Business

Complexity of economic spat comes into focus as Japanese and South Korean officials meet over trade row

by Satoshi Sugiyama

Staff Writer

Working-level talks between Japanese and South Korean export control officials ran over the intended time frame Friday, highlighting the complexity of the economic spat between the two Asian neighbors in the wake of Tokyo’s decision to strengthen export evaluations on three chemicals key to chip and display panel production.

The trade officials spent 5½ hours in Tokyo discussing the issue, which South Korea maintains will hurt its economy.

Japan has said the meeting was merely an opportunity to explain its decision rather than negotiate a retraction, as South Korea is demanding. The meeting — the first since Tokyo’s new export controls took effect — was held at Seoul’s request.

A Japanese trade ministry official with knowledge of the meeting said Tokyo explained its reasons for reinforcing its export controls and pointed out faults in Seoul’s export control system. South Korea did not demand Japan scrap the decision at the meeting, the official said.

“We think we have thoroughly explained our position,” the official said. “And we think South Korea has understood our position as far as what we have explained.”

Japan argued the measures are strictly about removing preferable export status due to a “significant loss of trust” between the two countries, while South Korea claimed it is an attempt to undermine its economy over political and historical tensions.

The stalemate reflects the deep rift between the countries and shows no signs of ending soon. South Korean President Moon Jae-in told Korean business leaders this week to brace for the dispute to drag on. Its ruling party has also introduced a 300 billion won (¥27.6 billion) supplementary package that will be used to support its chip and display panel industries.

Japan last week declared it will beef up screening procedures on three key chemicals shipped to South Korea and is considering removing South Korea from a list of countries deemed to be performing sufficiently on export controls, ensuring materials that can be used for conventional weapons and weapons of mass destruction are not being diverted to third parties.

Japan justified the decision by pointing out that trust with South Korea has diminished, citing unsatisfactory handling of export controls and historical issues.

South Korea vehemently pushed back against Japan’s move. Its top officials have repeatedly demanded Japan scrap the new regulations and threatened to introduce countermeasures. South Korea’s foreign minister on Wednesday expressed concern about Japan’s stringent trade controls, telling U.S. Secretary of State Mike Pompeo they could destabilize not only the South Korean economy but also global supply chains.

Tokyo maintains the export controls are not an embargo and do not constitute a curb on exports.

South Korea’s trade ministry announced this week the country’s authorities had unearthed 156 incidents of sensitive materials that can be used for manufacturing weapons of mass destruction being illegally diverted to unauthorized countries between 2015 and March 2019. The ministry said hydrogen fluoride, one of the three chemicals subjected to stricter inspection by Japan, was among the materials, but none of it originated from Japan.

South Korea presented the figures to underscore that its export controls are safe, but Japan says those figures support its claim that South Korea is failing at proper export management.

Information from AP and AFP-Jiji added

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