[EAI Commentary] Frustrated Japan-Korea Relations: Approaching Crisis, Receding Solutions

[Editor's Note]

One year has passed since the trade dispute between South Korea and Japan began on July 1st of last year with Japan's imposition of export controls. The two countries have fallen into a vicious cycle of responding to each other's missteps with further missteps, linking historical, economic, and security issues. The author, Son Yeol, Director of EAI and Professor at Yonsei University, diagnoses the core of the problem as governmental distrust and emotional confrontation, arguing that it is difficult to find solutions to forced mobilization and export controls as long as attitudes of anti-Japan sentiment and anti-Korea sentiment persist. In the current situation, where neither the mediation role of the United States, which is caught in its own nationalism, nor the self-regulatory efforts of the political circles can be expected, the author predicts that a time of arduous effort awaits to move towards rebuilding Japan-Korea relations based on a rational judgment of their strategic value, overcoming frustration and trials.

July 1st marks one year since the trade dispute between South Korea and Japan began. Japanese Prime Minister Shinzo Abe abruptly declared export controls on three types of materials related to semiconductors and displays destined for South Korea, freezing bilateral relations. In response, South Korea retaliated with boycotts of Japanese goods and a complaint to the World Trade Organization (WTO), escalating the conflict with the termination of the General Security of Military Information Agreement (GSOMIA), which invited U.S. intervention. The triple conflict structure, where historical disputes over the South Korean Supreme Court's ruling on compensation for forced wartime labor have escalated into economic and security conflicts, is now showing signs of rupture as the deadline for the liquidation of Japanese companies' assets approaches.

In response to the Japanese government's overt threats of retaliation, the South Korean government and ruling party have self-assessed that they have "turned a crisis into an opportunity by steadfastly confronting Japan's surprise measures over the past year" and are expressing their resolve to "launch Season 2 of the strategy for domestic production of materials, parts, and equipment." The attention of the media, political circles, and governments in both countries is focused on superficial issues such as the profit and loss statements for both countries resulting from the export control measures, the possibility and extent of future Japanese retaliation, and South Korea's countermeasures.

However, the core of the problem lies in the fact that governmental distrust and emotional confrontation are approaching a dangerous level. The two governments are caught in a vortex of distrust by repeatedly engaging in a game of mutual disregard and retaliation. Despite the de facto self-quarantine of both countries due to COVID-19, they are engaged in a non-contact diplomatic war, constantly attacking each other on every issue. Japan-Korea relations have now entered a state that can hardly be considered normal diplomatic relations.

The problem is politics. While the political leaders and governments of both countries may be able to temporarily postpone the second round of retaliation and resistance with clever tricks and stopgap measures to delay the liquidation of assets, it is difficult to find solutions to forced mobilization and export controls as long as attitudes of anti-Japan and anti-Korea sentiment persist. Politics is causing frustration for businesses suffering from the unwanted decoupling of the South Korean and Japanese economies amidst the severe business environment of COVID-19, and for the United States, which is striving to bind both countries through trilateral security cooperation and the Indo-Pacific strategy. Above all, the consequences of the unresolved conflict will fall entirely on the younger generation, who are frustrated by a faded nationalism.

The Vortex of Emotional Confrontation

The Japan-Korea conflict is approaching a decade. This is an unprecedented situation. The conflict, which began in earnest in 2012 with President Lee Myung-bak's visit to Dokdo and his remarks demanding an apology from the Emperor, continued with Prime Minister Abe's denial of past aggression and visit to the Yasukuni Shrine in 2013, and the dispute over the comfort women solution and international public diplomacy battles in 2014. The conflict deepened after the comfort women agreement in December 2015. The Abe government, by constantly criticizing the installation of a comfort woman statue in Busan, the pledges of presidential candidates to break or renegotiate the agreement, the review of the comfort women agreement, and the dissolution of the "Reconciliation and Healing Foundation," succeeded in inciting the anger of its citizens by portraying South Korea as a "country that does not keep its promises." It shifted to an offensive policy toward South Korea, stating that it could not tolerate South Korea's persistent harassment by constantly moving the "goalposts" on historical issues. The strong stance of demanding that the South Korean Supreme Court ruling be "promptly corrected as a violation of international law" and further choosing the extreme measure of trade retaliation stemmed from this strategy of attacking South Korea.

