Saehae bok mani badeuseyo (happy lunar new year) from Seoul. South Koreans are returning to work from the seollal holidays to positive news that their vaccination rollout is now imminent and social-distancing requirements have been further eased. Today’s main piece looks at a broader challenge for Asia’s fourth-biggest economy, namely its struggle to walk the walk on multilateralism — across trade, climate change and now the international response to the crisis in Myanmar.

Policy watch, meanwhile, examines the UK’s break with Brussels on bank capital rules. Oh, and we’d also like to congratulate Ngozi Okonjo-Iweala on finally being named the new director-general of the World Trade Organization.

When Moon Jae-in spoke at the UN general assembly last September, the South Korean president stressed that the power of human co-operation was a “potent weapon” that couldn’t be matched by a virus. Restoring multilateralism was, he said, a core pillar of the global fight against the fallout from the coronavirus pandemic. In the months that followed, Moon made several gestures in line with that plea.

He surprised environmentalists in October with a promise that his country would achieve net zero emissions by 2050, following similar moves by leaders in Tokyo and Beijing. Then, in a rare press conference with international reporters in January, he said his administration was closely considering applying to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP.

However, environmentalists and diplomats alike are now starting to wonder just how serious the Moon administration is on keeping those promises. Underpinning the scepticism is a lack of substantive policy or outreach to complement those earlier proclamations.

On climate change action, Seoul has touted a “Green New Deal”, broadly, funnelling stimulus cash into green-focused industries such as electric vehicles and hydrogen, solar and wind energy. It has started to phase out older coal-fired power stations but is still building new ones, meaning that in 10 years, about one-third of the country’s electricity will still come from coal. Nor have the nation’s powerful conglomerates such as Samsung, Hyundai and SK Group taken responsibility to counter the problem, despite being among the country’s biggest energy users.

Critics say a far more profound shift is urgently needed to achieve Moon’s carbon neutrality target. This is a country that is the world’s seventh largest emitter and derives just 5 per cent of its electricity from renewable resources. Indeed, South Korea’s policy is classified as “highly insufficient” in reaching the aims of the Paris Agreement, according to Climate Action Tracker, a research group.

On joining the CPTPP, the story is similar. There have been strong words from the top, but so far little action. In many ways, South Korea is a natural choice for an expanded pan-Pacific trade pact. It is at the heart of the region’s supply chain, producing high-tech electronic components as well as devices, cars, ships and pharmaceuticals. What’s more, Seoul already has bilateral free trade agreements with most current CPTPP members.

But Moon’s officials have not yet communicated whether or not South Korea has a serious plan to join. Possibly a bigger worry is that the thorny, but necessary, domestic groundwork of winning the support of affected industries and their lobby groups — namely the car and agricultural sectors — has not started either. Instead, significant resources were spent over recent months on trade minister Yoo Myung-hee’s campaign for the role of World Trade Organization director-general.

Taeho Bark, a former South Korean trade minister, told Trade Secrets that regional and multilateral trade agreements had taken on “additional meaning” given the hits to the global trading system in recent years — including Brexit, the fragile state of the WTO and the US-China trade war.

“CPTPP, as one of the options for governing world trade, is becoming more important,” said Bark. “It can give a catalytical push to the multilateral trading system.”

According to Bark, the government is likely to need more time to decide exactly how to tackle a problem as big as weaning one of the world’s most carbon-intensive economies off coal. But deciding to get serious about joining the CPTPP? That shouldn’t be so hard. “We have been discussing this for a really long time,” he said.

While Moon and his top aides at the presidential Blue House consider whether to act on these longer-term challenges, the military coup in Myanmar looks set to pose a more immediate test over Seoul’s commitment to multilateralism.

South Korea is among the top 10 foreign investors in the south-east Asian nation that was rocked by a military coup this month. There are about 300 South Korean companies with operations in Myanmar, including Hyundai and steelmaker Posco, but human rights experts are asking tough questions about the ethics of maintaining such a big presence in the military-controlled country. Already, Japan’s Kirin has said it will end its brewing joint ventures with ties to Myanmar’s army.

If the situation in Myanmar deteriorates, as many experts believe it almost certainly will, Trade Secrets expects these questions will become increasingly difficult for Seoul to answer.

Taken together, Trade Secrets wonders whether Moon, entering his last year of a sole five-year term, is missing a golden opportunity to make good on his potential to fill a void in true global leadership.

The European Banking Authority’s decision in December to allow lenders in the region to count investment in software towards their core capital levels raised a fair few eyebrows, including those of the Bank of England governor. As the FT reported, Andrew Bailey last week said the EU policy would “give a false picture of a bank’s loss absorbing capacity”. Bailey also said the change contravened the Basel standards on global banking regulation, which do not allow for intangible assets.

Threadneedle Street’s rebuke of the EBA (see here for more details on the view of the BoE’s Prudential Regulation Authority) marks the first significant post-Brexit break between the EU and the UK on banking regulation. And rather than, as many in Brussels feared (and many a Brexiter hoped), the UK going soft on big business and applying a light touch, it’s the other way round. As Alan Beattie quipped, the UK’s move is less Singapore, and more Ottawa-on-Thames. (That’s a reference to the sturdiness of Canada’s banks, which survived the 2008 global financial crisis in far better shape than their US counterparts.)

We’re with Threadneedle Street on this one, though. If a bank runs into trouble, we really don’t think their software is going to do much to cushion the blow.

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