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South Korean Prime Minister Lee Nak-yeon presides over a meeting of relevant ministers and members of the government affairs review and coordination council at the Central Government Complex in Seoul on of Aug. 8. (Yonhap News)

While the South Korean government had been planning to tighten controls on exports to Japan in retaliation for its removal of South Korea from its “white list” of countries that enjoy streamlined export procedures for strategic materials, Seoul ultimately postponed its decision. That postponement appears to have been motivated by the fear that scrubbing Japan from the South Korean white list could trigger a cycle of escalating retribution that could narrow the scope for diplomatic effort and also harm South Korean companies.

The decision to postpone confirmation of specific punitive measures and their timing was made following a discussion of the motion to alter the strategic materials export system during a meeting of relevant ministers and members of the government affairs review and coordination council, chaired by South Korean Prime Minister Lee Nak-yeon, at the Central Government Complex in Seoul on the morning of Aug. 8. Just one day before, reports had indicated that the government would announce a revision to the rules governing the export of strategic materials and a timeline for when those changes would take effect after the meeting, but those plans were shelved amid increasing calls for caution.

During a combined briefing by related ministries on Aug. 2, Hong Nam-ki, who serves both as Minister of Economy and Finance and Deputy Prime Minister, had announced that South Korea would remove Japan from its white list and take measures to manage exports more strictly. Those remarks were part of a backlash against the Japanese cabinet’s adoption, made that morning, of changes to its export and trade regulations, which had the effect of dropping South Korea from the white list.

At that point, South Korea’s Ministry of Trade, Industry, and Energy started rewriting the rules that currently expedite screening for companies exporting strategic materials to 29 countries grouped together as “Region A.” This group is composed of countries such as Japan, the US, the UK, Germany, and Australia that are party to the four major multilateral export control regimes, including the Wassenaar Arrangement.

The Ministry had reportedly wrapped up work on rewriting the rules, going so far as to conduct a legal review. Minister Sung Yun-mo had even said on a previous occasion that Article 10 of the rules for importing and exporting strategic materials would be revised to create a “Region C,” to which Japan would be added. Currently, the rules only outline two categories: Region A, which is the countries that enjoy expedited screening, and Region B, which is all the rest. Companies that are exporting strategic materials to Region A can receive a three-year comprehensive permit from the government following submission of a few documents, including a permit application and a declaration about the strategic materials. But exporters to Region B have to receive separate permits for each order, and those permits require additional documents, including contracts and pledges.

The government’s attitude about excluding Japan from the white list reportedly began to change late in the afternoon of the previous day. While related ministries were deliberating and sharing ideas, sources say, a consensus formed that more time was needed to review the options and make a decision.

“During this morning’s meeting, we did have a wide-ranging discussion about the measures that we [the South Korean government] can take against Japan. A specific plan will be decided during subsequent meetings by related ministers,” one government official said.

The government’s position is that the option of retaliation has been deferred, but not completely ruled out, and that a rethink is needed about the timing and intensity of the measures. And on Thursday, the Ministry of Environment did announce plans to tighten radioactivity testing during customs clearance of coal ash imported from Japan.

Experts believe that Seoul’s deferral reflects concerns that retaliating at the present juncture might actually limit the government’s options, given its emphasis on a “diplomatic solution.” Rushing to scrub Japan from the white list after pushing Japan to retract its own measures and to engage in dialogue might be branded as a retaliatory measure and could give Japan some cover for its unfair export controls. Since toughening export controls on Japan would inevitably place a burden on South Korean exporters as well, figures in South Korean industry have been nervously following the push to remove Japan from the white list.

Seoul maintains, however, that its deferral of countermeasures has nothing to do with Japan’s decision not to expand the list of products for which exporters have to receive separate permits for every order in its announcement of revisions to rules governing export and trade management and comprehensive permit processing on Aug. 7. Japan’s issuance of a permit for one order of photoresist more than a month after the tougher rules were put in place was not a major factor either, the government says.

“The idea that Japan might require individual permits for other products was only a reasonable concern raised by the press and the business community, one that had never been mentioned by the Japanese government. I don’t think this means that Japan is backing off,” another South Korean government official said.

“The South Korean government is already definitely committed to reviewing reciprocal measures. I think the final decision will be made through communication via several diplomatic channels this week,” said Choi Jae-seong, chair of the Democratic Party’s special committee charged with responding to Japan’s economic retaliation.

“We will intensify our diplomatic efforts to restore things to the way they were prior to Japan’s economic attack,” Lee Nak-yeon said.

By Choi Ha-yan, Lee Ji-hye, Choi Ye-rin, and Lee Wan, staff reporters

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