The Abe government's declaration of export controls on semiconductor and display-related materials was a dagger aimed at the heart of the South Korean economy, but it failed to achieve the expected effect because it did not lead to a complete ban. This was due to a self-contradiction in its justification. While the Abe government claimed that the Moon Jae-in administration was violating the international legal order and demanded correction, it simultaneously engaged in retaliatory export controls against the forced mobilization ruling, thereby undermining the international norm of separating politics and economics. The Japanese government, which advocates for the protection of the liberal international order by leading the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), feared a blow to its international credibility. It denied the logic of retaliation for forced mobilization, framing the export controls as "measures to ensure the proper implementation of export management for security purposes," and resorted to the difficult measure of issuing export permits to South Korean companies and publicly disclosing this fact to package it as an issue not violating WTO trade rules. Meanwhile, South Korean companies were able to manage the damage appropriately by reorganizing their supply chains through procurement from third countries or domestic production.

In contrast, South Korea's response was insufficient to demonstrate the agility and persistence needed to exploit Japan's weaknesses. While anti-Japanese sentiment was inflamed, particularly in political circles, leading to strong anti-Japanese policies such as boycotts of Japanese goods under slogans pursuing "a strong economy that no one can shake" and "independence from Japan," these efforts did not extend beyond domestic solidarity.

A greater misstep was the strategy of linking the two issues of Japan's withdrawal of export controls and South Korea's termination of GSOMIA. South Korea sought to pressure Japan by inducing U.S. intervention through the security issue of GSOMIA, but the United States, perceiving it as an issue that would undermine the joint front against China, strongly pressured South Korea. The termination of GSOMIA was not a blow to Japan's security but rather a reckless move that damaged South Korea's security and diplomatically covered up Abe's missteps.

Looking back, both South Korea and Japan engaged in foolish exchanges, responding to each misstep with another, escalating anti-Japanese sentiment in South Korea and anti-Korean sentiment in Japan to dangerous levels of distrust between the two governments. While the vortex of distrust and conflict between nations typically unfolds in situations of security dilemmas arising from conflicting interests, in the case of South Korea and Japan, emotions, rather than interests, are fueling the vortex of conflict. This creates a vicious cycle where mutual emotional confrontation causes negative ripple effects that harm shared interests, and the damage to interests, in turn, exacerbates emotional confrontation.

The vortex of conflict, accelerated by export controls and the GSOMIA dispute, continues unabated even amidst the COVID-19 crisis. Despite South Korea's sincere efforts to improve its export control system, Japan has not lifted the restrictions without a proper reason. In response, South Korea has resumed WTO dispute settlement procedures against Japan and is hinting at reusing the GSOMIA card. Following disputes over entry and exit, they engaged in a long-standing dispute over the inscription of the Hashima Island industrial heritage site on the UNESCO World Heritage list. When Japan expressed its opposition to South Korea's participation in the G7, South Korea responded with harsh verbal attacks, calling it "the world's highest level of shamelessness." A diplomatic war fueled by distrust and emotions continues.

Economic Decoupling and U.S. Mediation

There are two factors that can be cited as suppressing the vicious cycle of emotional disputes. These are economic interdependence and the mediation role of third countries. In the case of the past comfort women agreement negotiations, the weakening of South Korea-U.S.-Japan cooperation due to the Park Geun-hye administration's hardline drive toward Japan led to increased strategic concerns from the United States, and growing anxiety within the business community about the reduction of economic transactions and the future of business prompted a policy shift (Son Yeol 2018). This indicates that the vortex effect of conflicts arising from historical issues has downward rigidity.

Economic interdependence acts as a safety valve that suppresses conflict between nations. The reason why the strategic competition between the U.S. and China has not devolved into a full-blown security dilemma and conflict vortex is the power of complex interdependence operating at multiple levels. The problem lies in the economic relationship between South Korea and Japan. As the level of economic interdependence between the two countries decreases due to emotional factors, the level of political and strategic conflict can conversely rise.

