The Japan–South Korea trade dispute, also known as the Japan–South Korea economic war, was an economic conflict between Japan and South Korea.
There are different cited causes behind the conflict. The Japanese government removed South Korea from the "white list" for preferential trading in July 2019, as a response to alleged South Korean violations of United Nations prohibitions against exporting certain materials to North Korea. It later officially argued that the conflict was caused by the South Korean government noncompliance with export controls and regulations to prevent resale of strategic goods, and ignoring the Japanese government's request to hold export control talks for three years. However, the conflict was regarded as retaliation to the Supreme Court of South Korea's decisions regarding compensation by the South Korean government. The South Korean government has also denied any claims of mismanagement by the Japanese government.
Several external observers have stated that the current tensions are a reflection of or are responses to various historical grievances from Japan's occupation of the Korean peninsula and from recent regional flash points, such as relations with North Korea and China.
The trade dispute had caused a significant deterioration in Japan–South Korea relations to the lowest point since the two countries normalized their diplomatic relations in 1965.
Background
Japan and South Korea are some of the world's largest economies, ranking 3rd and 10th, respectively, in terms of GDP at the time. South Korea, the largest memory chip producer in the world, and Japan, the largest supplier of crucial materials in chip production, have so far served as the cradle for technological products such as smartphones and personal computers.
South Korea is home to Samsung Electronics and SK Hynix, companies that together produce two-thirds of the world's memory chips. In Japan, 3 companies (JSR Corporation, Showa Denko, and Shin-Etsu Chemical) as well as Kanto Denka Kogyo, produce 90% of the world's Fluorinated polyimide and Photoresist, both of which are used for LCD and OLED displays, and 70% of Hydrogen Fluoride, used to make LSI, DRAM and NAND flash memory. South Korea imports 94% of Fluorinated polyimide, 92% of Photoresists, and 44% of Hydrogen Fluoride from Japan, according to data from Korea International Trade Association. On the other hand, Japan had export dependency on South Korea for these three materials at 22.5%, 11.6%, and 85.9%, respectively.
The two countries established diplomatic relations in December 1965, following the signing of the normalization treaty in June of the same year when Japan recognized South Korea as the only legitimate government of the whole Korean Peninsula. As the relations continued to develop over the next few decades, both countries became two of the strongest allies of the United States in Asia, to counter the influence of China, Russia, and North Korea. However, their relations have been negatively impacted by many ongoing disputes, such as the Liancourt Rocks dispute (known as Dokdo in Korean and Takeshima in Japanese) and differing interpretations on Imperial Japan's treatment of the people in then-colonial Korea.
South Korean and Japanese membership of "Multilateral Export Control Regime"
There are different explanations behind Japanese and South Korean membership in the Multilateral export control regime, a US-led informal import and export control system of strategic goods created in the Cold War between the United States and its allies, of which its aim was originally to prevent the export of weapons or supplies to communist countries and helped to establish "white lists" for preferred trading nations.
At the US's request, South Korea began to establish its export control system signed in September 1987 with the US and a Memorandum of Understanding on Technical Data Protection was concluded.
To further integrate itself, laws such as the COCOM (Coordinating Committee for Multilateral Export Controls) were passed, and a system to regulate the import of strategic materials through certificates of acceptance and customs was created in July 1990. In September 2004, South Korea's export and import control system was implemented mainly by the Foreign Trade Act (Article 21), the Enforcement Decree of the same Act (Article 39–45), and the Strategic Commodity Export-Import Notice (public notice by the Ministry of Industry and Resources). In effect, South Korea had signed a treaty with the United States and made laws for it to take domestic effect. It is from this system that a mechanisms such as "white lists" resulted.
However, Hosokawa Masahiko, a professor at Mesei University in Japan, claims that the Japanese Ministry of International Trade and Industry (MITI) made approaches to other member countries and visited South Korea to support their undertaking to implement an export control system in the 1990s, from which South Korea became a member of the multilateral export control regime in 1996 (which later included the trade of missiles in 2001). This relationship caused METI, after Japanese 2001 Central Government Reform, to grant the status of "white country" to give special preferential measures in 2004. He also argues that export controls for national security has been considered as the security exception in Japan and US based on an agreement on "security exceptions" in Article 21, as published by the World Trade Organization (WTO).
Comfort women
Although the Japanese Ministry of Economy, Trade and Industry (METI) officially cites "undermined trust in the field of export control" as its reason to remove South Korea from the white list, many external observers argued that current tensions more broadly reflect historical grievances between Japan and South Korea, including comfort women. During Japanese colonial rule in the Korean Peninsula, many Koreans, both North and South, were forced to work at dozens of Japanese companies, often in brutal conditions. During World War II between 1939 and 1945, the Empire of Japan conscripted 5.4 million Koreans, 670,000 of them were sent to mainland Japan as forced labor and as "comfort women", or women and girls forced into sexual slavery in occupied countries and territories before and during World War II, or who participated in the earlier program of voluntary prostitution. After the two countries normalized their relations in 1965, surviving comfort women have demanded for compensation and an apology from the Japanese government, as well as individual claims for compensation. Opponents of the 1965 treaty argue it needs to be revisited because it was signed by then-President Park Chung Hee, who acted against public sentiment.
