South Korea to Remove Japan From Preferred Trade List

Banners featuring Japanese Prime Minister Shinzo Abe denounce Japan’s trade restrictions on South Korea on a street in Seoul, South Korea, on Monday. The sign states, “No Abe.” (AP photo/Ahn Young-joon)

SEOUL, South Korea (AP) — South Korea said Monday that it will remove Japan from a list of nations receiving preferential treatment in trade in what is seen as a tit-for-tat move after Tokyo’s recent decision to downgrade Seoul’s trade status amid a diplomatic row.

It wasn’t immediately clear how South Korea’s tightened export controls would affect bilateral trade. Seoul said some South Korean companies exporting to Japan will be able to receive exceptions from case-by-case inspections that are normally applied on sensitive shipments to nations with lower trade status and go through the same fast-track approval process that they currently enjoy.

Masahisa Sato, Japan’s vice minister for foreign affairs, said he believes the impact of Seoul’s move would be limited as Japan does not import much sensitive materials from South Korea.

Japan provided similar exceptions while removing South Korea as a favored trade partner, which eased some of the fears in Seoul about a blow to its export-dependent economy, where many manufacturers heavily rely on parts and materials imported from Japan.

After spending weeks berating Tokyo for allegedly weaponizing trade and vowing retaliation, South Korean President Moon Jae-in struck a more conciliatory tone Monday, saying that his government will refrain from “emotional” reactions to Japan over the trade dispute.

“While maintaining unwavering resolve and calmness, we need a long-term approach to look for fundamental countermeasures,” Moon said in a meeting with senior aides.

South Korea’s trade minister, Sung Yun-mo, said Seoul decided to remove Japan from a 29-member “white list” of countries that enjoy minimum restrictions in trade because it has failed to uphold international principles in its export controls on sensitive materials. Sung and other South Korean officials did not specify what they saw as Tokyo’s problems in export controls.

Sato said South Korea would be violating World Trade Organization rules if it was retaliating against Japan’s earlier measures. Park Tae-sung, a South Korean trade official, said that South Korea is making a legitimate effort under domestic and international laws to improve its export controls.

South Korea divides its trade partners into two groups while managing the exports of sensitive materials that can be used for civilian and military purposes. Seoul will create a new in-between bracket where it plans to place only Japan, which “in principle” will receive the same treatment as the nonfavored nations in what’s now the second group, Sung said.

South Korea’s government requires companies to go through case-by-case approvals to export sensitive items to nonfavored nations, which typically take 15 days. However, Seoul also plans to grant exceptions to South Korean companies exporting to Japanese partners under long-term deals and allow them to continue using a fast-track approval process that takes about five days.

South Korean officials did not clearly explain why they created a special bracket for Japan instead of grouping it with other nonfavored nations. They said Seoul will work to minimize impacts on South Korean exporters and bilateral trade.

Sung said the changes are expected to take effect in September, after a 20-day period for gathering public opinion on the issue and further regulatory and legal reviews. He said Seoul is willing to accept any request by Tokyo for consultation on the issue during the opinion-gathering period, but officials did not say whether Seoul’s decision will be negotiable.

South Korea’s announcement came weeks after Japan’s Cabinet approved the removal of South Korea from a list of countries with preferential trade status, citing an erosion of trust and unspecified security concerns about Seoul’s export controls.

Seoul says Tokyo is using trade to retaliate for South Korean court rulings that called for Japanese companies to compensate aging South Korean plaintiffs for forced labor during World War II and plans to file a complaint with the WTO.

Japan’s move came weeks after it imposed stricter controls on certain technology exports to South Korean companies that rely on Japanese materials to produce semiconductors and displays for TVs and smartphones, which are key South Korean export items.

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