As territorial claims in the South China Sea continue to test the patience of regional hegemons and superpowers alike, an economic conflict of a less visible, yet equally significant nature, has been brewing further north. Few would have expected that Japan and South Korea, ranked by the IMF as the world’s 3^rd and 12^th largest economies respectively, would emerge as parties to a trade dispute with deep historical roots and great potential reverberations for regional security and economic stability. Yet, the opposite is true. The Japan-South Korea trade dispute, fully in motion since July 2019, is a conflict in which the future of South Korea’s electronics industry is merely the tip of the iceberg. Hence, both the causes and the consequences of this seemingly out-of-sight conflict on the East Asian economic and security situation warrant a closer look.

Bitterness between Japan and South Korea has existed for over a century, motivated first by Imperial Japanese expansion onto the Korean Peninsula and the subsequent WW2-era conscription of 5.4 million Koreans into forced labour. Contemporary relations between the two countries are further marked by the sensitive issue of the Ianfu. This euphemism, referring to the so-called ‘comfort women’, encapsulates the sexual enslavement to which many Korean women and girls were subjected during the Peninsula’s Imperial Japanese occupation. While the Ianfu came from all over the Japanese Empire, the topic remained particularly contentious across the Korea Strait. As a consequence of these historical legacies, the two countries did not formally re-establish diplomatic relations until 1965. As survivors of Imperial Japanese aggression continued to claim compensation from the Japanese government, a series of public apologies and reparation payments followed. This culminated in a US-mediated 2015 agreement reached between Japanese prime minister Shinzō Abe and the then Korean president Park Geun-hye, formally putting these historical legacies at rest. Despite being accepted with much distaste in South Korea, the agreement allowed the two countries to re-engage on morally clean grounds.

By late 2019, much had changed for the worse. While the Japanese position was largely clear, the newly elected South Korean president Moon Jae-in announced the landmark deal would not be upheld, responding to domestic discontent with the 2015 agreement. A series of South Korean court rulings between November 2018 and March 2019 established that claims against Japanese corporations implicated in Imperial abuses of Koreans will be permissible. In summer 2019, Japan responded by introducing a 90-day approval period for exports of chemicals vital to South Korea’s semiconductor industry. In August, South Korea was removed from Japan’s list of preferential trading partners, with the same fate befalling Japan in Seoul shortly after. Thus far, bilateral negotiations and WTO efforts have been unsuccessful.

Much is at stake from an economic perspective. South Korea’s SK Hynix and Samsung produce 61% of the world’s semiconductor supply, as reported by IHS Markit. Importantly, 92% of South Korea’s 2018 export growth consisted of semiconductors manufactured from Japanese chemicals. Lower availability of materials crucial to the manufacture of microchips could harm the supply chains of tech firms globally. In the long-term, both Japan and South Korea would be disadvantaged by the limited trade. As such, both the global trade in electronics, as well as the growing East Asian economies, could face a contraction upon the prolongation of the trade dispute.

The situation is also disturbing from a security perspective. The General Security of Military Information Agreement (GSOMIA) is an information-sharing pact aligning Tokyo and Seoul in the exchange of information regarding North Korean nuclear and missile capability. Concluded in 2016, the agreement was set to expire on November 23. South Korea long warned it would not extend this intelligence-sharing partnership with Japan in light of the ongoing trade dispute, possibly jeopardising the security situation in the Sea of Japan. A day before the agreement was set to expire, Seoul had agreed to extend its GSOMIA membership. Nevertheless, as argued by a South China Morning Post article, such gesture signals few prospects for rapprochement, with mutual accusations quickly re-entering the debate. Consequentially, some analysts have gone as far as to label this conflict intractable.

Given the dispute’s potential impact on the economic and security situation in East Asia, the lack of international attention afforded to it is surprising. As it stands, the relationship between Tokyo and Seoul is cold, to say the least, while uncertainties regarding the WTO’s capability to act as a mediator signal that the situation has the potential to deteriorate. Uncertainties abound in any discussion of future amicable relations occurring across the Korea Strait. What is certain, however, is that the dispute far transcends economics, instead being deeply rooted in issues of national pride, legacies of Japanese Imperialism and a reluctance to compromise. While historical injustices should never be forgotten, contemporary international co-operation ought not to be curtailed by a shadow of the past. In some cases, though, the scars may just be too deep to ever heal.

Suggested Further Readings:

A South China Morning Post article discussing the limited rapprochement potential embodied in the extension of the GSOMIA: https://www.scmp.com/news/asia/east-asia/article/3039583/japan-south-korea-trade-war-friendly-gestures-mean-its-worse

An article from The Diplomat, mapping the modern-day political relations between Japan and South Korea: https://thediplomat.com/2019/10/japan-south-korea-and-the-politics-of-the-present/

A Time Magazine article placing the economic dimension of this trade dispute in the context of a changing global economic climate: https://time.com/5691631/japan-south-korea-trade-war/

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