In 1995, Japan said that compensation for former comfort women was settled in the 1965 agreement, and created the Asian Women's Fund. The fund was set up in 1994 and compensated former comfort women from formerly-occupied nations, including South Korea, through donations by private individuals. This compensation was generally accepted outside of Korea, but in South Korea, many people refused to accept it, saying that it was not money contributed by the Japanese government.
On December 28, 2015, after U.S. President Barack Obama pressured South Korean President Park Geun-hye and Japanese Prime Minister Shinzō Abe, the two countries signed an agreement regarding settling the issue of "comfort women" during World War II, which was deemed final and irreversible if Japan fulfilled its responsibilities. Japan agreed to pay ¥1 billion (₩9.7 billion; $8.3 million) to a fund supporting surviving victims while South Korea agreed to refrain from criticizing Japan regarding the issue.
On May 11, 2017, South Korean President Moon Jae-in announced the agreement would not be enacted in its current stage and that negotiations for a deal between Japan and South Korea over the comfort women dispute had to start over. Part of the justification for this was the lack of consultation from former comfort women and their supporters. Moon put forward a new proposal for a joint compensation fund that both South Korean and Japanese companies would contribute to, but Tokyo has rejected this.
In, January 2018, Moon called the 2015 agreement "undeniable, but called on Japan to accept the truth and make a heartfelt apology to victims."
In March 2018, the Japanese government argued that the 2015 Japan–South Korea agreement confirmed that this issue was finally and irreversibly resolved and lodged a strong protest to South Korea through diplomatic channels, stating that "such a statement goes against the agreement and is therefore completely unacceptable and extremely regrettable."
In November 2018, Moon Jae-in's administration shut down the Japanese-funded comfort women foundation which was launched in July 2016 to finance the agreement's controversial settlement, calling it a "political agreement that excludes victims and the public" and essentially voiding the 2015 agreement; however, Moon has not formally abandoned the agreement, stating that it was inappropriate to consider the deal "null and void". The decision sparked protest by Shinzō Abe's government, who warned of risking damaging ties between the two countries.
Court decisions regarding compensation
The two countries' bilateral relations then declined in late 2018, after the Supreme Court of South Korea and other high courts made a decision that ordered several Japanese companies, including Mitsubishi Heavy Industries, Nachi-Fujikoshi and Nippon Steel, to make compensations to the families of South Koreans who were unfairly treated and illegally forced to supply labor for World War II war efforts, such as building ships and aircraft for Japan without pay at a Mitsubishi shipyard and machine tool factory in Nagoya in 1944. The Japanese government protested these decisions, claiming that the issue was settled under the 1965 treaty of Normalization of Diplomatic relations between the two countries and stating that it would be taking "necessary measures" against South Korea.
On October 30, the Supreme Court rejected appeals to overturn a 2013 order requiring Nippon Steel to pay compensation to four South Korean workers who underwent forced labor which occurred during the war and ordered to pay each of the workers an individual sum of 100 million won (US$87,700). A month later, on November 30, 2018, Gwangju High Court rejected an appeal by Mitsubishi Heavy Industries regarding 2013 appeals of court decision that the company must pay 80 million won ($71,000) to compensate each of the 23 plaintiffs and ordered to compensate the remaining 5 South Korean elderly people who forced to work in a Japanese company where the company in a separated ruling by Supreme Court on November 28 ordered to pay 150 million won ($134,000) to each of 28 plaintiffs, elderly people which is still alive or their families. On January 18, 2019, Seoul High Court dismissed Nachi-Fujikoshi appeal of October 2014 Seoul Central District Court decision against an order that it must pay each 17 South Korean women 80 million to 100 million won (US$69,000 to US$89,000) because the victims were "tricked" into forced labor in harsh conditions.
On January 8, 2019, Daegu District Court approved a request by plaintiff to seizure of 81,075 shares held by Nippon Steel in POSCO-Nippon Steel RHF Joint Venture (PNR), a South Korea-based joint venture with POSCO, which is part of 2.34 million shares worth about 11 billion won ($9.78 million) owned by the Japanese steelmaker. These decision was followed in March 2019 by same decision for seizure of Mitsubishi Heavy Industries trademark and patent assets by Daejeon District Court.
On June 19, South Korea proposed to join funds with Japan to give compensation to forced labor victims but Japan rejected the offer. Instead, Japan called for the establishment of an arbitration panel in accordance with the rules of the 1965 Japan-Korea Normalization Agreement. The panel would consist of one member each from third-party countries.
Chronology
2019
July 2019
On July 1, Japanese 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 South Korea. These decisions, effective on July 4, put updated licensing policies on the industry, including a licensing process, forcing exporters to seek approval for each shipment up to 90 days. Deputy Chief Cabinet Secretary Yasutoshi Nishimura has said that the curbs were due to security concerns. The South Korean government has replied that the Japanese government is showing "economic retaliation" towards a matter that was decided by Supreme Court of South Korea, whose decisions cannot be altered by the Government of South Korea.