Strategic decoupling is occurring between South Korea and Japan, as evidenced by Japan's export controls on three semiconductor-related items. South Korean semiconductor companies are pursuing supply chain reorganization through domestic production or procurement from third countries for hydrogen fluoride, fluorinated polyimide, and photoresist. From an economic perspective, there is no reason to use lower-purity domestic products, but decoupling from Japanese companies is inevitable considering political uncertainty. Looking at Figures 1 and 2, a significant decoupling trend in the South Korea-Japan economy has been evident since 2012. Bilateral trade volume decreased by 27% in 2019 compared to 2012, and trade volume from January to May 2020 decreased by approximately 9.3% compared to the previous year. Decoupling in investment is even more pronounced, with Japan's investment in South Korea decreasing significantly by 69% from 2012 to 2019. Macroeconomically, amidst the risks of U.S.-China decoupling, the policy authorities of South Korea and Japan are encouraging mutual decoupling instead of forming a liberal alliance to counter it.

If distrust and emotional disputes cannot be curbed by economic effects, then the mediation role of the United States is expected. It is well known that the presence of the United States and the stationing of U.S. troops in the Northeast Asian region have contributed to the stabilization of Japan-Korea relations. The United States was the hidden architect of the normalization of diplomatic relations between South Korea and Japan in 1965 and has led security cooperation between the two countries within the framework of South Korea-U.S.-Japan trilateral cooperation. However, it is insufficient to play a role in mitigating the emotional disputes between South Korea and Japan by intervening in historical issues. In the process of achieving the 2015 comfort women agreement, the Obama administration played a key mediating role, but ultimately the agreement became hollow, and the difficulty of intervening in historical issues was realized. Furthermore, considering the current domestic atmosphere in the United States, where international cooperationism is declining and nationalism is rising, expecting an active mediation role from the United States is unrealistic.

Towards Rebuilding Japan-Korea Relations

Currently, the governments and political leaders of both countries are engaged in a diplomatic war of emotional confrontation, sharply dividing Japan-Korea relations into 'us and them,' 'allies and enemies,' driven by nationalistic fervor. This is the essence of the crisis. Even if the confiscation and liquidation of Japanese company assets can be postponed through stopgap measures, it is difficult to find solutions to forced mobilization and export controls unless the other party is recognized as a legitimate partner, not an enemy, and unless power is exercised with restraint and patience, leading to compromise. This must be accompanied by a rational judgment of the strategic value of the bilateral relationship.

Given the current political situations in both countries, it is unlikely that anti-Japanese and anti-Korean sentiments based on regressive nationalism will be resolved through self-regulatory efforts within the political circles. Therefore, paradoxically, both countries may find a path to resolution by fighting more. Perhaps only when frustration accumulates heavily throughout society through the alternation of emotional confrontation and stopgap measures, and when they experience severe damage in a chain of second-round retaliation and countermeasures, will self-reflection and reform emerge from political leaders. Japan-Korea relations await frustration, trials, and rebuilding. ■

■ Author: Son Yeol_Director of EAI and Professor at the Graduate School of International Studies, Yonsei University. He holds a Ph.D. in Political Science from the University of Chicago. He has served as Dean of the Graduate School of International Studies at Yonsei University, Dean of the Underwood International College, President of the Association for Modern Japanese Studies, and President of the Korean Political Science Association. His main research areas include international political economy, Japanese foreign policy, and East Asian international relations. His recent publications include "Diplomatic Security and Political Economy of Low Fertility and Aging Population" (2019, co-authored), Japan and Asia's Contested Order(2018, with T.J. Pempel), "South Korea's Middle Power Diplomacy" (2017, co-authored), andUnderstanding Public Diplomacy in East Asia (2016, with Jan Melissen).

■ Responsible Editor: Oh Seung-hee, Senior Research Fellow, EAI

Inquiries: 02 2277 1683 (ext. 202) / seungheeoh@eai.or.kr

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