Business

Japan OKs first shipment of high-tech chemical to South Korea under tightened controls

by Satoshi Sugiyama

Staff Writer

The government on Thursday tried to mollify global anxiety over perceived punitive trade moves against South Korea by approving exports of a key chemical to its neighbor for the first time since export controls on three chemicals were tightened last month.

Trade minister Hiroshige Seko rejected criticism of the recent decision to scrub South Korea from its so-called whitelist of countries cleared for preferential export screenings. The decision followed moves to impose tighter scrutiny on materials shipped there. He called the complaints “unjust.”

“Usually we don’t make an announcement when any single export is approved,” Seko told reporters. “But in extraordinary circumstances, in which the South Korean government unjustly called our measures an export ban, we decided to make an announcement.”

He said the ministry approved the shipment after confirming it poses no threat to national security.

Seko did not say which export got the green light. However, South Korean Prime Minister Lee Nak-yon said it was a chemical known as an extreme ultraviolet photoresist that is used to make chips by Samsung Electronics Co.

Photoresists become soluble when exposed to ultraviolet light and can then be removed, leaving behind a pattern. They are an important part of the process of making integrated circuits, such as those in memory chips.

Nevertheless, the trade ministry insisted that Tokyo is not giving in to Seoul because its go-slow procedure could yet be expanded to include other materials on Seoul’s shopping list.

South Korea has accused Japan of seeking to undermine its economy because of its inability to address pre-1945 grievances. Relations worsened recently when a series of South Korean judicial decisions required Japanese companies to pay compensation for wartime forced labor.

Japan insists its decision to remove South Korea from an export whitelist is not meant to inflict economic damage. It also disputes Seoul’s claim the move will damage global supply chains.

Experts said today’s announcement on the first shipment of chemicals backed up Japan’s explanation.

“From the beginning, I’ve said four to five weeks is the usual processing time. Look how it turned out,” said Masahiko Hosokawa, a former trade ministry official and a professor at Chubu University. “I think trades that have no issues will continue to be given export licenses. South Korea has overreacted.”

Junichi Sugawara, a senior research officer at Mizuho Research Institute, said Thursday’s announcement provides a mild sense of relief for Japanese exporters, giving them the impression global supply chains will not be disrupted.

Seko said the government will not arbitrarily apply stricter rules against South Korea and will continue to approve exports after “rigorous examination.”

But that may not be enough to placate South Korea. A fuming President Moon Jae-in on Thursday urged Japan to ease up.

“The measures so far undermine the trust of the free trade order and the international division of labor,” Moon said. “Even if there are any gains, it will be short-lived. In the end it is a game without winners, where everyone, including Japan itself, becomes a victim.”

South Korea has beefed up a budget earmarked for supporting companies that could potentially be affected by Japan’s go-slow maneuver. It is also contemplating removing  Japan’s preferential treatment status from its own “whitelist,” and asking the World Trade Organization to punish Japan.

The standoff over export controls began on July 4, when the Ministry of Economy Trade and Industry revised the rules on exporting three chemicals: resists, fluorinated polyimide and hydrogen fluoride, a strong acid. The new rules required exporters to apply for permission to conclude each separate contract, a procedure that could take about 90 days. Previously, export permissions were generally granted for three years at a time.

Moreover, last week Japan decided to strip South Korea of its status as a nation eligible for preferential treatment in trade, downgrading it to a category B nation subject to additional scrutiny, effective Aug. 28. The scrutiny is aimed at ensuring exports are not diverted to weapons production.

Seko again said that part of the problem is South Korea’s own export controls, which he urged it to re-evaluate. If “inappropriate” transactions are observed for materials beyond the three chemicals in question, the government will adopt “thorough measures to prevent recurrence, including expanded scrutiny,” he said.

In the meantime, Marc Knapper, deputy assistant secretary of state responsible for Japan and Korea, on Wednesday chided both nations, urging them to carry out some “soul searching” and tone down the rhetoric.

He said the two neighbors need to repair their strained relationship and unite amid rising challenges from North Korea, Russia and China that affect U.S. national interests.

“We must not let challenges in the region drive a further wedge between and among our three countries, Knapper said. “Japan and Korea each suffer consequences when their bilateral ties worsen, and we believe that each bears responsibility for improvement for their relations.”

Information from Reuters added

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