Japan-S. Korea Export Control Dispute: Status Update

On 13 May, the South Korean government called on Japan to express an official position on its export restrictions and white list by month’s end. This request was the culmination of a nearly year-long trade control dispute between the two nations which began in summer 2019.

Organizational changes are in the offering from South Korea, including a serious reform of its export control system.

Commodities at Issue

The export control dispute arose in July 2019 when Japan restricted exports of three key semiconductor components to South Korea (see Figure 1). Tensions heightened with the removal of South Korea from Japan’s export whitelist that August. September saw South Korea remove Japan from its own whitelist in response.

Each state ratcheted up licensing scrutiny on the other. Industries in both countries feared the issue would become a more significant problem.

Figure 1. Restricted Japanese Exports to South Korea

Institutional efficacy mixed with historical enmity and uncertainty over regional security set the stage for the dispute.

Japanese concerns were threefold: (1) a three-year gap in bilateral policy dialogues, (2) uncertainty regarding South Korea’s catch-all provision, and (3) a lack of staff and organization in South Korea’s export control system.

In the background, the rise of China’s semiconductor manufacturing capacity raised the stakes for both South Korea and Japan. As if that pressure was not enough, COVID-19 pandemic added another layer of urgency.

Dialogue Ongoing

Despite the tension, the ongoing trade control dispute has not scuttled bilateral dialogue.

In December 2019, the Seventh Japan-Korea Export Control Policy Dialogue was held where both sides agreed on the necessity of “promoting effective export controls”.

Talks continued in March 2020 at the Eighth Japan-Korea Export Control Policy Dialogue with South Korea calling for further easing of export restrictions and a mutual welcoming of “recent plans to improve legal basis and institutional capabilities in both countries, including latest developments in the Republic of Korea.”

A Ninth Japan-Korea Export Control Policy Dialogue is planned to be held in South Korea, but a final date has not yet been set.

Recent Revisions to South Korean Export Control

South Korea’s first legislative change arrived in March as an amendment to its Foreign Trade Act “to clarify its control over conventional weapons” with changes slated for a June implementation. The amendment sought to address Japanese concerns over South Korea’s catch-all provision.

The second change occurred in May, when South Korea’s Ministry of Trade, Industry and Energy (MOTIE) was expanded and reorganized (see Figure 2). Trade Minister Lee Ho-hyun characterized MOTIE’s organizational reform as more than a hiring spree, saying it has “unified the trade security business, such as preventing strategic material and technology leakage, and strengthening its expertise.”

Figure 2. Reorganization of MOTIE’s Office of International Trade and Investment

MOTIE’s existing Export Control Policy Division has been joined by two new divisions (the Export Licensing Division and the Technology Control Division). All three divisions are under the administration of the newly created Director General for Trade and Security. The revised responsibilities and duties of the now three export control divisions allude to South Korea’s aim for rapprochement (see Figure 3).

Figure 3. Post-Reform Responsibilities & Duties for MOTIE’S Export Control Divisions

Conclusion

The way Japan responds at the end of May will be the clearest indication yet of how prolonged the export control dispute will be.

With South Korea’s export control revisions, the prospects for dispute resolution are better than before. Willingness to engage in bilateral dialogue is encouraging. We expect a positive reception from Tokyo, but how soon restructuring will yield tangible results is unclear.

NOTE: For Figures 2 & 3, English organization names and responsibilities & duties are not yet finalized.