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South Korea, Japan are harming each other with their trade war

Reactions from the United States have been downright hostile while in Tokyo, they were more subdued.

South Korea's decision to unilaterally scrap an intelligence-sharing agreement with Japan in the midst of missile threats from North Korea has sent waves of anger and frustration to Tokyo and Washington. Simultaneously, the decision provokes backlashes against President Moon Jae-in's erratic leadership as he resorts to dangerous nationalism in dealing with South Korea's close economic partner while expressing equanimity on nuclear and missile threats from the Kim Jong-un regime.

Instead of displaying leadership to cool the crisis, triggered by the familiar issue of Japan's colonial rule, Moon has upped the ante by holding naval exercises around two rocky promontories in the Sea of Japan claimed by both countries.

At stake is not only heavy damage to Seoul's own interests, but also adverse impacts on long-term stability and strength of the trilateral alliance binding South Korea to Japan and the United States - an alliance that prevents nuclear-armed North Korea from starting another war on the Korean Peninsula and holds a first line of defense against assertive continental powers like China and post-Soviet Russia. Moon's actions benefit North Korea, which in recent weeks resumed firing missiles in Japan's direction. Kim is clearly emboldened by the United States allowing him to continue test-firing missiles while Japan's Prime Minister Shinzo Abe feels let down by both Seoul and Washington. There is concern in Seoul that Moon may be trying to remove South Korea from the trilateral alliance framework, effectively eviscerating it.

Under an arrangement called GSOMIA, short for General Security of Military Information Agreement, Seoul and Tokyo, frequent diplomatic frisson notwithstanding, have cooperated on sharing intelligence during the past three years. Seoul provided intelligence culled from on-the-ground surveillance and electronic eavesdropping along its 250km border with the North, and Japan reciprocated with high-tech satellite and submarine observations - a mutually advantageous system. If Japan excels in high-tech information, Seoul, which doesn't own a single spy satellite, specialises in no-less-important human intelligence.

This arrangement dovetailed with wider US security interests in the region. The US has significant military bases in Japan and South Korea, and maintaining close political and military relations with the two countries, two strong democracies and market economies facing off China and Russia, is a geopolitical imperative. Indeed, this was the prime reason the US brokered normalisation of relations between Seoul and Tokyo in 1965. Moon, threatening to undermine this paradigm, presents a US foreign policy challenge as weighty as the trade dispute with China.

Reactions from the United States have been downright hostile while in Tokyo, they were more subdued.

The US, with vast intelligence capability, is willing to share information with its close ally Japan, and Tokyo stands to lose little from being cut off from Seoul. On the contrary, in the absence of information from Tokyo or Washington, Moon may lose quick, accurate assessments of an enemy just 50 kilometers from Seoul.

Moon has a siege mentality, suggesting that Japan tries to contain South Korea's economic growth. For example, he tried to rally patriotism in July by lauding the 16th century Battle of Myeongnyang, during which the Korean navy resisted a Japanese invasion with 12 wooden vessels.

South Koreans increasingly shrug over such battle cries and after decades of such campaigns have developed more nuanced, mature perceptions on Japan's historical and contemporary roles. With 7 million Korean tourists visiting Japan last year, a campaign to boycott Japanese goods could have limited impact, and Moon risks political backlash at home.

The so-called "Korean fatigue" attributed to never-ending anti-Japan agitation has come home to roost. In the latest round of fresh outbursts, a 2018 Korean Supreme Court ruling upheld the case of several aging Koreans demanding compensation for wartime forced labour at Japanese industries. The court acknowledged their right to make individual claims and accepted their demand that properties belonging to guilty Japanese companies in Korea can be seized and sold off to pay claims. This ruling goes against the Japanese government position that "all claims against Japan have been settled for good" by the 1965 diplomatic normalisation treaty under which Korea received $500 million in grants and loans as compensation. Japan's position is that the court ruling, supported by Moon, violates this treaty.

Moon looks capable of holding a tough line on Japan so long as his leftwing populism - supported by a generation of voters who came of age during authoritarian periods, the most recent being 1988 to 1993 - can sustain energy. Much depends on how he responds to a rising jobless rate and tax burden resulting from rapidly expanding welfare spending. Wages have gone up 19 per cent during the last two years under Moon, forcing many small and medium industries, especially in manufacturing and service sectors, to close. The economy performs so poorly that Chosun Ilbo, the country's leading conservative newspaper, speculates that Moon resorts to Japan-bashing campaigns to tamp down disenchantment over his leadership.

Japan demonstrates readiness and patience for a long battle, and Moon's efforts to enlist the help of US intermediaries to resolve the dispute have fallen on deaf ears in Washington, where diplomats, think-tank specialists and politicos have succumbed to Korea Fatigue.

Tokyo, in a demonstration of resolve that Japan will not back down until Moon declares commitment to the 1965 normalisation treaty, officially posted its decision to exclude Seoul from the list of close trading partners. Seoul importers will require official clearance from the Japanese government for every item, taking weeks or months to get approval. The move severely impacts two of South Korea's major exports: semiconductors and display panels. Taiwan could gain from this action by replacing Seoul as major exporter of these goods.

Many analysts in Seoul suspect that Moon will not back down. The only face-saving way to break the impasse may be a change of government. The next parliamentary election is in 2020. The presidential election is in 2022. The constitution bars Moon from a second term. -Yale Global

Shim Jae Hoon is a journalist based in Seoul