(Repeats story published on Thursday, with no change to text)
* China, S.Korea's top trading partner, objects to missile
* S.Korea firms in China reporting discriminatory practices
* S.Korea considering complaining to WTO
* Unconfirmed retaliation hard for WTO to
* Little S.Korea can do to fight back -officials, analysts
By Cynthia Kim and Hyunjoo Jin
SEOUL, March 9 South Korean firms have had a
torrid time in China since Seoul dismissed Chinese objections
and approved a new missile defence system, but for all the
discriminatory tactics Korean firms say they are victims of,
there is little Seoul can do to retaliate.
South Korea sold $124 billion worth of goods and services to
its western neighbour last year, about five times the amount
exported to its eastern neighbour, Japan, and double that
shipped to its second-biggest market, the United States.
But the amount could drop this year after China's state
media orchestrated a boycott on Korean produce in protest at a
missile system designed to thwart any North Korean assault, but
whose radar China says is capable of penetrating its territory.
Korea's Lotte Group has suffered cyber attacks and said some
of its stores in China have been fined or closed by authorities,
while some shops have been hit by anti-Korean demonstrations.
Korean airlines have been refused permission to increase
China-Korea flights, cosmetics firms have reported increased
scrutiny at customs, and Chinese travel agents have been ordered
to stop tours to South Korea.
China's foreign ministry said law-abiding foreign firms were
welcome and would be protected. But South Korea's ruling party
said the government will actively consider complaining about
"unfair retaliation" to the World Trade Organization (WTO).
The WTO previously chastised China for restricting exports
of rare earth minerals during a 2010 row with Japan over
disputed islands, and then curbing global shipments.
But the organisation would find it far more difficult to
penalise more subtle forms of perceived retaliation, current and
former South Korean government officials told Reuters.
"We need some official proof," Chang Do-hwan, a director at
South Korea's finance ministry, told Reuters. "Taking diplomatic
action without confirming (that such tactics stemmed from
central government) could just spread anger."
Conditions for South Korean firms in China have deteriorated
since Seoul agreed in July to deploy the U.S.-made Terminal High
Altitude Area Defense (THAAD) system. The situation became acute
last week after a Lotte Group company decided to supply land for
Any means of fighting back could lie in South Korea's
biggest shipments to China - semiconductors and displays, which
make up over one-third of total exports to the mainland.
But any legal means of Korea risking one of its most
profitable sectors by restricting such exports is unrealistic,
said analyst Piao Ren-Jin at NH Investment & Securities.
"Seoul can continue to express its concern, and take this to
the WTO, but that's about it at the state-level," Piao said. In
a worst case scenario, the spat could reduce the size of South
Korea's economy by as much as 0.25 percent, she said.
Instead, the government has advised firms to devise
countermeasures such as diversifying markets.
One company considering such a move is Le Belle Cosmetics,
whose sales are "grinding to a halt" at a duty free shop in
central Seoul as Chinese tourist numbers fall, said the firm's
chief executive, Cathy Lim.
"We cannot just look at China," Lim said, highlighting
emerging markets such as Vietnam as options for expansion. "But
at the same time, no market can replace China."
Lee Hang-Koo, a senior research fellow at state-funded Korea
Institute for Industrial Economics & Trade, said the government
suggesting companies diversify markets to minimise any impact
from difficulties in China was "absurd and irresponsible".
"China is just too big," he said, adding a WTO complaint was
not feasible considering lack of evidence and could take years.
"It's better to just talk through diplomatic channels."
Any complaint can only worsen relations with South Korea's
biggest customer, which bought around a quarter of total exports
last year from around 10 percent at the turn of the century,
showed data from the Korea International Trade Association.
Over the same period, China's exports to South Korea have
moved little from about 4.5 percent, according to think tank
Hyundai Research Institute.
At present, there is little evidence of WTO rule-breaking.
Chinese authorities closed stores belonging to Lotte Group and
others due to fire-safety concerns, and cosmetics firms have
said Chinese market access has been tightened by stricter
customs and sanitary approval procedures.
"China, which has been lax about imposing rules, are just
applying those rules," said former South Korean foreign ministry
official Choi Won-Mog.
However, Korean authorities have said Chinese tour operators
have been given official "verbal" orders to halt Korean tours.
"China has carefully designed retaliation against South
Korea so that it does not violate international laws," having
learnt its lesson from the rare earths restrictions during the
Japan dispute, said Choi, a professor at Ewha Law School.
One of the most notable victims of the Japan dispute was the
automobile industry, with widespread vandalism of Japanese cars.
South Korea's Hyundai Motor Co is monitoring the
situation, a person familiar with the matter told Reuters.
"We have not seen any major impact so far, but we are
worried about how the situation will unfold," the person said.
"There is not much that individual companies can do."
(Reporting by Cynthia Kim and Hyunjoo Jin; Editing by