According to a South Korean newspaper report on Thursday, SK Innovation, the parent company of South Korea's largest oil refiner and battery maker SK On, is anticipated to pursue a merger with its energy affiliate SK E&amp;S. This merger is expected to result in the formation of a company with assets valued at a staggering 106 trillion won (USD 76.81 billion). The news of this potential merger led to a surge in SK Innovation's share prices, with an increase of more than 10 per cent on Thursday morning.

The report, citing unnamed industry sources, suggests that the merger is partly aimed at bolstering the struggling battery maker SK On by combining it with a profitable company that has a stronger financial position. SK On has been facing losses, and the merger with SK E&amp;S, which reportedly has a more robust balance sheet, could provide a lifeline for the battery maker.

The merger decision is expected to be made by company executives in late June, subject to shareholder approval. This move aligns with SK Group's broader strategy of streamlining its operations and reducing the number of its 219 affiliates. The conglomerate is also re-evaluating new investments, focusing primarily on artificial intelligence and chips, according to the Chosun Ilbo newspaper report.

While SK Inc, the holding company of SK Group, has not confirmed or denied the merger news, SK Innovation declined to comment on the matter. A spokesperson for SK E&amp;S did not immediately respond to a request for comment. 
The South Korean stock market reached a significant milestone on Thursday, with the KOSPI index climbing to 2,798.80, its highest level since January 2022, a remarkable 29-month peak. This achievement was largely driven by a remarkable surge in SK Innovation's shares, which soared by an impressive 16% amid discussions of a potential merger with SK E&amp;S.

The KOSPI index edged up by a modest 1.47 points (0.05 per cent), but this incremental gain was substantial enough to propel the index to heights not witnessed in over two years. SK Innovation's rally was fueled by reports of a potential merger aimed at starting&nbsp;its struggling battery unit. While SK Innovation acknowledged that it is actively exploring strategic options, including the merger under consideration, no concrete decisions have been finalized regarding this matter.

Interestingly, the euphoria surrounding SK Innovation's potential merger was counterbalanced by profit-taking activities in other sectors. Automakers, biopharmaceutical companies, and e-commerce giants experienced declines as investors sought to capitalise on their gains.

Despite these mixed market dynamics, foreign investors remained optimistic about the South Korean market, collectively purchasing shares worth a substantial 201.2 billion won (approximately USD 145.4 million), underscoring their confidence in the nation's economic prospects.

According to a South Korean newspaper report on Thursday, SK Innovation, the parent company of South Korea's largest oil refiner and battery maker SK On, is anticipated to pursue a merger with its energy affiliate SK E&S.

According to a South Korean newspaper report on Thursday, SK Innovation, the parent company of South Korea's largest oil refiner and battery maker SK On, is anticipated to pursue a merger with its energy affiliate SK E&S. This merger is expected to result in the formation of a company with assets valued at a staggering 106 trillion won (USD 76.81 billion). The news of this potential merger led to a surge in SK Innovation's share prices, with an increase of more than 10 per cent on Thursday morning. The report, citing unnamed industry sources, suggests that the merger is partly aimed at bolstering the struggling battery maker SK On by combining it with a profitable company that has a stronger financial position. SK On has been facing losses, and the merger with SK E&S, which reportedly has a more robust balance sheet, could provide a lifeline for the battery maker. The merger decision is expected to be made by company executives in late June, subject to shareholder approval. This move aligns with SK Group's broader strategy of streamlining its operations and reducing the number of its 219 affiliates. The conglomerate is also re-evaluating new investments, focusing primarily on artificial intelligence and chips, according to the Chosun Ilbo newspaper report. While SK Inc, the holding company of SK Group, has not confirmed or denied the merger news, SK Innovation declined to comment on the matter. A spokesperson for SK E&S did not immediately respond to a request for comment. The South Korean stock market reached a significant milestone on Thursday, with the KOSPI index climbing to 2,798.80, its highest level since January 2022, a remarkable 29-month peak. This achievement was largely driven by a remarkable surge in SK Innovation's shares, which soared by an impressive 16% amid discussions of a potential merger with SK E&S. The KOSPI index edged up by a modest 1.47 points (0.05 per cent), but this incremental gain was substantial enough to propel the index to heights not witnessed in over two years. SK Innovation's rally was fueled by reports of a potential merger aimed at starting its struggling battery unit. While SK Innovation acknowledged that it is actively exploring strategic options, including the merger under consideration, no concrete decisions have been finalized regarding this matter. Interestingly, the euphoria surrounding SK Innovation's potential merger was counterbalanced by profit-taking activities in other sectors. Automakers, biopharmaceutical companies, and e-commerce giants experienced declines as investors sought to capitalise on their gains. Despite these mixed market dynamics, foreign investors remained optimistic about the South Korean market, collectively purchasing shares worth a substantial 201.2 billion won (approximately USD 145.4 million), underscoring their confidence in the nation's economic prospects.

