World

South Korea to remove Japan from preferred trade list amid dispute

South Korea says it has decided to remove Japan from a list of nations receiving preferential treatment in trade in what's seen as a countermeasure to Tokyo's recent decision to downgrade Seoul's trade status amid a diplomatic row.

Japan downgraded South Korea's trade status earlier this month

Protesters in Seoul hold signs that read 'No Abe,' in reference to Japanese Prime Minister Shinzo Abe, during an anti-Japan rally on Aug. 2. South Korea says it has decided to remove Japan from a list of nations receiving preferential treatment in trade. (Kim Hong-ji/Reuters)

South Korea said Monday it has decided to remove Japan from a list of nations receiving preferential treatment in trade in what's seen as a countermeasure to Tokyo's recent decision to downgrade Seoul's trade status amid a diplomatic row.

It wasn't immediately clear how South Korea's tightened export controls would impact bilateral trade. Seoul said South Korean companies exporting to Japan will be able to receive exceptions from case-by-case inspections that are normally applied to exports to nations with lower trade status and go through a faster approval process they currently enjoy.

Japan provided similar exceptions while removing South Korea as a favoured trade partner, which eased some of the fears in Seoul about a possible blow to its export-dependent economy, where many manufacturers heavily rely on parts and materials imported from Japan.

After spending weeks berating Tokyo for allegedly weaponizing trade and vowing retaliation, South Korean President Moon Jae-in struck a more conciliatory tone on Monday, saying his government will refrain from "emotional" reactions to Japan over the trade dispute.

South Korean Trade Minister Sung Yun-mo said the government decided to remove Japan from the country's 29-country "white list" because it has failed to uphold international principles while managing its export controls on sensitive materials.

In-between bracket for Japan

South Korea currently divides its trade partners into two groups while managing the exports of sensitive materials that can be used both for civilian and military purposes. Seoul will create a new in-between bracket where it plans to place only Japan, which "in principle" will receive the same treatment as the non-favoured nations in what's now the second group, Sung said. 

South Korean officials didn't clearly explain why they created a special bracket for Japan instead of grouping it with other non-favoured nations. They say Seoul will work to minimize negative impact on South Korean exporters and bilateral trade.

Sung said the changes are expected to enter effect sometime in September, following a 20-day period for gathering public opinion on the issue and further regulatory and legislative reviews. He said Seoul is willing to accept any request by Tokyo for consultation over the issue during the opinion-gathering period.

South Korea's announcement came weeks after Japan's Cabinet approved the removal from South Korea from a list of countries with preferential trade status. Seoul had vowed retaliation while accusing Tokyo of weaponizing trade to retaliate over political rows stemming from their wartime history.

Japan's move came weeks after it imposed stricter controls on certain technology exports to South Korean companies that rely on Japanese materials to produce semiconductors and displays for TVs and smartphones, which are key South Korean export items.

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