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Japan – South Korea

  Mar 17, 2020

Japan – South Korea

What is the issue?

In recent weeks the relationship between Japan and South Korea has worsened significantly as Japan has removed South Korea from its “whitelist” of trusted export partners for certain chemicals that are vital to Korea’s high-tech industries.

Why is it done?

Japan says this move was driven by security concerns over South Korea’s enforcement of sanctions on North Korea. Also, Japan says the measures are designed to clean up export control procedures.

Is there a historical background to the episode?

The two countries share a complicated history that includes Japanese colonial rule of Korea from 1910 until the defeat of Japan in 1945.

In 2018, South Korean court rulings ordering Japanese firms pay compensation to Koreans over forced wartime labour inflamed long-running tensions.

South Korea views Japanese action as an escalatory retaliation for the court ruling forcing Mitsubishi Heavy Industries to pay compensation to Korean victims of wartime forced labor policies. 

The decisions drew condemnation from Japan, which argues the dispute was settled in 1965 when diplomatic ties were normalised between the neighbouring countries.

Mitsubishi Heavy, one of the firms involved, has refused to comply with the court order, while two other companies have had their assets seized in South Korea.

Which materials are involved?

The export curbs apply to three high-tech materials: fluorinated polyimide, photoresists and hydrogen fluoride.

Why are the materials important?

Japan is the dominant producer of those materials which are vital to make memory chips and display screens.

These are key industries for South Korea.

What is the effect?

The restrictions don't block the sale of the materials, but require Japanese exporters to acquire licences to sell the products to South Korea, potentially causing delays and choking supplies.

How did South Korea react?

The dispute has sparked strong reactions in South Korea, prompting boycotts of Japanese goods.

South Korea plans to take the dispute to the WTO and has argued that other countries could be caught in the crossfire.

How will the global electronics trade be impacted?

There are major concerns that such a move would have a grave impact on not only the economies in both countries, but the global supply chain If Japan's export controls remain in place for a prolonged period it could disrupt the global electronics supply chain given South Korea's dominance in the memory chip market. The price of memory components "could significantly increase due to the inability of the other memory suppliers to meet global demand.