South Korea's SK Innovation and SK E&S to go ahead with merger

A South Korean doctors' association has accused the government of employing intimidation tactics on Wednesday (Feb 28), just before the imminent deadline for almost 10,000 protesting trainee medical professionals to either return to work or face consequences.

Also read:&nbsp;<a href="https://www.wionews.com/world/legal-protection-granted-for-south-korean-nurses-to-conduct-certain-medical-procedures-694367">Legal protection granted for South Korean nurses to conduct certain medical procedures</a>

Official data indicates that 9,937 junior doctors, constituting 80.8 per cent of the trainee workforce, have resigned and gone on strike at 99 general hospitals to protest government plans to significantly augment medical school admissions in response to shortages and an ageing population.

Despite broad public support for the reforms, the government has set a Thursday (March 29) deadline for doctors to resume their duties, cautioning legal action, including prosecution and license suspension, for those who defy the order.

Also read:&nbsp;<a href="http://13.235.153.162/world/south-korea-declares-severe-health-alert-amid-doctors-strike-693175">South Korea declares 'severe' health alert amid doctors' strike</a>

A spokesperson for the Korean Medical Association (KMA), a prominent group representing senior doctors, criticised the government on Wednesday for attempting to address the matter through threats rather than dialogue.

"It is disheartening to witness the government's excessive accusations and intimidation tactics," remarked spokesman Joo Soo-ho to reporters. "If the government intensifies its punishment after March 1st, there will be no more resident doctors and specialists produced in the future."

The health ministry requested on Tuesday (Feb 27) that the police initiate an investigation into individuals associated with the walkout, including five connected to the KMA.

The widespread work stoppage has led to the cancellation and postponement of surgeries, chemotherapy and C-sections, prompting the government to elevate its public health alert to the highest level.

To ensure compliance, authorities have personally delivered return orders to the homes of certain trainee doctors, preventing them from evading them, for example, by turning off their phones to avoid receiving them via text message.

Also read&nbsp;|&nbsp;<a href="https://www.wionews.com/world/explained-south-koreas-hospitals-on-red-alert-as-thousands-of-doctors-stage-walkout-over-proposed-reforms-692913">Explained: Proposed reforms that have led South Korea’s doctors to walk out</a>

Seoul contends that it has one of the lowest doctor-to-patient ratios among developed countries, and the government is pushing for the admission of an additional 2,000 students to medical schools annually, starting next year.

Doctors strongly oppose the government's plan, arguing that it would compromise the quality of service. However, supporters of the reform assert that doctors are primarily concerned about potential reductions in their salaries and social status.

Polls indicate that up to 75 per cent of the South Korean public supports the increase in medical school admissions, particularly in remote areas where access to quality healthcare is a challenge.

Watch:&nbsp;South Korea doctors' protest: Government warn doctors to return to work or face legal action

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The South Korean health ministry announced on Tuesday (Feb 27) that nurses are now granted legal protection to perform certain medical procedures typically handled by doctors.

Earlier, South Korea raised its public health alert to the highest level on February 23, declaring a health services crisis attributed to the mass resignation of thousands of doctors protesting proposed medical reforms.

The doctors argue that the government should address existing issues before increasing the number of physicians.

(With inputs from agencies)

A South Korean doctors' association has accused the government of employing intimidation tactics on Wednesday (Feb 28), just before the imminent deadline for almost 10,000 protesting trainee medical professionals to either return to work or face consequences.

