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South Korea strongly urges Japan to withdraw export restrictions, approaches WTO

US trade associations worry about potential spillover effects on global economy

In addition to raising the issue at the World Trade Organization’s General Council on Wednesday in Geneva, Switzerland, the South Korean government sent a strong opinion to the Japanese administration calling for the complete withdrawal of its export restrictions.

In parallel, calls are also growing from global tech firms to urgently settle the trade dispute that may cause supply chain disruptions and impact the global economy.

The Ministry of Trade, Industry and Energy said in a press briefing in Seoul that it has delivered its opinion to the Japanese government over the revised bill of the Export Trade Control Order.

Japan’s Industry Ministry had announced revisions to the legislation on July 1 indicating it would remove Korea from a whitelist of 27 countries that receive preferential treatment for trade.

“Korea strongly urges Japan to immediately restore the groundless measures to toughen exports of three hi-tech materials,” said Industry Minister Sung Yun-mo at the briefing.

“The revised bill attempting to exclude Korea from its whitelist should also be retracted,” the minister said.

He said the opinion delivered on Wednesday includes detailed elaboration on why Japan’s claims are groundless.

Japan’s assertion that Korea’s “catch-all system” is insufficient is unfounded because it is strictly managed and is internationally proven, the ministry said. 

Industry Minister Sung Yun-mo (MOTIE)
Industry Minister Sung Yun-mo (MOTIE)

The catch-all system controls exports of certain goods to prevent them from being shipped to countries which may build weapons.

Korea’s system abides by rules of all four international export control systems, including the Wassenaar Arrangement, Nuclear Suppliers Group, Australia Group and Missile Technology Control Regime, according to the government.

Korea is also fully equipped with an institutional framework to control conventional arms through a number of laws, including its Foreign Trade Act, Notification of Export and Import of Strategic Materials and Special Trade Notification to Follow the Obligation of International Peace and Safety Maintenance, the minister said.

“Given the fact that Japan includes a country which did not even adopt a catch-all system in its whitelist, while flagging only Korea, is clearly a discriminatory measure,” Sung said.

He also said it is illogical for Japan to claim that the trust between the nations was undermined because the two sides have not held export control meetings.

According to the Industry Ministry, the two sides held the sixth and seventh export control talks in 2016 and 2018, respectively. Korea had requested for the eight round of talks but Japan delayed it citing scheduling difficulties, the ministry said.

“While we were waiting for the meeting to take place, Japan announced the revised plans on (the export trade management act) on July 1,” Sung said.

He added that Japan also did not raise any issue during high-level talks between the two nations in May 2018.

The ministry’s delivery of such an opinion to Japan is the first because there have been no economic conflicts between the two nations in the past, said Park Tae-sung, head of the office of international trade and investment. “The two nations have maintained close economic cooperation.”

Korea and Japan’s trade dispute discuss at the WTO’s General Council at the request of the Korean government. During the meeting, the Korean side intends to highlight that Japan’s export curbs are not in accordance with WTO norms. It is seeking to form a consensus among other members on the withdrawal of Japan’s export restrictions.

“All the members of the council have to agree for a successful outcome. Instead of decision-making, what we expect from the council is to shine light on Japan’s appropriate measures. We are preparing to approach the WTO (Dispute Settlement Body) officially,” said Chung Hae-kwan, head of new trade order cooperation division of the ministry.

Asked about any possible retaliation by Korea, he said that “under the WTO rules, when a trading partner takes improper measures, the other side should bring the case to the DSB first. Skipping such procedures and retaliating against the trading partner is against WTO rules.”

Meanwhile on Tuesday, six US electronics associations sent a letter to both Korea and Japan calling for the prompt settlement of the trade dispute.

They included the Computing Technology Industry Association, Consumer Technology Association, Information Technology Industry Council, National Association of Manufacturers, SEMI and Semiconductor Industry Association.

In a letter addressed to both trade ministries, they expressed their concerns regarding recently announced export restrictions on certain semiconductor manufacturing materials.

“(We) request efforts for a swift resolution of this issue to reduce harm to the global economy due to regulatory uncertainty, potential supply chain disruptions, and delays in shipments due to this ongoing dispute.”

“Japan and Korea are important players in these global value chains. Nontransparent and unilateral changes in export control policies can cause supply chain disruptions, delays in shipments, and ultimately long-term harm to the companies that operate within and beyond your borders and the workers they employ,” the letter said.

On the same day, five local economic associations, including the Korea International Trade Association and Korea Chamber of Commerce & Industry, also sent a letter to Japan urging similar action.

“If the revision of Japan’s export trade management act is implemented, it will damage the trust both nations have long built, cause uncertainties in their trade and industry relations, disrupt the global value chain and (ultimately) have a significant negative effect on the global economy,” the letter sent to Japan’s Ministry of Economy, Trade and Industry said.

By Shin Ji-hye (