South Korea and Japan Restore Trade Relations

South Korea formally restored Japan to its list of countries it gives preferential treatment in trade on Monday, three years after the neighbors downgraded each other's trade status amid a diplomatic row fueled by historical grievances. In announcing the move through a government gazette, South Korea's Ministry of Trade, Industry and Energy also said Seoul will further restrict technology and industrial exports to Russia and its ally Belarus to support the U.S.-led pressure campaign against Moscow over the war in Ukraine.

After years of friction, Seoul and Tokyo are working to repair relations as they tighten their three-way security cooperation with Washington to counter the threat posed by North Korea. Pyongyang has used the distractions caused by the war to accelerate testing of nuclear-capable missiles. South Korean officials expect Tokyo to restore Seoul as a favored trade partner too, but expect that step to take more time based on the procedures to revise Japan's export regulations. In September 2019, South Korea dropped Japan from its "white list" of countries receiving fast-track approvals in trade, reacting to a similar move by Tokyo. Japan had also tightened export controls on key chemicals South Korean companies use to make semiconductors and displays, prompting South Korea to file a complaint with the World Trade Organization. Seoul accused Tokyo of weaponizing trade to retaliate against South Korean court rulings that ordered Japanese companies to offer reparations to South Koreans forced into slave labor before the end of World War II, when Japan had colonized the Korean Peninsula.

The 2018 rulings irked Japan, which insists all compensation issues were settled by a 1965 treaty that normalized relations. Relations between the U.S. allies began to thaw in March when the government of South Korean President Yoon Suk Yeol, who took office in May 2022, announced plans to use South Korean funds to compensate the forced laborers without requiring Japanese contributions. Yoon traveled to Tokyo to meet with Japanese Prime Minster Fumio Kishida and they vowed to rebuild the countries' security and economic ties. Yoon's push to mend ties with Tokyo has triggered criticism from some forced labor victims and from his political rivals. They have called for direct compensation from Japanese companies that employed the forced laborers. But Yoon has defended his decision, saying closer ties with Japan are essential for dealing with a slew of regional challenges, especially North Korea's growing nuclear threat.

Following the Yoon-Kishida summit, South Korea withdrew its complaint at the WTO against Japan as Tokyo simultaneously confirmed its removal of export controls over a set of chemicals seen as vital to South Korea's technology industry. The Japanese restrictions had covered fluorinated polyimides, which are used in organic light-emitting diode (OLED) screens for TVs and smartphones, and photoresist and hydrogen fluoride, used for making semiconductors. With Japan's status restored, South Korea now provides preferential treatment to 29 countries - including the United States, Britain and France - over exports of sensitive "strategic" materials that can be used for both civilian and military purposes. South Korea divides its trade partners into two groups in managing export approvals of sensitive materials. The waiting period is usually five days for white-list nations, while other countries are required to go through case-by-case reviews that can take up to 15 days.

In announcing its new regulations over exports of strategic materials, the South Korean trade ministry also said the country will place hundreds more industrial products and components under its export restrictions against Russia and Belarus beginning this week. Seoul's controls so far have covered 57 items, including those related to electronics and shipbuilding, with authorities banning their shipments to Russia and Belarus unless the companies obtain special approvals. The list will increase to 798 items beginning Friday, including exports related to construction, machinery, steelmaking, automobiles, semiconductors and advanced computing. "(We) plan to work with relevant ministries to strengthen crackdowns and enforcement to prevent (the restricted items) from reaching Russia or Belarus through third countries," the ministry said in a statement.