A South Korean doctors' association has accused the government of employing intimidation tactics on Wednesday (Feb 28), just before the imminent deadline for almost 10,000 protesting trainee medical professionals to either return to work or face consequences. Also read: Legal protection granted for South Korean nurses to conduct certain medical procedures Official data indicates that 9,937 junior doctors, constituting 80.8 per cent of the trainee workforce, have resigned and gone on strike at 99 general hospitals to protest government plans to significantly augment medical school admissions in response to shortages and an ageing population. Despite broad public support for the reforms, the government has set a Thursday (March 29) deadline for doctors to resume their duties, cautioning legal action, including prosecution and license suspension, for those who defy the order. Also read: South Korea declares 'severe' health alert amid doctors' strike A spokesperson for the Korean Medical Association (KMA), a prominent group representing senior doctors, criticised the government on Wednesday for attempting to address the matter through threats rather than dialogue. "It is disheartening to witness the government's excessive accusations and intimidation tactics," remarked spokesman Joo Soo-ho to reporters. "If the government intensifies its punishment after March 1st, there will be no more resident doctors and specialists produced in the future." The health ministry requested on Tuesday (Feb 27) that the police initiate an investigation into individuals associated with the walkout, including five connected to the KMA. The widespread work stoppage has led to the cancellation and postponement of surgeries, chemotherapy and C-sections, prompting the government to elevate its public health alert to the highest level. To ensure compliance, authorities have personally delivered return orders to the homes of certain trainee doctors, preventing them from evading them, for example, by turning off their phones to avoid receiving them via text message. Also read | Explained: Proposed reforms that have led South Korea’s doctors to walk out Seoul contends that it has one of the lowest doctor-to-patient ratios among developed countries, and the government is pushing for the admission of an additional 2,000 students to medical schools annually, starting next year. Doctors strongly oppose the government's plan, arguing that it would compromise the quality of service. However, supporters of the reform assert that doctors are primarily concerned about potential reductions in their salaries and social status. Polls indicate that up to 75 per cent of the South Korean public supports the increase in medical school admissions, particularly in remote areas where access to quality healthcare is a challenge. Watch: South Korea doctors' protest: Government warn doctors to return to work or face legal action × The South Korean health ministry announced on Tuesday (Feb 27) that nurses are now granted legal protection to perform certain medical procedures typically handled by doctors. Earlier, South Korea raised its public health alert to the highest level on February 23, declaring a health services crisis attributed to the mass resignation of thousands of doctors protesting proposed medical reforms. The doctors argue that the government should address existing issues before increasing the number of physicians. (With inputs from agencies)

Doctors’ association in South Korea accuses government of ‘intimidation’

South Korean President Moon Jae-in's nominee for justice minister may soon take office under the cloud of a prosecution enquiry and public outcry over a scandal that has reignited debate over class privilege.

At issue are scholarships and other perks granted to the daughter of the nominee, Cho Kuk, allegedly out of line with her academic performance.

The scandal has struck a chord in South Korea where young people, who compete furiously through school and university, are increasingly finding themselves scrambling for a dwindling number of positions in a slack job market, in a system they see as plagued by systemic unfairness and bias in favour of the elite.

The scandal surrounding Cho, who faced a parliament confirmation hearing on Friday, has caused a media sensation and sparked protests since Moon nominated him in early August.

At the hearing on Friday, Cho did not deny his daughter's academic perks and expressed his "deepest apologies to the younger generation" for the disappointment that he caused them.

But he said his responsibility was to complete the reform of the justice ministry and prosecution, and would consider a way to make amends to young people who don't have the same opportunities.

His 28-year-old daughter has not been identified in South Korean media and she has made no public comment on the controversy.

Students at South Korea's top universities, including Seoul National University (SNU) where Cho is a professor of law, have held candlelight demonstrations calling for him to give up the nomination, reminiscent of the protests that swept Moon into power in 2017.

"She had opportunities that a typical high school, college student would not even be able to see, just because she is the child of the privileged class," Do Jung-geun, SNU student council president, said of Cho's daughter.

