Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Japan to remove South Korea from 'white list' of favored trade partners

Published 08/02/2019, 04:39 AM
Updated 08/02/2019, 04:39 AM
© Reuters. Protesters stand in front of policemen standing guard in front of the Japanese embassy during an anti-Japan rally in Seoul

© Reuters. Protesters stand in front of policemen standing guard in front of the Japanese embassy during an anti-Japan rally in Seoul

By Makiko Yamazaki and Ju-min Park

TOKYO/SEOUL (Reuters) - South Korea fired back at Japan over a deepening trade dispute on Friday, pledging it would not be "defeated again" by its neighbor, laying bare decades-old animosity at the root of a row over fast-track export status.

During a rare live television broadcast of his cabinet meeting, South Korean President Moon Jae-in threatened countermeasures after Japan's cabinet approved the removal of South Korea's fast-track export status from Aug.28.

Cutting South Korea from a so-called "white list" of favored export destinations mean more paperwork, on-site inspections for some Japanese exporters to obtain permits, potentially slowing down exports of a wide range of goods that could be used to produce weapons.

Relations between the two U.S. allies began to deteriorate late last year following a row over compensation for wartime forced laborers during Japan's occupation, but the language used by President Moon was the starkest yet.

"We won't be defeated by Japan again," Moon told his cabinet, pointedly invoking South Korea's difficult history with Japan, which colonized the Korean peninsula before World War Two.

He described Japan as a "selfish nuisance" for disrupting global supply chains, and aired suspicions over its motive for hobbling a rival economy.

As part of its countermeasures, South Korea will remove Japan from its own "white list" of favored trade countries and speed up the filing of a complaint to the World Trade Organization over Japan's export controls, Finance Minister Hong Nam-ki said.

Earlier in Tokyo, Japanese Industry Minister Hiroshige Seko told a briefing that the cabinet had taken the decision for national security reasons, and it was not intended to harm bilateral relations. South Korean officials have held a different perspective, particularly since last month, when Japan tightened curbs on exports to South Korea of three high-tech materials needed to make memory chips and display panels, threatening the global supply of chips.

TRUST DEFICIT

While Japan justified its decision on national security grounds, it has also pointed to an erosion of trust since South Korean court rulings ordered Japanese firms to compensate wartime forced laborers. Tokyo says that issue was settled by a 1965 treaty that normalized ties between the two countries.

"We want South Korea to first create an environment in which we can have dialogue with trust. It's South Korea's responsibility to do that," Industry Minister Seko said.

The rift is the latest example of how a decades-old disagreement has undermined relations between the two U.S. allies, at a time when Washington wants them working closely together on North Korea. It also awkward economically, as both export driven economies are facing sliding demand from China.

Tokyo has been frustrated by what it calls a lack of action by Seoul after South Korea's top court ruled last year that a Japanese steelmaker should compensate former forced laborers.

South Korea would be the first country to be removed from Japan's white list, which currently has 27 countries including Germany, Britain and the United States.

SENSITIVITIES

Seko said Japan was unwilling to hold a dialogue until South Korea corrected a statement made at a July meeting between bureaucrats of the two countries.

Japan has disputed a Korean official's comment that Seoul asked Japan to repeal the export curbs at that July meeting. Tokyo has also accused South Korea of breaking an agreement on what the two sides would disclose from the meeting.

South Korean officials, for their part, have warned they may reconsider an intelligence sharing accord with Japan if the feud worsens.

The United States has urged its two key Asian allies to consider reaching a "standstill agreement" to buy more time for talks, a senior U.S. administration official told reporters in Washington on Tuesday.

U.S. Secretary of State Mike Pompeo said on Thursday he hoped the two would find a solution by themselves, stressing cooperation on North Korea was "incredibly important". Seko said Japan had briefed the U.S. administration on its plans.

CHIPS AT STAKE

The fresh restrictions could deal an additional blow to South Korean chipmakers, which are already scrambling to secure key chipmaking materials after last month's export curbs.

South Korea's top imports from Japan by value last year were semiconductor components and equipment ranging from silicon wafers to chip etching machines, totaled at about $11 billion, nearly 20% of Japanese imports, according to data provided by Korea International Trade Association.

Moody's Investors Service said Japan's removal of South Korea from the white list is a credit negative for many South Korean companies.

South Korea's central bank chief also flagged concerns that Japan's move can significantly impact economy.

© Reuters. Protesters stand in front of policemen standing guard in front of the Japanese embassy during an anti-Japan rally in Seoul

On Thursday, South Korea reported its exports had tumbled for the eighth straight month in July, with the escalating trade dispute adding to an increasingly gloomy picture.

Latest comments

Since not one living person is responsible for WWII war atrocities Korea is so upset about, I think Korea kind of stepped on their own tail here. Seriously time to let go of the regrettable past and forge new friendships. Japan is correct to be ticked off about this.
you misunderstood the whole thing. Korean ppl now are not very upset about what happened in the past, rather regretting it. you could easily see this given that how koreans love japan and japanese culture. It is the japanese government who come up with their 'glorious past' in order to win the election.
you don't understand politics then, in war there is never a right or wrong, US used 2 atomic bombs and is proud of its exceptional war stuff too, but you don't see Japanese reacting to US election talks like Koreans does. fact is Korea f up on this one.
hahah tragic
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.