Economists critical of S. Korea’s Export Restrictions Against Japan

Posted on 14 August 2019

Source: Business Korea

South Korea has dropped Japan from its list of preferred trading partners on Aug. 12 in response to Tokyo’s recent decision to exclude Seoul from its trade whitelist.

In this regard, critics pointed out that the South Korean government should first seek to find a diplomatic solution through communication and negotiation rather than pursue a mutual retaliation as South Korea’s decision will not have much impact on Japan. This is because Japan does not import much from South Korea and it imports mainly consumer goods.

The South Korean government manages 1,735 strategic material items in total. The latest decision is expected to have an effect on hot-rolled stainless steel and nonmetal halides for which Japan has a relatively high reliance on imports from South Korea. However, experts said it is very insufficient to strike a direct blow at Japan as South Korea accounts for only a small portion of Japan’s imports and Japan can find easily find alternative import sources.

The amount of Japan’s imports from South Korea came to 1.62 trillion yen (US$15.44 billion or 18.82 trillion won) in the first half of this year, taking up 4.2 percent of the total imports of 39.13 trillion yen (US$372.21 billion or 45.37 trillion won), according to data from the Korea International Trade Association (KITA).

Jeong In-gyo, a professor of international trade at Inha University, said, “The effectiveness of South Korea’s exclusion of Japan from the whitelist will be very weak. Japan has not designated specific export items, taking a breather, because it intends to engage South Korea in dialogue, though there was no official announcement to that effect. Now, Japan can also use Korea’s response politically, saying that Japan tried to talk with South Korea, but South Korea responded with a retaliatory measure.”

Kang Sung-jin, an economics professor at Korea University, said, “The exclusion from the whitelist is meaningful only when the government limits exports of irreplaceable items. But this is not the case at the moment. I think Japan is sending a signal for compromise and South Korea should find a diplomatic solution first.”

Cho Kyung-yup, a senior research fellow at the Korea Economic Research Institute (KERI), said, “South Korea exports mainly consumer goods to Japan, so I doubt whether the government’s action will actually take a toll on Japan. The government should regain its composure and come make diplomatic efforts if it puts the national interest first. There is no reason to have confrontation with Japan.”

Huh Yoon, a professor of international studies at Sogang University, said, “Japan may act more emotionally against South Korea due to Seoul’s latest decision. The South Korean government should catch its breath and flexibly deal with the situation to reduce uncertainties for South Korean companies.” 

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