Identity politics in Korea-Japan trade dispute and its implications for the international trading system
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Identity politics in Korea-Japan trade dispute and its implications for the international trading system
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Irina A. Korgun 
Occupation: Senior Researcher, Acting Director, Center for the Russian Strategy in Asia, Institute of Economics, Russian Academy of Sciences; Associate Professor, School of Asian Studies, HSE University
Institute of Economics, Russian Academy of Sciences
HSE University
Address: Russian Federation, Moscow

This paper aims to analyse a trade dispute between Republic of Korea and Japan that started in summer of 2019. The dispute between two neighbours and allies may have wider international implications: currently, this dispute is being considered by the WTO and decision on it could impact how similar disputes are treated in future.

This research seeks to identify deeper mechanisms in development of the trade conflict and are rooted in events happened almost a century ago. The paper approaches the dispute from Korea’s perspective. Careful examination of layers of the conflict and a chain of events that preceded and followed it reveals a complex interplay of interests between various social and political groups in Korea. A catalysing role of identity politics in dispute development and subsequent internationalisation is discussed. It is argued that complex interplay of interests in Korean politics had created a venue for subnational players to exert influence on their own government and the regional balance and on how the dispute with Japan is treated.

The paper contributes to studies of international actions (political and economic) based on identity that makes societies prefer repudiation of former injustices over immediate economic benefits and how such actions impact international trade. Research confirms that the hyper-interconnected nature of the world creates ways for identity movements to expand into the area of international trade policy. The paper also draws attention to the fact that such disputes undermine existing principles of the international trading system which currently does not have adequate tools for their resolution. Reduction of risks associated with similar disputes is in the interests of the international community and should base on blended solutions that incorporate institutional, political, and judicial elements.

trade dispute, Republic of Korea, Japan, identity politics, WTO, export restrictions
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2 Current international environment is characterised by intensified geopolitical and economic rivalries. The US-China trade war is perhaps the most obvious case of tensions but aside from it, there are many other conflict situations which are smaller in scale but nonetheless are important for regional and international economy. Understanding how such conflicts shape, evolve and spill over to the international level threatening stability and resilience of global trade and economic order is important for creating protective mechanisms against risks associated with them.
3 This paper takes a closer look at a recent trade dispute between Republic of Korea (further Korea or South Korea) and Japan that started in summer 2019 and currently is pending in the WTO Dispute Settlement Body as dispute DS 590. The paper approaches analysis of the dispute from Korea’s perspective and identifies a catalysing role of identity politics in its development and subsequent internationalisation. By doing so, the paper contributes to studies of international ‘political action based on collective identity’ [1] and how they come to impact international trade. Research further expands this idea suggesting that the hyper-interconnected nature of the world creates ways for identity movements to expand to the area of international trade policy. The paper discusses certain implications that this dispute has for the global trading system represented by the WTO.
4 Research uses an interdisciplinary approach bringing in ideas from economics, international relations, and social science. It relies on general methods of science like induction, deduction and thought experiment. Obtained results have significance for understanding the mechanics of conflict development (here ‘conflict’ is used in a narrow sense of international relations meaning disagreement between parties on some issue) and how identity politics can impact the process. The paper also presents complex relations between East Asian countries where heritage of Japanese colonialism and World War II continues to exert influence over politics despite deep inter-connectedness of regional economies though trade and investment.
6 Mobilizing identities of various kinds have become a ‘constituent part of contemporary global politics’ [1] rendering life to a phenomena of identity politics. Today in a globalized and hyper-connected world, identity politics has become a marker of activity aimed at bringing people in groups around shared needs, values or interests. These identity groups believe that they possess valuable resources for social change [2]. Because of this belief, identity groups are instrumentalized to achieve broader political goals both domestically and internationally. Referring to the situation in the US, a noted political science scholar Francis Fukuyama noted that influence of identity politics over domestic policy was becoming bigger and bigger, particularly in the 21st century [3]. Some scholars suggest that this influence could be even more significant and can lead to a global ‘clash of peoples’ as a result [4].
