Will the US mediate the fruitless trade conflict between Japan and South Korea intensify the global supply chain reorganization?

category:Finance
 Will the US mediate the fruitless trade conflict between Japan and South Korea intensify the global supply chain reorganization?


With the intensification of contradictions, will the trade dispute between Japan and South Korea constitute a huge fluctuation in supply chains in the Asia-Pacific region and even in the world?

Lloyd Chan, an economist at the Oxford Institute of Economics, told First Financial Journalist that it was difficult to see other Asian countries benefit from the trade conflict between Japan and South Korea in the short term because of the difficulty in replacing Japans sophisticated materials and products. In addition, after the two countries removed each other from the white list, the risk of trade frictions becoming a protracted war increased, and it was more difficult to come up with diplomatic solutions.

Chen pointed out that the conflict will seriously damage market sentiment and growth as well as financial markets: This has imposed downside risks on South Koreas economic growth, and its manufacturing industry will further weaken. Increasing trade tensions will further reduce the prospects for South Korean exports in the near future, especially as South Korea is also affected by wider trade frictions and the global scientific and technological recession.

Protracted war between Japan and South Korea, South Korea is even more injured

On August 12, after Japan removed South Korea from the white list of preferential export treatment on August 2, South Korea announced that it would take tit-for-tat action against Japan to reduce Japans trade status in South Korea.

South Koreas Minister of Trade, Industry and Energy, Song Yongwu, said that Japan would delete the white list of 29 most trusted trading partners in South Korea, which would take effect sometime in mid-September.

In response, Masahisa Sato, Japans deputy foreign minister, said he believed Seouls move might be limited because Japan did not import many sensitive materials from South Korea.

According to Chens data, South Korea imported nearly $55 billion of goods from Japan last year, which accounted for 10.28% of the total imports of South Korea and 7.6% of the total exports of Japan.

It is worth noting that among the top 10 imports of nearly $55 billion in goods, semiconductor devices and other semiconductor-related products account for at least five ($10.9 billion).

On the other hand, Japan imports $31 billion from Korea, which accounts for only 4.2% of Japans total imports and 5% of Koreas total exports. This means that when Japan imposes trade restrictions on all South Korean imports, South Korea is unable to retaliate equally, Chen said.

At the same time, South Korea looks more vulnerable in this trade friction because it relies heavily on high-tech imports from Japan. Chen explained to First Financial Journalist.

Liu Xiangdong, Vice Minister of Economic Research of China International Economic Exchange Center, also pointed out in an interview with the First Financial and Economic Journalist: In terms of economic dependence, South Korea is relatively dependent on Japan a little more. Japans semiconductor industry developed earlier, but in the process of development, South Korea was supported by the United States and developed. In addition, Japans semiconductor industry was hit by American sanctions during the period of trade frictions between Japan and the United States, so Japans semiconductor downstream industries, such as chips and display screens, were not as good as South Koreas. But in the upstream industry, such as key raw materials and components, Japan still has a certain accumulation and foundation, so it still occupies a certain position in the semiconductor market.

It is reported that Korean companies are actively looking for semiconductor manufacturing materials overseas, and because Japanese trade restrictions only target Japanese companies, not restrict sales of Japanese overseas enterprises, Samsung and other enterprises can still get some breathing time.

According to foreign media reports, Samsung recently sought EUV photoresist supply from JSR Belgian subsidiary of JSR, an overseas company established by JSR and IMEC, a Belgian microelectronics center, which can maintain production for 6 to 10 months.

Trade conflicts may be protracted

To some extent, South Koreas so-called improvement approach is very grand. Originally, Koreas trading partners were divided into two groups according to the degree of tightening of export controls for sensitive materials exports that could be used for civilian and military purposes. Japan had previously enjoyed the first group of preferences. But according to the new trade policy announced on the 12th, South Korea has changed the original two groups into three groups. It is noteworthy that only one country in the new second group is Japan.

At the same time, Japan in principle will have the same treatment as the previous second group of non-preferential countries. According to the new guidelines, when Korean companies transport sensitive strategic materials to Japan, they will have to fill in additional documents, and the approval process may take up to three times as long, from five days to 15 days.

In addition, Seoul said that some Korean companies exporting to Japan could obtain exceptional exemptions through one-by-one inspection. Generally speaking, this exception is used when exporting sensitive goods to countries with lower trade status. Exporters can enjoy the same five-day rapid approval process as they do now. Japan also offered similar exemptions after removing South Korea from the White List, alleviating to some extent South Koreas concerns about its exports being hit hard.

Its hard to make a change in the short term.

As mentioned earlier, Zhao Shiying, the first official of the Korean Ministry of Foreign Affairs, and Akihiro Akiba, the second official of the Japanese Ministry of Foreign Affairs, planned to discuss on the 16th or 17th the solution to the contradiction between Japans restrictions on exports to Korea and the ruling of the Korean Grand Court. However, after the news of their meeting was exposed in the media, the plan for the talks was quickly cancelled. At present, however, both sides are expected to choose another opportunity to hold private talks.

Chen Ze pointed out that the initiatives of the two governments have received strong public support. Therefore, which side compromises first will be regarded as defeated by their voters, which makes it more difficult for the two governments to retreat.

Liu Xiangdong, who recently visited Japanese companies, told First Financial Journalist: From the latest signs, the Abe government (think) the Korean market is not so important to Japan. If the tough claim for compensation from Korea is harmful to Japanese enterprises, the Abe governments move is considered.

The problem now is that if the United States does not mediate, at least the Abe governments sanctions against South Korea will continue for some time. Liu Xiangdong pointed out.

If the trade conflict lasts for a long time, in terms of industrial chain transfer, Chen pointed out that Japanese companies can not be completely immune from supply chain shocks, because Japan also needs to buy products from Korean companies that monopolize half of the semiconductor industry.

In the long run, if regional competitors such as China catch up with Japans technological level, there may be trade diversion or diversification, Chen said.

Source: First Financial Responsibility Editor: Guo Chenqi_NBJ9931