With North Korea suddenly in the spotlight again due to its recent missle tests, activity at its borders with China and South Korea naturally receive greater attention. I have updated an earlier post on the China-North Korea rail sector noting that standards of business are nearly non-existent with an obviously desperate North Korea trying to get everything it can, any way it can.
Non-rail business seems to push forward as long as there is a buck to be made. Yonhap News reports on the China-North Korea trade and the impact the current "missle crisis" is having on the local economies:
Cross-border trade in China's northeast region bordering North Korea went on as usual Saturday amid lingering tension abroad over the North's missile launches this week, ethnic Koreans said. A Japanese daily reported the same day that China appeared to begin restricting trade with North Korea as a punitive action against the North's missile firings on Wednesday.
In the quote below, a witness of the ongoing trade requests anonymity--likely because a lot of the trade between China and North Korea is not of the legal variety:
"We don't feel much that there is a particular change here after the missile launches," an ethnic Korean living in the border city of Dandong said, requesting anonymity. "Even yesterday, I saw trucks and cars come and go across the Sino-Korean Friendship Bridge," he said, referring to the bridge over the Amnok River, also called Yalu in Chinese, which defines the territory of the two sides. Dandong serves as the main trade gate between the two ideological allies, and is bustling with logistics trucks that transport industrial goods to the North's Sinuiju from Monday through Friday.
Curiously, Japan's media reports the opposite:
Japan's Yomiuri Shimbun said in a dispatch from Dandong earlier in the day that cargo trucks traveling there via the river bridge have virtually vanished. The report suggested China has frozen trade with the North as a punitive action over its missile launches.
More anonymous (and probably not very reliable) sources counter that seasonality is a factor and nothing has changed in terms of the China-North Korea relationship:
Korean-Chinese businesspeople and North Korean workers, however, denied that China imposed sanctions on the North and said the seemingly reduced trade was a seasonal factor. "Usually in summer there's less trade. If the trading goods and personnel have reduced over the bridge, it's more likely from the seasonal influence. It is a far-fetched idea if they think it was that China began controlling the trade after the missile launches," an ethnic Korean businessman said, also asking not to be named.
Eventually, the article gets to the real reason why trade is likely still occuring despite the above Japanese reports:
"We cannot even think of the Chinese government blocking private-level trade with Pyongyang. And I've not even heard that China was controlling the transportation of goods going into North Korea," another businessman said.
In China these days, there is much more autonomy in terms of business exchanges and trade at the provincial level then those who have never been to China could imagine. There is a sense in the media in the West that China controls events across its provinces with the flip of a switch at Communist headquarters, but I believe this mostly occurs (in obviously more complexity than switch-flipping) at the more macro-levels of trade and business dealings. Many smaller business dealings don't register on Beijing's radar, and the messy border with North Korea around Dandong, I believe, would qualify as an area of smaller business dealings (non-military) mostly ignored by Beijing in the public arena. However, there are likely a number of "spies" lurking around to keep tabs as necessary on the happenings of the area.
The fact of the matter is that there is little enough business there already that no one is going to really hamper any illegal trade that might provide people there with whatever standard of living they can obtain. I have watched a few documentary reports on Japanese TV that interviewed North Koreans who escaped to China only to be put into prostitution and hiding or forced marriage. Many local Chinese or ethnic Koreans understand they can get away with this exploitation because the North Korean escapees will still rather risk exploitation than get deported back to North Korea. Someday I hope to make it to Dandong for a week or so, but right now is perhaps not the best time.
On the other side of North Korea, where trade has occured the past couple years between North and South Korean in an effort to boost the Kaesong Industrial Park development, there is some new reporting from Greg Hitt of the Wall Street Journal on Kaesong and the proposed US-S. Korea FTA in the context of the current missle crisis:
Titled "North Korea Complicates Trade Talks," the article starts off with pointing out that Kaesong remains the sticking point in resolving the FTA talks:
Despite North Korea's missile tests, talks between South Korea and the U.S. on a free-trade agreement are to resume today in Seoul. One sensitive issue: South Korea wants the pact to cover goods originating at its joint-venture Kaesong industrial complex in North Korea.