7 There is no strict criterion that makes a political movement into an example of ‘identity politics’. Rather, the term signifies a loose collection of political projects, each undertaken by representatives of groups that hitherto been neglected, erased, or suppressed1. Identity politics relies on an idea, that there is something like a “shared identity” amongst people in a particular group. But also, in identity politics movements’ identity demands recognition and respect for oneself as different [5]. According to W.Connolly (a political theorist known for his work on democracy, pluralism), capitalism, ‘an identity is established in relation to a series of differences that have become socially recognized’ [6]. The “identity” of identity politics is closely linked to the experience within ‘social structures that generate injustice’, and the possibility of a shared repudiation for the past. The latter serves as ‘mobilising single axis’ for activist in identity politics movement [7].
1. Stanford Encyclopaedia of Philosophy. 2020. Identity politics. >>>> (accessed 25.02. 2021)
8 The scope of political movements that may be described as identity politics is broad: the examples used in the philosophical literature are predominantly of struggles for recognition and social justice by groups of citizens within western capitalist democracies, but indigenous rights movements worldwide, nationalist projects, or demands for regional self-determination use similar arguments. Identity politics, according to A.Taiaiake (a professor in Indigenous governance and political science from Canada), appeals to a time before oppression, or a culture or way of life damaged by colonialism, imperialism, or even genocide [8].
9 So, based on what theory offers identity politics includes several essential features which are a (1) group of people, (2) mobilized around an idea that (3) they are different due to their experiences within society that (4) can be characterised as neglect or supressed or unjust and (5) seeking for recognition of their rights within a country’s policy landscape.
10 An important thing to note is that identity-based politics can only be conceptualised within a liberal-capitalist logic [9]. Institutionalized liberal democracy is a necessary condition of a possibility for contemporary identity politics. Under liberal democratic order, “identities are the locus and nodal point by which political structures are played out, mobilized, reinforced, and sometimes challenged” [10]. Globalisation has intensified identity politics. Hyper-connectivity of the world [11] makes political landscape increasingly porous, so it lets various social movements seek their identification by demanding change in policies.
11 Globalization aided identity politics movements ‘by providing accessible media and activist platforms as well as intergovernmental support through which they can amplify their claims’, write experts on identity movements M.Thiel (Florida International University) and R.Coate (UofSC) [1, p. 11]. These claims may have underlining economic motives but in certain cases psychological aspects are more prevalent. In one of the recent research papers by the famous economists G.Grossman (Princeton University) and E.Helpman (Harvard University) showed that when it comes to support for policies, identity politics can lead public to prefer policies that do not bring them immediate economic gains [12]. Scholars T.Besley (London School of Economics) and T.Persson (Stockholm University specify further that social identity choices like phycological feelings of association with a group, community, and understanding that a group may benefit collectively can lead public to support policies that do not bring immediate material benefits [13]. The aspects of identity groups discussed above are relevant for the Korea-Japan trade dispute. Shared feelings about the historic past mobilised Korean society around social movements for the rights of the victims of Japanese colonisations. This shared sentiment made Korean public to support policies that increased rather than dissolved tensions between the two countries notwithstanding economic losses.
13 The trade dispute between Korea and Japan formally started on July 1, 2019 when Japan announced restrictions on export to South Korea of three chemical components essential for productions of electronic chips and LED displays - hydrogen fluoride gas, fluorinated polyamide, and photoresists. Japan is one of the largest world producers of these three chemicals and Korean firms - Samsung Electronics and SK Hynix, leading producers of electronic - are its major customers. Dependence on Japanese supplies of these products ranges from 40% to 95% (see Table) meaning that switching to alternative suppliers is not easy. As table shows, in case of photoresists and fluorinated polyamide there is in fact little alternative to Japanese supplies.
