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story.lead_photo.caption A South Korean woman takes pictures of banners with image of Japanese Prime Minister Shinzo Abe to denounce Japan's trade restrictions on South Korea on a street in Seoul, South Korea, Monday, Aug 12, 2019. South Korea said Monday that it has decided to remove Japan from a list of nations receiving preferential treatment in trade in what was seen as a countermeasure to Tokyo's recent decision to downgrade Seoul's trade status amid a diplomatic row. The sign reads "No Abe." (AP Photo/Ahn Young-joon)

SEOUL, South Korea -- South Korea said Monday that it will remove Japan from a list of nations receiving preferential treatment in trade in what was seen as a retaliatory move after Tokyo's recent decision to downgrade Seoul's trade status amid a diplomatic row.

It wasn't immediately clear how South Korea's tightened export controls would affect bilateral trade. Seoul said some South Korean companies exporting to Japan will be able to receive exceptions from case-by-case inspections that are normally applied on sensitive shipments to nations with lower trade status and go through the same fast-track approval process that they currently enjoy.

Masahisa Sato, Japan's vice minister for foreign affairs, said he believes the impact of Seoul's move would likely be limited as Japan doesn't import much sensitive materials from South Korea.

Japan provided similar exceptions while removing South Korea as a favored trade partner, which eased some of the fears in Seoul about a possible blow to its export-dependent economy, where many manufacturers heavily rely on parts and materials imported from Japan.

South Korea and Japan have often had diplomatic and territorial disputes rooted in Japan's colonial rule of Korea from 1910 until its surrender to Allied forces in 1945 at the end of World War II. But bilateral relations have soured further under Prime Minister Shinzo Abe of Japan and President Moon Jae-in of South Korea.

Abe's stance on South Korea has hardened since last year, when its top court upheld a ruling that a Japanese company, Nippon Steel & Sumitomo Metal, must compensate four Korean men who said they had been subjected to forced labor during the Japanese occupation.

Moon has in recent weeks accused Tokyo of weaponizing trade as retaliation over historical disputes, with his domestic supporters urging him not to give in under what they called Japan's new "invasion," meaning an attempt to subjugate South Korea economically.

Moon struck a more conciliatory tone on Monday, saying that his government will refrain from "emotional" reactions to Japan over the trade dispute.

"While maintaining unwavering resolve and calmness, we need a long-term approach to look for fundamental countermeasures," Moon said in a meeting with senior aides.

South Korea's trade minister, Sung Yun-mo, said Seoul decided to remove Japan from a 29-member "white list" of countries that enjoy minimum restrictions in trade because it has failed to uphold international principles while managing its export controls on sensitive materials.

The new criteria were created because South Korea finds it "hard to work closely with a country that frequently violates basic rules of international export control or that frequently operates it in an inappropriate manner," Sung said, without citing Japan by name.

Sato said South Korea would be violating World Trade Organization rules if it was retaliating against Japan's earlier measures. Park Tae-sung, a South Korean trade official, said South Korea is making a legitimate effort under domestic and international laws to improve its export controls.

South Korea currently divides its trade partners into two groups while managing the exports of sensitive materials that can be used both for civilian and military purposes. Seoul will create a new in-between bracket where it plans to place only Japan, which "in principle" will receive the same treatment as the nonfavored nations in what's now the second group, Sung said.

Under the new guidelines, South Korean companies sending Japan sensitive strategic goods, like those that could be used for making weapons, will have to fill out additional paperwork. The approval process could also take as much as three times longer.

However, Seoul also plans to grant exceptions to South Korean companies exporting to Japanese partners under long-term deals and allow them to continue using a fast-track approval process that takes about five days.

South Korean officials didn't clearly explain why they created a special bracket for Japan instead of grouping it with other nonfavored nations. They said Seoul will work to minimize negative effects on South Korean exporters and bilateral trade.

Sung said the changes are expected to take effect sometime in September, after a 20-day period for gathering public opinion on the issue and further regulatory and legal reviews. He said Seoul is willing to accept any request by Tokyo for consultation over the issue during the opinion-gathering period, but officials didn't say whether Seoul's decision will be negotiable.

South Korea's announcement came weeks after Japan's Cabinet approved the removal of South Korea from a list of countries with preferential trade status, citing an erosion of trust and unspecified security concerns surrounding Seoul's export controls.

In addition to the South Korean government's vow of retaliation, members of the South Korean public are also boycotting Japanese consumer goods and leisure travel to the island nation.

Japan's move came weeks after it imposed stricter controls on certain technology exports to South Korean companies that rely on Japanese materials to produce semiconductors and displays for TVs and smartphones, which are key South Korean export items.

Information for this article was contributed by Kim Tong-Hyung and Mari Yamaguchi of The Associated Press, and by Choe Sang-Hun of The New York Times.

Business on 08/13/2019

Print Headline: South Korea to pull Japan from its preferred trade list

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