Japan on Monday imposed restrictions on exports used by South Korea's chip and smartphone companies, ramping up long-simmering tensions between the US allies over the use of forced labour during World War Two. Seoul quickly hit back, saying the measures violated international law and threatening to raise the issue at the World Trade Organisation.
The move raises the stakes in a protracted dispute over South Korean court rulings requiring Japanese firms to compensate victims of a wartime forced labour policy. The disagreement comes against the backdrop of decades of strained ties as the result of Japan's brutal 1910-45 colonial rule over the Korean peninsula.
The new measures take effect from July 4 and will significantly slow the export of several key materials used by South Korea's chip and smartphone giants. Japan said they were the result of a breakdown in trust with Seoul. "The export control system is built based on international relations of trust," Japan's Ministry of Economy, Trade and Industry (METI) said.
"After reviews by relevant ministries, it must be said that the relations of trust between Japan and South Korea have been significantly harmed," METI added. The new restrictions apply to three chemicals as well as the transfer of manufacturing technologies, removing them from a list that effectively allowed expedited export. It means that exporters will now have to apply for permission for each batch they wish to export to South Korea, a process that takes around 90 days each time, local media reported.
The chemicals affected by the move are fluorinated polyimide, which is used in the manufacture of displays, the photosensitising agent resist used in chip manufacture, and hydrogen fluoride, which is used to clean chips. METI said it would also begin soliciting public comment on the removal of South Korea from a list of "white" countries that face minimal restrictions on technology transfer with national security implications. South Korean trade official Park Tae-sung called the measures "unfair and in violation of international laws".
And Sung Yun-mo, minister of trade, industry and energy, said the government would "take necessary measures on the basis of domestic and international laws, such as bringing the case to the World Trade Organisation". But Japan's deputy chief cabinet secretary Yasutoshi Nishimura told a regular briefing that the move was "in accordance with international export regulations and World Trade Organisation rules".
"In addition to the fact that it has become difficult to work on export control with South Korea under a relation of trust, we have also seen inappropriate cases in connection with export control as it relates to South Korea," he told reporters. The measures come after a series of South Korean court rulings demanding Japanese firms compensate victims of wartime forced labour.
Japan has rejected the rulings and proposed the issue be put to arbitration under an agreement signed by the two countries when they normalised ties. South Korea countered with a proposal for local and Japanese firms to set up a voluntary compensation fund, which Tokyo flatly rejected as "unacceptable". When relations were normalised, Tokyo agreed a reparations package of grants and cheap loans for victims of various wartime policies, which it says resolved all outstanding claims.
A South Korean industry source said local firms would likely have inventory that could last a couple of months, "after which production could be hit by shortages". "South Korean firms are largely dependent on Japanese firms for such materials.... While we have tried to find alternative sources to diversify risk, it is not an easy task," the source said. The news sent shares in Samsung down 0.85 percent, with LG Electronics plunging more than three percent. In Japan, resist makers were also down sharply despite a gain in the market overall.
Yun Duk-min, former director of the state-run Korea National Diplomatic Academy, said the wartime labour dispute was hurting both sides. "The bickering will leave both Tokyo and Seoul as losers in the end without a victor, damaging the two economically."
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