Japan-South Korea trade spat expected to dominate World Trade Organization forum

The World Trade Organization will convene its General Council today amid an escalating trade dispute between Japan and South Korea.

wto south korea japan

Photo: Reuters/Denis Balibouse

The World Trade Organization will convene its General Council today amid an escalating trade dispute between Japan and South Korea.

Earlier this month, Japan imposed restrictions on South Korean firms importing key materials needed to manufacture semiconductors. South Korea’s semiconductor industry accounts for 16% of total global sales and a quarter of the country’s exports. Analysts believe that the export restrictions could slash South Korean GDP by as much as 2.2%.

Japan’s retaliatory actions are a response to a South Korean court ruling calling for compensation for forced labor. Japanese officials rejected the ruling, claiming that the question of forced labor was settled in a 1965 treaty that normalised relations between the two countries.

If sustained, the measures will have serious implications for Chinese manufactures, potentially impacting Chinese supply chains.

The trade spat could continue to intensify, with Japanese officials currently contemplating removing South Korea from their top export “white list” of trading partners. This could force South Korea to hedge with China and increase mutual trade. Both Chinese and South Korean economic growth and surplus have stagnated tremendously in the last couple of years. An ensuing trade war with Japan will only worsen these numbers.

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