Invest North Korea
07.23.10, 9:00 AM ET
HONG KONG -
Tensions on the Korean Peninsula have been rising as the U.S. and South Korea prepare for joint naval exercises in the Yellow Sea. The exercises come in response to the Cheonan sinking.
The alleged attack by the North on a South Korean Navy ship in March has left China and the U.S. divided once again on their approach to North Korea.
The Americans and South Koreans are using the momentum created by the Cheonan sinking to pressure the North into complying with their nuclear disarmament demands.
The upcoming joint naval exercises in the Yellow Sea are designed to "send a strong message," says U.S. Defense Secretary Robert Gates. Moreover, Secretary of State Hillary Rodham Clinton announced this week that the U.S. would expand its economic sanctions against Pyongyang as punishment for its continued defiance.
But history has shown us that the hard-line wind which is currently blowing through both the White House and the Blue House--the official residence of the South Korean head of state--will probably lead to further escalation.
Instead of following the previously ineffective path of applying pressure and saber-rattling, the international community should switch to a pragmatic approach that focuses on investing in North Korea, both politically and economically.
The most recent example of failed hard-line policy was in 2001-2003 during the presidency of George W. Bush, who labeled North Korea, Iraq and Iran as the "axis of evil." During that period, a North Korean official allegedly admitted that his country was developing nuclear weapons.
In response, the U.S. increased pressure on the North and further isolated it in an attempt to force compliance. Moreover, the New York Times reported that former Defense Secretary Donald H. Rumsfeld circulated a Pentagon memorandum to key administration officials proposing to oust North Korea's leadership.
This aggressive approach backfired as the North proved immune to sanctions. Pyongyang defiantly completed nuclear weapons and missile tests and withdrew from the Non-Proliferation Treaty--which aims to limit the spread of nuclear weapons. So the pressure intended to stop the development of nuclear weapons actually stimulated faster development.
A similar scenario seems to be unfolding in reaction to the upcoming joint naval exercises. "Such a move presents a grave threat to peace and security not only to the Korean Peninsula, but to the region," North Korean spokesman Ri Tong Il said on Thursday, adding that the drills would "destroy the mood for dialogue."Even so, he later said that his delegation was still willing to meet the U.S. and Japan on the sidelines of Friday's regional security conference in Vietnam.
The North has a long track record of reacting ferociously to outside pressure, Mike Chinoy writes in his book Meltdown. So we shouldn't be surprised if new diplomatic or military reprisals follow the naval exercises.
While heated rhetoric from North Korea is the most likely result of the strong outside pressure, there are two other possible scenarios for Kim Jong Il--the current leader of North Korea.
First, the North could make an official apology for the Cheonan attack--an incident for which it still denies responsibility. This is unlikely because it could lead to friction within North Korea's military ranks and would further weaken Pyongyang's diplomatic bargaining power with the outside world. This would probably make future negotiations on nuclear proliferation treaty issues far more complex and would have negative consequences for regional stability and progress on the Korean Peninsula.
Second, the effects of continued sanctions could trigger a sudden implosion of Kim Jong-Il's regime, a so called 'hard landing.' This unstable situation on the Peninsula could leave China with a flood of desperately poor North Korean refugees and in the power void that followed, could lead to civil war between North Korean military factions.
From a regional perspective, the most devastating aspect of regime collapse would be economic. Currently, the per capita income ratio gap between South and North Korea is approximately 15 to 1 and widening.
Credit Suisse has calculated that, in the case of a hard landing, building North Korea's economy would cost approximately $1.5 trillion over the next 30 years. If rising wages were to be incorporated, this number would increase to $2 - $5 trillion.
That's $67 billion a year. Which countries or institutions, especially in the current economic climate, are willing and able to pay? Keep in mind that the failure to provide economic support would lead to even more instability.
These scenarios leave us with two conclusions: First, whether we like it or not, we will have to engage with the Kim family to make progress. Second, a North Korean economic collapse should be avoided at all costs.
So, the $5 trillion question is: What should be done?
Progress on the Korean Peninsula will hinge on two stages of cooperation.
The U.S. and South Korea should move beyond the Cheonan incident and shift back to a pragmatic approach. Such an approach should focus on linking gradual denuclearization to a step-by-step normalization of U.S.-North Korea relations.
This was briefly tried during the Clinton Administration in the 1990s under the Agreed Framework, but was quickly scuttled by Republican opposition.
Kim Jong-Il puts all concerns--even feeding his countrymen--second to the survival of his regime, and views the U.S. as the biggest threat to preserving power.
Yet he showed willingness in the 1990s to follow the aforesaid framework and it might not be too late to reach a similar agreement now.
China--as the sole ally of North Korea--would play a fundamental role in this process. Beijing has continued playing its historical role of protecting the 'Hermit Kingdom'. China's efforts to shield North Korea from international pressures clearly showed as it vetoed strong UN Security Council sanctions.
The ability of Beijing to get Pyongyang back to the Six-Party Talks--which focus on denuclearization of the Korean Peninsula--will be vital.
That would clear the way for the second stage of cooperation.
After North Korea agrees to trade nukes for a normalization of relations, the international community should facilitate economic reform. Kim Jong-Il has previously shown interest in the Chinese development model--implementing Special Economic Zones (SEZ) within a communist regime. In 2002, the country's only economic journal said that markets had always been a part of the socialist system.
The companies that are able to turn North Korea into a land of factories could be the answer to the $5 trillion question of how to quickly improve living standards for impoverished North Koreans.
For companies, North Korea could be attractive because of its reported 99% literacy rate and large untapped labor force of approximately 15 million people between the ages of 15 and 64 years.
Letting foreign companies use North Korea as a factory would gradually revitalize the economy, raise the standard of living substantially, and benefit companies and consumers around the world. This economic integration into the world could also serve as an incentive for the North to behave more responsibly.
The U.S. might hate the thought of cooperating with a regime it despises. But had
the U.S. not struck a similar deal in the 1970s, 1.3 billion Chinese people could still be suffering a similar fate.
Koen C. Munneke is a M.A. candidate in International Cooperation at Seoul National University and previously received a Master's in Contemporary Asian Studies from the University of Amsterdam.