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The Other Trade War: Why South Korea And Japan Are At Odds

Image Source: asia.nikkei.com

With crimson garments and gold-framed dark turquoise curtains providing an impressive backdrop, the new emperor of Japan, Naruhito, was officially enthroned on Tuesday with all of the ceremony that might be expected from a family who claims a royal lineage over 2,500 years old.

But on the sidelines, Japan’s president, Shinzo Abe, and the prime minister of South Korea, Lee Nak-yon, were scrambling to deal with the ghosts of more recent history, memories which have led relations between the two countries to fall to the lowest level since Korea – not yet split between North and South – was a Japanese colonial possession.

During this period, many Koreans were enslaved by Japanese corporations such as Mitsubishi as part of their imperial rule. A 1965 settlement of $500 million by Japan to South Korea was viewed for years as a resolution, but last November, South Korea’s supreme court ruled that the companies which utilized South Korean forced labor should pay up.

A proposal in June by South Korea to jointly compensate the victims was rejected by Japan, which less than two weeks later decided to restrict the export of chemical fluids needed for semiconductors – a bulwark of the Korean economy. After a showdown at the World Trade Organization, Abe removed Japan from the “white list” of economic partner countries, setting limits on additional chemicals and materials to manufacture microchips, and pulled out from an intelligence-sharing pact. South Korea responded with its own restrictions just ten days later.

The rationale given by Japan – that South Korea was leaking technological secrets to its northern counterparts – reflects how the schism between the two countries is as much about the present as the past.

South Korea’s current government, led by President Moon Jae-In, is the most left-wing in the country’s history. On the geopolitical front, the country has veered towards accommodation of its northern neighbor, and by extension, China. 

Under Moon, government spending has soared by 30 percent, and anti-capitalist ideas are gaining traction among students and in intellectual circles, with biting criticisms of the market economy, like the film Gisaengchung, just released in the US as “Parasite” (review to come in Freely Magazine) wildly popular among the public. There is increasing resentment towards the generation that was in power at the time of the country’s dictatorship era.

Meanwhile, Japan has become increasingly conservative. The country’s leaders take a more cautious approach towards rapprochement with North Korea and have gone to great lengths to protect the American alliance. Japan is one of the only countries where relations are better, not worse, under Trump than under Obama. Abe has long desired for Article 9, which commits the country to pacifism, to be struck from the country’s constitution.

His wife and several members of his cabinet have supported a throwback educational approach which sees children between three and five required to memorize an 1890 list of principles demanding sacrifice to the Imperial House. Abe himself is a member of the Nippon Kaigi, a group of traditionalist ultras who harken back to the same time period and have promoted historical revisionism.

This last point continues to be a source of anger of South Koreans. Many Korean women were forced to act as sex slaves, or “comfort women,” to Japanese occupation soldiers, something which even before the recent diplomatic crisis has soured relations between the two countries.

Since August, South Koreans have boycotted Japanese goods en masse on what they consider patriotic and popular grounds, supported by politicians from various parties, as well as local business owners. Tensions have been further stoked by Korean threats to pull out of the 2020 Tokyo Summer Olympics and outrage over TV commercials by the Japanese Uniqlo which have been viewed by Koreans as mocking those still upset about colonial rule.

Polls show seven in ten Japanese back their government’s trade restrictions with South Korea, and Moon’s handling of the conflict is supported by well over half of South Koreans.

The trade war between the two Asian countries has had a devastating effect on the economies of both, with South Korean exports and Japanese exports falling 20 percent in the first 20 days of October while Japan’s crashed 5.2 percent last month. Globally, the disruption of supply chains could roil markets for semiconductors and digital goods.

Corporate lobbies and liberal economists in support of free trade deals have bemoaned the two countries’ use of tariffs policies as national security weapons and say that it threatens to normalize this approach at a time when the US, China, and the EU are engaging in trade wars of their own.

A torrent of additional claims by Koreans against Japanese corporations under the supreme court’s precedent are now expected.

Upon the conclusion of Naruhito’s dazzling ceremony, Lee handed Abe a letter from Moon containing the message that their two countries should work towards rebuilding their ties in a publicly cordial meeting.

Shortly afterwards, a Japanese government official echoed the wide distrust on both sides that remains behind the harmonious photo-op. “Japanese companies paying is out of the question,” he told the Wall Street Journal.