This essay first appeared in The Diplomat.

For decades, South Korean strategy rested on a stable hierarchy within the international order. The alliance with the United States provided security; Seoul then managed relations with Japan, Europe, China, and regional institutions around that anchor. The alliance remains indispensable, but Seoul can no longer assume that this foundation will stay stable.

The evidence is visible in the way Washington now deals with allies. In 2025, the United States initially announced sharply differentiated “reciprocal” tariffs on South Korea, Japan, and the European Union. Negotiations later produced a 15 percent baseline framework for all three, but the process mattered as much as the final rate. Trade access, industrial investment, defense procurement, and alliance politics were increasingly handled as one bargaining package. Allies were not exempt from economic pressure because they were allies.

At the same time, Europe and Asia have been building connections that would have seemed highly ambitious a decade ago. The European Union signed security and defense partnerships with Japan and South Korea in November 2024. This year, the EU and Japan launched a defense-industry dialogue, while the EU and South Korea signed a digital trade agreement and began implementing cooperation on maritime security, cyber and hybrid threats, information manipulation, space, and the defense industry. The strategic map is becoming more networked. 

The network, however, remains uneven. Japan already has a mature economic partnership with the EU and rapidly expanding defense-industry ties. EU-South Korea relations are deepening, but they still lack the density and regular strategic consultation found in EU-Japan ties. A trilateral format would therefore do more than add another meeting: it would reduce asymmetry among three partners whose capabilities are increasingly complementary.

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South Korea, Japan, and the EU now face four converging challenges and pressures.

The first is demographic. South Korea is aging faster than any other OECD society; Japan’s working-age population has been shrinking for decades; and the EU’s fertility rate reached a new low in 2024. Demography is not a social-policy sidebar. It affects defense recruitment, industrial capacity, fiscal room, technological adoption, and the ability to sustain long-term commitments. Each actor is experimenting with immigration, automation, workforce policy, and welfare reform, but the security implications remain largely compartmentalized.

The second is concentrated economic dependence. None of the three can or should decouple from China. Yet South Korea’s experience after the THAAD deployment, Europe’s debates over economic coercion, and China’s export controls on gallium, germanium, and other strategic inputs have shown that interdependence can be converted into leverage. De-risking therefore requires more than national stockpiles. It requires shared risk maps, compatible certification, co-investment in alternative suppliers, and advance consultation before export controls or industrial subsidies create collateral damage among partners.

The third challenge is U.S. volatility. The United States is still the only actor capable of providing extended nuclear deterrence to South Korea and Japan, and NATO remains central to European defense. But dependence on U.S. power now coexists with uncertainty about U.S. policy. The classic alliance dilemmas of abandonment and entrapment are no longer opposite ends of a spectrum. Today, U.S. allies fear both being left out and being drawn into bargains or contingencies they did not shape.

The fourth pressure is the collapse of the old geographic separation between European and Asian security. North Korean munitions, missiles, and troops have supported Russia’s war against Ukraine. Moscow, in turn, has provided Pyongyang with political cover, economic support, and the prospect of military know-how. What happens on a European battlefield is changing the military balance on the Korean Peninsula. A regional response to a cross-regional threat is structurally inadequate.

This is the case for an EU-Japan-South Korea strategic dialogue. This framework should not be described as strategic autonomy, equidistance, or a hedge against the United States. A better term would be institutionalized hedging: risk diversification through standing, rule-based consultation among allies and partners that remain anchored in the broader U.S.-led system.

The proposal is more feasible than ever before. Japan-South Korea relations have improved significantly in recent years. The January 2026 summit in Nara and the reciprocal summit in South Korea in May demonstrated continuity across leadership changes in both countries since June 2025. The EU already has free-trade, digital, green, and security frameworks with both countries. The task is not to invent three new bilateral relationships; it is to connect existing ones.

The dialogue should begin modestly, through a Track 1.5 process involving officials, experts, and industry. Its early agenda must be concrete and specific: a joint critical minerals and supply chain risk assessment; consultation on export controls and investment screening; cooperation on AI, cyber resilience, and digital standards; exchanges on demographic and defense workforce adaptation; and shared monitoring of North Korea-Russia military cooperation. Successful projects could then be elevated to ministerial working groups.

Two design choices are essential. First, the initiative must remain function-driven. It is not NATO, not the Quad, and not an anti-China coalition. Its purpose is to reduce vulnerability without demanding economic separation. Second, it should be complementary to relations with Washington and transparent about that purpose. Horizontal networks strengthen alliances when they help allies absorb shocks, coordinate positions, and arrive at consultations with greater capacity.

For South Korea, the need is particularly acute. Japan already has the G7, a mature economic partnership with the EU, and expanding European defense ties. Seoul’s international weight has grown faster than its institutional depth. An EU-Japan-South Korea dialogue would help close that gap.

Horizontalizing alliances is not a vote of no confidence in the United States. It is insurance for the moments when the United States wavers, overreaches, or changes course. The postwar hierarchy cannot simply be preserved by demanding more reassurance from Washington. Its resilience will depend on whether allies can build connective tissue among themselves before the next crisis forces them to improvise.

