The South Korean economy, one of the most developed in Asia, were in a difficult position not only because of the trade war, the United States and China, but also because of limitations of Japan. Sanctions affected the Japanese exports of raw materials in South Korea, which is required for the production of smartphones, semiconductors and displays. About how the trade confrontation between the two economic giants in East Asia could affect world trade, at RT.
Trade tensions with Japan have affected the South Korean economy. The Republic’s authorities lowered the economic growth forecast from 2.5% to 2.2%, and the Bank of Korea for the first time in 2016 lowered the interest rate to 1.5% per annum.
In early July, the Ministry of economy, trade and industry of Japan announced the introduction of export restrictions South Korea. In a message posted on the Agency’s website says about the withdrawal of the Republic from a list of “white countries” for which export control is simplified. In an official statement, also reported on “undermining trust between Japan and Korea in the field of control and regulation of exports.”
Thus, the Japanese authorities say high-tech raw materials sold in Korea without proper control companies, so it was decided to tighten the regulation of supply.
The Ministry in its official statement did not name any Japanese suppliers or Korean company, violating the existing export regulations. However, in Tokyo suggest that South Korea could resell imported from Japan raw material in the DPRK. This was reported by Japanese newspaper the Asahi, citing anonymous government representative. In addition to existing sanctions, Japan may impose similar restrictions on all materials that can be used in the military industry.
The South Korean government associates the introduction of export restrictions and confiscation of property of the Japanese company Nippon Steel & Sumitomo Metal. In the fall of 2018 the Supreme court of the Republic of Korea ruled that the Corporation must pay compensation in the amount of $89 thousand four Koreans. During world war II, Sumitomo Metal used forced labor of these workers. In 2019, the Supreme court of Korea dismissed the appeal of the Japanese side.
“We believe that the Japanese move is a clear act of economic retaliation,” — said in an interview with Korean radio station CBS, the Minister of economy and Finance of the Republic of Korea hon Us Ki.
The threat to the economy
The President of South Korea, moon Jae-In of the predicted negative consequences for the Japanese economy due to the loss of such a major importer of raw materials, such as South Korea. He said that export restrictions spur South Korean production of materials needed in high-tech manufacturing, said the newspaper “Yomiuri”.
The head of the joint program of the HSE and the University of Kenkhi “Economy and politics in Asia” Denis Shcherbakov in an interview with RT said that the establishment in the territory of Korea’s own production of these materials possible in the medium term. However, the expert did not exclude that at the initial stage, the Korean company will go the way of finding alternative suppliers.
“Because these materials can be used in the production of dual-purpose products, selecting new suppliers will be slow. Now to help Korean companies are ready to come different countries, including Russia. However, many of them have the same legislative capacity, as in Japan, that is, at any time to stop the export of these materials,” — said Shcherbakov.
Measures to limit exports caused a backlash from not only Korean businessmen and politicians, but also consumers. According to the survey of Korean sociological Agency Realmeter, 66,8% of the population willing to join a boycott of Japanese goods.
It is curious that Japan trade with Korea for a long time retains a significant surplus. According to the international trade Association of South Korea, after the signing of the trade agreement between the two countries in 1965, the country has never recorded a positive trade balance with Japan. In just 54 years, the trade deficit was $646 billion, and in the first five months of the year 2019 — $8.5 billion last year, this figure reached $24.8 billion, which was the maximum among all trading partners of the Republic of Korea.
Experts believe that the nascent trade war may have an impact on both countries, whose economies are strongly linked. However, Japan has a substantial trade surplus, therefore, Korea could suffer stronger.
“In the mutual trade between Korea and Japan has always been a surplus for Japan somewhere in the $20-25 billion So I think it is especially hard will not hit Japan. The creation of artificial barriers to the acquisition of Japanese components and these basic elements for the production of semiconductors is very sensitive to the whole South Korean industry associated with smartphones,” — said RT senior research fellow, Center for Korean studies Institute of Far Eastern studies, Kim Yong-UN.
Interest from America
Three types of material subject to Japanese export restrictions, required in the manufacture of circuits, chips, semiconductors, and displays. One of the main buyers of these materials is Samsung Electronics, the largest representative of the Korean industry. According to the portal Statista.com in the first quarter of 2019 Samsung took 23.1 per cent of the global smartphone market. Second place — China’s Huawei (19%).
Although experts expect the continuation of a trade war, affecting the production of digital technology, they do not predict a significant growth of prices in this market.
“I don’t think that will increase retail rates for buyers of smartphones, displays or TVs, since their share in the final product is relatively small. A temporary rise in price of these materials can be offset by subsidies to the companies themselves”, — said Denis Shcherbakov.
Crisis in economic relations between Korea and Japan coincided with a trade war between the US and China.
Analysts point out that China is very important cooperation with Japan and South Korea. According to the Japanese organization of foreign trade, China is the largest trading partner of Japan, the share of exports and imports for the year 2018 of 19.5% and 23.2%, respectively. For Korea, the share of exports to China made up 25% and imports 21%. Such data results in “UN COMTRADE”.
As experts underline, in spite of the close relationship in trade with China, Japan and Korea is defining a strategic partnership with the United States. The United States, in turn, not very happy with the contradictions in trade relations with their younger partners on the strategic triangle of Washington — Tokyo — Seoul.
“The United States will not directly participate in the resolution of the Japanese-Korean contradictions, because of the difficulties that will be created for the South Korean electronics industry, will benefit U.S. corporations and strengthen the position of Apple’s chief rival Samsung. In words of course, they will sympathize with the Koreans, but officially, everything has to be solved in the framework of bilateral relations”, concluded Kim Yong UN.
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