Japan-Korea Trade Dispute Could Affect Global Supply Chains, AEI Scholar Says

An American Enterprise Institute trade scholar says "Japan has chosen a dangerous and destructive mode of retaliation, one that is likely to greatly disrupt global electronic supply chains and bolster China’s push for dominance of 5G wireless," and it's not justified, even if South Korea has been provoking its former occupier.

Claude Barfield, a former consultant to the U.S. trade representative, wrote about the export restrictions instituted by Japan on certain chemicals necessary to make semiconductors and flexible display panels (see 1907010020). "Japan controls some 90 percent of the markets for two of the chemicals, and 70 percent of the third," Barfield said. "Japan has also threatened to go further and remove Korea from the so-called White List, a list of countries that have privileged security status. This would force Korean companies to go through a time-consuming procurement process in the future."

Barfield said that because Samsung and another Korean producer have customers around the world, a disruption to semiconductor production in Korea will ripple outward.

Korea had asked the secretariat of the Wassenaar Arrangement to mediate the dispute, since both Korea and Japan signed an agreement on curbing export of sensitive dual-use goods to rogue states. Japan claims South Korean manufacturers are allowing the chemicals to go to North Korea. "The secretariat responded that it has no mechanism to intervene in bilateral issues that may arise between member states," according to a report in the Korean press.