North Korea: Issues and U.S. Policy : Issues and U.S. Policy [1 ed.] 9781614704393, 9781606928455

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Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved. North Korea: Issues and U.S. Policy : Issues and U.S. Policy, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved. North Korea: Issues and U.S. Policy : Issues and U.S. Policy, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

Asian Political, Economic and Security Issues Series

NORTH KOREA: ISSUES AND U.S. POLICY

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No part of this digital document may be reproduced, stored in a retrieval system or transmitted in any form or by any means. The publisher has taken reasonable care in the preparation of this digital document, but makes no expressed or implied warranty of any kind and assumes no responsibility for any errors or omissions. No liability is assumed for incidental or consequential damages in connection with or arising out of information contained herein. This digital document is sold with the clear understanding that the publisher is not engaged in rendering legal, medical or any other professional services.

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ASIAN POLITICAL, ECONOMIC AND SECURITY ISSUES SERIES North Korean Foreign Relations in the Post-Cold War World Lyman R. Rechter 2009 ISBN 978-1-60692-806-6

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North Korea: Issues and U.S. Policy Samuel P. Massingame (Editor) 2009 ISBN 978-1-60692-845-5

North Korea: Issues and U.S. Policy : Issues and U.S. Policy, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

Asian Political, Economic and Security Issues Series

NORTH KOREA: ISSUES AND U.S. POLICY

SAMUEL P. MASSINGAME

Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved.

EDITOR

Nova Science Publishers, Inc. New York

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All rights reserved. No part of this book may be reproduced, stored in a retrieval system or transmitted in any form or by any means: electronic, electrostatic, magnetic, tape, mechanical photocopying, recording or otherwise without the written permission of the Publisher. For permission to use material from this book please contact us: Telephone 631-231-7269; Fax 631-231-8175 Web Site: http://www.novapublishers.com NOTICE TO THE READER The Publisher has taken reasonable care in the preparation of this book, but makes no expressed or implied warranty of any kind and assumes no responsibility for any errors or omissions. No liability is assumed for incidental or consequential damages in connection with or arising out of information contained in this book. The Publisher shall not be liable for any special, consequential, or exemplary damages resulting, in whole or in part, from the readers’ use of, or reliance upon, this material.

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Independent verification should be sought for any data, advice or recommendations contained in this book. In addition, no responsibility is assumed by the publisher for any injury and/or damage to persons or property arising from any methods, products, instructions, ideas or otherwise contained in this publication. This publication is designed to provide accurate and authoritative information with regard to the subject matter covered herein. It is sold with the clear understanding that the Publisher is not engaged in rendering legal or any other professional services. If legal or any other expert assistance is required, the services of a competent person should be sought. FROM A DECLARATION OF PARTICIPANTS JOINTLY ADOPTED BY A COMMITTEE OF THE AMERICAN BAR ASSOCIATION AND A COMMITTEE OF PUBLISHERS. LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA Available upon request

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C ONTENTS Preface

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Chapter 1

vii The North Korean Economy: Leverage and Policy Analysis Dick K. Nanto and Emma Chanlett-Avery

Chapter 2

North Korea: Economic Sanctions Dianne E. Rennack

Chapter 3

North Korean Refugees in China and Human Rights Issues: International Response and U.S. Policy Options Rhoda Margesson, Emma Chanlett-Avery and Andorra Bruno

1 55

85

Chapter 4

North Korea:Terrorism List Removal? Larry Niksch

121

Chapter 5

U.S. Assistance to North Korea Mark E. Manyin and Mary Beth Nikitin

151

Chapter 6

North Korea’s Abduction of Japanese Citizens and the Six-Party Talks Emma Chanlett-Avery

Chapter 7

North Korean Crime-for-Profit Activities Liana Sun Wyler and Dick K. Nanto

Chapter 8

Briefing and Hearing before the Committee on Foreign Affairs, House of Representatives, One Hundred Tenth Congress, First Session, January 18 and February 28, 2007 U.S. Government Printing Office

