Moon calls for ‘peace economy’ with N. Korea, slams Japan

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South Korea’s president on Monday described the country’s escalating trade war with Japan as a wake-up call to revamp its economy and also issued a nationalistic call for economic cooperation with North Korea, which he said would allow the Koreas to erase Japan’s economic superiority in “one burst.”

President Moon Jae-in made the comments during a meeting with senior aides to discuss Japan’s move to downgrade South Korea’s trade status and tighten controls on exports to South Korean manufacturers. Moon has described Japan’s moves as a deliberate attempt to damage South Korea’s export-dependent economy and accused Tokyo of weaponizing trade to retaliate over political disputes surrounding the countries’ bitter wartime history.

Earlier on Monday, South Korea said it plans to spend 7.8 trillion won ($6.5 billion) over the next seven years to develop technologies for industrial materials and parts as it moves to reduce its dependence. The government will also financially support South Korean companies in mergers and acquisitions of foreign companies and expand tax benefits to lure more international investment, while easing labor and environmental regulations so that local companies could boost their production, the country’s trade ministry said.

South Korea’s plans are aimed at stabilizing the supply of 100 key materials and parts in semiconductors, display screens, automobiles and other major export sectors, where its companies have heavily relied on Japanese imports to produce finished products.

“We need to do more than just overcome Japan’s trade retaliations and arm ourselves with broader sight and extraordinary determination to surpass Japan’s economy,” Moon said during the meeting at Seoul’s presidential Blue House.

“We should invest efforts to significantly enhance the competitiveness of (South Korea’s) parts and materials industry and also apply economic policies to revive vitality across all areas of our economy,” he said.

Moon used the meeting to convey a positive message to North Korea, which has significantly reduced its diplomatic activity with the South amid a stalemate in larger nuclear negotiations with the United States.

The North has been ramping up its weapons tests in recent weeks while expressing frustration over the slow pace of diplomacy and the continuance of US-South Korea military drills that it sees as an invasion rehearsal.

“The advantage Japan’s economy has over us is the size of its (overall) economy and domestic market. If the South and North could create a peace economy through economic cooperation, we can catch up with Japan’s superiority in one burst,” Moon said. “Japan absolutely cannot prevent our economy from taking a leap. Rather, (Japan) will serve as a stimulant that strengthens our determination to become an economic power.”

North Korea didn’t immediately respond to Moon’s comments. The North has been demanding that Seoul turn away from Washington and restart inter-Korean economic projects held back by US-led sanctions against the North. The United States has said the sanctions should stay in place until the North takes concrete steps to relinquish its nuclear weapons and ballistic missiles.

On Friday, Japan’s Cabinet approved the removal of South Korea from a list of countries with preferential trade status, which would require Japanese companies to apply for case-by-case approvals for exports to South Korea of hundreds of items deemed sensitive.

The decision followed a July measure to strengthen controls on certain technology exports to South Korean companies that rely on Japanese materials to produce computer chips and displays used in smartphones and TVs, which are key South Korean export products.

“Our industries for materials, parts and equipment have been compared to a cormorant,” said Sung Yun-mo, South Korea’s trade minister, referring to how fishermen exploit the bird’s behavior of spitting out the fish it snatches out from rivers, while explaining how South Korea’s imports from Japan grew whenever its own exports increased.

He said those South Korean industries should become more like a pelican, which “raises its own chicks inside its bill, where it also keeps the food.”

South Korean officials have vowed tit-for-tat retaliation, including taking Japan off its own “whitelist” of nations receiving preferential treatment in trade. South Korea’s presidential office said it will also consider ending its military intelligence-sharing pact with Japan as part of its countermeasures, saying it could be difficult to share sensitive information considering the deterioration of trust between the countries.

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