Improvement in Semiconductor and Other Industries... Strengthening Competitiveness
"Will Lead to Strengthened Korea-US-Japan Economic and Security Cooperation"
Possibility of Korea-Japan Defense Axis Amid Northeast Asian Situation
The government is set to establish channels for economic cooperation between the two countries in line with resolving the forced labor issue. As export restrictions between the two countries, centered on semiconductors, are expected to be lifted, the plan is to first normalize economic sectors where Korea and Japan can derive mutual benefits. It has been confirmed that President Yoon Suk-yeol also expressed the view that "judgment for the future and national interest is necessary" ahead of the government's final announcement.
According to the Presidential Office on the 6th, the government decided to begin discussions on economic cooperation plans centered on relevant ministries in response to Japan's move to lift semiconductor export restrictions. A Presidential Office official explained, "Since both countries have chosen a diplomatic solution to improve relations, efforts to maximize economic and security benefits will immediately follow," adding, "Primarily, the tangled issues around semiconductors are expected to be untied first."
In July 2019, Japan strengthened export controls on three semiconductor-related items to South Korea. In August, South Korea was also removed from the 'white list' of countries receiving preferential export treatment. These retaliatory measures were taken in response to a South Korean Supreme Court ruling ordering Japanese companies to compensate for forced labor during Japan's colonial rule. The Japanese government has maintained the position that these measures are "security-related responses." While some argue that the South Korean government should first withdraw its World Trade Organization (WTO) complaint regarding Japan's semiconductor material export restrictions, there is growing analysis that both countries will lift restrictions and withdraw complaints around the same time.
The government expects that lifting Japan's semiconductor material export restrictions will be a positive signal not only for the industrial sector but also for the overall recovery of the domestic economy. Although the previous administration avoided large-scale damage through diversification of import sources and promotion of localization, it failed to establish a long-term solution. In fact, the previous government pursued a so-called 'SoBuJang (materials, parts, and equipment)' self-reliance policy in response to Japan's export restrictions, but dependence on intermediate materials was not easily resolved. The process of finding substitutes for SoBuJang items previously dependent on Japan resulted in additional expenditures and extended research and development periods. According to last month's statistics from the Ministry of Trade, Industry and Energy's SoBuJang comprehensive portal 'SoBuJangNet,' the proportion of Japanese SoBuJang imports last year fell to a record low of the 15% range, but the import volume actually increased.
A government official said, "It will be difficult to expect an immediate recovery in the industrial sector from Japan's (semiconductor export) regulation lift, but in the mid to long term, Korea will have secured time to prepare for diversification of supply sources and localization," adding, "In the long run, Korea's own competitiveness in various fields, including semiconductors, will continue to improve."
The intensifying hegemonic competition between China and the United States, which has also destabilized the Northeast Asian situation, appears to have influenced the final solution to the forced labor issue. With the North Korean nuclear threat growing, Korea-Japan cooperation inevitably leads to strengthening the 'trilateral security system' among Korea, the United States, and Japan. Kim Sung-han, Director of the National Security Office, currently visiting the United States, commented on the connection between his visit and Korea-Japan relations improvement, saying, "The U.S. side is closely monitoring the improvement of Korea-Japan relations," and "Through improving Korea-Japan relations, we will discuss the roles the U.S. can play and measures that can be taken within the Korea-U.S. alliance framework to enhance Korea-U.S.-Japan security cooperation and overall relations among the three countries."
A new Korea-Japan cooperation axis is also expected to form in the Northeast Asian economic landscape, enabling checks on China. As China sent a 'strongest against strongest' message to the U.S. through the Chinese National People's Congress and the Chinese People's Political Consultative Conference, which formalized Xi Jinping's third term, our government will be able to stand with Japan on a new defensive line not only in security but also in economic supply chain management.
Accordingly, the areas of cooperation between the two countries are expected to expand further. Representative fields include emerging and core technologies such as quantum, bio, and space, as well as expanded exchanges of professional personnel and stabilization of supply chains for semiconductors, batteries, and critical minerals. At the Korea-U.S.-Japan summit held last year in Phnom Penh, Cambodia, the three leaders already agreed to establish a trilateral economic security dialogue. A senior government official stated, "The government's judgment is for national interest and future generations, and it is a measure to build competitiveness amid the complex and diversified global situation," adding, "The restoration of Korea-Japan relations will lead to strengthened cooperation among allies and partners following the Korea-U.S.-Japan alliance."
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