Geopolitics of trade frictions between #Japan and #SouthKorea

| July 23, 2019

On 4 July, the Japanese government announced tighter controls on the export of semiconductor materials to South Korea and threatened to exclude South Korea from the ‘white list’ of trusted trade partners. The move could hit South Korea’s economy hard, as South Korea’s economy relies heavily on the manufacturing industry, write Chen Gong and Yu (Tony) Pan.

Ever since the Korean economy took off, the manufacturing industry represented by Samsung, LG, SK, and other enterprises have made up an important part of South Korea’s economy. South Korea’s semiconductor exports totaled KRW 45.0294 trillion (about RMB 263.2 billion) in the first five months of this year. On the other hand, Japan will also suffer in an eventual trade dispute, but its losses are negligible compared with South Korea’s. Crucially, South Korea’s manufacturing sector is heavily dependent on Japanese semiconductor materials.

In addition, Japan controls more than 70% of the global supply for the three semiconductor materials under control. If the sanctions are prolonged, more than half of South Korean companies will become unsustainable. South Korea’s economy could be gravely affected, while Japan could regain its global dominance in semiconductor manufacturing.

The recent trade dispute between Japan and South Korea can be seen as Japan’s unilateral strike against South Korea, and the subsequent tough attitude displayed by the Japanese side shows that Japan’s recent measures are not merely based on economic reasons, but also functions to express its dissatisfaction in Japan–South Korea relations through economic means. In fact, Japan and South Korea have long been plagued by historical issues.

This is not the first time the Japanese government expressed its dissatisfaction with the South Korean government through economic means. In fact, it came as early as 2015, when the issue of comfort women and Dokdo Island caused high tensions to flare up between Japan and South Korea. As a result of these tensions, the Abe administration suspended a 14-year currency exchange program between the two countries.

Differing from the past, the two governments have restrained their previous responses due to the common geostrategic needs and the guidance of the United States as the leader of the alliance., but that compromising attitude is yet to be seen in the recent trade dispute. The reason for this change is that, in addition to existing conflicts in bilateral relations, Japan is increasingly dissatisfied with the current geopolitical development of north-east Asia.

Firstly, Japan and South Korea have increasingly divergent interests over the North Korean nuclear issue. For the Abe administration, the North Korean nuclear issue is an important opportunity to normalize Japan’s defense and re-establish Japan as a great power in Northeast Asia. However, since Japan cannot directly participate in any possible combat operations against North Korea and it is unlikely to become the target of North Korea’s proactive attacks, Japan can be objectively viewed as not being directly related to the North Korean issue. Compared with the North Korean nuclear issue, the Japan-North Korea relations are more affected by the hostage issue.

In this case, Japan can only get in by tying its policies tightly with U.S. policies. Therefore, Japan was once America’s biggest supporter of the “extreme pressure” policy. Yet preventing war is clearly more important to the South Korean government than forcing North Korea to abandon its nuclear program, which explains its ambivalence about America’s “extreme pressure” policy. Moreover, when it comes to how to respond to China’s rise, the South Korean government shows a very different attitude towards Japan’s close proximity to the United States, even considering the impact of THAAD issue and the recovery of China-Japanese relations since 2019. Without the influence of historical factors, the rise of China mean more opportunities than challenges for South Korea.

Secondly, with the recovery of U.S.-North Korea relations, China-North Korea relations, and even the Russia-North Korea relations in 2018, Japan has been increasingly marginalized on the North Korean nuclear issue. Japan is still trying to keep pace with the U.S. policy after a change in U.S. policy towards North Korea in 2018, but so far it has had little success. In the frequent diplomatic activities of North Korean leader Kim Jong-un in 2018, the leaders of Japan and North Korea became the only leaders among the Six-Party Talks that did not meet each other. Although Shinzo Abe has repeatedly said he would meet with Kim “without any preconditions”, the latter has apparently shown little interest in such a meeting.

The reason is that North Korea understands that resolving the “hostage issue” between Japan and North Korea does not help much in obtaining economic assistance from the Japanese side without thoroughly resolving the relations between North Korea and the U.S. On the contrary, Japan’s attitude towards North Korea will no doubt change as long as the U.S.-North Korea relations are resolved.

In addition to the negative response from North Korea, the Trump administration’s attempts to address the issue directly through leadership-level diplomacy have made the Abe administration feel increasingly marginalized in the North Korean issue. For example, Trump announced to suspend the joint military drills with South Korea after the first summit with Kim Jung-un without informing Tokyo in advance, which eventually had a significant impact on the Japanese political circles.

Thirdly, Japan is increasingly dissatisfied with the fact that the United States cannot continue to play an active leadership role in the region. As the leader of the Northeast Asian alliance system, the United States once acted as a “mediator” between Japan and South Korea, avoiding the escalation of the conflict between the two sides. The Trump administration is notably less enthusiastic on the issue than the Obama administration. This is partly because America lacks a clear vision of its own position in the Asia Pacific Alliance. Although the United States has emphasized the importance of the Asia Pacific Alliance system in several government documents and even proposed the idea of integrating bilateral alliances, there were only a few policies have been adopted.

On the contrary, Trump has recently mentioned that the United States intends to withdraw from the “US-Japan Security Alliance”, which made the Japanese government and society very worried about such an eventuality. Some Japanese scholars even said that Trump’s statement on the U.S.-Japan Security Alliance was comparable to the “Black Ship” incident before the Meiji Restoration. Japan is increasingly worried about the future geopolitical pattern of Northeast Asia. Given that, the recent trade friction between Japan and South Korea could be deemed as the manifestation of this concern.

Final analysis conclusion

The trade friction between Japan and South Korea is not simply an economic issue. It is essentially a way for Japan to express its dissatisfaction on a broader level through economic means. It also reflects the huge influence of historical issues still lurking behind the shadows in relations between Japan and South Korea, as well as the trend of Japanese foreign policy. Even if the trade dispute is resolved, Japan’s discontent will likely manifest itself in other ways, and could possibly change the geopolitical pattern in Northeast Asia.

Founder of Anbound Think Tank in 1993, Chen Gong is now ANBOUND chief researcher. Chen Gong is one of China’s renowned experts in information analysis. Most of Chen Gong’s outstanding academic research activities are in economic information analysis, particularly in the area of public policy.

Yu (Tony) Pan serves as the associate research fellow and the research assistant of Chen Gong, founder, chairman, and the chief researcher of ANBOUND. He obtained his master’s degree at George Washington University, the Elliott School of International Affairs; and his bachelor’s degree in University of International Business and Economics in Beijing. Pan has published pieces in various platforms domestically and internationally. He currently focuses on Asian Security, geopolitics in Indo-Pacific region and the US-Sino Relations.

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