Export controls in Asia
A trade dispute between Japan and South Korea has echoes of Donald Trump’s tactics
Take just about any trade fight today, and President Donald Trump’s America is at the centre of it: with Europe over cars and aeroplanes; with foreign producers of steel; with China over, well, everything. But a brawl now under way in Asia, between Japan and South Korea, has the potential to be as damaging as much of what Mr Trump has stirred up. It is also a sign that his model of abusing economic partners is spreading.
Tensions between Japan and South Korea go back centuries. Japan’s colonisation of Korea between 1910 and 1945 is still resented. Japan believes a 1965 agreement resolved claims by South Korea over forced labour. It is incensed that South Korea’s supreme court last year ordered Japanese firms to compensate victims. Amid a widening rift, Japan took its most serious action on July 4th when it began restricting exports to South Korea of three specialised chemicals used to make semiconductors and smartphones.
The stakes are high. Japan accounts for as much as 90% of global production of these chemicals. It exported nearly $400mworth of them to South Korea last year. That may not sound like much, but their importance is outsized. They are needed to make memory chips, which are essential to all sorts of electronic devices. And South Korean firms are the world’s dominant manufacturers of memory chips. If Japan were to choke off exports, the pain would ripple through global tech supply chains.
Japan has also hinted that it might start requiring case-bycase licences for the sale to South Korea of some 850 products with military uses. South Korean firms have called for boycotts of Japanese goods. The two countries, whose trade relationship, worth over $80bn a year, is larger than that between France and Britain, need to step back from the brink.