IPE-K < Lecture Note 8> 2013.6.7

1. IPE-K <Lecture Note 8> 2013.6.7 IPE-K: Two Koreas and Unification *Some parts of this note are borrowed from references for teaching purpose only. Semester: Spring 2013 Time: Friday 2:00~15:00 pm Class Room: No. 331 Professor: YooSoo Hong Office Hour: By appointment Mobile: 010-4001-8060 E-mail: yshong123@gmail.com Home P.: //yoosoohong.weebly.com

2. Geography

3. Communist demilitarized zone Democratic

4. South Korea GDP Per Capita $20,400 Military Expenses $21.06 billion Military as share of GDP 2.6% Population 48,846,823 Infant mortality 6.16 deaths/1,000 live births North Korea GDP Per Capita $1,800 Military Expenses $5.21 Billion Military as share of GDP 31% Population 23,113,019 Infant Mortality 23.29 deaths/1,000 live births Two Koreas Today

5. Cold War History: Korea • USA/USSR tensions emerge almost at once • USA envisions capitalist democracy • USSR envisions communist government • 1945: Divided occupation by the 38th Prallel Line

6. Emerging Cold War conflict between USA and USSR Joint elections were impractical Two separate Korean Governments established 1948 “Elections” in both South (UN endorsed) and North Korea Two Koreas

7. Korean War • January 12, 1950, United States Secretary of State,Dean Acheson referred at: • US Press Club: About America's Pacific defense perimeter • Implied that the U.S. might not fight over Korea • This omission encouraged the North and the Soviets

8. Korean War • War began June 25, 1950: North Korea Invades • Incheon landing, September 15 - September 28, 1950 • Chinese entry, October, 1950 • January 4, 1951, Communist Chinese and North Korean forces recaptured Seoul. • MacArthur was removed from command by President Truman on April 11, 1951. • Stalemate, July, 1951

9. Korean Division • Originally 38th parallel • Post Korean War: Red line called the DMZ

10. Korean War Ends • Cease Fire: July 27, 1953 • Neither Korea signed armistice • State of war continues • Both Koreas considered themeslves the only legitimate authority • Both Koreas had aurhoritarian dictatorships at least through 1987

11. Post Korean War History • South Korea: 40,000 US troops remain to guard South Korea • US supports pro American authoritarian regimes • North Korea: Chinese troops leave • North argues that South Korea is an occupied country, not independent • North sees US troops as a threat

12. North Korea • North Korea sees 40,000 US troops on its southern border as a major threat • Asserts South Korea is simply a colony of the US. • No need to work with SK, it is the US that matters. • Develops Juche ideology of independence • Economic independence • Military independence • Focus on People’s needs • In reality, Juche is a failure both in independence and in People’s needs. • It became an ideological back-up for the Kim’s family dictatorship.

13. North Korea • Authoritarian • Anti religious persecution • Inefficient production, very little economic growth • Becomes progressively less secure as South Korea outgrows the North

14. North Korea • Cold War ended • Communist Block Collapsed 1991 • North Korea could not play China and Russia against each other • South Korean President Roh Tae Woo (1988-1993) launched “Norde Politic” drive and normalized relations with China and Russia, Isolating North Korea. • Isolated North Korea has difficulty feeding its population • Bad weather • Communist incentive structure • Poor distribution • No more cheap resources from China and Russia • 25-30% of GDP spent on military

15. Nuclear Crisis • North Korea launched Nuclear program, 1990 • 1994: NK withdrew from membership with International Atomic Energy Agency (IAEA) • Jimmy Carter visited Korea representing Clinton Administration • 1994 Agreed Framework negotiated • N. Korea gives up nuclear weapons for energy support • Korean Economic Development Organization (KEDO) formed to help N. Korean energy development.

16. Nuclear Crisis • 1994 Agreed Framework • DPRK's nuclear power plants would be replaced with light water reactor (LWR) power plants by a target date of 2003. • Oil for heating and electricity production would be provided while DPRK's reactors were shut down, until completion of the first LWR power unit. • The two sides would move toward full normalization of political and economic relations. • The U.S. would provide formal assurances to the DPRK, against the threat or use of nuclear weapons by the U.S. • The DPRK would take steps to implement the Korean Peninsula Denuclearization Declaration.

17. South Korean Response • President KimDae Jung (1998-2003) Initiated “Sunshine Policy” • Attempts for the first time to engage NK with positive incentives • Negotiates some trade and family exchanges • President Roh Moo Hyun (2003-2008) Continued Sunshine policy • President MyungBak Lee • Disagrees with the “Sunshine” approach

18. Axis of Evil and Bush Doctrine • At 2002 State of the Union, President Bush included North Korea in “Axis of Evil” with Iraq and Iran • Iraq Invasion • President Bush declared the “Bush Doctrine” of preemptive war • US invaded Iraq North Korean Reaction • 2003 Withdrew from Nuclear Non-proliferation Treaty • Declared NK a nuclear power • Insists on addressing only US, not 6-party talks

19. North Korea’s Nuclear threat was derived from North Korean perception of insecurity • Korea’s division created that insecurity • North Korea sees US as the core threat (40,000 US troops aimed at them) • Bush Doctrine and US behavior since 2001 reinforces perception of threat • North Korean leadership is not crazy nor suicidal • North Korea uses aggressive negotiating tactics to achieve its ends • North Korea is unlikely to use nuclear weapons • Panic or over-reaction to North Korean provocations are counterproductive

20. The Political Economy of North Korea  Major changes in North Korean political economy over last two decades - Transformation is better understood as an unintended response to state failure in the wake of the famine than as a top-down reform. - Policy has at times ratified these changes, most notably with reforms of 2002 - However, since 2005 “reform in reverse” has been going on

21. NK Economic Decline and Recovery - Collapse: the great famine of the mid-1990s - Recovery: unintended grassroots marketization - Since 2005, the return of slow growth (and food distress

22. Declining Food Production

23. Declining Reliance on the PDS PDS: public distribution system. When the PDS cannot provide enough food, there are few ways for vulnerable people to cope beyond the now very limited international assistance that is being provided.

