Amid growing trade tensions between the two neighbouring nations, South Korea’s trade deficit with Japan is expected to hit the lowest level in 16 years, data from the Ministry of Trade, industry and Energy shows.

In the January-October period this year, South Korea’s trade deficit with Japan stood at $16.3 billion, down 20 per cent year-on-year, the smallest deficit with the neighbouring nation since 2003, the data shows.

South Korea’s exports to Japan amounted to $23 billion, down 6.5 per cent from the year-ago period while imports from Japan were $41 billion, down 12.8 per cent.

The decline is attributed to the fall in imports of consumer goods due to a widespread boycott of Japanese products and the reduction of high-tech material shipments by chipmakers Samsung Electronics and SK hynix, due to the global market slowdown, the ministry said.

South Korea and Japan, meanwhile, were set to hold the second bilateral consultations in Geneva, Switzerland, on Tuesday, to resolve a trade dispute triggered by Japan’s export restrictions.

Chung Hae-kwan, the director-general in charge of legal affairs at the ministry, left for Geneva on Monday to take part in consultations at the World Trade Organisation (WTO). This is the second round of talks after the two nations could not reach common ground on October 11.

Five days before the consultation, the Japanese government approved exports of liquid hydrogen fluoride to South Korea, the first approval for the material since it tightened restrictions on exports to the republic of three high-tech materials – alongside fluorinated polyimide and photoresists – in July.

The Japanese government is reported to have authorised two Japanese firms, including Stella Chemifa Corp, to import the materials to South Korea. It had approved the shipments of photoresists and fluorinated polyimide in August and September, respectively.

Japan’s approval last week is seen as its preparation ahead of the WTO consultations fearing that export restrictions would adversely affect international disputes.

However, the move “basically won’t have much impact [on the consultations]”, Chung told reporters before leaving for Geneva.

“The main purpose of our complaint is to withdraw Japan’s export restrictions. That is the main issue. One or two permits are not relevant to our WTO dispute,” he added.

Japan’s approval of individual cases could send a positive signal to local companies. But the uncertainties will continue unless Japan withdraws its export restrictions entirely, according to the ministry spokesperson.

The WTO dispute dates back to September 11 when South Korea complained about the export restrictions to the WTO Dispute Settlement Body, accusing Japan of carrying out politically motivated retaliatory measures.

The bilateral consultations are the first step in the dispute resolution process. If the two countries do not reach an understanding, Korea can request for a WTO panel at least 60 days after it asks for bilateral consultation, which it had sought on September 11.

It usually takes about 15 months from the time consultations for the WTO panel to make a ruling.

THE KOREA HERALD/ASIA NEWS NETWORK