14 Table. Korea’s sources of photoresists, fluorinated polyamide, hydrogen fluoride gas, 1000 USD
Indicators Photoresists Fluorinated polyamide Hydrogen fluoride gas
Import value from Japan 298,891 19,726 66,587
Share of Japan in total import (%) 93.2 84.5 41.9
Total import value 320,692 23,336 159,512
Korea’s major suppliers Japan: 298,891 Japan: 19,726 China: 82,974
US: 18,508 Taiwan: 1,719 Japan: 66,857
Belgium: 2,639 Malaysia: 996 Taiwan: 9,062
China: 573 China: 662 US: 532
16 Сonstructed by author. Source: Korea International Trade Association. (accessed 10.03.2021)
17 On August 2, 2019 Japan excluded Korea from the ‘whitelist’ of 27 trusted trade partners. This particular measure meant that export of a wider range of ‘strategic items’ - 1,115 parts and components in total - needed approval if they were to be exported to South Korea. For justification of these measures, Japanese government has brought up a security concern pointing out that there is a possibility that listed products, which are of dual use, could have fallen into the hands of North Koreans and can be used for military purposes [14].
18 Japan’s decision was condemned by Seoul as these restrictions created uncertainties for big corporations like Samsung and SK Hynix, Korea’s electronic industry and the Korean economy overall. Uncertainties could have had a further ripple effect in regional supply chains and affected businesses and consumers in different parts of the world. In retaliation, Seoul removed Japan from its own ‘whitelist’ on August 12, 2019, effective as of September 18, 2019.
19 As a part of its efforts to overhaul Japan’s restrictions, Seoul brought a case against to the WTO Appellate body where it is pending as dispute DS590: Japan — Measures Related to the Exportation of Products and Technology to Korea. Initially, other WTO members were reluctant to deal with the case considering it to be a bilateral matter. The security concern proposed by Japan in explanation of its actions was another factor why there was reluctance to deal with the matter in the WTO. Article XXI of the General Agreement on Tariffs and Trade (GATT) acknowledges "security exceptions" that countries may have, and its rather difficult to argue against it. But in the end Korean delegation managed to set up a WTO panel on June 29, 2020, and several members joined as 3rd party observers.
20 The nature of the interests from third parties is partially related to the fact that there have been recently two disputes involving the national security exception in Article XXI of the GATT. The Appellate Body in WTO has ruled in favour of Russia in its dispute with Ukraine 2019 and Saudi Arabia in 2020 in its dispute with Qatar, both countries used the national security exception like Japan. Rarely used since GATT inception in 1947, two rulings that upheld Article XXI over a span of just two year draws particular attention to Korea-Japan dispute. In certain sense, the decision on it will be fateful for the future considerations of similar disputes.2 But even more importantly, the dispute may influence decisions by other WTO members on high-technologies that fall into the category of dual-use functions.
2. Generally speaking, ‘states would like to be free to evade their trade obligations by defining the measures deemed necessary to defend national security interests’ [15].
22 Korea and Japan, both strategic allies to the US, have an unresolved historical issue that periodically puts strain on bilateral relations. The issue concerns the rights of forced labour and ‘comfort women’3, who suffered suppression and abuse during the Japanese colonial rule. After Korea’s transition to democracy in 1990’s, these women, their relatives and human right lowyers have mobilized into a movement around an idea to demand official apology and seek settlement from Japanese government. So, one can observe distinct elements of identity movement and political context necessary for its development in Korea mentioned in the theoretical part of this paper.
3. Effectively ‘comfort women’ were forced into sexual slavery at the military units in Korea and Manchuria. The war time legacy had an important influence on the national identity [29].
23 In 1965 Korea and Japan signed the normalisation treaty of 1965 that supposedly settled colonial legacy claims with a monetary settlement [16]. Under this agreement, Japan paid retributions of $300 million (equivalent to $2.4 billion as of summer 2019). Another $200 millions were received in loans and additional $300 millions in loans were given for a private trust [17]. Upon its signing, Japan ‘enacted Law 44 that nullified right of requests from Korean individuals’ [Ibid.].
