S. Korea begins legal review of WTO complaint against Japan's export curbs

South Korea's trade ministry has started a review of the legal grounds for filing a complaint with the World Trade Organization (WTO) over Japan's decision to tighten the rules for exports of semiconductor and display materials to Seoul, a government official said Wednesday.

"We believe that Japan's measure can be considered an act of controlling exports, which is strictly banned by the WTO," the official said on condition of anonymity. "The related departments have already begun administrative work on the issue."

Trade Minister Yoo Myung-hee canceled her business trip to Latin America scheduled for this week, apparently to deal with the trade row with Japan.

In a major escalation of a long-simmering diplomatic row over compensation for wartime forced labor, Japan abruptly announced earlier this week that it will tighten regulations on exports to South Korea of high-tech chemicals used in semiconductor and smartphone production.

In response, South Korea's Industry Minister Sung Yun-mo vowed to take "necessary" steps, including filing a complaint with the WTO, describing the Japanese move as an "economic retaliation."

Among the three items to be regulated starting Thursday is fluorine polyimide, which is used to make flexible organic light-emitting diode displays.

The other two materials are resist, a thin layer used to transfer a circuit pattern to a semiconductor substrate, and etching gas, which is needed in the semiconductor fabrication process.

When the new policy is implemented, Japanese companies will have to apply for approval for each contract to export specific materials to South Korean clients, including major brands such as Samsung, LG, and SK.

South Korea has been considered one of the so-called "white list" nations granted more leeway for faster export processing in terms of items related to national security. Twenty-seven countries have been receiving benefits from the exclusion, including the United States and Britain.

"Japan is violating article 11 of the General Agreement on Tariffs and Trade, which bans regulations on export volumes unless the products have a serious impact on national security," another South Korean official said.

While the South Korean government is reviewing filing a complaint with WTO, sources said Seoul will take flexible measures depending on the progress of the issue.

Experts said once the complaint is filed at the WTO, the dispute is expected to continue for a long period, considering that South Korea and Japan are closely connected in the semiconductor and information technology industries.

South Korea and Japan will first be asked to reach an agreement when the suit is filed. If the two parties fail to find common ground, the WTO will open a panel to review the dispute.

Bilateral ties between South Korea and Japan were further strained last October when Seoul's top court ruled that Nippon Steel & Sumitomo Metal Corp., a Japanese steelmaker now known as Nippon Steel Corp., must compensate four South Koreans for wartime forced labor and unpaid work. The Korean Peninsula was under Japan's colonial rule from 1910-45.

Japan has lashed out at the ruling, claiming that the compensation issue was fully settled in the 1965 bilateral accord on normalizing the countries' diplomatic ties.

President Moon Jae-in has said, however, the October ruling against Japan's wartime forced labor means individual rights to damage claims are not terminated under the pact between the two countries.

Source: Yonhap News