Foreign Policy Research Institute A Nation Must Think Before it Acts Tensions between South Korea and Japan Benefit No One
Tensions between South Korea and Japan Benefit No One

Tensions between South Korea and Japan Benefit No One

The current trade war between Japan and South Korea makes little logical sense in a liberal worldview of international relations. French economist Frederic Bastiat (allegedly) said that “when goods don’t cross borders, soldiers will.” The idea is that social and economic bonds created by trade across borders should form peaceful, mutually beneficial relationships between states. When two countries are mutually dependent on each other, neither have an incentive to fight with the other.  

Recent actions by Japan’s Shinzo Abe and South Korea’s Moon Jae-in seem to call that idea into question. On July 26, Japan’s Kyodo News Agency reported that the Japanese cabinet may vote to remove South Korea from a so-called “white list” of countries with minimal trade restrictions. It’s the latest step in a period of drastically heightened tensions, sparked by a South Korean court ruling last autumn that Japanese firms such as Mitsubishi have to pay damages to Korean victims of forced labor during World War II. 

What’s happening is in many ways counterintuitive. In social and economic terms, the two countries are close. In the coffee shop in Osaka, Japan, where I’m writing these lines, the only other customers aside from myself are Koreans. All the way from the airport into the city, you can get by just fine knowing only Korean. That’s how much of the transport infrastructure and staffing is planned out to accommodate South Korean tourists. 

In 2018, visitors from South Korea to Japan numbered almost seven and a half million, only second after Chinese tourists. Almost three million Japanese visited South Korea in the same year. In Seoul’s hyper-touristy Myongdong district, one hears just as much, if not more, Japanese than Korean. The “Korea-town” around Osaka’s Tsuruhashi neighborhood was bustling with Japanese fans of Korean music, food, and culture every time I visited during this week in July. However, actual economic exchange measured in terms of investments is surprisingly small for two large, neighboring economies. Still, in terms of human and cultural exchange, the two are very close.  

And yet, in both South Korea and Japan, political animosity against the other country’s government remains very real, despite the vast cultural consumption. Some South Korean stores have announced boycotts of Japanese products, flights sales to Japan from South Korea are down, and one South Korean YouTuber, in a publicity stunt, went all the way to the airport and bought a ticket to Japan, only to rip it up in a video clip. One recent poll found that 74 percent of Japanese distrust South Koreans, while 75 percent of South Koreans distrust Japanese. 

What’s particularly strange about the trade spat this time is that it’s very difficult to see what either side has to gain. It would be easy to assume that both Abe and Moon are ratcheting up tensions for domestic political reasons—sheer populism. The Japanese government claims that exports of sensitive, key components for South Korean semiconductor and phone display screens pose a potential security risk. Citing UN reports, the Japanese government claims that exporting certain sensitive chemical materials to South Korea would risk them ending up in North Korea, due to laxity in South Korean controls. The problem is that sensitive goods coming from Japan, too, have ended up in North Korea very much in the same fashion

Thus, the Japanese government’s claim of poor South Korean sanctions controls seems almost petty. The Japanese government, a top-notch gatherer of intelligence on North Korean methods for skirting sanctions, almost certainly knows full well that North Korea’s networks for sanctions circumventions is solid enough that whatever the regime really wants to get its hands on, it can, whether it be from either South Korea or Japan. That’s not to say that supervision couldn’t be stricter, but the issue is far more about North Korea’s circumvention skills than Japan’s or South Korea’s relaxed attitude toward sanctions.  

So, populism would seem to go a long way as an explanation. There’s certainly an element of it present, but it’s definitely not the whole explanation. There aren’t any direct, concrete domestic political reasons in either country right now that can explain the rather sudden rise of tensions. Abe won a rather comfortable majority in Japan’s elections in late July, and though the election might have spurred the rhetoric on, it cannot explain the full extent of Japan’s harsh tone and export curbs. 

On Moon Jae-in’s part, the timing for a trade war with Japan seems particularly ill-advised. Several economic indicators already look bleak. Around a week ago, the Bank of Korea announced an interest rate cut to 1.5 percent, in large part due to dwindling exports over the past few months. In April this year, South Korean exports dropped by two percent compared to last year, for the fifth consecutive month. In early July, the South Korean government lowered its growth prognosis for this year to between 2.4 and 2.5 percent, its lowest estimate in seven years. Meanwhile, some analysts have said that actual growth may turn out to be as low as 1.4 percent. Domestic economic policy changes are a major factor. Last year, the government raised the minimum wage by 16 percent, and again, this year, by 11 percent. January this year saw the highest unemployment figures in the country in nine years. In much of the country, you can visibly tell that the economy has seen much happier days. When I visited a popular resort town in the south of the country a few weeks ago, one restaurant owner told me that normally at this time of year the lines of waiting customers should be circling their way around the block. Vacation towns that should be bustling look almost eerily empty.  

The reasons behind this trade war defies easy explanations. Ideas and ideology, however, definitely matter. President Moon genuinely sees the heritage from the Japanese colonial period as a major stumbling block for contemporary policy and social change. A large part of his rationale in taking a tough line on Japan is, very likely, simply that he believes it’s the right thing. 

Behind the trade war lie tensions and sentiments far too complicated to explain in this space. (For a good, in-depth essay, I recommend this one by Paul K. Lee at the Carnegie Endowment website.) What we can say with certainty is that like almost all trade wars, this one has several losers and no winners. Trade tensions in East Asia are already proving highly detrimental to both South Korea and Japan, and if retaliatory measures continue between the two countries, the economic outlook for both countries will worsen. 

Aside from the two countries in question, the United States is the biggest potential loser. This situation is far too complicated for a well-timed tweet or in-person summit to solve. The Trump administration took two and a half years to fill the spot for Assistant Secretary of State for Asian and Pacific Affairs. One might wonder if the current crisis could have been avoided had the U.S. had this position filled sooner, as well as other diplomatic posts in East Asia that were long vacant. The U.S. is by far the most important ally for both South Korea and Japan. Had there been a permanent official dedicated to the region earlier on, this person might have been able to anticipate and attempt to mitigate tensions sooner. 

America cannot solve this issue—after all, it is merely an ally, and not a party. But the U.S. should work with South Korea and Japan to find a way to keep issues tied to historical reconciliation, at the very least, separate from trade, intelligence sharing, and matters related to geostrategic security. This issue may not hold the PR-glory and international weight of the North Korean nuclear program, but for U.S. strategic interests, supporting good relations between South Korea and Japan is absolutely vital.