PIIE Blog | North Korea: Witness to Transformation
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan
research institution devoted to the study of international economic policy. More › ›
Subscribe to North Korea: Witness to Transformation Search
North Korea: Witness to Transformation

Seoul Dispatch: Movement on the Peninsula?

by | August 26th, 2013 | 07:00 am

There can be little question that Pyongyang is making nice to the Park administration. Will this build into something more substantial on the North-South front? How do these moves fit into the larger diplomatic game? Before getting too hopeful, it is important to remember that the initiatives to date involve a costless and long-overdue gesture from the North (resuming family reunions), an agreement that promises to resume the cash flow from Kaesong and a plan to resume negotiations over Kumgang, also a source of cash for the North. The real question is whether the North is going to put something on the table that signals a more substantive change of course. We should support President Park’s efforts, but to date we have precious little to go on.

Events have been moving quickly, so we begin with a short review. Following the deal on the reopening of Kaesong, little time was lost getting South Korean managers back into the zone. We do not yet have a full assessment of the damages from deferred maintenance, loss of inventory, or perhaps outright theft. Nonetheless, the Ministry of Unification speculated in a press conference last Thursday that operations could commence as early as the end of September.

These developments were followed surprisingly quickly by openings on family reunions and Kumgang, and in ways that favored South Korean preferences. Picking up on President Park’s Liberation Day speech—which proposed resuming the family reunions–Pyongyang offered talks on the issue. The poison pill: the North wanted them coupled with talks on the reopening of the Mt. Kumgang resort. South Korea demurred on this counteroffer arguing that the two tracks should be separated in both time and place; the administration wanted to dispel any suggestion that the negotiations were linked.

North Korea assented and last Friday, the Red Cross negotiations on family reunions at Panmunjon made swift progress. The intention is to time the reunions to Chusok , the Harvest Moon celebrations that immobilize South Korea every year in September (Chusok falls on September 19 this year). North Korea did get a bit of linkage; the family reunions will be held at Kumgang. And there is still more work to do on that front. So far, it appears that the reunions are one-off; subsequent negotiations will need to address regularizing them, correspondence, and permitting actual visits rather than the painfully awkward  and staged meetings at Kumgang that have been the norm. But given the ticking clock and the diminishing pool of separated families to unite, the agreement is at least something.

Kumgang raises similar issues to Kaesong, but also the important question of security. The murder—it can only be called that—of tourist Park Wang-ja in 2008 is what put the resort in mothballs. The two sides will need to devise some language that acknowledges that this can’t happen again, even if nothing that is put on paper can constitute an iron-clad guarantee. The Kaesong agreement provides a template; “both sides” will secure the zone. There is also the question of whether tourists—from Korea or elsewhere—will go; the North Koreans do not only need to assure the South Korean government. (Our posts on the history of Kumgang, including the short-lived North Korean efforts to get other investors interested in the property, can be found here)

Rodong Sinmun followed up with a more wide-ranging piece on North-South relations that simply repeated over and over and over the importance of dialogue (A small rant: due to the ridiculous constraints operating on internet access to North Korean sites in South Korea, I could read about the piece in Yonhap but not access it directly; I had to have a trusty assistant in the US track it down; an edited version is appended below.) The piece and others that appeared in the paper last week followed a number of North Korean tropes, particularly that foreign powers divided the peninsula, that the 2000 and 2007 summit documents should be seen as constitutional of the relationship and that negotiations should follow the principle of “By Our Nation Itself”; this means that pesky US concerns about nuclear weapons should not dominate the agenda. But the tone was clearly that Kaesong should be seen by the South as an opportunity.

How do we interpret these moves? The most obvious is that this is about the cash flow. The losses are best calibrated in terms of the roughly $90 million in transfers that the North Koreans receive. The trade numbers reflect sales of inputs to the firms in the zone and their subsequent exports and thus clearly do not reflect value added. But the trade numbers do suggest the wider potential; from $180 million a month of bilateral trade in January, trade fell to virtually nothing by June.

Dan Pinkston at the International Crisis Group offered up a few friendly amendments to the “cash flow” hypothesis over some beers in Seoul. First, 50,000 unemployed workers in one locale is not the type of thing any government—authoritarian or democratic–wants to see. Apparently efforts to redeploy Kaesong workers, including through labor exports, did not prove as costless as the North Koreans might have thought. A second hypothesis is that developments at KIC also affected Chinese investors’ perceptions. Nick Hansen and Jeffrey Lewis at 38North use satellite imagery to show that construction at Hwanggumpyong Island is proceeding apace. But the imagery that they show only reveals construction of the zone itself; investors still have to choose to enter. Could Chinese firms be hitting the pause button after seeing how the regime was willing to play around with the KIC?

