The trade conflict between Japan and South Korea is a sign that the global order "is now collapsing," according to Deborah Elms, executive director at the Asian Trade Centre.

The two Asian countries are currently locked in a trade dispute that flared up in July when Japan restricted exports of high-tech materials to South Korea which are critical for producing semiconductors and display screens.

Since then, the two sides have threatened to drop each other from their respective preferential list of trusted trade partners, paving the way for potentially lengthy licensing processes — Japan's threat took effect on Wednesday. As things escalated, South Korea also scrapped a military intelligence-sharing pact with Japan.

"I think that this Japan-Korea incident is a symptom of what happens when a system starts to collapse," Elms told CNBC's "Squawk Box" on Wednesday. "You have trade disputes that escalate and there's no hand brake anymore, so they roll over into security disputes — and then again, there's no hand brake, so they can continue to percolate and there's no obvious way to end them."

"We are at a situation that, to be honest, really could have been reined in at any point, should have been reined in at some point ... and yet doesn't seem to be stopping," said Elms, whose projects include the Regional Comprehensive Economic Partnership (RCEP), according to the Asian Trade Centre.