Japan and South Korea’s relationship has become increasingly treacherous since July 2019 when Japan announced export controls on three materials. While their bilateral relationship has never seemed to be settled, current rising tension is explained by the leadership style of both countries. This article focuses specifically on trade war between the two which initiated in 2019 and has been ongoing and explain two conflicting viewpoints explaining the core of this trade conflict. 

Japan’s announcement on trade restrictions

Conflicts started on 4 July 2019 when Japan’s Ministry of Economy, Trade and Industry (METI) applied updated licensing policies and procedures on the export and transfer of controlled items and their relevant technologies to the Republic of Korea (ROK). Two statements outline specific policies, which are: removal of the ROK from the Appended Table 3 (so-called “white countries”) of the Export Trade Control Order and imposition of export control on  Fluorinated polyimide, photoresists and Hydrogen Fluoride and their relevant technologies. Such materials are used mainly for the production of semiconductors and display screens, which are intermediate products in the process of producing mobile phones and some other technological products. This announcement was a concern for ROK given that Japan dominates 90% of world’s supply of fluorinated polyimide and resists and about 70% of hydrogen fluoride, making South Korean companies difficult to source from alternatives. According to IHS Markit, specific companies impacted particularly are Samsung Electronics and SK Hynix which produced 61% of components used in memory chips in 2018. 

ROK’s response

In response to the removal from preferential treatment (‘white list’) of three materials by Tokyo, ROK took three main actions at political level. Firstly, it submitted a complaint with the WTO, arguing that Tokyo’s act violated WTO rules by regulating trade for political reasons. While it provides Tokyo and Seoul a place for a discussion to settle the conflicts, US refusal to appoint new judges resulting from the concern over legal-overreach, it did not solve any disputes by itself. ROK then decided to terminate the intelligence sharing deal, known as  GSOMIA (General Security of Military Information Agreement) with Japan. This allows two countries to share information about North Korea’s military activities directly with each other, without going through their joint allies of the US. This decision is interpreted as a result of ROK’s interpretation of Japan’s justification for the action based on security matters. While two countries managed to settle their disputes by ROK confirming to the intelligence sharing pact in November, it would “conditionally” suspend the expiry, with national security official Kim You-geun confirmed that the GSOMIA would not be allowed to lapse at midnight. Under such a volatile circumstance, economic tensions are still ongoing. Thirdly, ROK also removed Japan from its own white list, while not mentioning the types of products being qualified. This triggered tit-for-tat trade war between the two. One of the products hit hardest is beer, which declined to zero in September from 800 million yen in 2018. The choice of beer is a strategic decision made by ROK being Japan’s largest beer consumer. Tokyo-based beer maker Asahi said in an earnings report earlier in November that in the nine months to September, operating profit in the region that includes South Korea plummeted 68% compared to the same period in 2018, mainly due to “the significant sales decrease of Asahi Super Dry in South Korea.”

Historical background

While Tokyo claims that its export controls are based on security and trust issues, especially its fear of chemicals released to North Korea, South Korea’s Court rulings in November 2018 requiring compensation for forced labour during Second World War arguably brought about all of this time’s trade war. South Korea’s Supreme Court upheld its lower courts by ordering Mitsubishi Heavy Industries of Japan to compensate for South Koreans being forced to work in factories during the Second World War. Specifically, it ordered each one of five women 100 million to 150 million won or $89,000 to $133,000 while in a separate ruling, the court also ordered Mitsubishi to pay 80 million won to each of six men who said they were subject to forced labour at Mitsubishi shipyard and machine tool factory in 1944. 

While it is misleading to categorize “Japanese” and “South Korean” perspectives, this article uses such a categorization on the basis that each country represents the position each administration takes.

Japanese interpretation of the court ruling

Mr Abe argued that he wants South Korea to uphold promises, including 1965 treaty which become the principle for the interstate relations. Abe administration states that 1965 Treaty on Basic Relations between Japan and the Republic of Korea, which includes a package of about $800 million in grants and cheap loans are included, must be upheld universally. Japanese courts have been upholding this treaty for since the first case claiming for compensation was brought in. The initial case was in 1997 when two Koreans brought to a Japanese court by seeking damages and unpaid wages for forced labour at steel mills owned by a predecessor company of Nippon Steel. In this sense, when the Supreme Court of ROK started a demand for reparations, it does not uphold the contents and more importantly, the essence of international law. Korea’s court rulings therefore undermine confidence in relations between the two countries. 

South Korea perspective of the court ruling

South Korean courts, in their latest rulings,uphold that individual right to seek for compensation is not terminated. In the case of 2012, the Court upheld the company’s liability for the first time, arguing that it violates South Korean constitution and international legal norms. In other words, wartime acts committed by Japan, around forced labour, concern the issues of human rights that must be upheld in any situations. Therefore, the Japanese actions during wartime years traumatized Koreans being affected greatly. 

Three main factors explain the willingness of Koreans to continue their claim for compensation after 1965 agreement, and they are historical, political and economic. 

Historian Bruce Cummings stated that “Japan fractured the Korean psyche, pitting Korean against Korean with consequences that continue to our time,” as Koreans filled bureaucratic, judicial and police roles during the later periods of wartime years, being forced to mobilize their own country men and women. 

From President Moon Jae-In’s political base, attacking of Japan on wartime forced labour allows to gain support from the public who are against the South Korea’s families alleged to have benefitted by profiting themselves through aligning with Japanese zaibatsu or conglomerates or so-called collaborators. In his 2017 presidential campaign, he lashed out at “chinil” or pro-Japanese Koreans who he said collaborated with Japanese colonialists. His support for campaigners for compensation is therefore stemming from his anti-Japanese colonialism sentiment during the 2017 election, as he has a mandate to pursue policies he promised. 

Economically, at the time when they signed the treaty, South Korea found a rapidly growing Japan as the indispensable partner for economic development of its country while China was embroiled in cultural revolution. Indeed, Japan was experiencing a rapid growth stage from 1955 to 1972, attracting foreigners in 1964 when Olympics was held. At present, Japan’s economic growth has been slowed down and ROK have other neighboring allies including China for their economic transactions, reducing any purposes for promising an unequal treaty for many Koreans. 

Japan’s dominance in the market of semiconductor industry hurts Korean consumers of digital products including mobile phones because their prices increase after being affected by their export controls. Japan, similarly, was affected by the decline in demand for products like beer and also declining tourists from ROK, negatively affecting its GDP. Behind such a trade war, there is a historical background which stemmed from the experience of the Second World War. What makes this particular case of trade war special is that it is directly an issue of history and politics rather than economics as in case of ongoing US-China trade war.