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Japan‘s exports of strategic material to Asian countries

While announcing that South Korea would be removed from Japan’s “white list” of trusted trading partners on Aug. 2, Japanese Minister of Economy, Trade, and Industry Hiroshige Seko said, “Taiwan and 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.” Seko’s comments strongly emphasize that Japan’s measures won’t harm Taiwan or the ASEAN states (the Association of Southeast Asian Nations). Japan’s strategy of wooing the ASEAN states and Taiwan is noteworthy since it has implications for the most effective response that South Korea can make.

Seko went on as follows: “This won’t have a negative impact on Japanese exporters either. Such a negative impact would mean that the supply chain between Taiwan and ASEAN member states isn’t functioning.” On the face of it, Seko’s comments suggest that ASEAN member states have been better at handling exports of strategic materials than South Korea, despite their absence from the privileged white list. It’s possible to conclude that Seko was praising ASEAN and Taiwan in an attempt to prop up the claim that South Korea wasn’t removed from the list for political reasons. But given the awkward position of the Abe administration, which is facing international criticism for taking action that undermines the norms of international free trade, some analysts think that Tokyo is making overtures to ASEAN in a deliberate attempt to line up allies.

Another contributing factor is that the strategic materials that fall under the export controls are also exported to Taiwan and the ASEAN member states on a large scale. Figures for export item codes provided by the Korea International Trade Association (KITA) show that some of the top destinations for Japan’s exports of photoresist (worth 315.5 billion yen, or US$2.96 billion, last year) other than South Korea (38.1 billion yen, or US$357.17 million) were Taiwan (59.25 billion yen, or US$554.97 million), China (53.75 billion yen, or US$503.41 million), Hong Kong (10.5 billion yen, or US$98.42 million), and three ASEAN states (Singapore, 10.9 billion yen, or US$102.17 million; Thailand, 5.5 billion yen, or US$51.56 million; and Vietnam, 4.88 billion yen, or nearly US$45 million).

Japan’s exports of doped chemical elements with electronic engineering applications were worth 433.4 billion yen (US$4.06 billion) last year altogether, with the largest importer being Taiwan, at 132.7 billion yen (US$1.24 billion). Other major importers were South Korea (88.68 billion yen, or US$830.56 million), China (52.45 billion yen, or US$491.28 million), and four ASEAN states (Singapore, 29.26 billion yen, or US$273.77 million; Malaysia, 5.55 billion yen, or US$51.57 million, the Philippines, 1.4 billion yen, or US$13.13 million; and Thailand, 1.26 billion yen, or US$11.25 million).

Seko’s decision to specifically mention Taiwan and ASEAN while stating that the supply chain wouldn’t be affected appears to reflect an effort to divert the strategic materials previously bought by South Korea to Southeast Asia in order to placate ASEAN states while further isolating South Korea. That would also allow Japan to alleviate the harm to its own exporters. This strategy is further aimed at reassuring Taiwan, which is a major importer of parts and materials, alongside China.

Even though Japan is fundamentally violating the norms of free trade, the country has in fact revealed its desire to seize the initiative in the realignment of the international trade and commerce order by shifting from its traditional economic focus on its domestic market of 120 million Japanese toward an export-reliant economy, through a series of policies known as Abenomics. Japan had been hobbled by continuing stagnation in the domestic market after the collapse of the “bubble economy,” but more recently, Tokyo has seized upon exports as an economic driver, spearheading the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which took effect on Dec. 30, 2018, and the EU-Japan Economic Partnership Agreement, which took effect on Feb. 1, 2019.

Criticism from neighboring countries about a frontal assault on the norms of free trade is inevitably disconcerting for Japan, given its ambition for leadership in a time of global change, and that sense of crisis is basically driving Japan to move hastily in a bid to bring Taiwan and ASEAN over to its side. “The two countries are mirroring each other’s strategies,” a senior official at the Blue House said on Monday. An effective way for South Korea to target Japan’s “weakest link,” analysts say, is to strengthen its free trade links with other Asian countries.

By Cho Kye-wan, staff reporter

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