Addressing the May 24 sanctions

How are we going to deal with the May 24 sanctions? Ahead of the 70th anniversary of the liberation and division of Korea, and the fifth year of the May 24 sanctions, we are faced with this important question. If the Park Geun-hye administration hopes for improved inter-Korean relations in its third year, this is its last chance.

The views on the May 24 sanctions could be different depending on the emphasis on national interests. If the sanctions are lifted without addressing the issues that inspired them - namely an apology for the 2010 attack on the Cheonan warship and a promise for no other provocations - it may appear that the administration lacks consistency in its policies. Meanwhile, changes to or the lifting of the sanctions may be desirable as these restrictions have negative effects on national interests.

First of all, the sanctions increase the cost of unification. The theoretical basis for “unification as a jackpot” - is the pursuit of a gradual economic integration through economic exchanges, and shifting the North Korean system into a market economy while completing political reunification.

However, the prolonged suspension of inter-Korean economic exchange aggravates the difference between the economic capacities of the South and the North, and this widening gap is likely to drastically add to unification’s costs.

Moreover, the benefit of unification is maximized when North Koreans are healthy and educated; currently, they are not even offered a chance to enhance their level of health or educational.

Second, the ways to induce changes in the North are fundamentally blocked. The market is the source of survival for the North Korean people, and trade is the lifeline for the North Korean government. And through these two channels, the North Korean economy has become exposed to capitalism, and North Korean companies and people are experiencing them in order to survive.

According to a recent study, North Korean defectors who were engaged in market activities in the North are noticeably more accepting of capitalism than those with no experience. The May 24 sanctions made economic exchange useless when it is our strongest weapon to accelerate changes in the North.

Thirdly, the May 24 sanctions resulted in losses for Korean companies. According to survey data on the companies dealing with North Korea and China, Korean trading companies have suffered a 43 percent decline in revenue since the May 24 sanctions, while Chinese trading companies enjoyed a 74 percent increase. Some Chinese companies outsource production to North Korea and label them as “made-in-China” to export them to the South.

The effectiveness of the May 24 sanctions are very low, and they actually hurt South Korean businesses and provide lucrative opportunities for Chinese companies.

Fourth, severed exchanges and dialogue with Pyongyang limit the chances to resolve nuclear tensions. No creative resolution for nuclear tension is possible unless the overall design of inter-Korean relations is changed through exchanges and talks.

However, Washington employed “strategic patience,” which effectively allowed Pyongyang to buy time to develop and enhance its nuclear program. When using all available means is not enough, Seoul focuses on diplomacy with the United States and China, and virtually has no plan to deal with Pyongyang.

It is the responsibility of our politicians to close the gap between national interests and our dignity surrounding the May 24 sanctions. President Park Geun-hye must communicate with and provide a vision while gracefully displaying a moral legitimacy that the dictatorial regime cannot imitate. If Korea decides to lift the sanctions, the president and the leaders of both the ruling and opposition parties must issue a statement and designate March 26 as the day to honor the soldiers killed in the sinking.

To make sure the sacrifices of those 46 sailors is not futile, a more fundamental solution for this North Korean dilemma - rather than an apology or retaliation - is reunification, and our political leaders need to convince the nation that lifting the May 24 sanctions would be a step closer to reunification.

The South Korean government is currently at a critical juncture in deciding whether to keep the sanctions, make a strategic detour or address it directly. If the government chooses the status quo, it is unlikely that inter-Korean relations will improve during Park’s term.

The cost of the sanctions would also drastically increase. A strategic detour may be safest, but its effect is uncertain. The North Korean regime is not likely to be moved by a few indirect investment projects, social or cultural exchanges, or humanitarian assistance.

As the prices of natural resources fall, and with increasing dependency on the U.S. dollar and the Chinese yuan, North Korea cannot expect a fiscal income, and it hopes for economic exchanges more than anything.

Lifting the May 24 sanctions could be a political burden, but it is up to our leaders and Korean society to make it a turning point in order to move forward.

Our citizens hope to see national dignity and national interests combine. The government’s decision and its communication regarding the May 24 sanctions are more important than ever now.

Translation by the Korea JoongAng Daily staff.

JoongAng Ilbo, May 7, Page 35

*The author is a professor of economics at Seoul National University.

by Kim Byung-yeon