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Op-ed

North Korea: Take Away Their Mercedes

by Marcus Noland, Peterson Institute for International Economics

Op-ed in Newsweek
February 14, 2009

© Newsweek


Last September, satellite photos of North Korea revealed construction of a large new missile-launch facility near the Chinese border. Now speculation is growing that Pyongyang may be about to test a multistage rocket, one potentially capable of reaching the US West Coast. South Korean intelligence officials estimate that the launch site is 80 percent complete, and their US counterparts claim the North is moving forward with preparations, including engine tests.

Should Pyongyang fire its new weapon, it would be just the latest in a recent string of bellicose moves, including abrogation of all military accords with Seoul (which led the South to raise the alert level of its forces). Some pundits see this aggressiveness as an attempt to punish the conservative South Korean government for jettisoning the "sunshine policy" of its predecessors and making further economic aid conditional on North Korean reform. Others see it as a test of the new Obama administration. Still others say it reflects a power struggle in the North—or that it's a test drive for potential arms buyers like Iran, Syria, and Libya.

Pyongyang will probably claim a test launch represents none of the above. After a 1998 launch, for instance, it insisted its only goal was to loft into orbit a satellite warbling "immortal revolutionary hymns," such as the "Song of General Kim Il Sung," at 27 megahertz.

Whatever the truth, President Obama will find himself in an awkward situation: Having said that he'll negotiate with US enemies, he'll also feel compelled to respond to a provocation. This, most likely, will mean a return to the United Nations. During the campaign, candidate Obama promised that if North Korea reneged on its international commitments, he'd lead a multilateral effort aimed at "suspending energy assistance, reimposing sanctions that have recently been waived, and considering new restrictions."

There's just one problem: UN sanctions have been tried before, and failed. Following North Korea's last major missile launch, in July 2006, the UN Security Council demanded that Pyongyang suspend all ballistic-missile activities and reestablish an earlier moratorium on launches. The United Nations also imposed limited economic sanctions, which were broadened that October following a nuclear test to include heavy weapons and luxury goods.

Yet none of these measures changed North Korea's behavior, probably because they were implemented less than zealously. Some states that have bought Pyongyang's weapons before, like Iran and Ethiopia, refused to file reports with the United Nations. Meanwhile, the UN resolution left the definition of luxury goods and the implementation of the embargo up to individual countries, enabling Russia to exclude watches under $2,000 and fur coats under $10,000. China—North Korea's largest trade partner—declined to even publish a list of embargoed goods, and it appears that Chinese luxury exports to the North actually increased. Such goodies matter greatly to Kim, who uses handouts, ranging from Mercedes sedans to Hennessy cognac, to buy political loyalty.

Fortunately, should Pyongyang test its new toy today, Obama may have an easier time getting other key states to cooperate. The current South Korean government, for example, favors a tougher line on the North, and even China may be losing patience, showing a greater readiness to punish bad behavior. Both countries will be more likely to support restrictions that could really hurt Pyongyang. North Korea is critically dependent on outsiders for oil, food, and essential medicines. While no one is talking about cutting off the last two, China has stopped oil deliveries before, and when it did so in 2003, Pyongyang quickly returned to the bargaining table.

Other measures have also worked in the past. In 2005, for example, the US Treasury Department acted against a small Macau bank holding North Korean assets, including profits from missile and gold sales and possibly even including Kim's personal political slush fund. This one measure tanked the black-market value of North Korea's currency, disrupted legitimate commerce, and reportedly necessitated a scaling back of festivities associated with the Dear Leader's birthday. And Pyongyang got the message: It soon made concessions, such as shutting down the Yongbyon nuclear facilities and permitting the return of international inspectors.

As all this suggests, if North Korea starts acting up, more toothless trade sanctions will not stop it. But there are other options. If the key players make it clear in advance that another missile launch will be met with comprehensive and strictly enforced trade and financial restrictions, as well as energy cuts, a reduction in aid, and a willingness to disrupt the North's military cooperation, such pressure could well succeed where other, more feeble efforts have failed in the past.


RELATED LINKS

Book: Witness to Transformation: Refugee Insights into North Korea January 2011

Peterson Perspective: North Korea's Immunity to Outside Pressure: Part I December 12, 2012

Policy Brief 10-1: The Winter of Their Discontent: Pyongyang Attacks the Market January 2010

Working Paper 10-2: Economic Crime and Punishment in North Korea March 2010

Paper: FTAs and the Future of US-Korean Trade Relations November 2009

Paper: Implementing the KORUS FTA: Key Challenges and Policy Proposals February 2008

Policy Brief 08-6: North Korea on the Precipice of Famine May 2008

Policy Brief 07-7: The Korea-US Free Trade Agreement: A Summary Assessment August 2007

Policy Brief 06-4: Negotiating the Korea–United States Free Trade Agreement June 2006

Working Paper 07-7: North Korea’s External Economic Relations August 2007

Book: Avoiding the Apocalypse: The Future of the Two Koreas June 2000

Book: Free Trade Between Korea and the United States? April 2001

Working Paper 08-4: Migration Experiences of North Korean Refugees: Survey Evidence from China March 2008