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Japan downgrading S. Korea’s trade status, raising tensions

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A visitor looks at South Korean products at a shop in Shin Okubo area in Tokyo. Japan has approved the removal of South Korea from a “whitelist” of countries with preferential trade status, escalating tensions between the neighbors. The decision will fuel antagonism between the two neighbors already at a boiling point over the export controls and the issue of compensation for wartime Korean laborers.

TOKYO >> Japan’s Cabinet on Friday approved the removal of South Korea from a “whitelist” of countries with preferential trade status, a move sure to fuel antagonism already at a boiling point over recent export controls and the issue of compensation for wartime Korean laborers.

The decision expanding controls over exports of sensitive materials takes effect on Aug. 28. It follows an earlier requirement that Japanese companies’ exports to South Korea be approved on a case-by-case basis for three materials used in semiconductors, smartphones and other high-tech devices — South Korea’s key exports.

Trade Minister Hiroshige Seko said the decision was needed to “appropriately carry out export controls for national security purposes” and was based on South Korea’s “insufficient” export controls.

In addition to escalating tensions between the Asian neighbors, the move will ripple across the high-tech sector, further affecting supply chains already rattled by U.S.-China trade tensions.

The loss of preferential trade status will apply to dozens more products on a list of items that potentially could be converted to weapons. That’s in addition to more than 200 other items requiring individual inspection for exports to all countries. Ending South Korea’s “white country” status would also mean Japan could limit exports of any product on national security grounds.

South Korea expressed “deep regret” and vowed a stern response over Japan’s decision. In a statement read on national TV, the presidential Blue House spokeswoman Ko Min-jung said that Seoul had committed to resolving its trade row with Tokyo diplomatically and will now sternly respond to the Japanese measures it sees as “unjust.”

South Korea says the Japanese trade curbs could hurt its export-dependent economy and has accused Japan of weaponizing trade to retaliate over disputes stemming from wartime history. Tokyo’s export measures since early July have already triggered angry protests and boycotts from South Korea.

Japan’s Trade Ministry says Seoul has undermined a “relationship of trust” in export controls after repeatedly ignoring or postponing Japan’s request for explanation over what Japan considered problematic shipments. It said it had concerns about whether South Korean export controls would prevent misuse of sensitive materials.

Approvals of such exports could take up to 90 days, slowing but not halting shipments. The standard procedure works fine with other countries and it should not be a problem with South Korea, Seko said.

Seko said a removal of South Korea’s preferential trade status only means the country gets a standard treatment, just like any other countries in Asia and elsewhere, and should not affect bilateral relations.

“We have no intention whatsoever to affect relations between Japan and South Korea, and it’s not meant to be retaliation on something to begin with,” Seko said. “I hope South Korea understands that this is not an export ban.”

The trade spat came as relations between the two neighbors have soured over South Korea’s demands for compensation for their harsh labor for Japanese companies before and during World War II, an issue Japan says was settled under the 1965 treaty normalizing relations.

Japan denies Seoul’s allegation that the export controls were imposed as retaliation for South Korean court rulings allowing Japanese companies’ assets to be seized over compensation for their wartime use of Korean laborers.

Japan and South Korea are both important hosts for U.S. military bases in East Asia. But they’ve been bickering for years over a territorial dispute and over South Korean demands for more contrition and compensation from Japan over the wartime labor and sexual abuse of Korean women in military brothels during the Japanese colonization of the Korean Peninsula in 1910-1945.

Japanese Foreign Minister Taro Kono and his South Korean counterpart, Kang Kyung-wha, spoke Thursday on the sidelines of the Association of Southeast Asian Nations meetings in Bangkok, but repeated each other’s demands. Kang and Kono will hold talks Friday with U.S. Secretary of State Mike Pompeo, a three-way meeting that comes after Seoul’s efforts to seek U.S. help in resolving its trade row with Japan.

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