24. Changing Pathways to Advancement

25. Origins of Shortage On the back of increasing harvests, rising aid government seeks to re-assert control  Internally Banning private trade in grain Seizures in rural areas Shut down relief agencies in the hinterland  Externally: 2006 missile and nuclear tests disrupt assistance from South  Bad weather: the floods of 2007

26. Evidence I: Quantities

27. Evidence II: Prices 1. 10/01/2005: Ban on private trade in grain & revival of PDS 2. 07/14/2006- 07/15/2006: Flood 3. 10/09/2006: Nuclear Test & UN Sanctions 4. 08/15/2007- 08/31/2007: Flood 5. 12/01/2007: Introduction of Chinese Export controls, partial ban on trading activities 6. 04/01/2008: Tightened control on trading activities 7. 05/14/2008: Military stocks reportedly ordered released & US aid announcement on the 16th. 8. 06/30/2008: Arrival of first aid shipment

28. Evidence III: Qualitative

29. Developments in the External Sector

30. China’s Growing Share

31. China-DPRK Trade

32. China Food Exports to DPRK

33. North-South Trade

34. Forms of Engagement

35. The Kaesong Industrial Park  The model • An inducement in broader North-South relations • Engagement to socialize and transform  The outcome: leverage in reverse • North Korea not only holding hostage until release… • But holding entire Kaesong project hostage • Recent evidence of backing off by reducing land rent and wage demands  Compromise • Resumed normal business

36. The New Geography of North Korean Trade • Beyond China, the growth of ties with Middle East (ongoing project)  With new incentives to proliferate • Nuclear cooperation with Syria and Iran • Missiles: even during moratorium on test, working with Iran • Small arms to Burma, perhaps even Hezbollah and Hamas • Other illicit activities  US concerns: not simply sanctions in context of 6PT, but defensive concerns and link to Middle East

37. Refugees’ Life Beyond North Korea  Preferences for permanent resettlement US attracts younger, better educated respondents More might prefer China if policies changed  Most want unification

38. South Korean MoneyCoins- 10, 50, 100, 500 Korean Won.Notes- 1,000, 5,000, 10,000 Korean Won. 1 US Dollar = 1,043 South Korean Won

39. North Korean Currency

40. October 2006 One Night from a Saterlite http://www.dailymail.co.uk/pages/live/articles/news/worldnews.html?in_article_id=410158

41. Prospectsof Reunification

43. North Korea  Communist system - The world most isolated regime & economic backwardness - Dictatorship and human rights issues - Nuclear development & ‘military-first policy’  “Juche” (Self Reliance) Ideology: - Symbolizes autonomy or identity in ideology, independence in politics, self-sufficiency in economy and reliance on Korea’s own forces in national defense.  Characteristics of North Korean system: - Acceptance of hereditary succession of power - Most militarized country among communist countries - Anti-American education

44. South Korea (ROK) • One of the most successful postwar economic development and democratization - 12th largest economy (member of OECD) - 12th largest trading country - 11th in global competitiveness (WEF 2007) - 1st in university enrollment - 1st in broadband penetration (90% of households) - Fully democratized political system

45. Current(MB) KoreanGovernment • Five Goals by Sector • - A government serving the people • - A lively market economy • - Active welfare • - A country rich in talent • - A global Korea •  “21st Century Strategic Alliance” KORUS FTA • - “Denuclearization, Openness, 3000“ • - Six-party talks (multilateral approach) >Inter-Korean Summits (bilateral approach)

47. Inter-Korea Agreements and Documents1953-Present  Total 92 agreements and documents: - 1953: Armistice Agreement - 1972: Inter-Korean Joint Communique - 1991-1992 (11 on Inter-Korean Basic Agreement) - 1994-1997 (9 on DPRK-US Agreed Framework-related) - 2000-2004-2007 (69+1 since the Summit in 2000)

48. South Korea’s Policy Towards North Korea  From confrontation to reconciliation  Engagement policy of North Korea during the last decade - Dialogue and cooperation - Confidence building - Peaceful coexistence - Prosperity on the Korean Peninsula and Northeast Asia  Peaceful and gradual process of unification  Sunshine Policy - Not allow any armed provocation hampering peace on the peninsula - Don’t absorb North Korea - Push reconciliation and cooperation with North beginning with those areas which can be most easily agreed upon

49. Inter-Korean Relations  Humanitarian assistance - South Korea is the biggest donor county to the North  People’s exchanges - In 2005, 88,000 South Koreans visited the North (more than the total number of visitors during the previous five decades) - 1.5m South Korean tourists to Mt. Geumgang since 1998

50. SK Government Aid to North Korea1995-2004 Year Aid Amount (USD) Note 1995 232,000,000 Rice (150,000 MT) direct 1996 3,050,000 Grain, P milk via UN 1997 26,670,000 Grain, P milk via UN 1998 11,000,000 Grain, flour via UN 1999 28,250,000 Fertilizer - direct 2000 78,630,000 Fertilizer – direct 2001 70,450,000 Fertilizer, grain, underwear, medicine – D 2002 83,750,000 Fertilizer, grain, med – Direct 2003 87,020,000 Med, cash (Unicef), fertilizer, grain -D 2004 740,000 Yongchon ER supplies, medicines, etc.-D