[Supply Chain Risks Grow Part 2] Invisible Control Tower... Sobujang Committee Meets Only 3 Times This Year

Launched After Japan's 2019 Export Restrictions... Only 9 Meetings in Over 2 Years
Failed to Function Amid US-China Conflict and Semiconductor Shortage, New Committees and TFs Established Proliferatively When Issues Arise
Self-Praise for SoBuJang's Overcoming Japan, But Japan Strengthens Supply Chain Security
Japan Supports Costs for Shifting Production Bases from China to ASEAN... Strengthens US-Japan Security Alliance and Cooperates with ASEAN through CPTPP

[Sejong=Asia Economy Reporter Kwon Haeyoung] Supply chain risks originating from overseas, such as China, were partly due to the government's inadequate preemptive response. The government established various task forces (TFs), including the 'Materials, Parts, and Equipment Competitiveness Committee' as a supply chain control tower, but its actual operation was sluggish, rendering it ineffective. This contrasts sharply with Japan, which triggered the 2019 materials-parts-equipment (SoBuJang) crisis and has since recognized supply chain issues as a security matter amid US-China tensions, preparing steadily. Experts now advise that instead of creating committees and operating them superficially each time a crisis occurs as a 'patchwork solution,' a mid- to long-term supply chain strategy integrated with national security must be reestablished.

◆SoBuJang Committee held only three meetings this year＝According to the government on the 12th, the SoBuJang Competitiveness Committee held only three meetings this year. Established in October 2019, three months after Japan's export restrictions on materials, parts, and equipment, this committee is a roughly 30-member organization chaired by the Deputy Prime Minister and Minister of Economy and Finance, with the Minister of Trade, Industry and Energy as vice-chair. It effectively serves as the pan-government supply chain control tower overseeing SoBuJang policies. However, in the two years since its inception, the committee has convened only nine times.

Despite the US-China conflict escalating during the Trump administration and continuing under the Biden administration, and the global supply chain instability worsening due to the semiconductor shortage at the end of last year, the government's supply chain control tower has essentially failed to function properly. Whenever issues such as US support for its domestic semiconductor industry or requests for semiconductor supply chain data arose, the Korean government discussed them at meetings like the Ministerial Meeting on External Economic Affairs but only at a reactive level. While the global supply chain order shifted focus from 'cost' to 'security and value,' the government essentially neglected mid- to long-term strategy formulation. It failed to learn lessons from the SoBuJang crisis caused by Japan's export restrictions and inadequately responded to China's export restrictions, leading to the domestic shortage of urea solution.

The government has been busy creating new meetings and TFs whenever issues arise. In October, the Ministry of Economy and Finance established the 'Ministerial Meeting on External Economic Security Strategy,' a minister-level body including the Foreign Minister and the Director of the National Intelligence Service, to discuss US semiconductor data requests. The Ministry of Foreign Affairs also set up an internal economic security TF earlier this month. Amid this, the Ministry of Economy and Finance is reportedly preparing to establish a new pan-government supply chain TF to review the entire supply chain following the urea solution crisis. Critics point out that this cycle of creating patchwork TFs whenever crises occur and then letting them become empty shells once things calm down is a vicious cycle. There are calls to establish a supply chain security consultative body directly under the President or Prime Minister’s Office to formulate mid- to long-term measures and operate it on a weekly basis.

◆While boasting about overcoming Japan in SoBuJang, Japan strengthens supply chain security＝Experts emphasize that the government must now recognize and approach supply chains as a security issue. Amid the shift in the global trade order after US-China tensions and COVID-19 from 'multilateralism to regionalism' and 'free trade to protectionism,' supply chains should be viewed as a security matter, strengthening regional cooperation centered on the US, allied countries, and ASEAN. As the US restructures the global supply chain order focusing on 'de-Chinafication,' Korea should not merely focus on internalizing supply chains and reducing high dependence on China but also strengthen cooperation with other regions based on a solid relationship with the US to establish diverse safety nets.

Japan has responded more swiftly. It has strengthened domestic production of strategic industries vulnerable to US-China tensions and pursued supply chain diversification policies from a national security perspective. Particularly, for products and parts with heavy dependence on specific countries like China, subsidies are provided for relocating production bases back to Japan?covering about two-thirds of costs for small and medium enterprises and half for large corporations. For items with high Chinese dependence supplied to Japan, when production facilities are moved to ASEAN, subsidies cover about two-thirds of costs for SMEs and half for large companies. Additionally, Japan pursues various policies such as diversifying rare earth procurement sources and developing alternative technologies. This is on a different level compared to Korea’s government, which has been fixated solely on overcoming Japan in SoBuJang.

Above all, Japan has strengthened cooperation with allies such as the US in diplomacy and trade and established economic cooperation systems with the ASEAN region. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a clear example of this. Japan aims to participate in building a new trade order in the Asia-Pacific region and strengthen economic cooperation, including supply chains, with regional countries. However, Korea delayed joining the CPTPP due to concerns about China, and although the government recently expressed willingness to join, the upcoming presidential election next year leaves the outcome uncertain.

Professor Jung In-gyo of Inha University’s Department of International Trade said, "The political sphere exploited the SoBuJang crisis caused by Japan’s export restrictions as an 'anti-Japan' issue, preventing the government from fully responding to supply chain issues. The recent urea solution crisis was also predictable, but the government just sat still and suffered." He added, "The recent discussion between the US State Department’s Assistant Secretary for East Asian and Pacific Affairs and the Ministry of Trade, Industry and Energy on supply chain issues indicates that the US views supply chain issues beyond industrial and trade dimensions, extending into diplomacy and security. Korea should also establish a mid- to long-term supply chain security strategy based on a solid alliance with the US amid US-China tensions."

This content was produced with the assistance of AI translation services.