24 But Korean side has a different approach to the past settlement. Members of the movement claim that the 1965 treaty concerned only official and neglected individual parties. Therefore, they have the right to seek compensation from the Japanese government for oppression they experienced in the past.
25 In 2000’s the ‘comfort women’ question started to gain more weight in South Korean political landscape. In 2011 civil rights groups began bringing cases to Korean courts against big Japanese companies like Mitsubishi and Nippon asking them to compensate the victims and their families for past humiliations. After long litigation the matter had was decided in 2018 by Korea’s Supreme Court which ruled that Nippon steel Mitsubishi Heavy Industries had to compensate South Korean survivors of forced laborers with about $89,000 each [18; 26]4.
4. A dozen other cases involving 70 Japanese companies - including Toshiba, Panasonic and Nissan - are still pending in lower courts.
26 In essence, the amount of compensation $89,000 awarded by the court is not very significant but it is the legal aspect of the issue that matters for the Japanese side. For Japan, the normalization treaty meant that it had repaid for its colonial legacy. In addition, it made two other attempts in 1994 and 2015 to settle down the ‘comfort women’ issue. But Seoul rejected both the Asian Women Fund initiative in 1994 and Japanese donation of 10 billion yen, or $8.3 mln, to an association of women - victims of colonial period in 2015 [19]. So, for the Japanese government continuing civil groups’ claims and the ruling of Supreme Court undermined foundations of trustful relationship set in the 1965 agreement. So, it decided to remove certain economic preferences that Korea enjoyed as a result of the normalization treaty including shipping of strategic materials to Korea that were changed from special to normal ones applied to other countries.
27 Korea has a different perspective on the issue of apology and donations. The ‘comfort women’ movement claims that failure of the Japanese government to recognize that women were forced into labor make Japanese intentions, including an official apology made in 2015, only an official act that does not come from the heart. They demand a ‘sincere apology’ and ‘victim-oriented approach’. So, the difference in how two sides view the essence of the conflict (legal vs emotional) becomes a considerable strain and complicate the dispute resolution.
28 Certain facts suggest that the decision to go ahead with the claims was not done solely by the Korean activists. Considering that this dispute is now unfolding at the international level, Korean government has a large amount of bargaining power to persuade the public in the necessity of acceptance or rejection of an apology and donations. In this context, a position of Korea’s president Mun Jae In is important for understanding the dynamics of the dispute.
29 Borrowing from Putnam, a scholar who did one of the pioneering studies on two-level games, Mun Jae In can be considered a principal negotiator in conflict with Japan. The principal-agent theory suggest that the principal negotiator is not serving as a mere formal link between international and domestic levels [20]. He has his own consideration and preferences that he tries to address. There are three motives that could theoretically influence him - enhancing his standing, shifting the balance of power, and pursuing his concepts of national interest. Thus, Korean president’s choices in dealing with the social movement and its claims in order to achieve his objectives could have influenced the course of the dispute.
30 Mun Jae In has built his career as a human and labor rights lawyer. He worked closely with previous President Rho Mu Huyn, another prominent and popular civil rights person in Korea’s history, so he needed to match up to the image with his actions [21]. This could led Mun’s government to decide in favor of a more aggressive tone in the matter of historic past. It was Mun’s decision to re-consider a settlement with Japan proposed by the previous government of Park Geun Hye. He decided to return the funds that Abe government donated in 20155.
5. South Korea will not renegotiate 'comfort women' deal with Japan. Financial Times. 2018, January 8. >>>> (accessed 27.03.2021)
31 Two other Mun Jae In’s initiatives that contributed to building tensions in relations with Japan were to invite an activist Lee Yong-soo, a representative of the ‘comfort women’ rights movement, to meet the U.S. President Donald Trump and to add an annual Memorial Day for Japanese Forces’ Comfort Women Victims to the country’s calendar. So, as a Harvard scholar Pandey writes ‘Japanese reparations have become increasingly politicized in South Korea’ [19, p. 17]. The general atmosphere that preceded a trade conflict with Japan was not conducive for a constructive dialogue on disagreements. Instead, it encouraged bitter feelings about colonial past.
