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Backgrounder #1333 on Trade and Economic Freedom

October 7, 1999

Easing Trade Sanctions Against North Korea: Not Enough to Promote Lasting Peace

By

On September 17, President Bill Clinton announced a significant upgrading of relations between the United States and communist North Korea. The move considerably eased the strict trade embargo that has been in place since 1950, when the North's invasion of South Korea ignited the three-year Korean War. The conciliatory gesture comes on the heels of a September 12 pledge by North Korea that it would postpone test flights of its intercontinental ballistic missiles.

In announcing the new trade measures, the Clinton Administration unveiled the results of a U.S.-Korea policy review mandated by Congress late last year. The review, conducted by former Secretary of Defense William Perry (the so-called Perry report), calls for a comprehensive approach to easing tensions on the Korean Peninsula by offering trade and political benefits to the North in return for positive, reciprocal steps from the regime in Pyongyang. A comprehensive policy based on a strict reciprocity requirement is indeed the most effective way to deal with the North, which has acted with belligerence toward South Korea in the past. But for nearly five years, U.S. policy has not followed a comprehensive approach, and, as a result, tensions on the Korean Peninsula remain high.

Executed wisely, easing trade sanctions against North Korea has merit. Although such a move is of little immediate, tangible value to Pyongyang because the ravaged North Korean economy offers few attractive business opportunities to American companies, over time, expanding trade ties could help to pry open the North's tightly sealed society.

It is unfortunate, however, that the Clinton Administration announced this sanctions move in a way that appeared to be yet another hasty reaction to Pyongyang's saber rattling. Moreover, the White House did little to garner congressional support in advance of the move, and hence undermined bipartisan support for the changes. The announcement smacks of yet another tactical move to pacify the belligerent North Koreans rather than to implement a comprehensive strategy for dealing with North Korea. It is time for the United States to consider alternative measures that would prod North Korea into taking tangible steps toward lasting peace.

THE CONTINUING THREAT

The Korean Peninsula is the most heavily militarized spot on earth, and the only place where an outbreak of war would result the swift and heavy loss of American lives. Despite a tattered economy and rampant starvation, North Korea maintains one of the world's largest standing armies--one million strong. To contain this threat to peace on the Peninsula, 37,000 U.S. troops are stationed in South Korea at a cost to American taxpayers of about $3 billion per year.

Nearly a decade after the end of the Cold War, Pyongyang's belligerent stance continues unabated. Despite the Clinton Administration's proclivity toward treating Pyongyang with flexibility and conciliation, the North regularly has perpetrated such provocations as military intrusions into the South by land and sea and attacks on South Korean officials and civilians. Lingering concerns remain over the North's nuclear weapons development program. Moreover, the North rapidly is developing intercontinental ballistic missiles that may soon be capable of reaching the United States. It also has sold its missile technology to other nations, including Iran and Pakistan. And, in recent years, Pyongyang has used its missile capability aggressively to extort assistance from the international community.

In the past, the Clinton Administration regularly surrendered to the North's bribery diplomacy. The latest example is Washington's recent exchange of trade concessions for a verbal commitment from the North that it would postpone suspected plans to test fire an intercontinental ballistic missile. That pledge was first issued on September 12 during talks between U.S. and North Korean officials in Berlin.

In keeping with past maneuvering, however, the North quickly began to backpedal on its commitment. Addressing the U.N. General Assembly on September 25, North Korean Foreign Minister Paek Nam-sun qualified the pledge, saying the missile test moratorium would remain in place only "for the present." The testing freeze is subject to continuation of "high-level talks for the settlement of pending issues between the Democratic People's Republic of Korea and the U.S."1

On September 29, a statement by the North Korean Communist Party's newspaper essentially annulled the pledge: "The issue of missile launch is a matter wholly pertaining to our sovereignty and North Korea will launch a missile any time it feels necessary."2 Pyongyang has now positioned its so-called pledge in such a way that it can be used as leverage to pressure Washington for further trade, aid, and political concessions. This is in keeping with a pattern of North Korean brinkmanship and broken promises in talks with the United States over the past five years.

WASHINGTON'S FLAWED POLICIES

The cornerstone of the Administration's policies toward the North is a pact signed nearly five years ago--the "Agreed Framework"--to "freeze" Pyongyang's nuclear weapons development program. After many months of tedious negotiations, the first-ever U.S.-North Korea political agreement was concluded in October 1994. This framework marked a sharp break with the established policy that had governed relations with North Korea for decades. With the framework's signing, the United States entered a major agreement with Pyongyang that did not include the South. Such direct political ties with the United States had been a key North Korean diplomatic goal for years.

