ADVERTISEMENT

South Korea Moves to Downgrade Japan Trade Ties, Seeks Talks

South Korea’s trade deficit with Japan was $24 billion in 2018, the biggest among more than 250 trade partners.

South Korea Moves to Downgrade Japan Trade Ties, Seeks Talks
Stacked shipping containers at a port in Japan (Photographer: Tomohiro Ohsumi/Bloomberg)

(Bloomberg) --

South Korea moved to downgrade Japan from its list of most trusted trading partners while also seeking talks to end a months-long spat that has hurt economic ties between the two American allies.

South Korea plans to split its fast-track category into two and initially put Japan as the only country in the second one, the Ministry of Trade, Industry and Energy said Monday. The move comes less than two weeks after Japan removed South Korea from its list of “white nations” considered safe enough to export strategic materials to.

South Korean President Moon Jae-in demanded last week Japan reconsider its decision, warning there are no “winners in this game.”

The dispute has undermined the economic outlook of South Korea, which is already struggling to cope with the U.S.-China trade war. Companies in South Korea need materials from Japan to produce memory chips and displays.

Big trade deficit

“It’s symbolic, given the importance of South Korean products in Japan’s industries is small,” said Oh Tae-heon, an economist who teaches Japan studies at Kyung Hee Cyber University in Seoul. “It won’t create the kind of urgency in Japan that South Korea felt when exports of semiconductor materials were curbed.”

South Korea’s trade deficit with Japan was $24 billion in 2018, the biggest among more than 250 trade partners, according to the Korea International Trade Association.

Industry Minister Sung Yun-mo told reporters Monday in a briefing that South Korea was ready to agree to talks with Japan during its 20-day review period before the new designation takes effect in September.

South Korea Moves to Downgrade Japan Trade Ties, Seeks Talks

Currently 29 nations are in South Korea’s “Ga” list of most trusted trading partners for strategic materials, while all other countries belong to the other “Na” category, according to the trade ministry’s website.

Machine tools, chemicals and stainless steel are among the types of products that South Korea’s ministry has listed on its website as subject to the export controls.

Japan would be placed in the new “Ga2” category and treated “in principle” in the same way as countries in the “Na” category, the ministry said in an emailed statement.

To contact the reporter on this story: Sam Kim in Seoul at skim609@bloomberg.net

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Peter Pae, Daniel Ten Kate

©2019 Bloomberg L.P.