Some of the allegations against Cho's daughter that have drawn the most ire include her being named as first author of a medical paper in the Korea Journal of Pathology in 2009 when she was still in high school and had just completed a two-week internship at Dankook University's institute of medical science.

She also failed her exams at Pusan National University's medical school twice, according to school records, but not only kept her place but got scholarships worth a total of 12 million won ($9,900) over six semesters between 2016 and 2018.

The Seoul Central District Prosecutors' Office has opened an investigation into unspecified allegations against Cho's family with a series of raids into dozens of related offices late last month, including the universities involved in the allegations.

The prosecutors' office declined to comment.

If appointed, Cho would oversee the prosecutors' office, but he has vowed not to receive reports on any investigation into his family.

Progressive disappointment

The scandal has been a particular disappointment to the young people who supported Moon and his party when he became president.

The liberal Moon took office in 2017 after the impeachment for corruption of his conservative predecessor, who came from one of South Korea's most prominent political families.

Moon promised change.

"Opportunities will be equal, processes will be fair, and results will be just," he said.

At the time, Cho was seen as a vocal champion of progressive causes who had spoken out against elitism.

"Cho should listen to those disappointed by his hypocritical naked face," said Shin Seong-min, student council president of the College of Education at SNU.

Moon's ratings have been sliding, with the Cho scandal the latest issue to undermine his support.

In the latest poll of 1,002 people by Gallup Korea in Sept. 3-5, 49 per cent said they disapproved of Moon's work; 21 per cent of them said Moon's decision to appoint Cho was the reason for their disapproval, up 6 percentage points from the previous week. It was the second-highest reason for disapproval, after the sagging economy, at 22 per cent.

More than 70 per cent of South Korean high school graduates entered college, according to the latest government data, but one out of 10 South Koreans between the age of 15 and 29 were unemployed as of July, the highest youth unemployment rate in 20 years.

"For South Koreans, fairness means fairness of opportunity," said Jeong Han-wool, senior researcher at Hankook Research, an opinion survey firm.

"Those in their 20s, who feel the most fatigue from competition out of all South Koreans, seem to be angry because they see this as symbol of what they had suspected all along - that they are living in a 'league of their own' society where opportunities are not allotted by contribution or ability, but circumstances outside their control."

South Korean President Moon Jae-in's nominee for justice minister may soon take office under the cloud of a prosecution enquiry and public outcry over a scandal that has reignited debate over class privilege.

South Korean President Moon Jae-in's nominee for justice minister may soon take office under the cloud of a prosecution enquiry and public outcry over a scandal that has reignited debate over class privilege. At issue are scholarships and other perks granted to the daughter of the nominee, Cho Kuk, allegedly out of line with her academic performance. The scandal has struck a chord in South Korea where young people, who compete furiously through school and university, are increasingly finding themselves scrambling for a dwindling number of positions in a slack job market, in a system they see as plagued by systemic unfairness and bias in favour of the elite. The scandal surrounding Cho, who faced a parliament confirmation hearing on Friday, has caused a media sensation and sparked protests since Moon nominated him in early August. At the hearing on Friday, Cho did not deny his daughter's academic perks and expressed his "deepest apologies to the younger generation" for the disappointment that he caused them. But he said his responsibility was to complete the reform of the justice ministry and prosecution, and would consider a way to make amends to young people who don't have the same opportunities. His 28-year-old daughter has not been identified in South Korean media and she has made no public comment on the controversy. Students at South Korea's top universities, including Seoul National University (SNU) where Cho is a professor of law, have held candlelight demonstrations calling for him to give up the nomination, reminiscent of the protests that swept Moon into power in 2017. "She had opportunities that a typical high school, college student would not even be able to see, just because she is the child of the privileged class," Do Jung-geun, SNU student council president, said of Cho's daughter. Some of the allegations against Cho's daughter that have drawn the most ire include her being named as first author of a medical paper in the Korea Journal of Pathology in 2009 when she was still in high school and had just completed a two-week internship at Dankook University's institute of medical science. She also failed her exams at Pusan National University's medical school twice, according to school records, but not only kept her place but got scholarships worth a total of 12 million won ($9,900) over six semesters between 2016 and 2018. The Seoul Central District Prosecutors' Office has opened an investigation into unspecified allegations against Cho's family with a series of raids into dozens of related offices late last month, including the universities involved in the allegations. The prosecutors' office declined to comment. If appointed, Cho would oversee the prosecutors' office, but he has vowed not to receive reports on any investigation into his family. Progressive disappointment The scandal has been a particular disappointment to the young people who supported Moon and his party when he became president. The liberal Moon took office in 2017 after the impeachment for corruption of his conservative predecessor, who came from one of South Korea's most prominent political families. Moon promised change. "Opportunities will be equal, processes will be fair, and results will be just," he said. At the time, Cho was seen as a vocal champion of progressive causes who had spoken out against elitism. "Cho should listen to those disappointed by his hypocritical naked face," said Shin Seong-min, student council president of the College of Education at SNU. Moon's ratings have been sliding, with the Cho scandal the latest issue to undermine his support. In the latest poll of 1,002 people by Gallup Korea in Sept. 3-5, 49 per cent said they disapproved of Moon's work; 21 per cent of them said Moon's decision to appoint Cho was the reason for their disapproval, up 6 percentage points from the previous week. It was the second-highest reason for disapproval, after the sagging economy, at 22 per cent. More than 70 per cent of South Korean high school graduates entered college, according to the latest government data, but one out of 10 South Koreans between the age of 15 and 29 were unemployed as of July, the highest youth unemployment rate in 20 years. "For South Koreans, fairness means fairness of opportunity," said Jeong Han-wool, senior researcher at Hankook Research, an opinion survey firm. "Those in their 20s, who feel the most fatigue from competition out of all South Koreans, seem to be angry because they see this as symbol of what they had suspected all along - that they are living in a 'league of their own' society where opportunities are not allotted by contribution or ability, but circumstances outside their control."