32 Politicization reached its peak when after Japan announced its trade restrictions Korean unions started to boycott popular Japanese clothing brands like UNIQLO and MUJI, Japanese beer and Japanese premium automakers - Lexus and Honda. These companies saw a sharp decrease in sales. For example, sales of Toyota cars decreased 36.7% for 2019, while Nissan experienced a drop of 39.7%. One of the strongest negative effects from the boycott campaign took place in the tourism sector.

34 Figure 1. Number of Korean visitors to Japan by month, 2019-2020. Created by author.
35 Source: Korea Statistical Service. >>>> (accessed 05.04.2021)

37 Figure 2. Number of Japanese visitors to Korea by month, 2019-2020. Created by author.
38 Source: Korea Statistical Service. >>>> (accessed 05.04.2021)
39 Number of Koreans visiting Japan fell by 7.61% in July and 48% in August compared with the previous year and remained low through the end of 2019 to the early 2020 before the COVID-19 pandemic started (see Figure 1). Because the decrease was very sharp, supposedly, some regional economies in Japan that were receiving large numbers of Korean tourists did not have time to adjust. For example, Kyushu, where Koreans made up almost 50% of all foreign tourists, and Okinawa had to deal with massive cancellations of flights and hotel bookings. The number of Japanese tourists in Korea was little affected by the dispute: number of incoming Japanese tourists in the second half of 2019 was similar to the previous years (see Figure 2).
40 Politicization played in the interests of the president’s party that was seeking re-election. In spring 2019 before the conflict started in July, Mun Jae In’s approval rating fell as low as 30% and he needed to be more proactive in order to divert public attention and let his party win Parliamentary elections in 2020. Effectively, president’s resolute actions against Japan brought him more political weight in public’s eyes. 73% of the population supported government’s action in what they consider an unresolved historical dispute [22]. Supposedly, it contributed to success of the ruling party in Parliamentary elections: Mun’s Democratic Party and DP’s Platform party took 180 parliamentary seats out of 300 [23].
41 A factor that helped Mun’s government and consolidated support from the public was that in Korea there is very little social disagreement about the Japanese colonial legacy. This meant that the government did not have to take into account expectation of various domestic stakeholders and ‘to make and sell outcomes to international and domestic audiences’ [24] like in other cases of identity politics. Social identity choices [14] that includes phycological feelings of association with a group, community, and understanding that a group may benefit collectively made public to prefer policies that did not bring them immediate material benefits. Even if relations between Korea and Japan are economically beneficial for Korea as a whole, Koreans chose to support historically disadvantaged groups because it would give a nation a sense of repudiation for the past misfortunes.
42 Another potential stakeholder, the US that could have reasoned both party into dialogue was not actively engaged under the Trump Administration because it perceived both Japan and Korea as ‘security free-riders’ [25]6. And neither Korea nor Japan were willing to see a deeper US involvement.
6. It is not yet clear what position the current Biden Administration will take on the matter. But it seems that the US Department of State has condemned actions of Japanese Imperial government as it considers ‘the trafficking of women for sexual purposes by the Japanese military during World War II was an egregious violation of human rights’ but is interested that parties work together towards a mutually acceptable solution. See: Japan's wartime sexual slavery 'egregious violation of human rights': US State Department. The Korea Times. 19.02.2021. >>>> (accessed 04.03.2021)
44 Korea-Japan dispute might sound like a rather narrow and regionally confined subject, but it is a subject with a global relevance. It sheds light on yet another aspect in which identity politics and broader - nationalism - can spread into trade policy of countries and make them act aggressively even if they are known as moderates in their trade tactics. The Korea-Japan dispute is a reflection of what Heath [27] calls ‘the increasing entanglement between national security policy and “ordinary” economic regulation’.
