Asian Duel : Explaining the escalating "Trade War" between Japan and South Korea and its Geopolitical Impact

|Image: Japanese PM Shinzo Abe & South Korean President Moon Jae-In at the G-20 Summit,2019|

Japan and South Korea are Asia's biggest economies after China and India and have gained worldwide acclaim for their global brands. But the relationship between these 2 powerhouses have long been strained, and now we're seeing those tensions escalating into a full-blown trade dispute. Amid these tensions, many people are curious as to why these nations are at loggerheads? The Wholistic View tries to find the answer (8 Min. Read)

In July 2019, the Japanese Government announced that it would restrict the export of chemicals-fluorinated polyamides, photoresists, and hydrogen fluoride(crucial for producing semiconductors) to South Korea citing reasons that Korean companies had been inadequately managing these chemicals and leaking them to North Korea for the advancement of its military applications. South Korea on the other hand vehemently denied these accusations and called on the United Nations to investigate Japan's claims to prove their innocence.

For Starters, Semiconductor is a key material used in almost all electronic devices and have been Korea's top export product. Under the new export norms to Korea, Japanese companies now required a license for each chemical to export to Korea which could take up to 90 days to be granted. These restrictions posed a significant threat to Korean Economomy since this would, in turn, delay the productions thereby threatening the global market share of Korea in semiconductors.

|Image: South Korean protesters participate in a rally to denounce Japan's new trade restrictions on South Korea in front of the Japanese embassy in Seoul, South Korea|CHUNG SUNG-JUN/GETTY IMAGES|

Japan went a step head ahead by slapping another trade restriction by removing South Korea from its "white list"(list of countries entitled to receive preferential treatment in trade) further aggravating an already strained bilateral relationship. In retaliation, South Korea challenged Japanese measures at the World Trade Organization and threatened to review continuing military information exchanges with Japan.

Though these restrictions have been garbed under the disguise of national security and economic measures, the real bone of contention, however, goes way back in time and beyond trade. Korea's modern-day resentment of Japanese can be traced back to over a century ago when Japan under its Imperial Rule annexed the Korean Peninsula in 1910. During this time, Many Koreans were made to work in Japanese Factories and mines under poor conditions. Thousands of women, many of them Korean also served as "comfort women", a Japanese euphemism to describe those forced into sex work at military brothels.

|Image: Japan Soldiers arriving in Seoul, Korea during the Russo-Japanese War. Date: circa 1904-1905.yoonqin images|

Japanese rule came to an end in 1945 following the defeat of Axis powers in World War II. After years of negotiations, these two nations signed a treaty in 1965 aimed at completely wiping all colonial-era claims in exchange of $800 Million worth of loans and economic aid to be given by Japan. This didn't go down well with South Korean citizens who deemed it insufficient as they thought it was not enough reparation for sensitive issues. These Nations attempted to settle it decades letter in 2015 when Japanese PM Shinzo Abe apologised for what has been done during the Imperial rule and showed remorse and established a $10 Million fund for surviving comfort women of the Imperial Era. As per this treaty, both states decided to refrain from criticising each other over this contentious issue on international stage anymore.

Many Korean groups were still not happy with this outcome saying they weren't consulted during the negotiations. This resentment morphed into mass demonstrations on the streets of Seoul. Koreans started to boycott Japanese goods. In 2017, Moon Jae-in became South Korea's president and made it clear that South Koreans would not accept the deal brokered by the previous government. Resentment was growing in Japan as well, where many felt South Korea was struck in a loop making it impossible to settle the colonial claims and move ahead.

What became the final nail in the coffin was a decision by the Korea Supreme Court which held Japanese companies accountable for forcing Korean workers into factories during the Second World War. Companies namely Nippon Steel & Sumitomo Metal as well as Mitsubishi Heavy Industries were ordered to compensate several Koreans for forced labour during the war. This infuriated the Japanese Govt. to a great extent which led to the matter of tightening Trade Ties.

So, How do these trade tensions affect Korea? Well, Korean Companies such as Samsung and SK Hynix which are two of the world' largest semiconductors manufacturers will face difficulty in procuring the raw products for their goods. In the short term, the price of Korean semiconductors will go up which will hamper their export prospects. Thus, these companies may be forced to look for alternative supply sources for their technology parts and materials imported from Japan. This can be a silver lining for the Korean economy as well since the price of several products which were down due to their abundant supply from Japan increased which resulted in Samsung posting unexpectedly higher profits.

Many Experts believe that restricting exports to South Korea would backfire and may hurt the Japanese Economy because many Korean companies have lost trust in Japan and may choose not to do business with them in future. On the other hand, Dropping out of the military exchange with Japan means that South Korea would no longer be notified about irregular activities in its regional waters. In 2019 alone, Seoul and Tokyo exchanged "classified military information" about North Korea 7 times. Some experts say that this could create a serious lag and cause detrimental consequences for the effective monitoring of North Korea's nuclear threats.

|President Trump with President Moon Jae-in of South Korea, left, and Prime Minister Shinzo Abe of Japan, right, in Hamburg, Germany, in 2017.Credit...Stephen Crowley/The New York Times|

Beyond military effects, a worsening Japan-Korea relationship may weaken geopolitical ties. The deteriorating relationship between the two neighbouring countries is impacting the world's largest economies. For one, China and the U.S. are fighting to be the mediator. While the two largest economies are in the midst of a trade war of their own, they're doing their best to avoid souring a bond between Japan and Korea. China has publicly supported a resolution to the trade tension but at the same time, Chinese companies are engaged in positioning themselves as a replacement for their Japanese counterparts. While China could benefit from new export orders, Beijing ultimately hopes to keep the Japan-South Korean-China Free trade agreement negotiations on track, but that will be unlikely as tension escalates.

What's next? Analysts say that China can benefit economically if South Korea and Japan resolve their differences, but it could potentially benefit geopolitically if their relationship worsens, weakening the US influence in the region. The US, which has a sizeable military presence in both countries, has always served a bridge between the two nations but the trump administration has stayed relatively low key in the recent Japan-Korea dispute which in turn may even indirectly strengthen Chinese influence globally.

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