Japan-Korea rift to hit global giants, have wider impact

Columnist  | Skand Tayal

Opinion, Oped

Japanese and Korean companies are inextricably linked in global value chains, particularly in electronics and manufacturing.

South Korean President Moon Jae-in (Photo: AP)

Since the formal normalisation of relations in 1965 between the erstwhile coloniser Japan and its colony South Korea, their relations have been marked with somewhat hesitant contacts between the leaderships and close collaboration between the corporations but a pervading sentiment of mutual resentment and distrust between their peoples. The grievances nursed by the Koreans rile their bilateral relations from time to time.

Despite the bitter experience of oppressive Japanese rule over the Korean peninsula during 1910-1945, then President Gen. Park Chunghee took a pragmatic decision to normalise relations with Japan primarily to secure investments, technology and markets. The “Treaty of Basic Relations” between Japan and South Korea was signed in 1965 after protracted negotiations and sought to deal with the baggage of history at one stroke and build their future relations on the foundation of economic cooperation. The treaty sought to compensate Korea for all the exploitation of the Korean people before and during World War II and to bury the past, with Japan providing approximately $800 million in grants, loans and investments.

Japanese governments since then firmly believe that this treaty settled completely and finally all the war-time property issues as well as any individual claims for compensation. Article II of the treaty clearly stipulates that “the High Contracting Parties confirm that the problems concerning property, rights and interests of the two parties and their peoples (including juridical persons) and the claims between the parties and between their peoples — have been settled completely and finally.”

After the democratisation of South Korea in the late 1980s, popular discontent among Koreans against the treaty emerged in two main grievances. Demand for redress for the so-called “comfort women” who were Korean women sexually exploited by Japanese soldiers and inadequacy of compensation for Korean forced labour which worked in Japanese factories and mines.

The “comfort women” issue refuses to die despite various attempts by the two governments. Japanese apologies for these inhuman acts have been seen as insincere and monetary compensation to the survivors inadequate by the Korean masses. The agreement reached by former South Korean President Park Geun-hue and Japan in 2015 to “finally and irreversibly” settle the issue with Japan creating a fund of Yen 1 billion for the women and their families was opposed by the Korean people and dissolved by the present Moon Jae-in administration. Repeated installation of statues of comfort women in front of the Japanese embassy in Seoul and other establishments by Korean activists has further infuriated the Japanese government and public.

The simmering dispute regarding sovereignty over Dokdo island, which is under possession of South Korea but claimed by Japan, is another thorn bedevilling their relations.

In 2005, the then liberal regime of President Rho Moo-hyun declassified the documents related to the negotiations of the 1965 treaty, which revealed that the Korean negotiators had made a number of statements that could be construed as surrendering the rights of individual Koreans to sue the Japanese entities. This surrender of legal rights has been challenged in Korean courts and in a landmark judgment in 2018, the South Korean Supreme Court ruled that three major Japanese corporations including Mitsubishi Heavy Industries and Nippon Steel compensate their wartime Korean workers. Tokyo protested strongly, claiming that this ruling was in violation of international law as the issue of compensation was fully settled under the 1965 treaty.

Initially, Japan asked for third-party arbitration, which was rejected by Seoul. The deadline for making any bilateral arrangement to resolve the issue passed on July 18, 2019 and Japan then decided to pressure South Korea by restricting the export of three chemicals critical for South Korea’s semiconductor chip industry. On August 2, Japan removed South Korea from the “White List” of 27 countries which enjoyed preferential treatment for export of sensitive materials. Now, the Japanese companies supplying these chemicals to Korea will have to seek the government’s approval for each contract, a cumbersome process taking at least 90 days for approval.

This move will directly hit South Korean chipmakers Samsung Electronics and Hynix which together make almost two-thirds of global memory chips going in smartphones, TVs, cars, etc. Notably, by value about 20 per cent of South Korean export revenue is from the export of semiconductor chips.

Following US President Donald Trump’s policy of applying sanctions and tariffs on national security grounds, Japan’s chief cabinet secretary has stated that these measures against Korea are on national security grounds without specifying what these concerns were. Japanese officials have alleged that South Korea has insufficient export control systems, which has been angrily contradicted by the Koreans.

South Korea’s reaction to Japanese export restrictions has been angry and emotional. There are reports of a boycott of Japanese goods by Korean consumers ranging from clothes to cars. The sales of Japanese beer in Korea have reportedly dropped by 45 per cent.

Japanese and Korean companies are inextricably linked in global value chains, particularly in electronics and manufacturing. Any export restrictions will harm both the countries as alternative supply sources would soon emerge. It is therefore hoped that corporate pressure in both countries will compel the political leaderships to rapidly resolve the differences.

East Asia is witnessing a hike in tensions on various counts. The US-China trade war is a manifestation of their increasing contestation for future supremacy in the Indo-Pacific region. It is important that these two main allies of United States in the region have a relationship of trust and confidence. The continued tension between Japan and South Korea would weaken the hands of US policymakers in meeting the challenges faced in the South China Sea as well as in the East China Sea.

For India, both Japan and South Korea are “strategic partners”. It may be useful for New Delhi to quietly advise caution and restraint to both our partners and urge them to focus on the emerging strategic and economic challenges rather than being prisoners of the past.

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