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| A civic group protests Japan's removal of Korea from its whitelist of trusted trading partners at Songdo Convensia in Incheon, Friday. The countries' culture and tourism ministers were meeting there. / Yonhap |
Experts say deepening trade feud will damage both nations
By Baek Byung-yeul
Korea will drop Japan from its "whitelist" of trusted trade partners by the end of this month in the latest move to counter Tokyo's export restrictions on high-tech materials and removal of Korea from Japan's own whitelist, according to the trade ministry, Sunday.
The Ministry of Trade, Industry and Energy said it would put into effect the revision to its export control scheme for strategic items this month. The revised scheme contains details on downgrading Japan status on Korea's 29-country whitelist.
The trade ministry is gathering feedback from the public via the citizen participation legislation center until Tuesday.
Korea decided to remove Japan from its whitelist on Aug. 12 after Japan's continued refusal to talk with Korea about Tokyo's export restrictions, implemented on July 4, on three materials crucial for producing semiconductors and display panels. Tokyo also removed Seoul from its whitelist, effective Aug. 28.
When he announced the revision to its export control scheme for strategic items, Trade Minister Sung Yun-mo said Korea was open to any kind of talks with Japan. The ministry also gave notice to Tokyo before the announcement, but there had been no official talks between the two, the ministry said.
Japan had been on Korea's top-tier Group A list of 29 countries subject to preferential export procedures. But the revised export bills will break Group A into Group A-1 and A-2. The 28 nations in Group A-1 will keep their status as preferred trading partners while Japan will be the only nation in Group A-2.
Under the new rules, Korean companies that plan to sell certain strategic items to Japan must obtain government permission. The trade ministry said there are 1,735 such strategic items.
Experts said the deepening trade row would eventually hurt both countries because it increases the risks to their economies.
"The trade dispute further undermines Korea's near-term growth prospects," a Moody's report said. "The country's outward-facing economy is vulnerable to weakening exports. This escalation is likely to weigh on Korea's manufacturing sector."
The report added that the trade conflict is likely to deal a blow to Japan as well.
"The fallout will also be negative for Japan, but likely to a smaller degree," it said. "Although, Korean consumers already are boycotting Japanese products and reportedly opting against visiting Japan, thus weighing on tourist arrivals, the trade in intermediate goods ― including those covered by the export curbs and also more correlated to the global economic cycle ― poses a larger threat to the Japanese economy,."
Yun Chang-hyun, a business professor at the University of Seoul, emphasized the need for diplomatic efforts to resolve the conflict.
"Even though the Korean government vowed to concentrate on localizing parts and materials and to find other suppliers to diversify the supply chain, this cannot be achieved soon," Yun said.
"The two countries have had a productive and efficient relationship by importing quality raw materials from Japan and exporting finished products to the global market. Given the continuing dispute between them is expected to hurt their economies, Japan and Korea should seek a political and diplomatic compromise to recover their supplier-buyer relationship."
