What North Korea Wants: Rescue Its Economy

Michael E. O’Hanlon and Mike Mochizuki
Mike Mochizuki Associate Professor of Political Science and International Affairs, Elliott School of International Affairs - The George Washington University

August 6, 2003

Now that the United States and North Korea have finally agreed to talk, the issue is what to talk about. A priority of the Bush administration, as well as its predecessors, has long been the dismantling of the North’s nuclear-weapons program. This goal is realistic, but only if the United States is prepared to engage North Korea on a wide range of issues—especially its failed economy.

The structure of the talks—scheduled for next month, they will include China, Russia, South Korea and Japan—ensures that the major regional players will be able to emphasize to Pyongyang that its nuclear weapons program must first be frozen and then dismantled entirely. Unfortunately, North Korea probably won’t listen to a proposal that requires it to make all the initial concessions. It already had something close to the deal Mr. Bush is now proposing under President Bill Clinton—but then Pyongyang willfully ignored it and began a secret nuclear program in the late 1990’s.

If anything, North Korea now thinks it needs nuclear weapons even more than before to ensure its own security, given President Bush’s overthrow of Saddam Hussein, his doctrine of military pre-emption and his statement that North Korea is part of an “axis of evil.” And Washington’s vague promises to eventually discuss better diplomatic and economic ties are unlikely to sway North Korean leaders.

Mr. Bush is right that appeasement doesn’t pay, and that the United States should not bribe North Korea to return to a nuclear deal they already violated. Unfortunately, that probably leaves the situation at a standoff, since North Korea won’t accept the administration’s terms.

What to do under these circumstances? As Secretary of Defense Donald Rumsfeld says, if you have an unsolvable problem, enlarge it. The United States should demand much more of North Korea—and offer more as well.

The key is to recognize that a core cause of the crisis is the North’s economy, which has shrunk by half in the past 15 years. Only a plan that begins to repair that economy can resolve this nuclear crisis and prevent future ones.

This approach would not mean giving in to blackmail. The United States, South Korea, Japan, China and Russia would force North Korea to reshape its economy and modify its oppressive form of governance as a condition for assistance. It would amount to regime change—but regime change without war.

The cornerstone of this plan would be deep cuts in North Korean conventional military forces together with major economic reforms. Conventional forces don’t get the headlines, but they gobble up most of North Korea’s military budget and perhaps 20 percent of its total gross domestic product. A treaty mandating 50 percent cuts in heavy weaponry for both Koreas would be relatively straightforward to negotiate and verify. It would also be perfectly consistent with American and South Korean security interests.

Just as in Vietnam and China, the economic reforms would begin in certain special economic zones. In these areas, entrepreneurial activity would be encouraged, foreign investment facilitated, infrastructure improved and most existing Communist laws lifted. North Korea has tried to establish such zones, but the tensions on the peninsula have discouraged any serious outside investment.

Each country involved in the talks would play an important role. China would provide advice on how to promote entrepreneurial activity within a command economy. The United States would relax trade sanctions, promising to lift them formally if North Korea kept to its commitments over several years. Japan, South Korea, China, America and any other interested parties would help to build the needed infrastructure; aid totaling about $2 billion a year could be needed, above and beyond assistance provided in the form of food and energy. To avoid misuse, most of the aid would not be in the form of cash, and it would be provided year by year only to the extent that North Korea verifiably upheld its end of the bargain.

The plan would then expand geographically and broaden its scope to include agricultural, public health and education programs. A decade or more could be needed to make this work. But if pursued seriously, it could reap major rewards—possibly doubling G.D.P., according to the Institute for International Economics.

Other demands would be placed on North Korea as well. It would have to eliminate chemical and biological weapons, stop producing and selling missiles, let all Japanese kidnapping victims and their families leave North Korea for good, stop counterfeiting and drug-running, and begin a human rights dialogue with the outside world akin to what China has accepted in recent years. The United States would also promise not to attack North Korea and to establish diplomatic ties.

All these elements would not need to be in an initial agreement with North Korea. But they should all be on the table immediately. By offering the North’s leaders a vision for an alternative future, the United States and its allies may be able to dissuade them from their self-destructive path. And a broader agenda for diplomacy has the best chance of getting North Korea to consider what it has so far refused to do: giving up its nuclear weapons capacity.

North Korea may very well say no to this kind of proposal. But in that event, having given diplomacy a serious try, the United States will be in a better position to argue to South Korea, Japan, China and Russia that much sterner measures are needed—including economic sanctions and perhaps even military force. And if North Korea confronts a unified coalition making firm demands while also offering concrete inducements to reform, it will probably recognize it has no real choice but to say yes.