(News Focus) Japan's removal of export curbs on S. Korea to boost supply chain stability, ease biz uncertainties
By Oh Seok-min
SEOUL, March 16 (Yonhap) -- Japan's removal of export curbs on South Korea is expected to ease business uncertainties and help ensure stable supply chains of key industry materials amid global supply disruptions and tougher competition in advanced industry sectors, experts said Thursday.
Earlier in the day, Seoul's industry ministry announced Japan will remove export restrictions on three major industrial materials -- fluorine polyimide, photoresist and hydrogen fluoride -- essential for chips and displays, effective immediately. Japan imposed the restrictions in 2019 in apparent retaliation for the South Korean Supreme Court's ruling in 2018 that ordered Japanese companies to pay compensation to victims of Japan's forced labor during its 1910-45 colonial rule of Korea.
In response to the lifting of the export curbs, Seoul decided to drop its complaint with the World Trade Organization against Japan over the matter.
"The removal of the restrictions will ease burdens on companies regarding necessary procedures for exports and to ease business uncertainties," Industry Minister Lee Chang-yang told reporters. He is in Tokyo accompanying President Yoon Suk Yeol on a two-day visit meant to restore bilateral ties long marred by shared wartime history and other issues.
"The latest agreement does not stop short of removing export restrictions but will be a first step in building trust, which will serve as a foundation for joint work to stabilize global supply chains," he added.
The two sides also agreed to close consultations on reinstating each other to their respective "whitelist" of trusted trading partners, according to the ministry.
Japan had removed South Korea from the list of nations with a fast-track trade status in 2019, requiring tough screening in importing hundreds of "strategic items" that could potentially be diverted for military use. In a tit-for-tat move, South Korea delisted Japan from its trade partners given preferential treatment.
Some experts here have said the impact of the removal of the restrictions would be limited, as South Korea was able to secure fresh supply routes of key materials and parts by diversifying import channels, developing technologies of its own and attracting foreign investment.
In the wake of Japan's export curbs, the Seoul government designated 100 "key strategic technologies" for extended support for indigenous development, and the country's dependence on Japan for the items fell to an all-time low of 15.1 percent last year from over 30 percent tallied in 2019.
Earlier this year, the government expanded the list to involve 150 key technologies in semiconductors, batteries and vehicles, among other sectors, and earmarked 937.6 billion won (US$714.6 million).
"But the trade dispute with Japan was feared to have negatively affected South Korean companies in a longer-term perspective, as it has prevented them from cooperating and competing with Japanese firms, which are necessary for technology development in chips, display and other advanced industries," Sagong Mok, an expert from the Korea Institute for Industrial Economics and Trade, said.
Joint research and development work will likely create synergy in those sectors, in particular, given Japan's prowess in basic science, materials and equipment fields, he added.
"The trade dispute has led to a drastic fall in bilateral trade, high costs and supply disruptions, sparking greater risks for corporate management," the Korea International Trade Association said in a release.
"The lifting of the restrictions will be able to cause a substantial growth in investment and technology cooperation in semiconductor and other advanced sectors, which will reinvigorate their economy under tough business circumstances of the date," it added.
Experts also called for the swift recovery of their respective fast-track trade status for tangible benefits.
"South Korea was the only Asian nation that was on Japan's whitelist. The removal from the list has served as trade barriers for South Korean companies, which affected their corporate investment decisions, exports and the overall bilateral economic ties," Lee Sang-ho, an official of the Korea Economic Research Institute (KERI), said.
Between 2019 and 2021, South Korea's exports to Japan dived by 13.52 trillion won, and Japan's direct investment in South Korea fell 6.8 trillion won, KERI data showed.
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