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Japan-South Korea rift

WTO to settle old Japan-South Korea case as new tensions brew

Tokyo wants end to Seoul's dumping duties targeting valves since 2015

The WTO's appellate body is expected to issue a report on the case as early as Tuesday.   © Reuters

TOKYO -- The World Trade Organization is poised to settle a 4-year-old anti-dumping dispute between Japan and South Korea, a decision that will come amid an already hostile economic relationship between the two neighbors.

South Korea imposed anti-dumping duties of roughly 10% and 20% on Japanese-made industrial valves in 2015, following an investigation. Japan launched a complaint in March 2016, requesting WTO consultations, and filed an appeal in May 2018 after a dispute settlement panel skirted a decision on certain issues.

The duties remain in effect on the pneumatic valves, which control the flow of air and are used in industrial equipment, semiconductor manufacturing and automobile assembly.

The WTO's appellate body is expected to issue a report on the case as early as Tuesday, Japanese government sources say. The report will serve as a final conclusion.

The settlement panel in April 2018 generally agreed with Japan's argument of no causal link between imports of Japanese products and harm to South Korea's industry. But it also said that Tokyo's claims, such as Seoul failing to thoroughly probe price differences between Japanese and South Korean products, were "not within the panel's terms of reference."

Japan's appeal seeks a clear-cut finding of a WTO violation by South Korea so that Tokyo may immediately demand the elimination of the duties, under which Japanese companies pay around 1 billion yen ($9.4 million).

The WTO appellate decision will come amid a deepening feud between Tokyo and Seoul that escalated in July when Japan tightened controls on exports of crucial chipmaking materials to South Korea.

Tokyo took the broader step late last month of removing South Korea from its so-called whitelist of preferred trading partners, a move that came shortly after Seoul scrapped an intelligence-sharing pact with Japan.

South Korea responded to its removal from the whitelist by saying it would file a WTO complaint against Japan.

Japanese exports to South Korea are down 11% in the first half of 2019 from a year earlier, at 2.6 trillion yen, while imports from South Korea fell 7% to 1.6 trillion yen.

If the WTO appellate body in the anti-dumping case finds no error in the settlement panel having avoided a decision, Seoul "might argue that the WTO has found no violation," a Japanese government official said.

If Japan's assertions are recognized even partially, Tokyo plans to proclaim a treaty violation by South Korea. Should Seoul fail to remove the duties, Japan would ask the WTO to confirm South Korea's failure to perform the body's recommendation. But that process could take several years, and Japanese companies would continue paying the anti-dumping duties.

The appellate body has the same members as in April, when it upheld South Korean bans on Japanese seafood from Fukushima and seven neighboring prefectures in the wake of the 2011 nuclear disaster. The decision overturned a dispute panel finding that had supported Japan's complaint.

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