September 11, 2019 / 12:37 AM / a month ago

Seoul to file WTO complaint over Japan's 'discriminatory' export curbs

SEOUL (Reuters) - South Korea plans to file a complaint over Japan’s tighter export controls at the World Trade Organization on Wednesday, accusing Tokyo of being “politically motivated” and “discriminatory” in an escalating row rooted in wartime history.

FILE PHOTO: A police officer stands guard near Japan and South Korea national flags at hotel, where South Korean embassy in Japan is holding the reception to mark the 50th anniversary of normalisation of ties between Seoul and Tokyo, in Tokyo June 22, 2015. REUTERS/Toru Hanai/File Photo

In July, Japan imposed tighter controls on exports of three materials to South Korea used in smartphone chips and displays following a diplomatic dispute over compensation for forced laborers during Japan’s occupation of Korea during World War Two.

The complaint intends “to prevent the act of abusing trade for political purposes from recurring,” South Korea’s Trade Minister Yoo Myung-Hee said at a briefing.

Bilateral relations deteriorated after South Korea’s Supreme Court last year ordered two Japanese companies to compensate wartime workers in a ruling that Tokyo said violated international law. Japan says the issue of compensation was settled under a 1965 treaty.

The dispute has rippled through security cooperation over North Korea, with Seoul deciding to scrap a military intelligence-sharing pact with Japan, inviting criticism from both Tokyo and Washington.

Yoo said South Korean firms are “faced with serious damage” as a result of the export curbs, which also cast uncertainty into the global supply chain and the global economy.

The materials affected by Japan’s export controls are fluorinated polyimides, photoresists and hydrogen fluoride, which are used by South Korean tech firms such as Samsung Electronics (005930.KS).

Japan now requires exporters to seek permission each time they want to ship those materials, which takes up to 90 days. Previously, it only took a couple of weeks to ship, Yoo said.

Only three shipments have been approved since Tokyo took action on July 4.

Japanese officials had cited “inadequate management” of sensitive items exported to South Korea as a reason for the export curbs.

Japan’s industry minister, Hiroshige Seko, said on Wednesday that the country would respond “in line with WTO procedures.”

“We intend to thoroughly explain Japan’s stance that our actions are in accordance with WTO rules,” he said at a news conference.

“Seoul’s complaint will not lead Japan to drop its tighter export curbs on the three items, but this will certainly put pressure on Japan to cautiously implement the measures,” said Ahn Duk-geun, a professor at Seoul National University.

60-DAY CONSULTATION

As the first step of WTO dispute settlement, South Korea will request consultations with Japan and seek the end of the export curbs. If that does not resolve the issues, South Korea will request a WTO panel ruling on the cases, the trade minister told a briefing.

The talks could take 60 days or more, a trade ministry official said.

Yoo also said South Korea was considering “all options” in response to Tokyo’s decision to drop Korea from the so-called white list of preferred trading partners. South Korea is taking steps to drop Japan from its own white list, a move that experts say is likely to prompt Japan to launch a complaint at the WTO.

But WTO cases can take years.

“They should resolve the matter politically and diplomatically, but chances are low for such a resolution because both governments are using the dispute to their own political advantage,” said Cheong In-kyo, an economics professor at Inha University.

Meanwhile, the WTO Appellate Body on Tuesday broadly upheld an April 2018 panel ruling against South Korea’s anti-dumping duties on imports of pneumatic valves from Japan.

But South Korean trade officials said the decision is not a victory for Japan, arguing that the WTO rejected most of Japan’s claims, making it unlikely Seoul will need to scrap anti-dumping duties on Japanese valves.

Reporting by Hyunjoo Jin, Additional reporting by Ritsuko Shimizu in TOKYO; Editing by Kim Coghill, Edwina Gibbs and Gerry Doyle

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