After winning the elections to the Upper House on July 21, Japan’s Prime Minister, Shinzo Abe, acquired some additional political clout to extricate his country from the trade war he had launched against neighbour South Korea. But how did this sudden trade war start and what could be the deeper reasons behind this ugly situation? The confrontation began in July when the Abe government restricted exports to South Korea of three materials critical to the manufacture of semiconductors and smartphone displays. The move threatened to disrupt the tightly linked supply chains and drive up the price of everything ~ from memory chips to iPhones.

Both Japan and South Korea continue to suffer from the baggage of history. Given the rigid stance of both countries, no easy solution seems likely. The latest Japanese retaliatory action is against the court ruling in South Korea, ordering Japanese firms to compensate the victims of wartime forced labour. Questions have been raised about Mr Abe’s decision as he has been a votary of strengthening the international trade order. In an editorial, Bloomberg wrote tha Mr Abe’s decision is “foolish and hopeless”. It argued that through exports curbs, Japanese suppliers will lose the market share as well as their reputation for reliability and therefore urged Japan to lift the export controls.

As the diplomatic row deepened after the South Korean court ruling over compensation for wartime forced labour, Japan’s foreign minister Taro Kono summoned South Korea’s ambassador Nam Gwan-pyo after the deadline set by Japan for South Korea to accept thirdparty arbitration of the forced labour dispute had passed. Japan contends that South Korea’s Supreme Court ruling, ordering two Japanese firms to compensate the wartime workers, is improper and that Seoul must take swift measures to correct this mistake. According to Japan, the issue of compensation was settled under a 1965 treaty which established diplomatic relations between the two nations, postWorld War II. In June 2019, Japan rejected a South Korean proposal to form a joint fund with Japan to compensate South Korean plaintiffs.

Compensating South Koreans for labour during Japan’s 1910-1945 occupation of the Korean peninsula has soured relations between the United States’ closest Asian allies. With the dispute over compensation assuming the dimension of trade frictions, there are suggestions that both sides ought to refer the dispute to the International Court of Justice (ICJ).

The trade row has escalated tensions. Japan’s Ministry of Economy, Trade and Industry issued a statement that Tokyo “will apply updated licensing policies and procedures on the export and transfer of controlled items and their relevant technologies to (South Korea. Through careful consideration among the relevant ministries in Japan, the Government of Japan cannot help but state that the Japan- (South Korea) relationship of trust including in the field of export control and regulation has been significantly undermined”. Additionally, Tokyo removed South Korea from the list of “white countries” ~ countries that Japan deems to have trustworthy export control systems.

Responding to reactions from South Korea to its decision to implement export curbs, resulting in widespread boycott of Japanese products and services in South Korea, from beer to clothes, the two countries are contending with the worst economic climate in a decade, Japan blamed South Korea’s “deficiencies” in its export control system and not in reactions to the labourers dispute, which South Korea rejected as “unjust economic retaliation”. South Korea’s trade ministry strongly reacted, saying that Japan’s plan to remove South Korea from its “white list” of countries with minimum trade restrictions should be based on “clear evidence and facts”. There are fears that Japanese curbs could have a grave impact on not only the economies in both the countries, but on the global supply chain as well.

South Korea tried to exert international pressure to bear on Japan by articulating its complaint at the World Trade Organisation (WTO), but that did not cut ice with the Japanese as the two allies of the US lobby continued accusing each other. Japanese ambassador in Seoul, Junichi Ihara, told the WTO meeting that the change in trade procedures was Japan’s prerogative and was nothing unusual. It reflected Seoul’s failure to negotiate the mutual streamlining of trade procedures. The ambassador also observed that it was based on national security concerns, following “some cases of inappropriate export” to South Korea. Japan is aware of the fact that national security claims could exempt it exempt from the rules of WTO and that Seoul’s complaint would stand on weak ground.

South Korea had brought the dispute to WTO, hoping to rally international opposition to Japan’s move but several countries preferred not to get involved in the dispute between two nations with an intertwined and complex history. The situation could escalate further, with the two governments engaging “in a tit-for-tat exchange of retaliatory measures for at least several months to further sours bilateral relations.” The tensions between the two Asian rivals are not recent. This stems from more than six decades of resentment from South Korea towards Japan. During the Japanese occupation of the Korean Peninsula from 1910 to 1945, many Korean women were forced into sex work in military brothels. The “comfort women” issue, the euphemism for Korean women drafted to provide sex to Japanese soldiers in war fronts, keeps bothering both nations. It is unfortunate that when the world’s two largest economies, the US and China, continue to engage in the tariff battle, two of Asia’s major economic players appear to be nearing their own trade war over political disputes.

The US is worried over this undesirable development and has urged its major allies, Japan and South Korea, to find ways to resolve the issues. During a three-way meeting in Bangkok, the US Secretary of State Mike Pompeo urged Japan’s foreign minister, Taro Kono, and South Korean foreign minister, Kang Kyung-wha, to end the dispute as early as possible. In the net, both countries remain on different tracks.

While Kono maintained that all compensations were settled in the 1965 bilateral agreement and therefore South Korea should work on rectifying the breach of international law, Kang insisted that it is not fair that Japan decided to remove South Korea from the list of countries eligible for preferential treatment.

She also hinted that South Korea may potentially scrap the General Security of Military Agreement or GSOMIA, if Japan does not reverse the decision. In the present scenario, there does not seem to be a way out to resolve the dispute. That is undesirable for Asian peace.