(Bloomberg) — South Korea’s top trade official says the world should set up a framework that allows businesses to stay resilient in the face of a crisis like the war in Ukraine that disrupts global supply chains.
“For strategic raw materials, it is important to foster an international cooperation network because it’s risky to depend on one or two countries,” South Korean Trade Minister Yeo Han-koo said in an interview Thursday.
“We need to explore new ways in which we could establish some sort of early warning system if there’s any risk factor along the supply chain, or also a network of bilateral and multilateral cooperation for supply chains,” he added.
Amid a rapidly changing global order, South Korea and Japan should also take a fresh look at their relations, Yeo added, in comments that follow the election of Yoon Suk-yeol as president in Wednesday’s vote. Yoon is calling for a mending of ties between the neighbors.
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Since the Russian invasion of Ukraine, global supply chains for everything from energy to crops are under threat, sending alarm bells ringing across a world economy already grappling with soaring inflation.
Rising prices are a major concern for South Korea’s exporters as well, because the country relies heavily on imports for energy needs. It posted a trade deficit in December and January when oil prices pushed up Korea’s national fuel bill to outweigh earnings from exporters.
“It’s important to diversify. When it comes to Ukraine and Russia, there are some key raw materials that Korean companies import,” Yeo said.
The US and some middle eastern countries could be among alternative sources of energy should South Korea no longer be able to import from Russia, he said.
Korea has joined the West in imposing sanctions against Russian financial institutions including the central bank and sovereign wealth funds. It will still make financial transactions over energy trade under an exemption granted by the US until at least mid-June.
Regarding relations with Japan, Yeo said there was room for progress.
“It’s high time to have a fresh look at bilateral relations and forge forward-looking, more constructive relations between Korea and Japan,” he said. “It’s important to keep politics separate from economic and trade investment when we talk about multilateral trade platforms. “
Relations between the two Asian economic heavyweights remain strained over trade and historical disputes, and improving them may be among the top agenda items to be pursued by Yoon.
Ties deteriorated in 2019 when Japan put in effect some export controls on key chip-making materials shipped to South Korea. Current President Moon Jae-in has said Tokyo needs to show proper contrition for its 1910-1945 colonial rule over the Korean Peninsula while Japan said all matters of compensation were settled decades ago by an agreement between the neighbors.
The two sides exchanged protests as recently as last month over their views on Japan’s recent nomination of a mining site for the 2023 UNESCO World Heritage list. South Korea says wartime Korean labor was used at the site.
Still, repairing ties with Japan may be a necessary step if Korea wants to join the Comprehensive and Progressive Agreement for Trans-Pacific free trade zone as it requires unanimous approval by member nations.
“It is of both ROK and Japan’s interest to focus on the future rather than the past,” Yoon said, referring to the Republic of Korea’s formal name. “I will consider the future of Korea-Japan relationship by having a forward-looking perspective for our youth and future generation.”
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