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(EDITORIAL from Korea Times on Aug. 6)

Editorials from Korean Dailies 07:06 August 06, 2019

Reduce reliance on Japan
Time to beef up materials, parts industries

The Moon Jae-in administration has decided to nurture the country's materials, parts and equipment industries as part of efforts to reduce their undue dependence on Japanese imports. The decision is a step in the right direction to tackle Japan's expanding trade restrictions against South Korea.

On Monday, Minister of Trade, Industry and Energy Sung Yun-mo announced a plan to boost local production of 100 key strategic items to ensure a stable supply by 2024. The industry ministry promised support such as budget, finance, tax incentives and deregulation for domestic businesses.

The plan calls for finding alternative suppliers of 20 core items in other countries such as the U.S. and China within a year. It also requires a stable supply of the remaining 80 items within five years. Those items include three high-tech materials essential for the production of semiconductors and display panels, on which Japan imposed export restrictions early last month. On Aug. 2, Japan expanded its export curbs by removing Korea from its list of countries eligible for preferential treatment in trade.

The escalating trade dispute with Japan shows how Korea and its companies have relied too excessively on imports of Japanese materials, parts and components and equipment. Simply put, the country has had no other choice but to import such items in order to produce and export memory chips, TV sets, cars, ships and other goods for economic growth.

In other words, Korea has made its industries and economy vulnerable to external factors due to its heavy dependence on Japan. As seen in the ongoing flare-up of conflicts over historical issues such as Japan's wartime forced labor, Korea runs the risk of economic retaliation from the former colonial power.

Therefore, it is imperative for Korea to reduce its excessive reliance on the world's third-largest economy. This is not only necessary for the country's sustainable growth, but also for national security.

This structural problem has caused Korea to suffer an accumulated trade deficit of $604 billion (708 trillion won) with Japan since the countries normalized diplomatic ties in 1965. Bilateral economic cooperation has been based on comparative advantages and international division of labor and production.

But Korea has had to pay the price. The more it wants to export, the more it has to import from Japan. This has left Korea with a huge trade deficit, while fattening the pockets of Japan and its companies. This now has to be changed to rectify the shortfall and put Korea on an equal footing with Japan.

For this reason, Japan's expanding trade curbs should serve as an opportunity for Korea to push for industrial restructuring to improve competitiveness. The nation also needs to boost cooperation between family-run conglomerates and small and medium enterprises to localize materials, parts and equipment. The sooner, the better.
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