South Korea has never had surplus in trade with Japan for more than 50 years since diplomatic relations between the two neighboring countries normalized in 1965, falling into a disadvantageous position in taking measures to counteract Japan’s punitive trade barriers.
According to trade data released by Korea International Trade Association and Korea Customs Service on Saturday, Korea’s cumulative trade deficit with Japan has amounted to $604.6 billion since 1965 when the two countries normalized their diplomatic relations. In the early stages of their trade, Korea’s deficit with Japan stood at $130 million, but the gap widened to $1.24 billion in 1974 and $11.87 billion in 1994 as Korea’s economy rapidly developed.
Korea briefly lowered trade deficit with Japan during the 1998-1999 Asian financial crisis, but the gap soon widened to surpass $10 billion after 2000 and reached $36.12 billion in 2010. The deficit has been mostly hovering around $20 billion since then.
Korea’s trade deficit with Japan is also the largest when comparing with other countries.
Last year, Korea saw the largest trade deficit with Japan with the amount totaling $24.08 billion, followed by Saudi Arabia ($22.38 billion), Qatar ($15.77 billion), and Kuwait ($11.54 billion), which are all exporters of crude oil except for Japan that Korea needs to depend on.
By item, Korea saw a total $8.57 billion deficit with Japan from imports of nuclear reactors, boilers, and machinery last year, $4.33 billion from imports of electric devices, recorders, and regenerators, $3.57 billion from imports of optical instrument and precision instrument, data showed.
In particular, Korea’s bulk of deficit with Japan last year came from imports of devices, electronic integrated circuits, manufacturing machine, and electronic equipment processor and controllers, which are mostly components and materials with high technological barriers.
But the export items that Korea saw a trade surplus with Japan were mineral fuel ($3.19 billion), natural pearls and jewelry ($560 million), and fishery and shellfish ($370 million), which can be easily replaced by other countries.
The latest data underscored that Korea is left with little options to counter retaliatory trade barriers from Japan over the wartime labor row.
The Japanese government stripped of Korea’s preferential fast-track export status as of Thursday. Without the waivers, Japanese exporters of three tech materials, which are critical in producing Korea’s mainstay industry items chips and displays, have to apply for permission each time they want to ship these materials to Korea, a process that could take about 90 days.
Seoul denounced the move motivated as retaliation for recent court rulings in Korea over wartime compensation claims, which Japan argued were resolved in the 1965 treaty.
Japan is said to be considering expanding the sanctions to a wider range of exports, a move that could have ripple effects across Korea’s manufacturing supply chains as the country relies heavily on Japanese imports of high-tech materials, components and equipment.
By Kim Tae-joon and Lee Eun-joo
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