SEOUL/TOKYO – South Korea’s foreign minister told U.S. Secretary of State Mike Pompeo that Japan’s export controls against Seoul are “undesirable,” the ministry said on Thursday as a trade row between the East Asian neighbors grows.
South Korea’s ruling party also announced on Thursday that up to about 300 billion won (¥27.6 billion) would be included in a supplementary budget bill to cope with Japan’s export measures by speeding the localization of materials supplies for chips and display panels.
The ruling Democratic Party said about a third of the proposed budget would be for supporting South Korean materials and equipment makers to commercialize their products.
Also on Thursday, S&P Global Rating’s Asia-Pacific chief economist Shaun Roache said the dispute was as unpredictable as the U.S.-China trade war and was likely to affect South Korea’s economic growth.
Japan tightened measures last week on exports of three materials crucial for smartphone displays and chips, saying trust with South Korea had been broken in a dispute with Seoul over South Korean courts ordering Japanese firms to pay compensation to laborers from World War II.
The restrictions will affect companies such as Samsung Electronics Co. Ltd. and SK Hynix Inc., which supply chips to companies such as Apple Inc., but do not amount to a quota, embargo or curb on exports.
South Korea and Japan clashed at the World Trade Organization earlier this week, and Seoul is stepping up diplomatic overtures to their mutual ally, the United States, to step in. However, experts said the United States is unlikely to become a mediator in the dispute.
South Korean Foreign Minister Kang Kyung-wha told Pompeo in a phone call late on Wednesday that Japan’s trade controls may not only cause damage to South Korean companies, but also disrupt the global supply chain and hurt U.S. firms.
Kang “expressed concern that this is undesirable in terms of friendly relations between South Korea and Japan and trilateral cooperation among South Korea, the U.S. and Japan,” the ministry said. Seoul hoped Tokyo would withdraw the restrictions and that the situation would not deteriorate further, it said.
Pompeo said he understood, and both agreed to continue to cooperate and to strengthen communication among the three sides, the Foreign Ministry said in a statement.
Kim Hyun-chong, deputy chief of South Korea’s National Security Office, arrived in Washington on Wednesday and told reporters he was there to meet officials from the White House and Congress to discuss issues that included Japan’s tightened regulations on exports.
A former Japanese ambassador to the United States, Ichiro Fujisaki, said on Wednesday, “I don’t think we need the United States to mediate, just like Japan would not mediate U.S.-Mexico ties or U.S.-Canada relations.”
“This is an issue to be solved between Japan and South Korea,” Fujisaki said.
New U.S. Assistant Secretary of State for East Asian and Pacific Affairs David Stilwell is visiting Asia until July 21, including stops in Japan and South Korea, to work on a shared vision for the Indo-Pacific region, the State Department said in a statement.
It did not say whether the Japan-South Korea dispute would be discussed.
Sheila Smith, senior fellow for Japan studies at the Council on Foreign Relations, said it may be too early for Stilwell to assess what the United States could do to help.
“He is likely to begin with what I would call deep listening,” she said.
Prime Minister Shinzo Abe and his aides have hinted at possible South Korean illegal transfers of sensitive materials to North Korea, and they now say South Korea has failed to respond to requests for talks about problems with export controls.
Japanese officials have not specified which companies they suspect of having mismanaged exports of sensitive materials. South Korea’s trade ministry acknowledged Wednesday that from 2015 to March 2019 the government detected 156 cases of unauthorized exports of sensitive materials that could be used for military purposes. It said illegal shipments included thermos-cameras, carbon fiber, zirconium, sodium cyanide and hydrogen fluoride that went to countries like the United Arab Emirates, Vietnam, China, Russia, India, Pakistan, Iran, Syria, Turkey and Sri Lanka.
Hydrogen fluoride is a semiconductor material covered by Japan’s tightened export controls imposed on South Korea on July 4. No Japanese-made hydrogen fluoride was involved, the South Korean ministry said.
The Korean ministry also said exposure of the cases shows South Korea’s monitoring system is working and that it’s more transparent than Japan’s. It was unclear if any cases involved Japanese imports or were the main reason for Japan’s decision to impose stricter controls on exports to South Korea.