South Korean President Moon Jae-in urged Japan on Monday to retract its export restrictions on key materials to the South Korean tech industry and launch consultations to resolve the trade issue.

Moon said during a meeting with his senior aides that his administration will make “calm” efforts for the diplomatic resolution, noting that the vicious cycle of measures and countermeasures will never be desirable for the economies of both South Korea and Japan.

If actual damages are done to South Korean companies, Moon said his government would have no choice but to take necessary steps toward Japan though he did not hope to do it.

Moon called on Japan to retract export curbs and launch sincere consultations, saying Japan should return to the international belief that trade is a tool for common prosperity as well as the principle of free trade advocated by Japan itself.

Moon’s comments came after Japan imposed stricter regulations on exports to South Korea last week of materials vital to the South Korean tech industry.

The materials, including fluorine polyimide, photoresist and etching gas, are used to produce semiconductors and display panels that inevitably influence the manufacturing of smartphones, TVs and other tech products.

Semiconductors and display panels are the mainstays of the South Korean tech industry and the major export items of the export-driven economy.

South Korea regarded the Japanese measures as an “economic retaliation” over the South Korean top court’s rulings for the past eight months that ordered some of major Japanese companies, including Nippon Steel and Mitsubishi Heavy Industries among others, to compensate the South Korean victims of forced labor.

South Korean historians said at least 700,000 Koreans were forced into hard labor without pay before and during World War II. The Korean Peninsula was colonized by Japan from 1910 to 1945.

Japan claimed that the reparation issues were settled through the 1965 accord that normalized diplomatic relations between Seoul and Tokyo following the colonial era, but South Korea said the 1965 pact did not refer to individuals’ right to compensation for the wartime hard labor.

Moon said uncertainties over the global economy expanded amid the deepening of protectionism and trade dispute adding to the faster-than-forecast global economic slowdown.

The South Korean president called for a “cool-headed and calm” response under situations that the trade-dependent economy was faced with external uncertainties, noting that overstating the crisis and creating the sense of anxiety would weaken the economic sentiment and eventually damage the economy.

Despite the super-fast growth for the past decades, Moon said the South Korean economy had a heavy dependence on materials, components and equipment from overseas that are vital to its manufacturing sector.

To take Japan’s export curbs as an opportunity to foster local companies of parts and materials, the president vowed to provide all available support for the development of homegrown components, materials and equipment.

According to the Ministry of Trade, Industry and Energy, South Korea recorded a deficit of 6.7 billion U.S. dollars in trade of industrial parts and materials with Japan in the first half of this year.

It took up about two-thirds of South Korea’s total trade deficit with Japan worth 9.9 billion dollars in the first half.

For the past five years through 2018, South Korea’s trade deficit with Japan in industrial parts and materials reached 76.3 billion dollars, including a deficit of 15.1 billion dollars in 2018.

Since the bilateral diplomatic ties were normalized in 1965, South Korea has never posted a surplus in trade with Japan, according to the local daily Maeil Business News.

South Korea logged the trade deficit with Japan of 28.3 billion dollars in 2017 and 24.1 billion dollars in 2018 each.

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