Japan Trade Dispute Draws South Korea Closer To The North, Deepening WW II Faultlines

Adding tension to an already troubled region, Japan on Friday removed South Korea (ROK) from its roster of countries that have fast track export status. The list will drop to 26 countries that includes Germany, the United Kingdom and the United States.

The fast track allows Japanese exporters to bypass extra administrative procedures to obtain export permits. The move will likely slow down Japanese exports of goods to South Korea including materials used to produce weapons.

Japan and South Korea are both allies of the United States but relations between the two have been testy, to say the least, since before World War II. Despite several documented apologies by Japan over atrocities and forced labor during the war, many South Koreans feel that Japan has never “apologized sufficiently." Japan feels that the issue was settled by a treaty signed in 1965 when Japan compensated for past deeds with loans and grants totaling $800 million (the equivalent of about $6.5 billion in today’s dollars).

Japan says that its actions are not political and are based on national security but admits there was an “erosion of trust” in 2014 when ROK ruled that Japanese firms give added compensation to the forced laborers of the war that happened over 70 years ago.

The Japanese Asahi Shimbun newspaper published a poll in mid-July and 56 percent of the respondents supported the move versus 21 percent who did not, even though it might hurt some Japanese firms, especially manufacturers of chemicals used in the microchip industry.

The ROK will need to take steps to adjust. ROK President Moon Jae-in said during a meeting with senior aided that South Korea needs “a wider view and extraordinary determination” to overtake the Japanese economy. He also called Japan’s move a reckless and unfair retaliatory action by Tokyo and promised to take stern action against it.

One “stern action” might be for both Koreas to work together, an irony in itself. Moon said during that same meeting that “If inter-Korean economic cooperation leads to a peace-driven economy, we will be able to catch up to Japan’s dominance.” What may hinder these efforts are stalled discussions between U.S. President Donald Trump and North Korea’s leader Kim Jong Un concerning the dismantling of North Korea’s nuclear program and the scheduled joint military exercises between the U.S. and ROK that is sure to draw the ire of Pyongyang.

The true winner might well be whoever ends up supplying ROK the goods formerly supplied by Japan based on the announcement Monday of South Korea’s plan to spend about $6.5 billion for “local” suppliers in an effort to reduce the reliance on Japanese imports.