Japan set to strike South Korea off trade 'white list'

Members of the Japan delegation arrive for a World Trade Organization meeting in Geneva where the worsening trade and diplomatic dispute between South Korea and Japan will be raised, on July 24, 2019.
Members of the Japan delegation arrive for a World Trade Organization meeting in Geneva where the worsening trade and diplomatic dispute between South Korea and Japan will be raised, on July 24, 2019.PHOTO: REUTERS

TOKYO - Japan looks set to strike South Korea off its trade white list after a public consultation drive which ended on Wednesday (July 24) received more than 10,000 entries, an overwhelming proportion of which are said to be in favour of ending preferential treatment to Seoul, citing security concerns.

Trade minister Hiroshige Seko told reporters in Tokyo on Wednesday, hours before a World Trade Organisation (WTO) meeting in Geneva discussed the issue, that matters of security should be decided on the discretion of each country.

Hence, Japan has not run afoul of a global trading regime that frowns upon unilateral punitive trade measures.

Meanwhile, South Korean industry minister Sung Yung-mo urged Tokyo to ditch the plan to remove Seoul off the white list, saying that the "very grave" act would undermine economic and defence partnerships of the two United States security allies.

"The removal of South Korea from the white list of countries is against international norms and we are worried about its serious negative impact on global value chains and free trade," he said.

South Korea argued at the WTO that the trade measures amounted to political retaliation over a spat over wartime labour, given that there seems to be no other trigger.

Japan, however, says the trade measures are separate from the wartime labour issue, over which South Korea has rebuffed its bid to bring the case to arbitration.

"South Korea said that the measure taken by Japan went against the free trade system. Free trade, however, does not mean allowing trade in sensitive goods and technologies that can be diverted to military use, without any controls or conditions," Japan told the closed-door meeting, according to AFP.

Reuters, citing a Geneva official, said that no other countries took the floor to support either side.

Upper House lawmaker Rui Matsukawa told a news briefing on Wednesday that Japan's removal of preferential trade treatment for South Korea only brings it in line with Japan's trade requirements for over 160 countries in the world.

South Korea's presence as the only Asian country on Japan's 27-nation white list since 2004, she said, was a privilege and not a right.

Branding the Korean response an "overreaction", she noted that South Korea is also not on the trade white list of such jurisdictions as the European Union and Australia.

The ongoing spat stems from a Japanese requirement, which came into effect on July 4, that permission be obtained for each contract to export fluorine polyimide, photoresists and hydrogen fluoride (etching gas) to South Korea.

 
 
 
 

Japan is a world leader in these materials, which are key to South Korea's semiconductor industry. But Tokyo has accused Seoul of lax export controls that have led to their smuggling.

As the white list also applies to hundreds of other materials that could have military applications, South Korea's removal from this list - which public broadcaster NHK said could happen next month - will mean exporters may need to obtain licences for even more items.

On Tuesday, six American tech industry groups, with members such as Apple, urged the two countries to resolve their differences quickly. In an open letter they said: "Non-transparent and unilateral changes in export control policies can cause supply chain disruptions, delays in shipments, and ultimately long-term harm to the companies that operate within and beyond your borders and the workers they employ."

But Japan Foreign Trade Council chairman Kuniharu Nakamura said on Wednesday: "This is not about export bans or quantity restrictions. Items can still be exported if the procedures are followed properly. We simply have to make sure to start the procedure early and secure permission promptly."