Effectiveness of trade embargoes
North Korea (DPRK) presents an enigma and a challenge for the US and its allies. While DPRK is determined to improve its nuclear strike capability, the US has been working for many years to stop DPRK from acquiring nuclear weapons, or at least to slow down its nuclear programme. In the latest round of US-DPRK skirmish on this issue, the latter tested a hydrogen bomb and two inter-continental ballistic missiles (ICBM) and the US retaliated by getting tougher sanctions on DPRK passed through the UN. Sanctions against DPRK are not new. The latest measures which target a broad range of North Korean interests is a watered-down version of the original US proposal, and there is already scepticism if these would change anything as far as Kim Jong-Un's regime is concerned. DPRK struck back by sending another test missile over Japan on the morning of September 15. Whether one calls DPRK a "rogue nation" or considers it the "last bulwark against superpower domination", the failure of these efforts to bring the country to the negotiating table will unquestionably be a bad sign for global diplomacy and peace in East Asia.
Let us take a quick look at recent history to understand the current situation a little better. US presidents have had three options to stop the North Koreans from building nuclear weapons: diplomacy, sanctions and military. While diplomacy or negotiations has so far been the preferred option for the countries involved in the Six Party (DPRK, US, UK, China, South Korea and Japan) Talks, there has been no progress since 2012. The carrot and stick policy of the US and its allies lacked any carrots to lure DPRK to make any concessions.
To punish DPRK, the UN Security Council, on a parallel track unfurled the "stick" approach without any success. In order to understand why these sanctions failed, one does not have to look very far. Sanctions can range from "comprehensive economic and trade sanctions to more targeted measures such as arms embargoes, travel bans, and financial or commodity restrictions," according to the UN, and have three goals: limit access to a good or service, modify a country's behaviour, and/or to penalise it.
The problem with sanctions against DPRK has been two-fold: the list of sanctioned goods and services is not comprehensive enough and secondly, countries and businesses have found enough loopholes to bypass these sanctions. The latest round of sanctions passed by the UN Security Council on September 11, the 9th such measure since 2006, covers some of DPRK's vital imports and exports. However, on the eve of the Security Council vote, USA scaled back its demand for very stringent measures against DPRK to avoid vetoes by China and Russia.
However, it is doubtful if the latest measures will change Kim Jong-Un's behaviour given that he has three goals: to get military concessions from the USA, deter USA from attacking DPRK, and reunification on its own terms. Nonetheless, the new sanctions on textiles will cause economic problems for DPRK. Since DPRK's exports of coal, iron, seafood and other minerals have already been severely curtailed by previous rounds of sanctions, textiles had been its biggest foreign exchange earner. In 2016, DPRK's textile exports brought in USD 752.5 million, with 80 percent going to China. The latest embargo would also reduce North Korea's fuel import by 30 percent, and combined with previous sanctions, 90 percent of DPRK's declared exports, including seafood, coal and textiles will be embargoed.
But, as already mentioned, economic sanctions on DPRK left a number of loopholes for it and its allies, particularly Russia and China, and commercial interests in all three countries to exploit. Russia imports DPRK's manpower for its construction and logging industries, and remittances are regularly flowing into Kim Jong-Un's coffer. Chinese entrepreneurs keep DPRK's textile industry busy by re-exporting garments with "Made in China" labels. US frustration with lack of full cooperation from China was evident from President Trump's tweet on July 5, 2017, "Trade between China and North Korea grew almost 40 percent in the first quarter. So much for China working with us—but we had to give it a try!" "North Korea's economy is almost entirely dependent on China, with Beijing providing Pyongyang with food, fuel, and machinery." And ironically, North Korea's economic growth climbed to a 17-year high in 2016.
However, China should not be singled out for the failure of sanctions to deliver. For example, while UN sanctions prohibit the sale of luxury goods to DPRK, countries often define what that means. "The resolutions list jewellery, luxury automobiles, sports equipment and snowmobiles but make no mention of televisions, consumer electronics or home appliances." DPRK has become adept at cannibalising parts from permitted items for prohibited uses. DPRK has been aided also by its diplomats who have been found to be working as government procurement agents overseas. And, in the Chinese towns bordering DPRK, it is known that Chinese businessman openly work with the North Koreans to ease sanctions.
I will be remiss if I end this commentary without any suggestions for the sanctions to work, but most importantly to end the current stalemate. In my view, it's a three-party dance involving the USA, DPRK, and China! How do we get China to comply with UN resolutions vis-à-vis DPRK? Here are my thoughts.
First of all, China's role in the conflict must become more transparent. As DPRK's largest trading partner, it must demonstrate due diligence in making sanctions work, and not procrastinate like it did earlier. It is understandable that China, which has a long border with DPRK, has some vital interests in this region, and its goals can be summarised as follows: i) Show solidarity with DPRK to prevent Korean reunification on US terms; ii) Prevent any future war; iii) Prevent North Korean refugees from crossing into China and; iv) Forestall any threat to the ruling party in DPRK.
China also would be cautious about provoking Kim Jong-Un into any reckless move by cutting off all oil imports into DPRK since the history of Japan's experience after such US moves during the Second World War is still fresh on China's mind. China, nonetheless, holds a number of cards to ease the tensions going forward. Its leverage with DPRK is enormous since now 90 percent of DPRK's foreign trade is with China. With100 percent Chinese compliance, Kim Jong-Un will realise that the economic cost of its nuclear programme is getting prohibitive.
However, if Kim Jong-Un remains defiant some further steps can be taken. These are: sanctions on any country that trades with DPRK or financial institutions that provide Pyongyang access to money, and enforce and strengthen some prohibitions on port calls by vessels that have been previously involved in illicit trade with DPRK.
In the final analysis, USA and its allies must offer something else besides threats of "fire and fury" to the North Korean leaders to bring the two parties closer. "That will require the United States to put something on the table that North Korea wants, perhaps a reduction in US-South Korean military exercises," to quote Kelsey Davenport, a US arms control expert.
Dr Abdullah Shibli is an economist and works in the ICT industry.
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