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| Korea International Trade Association (KITA) Chairman Kim Young-ju speaks during a press conference at the association's headquarters in Seoul, Wednesday. Courtesy of KITA |
By Nam Hyun-woo
Japan's escalating moves to place restrictions on trade with Korea will end up dealing a heavy blow to the global value chain, which refers to different stages of the production process being distributed across different countries, the head of Korea's largest trade association said Wednesday.
"It is deplorable that diplomatic and political issues between the two countries have spread to setbacks in trade and economy," Korea International Trade Association (KITA) Chairman Kim Young-ju said during a press conference in Seoul.
"Korea and Japan have built close relations in trade by specializing in certain processes for decades and played huge roles in the global value chain. The two countries' conflict will deal a heavy blow to the global economy."
Kim's remark came after Japan launched initial export restrictions on resource materials for manufacturing semiconductors and display panels to Korea earlier this month. This has been interpreted as a retaliatory move against last year's Supreme Court rulings here against Japanese firms over compensation for wartime forced labor.
Korea stands as a semiconductor and display powerhouse, but the country's chip and display makers rely on Japan in securing resource materials. In terms of hydrogen fluoride, also known as etching gas, 41.9 percent of the total volume of Korea's imports comes from Japan.
"Manufacturing industries across the world have seen advances thanks to the contributions of the two countries, which have successfully assumed their roles in the global value chain," Kim said. "It is regretful that the two countries' trade feud has come at a time where countries and industries are required to ramp up their efforts toward the Fourth Industrial Revolution."
Not only Kim but also other trade experts have raised concerns that both countries will lose big if current tensions lead to the implementation of tit-for-tat measures.
The Korea Economic Research Institute expects Korea's gross domestic product will decline by 2.2 percent if Korean chipmakers suffer a 30 percent shortfall in the materials necessary for semiconductors. If the two countries exchange retaliatory measures, Korea and Japan's GDPs will decline 3.1 percent and 1.8 percent, respectively.
Though Kim refrained from making assumptions on the progress of the bilateral trade conflict, he said Korean companies have to be prepared for a protracted feud, similar to the U.S.-China trade war.
During the press conference, KITA released a report titled Trade Strategy 2020 and urged traders to take the U.S.-China feud into account as "a constant" matter.
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