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Japan claims it’s restricting exports to South Korea because of ‘national security.’ Here’s the real reason why.

By squeezing Korea’s electronics industry, Japan hopes to get concessions on forced labor lawsuits

- July 18, 2019

Tensions are flaring up again between South Korea and Japan. Earlier this month, Japan restricted exports of three chemicals vital to South Korea’s electronics industry, citing national security concerns. Seoul called the move “economic retaliation” and filed a complaint with the WTO. Tokyo has also threatened to remove South Korea from its “white list” of trustworthy countries for trade in sensitive materials by July 24.

To outside observers, the trade spat may seem sudden. However, the relationship has been deteriorating since last fall, when long-existing disagreements over Japan’s history with the Korean Peninsula were reignited.

South Korean court rulings precipitated the current spat.

The main irritant — but certainly not the only one — in Japan-South Korean relations is history. Last October and November, the South Korean Supreme Court handed down landmark rulings in favor of 10 plaintiffs (most of whom had already passed away) who had brought claims against Japanese firms that had used unpaid or underpaid South Korean laborers before 1945.

Japan rejected the rulings as violations of the two countries’ 1965 Basic Treaty and accompanying Claims Settlement Agreement. The Japanese government urged Japanese firms not to settle with the plaintiffs and threatened visa restrictions and tariffs earlier this year. As a result, the plaintiffs’ lawyers have moved ahead to seize South Korean-based assets of Japanese firms that refuse to pay compensation, although the seizures have yet to take place.

South Korea’s domestic politics complicates things further.

The forced labor rulings resonate with long-standing South Korean grievances about Japan’s colonial rule over the Korean Peninsula from 1910 to 1945. They are also inextricably linked with South Korea’s recent political upheaval. Investigations found that the Supreme Court had delayed ruling on the forced labor cases in exchange for political favors from the administration of impeached President Park Geun-hye. This is the key reason why President Moon Jae-in’s administration has refused to intervene in the judicial proceedings. That said, the administration may also be taking advantage of an opportunity to stoke nationalist sentiment to distract from other economic- and North Korea-related challenges.

There is another related political controversy: the December 2015 deal that South Korea and Japan reached over the “comfort women” issue, where Korean women had been pressed into wartime sexual slavery. Many of the millions of South Koreans who protested for 20 weekends to impeach Park Geun-hye saw the process leading up to the deal as the epitome of her authoritarian governance style.

All five main candidates from across the political spectrum in South Korea’s snap presidential election in 2017 had pledged to review the deal. Moon did so after winning the presidency. His administration decided to keep the deal so as not to jeopardize relations with Japan. However, he undermined this position by letting the Japanese government-funded Reconciliation and Healing Foundation (which had been created to distribute the roughly $9 million that Japan paid as part of the 2015 comfort women deal) wither.

On July 4, the Moon administration formally shuttered the foundation, despite Japanese objections. Three-quarters of the sex slaves who were alive at the time the deal was reached had already accepted money from the foundation, as did six dozen families of victims. While the South Korean government claims it is not scrapping the deal, closing the foundation has further heightened tensions with Japan.

Tokyo has sought third-party arbitration to resolve the dispute over compensation for forced laborers, as laid out in Article 3 of the Claims Settlement Agreement attached to the 1965 treaty that normalized relations between Japan and South Korea. Seoul again refused such an arbitration panel this week, while the forced labor plaintiffs assert that individual claims like theirs should not fall under the agreement.

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Public opinion could harden.

Bilateral relations are not the top public concern in either democracy. As Japan heads to the polls Sunday for the Upper House election, the main issues include social security, the graying population and constitutional revision. Meanwhile, Moon faces the challenges of high unemployment, a sluggish economy and the lack of progress in relations with North Korea.

Still, a Japanese survey found that more than 50 percent of voters supported their government’s export restrictions, versus 21 percent who did not. Even among opponents of Prime Minister Shinzo Abe’s cabinet, more people supported them (43 percent) than opposed them (36 percent). Two-thirds of South Koreans reportedly support the growing movement to boycott Japanese products.

Even before Japan imposed export controls in early July, two-thirds of the Japanese and South Korean publics felt that relations had deteriorated, according to the Genron NPO and East Asia Institute (EAI) joint poll conducted annually. South Korean respondents were distrustful of Abe in particular, with 80 percent saying they had a very bad or somewhat bad impression of him. In general, half of respondents in each country had a bad or somewhat bad impression of the other country, although this was not as high as in 2013-2015, when three-quarters of South Koreans had negative impressions of Japan. Continued tensions will likely stoke mutual antipathy.

Both countries’ business communities are usually a force for calm.

In the past, the Japanese and Korean business communities helped to calm disputes over history or territorial issues. Last fall’s rulings, however, were against Japanese firms, opening up the possibility of further postwar compensation claims lawsuits against other companies. Going beyond a 2012 ruling that recognized individual forced laborers’ rights to bring claims, the 2018 rulings declared the entire colonial period illegal.

Today, more than 1,300 plaintiffs are participating in nearly 20 lawsuits against some 70 Japanese firms in Korean courts. These lawsuits are the latest wave of three decades of litigation in Japanese and U.S. courts that contributed to an assortment of organized movements for postwar compensation.

Prime Minister Abe has been a champion of free trade. A New York Times article that compared Japan’s trade restrictions to President Trump’s retaliatory use of tariffs has provoked ire in Tokyo. But Abe’s current policy approach is “weaponizing trade as a way of settling unrelated disputes,” as two political scientists recently argued, rather than upholding “a free, fair, and non-discriminatory” trade environment.

The South Korean government, meanwhile, has also met with business leaders. Moon urged them to prepare to make do without Japan if necessary.

Trump’s trip to Japan sent some mixed signals

The U.S. is beginning to get involved, perhaps too late.

At first, it seemed likely that the U.S. government would sit out this round of Japan-South Korea tensions. Senior Japanese and South Korean officials flocked to Washington last week to push their cause, but Trump administration officials and diplomats in East Asia declared that they would not intervene. This week, however, saw NSC Asia Director Matt Pottinger and the top U.S. diplomat on Asia dispatched to the region.

Both Korea and Japan have legitimate grievances. However, each is also partly responsible for the current deterioration in relations and any potential fallout. Bad relations are likely to harm both economies and make trilateral cooperation with the United States more difficult. The United States is likely worried that its strategic interests in the region will suffer, especially if the economic dispute spills over into security tensions. That possibility felt real last December, when a South Korean destroyer locked its fire control radar on a Japanese patrol aircraft.

While U.S. mediation is no silver bullet, it may help the two resolve their conflict. In 2014 and 2015, after nearly three years of no meetings between the leaders of Korea and Japan, the Obama administration worked behind the scenes to encourage the talks that produced the historic but controversial deal on the comfort women issue. As Daniel Sneider has argued, the United States has unique leverage in Seoul and Tokyo. In Seoul, Washington is critical for any progress on North Korea, which is a key aspiration for Moon. Anticipated trade talks give Washington leverage in Tokyo.

However, while there are calls on both sides for a diplomatic solution, the Moon and Abe administrations seem to lack the political will and are signaling continued intransigence.

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Celeste Arrington is an assistant professor of political science and international affairs at George Washington University.