South Korea’s Moon warns Tokyo against taking trade dispute into ‘dead-end street’

President Moon Jae-in met with senior executives from 30 leading companies and criticised Japan for imposing export curbs on three materials for political purposes
Moon said he would ‘drastically’ increase spending and support domestic production to reduce dependence on foreign suppliers

Moon Jae-in

Park Chan-kyong

Published: 4:21pm, 10 Jul 2019

Why you can trust SCMP

South Korean President Moon Jae-in vowed to increase government spending to boost domestic production of hi-tech materials to make smartphone displays and chips, as he warned of a “prolonged” dispute with Japan over its export controls.

In a meeting with senior leaders from the country’s 30 largest corporations – including Samsung, SK Hynix and LG – Moon criticised Japan for tightening its rules for political purposes, saying they were linked to United Nations sanctions against North Korea.

A Japanese media report last week quoted an unidentified senior member of Prime Minister Shinzo Abe’s party saying that hydrogen fluoride – one of the three Japanese materials now under export controls – had been sent from the South to the North. The material can be used in chemical weapons.

How China can win a ‘trade war’ between Japan and South Korea

“It’s hardly desirable in terms of bilateral friendship and security cooperation for the Japanese government to take measures aimed to damage our economy for political purposes and make groundless remarks linking the moves to sanctions against North Korea,” Moon said.

Japan should not “bring the situation down a dead-end street”, he added, noting Seoul was seeking a diplomatic resolution but would also double down on efforts for domestic corporations to shake off their reliance on Japanese materials.

“No matter how this episode concludes, we must turn it into an opportunity to reduce dependence on foreign suppliers for key technology, parts, materials and equipment,” Moon said.

Moon warns Japan ‘don’t force our hand’ with hi-tech export curbs

“Especially, we must improve the industrial structure depending on a particular state. The government will drastically increase budgets to nurture industries for parts, materials and equipment and mobilise all possible means including taxational and financial measures.”

South Korea relies on Japanese suppliers for 91.9 per cent of its photoresists (used to transfer circuit patterns on semiconductor wafers), 43.9 per cent of its hydrogen fluoride that is used as etching gas in chipmaking and 93.7 per cent of its fluorinated polyamides used in smartphone displays.

South Korean protesters with signs reading “Japan should stop economic retaliation.” Photo: AP

Japan’s decision effectively removes the preferential treatment previously afforded to exports to South Korea. As a result, exporters will be required to gain permission each time they want to ship, which takes about 90 days.

Companies like Samsung and SK Hynix, which in turn supply chips to the likes of Apple and Huawei, will therefore be obliged to source materials from other markets, including mainland China and Taiwan, said Park Jea-gun, head of the Korean Society of Semiconductor & Display Technology.

Yoo Sang-im, a professor of electronic materials at Seoul National University, said it would be “next to impossible” for South Korea to develop technology to replace Japanese imports.

We must ... reduce dependence on foreign suppliers for key technology, parts, materials and equipment

Moon Jae-in

“Because of the wide technology gaps and Japan’s intellectual property rights, it would be a daunting task for South Korean companies to develop their own ways that could compete with those of Japanese suppliers,” he said.

“Had South Korean companies found products from Chinese or Taiwanese suppliers satisfactory in terms of quality and prices, they would not have become dependent on Japanese suppliers so much.”

Moon’s meeting on Wednesday was to seek feedback from the leaders on the effects of Japan’s tightened export rules.

The two countries are making arrangements for a meeting in Tokyo on Friday, at which South Korea plans to demand the withdrawal of the curbs while asking Japan about the reasons behind their introduction, according to South Korean Trade, Industry and Energy Minister Sung Yun-mo.

South Korean elementary school students with wooden plates showing Japanese rising sun flags, demanding full compensation and an apology for wartime sex slaves. Photo: AP

Relations between the countries have sunk to their lowest in years following a series of South Korean court rulings that victims of wartime forced labour during Japanese occupation of the Korean peninsula should be compensated by Japanese companies.

Tokyo has denied last week’s decision to restrict exports to South Korea was a politically motivated countermeasure but it has nonetheless prompted a backlash in South Korea and calls for a boycott of Japanese products.

Decades-old disputes continue to drive a wedge between Japan and South Korea: aside from the issue of forced labour, there remains deep-seated resentment in South Korea over Japan’s use of wartime sex slaves known as “comfort women” and Tokyo’s perceived failure to properly atone.

South Koreans call for boycott of Japanese cars, beer

In Japan, Abe’s government is just weeks away from an upper house election on July 21.

Professor Lee Young-chae from Keisen University in Tokyo said the timing of the export restrictions, so close to the election, was no coincidence.

“One issue that could lead to an election win seems to be rallying Abe’s conservatives and consolidating swing voters by showing an anti-South Korea, a tough stance toward South Korea,” Lee said. “And it seems to be working.”

Additional reporting by Reuters and Associated Press

Connect with us on Twitter and Facebook

This article appeared in the South China Morning Post print edition as: Moon warns of long dispute with Japan

Post