US not happy with conflict Japan, South Korea

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Like China and the US, Japan and South Korea are involved in a trade dispute. Old wounds play a role. The US is worried.

Not only is there a trade war between the United States and China, but also between Japan and South Korea. But what matters between the US and China as to who will become the global power of the future, Japan and South Korea are all about the past. That conflict can also have a disruptive effect on the worldwide production of electronics.

Since the beginning of this month, Japan has banned the export to South Korea of ​​three high-tech materials needed to produce memory chips. And it is precisely in South Korea that the two largest producers of such chips are: Samsung Electronics and SK Hynix. If the production of chips decreases, then that is difficult for the production of mobile phones, among other things, and it will harm companies such as Apple, Dell and Sony worldwide.

The Japanese export ban would never have happened if Japan and South Korea did not share such a troubled past. Between 1910 and 1945, Korea was under Japanese colonial rule, and Koreans were forced in large numbers during the Second World War to large-scale forced labor for Japanese companies.

Japan thought that conflicts about forced labor were permanently settled with an excuse and compensation arrangement that the country concluded with South Korea in 1965, but a Korean judge thought otherwise. At the end of last year, they determined that individual Koreans can still claim compensation for their forced labor.

Japan denies that, and the country believes that South Korea should refer the matter to an international dispute committee if it believes the 1965 settlement is incomplete. South Korea has not done that so far, and in the meantime, things have risen.

US embarrassed

The dispute between Japan and South Korea, both major allies of the United States, is now embarrassing America. David Stilwell, the highest American diplomat for East Asia, said on Wednesday in Seoul that America will “do what it can” to solve the problem. In addition, there is a lot at stake for the US, as Washington needs both countries too badly, not only as a counterbalance to emerging China, but South Korea is also playing a major role in US President Trump’s attempts to to conclude an agreement with North Korea.

Japan also officially denies that the export measure is a punishment for the Korean position on the claims of former forced laborers, even though a Japanese minister referred to the conflict about that. He spoke about the breach of trust as a reason for the measure. Reports also appeared in Japanese media that this was not the issue. It would be correct that South Korean companies would sell the substances illegally to North Korea. South Korea has denied that.

Political conflict

It is striking that after the US, Japan is now also opting to fight a conflict that is essentially political in nature with economic means. Maybe Japan copied that from the US. In the case of Japan and South Korea, the conflict stems from an unprocessed past, in the case of China and the US also from a struggle for the distribution of world power in the future. But both countries use trade measures on more political than economic grounds.

Mixing economy and politics in this way has only become common again under US President Trump. To that end, political and international trade had to be kept as separate as possible from each other. That was the best thing for global free trade, was then the credo. Economic conflicts could best be submitted to independent, multilateral bodies such as the World Trade Organization, precisely so as not to unnecessarily burden political relations between countries. That now seems almost old-fashioned.

About the author

Nicholas de Kramer

Nicholas de Krammer, а self-taught economic analytic with heave mathematical background. Math behind the economics (and economics behind math) is the strong side of the author. Contact him at [email protected]

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