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South Korea: Japan's export restrictions could have 'dire consequences' for global economy

By Thomas Maresca
South Korea: Japan's export restrictions could have 'dire consequences' for global economy
Japan announced export restrictions at the beginning of this month that will require suppliers to apply for licenses each time they ship certain products, targeting key components used in South Korea's high-tech manufacturing industry.  File Photo by tartaruga1988/Shutterstock

SEOUL, July 17 (UPI) -- Japan's export restrictions to South Korea on key materials used in manufacturing semiconductors and digital displays could have a major global impact on companies and consumers and may lead to "dire consequences," a South Korean government official said Wednesday.

The official, who spoke to reporters in Seoul in a background briefing on government strategy, said Japan's moves could have "dire consequences of stopping semiconductor lines."

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"It will adversely affect companies ranging from Apple, Amazon and Dell to Sony and billions of consumers all over the world," the official said.

Japan announced export restrictions at the beginning of this month that will require suppliers to apply for licenses each time they ship certain chemical products to South Korea, a time-consuming process that takes about 90 days for approval.

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The targeted products -- hydrogen fluoride, fluorinated polyimide and photo resist -- are key components used in South Korea's high-tech manufacturing industry.

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Japan may also remove South Korea from a "white list" of trusted countries that face minimal restrictions on technology transfers seen as having national security implications.

The South Korean official claimed Japan's export restrictions are "inconsistent" with World Trade Organization principles and the values of free trade that Japanese Prime Minister Shinzo Abe vowed to uphold when he hosted the Group of 20 global summit in Osaka last month.

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If you violate the "sacrosanct principles" of free trade, the South Korean official said, "the global value chain will crumble."

The official said it was "particularly disappointing" that South Korea's semiconductor industry was the target of Japan's actions. Semiconductors make up some 25 percent of South Korea's exports, and technology giant Samsung represents 21 percent of the country's stock market value, the official said.

The restrictions are seen by many as retaliation for an ongoing dispute over forced labor during Japan's 1910-45 colonial occupation of South Korea.

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South Korea's Supreme Court ruled last year that Japanese companies must provide compensation to their victims of forced labor. Japan, however, has argued that all reparations claims were resolved during the 1965 accord that normalized bilateral relations between the two countries.

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Japan's Chief Cabinet Secretary Yoshihide Suga suggested that the ruling is a source of damaged trust between the two countries at the briefing in which he announced the export restrictions.

However, Tokyo has since claimed that the export controls were due to issues of national security, claiming that the chemicals were not properly controlled and that Seoul may have violated North Korea sanctions. Seoul has responded with its own allegations of Japan's violations of North Korea sanctions

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The South Korean official on Wednesday offered to bring the matter before the United Nations Sanctions Committee.

"We would be more than glad to have the U.N. Sanctions Committee scrutinize all the alleged violations, including Japan's," the official said. "And if it turns out that we are in full compliance with these export control regimes, then there's no ground for maintaining these measures."

The export restrictions have been named a formal agenda item for the WTO's General Council, which is set to discuss the issue on July 23 and 24.

Japan has called for a third-party arbitration to settle the wartime labor dispute, but the South Korean official stressed that Seoul's preferred mode for resolving all issues is "through a diplomatic channel of dialogue."

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"Korea and Japan should resolve in a constructive manner historical matters and enter into a future-oriented relationship," the official said. "We believe we can settle disputes regarding export control and the Supreme Court ruling through constructive dialogue."

The standoff has plunged relations between South Korea and Japan to their lowest point in years. Public opinion has flared in South Korea over the export restrictions, with local convenience stores halting the sale of Japanese beer and snacks.

The official said that if Japan decides to take further steps and take South Korea off its export white list it "would cause a tremendous amount of problems" and "put a tremendous strain on the U.S.-Japan-Korea trilateral relationship."

"I hope we don't get to that point," the official said.

The official added that science and technology should not be used as tools in a trade war, which would "only lead to tragic consequences."

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