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159 167

185

vi Chapter 9

Contents North Korean Human Rights: An Update, Hearing before the Subcommittee on Asia, the Pacific, and the Global Environment of the Committee on Foreign Affairs, House of Representatives One Hundred Tenth Congress First Session March 1, 2007 U.S. Government Printing Office

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Index

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P REFACE North Korea’s increasingly reckless behavior represents an immediate and growing threat not only on the Korean peninsula but to the entire Asia-Pacific region. This region has enjoyed an unprecedented period of peace and prosperity for several decades and has been transformed into an engine of the global economy. However, North Korea’s repeated provocations, including last year’s July 4th missile launches and the October nuclear test, pose a great threat to the stability required for the region’s continued growth. The impact of a major crisis would be felt far beyond Korea, not only in Tokyo and Hong Kong but in London and New York as well. Concerns have been raised that Kim Jong Il and his regime may conduct a second nuclear test in the near future. This, in turn, could trigger a nuclear arms race in the region, with Japan, South Korea, and perhaps even Taiwan reevaluating their fundamental security needs. The threat posed by North Korea’s nuclear program has wider, even global, implications. The regime has long been a major proliferator of nuclear and other weapons-of-mass-destruction materials and technology. Its ties to the Dr. A.Q. Khan nuclear black market network have been extensively documented. In addition, Pyongyang has been involved for many years in missile sales to Iran and other rogue states in the Middle East. Chapter 1 - North Korea’s dire economic straits provides one of the few levers to move the Democratic Peoples Republic of Korea (DPRK) or North Korea to cooperate in attempts by the United States, China, South Korea, Japan, and Russia to halt and dismantle its nuclear program. These five countries plus North Korea comprise the “six parties” who are engaged in talks, currently restarted, to resolve issues raised by the DPRK’s development of a nuclear weapon. This article provides an overview of the North Korean economy, its external economic relations, reforms, and U.S. policy options. In June 2008, the Bush Administration announced that it was lifting restrictions under the Trading with the Enemy Act and was starting the process to remove the DPRK from the list of State Sponsors of Terrorism. Other sanctions, including U.N. sanctions imposed following North Korea’s nuclear test, still remain in place. The economy of North Korea is of interest to Congress because it provides the financial and industrial resources for the Kim Jong-il regime to develop its military and to remain in power, constitutes an important “push factor” for potential refugees seeking to flee the country, creates pressures for the country to trade in arms or engage in illicit economic activity, is a rationale for humanitarian assistance, and creates instability that affects South Korea and China in particular. The dismal economic conditions also foster forces of discontent that

