More sanctions are the best way to deal with North Korea

Testing the West: North Korean leader Kim Jong-Un
REUTERS
Byung-Yeon Kim11 September 2017
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With President Trump pushing for more sanctions against North Korea in the UN today, many observers wonder if this can prevent a potentially devastating war in the Korean peninsula and a way to achieve North Korea’s nuclear disarmament. There are the crucial hidden vulnerabilities of North Korea, namely its economy. On the basis of my recent research and analysis, I suggest tthe North Korean economy should be hit hard to secure a peaceful solution to the crisis.

First, the “socialist” North Korean economy can be regarded as an “open” economy. North Korea’s trade dependency in the recent years exceeded 50 per cent, which is similar to the average trade dependence of all capitalist countries in the world. As such, the North Korean economy, like any small market economy, is vulnerable to negative shocks in trade.

Second, trade is the single-most important source of foreign currency for the North Korean regime. The new sanctions adopted by the United Nations Security Council might decrease North Korea’s total exports by 50 per cent and hard currency revenue by more than a third. This would be a substantial hindrance to its weapons programme.

Third, many North Korean households depend on the market rather than official work for survival. The surveys of North Korean refugees indicate that more than 70 per cent of households are involved in market transactions, while only 50 per cent work in official sectors. Importantly, both the demand and the supply of consumer goods and food at markets depend largely on trade. As the livelihood of North Koreans suffers from sanctions, the divide between Kim Jong-un and the people may deepen. This will place pressure to consider denuclearisation at the negotiating table.

For the sanctions to be effective China must be on board, as it is responsible for more than 90 per cent of North Korea’s trade. The new sanctions eliminate any discretion by the Chinese authorities, and should severely limit North Korea’s economic growth. Since March, China has stopped importing coal from North Korea, which reduced North Korea’s total export to China in the first half of the year by 25 per cent.

In response to North Korea’s most recent test of nuclear weapons, the international community should agree on tougher sanctions that may include cutting off oil supplies to North Korea. Skilful diplomacy and productive dialogue with North Korea are necessary too. However, these sanctions can help pave the way for dialogue and should help facilitate a more long-lasting agreement.

Byung-Yeon Kim is Professor of Economics at Seoul National University and the author of Unveiling the North Korean Economy published by Cambridge University Press

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