[Editorial] Inter-Korean trade

By Korea Herald

Balance needed with China’s growing economic clout

  • Published : Feb 6, 2014 - 19:37
  • Updated : Feb 6, 2014 - 19:37
Data released last week showed that trade volume between North Korea and China reached a record high last year, while inter-Korean trade plummeted to the lowest level since 2005.

According to figures from the Korea International Trade Association, the North’s commerce with China amounted to $6.54 billion in 2013, up 10.4 percent from the previous year. In contrast, statistics from Korea Customs Service showed trade between the two Koreas shrank by 42 percent from a year earlier to $1.13 billion last year.

The sharp reduction in inter-Korean trade was attributed mainly to the suspended operation of a joint industrial park in Gaeseong, north of the Demilitarized Zone, for five months starting last April, amid heightened tensions on the peninsula. Officials in Seoul expect that commerce between South and North Korea will rise this year to the usual level, but still remain below $2 billion.

The continuous increase in North Korea’s trade with China indicates the impoverished regime’s economic reliance on its sole ally has been growing, though Beijing has become frustrated with its recalcitrant neighbor. China voted in favor of tougher U.N. sanctions against North Korea after Pyongyang conducted a third nuclear test early last year. As shown by the latest trade data, however, China’s hardened stance has hardly affected its economic relations with North Korea. The strained ties between the two Koreas, particularly since the North’s deadly provocations against the South in 2010, have also resulted in increasing Pyongyang’s reliance on Beijing for its economic survival.

Mineral resources are North Korea’s major export items, with $1.37 billion worth of anthracite and $294.1 million of iron ore shipped to China in 2013. The North depends on China for nearly all of its crude oil demand, with last year’s imports amounting to $598.1 million.

The growing reliance on its giant neighbor has apparently worried the North Korean leadership. Their concern was expressed inadvertently but explicitly in a statement issued after last December’s execution of Jang Song-thaek, the uncle and mentor of the North’s young leader Kim Jong-un. Citing a long list of Jang’s wrongdoings, it described him as a traitor who had sold off North Korea’s natural resources to China at a cheap price.

But China is virtually the only destination for the shipments of North Korea’s minerals, which are a major source of hard currency for the impoverished state.

Behind Pyongyang’s recent conciliatory gestures toward Seoul, some experts here note, is the hope to forge favorable external conditions for boosting its moribund economy and reducing China’s economic clout.

The North agreed with the South on Wednesday to resume reunions of separated families later this month, dropping its attempt to link the humanitarian event to the scrapping of joint military exercises between Seoul and Washington, which are set to run from late February through April.

A North Korean chief delegate to the Red Cross talks on family reunions said the meeting “is a very important starting point for improving the North-South relations.”

The agreement appears to suggest that Pyongyang has set the course of enhancing reconciliation with Seoul in a step toward improving its dire economic conditions. According to recent reports by research institutes here, a fuel rationing system in North Korea seems to have been dismantled, and it is likely to face a shortage of about 340,000 tons of grain this year.

President Park Geun-hye’s government may have to ponder how far to push economic cooperation with Pyongyang when it continues to refuse to discard its nuclear weapons program. But Seoul has reasons to be more proactive, given that the North Korean economy will become further subordinate to China’s if inter-Korean projects remain stalled for years to come.

While improving the legal and institutional framework of inter-Korean businesses to match international standards, the South needs to consider helping the North develop previously created free trade and economic zones in border areas, which have languished for the past years.