Moon Jae-in appointee's 'privileged' daughter angers young South Koreans

By Pushan Dutt

Japan and South Korea are showing no signs of resolving an escalating trade dispute, which traces back to 1910. It now poses a threat to the world’s tech supply chain and has potentially severe consequences for the global economy. And the dispute is being played out within a complex confluence of historical grievances, domestic politics, the ongoing US-China trade war and a looming global recession.

Japan has officially removed South Korea from its list of trusted trade partners that receive preferential treatment for importing sensitive Japanese-made goods, as of August 28. The list of goods includes chemicals that are crucial to producing the semiconductor memory chips found in most modern electronic devices.

This means that Japanese companies will now have to apply for a licence to export the chemicals to South Korean companies, a process that could take up to 90 days. Semiconductors are South Korea’s top export item. With manufacturers reliant on the chemicals from Japan, any delay in their production could pose a significant threat to the country’s economy and the South Korean currency, the won, which has already dropped 8 per cent against the US dollar this year.

From a global perspective, South Korea semiconductor giants Samsung and SK Hynix, which supply 60 per cent&nbsp;of the world’s memory chips, have warned that they can’t rule out production disruption if the Japanese export restrictions remain in place. Any delay to supply could cause serious disruption to global tech supply chains and significantly impact other tech giants, like Apple and Huawei, who use memory chips and displays from Samsung.

A conflict with deep roots 
 
Japan has given no indication that it will change its mind. It claims the restrictions are a response to a national security concern, alluding to leaks to North Korea.

With no evidence put forward to support this, the likely scenario is that Japan’s action is part of an escalating and ongoing dispute involving historic grievances that date back to Japan’s colonisation of the Korean peninsula more than a century ago. During World War II, Japan conscripted more than 670,000 Koreans as forced labourers to support its military ambitions.

The recent decision to remove South Korea from trusted trade partner status originates with a South Korean high court ruling in October 2018. The court ordered Japanese companies to compensate individual victims of forced labour including the “comfort women” – Korean women taken as sex slaves and forced to work in war-time brothels.

Japan insists that most of the necessary compensation was settled as part of a $500m payout under a treaty signed in 1965 and then a new agreement that was reached in 2015. But the current South Korean president, Moon Jae-in, created a taskforce in 2018 which concluded that the 2015 agreement did not reflect the opinions of the victims, especially their demand that Japan admit direct responsibility. Tokyo refuses further discussion of this issue and the bilateral relationship has continued to deteriorate.

