Published : Aug. 13, 2019 - 16:48
As expected, tensions between South Korea and Japan have continued to worsen. On Aug. 2, Japan followed through with its threat to remove Korea from the “whitelist” of countries that Japan designates as preferential trading partners. This action means that companies exporting select products to Korea will need approval from the Japanese government before exporting. The Japanese government could use the approval process to restrict exports to Korea.
The Korean government condemned the Japanese government’s decision and reciprocated by taking Japan off its whitelist. It has also made a commitment to support the development of parts, materials and equipment to reduce dependency on the Japanese imports that go into Korean products.
Citizens’ groups, meanwhile, have promoted a boycott of all things Japanese with a focus on Japanese products and travel to Japan. So far, the boycott has caused airlines to scale back flights to Japan on some routes; sales at Japanese retailers are down. The full effects of the boycott will become apparent as time moves on.
Leaders of both countries, meanwhile, are not talking. The media has called on the US to intervene as it has in the past, but the Trump administration is balking. Some decry the lack of US leadership, whereas others argue that it is best for the two countries to work things out between themselves.
The lack of high-level interest in negotiating has left the Korean boycotts as the most visible face of the conflict. Citizens are free to speak out against Japan and boycott causes they believe in. The problem with boycotts, however, is that they are effective when they inflict deep economic pain on their target. To do so, they need overwhelming public support and strong influence over a market for a good or service.
Though the gap between Korea and Japan has narrowed considerably, Japan remains the larger nation in two areas: population and economy. Both are about 2.5 times bigger than Korea’s. This means that even as Korea closes the gap and even surpasses Japan, Japan will remain much larger for at least the rest of this century.
The gap both in population and economic strength makes it almost impossible for the boycott of Japan to succeed because the Korean market is not large enough to hurt Japan enough to cause a change in behavior. The airlines offer a good example. Most of the flights between Korea and Japan are operated by Korean airlines. Boycotting travel to Japan will end up hurting Korean airlines the most because of the loss of revenue from the highly profitable Japan routes.
Likewise, some of the Japanese retail outlets being targeted are owned by Japanese companies, but others are owned by joint ventures or fully owned by Koreans. Lotte, for example, controls 49 percent of Uniqlo’s operations in Korea. All Uniqlo stores employ Koreans and pay rent to Korean landlords. Many of the products, meanwhile, are made in third countries. A decline in Japanese imports sold by Korean retailers will hurt the Korean importers and distributors.
Uniqlo, a major Japanese clothing retailer, has confirmed that the boycott is hurting sales in Korea. Japanese automakers have also reported sharp drops in sales to Korea. The important question is how much these drops really hurt.
Korea absorbs about 7 percent of Japanese exports, making it the third-largest market for Japan. Many of those exports are in areas where Japan is technologically dominant, such as precision machinery and equipment. Consumer products such as cameras also come to mind, but most of the country’s exports to Korea are products that the public rarely sees. Boycotting them is extremely difficult because competing non-Japanese products may not be available or easy to adopt.
The boycott may feel good now, but it hurts Korean business at a time of economic weakness and has little chance of success. The government’s plan to invest in competing technology is a far more effective response because it invests in Korea’s economic future. It is positive and forward looking.
Instead of boycotts, Koreans should ignore Japan and focus on channeling their anger into improving competitiveness. This has already happened with cellphones and computers, where Korean brands such as Samsung and LG have become big global leaders. Koreans are respected the world over for their optimism and can-do spirit. That, more than anything, will help them win the long game.
By Robert J. FouserRobert J. Fouser, a former associate professor of Korean language education at Seoul National University, writes on Korea from Pawtucket, Rhode Island. He can be reached at robertjfouser@gmail.com. -- Ed.