International Trade

As geographical neighbors,China and South Korea share many similarities in culture,history,geography,and even ethnicity.Besides,they have historically been affected by Confucian culture.The similar status of both countries in East Asia makes the relationship between China and South Korea becomes an important part of world political relations.Since the establishment of diplomatic ties in 1992,China-ROK relations have witnessed rapid development,and they enjoy not only political friendship with each other but also win-win economic cooperation.In addition,China and South Korea both made outstanding contributions to building a new order in northeast Asia in the 21 st century,and maintaining peace and stability on the Korean peninsula.However,the relationship between China and South Korea is also a bilateral relationship in the world,so its trend is bound to be influenced by the international situation,which will be affected by relations between major powers,national interests and many other factors.In recent years,Sino-Korea relations have been experiencing several ups and downs.Conflicts over maritime rights and interests,disputes over the application of cultural heritage and the recent deployment of the THAAD by the ROK have adversely affected bilateral political relations and economic cooperation between China and South Korea.The development of Sino-Korea relations was at a standstill or even declined.Among them,the deployment of the THAAD system in South Korea at the end of 2016 seriously threatened China's national security interests,which caused strong condemnation and dissatisfaction of Chinese officials and the public.After the South Korean Lotte Group announced in February2017 that it provided construction land for the THAAD system,dissatisfaction among Chinese citizens has escalated,and boycotts against South Korean companies and products,including Rakuten,have erupted,which has brought a lot of impact on economic exchanges between China and South Korea,and the THAAD incident has caused a retrogression in Sino-Korea relations,and it has not yet fully recovered.The impact of international political relations on international trade has been a hot topic in academic research.In recent years,political conflicts between China and neighboring countries have occurred from time to time,and domestic empirical analysis of the impact ofsuch political conflicts on international trade has been less frequent and unexpected.However,how exactly the political conflict incidents in China affect the direction of international trade,what kind of impact effects will have,and how long these chain effects will continue,are all issues worth exploring.This article takes the Sino-Korea THAAD incident as an example,and uses the event analysis method to construct a difference-in-difference model of the THAAD incident affecting Sino-Korea trade.Then,we used two-digit product trade data to explore whether THAAD incident did have a negative impact on the exports from South Korean to China,and a placebo test was arranged after the benchmark regression to increase the reliability and robustness of the regression results.In addition,the article also analyzes the possible impact of the THAAD incident on China's imports and studies whether a trade transfer to the third country has occurred.The empirical results in this article show that the Chinese consumer boycott triggered by the THAAD incident has caused the loss of Korean exports to China to nearly 30%.Moreover,the affected products are mainly concentrated in the field of consumer products,which with higher replaceability.At the same time,the results of the study show that South Korea's electronic products trade with China is hardly affected by the THAAD incident,which also shows that the Chinese official attitude in the THAAD incident is still relatively rational and restrained,while the negative impact on South Korea's exports to China is more from the spontaneous private consumption boycott.The results also show that the import substitution effect brought by the conflict makes the third-party exporting countries such as Japan,the United States and Germany benefit from the THAAD incident,since these countries expand their exports to China.However,such import substitution effect is of short-term nature and gradually disappears with the time delay.This article reveals the possible impact of political conflicts on international trade,and suggests that China and South Korea should strengthen regional cooperation,strengthen government-level communication and dialogue,establish a multi-channel communication mechanism,and establish a crisis management mechanism in response to emergent international political events.And according to the conclusion that some core electronic products exported by South Korea to China have not been significantly negatively affected,it is suggested that the Chinese government should accelerate industrial transformation,reduce import dependence,promote diversification of import channels,and actively expand new trading partners and actively implement One Belt One Road initiative.