45 Examination of Korea-Japan trade conflict conducted in this paper is not full as it needs information on how the political process and a public discussion that accompanied unfolding of the ‘comfort women’ issue in Korea and subsequent Korea’s court rulings developed in in Japan. But even with its limitations it reveals how a complex interplay of interests in Korean politics has created a venue for ‘subnational players to exert influence on their own governments and the regional balance’ [28]. Moreover, now considered by the WTO Dispute Settlement Body the case can become a precedent for future decisions.
46 There are several key points with regard to the global trading system that can be taken away from Korea-Japan trade dispute. First, the dispute shows fragility of the hyper-connected system characterized by high fragmentation in international production and trade. Actions of one of the participants of global value chains targeted even at a smaller part of a global production and distribution process can have a ripple effect on the international level. It did not happen in case of the Korea-Japan dispute but there is abundant evidence of associated risks from Covid-19 pandemic.
47 Second point comes out of the previous one. Interconnectedness of the world through trade and production links make it tempting to exploit inter-dependencies in order to influence decision-making process in non-economic areas or for reasons of competition. This represents a process of ‘weaponization’ of trade and demonstrates how ‘our existing models for separating security measures from ordinary economic regulation’ are being undermined [31].
48 Third point is a slightly narrow one: in the face of Korea-Japan dispute the WTO it has to deal with a matter that has a non-economic component instead of focusing on a task of trade facilitation and development. Such cases take long time to resolve, drain scarce human resources and time.
49 In way, Korea-Japan trade dispute and other similar disputes tell a story of a triumph of national security concern over non-discrimination principle. Dissatisfaction with the past events or present state of things and perceived threats to a country’s economic status may help explain the rise of identity politics and nationalism and their blend into trade practices. Korea-Japan case demonstrates how identity politics culminates into nationalism that can be seen in many countries today and how this nationalism further spills into international arena. If such practices are not regulated by the international trading system, its functioning will be inhibited in the future. Already at this stage deteriorating relations between the two countries had an impact on the process of election of the General Director of the WTO. A candidate from Korea Yuo Myung-hee struggled to obtain support from Japan in her bid despite her rich experience.
50 There is nothing with identity politics as such. But in the context of international trading system cultural and historic factors similar to the ones found in the case of Korea-Japan trade dispute may divert resources and attention away from serious thinking on how to resolve nascent issues of the trading system itself and improving its efficacy. The dispute under discussion reflects fragility of international trading system in the face of non-economic concerns and further confirms the need for new set of rules and safety valves to deal with similar emergencies.
52 From the viewpoint of dilemmas of collective action, two countries Korea and Japan would be much better off in the absence of the dispute or if the countries would have found a solution that would satisfy both parties. But so far this has not happened, and the matter that used to be an issue in bilateral relations has become a matter decided by a multilateral institution. The overarching question is this matter that involves national security argument on Japan’s side and identity politics element on Korea’s side can be effectively reconciled through international economic framework. Another part of the problem is whether existing international regulation inside WTO allows its judges to manage the case effectively.
53 From a regional perspective, East Asia has a number of unresolved historical matters and Korea-Japan is only one of those. The matter has been persisting for decades and one of the reasons why it had not been aggravated is supposedly, strategic alliance with the US that both countries have and that serves as a safety valve. But even this alliance cannot guarantee reconciliations. The full resolution of the colonial legacy can be hard to achieve in reality, and the issue may escalate depending on political climates in two countries. Because identity politics has become a global phenomenon international community needs instruments to address similar cases through blended mechanisms of institutional and judicial nature. Such mechanisms would provide needed balance between economic, political, social and even historic considerations when deciding on matters similar to the one presented in this paper. They will also create opportunities to spare the international trading system from unwanted risks and enhance resilience of its structures towards shocks.
54 In conclusion, it is worth mentioning that there is nothing wrong with the identity politics as such: it is neither positive nor negative, but obviously it is not neutral. And solutions that the international community seeks to address will influence world economic order and its ability to respond to challenges in the future.


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