Korea suspends WTO complaint against Japan on materials exports

Industry

Published: 06 Mar. 2023, 17:54 Updated: 09 Mar. 2023, 10:20

Korea suspends WTO complaint against Japan on materials exports

Kang Kam-chan, director general for trade controls policy at the Ministry of Trade, Industry and Energy, speaks during a press briefing held at the government complex in Sejong on Monday. [YONHAP]

Korea will suspend a complaint filed with the World Trade Organization (WTO) against Japan for restrictions on the export of certain key materials to Korea, as the two countries agreed to work together to lift the export curbs.

It is not a withdrawal of the complaint, the Trade Ministry said.

The announcement came over three years after the restrictive measures were first imposed.

“The Korean and Japanese governments decided to quickly proceed with bilateral discussions aimed at restoring Korea-Japan trade relationship to the state before July 2019,” said Kang Kam-chan, director general for trade controls policy at the Ministry of Trade, Industry and Energy, during a press briefing Monday.

“During the discussions, the Korean government will halt the dispute settlement process with WTO on a complaint against Japan,” Kang said.

The Japanese government will soon host a policy dialogue on export controls, according to Kang.

The specific date has not been settled yet.

In July 2019, Japan required extra documentation for exports to Korea of three key chemicals — hydrogen fluoride, photoresists and fluorine polyimide — essential in the making of semiconductors and displays.

Japan also removed Korea from its so-called white list of trusted trading partners.

The Japanese government cited Korea’s failure to comply with strict controls on strategic exports, threatening Japan’s national security.

But Korea saw the move as retaliation for a court decision in late 2018 calling for compensation for Koreans forced into labor by Japan during World War II.

In response to Japan’s restrictive measures, Korea filed the complaint with the WTO in September 2019.

The WTO decided in 2020 to establish an arbitration panel, but the process has been at a standstill since then as Korea and Japan failed to agree on panel member selection.

The Japanese government is demanding Korea withdraw its complaint with the WTO before its considered lifting export restrictions, according to the Yomiuri Shimbun’s report Sunday.

Kang stressed that “the suspension of the WTO dispute settlement process is not a withdrawal of the complaint.”

The latest decision to suspend WTO complaint and hold a policy dialogue was announced simultaneously by the Korean and Japanese governments, Kang added.

Since the strengthening of export controls on three semiconductor materials, Korea has been working to diversify its sourcing away from Japan.

“Korea’s dependency on Japan’s key materials, parts and equipment supply has been significantly lowered, but uncertainties still remain for businesses due to the export restrictions,” said Kang.

“We expect the lifting of export curbs will resolve such uncertainties.”

In 2022, 15 percent of Korea’s materials, parts and equipment imports were from Japan, compared to 17 percent in 2019.

For the 100 core materials and application items, Korea’s reliance on Japan was lowered to 24.9 percent in 2021 from 30.9 percent in 2019, according to the Trade Ministry’s report last year.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]