Asia Business Channel

Japan vs South Korea – Both countries cut each other from export whitelists

 

The trade war between Japan and South Korea escalated dramatically on Friday after Japan said it would remove South Korea from its whitelist of favored economic partners. Less than four hours later, South Korea retaliated by removing Japan from its whitelist of preferred trading partners as well.

This result of this escalation is that both Japanese and South Korean exporters will have to undergo additional paperwork, regulations and screening and that key exporters in Japan will need to make sure that their goods and products do not have a military application that could benefit South Korea's military or weapons industry.

The escalation of tensions between the countries has been reignited as simmering tensions related to Japan’s colonization of South Korea in 1910. Japan ruled South Korea until the end of World War 2 and the 35-year reign by Japan was considered brutal. While both governments have said that World War 2 issues were resolved years earlier, resentment by South Koreans towards Japan continues to simmer.

At the same time that the Japanese government announced its decision to remove South Korea from its whitelist of favored trading partners, Hiroshige Seko, Japan's Minister for Trade was saying that this "is not an export ban."

The decision by the Japanese government means that Japanese companies who export "strategic" goods will be required to provide additional documentation related to their exports, will need to obtain more permits and will have to go through additional customs export screening to ensure their products are not being used by South Korea's military or weapons industry.

According to a report by Reuters, this is the first time Japan has removed a country from its whitelist, which includes the U.S., the UK and Germany. In retaliation South Korea retaliated by removing Japan from its whitelist of 29 preferred trading partners. At a time of the China-U.S. trade war, the problems between Japan and South Korea threaten the global supply chain for technology goods and have the potential to lower economic growth in both countries. On July 1st, Japan placed export curbs on fluorinated polyimide, photoresists, and hydrogen fluoride. These are key hi-tech materials that are used by South Korea's electronic industry to make semiconductors and display screens. South Korean citizens have protested the move by Japan be urging their fellow citizens to boycott Japanese products.

After Japan announced that South Korea was taken off of its whitelist, South Korean President Moon Jae-in told an emergency cabinet meeting on Friday and said,

"The step taken by Japan today is something that impairs the long-standing economic cooperation and friendly partnership between our two countries, posing a grave challenge to the bilateral relationship. Moreover, it is a selfish, destructive act that will cripple the global supply chain and wreak havoc on the global economy and it is sure to draw condemnation from the international community."

South Korean Finance Minister Hong Nam-ki also commented on the dispute between the two countries and said that South Korea plans to speed up efforts to file a complaint on Japan’s export controls with the World Trade Organization.

 

 

 

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