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Japan-South Korea rift

South Korea digs in its heels on Japan tariffs after WTO ruling

Anti-dumping duties dating to 2015 add fire to trade feud

A South Korean protester holds an anti-Japan sign at a rally in August. Bilateral ties have cooled in recent months over trade and historical disputes.   © Reuters

TOKYO -- South Korea does not plan to drop anti-dumping tariffs on Japanese pneumatic valves despite a ruling Monday by the World Trade Organization favoring Japan, exposing a deep divide between the two countries amid heightened tensions.

The decision by the WTO's Dispute Settlement Body calling the tariffs in violation of trade rules will have little impact on its tariff policy, Seoul said late Monday. South Korea argued that it actually won the anti-dumping case, as the settlement body upheld its position on 10 of 13 issues in play.

The valves in question are used in a wide range of products from automobiles to chipmaking equipment. South Korea has imposed tariffs of up to 23% on the Japanese valves since 2015, claiming their low prices are hurting domestic manufacturers.

Japan brought the case to the WTO in March 2016. The trade bloc's appellate body, in a ruling on Sept. 10, accepted Tokyo's argument that its high-quality valves do not compete with South Korean counterparts in terms of price -- a decision finalized through the settlement body on Monday.

The WTO also said that South Korea fails to do enough in terms of disclosing information and price analysis.

"The WTO is calling on South Korea to correct trade violations," a Japanese government source said. "South Korea is just trying to argue each point individually."

But South Korea views the ruling as a victory. Seoul National University professor Ahn Duk-geun, an expert in international trade, said that South Korea could continue to make the case for the tariffs.

"The WTO told South Korea that it did not provide enough justifications for the additional tariff," Ahn said. "This means that it can maintain the tariff if it can produce a satisfactory explanation."

Both countries are interpreting the ruling in their favor, Ahn said. "The problem will likely be drawn out for some time, given the lack of trust between the two sides," he said.

Japan said it was prepared for constructive talks at the settlement body meeting Monday. But South Korea rejected Tokyo's demand that it scrap the anti-dumping tariff.

The countries are also at odds over Japan's export restrictions on chip-related materials, an issue that South Korea has brought to the WTO. The recent decision on Japanese valves helps Tokyo's image as a fair trade partner, but South Korea is not ready to accept it.

The two sides now have up to 15 months to find a resolution on the valves. If they cannot reach a compromise within this time, Japan can request WTO approval for retaliatory measures on South Korean products.

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