Sep 16, 2013

South Korea Puts Near-Total Ban on Japanese Fish Imports Opening Opportunities for other Nation Exporters

The government of Japan announced last week that, at a cost of USD 470 million, they would build a “frozen wall of soil” around the base of the destroyed Fukushima nuclear reactor.  The ice wall will supposedly, once and for all, stop the reactor's irradiated water from leaking into the ocean.  Japan still faces import bans on much of its food exports and is doing everything it can to help put the disaster behind it.  Unfortunately, recent news out of South Korea shows that Japan is still having a hard time convincing its neighbors that it has the situation under control.

On September 6, 2013, South Korea responded to pressure over public fears that fish imported from Japan's Fukushima Prefecture was unsafe by instituting an even more extensive ban on Japanese fisheries. The new ban covers nearly 430 miles of Japanese coastline that surrounds the affected area – a much larger area than the previous ban, which targeted Fukushima Prefecture alone.

Japan’s government responded by saying that all fish exported from areas affected by the nuclear disaster are checked extensively before being exported, and that they would bring the case to the World Trade Organization if the matter wasn’t quickly resolved.  An article in the Korean Herald was quick to note that both China and Taiwan, immediately after the disaster, imposed a total ban on Japanese imports, yet received no such threat by the Japanese government.  Peculiar?

Japan exports about USD 92 million worth of fish per year to Korea.  That doesn’t sound like much, but when coupled with the Chinese, Taiwanese, and several other countries' bans, the sum begins to matter for Japan. With so many of Japan's industries threatened with import bans, it seems like they are now ready to fight tooth-and-nail over every area they can.  The total amount of economic damage done to Japan as a result of the nuclear disaster is unclear, but there are some estimates that push the price tag beyond USD 250 billion.  Ouch.   We doubt that the Korean government will budge.

For example, the United States found out the hard way that getting back into the Korean market after being forced out is not easy.  In 2003, after a case of mad cow disease was reported in Washington State, South Korea slapped a total ban on imports of U.S. beef.  Before the ban, U.S. exports to Korea were worth around USD 815 million.  Many premium cuts of beef in Korea are considered less than premium in the United States, thus, the margins for exporting to Korea tend, also, to be quite high.

In 2006, the U.S. tried to enter the market again, but bone chips found inside a shipment ended up killing the attempt.  Finally, in 2008, the U.S. was able to get back into the market with the market size now near to the pre-ban level. 

The U.S. beef ban, like many issues involving perceived foreign malfeasance in Korea, is exasperated by the South Korean media.  The beef's effect on the safety of the South Korean public were exaggerated (some data was even proven falsified), people became angry, and nation-wide protests were had.  To this day, the reputation of U.S. beef in the Korean market is still tainted and, as recently as last year, South Korea's government floated the idea of once again banning U.S. beef.  The issue ended up being quietly settled behind closed doors after vigorous complaints by the U.S.

It should be painfully obvious to Japan, perhaps more so than any other country, that the Korean government is adept at shaping their public's opinion.  Knowing this, Japan needs to tread carefully to avoid experiencing yet another loss to its export market.

Cleaning up after a nuclear disaster is not as simple as disposing of infected cows.  Korea instituting a near-total shutdown of fishery imports from Japan would harm the industry there for years to come.  Fallout from the Fukushima nuclear reactor is seemingly leaking into nearly every area of the Japanese economy, and it remains to be seen what the total consequences of the disaster will be.
____
info@ipglegal.com