Business

South Korea removes Japan from trade whitelist as feud deepens

Bloomberg, Kyodo

South Korea has removed Japan from its list of most trusted trading partners, the latest sign of unraveling ties between two U.S. allies mired in a series of disputes.

The change means that exports of some strategic goods to Japan will receive greater scrutiny than shipments to 28 other fast-track destinations, South Korea’s trade ministry said early Wednesday in a statement.

Japan on Wednesday urged South Korea to clearly explain why it revoked Tokyo’s preferred trading partner status, calling the move “extremely regrettable.”

The central government has not received sufficient explanation from South Korea as to the rationale and details of the latest change despite Tokyo’s earlier inquiry, Chief Cabinet Secretary Yoshihide Suga said.

“It’s extremely regrettable that the review was made,” Suga said at a news conference. “We will continue to urge South Korean authorities to fulfill their accountability to the international community.”

Possible impacts on Japan are likely to be limited, said Kuniharu Nakamura, who chairs Japan Foreign Trade Council Inc., a Tokyo-based trade research body, as some critical items, including those related to semiconductors that cannot be replaced, are excluded.

The move comes after Japan last month cut South Korea from a so-called whitelist of nations it deems safe for exports of strategic materials.

In the statement, South Korea’s trade ministry said Wednesday’s revision is to improve the country’s control of strategic material exports, and is not a retaliation against Japan. It said the country has notified Japan of the changes, and explained the background of the revisions through various routes.

Isshu Sugawara, Japan’s trade minister, issued a statement saying it was regrettable that South Korea had taken the measure without providing a proper explanation.

“The trade ministry will continue to urge the South Korean trade authorities to fulfill their responsibility to explain this to the international community,” he said.

South Korea also plans to terminate a U.S.-endorsed intelligence-sharing pact with Japan, and has filed a complaint with the World Trade Organization against its neighbor for imposing tighter export controls on materials key to tech manufacturing.

The trade tensions have hurt South Korea’s economic outlook as some of the country’s major companies rely on materials from Japan to make products such as memory chips and displays. The worsening situation bodes ill for economies already struggling amid weak global demand and the U.S.-China trade war.

Japan’s exports to South Korea fell 9.4 percent in August compared with a year earlier, as exports of chipmaking equipment to its neighbor fell almost 40 percent.

The dispute stems largely from differences in perception as to whether Japan has shown sufficient contrition for its 1910-45 colonization of the Korean Peninsula. Last year, the South Korean Supreme Court ruled in favor of individuals seeking compensation from Japanese firms for forced labor during the colonial era. Japan says the ruling violates a 1965 treaty between the two governments.

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