&#91OUTLOOK&#93Only the names have changed

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&#91OUTLOOK&#93Only the names have changed

Not quite a decade ago, as the last nuclear crisis with North Korea was reaching a peak, I wrote the following about the potential utility of economic sanctions:
The debate over U.S. policy toward North Korea boils down to one deceptively simple question: What does Kim Il Sung want? If the Great Leader views a nuclear weapons option as important to the survival of his regime, economic sanctions are unlikely to force him to give it up. But if he views the threat of developing nuclear weapons as a bargaining chip, some combination of carrots and sticks may induce him to trade it away.
Change the name to Kim Jong-il, and Great Leader to Dear Leader, and essentially the same could be said of the situation facing policymakers today.
What differs most notably from a decade ago is the American position of refusing to negotiate directly with North Korea. Governments and attitudes have also changed in other key countries, most notably the adoption of the “sunshine policy” by former President Kim Dae-jung. But President George W. Bush’s position of no direct talks is the key factor driving events at the moment. That, in turn, raises the question of whether the Bush administration has concluded that engagement and the gradual reintegration of the peninsula are no longer options and that the North Korean regime should be squeezed until it collapses?
North Korea, as it did in 1993-94, is threatening to treat the imposition of sanctions as an act of war. Its economy hovers even closer to the brink of total collapse and, despite the seriousness of the nuclear threat on the peninsula, South Korea and China remain reluctant to impose economic sanctions. These countries remain concerned about provoking a military response from North Korea or causing a sudden and destabilizing collapse of the regime in Pyeongyang. These factors, combined with even more distrust between the United States and North Korean governments, mean that the obstacles to using sanctions are larger today than a decade ago.
In addressing similar diplomatic constraints in 1994, then President Clinton proposed a strategy of gradually escalating sanctions that targeted financial flows to the North Korea and avoided trade sanctions, except for arms exports.
The Bush administration, although it has rejected all other elements of the Clinton approach to North Korea, may be considering a similar approach to sanctions. According to press reports, the contemplated strategy involves cutting off important sources of North Korean foreign exchange without having to rely on the North’s key trading partners. The administration succeeded in getting South Korea and Japan to agree to cut off fuel oil shipments under the Agreed Framework and it continues to press China to exert more leverage over North Korea. But these countries remain reluctant to push North Korea to the wall because of the potential military, political and economic consequences. Thus, the administration is reportedly concentrating on how the United States could cut off North Korea’s exports of illegal drugs, arms and, if it comes to that, fissile material.
These proposed sanctions obviously pose significant enforcement challenges, however. The major markets for North Korea’s lucrative missile exports are Iran and Syria, which have little incentive to cooperate in a sanctions effort. The Clinton administration called for a cargo flight ban to enforce the arms boycott, but rejected naval interdiction as too provocative.
The Bush administration is reportedly more willing to use naval interdiction, but the decision to allow the ship carrying North Korean missiles to Yemen to complete its journey underscores the legal and diplomatic obstacles involved. Moreover, even with physical interdiction, smuggling across the Chinese and Russian borders of drugs and smaller arms could leave a major loophole. Thus, these sanctions alone would likely be insufficient either to coerce changes in North Korean behavior or to cause the collapse of the regime, if that is the goal.
An alternative scenario would involve a UN Security Council resolution that condemns North Korea’s violations of international norms and commitments and authorizes physical interdiction of illicit North Korean exports. Given the anger over the abductions of its citizens and the missile test over Tokyo a few years ago, Japan might be more willing than previously to cut off remittances and limit other transactions with North Korea.
Under this scenario, China and South Korea might not need to do more than state that they would not bail out North Korea and perhaps send a signal by slowing or suspending some current transactions. But for it to have any chance of working, the United States would have to be willing to negotiate the terms of North Korea’s surrender of its nuclear weapons capability-- and so would Kim Jong-il.

* The writer is a research fellow at the Institute for International Economics in Washington, D.C. She is a co-author, along with Gary Clyde Hufbauer, Jeffrey J. Schott, and Barbara L. Oegg of the forthcoming “Economic Sanctions Reconsidered,” 3rd ed. (Institute for International Economics).

by Kimberly Ann Elliott
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