Thursday, April 17, 2014
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Turning North Korea Around

SEOUL – Negotiations over the denuclearization of the Korean peninsula look set to resume. Sadly, they are unlikely to end soon. Talk of a “grand bargain” remains just that – talk.

Trust between North Korea and the United States, South Korea, and Japan is almost non-existent. While all leaders – including North Korea’s Kim Jong Il – remain committed to denuclearization in public, none appears ready to risk much in terms of domestic politics to achieve that end. So the best the world can currently hope for is revived dialogue, an agreement to freeze the North’s Yongbyon nuclear plant, and perhaps a moratorium on further missile and nuclear tests.

To speed the process, a new long-term strategy aimed at the underlying factors at work in North Korea – and in relations with its rulers – is needed. Simply put, the US and other powers need to pursue constructive economic engagement with North Korea to help the regime achieve “strength and prosperity” through economic transition and integration with the global economy.

Constructive economic engagement will benefit ordinary North Koreans, who have suffered as much as any people on Earth since the Cold War’s end. The root cause of North Korea’s economic difficulties is its isolation from the forces of globalization, from which East Asia in particular has profited.

In the late 1990’s, as China and Vietnam were posting rapid GDP growth, North Korea was ravaged by one of the worst famines in modern history. Today, North Korea is a de-industrializing, near-subsistence economy. The best hope for most North Koreans is the subterranean market economy that fills the gaps in the state’s planned economy and public distribution system. Trade with China is keeping those market forces supplied with goods and business opportunities across the border.

Rather than pressure China to shut down the cross-border flow of fuel and food in order to “teach Pyongyang a lesson,” the US and its allies must find ways to support North Korea’s economic integration with the region. More effective than freezing accounts and barring travel by officials with ties to the missile and nuclear programs would be to work with North Korea’s younger technocrats, banking and financial officials, and economic advisers to improve their expertise in managing North Korea’s economic transition.

Of course, economic engagement will not solve the nuclear conundrum in the short term. Nothing will. The Korean Peninsula will most likely achieve “complete, verifiable, and irreversible denuclearization” only when North Korea is already moving in the direction of economic growth and integration.

North Korea’s regime will require demonstrable evidence that a secure, prosperous, non-nuclear development model is available to it before it abandons its nuclear program. So, as nuclear talks proceed, the US and its partners should help North Korea lay the foundations for a new political economy based on international commerce, investment, and cooperation, as an alternative to the current model predicated on a hostile security environment. We should think of North Korea’s economic transition process as a prerequisite for full denuclearization, rather than simply holding out the promise of a big assistance package as a quid pro quo .

Of course, some of the big-ticket items in an economic engagement policy will remain contingent on progress in security arrangements and peninsular denuclearization. But North Korea and the international community can already take some substantive steps.

These include opening diplomatic and official channels in order to improve mutual understanding and the general climate for exchanges; promoting US-North Korea economic dialogues and workshops; encouraging US universities, research institutes, and non-governmental organizations with expertise in economic transition and development to initiate and develop contacts with North Korean counterparts; and permitting the International Monetary Fund, the World Bank, and the Asian Development Bank to increase North Korean participation, with the ultimate goal of membership.

During the recent visit of a high-level North Korean delegation to the US, there were encouraging signals that its rulers would welcome increased economic contacts, including with international financial institutions. Moreover, North Korea is actively courting foreign investment. The United Nations Development Program recently reopened its office in Pyongyang, another positive sign of the regime’s readiness to work toward common development goals.

Of course, new sources of growth in North Korea could threaten vested interests, leading to institutional rivalries, factional tension, or a conservative backlash. And the regime will not want the process of economic opening to get too far ahead of security agreements and political normalization. After all, the main lesson that North Korean leaders take from China’s success is that security (Mao Zedong’s rapprochement with the US) precedes economic transition (Deng Xiaoping’s reform and opening policy).

Constructive economic engagement will be a tough sell outside North Korea. In the US, North Korea is seen mostly through the prism of nuclear non-proliferation, and the new administration is wary of being tricked into giving its rulers anything without getting fissile material in return. In South Korea, President Lee Myung-bak’s political base wants to roll back, not reinvigorate, the Sunshine Policy, and there is a widespread (though by no means universal) weariness with engagement.

In Japan, fear of North Korea’s nuclear threat and anger over the abduction of Japanese citizens generates powerful political pressure against engagement. China is the one place that quietly implements a constructive economic engagement approach. Instead of pressing Beijing to cut off North Korea, the US and its allies should further develop their own efforts to draw North Korea out of its insularity.

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