WTO agrees to mediate Japan, South Korea electronics dispute

The World Trade Organization granted South Korea’s request for a dispute inquiry into Japan’s decision to restrict exports of electronics components.

During a meeting in Geneva Wednesday, it agreed to establish a panel of three experts to determine if Japan violated WTO rules when it imposed restrictions on three classes of chemicals used in the production of smart-phone displays, TV screens and semiconductors.

South Korea alleged Japan’s measures “constitute a politically-motivated, disguised restriction on trade” that disrupted global value chains for South Korean manufacturers like Samsung Electronics Co. and SK Hynix Inc., according to a statement obtained by Bloomberg.

The Japanese delegation previously said its restrictions are permitted by WTO rules and explicitly tied its defense to the trade body’s national-security exemption. The U.S. has used the same loophole to put tariffs on steel imports.

Trade relations between Tokyo and Seoul soured last year after South Korea’s top court ordered two of Japan’s largest companies—Mitsubishi Heavy Industries Ltd. and Nippon Steel & Sumitomo Metal Corp.—to compensate the families of South Koreans who were forced into labor during World War II.

The Japanese government said the move was illegal and unsuccessfully called on Seoul to resolve the matter according to a 1965 treaty that normalized relations and included a $300 million payment.

After the South Korean government rebuffed Japan’s overture, Japan announced its export restrictions and proposed to remove South Korea from its list of nations that are exempt from national-security export controls.