Japan set to remove South Korea from export ‘white list’
Last Modified: 06:47 AM, Thu Aug 01, 2019

Robin Harding in Tokyo, and Edward White and Song Jung-a in Seoul

FT.com. 01 August 2019
Decision marks a worsening of dispute over wartime forced labour compensation

Japan intends to remove South Korea from its export control “white list” at a cabinet meeting on Friday in an escalation of their dispute about compensation for wartime forced labour.

According to one former minister, Japan is “100 per cent sure” to go ahead with a move that could require exporters to obtain licences when they ship a wide range of chemicals and electronic goods to South Korea.

The decision to remove South Korea from Japan’s list of friendly countries would come despite US efforts to mediate that could yet result in a last-minute delay. It marks a worsening of the dispute, with Seoul threatening to tear up an intelligence-sharing pact in retaliation.

After a meeting with her Japanese counterpart Kono Taro in Bangkok, South Korean foreign minister Kang Kyung-wha told reporters that Seoul will have no option but to review the security relationship between the countries if Japan goes ahead with its move.

Japan has already imposed controls on three chemicals crucial to South Korea’s world-leading semiconductor industry: fluorinated polyimide, photoresists and hydrogen fluoride etching gas. Japan has a dominant global market share for each.

Tokyo insists that its move is a regular, bureaucratic decision on arms control but it is widely regarded as retaliation against a ruling by South Korea’s supreme court last autumn that awarded damages against Japanese companies, including Mitsubishi Heavy Industries, for forced labour during the second world war.

According to Tokyo, all such claims were “settled completely and finally” by a 1965 treaty under which it paid compensation to the South Korean government. Japan has been demanding arbitration as required by the treaty, but Seoul has refused to appoint an arbitrator, leading Tokyo to declare a breakdown in trust. 

“The white list countries are treated specially and South Korea is the only country in Asia on the list,” said Akira Amari, the former economy minister and a close associate of prime minister Shinzo Abe. “All this does is return them to being treated normally.”

Officials in Seoul have been bracing for the new controls after a meeting between the countries’ trade ministers this week failed to make any progress. 

President Moon Jae-in’s government has pledged to boost support for local industries to develop new materials and components to replace the Japanese imports, a move that would take months, if not years, to bear fruit given the specialist high-tech nature of many of the products. 

However, Mr Moon has stopped short of a tougher retaliatory response, despite rising anger among many South Koreans over the issue. 

“We are not likely to take any sort of direct retaliatory measures that go against international free trade rules,” one high-ranking government official said. “When we got hit by someone for no reason, we ask the person why he hit us and ask the police to look into it. That’s what we’re doing at the moment.” 

“Our companies are trying to source key materials and parts domestically rather than importing them. So it will be the Japanese suppliers who will suffer from the Japanese move in the end,” the official added. 

Tokyo’s moves threaten to cause widespread disruption to the tech supply chain. If Tokyo removes Seoul from the white list, South Korean companies could be obliged to seek individual approvals for 857 of the 1,120 strategic materials they import from Japan, according to a research note from Korea Investment & Securities. 

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The Financial Times Ltd.
Article Info
Publication: FT.com
Organization: Government of South Korea, Mitsubishi Heavy Industries Ltd
Location: Asia-Pacific, South Korea, Japan, Asia-Pacific
People: Song Jung-a, Edward White, Robin Harding
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Japanese business & finance, Japanese politics & policy, Global trade, Global Economy, Economy, World, Emerging markets, Politics