The dispute is an emotional one for both countries. Thousands of South Korean protesters have marched on the Japanese embassy in Seoul, to express their displeasure at being downgraded as a trading partner. Many South Koreans have also vowed to boycott Japanese products, and there are reports that petrol station operators have been urged to stop refuelling Japanese cars.

Global slowdown

Both Japan and South Korea are integral to the world economy and disruptions will have spillovers that will go beyond the two antagonists. The most immediate threat is to the global tech supply chain, but any slowdown increases the likelihood of a worldwide recession.

The dispute has come at a particularly bad time. Major economies are currently experiencing weak growth with negative numbers coming out of the UK and Germany and a general slowdown in the US, China and India. With the world’s two largest economies, the US and China, involved in an escalating tariff war that is chilling business investment, confidence and trade flows across the world, the Japan/Korean trade spat will only add to business uncertainty.

There is little indication as to when these disputes will be resolved, or in whose favour. Add to this the chaos surrounding Brexit and businesses are left wondering what will happen next. Not surprisingly, firms are already adopting a wait and see attitude, postponing investment and waiting for clarity amid increasing uncertainty, as bond markets &nbsp;send alarming signals of a looming recession.

Shifting power, weaponising trade

In the past, the US would have stepped in to prevent any flare up between its two South-east Asian allies from getting going out of hand. But the Trump administration has been hesitant to get involved, despite the important role both countries play in monitoring North Korea’s nuclear ambitions.

In a telling sign of shifting power in the region, China has already offered to step in and help mediate the dispute. The foreign ministers of the three countries met recently but failed to set a date for the annual meeting of their leaders.

China considers stability a priority and has been actively seeking to bolster regional economic integration as its relationship with the US sours. It will also be worried about the impact the Japan-South Korea trade spat could have on large Chinese technology companies like ZTE and Huawei, which rely on US suppliers like Qualcomm for chips and semiconductors. But if the US trade sanctions cut off this source of supply, they will be looking to South Korea for the vital components.

Another concern globally is Japan’s use of national security to justify its trade policy. This weaponising of trade follows Donald Trump’s citing of security concerns when putting tariffs on steel and aluminium imports. China sees the trade war as an attempt to disrupt its core development strategy, the Made in China 2025 plan, prevent it’s reemergence as a world power and views the trade dispute through the lens of security and sovereignty.

World Trade Organisation (WTO) rules which govern trade between countries are, to a large extent, based on norms. They include a national security exemption clause which relies on members applying it in good faith. Once member states start taking advantage of the provision, there is likely to be a cascading effect, tempting more countries to weaponise this exemption in a tit-for-tat trade war.

(Pushan Dutt is Professor of Economics, INSEAD) 
 
(This article was originally published on The Conversation. Read the <a href="https://theconversation.com/how-a-century-old-dispute-between-japan-and-south-korea-threatens-the-global-supply-of-smartphones-122502">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

 
&nbsp;

&nbsp;

By Pushan Dutt Japan and South Korea are showing no signs of resolving an escalating trade dispute, which traces back to 1910. It now poses a threat to the world’s tech supply chain and has potentially severe consequences for the global economy.

