Japanese and South Korean Economic Decision-Making: The 2019 Trade Dispute and Retaliatory Policy
Open AccessThis paper examines the trade dispute between Japan and South Korea (2019– ) and the motivations of and influences on the decision-making processes of both governments. Tying historical disagreements– chiefly the issue of forced labor during Japan’s colonization of Korea– to the imposition of restrictive trade measures, this thesis argues Japanese retaliation for the South Korean support for compensation and Korean retaliation for the initial curbs. The trade dispute began in July 2019 as Japan tightened export controls and removed South Korea from its white list of preferred partners. While the Japanese government argued security concerns as its motivation, this empirical case demonstrates the role of historical disagreement as a key factor. Prime Minister Shinzo Abe’s leadership of the decision was fueled by his frustration over the forced labor issue, particularly regarding the South Korean Supreme Court’s ruling against Japanese firms. Given the expanded power of the Prime Minister and Abe’s concentration of political support, he was enabled to pursue retaliatory policy in line with his personal agenda. On the South Korean side, the removal of Japan from its white list was motivated by domestic pressures on President Moon Jae-in to retaliate. While Moon’s history of support for individuals’ rights and victims of wartime atrocities, domestic pressures such as public opinion and electoral politics constrained his policy options and led him to take a hardline stance against Japan.In an apparent resolution of the forced labor and trade disputes, the new South Korean President Yoon Suk-yeol decided in March 2023 to compensate victims through a government-organized fund, absolving Japanese firms from any contribution. Yoon’s decision to reconcile with Japan at a major political cost reflects a shift in strategic calculations favoring alignment with Japan to address global challenges and regional concerns. In its application of domestic politics, leadership primacy, and external factors models of foreign policy, this thesis assesses the extent to which Japanese and South Korean leadership faced opportunities or constraints in setting trade policy.
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