Korea will pay the price if trade war continues

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Korea will pay the price if trade war continues

The Korean economy will be hit hardest if the trade dispute between Seoul and Tokyo continues, a study predicted Sunday.

According to the Korea Economic Research Institute (KERI) under the business lobbying group Federation of Korean Industries, the Korean economy will shrink between 0.25 and 0.46 percent if Japan continues to exclude Korea from its so-called white list of countries that benefit from expedited export procedures.

The Japanese economy will shrink between 0.05 percent and 0.09 percent as a result of the Korean government doing the same.

The KERI report noted that Korea is likely to suffer more than Japan largely because it has a larger reliance on materials imported from Japan that play a crucial role in manufacturing in key industries. Korean goods exported to Japan, on the other hand, can be easily replaced with domestic products.

As well as three key materials that the Japanese government has been restricting exports of since July, Tokyo could further expand its restrictions on 11 additional materials such as mask blanks, photomask raw material and cellulose acetate, which are used in manufacturing semiconductor chips and display products as well as titanium used in aviation and space-related products.

On the contrary, Korea could consider restricting the export of 18 goods including nine steel products and six industrial chemical materials.

The KERI report noted that the Japanese government’s restrictions of key materials to Korea will likely contribute to raising Korean manufacturers’ cost burden, rather than impeding production.

But if the Japanese government’s trade restrictions do start to affect production, the Korean economy could shrink as much as 6.26 percent, depending on the number of materials that are restricted.

“As Korea is expected to suffer more over the export regulations imposed by both countries against one another, it is important to aggressively seek a solution,” said Cho Kyeong-yeop, the senior researcher at KERI.

Cho added that the dispute will lead to both countries falling behind in developing leading technologies.

Meanwhile, Japanese consumer goods have suffered since Korean customers started a boycott movement.

Japanese beer imports in September fell 99.9 percent compared to the same period a year ago, while Japanese automobile sales fell 58.4 percent compared to the previous year in October.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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