Tensions have been mounting between Japan and South Korea. Both countries have removed each other from their white country lists, and some observers believe that an economic war between Japan and South Korea has already broken out. The policies of Prime Minister Shinzo Abe enjoy the support of a clear majority of Japanese, while the boycott of Japanese products and other forms of political mobilization are gathering momentum in South Korea, as President Moon also seems to be trying to link his own policies with the Japan-South Korea antagonism, arguing that his country can achieve economic independence from Japan through North–South unification.
It is time to take a step back and calmly review the facts of the origins and evolution of this so-called economic war. Misunderstandings on both sides and perceptions that are out of step with reality can only inflame emotions.
Following the end of the G20 summit, U.S. President Donald J. Trump headed for Panmunjom on the Korean peninsula where he met with Kim Jong-un, and on July 1, the Japanese government announced its “sanctions” on trade with South Korea, which led to tensions in Japan-South Korea relations. In South Korea, there is talk about presenting the case to the WTO and a movement to boycott Japanese products is taking form. Meanwhile, there are those in Japan who are calling for broader sanctions. However, there appears to be a slight discrepancy between the “embargo” on specified products that has been reported on by many media outlets and others and the details of the actual measures.
According to the “Update of METI’s licensing policies and procedures on exports of controlled items to the Republic of Korea,” posted by the Ministry of Economy, Trade and Industry (METI) on its website, “In order to ensure appropriate implementation of export control and regulation based on Article 25(1) and Article 48(1) of the Foreign Exchange and Foreign Trade Act, METI will apply updated licensing policies and procedures on the export and transfer of controlled items and their relevant technologies to the Republic of Korea (ROK).” That is, these actions are regarded as measures based on Japanese law. Moreover, the reason for taking these measures is given as “METI has developed these [licensing] policies and procedures [for implementing its export control and regulation] through reliable relationships based on trust and close communication,” while “through careful consideration among the relevant ministries in Japan, the Government of Japan cannot help but state that the Japan-ROK relationship of trust including in the field of export control and regulation has been significantly undermined.” In this situation, they state that “Considering that certain issues in ROK’s export control and regulation can only be addressed under a relationship of utmost trust” and that “certain sensitive items have been exported to the ROK with inadequate management by companies.” It is as of yet unclear what this “inadequate management” refers to, but in any case, the reason given is undermining of international “reliable relationships” in Japan–South Korea relations.
So what measures were actually taken? First, there was a policy of “removing the Republic of Korea from the Appended Table III (so called “white countries”) of the Export Trade Control Order” that was announced in a public comment. In short, this means terminating the preferential treatment of allowing for simplified trade procedures that had been applied to South Korea since 2004 and returning their status to what had been in place up to 2003. This creates the need to apply for permits for every contract. At present, the list of white countries includes Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, South Korea, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Spain, Sweden, Switzerland, United Kingdom, United States. The list does not include China nor most Southeast Asian countries. This means that if South Korea is removed from Japan’s white country list, its exporters will have to go through the same procedures as those from Japan to China, Taiwan, and most Southeast Asian countries.
Second, it was announced that “From July 4, exporters shall apply for an individual export license for export of Fluorinated polyimide, Resist, and Hydrogen Fluoride, and their relevant technologies, which may include technology transferred with exports of manufacturing equipment to the Republic of Korea, as the relevant bulk licenses for those three items will no longer be applicable.” This entailed Japan removing South Korea’s “white country” status and switching to individual applications for every contract, mainly with regard to Japan’s provision of parts to the South Korean semiconductor industry in advance of the decision to fully removing South Korea from the list of white countries. In other words, Japan-South Korea relations were returned to what was in place in 2003 and earlier in terms of these specific products. In reality, it is simply returning to the same procedures as those that apply to Japanese exports to China and most other Asian countries.
Is it actually reasonable to regard these two measures as an “embargo”? The Japanese government also states that it intends to do no more than to apply the same procedures to exports to South Korea as does the EU. It is true that procedures become cumbersome once you grow accustomed to white country status, and I understand the problem of political statements linking the decision to suspend white country status with the conscripted worker issues, as well as how that provokes opposition from the South Korean side. Even so, looking at the policy of the Japanese government in itself, can we really call it an embargo? Will it stop products from going to South Korea? Moreover, is it really a violation of WTO rules? If it is indeed a violation, then Japan was also in violation of those rules in 2003 and earlier, and the current trade procedures between Japan and non white countries are likewise violations.
On August 2, the Japanese Cabinet decided that South Korea should lose its white country status for all products, beyond the original three. In response, South Korea announced that it would suspend Japan’s white country status. We may expect Japan to respond with additional measures.
Yet it is hard to say with conviction that the Japanese government’s measures constitute “sanctions.” The fundamental question is whether applying the same treatment as that which is in place for the majority of countries in accordance with domestic law can really be termed “sanctions.” Of course, there are issues like why it was deemed that international “reliable relationships” had broken down and what is meant by “inadequate management.” On these issues, the Japanese government should make clear what it deemed problematic with South Korea’s export control. Moreover, more care is needed not to directly link issues of historical perception with the trade system. We also now need to pay attention to how exports to South Korea will proceed under the new arrangement of a non white country.
The key point to make here is that issues such as these can easily feed into national sentiment. That is why we need to avoid emotional responses and approach them with a clear view of the facts.
Shin Kawashima is a professor at the University of Tokyo.