Engaging North Korea: The Role of Economic Statecraft

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HONOLULU (May 31, 2011) -- Last week, the U.S. imposed new sanctions on the (North) Korea Tangun Trading Corporation, accused of having trafficked equipment and technology listed on multilateral export control lists “or otherwise having the potential to make a material contribution to WMD or cruise or ballistic missile systems.” The new sanctions under the Iran, North Korea and Syria Nonproliferation Act will be effective for two years.
Also recently, a leaked U.N. Panel of Experts report provided a surprisingly blunt introduction to how the North Koreans—with the complicity of unnamed “third parties”—have sought to circumvent international sanctions. Among other things, the experts found that North Korea and Iran have shared nuclear missile technology and that they have received assistance, in violation of the sanctions, from China and Russia respectively.
These recent events bring renewed focus to the question of how effective either sanctions economic inducements can be in dealing with North Korea. In a new East-West Center Policy Study “Engaging North Korea: The Role of Economic Statecraft,” scholars Stephan M. Haggard and Marcus Noland conclude that North Korea’s political economy and external relations render it remarkably insensitive to either sanctions or inducements.
“Evidence on North Korean intent to engage is elusive, but consistent with an interpretation that North Korean motivations have varied over time,” they write.
On the one hand, they say, "it is conceivable that as a post–Kim Jong-il regime consolidates power internally, it may be more willing to engage in serious negotiations, or that the country’s worsening food shortages might push the regime to re-engage."
However, the converse appears at least equally plausible: “that the new leadership may be too politically insecure or divided to make meaningful concessions, or that the consolidation of power may only reinforce trends toward a more hard-line policy. If so, the ultimate resolution of the North Korean nuclear issue may await fundamental change in the political regime.”
When the Bush administration came to office, Haggard and Noland write, “North Korea was in a relatively reformist phase. … Over time, however, the mixed results of the reforms and the worsening external environment led to clear shifts in economic policy that are suggestive of deeper political changes in the regime. Particularly after 2005, and culminating with the disastrous currency reform of 2009, the regime’s ‘military first’ politics [took] a much harder form.”
Kim Jong-il’s likely stroke in 2008 and the subsequent unveiling of his young son Kim Jong-un as his heir apparent have frustrated prospects for engagement, Haggard and Noland say: “These domestic political events coincided with a further ‘hardening’ of the regime around core bases of support, a preoccupation with showing resolve, and a declining willingness to make tradeoffs. In combination, these political shifts help explain the particularly unwelcoming stance North Korea took toward the incoming Obama administration, a stance that deeply colored Washington’s reaction to the missile and nuclear tests of 2009.”
There is little evidence that ratcheting up pressure on North Korea has “worked,” the authors say; to the contrary, it generated escalatory responses and poisoned negotiations. Thus, they conclude, “Sanctions can be justified only on purely defensive grounds: as a means of limiting North Korea’s WMD or proliferation activity. But as a tactical tool to induce concessions at the bargaining table, the track record is mixed at best.”
About the Authors
Marcus Noland is the Deputy Director of the Peterson Institute for International Economics and a Senior Fellow at the East-West Center. Stephan Haggard is the Krause Distinguished Professor at the Graduate School of International Relations and Pacific Studies, University of California San Diego. They maintain a blog on North Korea issues called North Korea: Witness to Transformation .