Japan to remove South Korea from preferential treatment list, with decision due Aug. 2

Kyodo, AP

Japan will decide on Aug. 2 to remove South Korea from its list of countries allowed to buy products that could be diverted for military use under preferential arrangements, sources familiar with the plan said Friday.

The Cabinet of Prime Minister Shinzo Abe plans to endorse the removal of South Korea, which will likely take effect in late August, according to the sources. Seoul, which was awarded the status in 2004, will become the first country to lose its position on Japan’s so-called white list.

Taking South Korea off the white list would further raise tensions with Seoul at a time when Tokyo has said mutual trust has been “severely damaged.”

The two countries have locked horns over Tokyo’s imposition in early July of tighter export controls on some South Korea-bound materials used in making chips and displays, citing security reasons. Tokyo also announced plans to drop South Korea from its list of countries allowed preferential trade status, pending public comments and Cabinet approval.

Officials are studying opinions sent to the government during the public comment period that ended Wednesday, a required step that is largely a formality.

More than 10,000 opinions were submitted, trade ministry officials said, including one from the South Korean government calling for the plan to be scrapped. They said the majority of the commenters supported stripping South Korea of its preferential status.

The Asian neighbors are also at loggerheads over compensation for wartime labor during Japan’s 1910-1945 colonial rule of the Korean Peninsula.

Chief Cabinet Secretary Yoshihide Suga said at a news conference that the Ministry of Economy, Trade and Industry is still reviewing the public comments and that nothing has been decided. “As we have been saying all along, the planned removal of South Korea’s ‘white nation’ status is an appropriate measure in order for Japan to effectively carry out export controls,” Suga said.

The delisting would take effect three weeks after the Cabinet’s approval, which would be around Aug. 23. Currently, Japan has a total of 27 white-listed countries including the United States, the U.K., Germany, Australia, New Zealand and Argentina.

By completing simplified procedures, exporters can ship products and technology that could be diverted to military use to such white-listed countries. But they need to obtain approval from the trade ministry before exporting them to countries that are not on the white list.

In phone talks with Foreign Minister Taro Kono on Friday, South Korea’s Foreign Minister Kang Kyung-wha called on Japan not to drop South Korea from the white list, saying that such action would worsen the current situation, according to the South Korean Foreign Ministry.

Kang also urged Japan to reverse the tightened controls on the export of high-tech materials used by South Korean companies.

As supply chains are intertwined, there are concerns that the measures will hit not only South Korean chipmakers such as Samsung Electronics Co. and SK Hynix Inc. but also Japanese exporters.

Tokyo has cited “significantly undermined” trust between the two countries in moving to applying the previous, rather than the more recent simplified, procedures for exporting three materials used in smartphone displays and semiconductors.

Stepping up opposition to Japan’s the export controls, South Korea has taken the dispute to the World Trade Organization, with both sides trading barbs at a meeting earlier this week of the Geneva-based body’s General Council. Japan has countered South Korea’s insistence that the measure is against WTO rules and undermines free trade.