Still another possibility is that we are witnessing the effects of a Chinese diplomacy that is opaque. Beijing is not going to issue press releases about how they are putting the squeeze on the North. But it is not impossible that they are.

If so, it raises questions for both Seoul and Washington about where this is leading. From North Korea’s perspective, family reunions are costless while reopening Kaesong and Kumgang is a big win; indeed, a number of conservatives in the South were disappointed that the issue was resolved, believing that Kaesong should just be shuttered.

Back in November of last year, Park wrote a short piece on her vision for the region in the Wall Street Journal that sounded a lot like Roh Moo Hyun’s idea for a “zone of peace and prosperity.” Her Ministers of Unification and Foreign Affairs have been struggling to give Trustpolitik shape ever since. What, exactly, is the next step that involves some material or political compromises from the North and thus a sign of more forward-looking intent? Bilateral negotiations about the South Korean aid budget hardly seem the way to go; military confidence building measures (CBMs), for example, would provide a much stronger signal.

And what about the nuclear issue? How does this build to a resumption of the Six Party Talks? China and North Korea could well use progress on North-South relations as an argument for an early resumption of the talks. But in the wake of North Korea’s highly public statements of intent to keep its nuclear program, we remain baffled about how the negotiations would even unfold in the absence of some prior actions.

To restate our conclusions, it is better to have the North and South talking than not talking. Park’s efforts to feel her way forward should be supported. But family visits, Kaesong and Kumgang should not be interpreted as evidence of “trust building.” North Korea is not putting anything on the table that we can see. We are returning to a status quo ante that the North itself disrupted. So what’s next?


Dialogue and Cooperation Is the Path to Reconciliation, Peace, and Reunification

Rodong Sinmun 08/22/13

Through our active, sincere effort, an atmosphere for improving North-South relations is being created. This is bringing hope and anticipation to all brethren who desire reconciliation between North and South and fatherland reunification.

The present situation, in which an opportunity for improvement has been provided in the North- South relationship that was broken down for several years, demands re-activating dialogue and cooperation between North and South to realize the people’s earnest desire for peace, national co-prosperity, and independent reunification. North and South must fundamentally improve North-South relations and open up a wide path for reunification by actively conducting dialogue and cooperation in every direction, in line with the demands of the era and the aspirations of the brethren.

The great leader Comrade Kim Jong Il pointed out the following.

“We must transform the North-South relationship from a relationship of mistrust and confrontation into a relationship of trust and reconciliation so that we can achieve independent, peaceful reunification of the fatherland through the united strength of the entire nation.”

Dialogue and cooperation between North and South is a necessary process for promoting trust and reconciliation and opening the path to peace and reunification. The hostility and conflict between North and South that results from the long national separation compelled by outside forces is the root cause in hindering the nation’s unity and blocking the path of fatherland reunification….

Dialogue and cooperation between North and South is certainly not work for the advantage of only one side. It is something for the joint benefit of North and South and for the nation’s unified development and prosperity.

Since the announcement of the 15 June Joint Declaration, North and South have actively promoted dialogue and cooperation in accordance with the spirit of By Our Nation…

Dialogue and cooperation between North and South is a good method to achieve an easing of tensions and peace through the united strength of the nation. Our nation has a more vital interest than anyone in the Korean peninsula’s peace and stability. It is not different nations in the North and South confronting each other, but one nation artificially divided by outside forces. If war breaks out in this land again, the terrible disaster brought from that will be beyond comparison to the last Korean war. Our nation, which has lived with the constant threat of war, absolutely does not want an aggravation of North-South confrontation…

The fact that our nation, the wisest and most strongly patriotic in the world, was divided by outside forces and is in mutual confrontation without realizing reunification even today, approximately 60 years later, cannot be anything but a tragedy and disgrace. Even noting that there is a difference in ideology and system, if North and South proceed to activate dialogue and cooperation, they can trust [each other] to some extent and unite to achieve peace, national co-prosperity, and reunification. If dialogue and cooperation are activated between North and South, the chill of confrontation will disappear, and a warm atmosphere of reconciliation will fill the land. North and South must not miss the opportunity for dialogue and cooperation that has been prepared at last…

The only correct path for peacefully resolving the country’s reunification issue and opening up a national breakthrough is to advance dialogue and cooperation according to the 15 June Joint Declaration and the 4 October Declaration. The 15 June Joint Declaration and the 4 October Declaration are joint programs for actively achieving dialogue and cooperation between North and South…. Normalization of the Kaeso’ng Industrial Complex work is a first step in restoring dialogue and cooperation between North and South…

When the South Korean authorities actively respond to our patriotic, nation-loving appeals and measures, the North-South relationship will emerge from the state of mistrust and confrontation and be transformed into a relationship of genuine trust, reconciliation, and cooperation.