Introduction and Contribution

Economies depend on infrastructure: roads enable the movement of goods and workers, electricity powers businesses and factories, and communications technologies allow for the exchange of information and services. Yet in our connected world, roughly 1 billion people live more than two kilometers from an all-season road, and approximately 1.2 billion have no access to electricity.¹

For decades, institutions such as the World Bank and McKinsey Global Institute have promoted the idea that closing a trillion-dollar gap between planned global infrastructure investment and the estimated level of investment needed to drive growth will alleviate poverty, harness the potential of developing nations to increase global GDP, and enrich foreign investors. But despite the fact that unrealized gains from greater infrastructure investment in emerging market and developing economies (EMDEs) outstrip those in the rich world, comparatively little capital flows into the infrastructure of poor countries.

In “The Global Infrastructure Gap: Potential, Perils, and a Framework for Distinction,” Camille Gardner and Peter Blair Henry reject the received narrative that flooding poor countries with capital simply to reach a target level of infrastructure investment will yield the desired gains. Instead, they urge investors and policymakers to move from thinking about infrastructure “gaps” to prioritizing infrastructure returns. Specifically, they propose the first “dual hurdle” framework. The framework uses cross-country differences in returns to identify efficiency in cross-country investments, incorporating the incentives that suppliers and allocators of capital must have to finance productive projects.

Applying the framework to historical data, Gardner and Henry debunk the notion that poor countries offer ubiquitous opportunities for productive investment. Only 13 percent of countries in the data set cleared the dual-hurdle tests of efficiency for projects in both roads and electricity. But for countries that did clear the hurdles, the return on infrastructure was large: more than 10 times greater in some cases than the return on rich-country private capital.

This underscores the need for updated and more accessible data to drive decisions and prioritize projects. Differences across countries, sectors (e.g., roads vs. electricity), and locations (urban vs. rural) must be taken seriously to avoid a wasteful allocation of global infrastructure capital.

Gardner and Henry expand our understanding of when cross-country infrastructure investments are efficient and why poor countries have struggled to catch up. And as labor forces in poor countries grow rapidly, the problems associated with infrastructure scarcity are likely to become more acute, increasing migration pressures. Effective investment can mitigate risks while generating mutual gains for poor and rich countries alike.

When Infrastructure Investment Pays Off

The authors’ dual hurdle framework reveals that public infrastructure investment in a poor country is efficient only if it yields higher returns than the social rate of return on private capital (a) within the country and (b) in rich countries. Countries that clear both hurdles are deemed strong candidates for more investment.
 

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Figure 4. The Dual-Hurdle Framework

Note: For a given poor country and type of infrastructure, the dual-hurdle framework sorts each country-infrastructure observation into one of four quadrants according to whether it clears the hurdle for efficient: (a) domestic investment, and (b) foreign investment.
 

Gardner and Henry apply their framework to 53 countries that belong to the only known data set of comprehensive cross-country estimates of the social rates of return on infrastructure (roads and electricity) in poor countries, found in a paper commissioned by the World Bank that is based on data from 1985.² In their analysis, Gardner and Henry show that while some countries have opportunities for high returns (especially for paved roads), many others do not. In very few countries can the case be made for investing across multiple kinds of infrastructure (only 7 of 53 countries cleared the dual hurdles for both roads and electricity), and for some countries there is no case to be made.

To be clear, infrastructure investment is not generally inefficient. Indeed, worthwhile projects to increase or upgrade infrastructure in poor countries can yield much higher gains than are available from private investment in both poor and rich countries. This is because infrastructure improvements raise productivity across the economy. The problem is that these high-return opportunities are difficult to identify, especially without updated, readily accessible, quality data.

Different types of infrastructure also vary in their impact depending on the context. For example, investments in electricity often yield low returns in rural settings but high returns in urban settings (where firms are concentrated and struggle due to unreliable power). By contrast, roads more often yield higher returns because they support market activity overall. Finally, the authors show that efficient infrastructure also depends on the interaction of private capital, human capital, and good institutions. This underscores the limitations of simply building more infrastructure in isolation. 

Challenges to Infrastructure Investment

Gardner and Henry document extensive variation in efficiency when comparing private versus public capital allocation (in roads and electricity) across rich and poor countries. The social rates of return on public capital vary much more than with private capital, which is the case in both rich and poor countries, and inefficiencies in public capital allocation are greater in poor countries than in rich ones. This variation is driven not just by economic factors but also by political and institutional constraints.

The concept of “frozen capital” helpfully describes the outcome of problems facing prospective investors. For one, because infrastructure requires complementarities (e.g., electrifying an area requires the preexistence of reliable roads), individual projects may be unprofitable unless others are simultaneously financed and coordinated.

Additionally, foreign investors may distrust the governments of the countries where they invest, or they may be wary of the quality of domestic firms tasked with completing a given project. This will certainly be true where transparency and accountability are lacking. Especially in poor autocracies or semi-democracies, governments may arbitrarily change the law, fail to honor contracts, or face political and social instability, leaving investors uncertain about the prospect of repayment and return on their investments.

Ultimately, infrastructure investment offers great promise, but it must be evidence-based and approached with caution. The challenge is not to simply raise the level of investment but, as “The Global Infrastructure Gap” shows, to use cross-country differences in returns to identify the right infrastructure projects, in the right places, to maximize the efficiency of cross-country capital allocation.

*Brief prepared by Adam Fefer.

_References:

_{1. Canning, David, and Esra Bennathan. 2000. “The Social Rate of Return on Infrastructure Investment.” World Bank Policy Research Working Paper 2390.}

_{2. Rozenberg, Julie, and Marianne Fay, eds. 2019. Beyond the Gap: How Countries Can Afford the Infrastructure They Need While Protecting the Planet. Washington, DC: World Bank.}