Just outside Seoul is a nursing home, a common sight in rapidly aging South Korea. This particular nursing home however, features statues, plaques, a museum – and up until recently, a large amount of Japanese visitors wanting to learn more about their country’s history.

The House of Sharing, as this nursing home is known, stands out because of its residents. All of them are elderly women. But they have a shared experience: they were ‘comfort women’, forced into sexual slavery by the Imperial Japanese Army during the Second World War.

Now in their 90s, they live on in the hope that the Japanese government will some day acknowledge their plight and issue a formal apology.

Portraits of comfort women at the House of Sharing, Seoul
The Chips are Down

To many of us, World War II seems like a distant memory. The main actors in the war have mostly normalised relations. In East Asia, Japan’s economic strength had former adversaries China and South Korea seek trade with the island nation. Now, Japan is the world’s third largest economy, while South Korea ranks eleventh.

Indeed, both Japan and South Korea are integral to the world economy. In particular, the tech supply chain relies heavily on healthy relations between Tokyo and Seoul.

South Korea is home to Samsung Electronics and SK Hynix, behemoths which together produce the vast majority of the world’s OLED displays and memory chips. In Japan, 3 companies (JSR Corporation, Showa Denko, and Shin-Etsu Chemical) as well as Kanto Denka Kogyo produce 90 per cent of the world’s fluorinated polyimide and photoresist layers, both of which are used for OLED displays.

Samsung memory chips mounted in a solid state drive (SSD)

South Korea imports 94 per cent of fluorinated polyimide and 92 per cent of photoresists from Japan, while Japan has export dependency to South Korea of 22.5 per cent and 11.6 per cent respectively for the two materials.

Any disruption to this mutually reliant supply chain will spell disaster for smartphone manufacturers further afield like Huawei and Apple, which source many components from South Korean suppliers.

Animosity Runs Deep

In an ideal world, Japan would have apologised for its conduct in the war, while Korea would be willing to forgive the atrocities of the past. But that, of course, is not the case.

Grievances of the past run deep between the Korean and Japanese people. The issue of comfort women is just one of the underlying tensions which recently bubbled up to the surface. For its part, Japan claims to have already done enough to atone for its past misdeeds. Apart from multiple apologies, Tokyo has also set up a ¥1 billion fund to support surviving victims in 2015.

Statue in bronze representing comfort women in front of the Japanese Embassy, Seoul

On the other hand, Korea feels that Japan’s moves are insincere. For instance, Japanese history textbooks downplay the conduct of the Imperial Japanese Army, while skirting the issue of comfort women altogether. Surviving comfort women also want a specific type of apology: one addressed to them individually, from the Japanese government. Monetary compensation has no meaning for them – they want their dignity restored in a mea culpa from Tokyo.

These issues, combined with historic animosity between the two nations, has bubbled up in a trade dispute that has run parallel to the more widely publicised US-China trade war.

History Bubbles to the Surface

The roots of the current trade dispute lie in a decision by the Supreme Court of South Korea in late 2018, which ordered several Japanese companies, including Mitsubishi Heavy Industries, Nachi-Fujikoshi and Nippon Steel, to make compensations to the families of South Koreans who were unfairly treated and illegally forced to supply labour for World War II war efforts.

Understandably, this infuriated Tokyo. Japan claims that the 1965 Treaty on Basic Relations between Japan and the Republic of Korea bars South Korean individuals from seeking compensation for incidents that occurred before August 15, 1945, but South Korea’s most recent supreme court ruling on forced labor said otherwise. The government in Seoul has claimed that they cannot interfere in a decision by the Supreme Court.

Shinzo Abe and Moon Jae-in at the G20 Summit in Osaka

On 1 July 2019, the first salvo of the trade war was fired. Japan announced that it would tighten the export of chemicals that are critical for the South Korean semiconductor industry. Tokyo then removed Seoul from its “white list” of trusted trade partners – effectively choking bilateral trade between the two nations.

Seoul replied with tit-for-tat measures, while pulling out of the General Security of Military Information Agreement (GSOMIA), an intelligence sharing treaty crucial to monitoring North Korean aggression.

While tariff measures have yet to be taken between the two antagonists (unlike the US-China trade dispute), the current dispute represents a deterioration of international relations at a time when the world economy is softening.

A Way Out?

In the past, the United States would have stepped in to prevent any flare up between its two East Asian allies from getting out of hand. But Washington has been hesitant to get involved, despite the important role both countries play in the regional balance of power.

In its place, China has offered to mediate the dispute – a sign of shifting power in the region. Beijing also seeks stability in the region, while cultivating allies as its own relationship with the US deteriorates. It will also be worried about the impact the Japan-South Korea trade spat could have on Chinese technology companies like ZTE, which rely on US suppliers like Qualcomm for chips and semiconductors. But if the US trade sanctions cut off this source of supply, they will be looking to South Korea and Japan for vital components.

Shinzo Abe and Xi Jinping

So far, the foreign ministers of China, Japan, and South Korea have met, but a date for the meeting of leaders has yet to be set. Xi Jinping, Shinzo Abe, Moon Jae-in, and possibly Donald Trump will have to sit down and hash out a deal which will restore relations between the two East Asian economies.

What Now?

For now, emotions are running high in South Korea and Japan alike. Thousands of South Korean protestors have marched on the Japanese embassy in Seoul. while a campaign to boycott everything Japanese is ongoing. There have even been reports of petrol station owners refusing to refuel Japanese cars in Korea.

Tourists arriving in Japan from South Korea have dropped around 7.6 per cent in July alone, and sales of Japanese beers at some of South Korea’s most popular convenience stores have plummeted more than 21 per cent since the first week of July.

On the other hand, Samsung has secured around three months of emergency supplies, while also sending its own representatives to Japan for direct negotiation. Business leaders in both countries have lobbied their respective governments to ease trade restrictions and restore bilateral relationships.

Protestors in Korea showing anti-Japanese sentiment

Not surprisingly, firms are already adopting a wait-and-see attitude, postponing investment and waiting for clarity amid increasing uncertainty, as bond markets send alarming signals of a looming recession.

In ASEAN, the rift between Japan and South Korea is likely to complicate matters amidst the parallel US-China trade war. At the ASEAN Foreign Ministers’ Meeting in Bangkok on 31 July, both South Korea and Japan sought to assuage their Southeast Asian counterparts. Japan’s Minister of Economy, Trade, and Industry, Hiroshige Seko, said, “The member states of ASEAN have been strictly managing their exports thus far, and we also have a close economic relationship with them. As such, I don’t think this will affect our global supply chain.”

The ASEAN Foreign Ministers’ Meeting, held in Bangkok, was also attended by representatives from Japan and South Korea

As pressure builds on all sides, it is imperative that the rules of free and fair trade are upheld. ASEAN is in a unique position as a middle person and neutral trading partner between Washington, Beijing, Tokyo, and Seoul. In emphasising the region’s shared commitment to free trade and the unimpeded global exchange of goods, it is hoped that level heads prevail in both trade disputes and stabilise the world economy.

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