By Pushan Dutt Japan and South Korea are showing no signs of resolving an escalating trade dispute, which traces back to 1910. It now poses a threat to the world’s tech supply chain and has potentially severe consequences for the global economy. And the dispute is being played out within a complex confluence of historical grievances, domestic politics, the ongoing US-China trade war and a looming global recession. Japan has officially removed South Korea from its list of trusted trade partners that receive preferential treatment for importing sensitive Japanese-made goods, as of August 28. The list of goods includes chemicals that are crucial to producing the semiconductor memory chips found in most modern electronic devices. This means that Japanese companies will now have to apply for a licence to export the chemicals to South Korean companies, a process that could take up to 90 days. Semiconductors are South Korea’s top export item. With manufacturers reliant on the chemicals from Japan, any delay in their production could pose a significant threat to the country’s economy and the South Korean currency, the won, which has already dropped 8 per cent against the US dollar this year. From a global perspective, South Korea semiconductor giants Samsung and SK Hynix, which supply 60 per cent of the world’s memory chips, have warned that they can’t rule out production disruption if the Japanese export restrictions remain in place. Any delay to supply could cause serious disruption to global tech supply chains and significantly impact other tech giants, like Apple and Huawei, who use memory chips and displays from Samsung. A conflict with deep roots Japan has given no indication that it will change its mind. It claims the restrictions are a response to a national security concern, alluding to leaks to North Korea. With no evidence put forward to support this, the likely scenario is that Japan’s action is part of an escalating and ongoing dispute involving historic grievances that date back to Japan’s colonisation of the Korean peninsula more than a century ago. During World War II, Japan conscripted more than 670,000 Koreans as forced labourers to support its military ambitions. The recent decision to remove South Korea from trusted trade partner status originates with a South Korean high court ruling in October 2018. The court ordered Japanese companies to compensate individual victims of forced labour including the “comfort women” – Korean women taken as sex slaves and forced to work in war-time brothels. Japan insists that most of the necessary compensation was settled as part of a $500m payout under a treaty signed in 1965 and then a new agreement that was reached in 2015. But the current South Korean president, Moon Jae-in, created a taskforce in 2018 which concluded that the 2015 agreement did not reflect the opinions of the victims, especially their demand that Japan admit direct responsibility. Tokyo refuses further discussion of this issue and the bilateral relationship has continued to deteriorate. The dispute is an emotional one for both countries. Thousands of South Korean protesters have marched on the Japanese embassy in Seoul, to express their displeasure at being downgraded as a trading partner. Many South Koreans have also vowed to boycott Japanese products, and there are reports that petrol station operators have been urged to stop refuelling Japanese cars. Global slowdown Both Japan and South Korea are integral to the world economy and disruptions will have spillovers that will go beyond the two antagonists. The most immediate threat is to the global tech supply chain, but any slowdown increases the likelihood of a worldwide recession. The dispute has come at a particularly bad time. Major economies are currently experiencing weak growth with negative numbers coming out of the UK and Germany and a general slowdown in the US, China and India. With the world’s two largest economies, the US and China, involved in an escalating tariff war that is chilling business investment, confidence and trade flows across the world, the Japan/Korean trade spat will only add to business uncertainty. There is little indication as to when these disputes will be resolved, or in whose favour. Add to this the chaos surrounding Brexit and businesses are left wondering what will happen next. Not surprisingly, firms are already adopting a wait and see attitude, postponing investment and waiting for clarity amid increasing uncertainty, as bond markets send alarming signals of a looming recession. Shifting power, weaponising trade In the past, the US would have stepped in to prevent any flare up between its two South-east Asian allies from getting going out of hand. But the Trump administration has been hesitant to get involved, despite the important role both countries play in monitoring North Korea’s nuclear ambitions. In a telling sign of shifting power in the region, China has already offered to step in and help mediate the dispute. The foreign ministers of the three countries met recently but failed to set a date for the annual meeting of their leaders. China considers stability a priority and has been actively seeking to bolster regional economic integration as its relationship with the US sours. It will also be worried about the impact the Japan-South Korea trade spat could have on large Chinese technology companies like ZTE and Huawei, which rely on US suppliers like Qualcomm for chips and semiconductors. But if the US trade sanctions cut off this source of supply, they will be looking to South Korea for the vital components. Another concern globally is Japan’s use of national security to justify its trade policy. This weaponising of trade follows Donald Trump’s citing of security concerns when putting tariffs on steel and aluminium imports. China sees the trade war as an attempt to disrupt its core development strategy, the Made in China 2025 plan, prevent it’s reemergence as a world power and views the trade dispute through the lens of security and sovereignty. World Trade Organisation (WTO) rules which govern trade between countries are, to a large extent, based on norms. They include a national security exemption clause which relies on members applying it in good faith. Once member states start taking advantage of the provision, there is likely to be a cascading effect, tempting more countries to weaponise this exemption in a tit-for-tat trade war. (Pushan Dutt is Professor of Economics, INSEAD) (This article was originally published on The Conversation. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

How a century-old dispute between Japan and South Korea adds to global trade uncertainty