Facilitating Reform in North Korea: The Role of Regional Actors and NGOs

IntroductionNorth Korea has relaxed its Stalinist economic model, authorized some markets and entrepreneurship, and sought foreign trade and investment. These changes have been overshadowed by the crisis over Pyongyang's nuclear weapons program, but have nonetheless created unprecedented opportunities for liberalization of one of the world's most repressive regimes. The already tenuous and complex nature of the nuclear talks, the regime's almost total monopoly on foreign interaction with its citizens, and the complete absence of civil or political society inside the country, means that options for responding meaningfully to North Korea's economic transition are limited to either engagement or coercion.Given the weakness of the North Korean economy, it is tempting to believe that fast and satisfactory change could be achieved through sanctions. Since at least 1991, imposing a blockade on all North Korea's interactions with the outside world has been advocated, especially by some circles in Washington, with the stated goal of promoting not so much a change in North Korea's behavior as a complete collapse (Eberstadt, 2004 and Chosun Ilbo, 2004).It is unlikely that sanctions could achieve the goal of nuclear disarmament and systemic change simultaneously. Sanctions tend to be effective only when their goals are relatively modest (Clyde Hufbauer, 1998 and Elliott, 2003). If they are to be used, their immediate goal should be restricted to the most pressing concern, North Korea's denuclearization.Even without the added complexity of the nuclear crisis, the structure of North Korea's economy presents unusual challenges to a sanctions regime. As Crisis Group reporting on Myanmar shows, when the costs of the sanctions do not outweigh the costs the country expects to incur from complying with the demands, change in the status quo is unlikely (Crisis Group, 2004a). Cutting off North Korea's fuel and food supply would impact catastrophically on industry, agriculture, and the population, but do very little to unsettle the leadership. This was demonstrated conclusively by the famine in the mid-1990s.North Korea's trade figures indicate that it would be impossible to craft a meaningful sanctions policy without the full cooperation of South Korea and China, both to curtail their aid and trade and to help blockade drugs and weapons transfers. Both South Korea and China fear that the cost of a successful sanctions regime would be as high for them as for North Korea. They fear sudden change would at best result in a large and destabilizing outflow of economic migrants; at worst, put a heavily armed failed state on their doorsteps (Crisis Group, 2004b). Japan does not offer a much more realistic avenue for pressure. It is the only country with which North Korea has a trade surplus, making it an important source of hard currency for Pyongyang. However, when Japan has attempted to limit the flow of goods and currency to North Korea in 2004 and 2005, China has always stepped in to more than compensate for the deficit. Unilateral sanctions imposed by the U.S. would have a negligible economic impact and minimal effectiveness.While sanctions are unrealistic, North Korea's provocative behavior on the nuclear issue makes it difficult for countries seeking engagement to directly facilitate reform. Much of the value of international engagement depends on North Korea's leadership being willing to entertain new ideas and endorse deeper systemic change, rather than to abuse assistance for rent-seeking and regime enrichment, as has too often been the case. There cannot be sustainable development without a simultaneous commitment to growing democratic, market-oriented institutions (Sen, 2000, Rodrik, 1997 and Hall, 1999). It is readily apparent from its interactions with aid agencies, South Korea, and private sector investors that the regime's egy is to seek external resources while resisting economic reform or openness. …