Solution urgently neededThe de facto export ban by Japan on three key materials necessary for chip and OLED display manufacturing has begun to take a toll on Korean manufacturers. Japan started restricting Korea’s imports of fluorinated polymide, photoresists and hydrogen fluoride shipments last week. Since then no shipments have been approved. Samsung Electronics and other component makers have told the government that their factories could stop running later this month if they do not receive fresh stocks from Japan.
The government held emergency meetings with businesses over the weekend. Top economic policymakers — Finance Minister Hong Nam-ki and Kim Sang-jo, presidential policy chief — met with heads of Hyundai Motor, SK and LG Group. The heads of Samsung and Lotte Group were away on overseas business trips. President Moon Jae-in has invited chiefs of the top 30 business groups to a meeting on Wednesday. The government and business must work together to counter trade attacks from Japan. Moon must listen to corporate voices to draw up an effective counterattack.
But Seoul doesn’t have too many options. The government has vowed to pour in 6 trillion won ($5.1 billion) to promote the IT materials and parts sector and diversify import lines, but that can’t produce results overnight. Japan, meanwhile, is ready to ratchet up trade barriers. Japanese Prime Minister Shinzo Abe in a TV debate claimed Seoul cannot be trusted because it is a state that does not abide by inter-government agreement. He complained about Seoul’s disbanding of a peace foundation aimed to compensate comfort women under a 2017 bilateral agreement and Supreme Court rulings last year ordering Japanese companies to compensate individuals for forced labor in colonial times. Tokyo has been arguing wartime and colonial reparations were completely settled by a 1965 treaty.
Japan warned it will removed Korea from the a so-called white list of countries that are allowed free exports. That would mean Korea would be exempted from fast-track supplies of over 1,100 substances needed to make many things. Japan is not expected to yield any time soon. Given their reliance on Japanese suppliers, Korean companies have little options in finding immediate replacements.
What the government needs to do is to settle the diplomatic row with Tokyo. “The crisis has been triggered by political and diplomatic impotence,” said Lee Jong-cheol, Bareunmirae Party spokesman. The government must try to renew dialogue with Tokyo and seek a diplomatic breakthrough. A lengthy conflict will only hurt the citizens and industries of both nations.