Nick Beams
Japan and South Korea are locked into a deepening economic and political conflict which shows no sign of ending, despite urgings by the United States to settle the dispute involving two of its crucial allies in North-East Asia.
South Korea announced this week that it had removed Japan from a list of countries that qualify for accelerated supply of South Korean products, after Tokyo had imposed a similar measure against South Korea on August 2.
Announcing the decision, Sung Yun-mo, South Korea’s minister of trade, industry and energy said: “It’s difficult to work closely with countries whose practices don’t abide by basic principles of the international export-control system and continuously are applied inappropriately.”
He said Seoul was open to negotiations with the Japanese government. However, that does not seem likely because the attitude of both sides has been hardening over the course of the dispute.
It first came into prominence in early July when Japan announced it would tighten controls over the exports of three chemicals—fluorinated polyamides, photoresists and hydrogen fluoride—crucial for the production of semi-conductors in South Korea.
The decision brought an immediate response from electronics giant Samsung, South Korea’s largest company. “It’s one of the worst situations we have ever had,” an unnamed senior Samsung official told the Financial Times. “Politicians take no responsibility for the mess, even though it has almost killed us.”
The Bank of Korea also weighed in, with the central Bank governor Lee Ju-yeol citing Japan’s export restrictions as one of the factors behind its decision last month to revise its growth forecast downward from 2.5 percent to 2.2 percent.
“If export restrictions are realised and expanded, we cannot say its impact on exports and the economy is small,” he said.
The conflict was set in motion by a decision of the South Korean Supreme Court last October that Japan had to pay compensation to four workers who had been used as forced labour by Nippon Steel during the Second World War.
Japan hit back at the decision saying the question of compensation was covered by a 1965 agreement under which Japan paid $800 million to South Korea. It feared the verdict could open the way for claims by more than 220,000 victims of forced labour and their relatives, resulting in compensation claims that could reach $20 billion.
Concerns were further raised in January when a South Korean court gave the green light for the expropriation of some of Nippon Steel’s equity holdings in a joint recycling venture with a South Korean steel-making firm to fund payments to the four plaintiffs. This raised fears that other Japanese assets could be seized in the future.
Japan did not take immediate action but according to a report in Foreign Policy, Prime Minister Shinzo Abe was “highly frustrated with the situation and was looking for a weapon he could use.” He settled on action over exports.
The restrictions on the three key chemicals were announced at the beginning of July. The timing of the decision was politically significant as it coincided with the opening for the election campaign for Japan’s upper house. Abe was seeking to promote nationalism in order to boost support for his planned revision of the Japanese constitution to overturn Article 9 of the constitution—the so-called pacifist clause.
Japanese officials said some South Korean companies were inadequately managing the chemicals and that some, with military applications, were finding their way to North Korea, without providing any specific examples.
Tokyo then upped the ante earlier this month when it removed South Korea from its list of countries entitled to receive preferential treatment in trade. The measure, which comes into effect on August 28, will impact on the export of more than 1,000 different products.
Japan claimed the restrictions were being imposed on “national security” grounds. The decision brought a strident denunciation from South Korean President Moon Jae-in.
Addressing an emergency cabinet meeting on August 2, Moon said: “We will never again lose to Japan. As we have already warned, if Japan intentionally strikes at our economy, Japan itself will also have to bear significant damage.”
The conflict has set off a growing consumer boycott movement of Japanese products involving beer, cars, cosmetics and clothing. The anti-Japanese sentiment is being deliberately encouraged by sections of the Moon administration, which, like Abe, are seeking to whip of nationalism and chauvinism to divert away from deteriorating social conditions.
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