South Korea to halt WTO dispute process while discussing Japan's export curbs

A logo is seen at the WTO in Geneva
A logo is seen at the World Trade Organization (WTO) headquarters before a news conference in Geneva, Switzerland, October 5, 2022. REUTERS/Denis Balibouse/File Photo

SEOUL, March 6 (Reuters) - South Korea will halt a World Trade Organization (WTO) dispute process sparked by a complaint against Japan as the two countries discuss Japan's export curbs on high-tech materials to South Korea, the two countries' trade ministries said on Monday.

In July 2019, Japan imposed export curbs on materials used in smartphone displays and chips amid a decades-old row with Seoul about South Koreans who said they were forced to work under Japan's 1910-1945 occupation of Korea.

As South Korea has proposed its companies would compensate those people, both countries will quickly begin discussions to return export curbs to their pre-July 2019 state, the ministries said on Monday.

"The suspension of the WTO dispute resolution process is not really a withdrawal... but a pause," said Kamchan Kang, director-general at Korea's trade ministry. "If the issue does not progress well, the process may resume again."

South Korean tech firms such as Samsung Electronics Co Ltd (005930.KS), SK Hynix Inc (000660.KS) and LG Display Co Ltd (034220.KS) were among companies widely expected to be affected by Tokyo's curbs on fluorinated polyimides, photoresists and hydrogen fluoride, in which Japanese production dominated.

But Seoul-based analysts said the impact was limited as the companies found import routes through other countries, worked to diversify sourcing - including investing in local materials firms - and some Japanese firms set up production in South Korea.

"In hydrogen fluoride's case, domestication has progressed considerably," said Kim Yang-Paeng, senior researcher at Korea Institute for Industrial Economics and Trade.

Reporting by Joyce Lee and Heekyong Yang; Editing by Kim Coghill and Christopher Cushing

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