Diplomatic tension between Korea and Japan is once again escalating. On Aug. 4, a public announcement by the Korean judiciary was made regarding the effectuation of a seizure order regarding the assets of Nippon Steel. In response, the Japanese steelmaker appealed the order.
About a year ago, the Supreme Court here ruled that Nippon Steel should compensate surviving Korean workers for their forced labor before and during World War II. Various legal disputes arose, and Nippon Steel refused to accept the decision. Now, the Korean judiciary is moving forward with the ruling by seizing the assets of the company on Korean soil.
The Japanese government insists that the right to claim reparations was ended with the 1965 treaty normalizing diplomatic relations between the two countries. Although there are several legal issues that need to be addressed, the problem at hand is way more complicated than just a ruling and an appeal.
The ruling saw the Japanese government withdraw preferential treatment for Korean companies buying key raw materials for semiconductor production. Korean consumers boycotted Japanese products in return. This conflict later went on to become a so-called "trade war" between Korea and Japan.
Matters of national pride often put a country's economy at stake. The current saga happening in Northeast Asia is not any different. Japan's decision to take Korea off its "White List" only seems to have backfired for both Seoul and Tokyo.
The export of raw materials for semiconductor production from Japan to Korea dropped by 27.9 percent. Korea struggled to find a replacement for the regulated Japanese items such as hydrogen fluoride, and the opportunity cost spent to overcome the risk has been vast.
It is too apparent that there has been no winner in this trade war, and it is easy to forecast that there will be none in the future. Both Korea and Japan are biting the bullet, the former clinging to revenge for the past and the latter stubbornly sticking to its guns.
Korea's economy depends heavily on global trade. More than 60 percent of its GDP comes from international trade. Its market, therefore, is very much affected by the tides of diplomacy. Many enterprises suffered from a Chinese whim concerning the deployment of a U.S. anti-missile system called THAAD on Korean soil.
The peninsula has also become a pig in the middle of the chaos of the fierce trade war between the U.S. and China. Its stock market fluctuates depending on how foreign investors make up their minds. The minimization of liability is crucial to induce economic growth and attract overseas funds. There should not be any room for national pride when the interests of a country's people are at stake.
Japan also cannot escape heavy criticism for its decision in a similar context. It has been well-known that ever since his inauguration, Prime Minister Shinzo Abe and his cabinet have brought old reasons for conflict with Korea into the public realm for their political advantage.
Nationalism has been a useful agenda for the conservative administration to draw polls and votes. Apart from the stability of the regime, the losses and damage done to private enterprises and the people have been left for them to take care of.
In both countries, decisions were made by governments, but it was up to the market and its participants ― their very own people ― to make amends and recover. Whom are they to hold responsible for all these lost benefits, and the opportunity costs?
In a free-market economy, there are only winners. Both the seller and the buyer acquire satisfaction for their individual needs. It is only mere intuition that Japan will be jeopardized by the boycotting of Japanese goods here. The boycotting of a product leads to the boycotting of its buyer's needs and satisfaction.
Korean businesses' long hard strides to find an alternative source for hydrogen fluoride and a drastic increase in online purchases for Japanese clothing brands such as SPA and UNIQLO are good examples of such phenomena. Trade is performed under the spirit of mutual benefit, and it is the same for relations between nations.
Therefore, diplomatic matters should be resolved under the spirit of mutual amicability and respect for the people of both countries. Only when we place priority on the utility of people, can both countries then turn their heads to the future. The longer this conflict continues, the more significant the burden is to the market, and the more the people in it have to suffer.
For many of the "good years," Korea and Japan had been sharing the common value of free democracy and the free market, putting the tragic past behind them. The intertwined value chains they created were far greater than many could possibly imagine.
A brand-new attitude is of absolute necessity, not only to resolve the conflict, but mainly for the benefit of their people and their economies. Far beyond the battle for pride between nations ― and the redemption of old rights ― awaits a mutual economic bond of two Eastern powers.
Kwack Eun-kyoung (firstname.lastname@example.org) is secretary general of the Center for Free Enterprise (CFE). The views expressed in the above article are the author's own and do not reflect the editorial direction of The Korea Times.
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