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Japan restores South Korea to export 'whitelist' after 4 years

Korea's finance minister departs for Japan to recover soured economic ties between two countries

June 27, 2023 - 15:54 By Jo He-rim
A composite image of the South Korean (right) and Japanese flags (123rf)

Japan is putting South Korea back on its “whitelist” of trusted trading partners, marking the end to a trade dispute that had dragged on for four years, as the two sides have renewed a commitment to improve bilateral economic ties.

Japan’s Ministry of Economy, Trade and Industry announced Tuesday it has decided to redesignate Korea as a "Group A" country, returning to Seoul the preferential export treatment it had enjoyed until 2019.

“The Republic of Korea will be added to the countries listed in Appended Table 3 of the Export Order,” Japan’s Economy Ministry said in a release, announcing the result of the Cabinet meeting held earlier in the day.

The Japanese government decided to partially revise the Export Trade Control Order based on the Foreign Exchange and Foreign Trade Act to add South Korea to the whitelist, according to the Japanese ministry.

After being promulgated Friday, the amendment will come into force from July 21.

The latest measure would reduce the time and procedures it takes for Japanese companies to export strategic materials to Korea, from the current two to three months to about a week.

Japan requires a license application for companies to export overseas even if the export item is not on the list of controlled items if there is a risk that the item could be used for the development of weapons of mass destruction or conventional weapons.

By redesignating Korea into its list of trusted trading partners, Japanese companies will benefit from blanket licenses for exporting to Korea.

South Korean presidential office welcomed the decision, calling it a "symbolic" measure recovering bilateral trust and resolving trade uncertainties for the two countries.

"The trust between the two countries regarding trade has been completely recovered," Presidential Spokesperson Lee Do-woon said in a press briefing on Tuesday.

"After President Yoon Suk Yeol and Japanese Prime Minister Fumio Kishida restored the shuttle diplomacy, the two countries have been actively cooperating in the economic field. As the trade process will be simplified (following the decision), I expect it will further stimulate business cooperation."

Tokyo downgraded Seoul to Group B in 2019 after imposing export controls on three key semiconductor materials to Korea -- fluorine polyimide, photoresist and hydrogen fluoride -- in apparent retaliation against Korean court rulings in the previous year. Seoul’s top court ordered two Japanese companies to compensate Korean victims of forced labor during Japan's 1910-45 colonial rule of the Korean Peninsula.

Facing the trade restrictions, Seoul had also removed Tokyo from its own whitelist, and filed a complaint with the World Trade Organization against the export curbs.

The frayed economic ties weakened trade between the two countries.

Talks for a recovery in relations reignited last year, when the Yoon Suk Yeol administration took over in May 2022. Yoon traveled to Tokyo for a summit with Japanese Prime Minister Fumio Kishida in March this year, and reinstated Japan's status the following month.

After the summit, Japan lifted restrictions on exports of key semiconductor materials to Korea. South Korea in turn withdrew its complaint filed with the World Trade Organization against the export curbs.

After vowing for joint efforts to recover their frayed ties in their first summit, the two leaders met again in Seoul in May to reaffirm their resolve and agree on industrial cooperation in various sectors, including semiconductors, materials, parts and equipment.

Korea's Ministry of Trade, Industry and Energy welcomed Japan's decision and said it will closely work with Tokyo on increasing bilateral and multilateral trade opportunities.

"The president traveled to Tokyo in March to lay the grounds for the two countries to improve bilateral trust. And with our preemptive action to reinstate Japan on our whitelist, and the in-depth discussions with Japan's Trade Ministry, we have fully recovered bilateral trust in trade," Seoul's Trade Ministry said.

Eyes are on what impacts the recovery in trade relations with Japan, which accounts for about 5 percent of Korea's export volume, would bring to Korea, which has run a trade deficit for 15 consecutive months.

According to a Korea Chamber of Commerce and Industry report released in March, Korea is expected to see an increase of $2.69 billion in exports to Japan when it recovers to the levels of 2017 and 2018 -- before Japan introduced its export curbs.

Meanwhile, Finance Minister Choo Kyung-ho will meet his Japanese counterpart on Thursday to discuss cooperation in finance and trade.