[Viewpoint] Saving trade with the North

The trade volume between South Korea and North Korea has increased nearly 100 times in the 20 years since the two Koreas set up business links, a remarkable achievement indeed. But as revealed in the recent third round working-level meetings at Kaesong, the South and the North feel more distant from each other than ever before, despite the growth in trade.

Particularly, negotiations over regulations on management of the Kaesong Industrial Complex are likely to take a long time, and some organizations that have economic exchanges with North Korea or provide aid to the country have expressed their discontent with the government’s policy.

In April, the association of South Korean companies that operate in the Kaesong Industrial Complex wrote to the government urging it to resume high-level talks with the North and build accommodation facilities as soon as possible for South Korean workers who work in the Kaesong Industrial Complex.

The association plans to collect signatures from those who work for the companies that operate at the industrial complex and submit the documents to the Blue House and other government organs.

It is understandable that they feel frustrated over the current situation. However, the essence of the current problem is not that simple. The primary reason for tightened inter-Korean relations, which disrupt trade between the South and the North, is North Korea building tension by conducting a second nuclear test and detaining a Hyundai Asan worker for a long period. These actions break the trust between the South and North Korean authorities and threaten the foundation of the 10-year-old Kaesong Industrial Complex. Ignoring this and urging only the South Korean government to make concessions and provide additional aid can hinder economic cooperation between the two Koreas. North Korea might use it as a card to put pressure on South Korea at the negotiation table, or it might use the situation as a tool to create conflict and division among South Koreans.

In this regard, the case of economic cooperation between East and West Germany in the early 1980s sends an important message to us. After the summit meeting between West German Chancellor Willy Brandt and East German Prime Minister Willi Stoph in March 1970, West German companies built facilities for processing goods in East Germany, the first step in trade between the two sides.

But due to decades-old separation, the two sides had different views on the economy. East Germany reduced the scale of economic cooperation numerous times, demanding that U.S. nuclear arms positioned in West Germany be withdrawn.

As a result, business of West German companies that operated in East Germany worsened and the companies’ discontent with its government grew. Chancellor Helmut Schmidt put together jobs regarding trade with East Germany or providing aid to East Germany - which, until then, had been scattered in different ministries - into a single public corporation.

He let the new public corporation supervise all related affairs including drawing investment strategies or providing aid, and left humanitarian aid to the private sector. This measure is evaluated as minimizing negative side effects that political conflict imposed on economic cooperation, by simplifying trade channels between East and West Germany and making communications between the public and government sectors more smooth.

For South Korea, economic cooperation with North Korea is quite small in terms of its scale. However, it is meaningful. It’s true that North Korea might feel threatened that capitalist practices are spreading through economic cooperation with the South, but it also appreciates that the business at Kaesong can help overcome a lack of food and foreign currency.

As economic cooperation with the North has not met global standards and raised the criticism that our government shovels aid to the North, the order in trade between the South and the North must be fixed fundamentally.

The primary tasks are to sort out channels for economic cooperation with the North and to have more sincere communication with private companies. The organizations that work for economic cooperation with the North or provide aid must first look at the reasons why economic cooperation between the two Koreas has tightened from various points of view before they urge both South and North Korea to make changes.

Worries are growing that South Koreans might be divided over the issue. We have to end the endless debates and set new coordinates for economic cooperation between South and North Korea.

*The writer is the director of the Center for International Development Cooperation at the Korea Institute for International Economic Policy.

by Cho Myung-chul