(LEAD) WTO sets up panel to look into Seoul-Tokyo trade row

(ATTN: UPDATES with more details on WTO panel future course in paras 11-13)
By Kang Yoon-seung

SEOUL/GENEVA, July 29 (Yonhap) -- The World Trade Organization's dispute settlement body on Wednesday decided to set up a panel to look into South Korea's complaint against Japan's export restrictions, a month after the decision was put off due to Tokyo's opposition.

Under the WTO rules, an investigation panel can be set up unless there is unanimous opposition from all members.

In June, South Korea reopened the WTO complaint over Japan's export curbs on key industrial materials, as Tokyo remained unresponsive to Seoul's call for the removal of the export restrictions it imposed one year ago.

The bilateral dispute began in July last year, when Japan abruptly announced it would regulate South Korea-bound exports of the three materials -- photoresist, etching gas and fluorinated polyimide that are critical for the chip and display industries, the backbone of Asia's No. 4 economy.

A month later, Japan even removed South Korea from its list of trusted trading partners, provoking Seoul to take tit-for-tat action in September.

Tokyo blamed Seoul for failing to effectively control trade of sensitive items that can be diverted for military purposes, but it has not yet provided clear evidence on how South Korea violated international rules.

Japan's export curbs are viewed as retaliation against a South Korean court's decision that ordered Japanese companies to provide compensation for their wartime slavery of Korean workers.

With the two countries making no clear progress in resolving the dispute, South Korea filed a complaint with the WTO on the issue in September.

The country had suspended the process in November 2019 in a goodwill gesture, with Japan also lifting some regulations for photoresist.

As there were no further developments, in May 2020, South Korea warned it would have no choice but to resume the WTO complaint unless Japan put forward any moves to address the issue.

South Korea has argued that Japan "fails to administer its laws, regulations, decisions and rulings of general application relating to the restrictions on exports in a uniform, impartial and reasonable manner," according to a WTO document. It said such moves conflict with WTO agreements that call for free and fair movement of goods, services and intellectual property.

Seoul's Ministry of Trade, Industry and Energy said the WTO will move to appoint panel members, receive written arguments from both sides outlining their positions on the matter, as well as listen to oral testimonies.

"From the setting up of the panel to a final decision being reached in principle takes between 10 to 13 months, although this can be shortened or pushed back, depending on developments," it said.

So far, Tokyo's retaliation has caused more damage to Japan than South Korea.

In 2019, South Korea's exports to Japan moved down 6.9 percent, whereas its imports nose-dived 12.9 percent.

The ongoing "boycott Japan" movement among South Korean consumers dealt a harsh blow to Japanese consumer goods companies. Demand for Japanese beer became nearly nonexistent here, a development far different than the past when South Korea used to be the top buyer of Japanese beer through 2018.

South Korea also managed to diversify its sources to secure the crucial items while making efforts to foster its technologies for equipment, parts and materials as well.

Data compiled by the Korea International Trade Association showed South Korea's imports of hydrogen fluoride from Japan over the January-May period plunged 85.8 percent on-year. Accordingly, Japan only accounted for 12 percent of South Korea's total imports of the material, down from 44 percent posted last year.

But for South Korea, settling the trade row with the Asian neighbor is still important, as Japan could come up with more regulations down the road. The country also has enough uncertainties on its plate due to the new coronavirus pandemic.

South Korea's exports are expected to fall 9 percent on-year in July, possibly extending a slump to the fifth consecutive month, a poll by Yonhap Infomax, the financial news arm of Yonhap News Agency, showed this week.

colin@yna.co.kr
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