In the Agreed Framework, the Administration offered improved trade and political ties that eventually would end the U.S. economic embargo against the North and lead to the beginning of formal diplomatic relations. More important, for the first time, the United States pledged economic aid to the North, including $50 million per year for fuel oil and the construction of two nuclear reactors valued at about $5 billion. Together with a consortium of about a dozen nations, the United States is raising funds to support this process, although Seoul pledged to pick up most of the tab. Since then, the Administration has spent nearly half a billion dollars on various forms of aid to North Korea, making it one of the largest recipients of U.S. foreign assistance in the world.

The Clinton Administration hailed the Agreed Framework as an historic opportunity to achieve peace on the Peninsula, but tensions have not subsided. In fact, tensions between the North and South have only increased in recent years. The framework has failed to achieve its intended goals in four key areas:

  1. It has not provided any assurance that the North has suspended covert efforts to continue its nuclear weapons program;

  2. It has not reduced the North's threats and use of extortion against the South and the international community;

  3. It has not led to productive North-South dialogue; and

  4. It has not reduced the North's growing military threat.

PROMOTING LONG-TERM PEACE, NOT APPEASEMENT

With a clear record of failure and growing resistance in Congress to its increasingly expensive policies toward North Korea, the Clinton Administration should move quickly to formulate new policy initiatives. It should take its cues from the newly released Perry report and impose a strict reciprocity yardstick on future dealings with Pyongyang. In close consultation with Seoul, Washington should take the following steps:

  1. Promote discussions with South Korea, Japan, and other concerned nations on a substantial package of trade and aid offers for North Korea.
    For example, a significant portion of the billions of dollars pledged for the decade-long reactor construction project should be used now as leverage in negotiating with the North. Serious consideration should be given to scrapping the light-water nuclear reactor project in favor of a more practical and viable approach to solving the North's energy needs, such as the construction of conventional non-nuclear power-generating facilities. These facilities are not only less expensive to build, but also more appropriate, given the state of the North's energy distribution infrastructure.

  2. Make future aid to North Korea dependent on real concessions.
    In return for the new assistance package, the Administration should call on the North to reduce military tensions, to abandon its intercontinental ballistic missile program, and to resume peace talks with the South. A new package of aid, which North Korea desperately needs, must be conditioned on the termination of its ballistic missile development and its proliferation efforts. North Korean missiles soon could be capable of reaching the United States, and Pyongyang's trafficking in missile technology is allowing rogue states to pose a growing threat to their adversaries.

  3. Insist that the North engage in serious, high-level peace talks with Seoul.
    In the Agreed Framework, Pyongyang pledged to resume substantive dialogue with Seoul, but nearly five years later it remains in violation of this obligation. The baseline for those talks should be the Basic Agreements ratified by the North and South Korean governments in 1992. Long ignored by the Clinton Administration, these pacts--negotiated by both sides' prime ministers--outline specific and practical steps toward easing political and military tensions, including expansion of North-South trade, citizen exchanges, a pullback of troops from both sides of the border, and phased reductions in armaments and troops.

  4. Discuss with the South and its allies the benefits of forming a "peace corps" for North Korea.
    As part of this package deal, and with the goal of sparking systemic North Korean reforms, Seoul and its allies should consider creating a "peace corps" type of program for North Korea. The North has an enormous need for social and economic infrastructure revitalization, beginning with its agricultural sector. A consortium of concerned and interested nations should offer technical assistance in areas ranging from farming to health care, telecommunications, transportation, electricity generation, and business development. A "peace corps" organization could ensure that such future assistance helps the North Korean people and is not siphoned off by the North Korean government or military.

  5. Appoint a senior U.S. negotiator as a special envoy to Pyongyang to oversee these policy adjustments and to coordinate policy among the United States, South Korea, Japan, and other concerned nations.
    The United States and Seoul will have to move decisively to sell this new arrangement to Pyongyang. A high-level envoy is necessary to convince North Korean leaders that the package deal serves the interests of all parties concerned and that Seoul and its allies solidly resolve to end the threat to peace posed by Pyongyang's military machine.

CONCLUSION

The Cold War has ended, and North Korea no longer has China and the Soviet Union standing ready to support its military aggression toward the South. But even as its economy crumbles, the North poses a daily threat to the security of South Korea, as well as to the interests of the United States and South Korea's other allies. The recent easing of the trade sanctions will not be enough to promote lasting peace.

The time has passed for the allies to simply offer reasonable incentives to Pyongyang; they must now press the North for substantive efforts and rapid progress toward peace and stability on the Korean Peninsula.

Daryl M. Plunk is a former Senior Fellow in the Asian Studies Center at The Heritage Foundation.


1. "US Must Do More to Build Goodwill: NK," Korea Times, September 27, 1999, p. 1.

2. "NK Resumes Warning of Missile Launch," Korea Times, September 30, 1999, p. 1.

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