By: Rupakjyoti Borah

Japan and South Korea are mired in a trade dispute that runs the danger of further damaging their already fraught relationship at a time when the political situation in North Asia demands closer cooperation in the face of threats from a pugnacious government in North Korea, backed by Russian and Chinese governments happy to cause mischief.

David Stilwell, a former Air Force general recently appointed assistant secretary of state for East Asian and Pacific Affairs, is shuttling between the two countries in an attempt to cool the situation, with the State Department saying it is “critical to ensure strong and close relationships between and among our three countries in the face of shared regional challenges” including that posed by North Korea.

The latest episode began on July 1 when Japan imposed export restrictions on three important industrial materials used by South Korean companies to make semiconductors and display screens. South Korea has now taken the dispute to the World Trade Organization (WTO).

Japan is also mulling a plan to remove South Korea from a list of countries that face minimum trade restrictions, a so-called “white list,” insisting that its planned removal of preferential trade treatment for Seoul is similar to its requirements for over 160 countries across the world and that South Korea’s listing as the only Asian country on this white list ‘was a privilege and not a right.’

The Japanese government charges that Seoul was unable to prevent hydrogen fluoride from being passed on to North Korea. Hydrogen fluoride can be used in weapons development and given Tokyo’s worries vis-à-vis Pyongyang, its concerns seem valid. Seoul has, of course, denied the accusations.

A Japanese Ministry of Trade, Economy and Industry statement on the issue notes that “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.”

However, the dispute has to be seen in conjunction with many other issues, some going back for decades, that are bedeviling the ties between the neighbors.  Earlier last year, for instance, a South Korean court ruled that Japanese companies should pay compensation to South Koreans who the court said were forced to work in Japanese factories when the Korean peninsula was under Japanese control between 1910 and 1945.

There are many other issues too, where the two countries do not see eye-to-eye. South Korean President Moon Jae-in favors a cautious approach which seeks to build better ties with the North. On the other hand, for Japan the crucial issue is the decades-old abduction of Japanese nationals by North Korea and without their return, the potential for normalization of ties between Japan and North Korea looks very dim.

Other issues arise from the colonial period when Japan controlled the Korean peninsula although the issues were deemed to have settled by the 1965 Treaty of Basic Relations between Japan and South Korea.

All these come against the backdrop of the US-China trade war and Japan’s own trade tensions with the US.  Although Prime Minister Shinzo Abe has managed to build a close relationship with US President Donald Trump, it hasn’t prevented Trump from taking aim at Japan’s exports to the US, especially in areas like automobiles.  

Implications

The dispute is likely to have consequences on both the economic and political fronts, not only for the two countries, but beyond their borders too. There are fears that this could affect global supply chains and could hurt the fortunes of large tech companies across the world.

On the bilateral front, it is likely to worsen relations between the two countries, at one of the lowest points in the wake of a series of incidents. Already some South Korean businesses have called for a boycott of Japanese products.

It is also likely to make the resolution of the North Korean dispute even more difficult especially with respect to Japan’s ties with North Korea. Pyongyang has just tested two short-range missiles which clearly indicates that it is not willing to let go of its arsenal of nuclear weapons or missiles.

In addition, it is likely to make Washington’s task in Northeast Asia much more complicated. Both South Korea and Japan are strong US allies and any US misstep might see South Korea moving closer to China in the region.

For Abe, this comes at a time when his ruling coalition has secured a majority in the recent Upper House elections, though it won’t be enough to help him proceed with his pet project of constitutional amendment. For South Korean President Moon Jae-in, he is appealing to his domestic constituency as well through this issue. He has already been at loggerheads with Tokyo on a host of issues.

Even though South Korea has taken the dispute to the World Trade Organization, it has failed to elicit support there. What is clear is that we are unlikely to see a quick resolution to this trade dispute between Japan and South Korea. Tokyo under Abe clearly has an edge over Seoul on this issue and hence can afford to bide its time and this is exactly what it seems to be doing at the moment.

Rupakjyoti Borah (rupakj@gmail.com) is a research fellow with the Tokyo-based Japan Forum for Strategic Studies. He has been an Assistant Professor of International Relations in India and a Visiting Fellow with the Japan Institute of International Affairs. The views expressed are personal. He tweets at @rupakj