Korean firms on edge over post-poll impact

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Korean firms on edge over post-poll impact

Japanese Prime Minister and ruling Liberal Democratic Party President Shinzo Abe gestures as he answers questions during a television interview following Parliament's upper house election at the party's headquarters in Tokyo, Sunday. AFP-Yonhap

By Nam Hyun-woo

Japanese Prime Minister Shinzo Abe's victory in the country's Upper House election Sunday will tighten Tokyo's stance on trade with Seoul and deal a bigger blow to companies here, industry officials said Monday.

They said of imminent concern is Japan's potential move to remove Korea from its "white list" of 27 countries given customs shipping-clearance priority for the import of industrial materials from Japan. Chances of additional restrictions remain because Abe demanded Seoul provide an "answer" on the two countries' trade conflict, which stems from last year's Supreme Court rulings here against Japanese firms over compensation for wartime forced labor.

"We see a great possibility of the trade conflict between the two countries being protracted after Abe's comments following the victory," an official at a domestic conglomerate said asking not to be named. "Companies are sending their CEOs to Japan to seek ways to contain the fallout of the trade restrictions, but frankly there seems to be no effective solution companies can come up with."

During an interview with Asahi TV, Sunday, Abe said there will be no constructive discussion regarding the two countries' trade conflict unless Korea brings "a proper answer" to its breach of a 1965 treaty between Seoul and Tokyo.

In the treaty, Seoul agreed to settle all relevant claims in return for financial compensation and soft loans during the establishment of diplomatic relations. Japan claims last year's Supreme Court rulings violate this treaty, while Korea says the treaty does not cover individual rights to demand compensation.

Japan imposed initial export restrictions on materials for manufacturing semiconductors and panels for displays July 4 and threatened to remove Korea from its white list. The removal is expected to affect trade in at least 1,100 items which comprise "the foundation of manufacturing industries."

"When Japan first announced the export curbs on three high-tech materials, some suspected it was a temporary strategy to unite the right wing before the election, but the comments show that Abe was thinking of a long-term feud, dropping hints that Tokyo will continue retaliatory moves unless Korea brings an answer to Japan's liking," said Kim Gyu-pan, Japan team head at the Korea Institute for International Economic Policy.

"The items that would be affected by a removal from the white list include core materials for cars, machinery and chemicals, meaning the foundation of Korea's manufacturing industry could be disrupted," he said. "Adding more concern is that Japan seems to be committed to such a hardline approach unless the Korean government makes a drastic change in its diplomatic stance toward Japan."

As Japan's trade restrictions are expected to become worse, company CEOs are visiting the country to try and contain the damage.

According to officials, SK hynix CEO Lee Seok-hee visited Japan, Sunday, to meet with Japanese partner firms and discuss ways to secure materials for chips.

Earlier, Samsung Electronics Vice Chairman Lee Jae-yong visited Japan for six days on a similar mission, and reportedly asked partner firms to secure 90-day reserves of the affected materials. This is interpreted as Samsung expecting the export curbs will be prolonged.

"We know that the government is coming up with measures, such as an explanation to the WTO, but that will take time," a chemical industry official said. "With little hope for the government to settle this in the short term, companies have no option but to make their own efforts to localize materials or change manufacturing processes to use materials from other countries."



Japanese Prime Minister and ruling Liberal Democratic Party President Shinzo Abe gestures as he answers questions during a television interview following Parliament's upper house election at the party's headquarters in Tokyo, Sunday. AFP-Yonhap

By Nam Hyun-woo

Japanese Prime Minister Shinzo Abe's victory in the country's Upper House election Sunday will tighten Tokyo's stance on trade with Seoul and deal a bigger blow to companies here, industry officials said Monday.

They said of imminent concern is Japan's potential move to remove Korea from its "white list" of 27 countries given customs shipping-clearance priority for the import of industrial materials from Japan. Chances of additional restrictions remain because Abe demanded Seoul provide an "answer" on the two countries' trade conflict, which stems from last year's Supreme Court rulings here against Japanese firms over compensation for wartime forced labor.

"We see a great possibility of the trade conflict between the two countries being protracted after Abe's comments following the victory," an official at a domestic conglomerate said asking not to be named. "Companies are sending their CEOs to Japan to seek ways to contain the fallout of the trade restrictions, but frankly there seems to be no effective solution companies can come up with."

During an interview with Asahi TV, Sunday, Abe said there will be no constructive discussion regarding the two countries' trade conflict unless Korea brings "a proper answer" to its breach of a 1965 treaty between Seoul and Tokyo.

In the treaty, Seoul agreed to settle all relevant claims in return for financial compensation and soft loans during the establishment of diplomatic relations. Japan claims last year's Supreme Court rulings violate this treaty, while Korea says the treaty does not cover individual rights to demand compensation.

Japan imposed initial export restrictions on materials for manufacturing semiconductors and panels for displays July 4 and threatened to remove Korea from its white list. The removal is expected to affect trade in at least 1,100 items which comprise "the foundation of manufacturing industries."

"When Japan first announced the export curbs on three high-tech materials, some suspected it was a temporary strategy to unite the right wing before the election, but the comments show that Abe was thinking of a long-term feud, dropping hints that Tokyo will continue retaliatory moves unless Korea brings an answer to Japan's liking," said Kim Gyu-pan, Japan team head at the Korea Institute for International Economic Policy.

"The items that would be affected by a removal from the white list include core materials for cars, machinery and chemicals, meaning the foundation of Korea's manufacturing industry could be disrupted," he said. "Adding more concern is that Japan seems to be committed to such a hardline approach unless the Korean government makes a drastic change in its diplomatic stance toward Japan."

As Japan's trade restrictions are expected to become worse, company CEOs are visiting the country to try and contain the damage.

According to officials, SK hynix CEO Lee Seok-hee visited Japan, Sunday, to meet with Japanese partner firms and discuss ways to secure materials for chips.

Earlier, Samsung Electronics Vice Chairman Lee Jae-yong visited Japan for six days on a similar mission, and reportedly asked partner firms to secure 90-day reserves of the affected materials. This is interpreted as Samsung expecting the export curbs will be prolonged.

"We know that the government is coming up with measures, such as an explanation to the WTO, but that will take time," a chemical industry official said. "With little hope for the government to settle this in the short term, companies have no option but to make their own efforts to localize materials or change manufacturing processes to use materials from other countries."



Nam Hyun-woo namhw@koreatimes.co.kr


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