Hitt next provides a nice summary of Kaesong, which can be studied in much more detail via my in-process case study on the industrial complex:
The joint venture, launched in 2003 and located just north of the demilitarized zone that divides the Korean peninsula, combines South Korean capital with North Korean labor. It employs about 7,000 North Koreans who produce goods such as appliances and plastic containers for cosmetics. While the value of goods made at the venture is small, representing about one-third of the $1 billion in annual trade between North and South Korea, its potential is big. By the time the complex is in full operation in 2012, it could employ more than 750,000 North Koreans.
At odds between the U.S. and South Korea is the approach to North Korea, and with the missle crisis the distinction is highlighted further:
Kaesong illustrates a fundamental difference between the U.S. and South Korea. The U.S. sees North Korea as a threat to global stability and is seeking ways to force the country to abandon its nuclear ambitions. But South Korea sees a potentially peaceful neighbor and is looking for ways to promote dialogue and spread capitalism, with reunification the ultimate aim.
"It's a long-term goal that we'd like to achieve during...negotiations," says Ahn Chong Ghee, economic counselor at South Korea's embassy in Washington. Mr. Ahn says North Korea's missile testing hadn't damped the South's eagerness to include Kaesong in any pact.
The benefits of implementing an FTA between the U.S. and South Korea would be significant and very real:
The free-trade pact would be the U.S.'s largest pact since the North American Free Trade Agreement passed Congress more than a decade ago. Annual trade between the U.S. and Korea stands at $70 billion, and a business coalition including U.S. auto makers, financial-services firms and drug manufacturers sees important market-access gains to be had. In South Korea, there is concern about protecting domestic rice farmers from U.S. competition, but Seoul also hopes a trade pact would solidify the country's role as an Asian economic hub, giving Korean producers an edge over Asian rivals in access to the U.S. market.
However, with North Korea not doing itself any favors by launching its missles towards neighboring countries, countries it considers ememies, South Korea's relatively little leverage in the long-term standoff will do little to alleviate any U.S. concerns in including Kaesong in an FTA, let alone change the nature of the overall U.S. policy towards North Korea:
The Kaesong proposal would puncture economic sanctions imposed by the U.S. on North Korea and runs counter to the White House's strategy of isolating North Korea. It would almost certainly force a larger debate on Capitol Hill, shifting attention from improved trade ties with Seoul to North Korea's nuclear ambitions and its record of labor and human-rights abuses.
The U.S. and South Korea hope to agree on the trade deal by year's end, so it could go to Congress before President Bush's authority to negotiate trade pacts expires at midyear 2007. Under that authority, Congress can vote "yes" or "no" on trade pacts but can't alter them. Even before the missile test, U.S. officials were leery of making an overture toward North Korea, insisting that any trade pact simply be "an agreement between our two countries," as a spokesman for the office of U.S. Trade Representative put it.
The following part of the article also hints that Kaesong should at the most be a consideration much further down the road while other possible FTA-damaging issues are worked out:
Even without Kaesong, a fight over the South Korea pact likely looms on Capitol Hill. American textile producers are worried about increased competition, and the AFL-CIO has expressed "grave concerns" about labor rights. Adding Kaesong "has the potential to sink" any deal, inviting the pact to be debated on geopolitical grounds, warns Montana Sen. Max Baucus, the top-ranking Democrat on the Senate Finance Committee.
My feeling is that South Korea is in a rush for the high-risk Kaesong project to be deemed an inter-Korea success via endorsements like an inclusion in the FTA before it is even a true, sustainable economic success based on actual, on-the-ground results. The U.S. would be making a mistake to endorse Kaesong via an FTA when it is so early in its infancy, and in the context of the fragility and irrationality of the North Korean state. However, at the same time, the U.S. should not just ignore Kaesong but leverage it as another avenue for monitoring North Korean activities to gain further insight into the regime and prepare logistically for future trade activities should North Korea collapse. There is nothing that says that, because Kaesong is a politically and diplomatically unendorsable project, it shouldn't be studied closely.
UPDATE: This issue is further mentioned at Ben Muse, which I noticed has mentioned this site previously and at The Asia Pages. For very frequent posting on Korean peninsula relations and politics, The Korea Liberator is a must as well!