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Samuel P. Massingame

potentially could turn against the Kim regime — especially if knowledge of the luxurious lifestyle of communist party leaders becomes better known or as poor economic performance hurts even the elite. Economic conditions in North Korea have been improving since the disastrous conditions in the mid-1990s but still are dismal for those out of the center of power. Crop failures and flooding have reportedly increased the potential for mass starvation in 2008, although progress in the Six Party Talks have open the way for deliveries of humanitarian assistance from the United States and South Korea. The DPRK has embarked on a program of limited economic reforms that include allowing open markets, allowing prices to better reflect market values, reducing dependence on rationing of essential commodities, trimming centralized control over factory operations, and opening areas for international investment. North Korea has extensive trading relationships with China and South Korea and more limited trade with Russia. Because of economic sanctions U.S. and Japanese trade with North Korea in 2006 and 2007 was virtually nil. The DPRK has been running an estimated $1.5 billion deficit per year in its international trade accounts that it funds primarily through receipts of foreign assistance and foreign investment as well as through various questionable activities. Chapter 2 - U.S. economic sanctions are imposed against North Korea for five primary reasons: (1) North Korea is seen as posing a threat to U.S. national security; (2) North Korea is designated by the Secretary of State as a state sponsor or supporter of international terrorism; (3) North Korea is a Marxist-Leninist state, with a Communist government; (4) North Korea has been found by the State Department to have engaged in proliferation of weapons of mass destruction; and (5) North Korea has been found by the President to have detonated a nuclear explosive device. The United States has also taken steps to isolate the Macau-based Banco Delta Asia for counterfeiting and money-laundering activities, actions North Korea has characterized as attacks against it. In accordance with U.S. law, the United States limits some trade, denies trade in dual-use goods and services, limits foreign aid, and opposes entry into or support from international financial institutions. At the President’s discretion, North Korea would also be subject to the economic sanctions pursuant to the International Religious Freedom Act of 1998, under which the administration has identified North Korea as a “country of particular concern” since 2001, and pursuant to the Trafficking Victims Protection Act of 2000, under which the administration has classified North Korea in the category of most severe offender (Tier 3) since 2003. In October 2002, after meetings between high-level U.S. and North Korean government officials, the United States reported that North Korea had confirmed suspicions that it had reactivated its nuclear weapons development program. An international crisis ensued, with North Korea expelling International Atomic Energy Agency (IAEA) inspectors and declaring that it would withdraw from the Non-Proliferation Treaty. Participants in the Korean Energy Development Organization (KEDO) — including United States, Japan, South Korea and European Union — in turn suspended shipments of fuel oil. KEDO also suspended construction of the light-water reactors, the completion of which had been planned for 2003. North Korea officially withdrew from the Nuclear Nonproliferation Treaty on January 10, 2003 (effective three months hence), the first signatory country to do so. In August 2003, North Korea joined the United States, Japan, South Korea, China and Russia in six-party talks. The six nations have met for five rounds, most recently in December 2006, after North Korea’s nuclear test in October 2006.

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Preface

ix

This paper explains the U.S. economic sanctions currently in place, and summarizes recent events as they relate to the potential application of additional restrictions. It will be updated as necessary. Chapter 3 - North Koreans have been crossing the border into China, many in search of refuge, since the height of North Korea’s famine in the 1990s. The State Department estimates that 30,000-50,000 North Korean refugees currently live in China (some nongovernmental organizations estimate the number is closer to 300,000) and believes those who are repatriated may face punishment ranging from a few months of “labor correction” to execution. A number of reports also document the difficult conditions faced by North Koreans who remain in China. The plight of the North Koreans focuses attention not only on those seeking refuge and their refugee status, but also points to the factors driving their decision to leave, primarily food shortages, deteriorating humanitarian conditions, and human rights violations. North Korea is generally characterized as one of the world’s worst violators of human rights and religious freedom, an issue that some Members of Congress and interest groups say should assume greater importance in the formation of U.S. priorities towards North Korea. Congressional concern about human rights in North Korea and conditions faced by North Korean refugees led to the passage of the North Korean Human Rights Act (NKHRA) in 2004. North Korean refugees in China and human rights issues are frequently raised simultaneously, particularly in a congressional context. Although the situation for North Koreans seeking to leave their country and for those who remain inside its borders pose different questions and may call for separate responses, both focus on the nature of the regime in Pyongyang. Critics of the North Korean government have raised both issues together to put pressure on the regime, particularly when nuclear weapons program negotiations stalled. Some advocates do not want to link refugee and human rights issues, claiming that the former calls for a quieter, cooperative approach, while the latter requires a more outspoken response to the North Korean government’s practices. Although some policy experts insist that the United States has a moral imperative to stand up for the oppressed, others say that this creates obstacles in the nuclear disarmament negotiations. In 2007, the Bush Administration entered into bilateral talks with North Korea and linked the prospect of diplomatic relations and Pyongyang’s re-entry into the international community with only the nuclear issue, leaving out human rights and refugee concerns. Nevertheless, North Korean human rights and refugee issues remain significant concerns and also have broader regional importance. China and South Korea want to avoid a massive outflow of refugees, which they believe could trigger the instability or collapse of North Korea. North Korean refugees seeking resettlement often transit through other Asian countries, raising diplomatic, refugee, and security concerns for those governments. South Korea, as the final destination of the vast majority of North Koreans, struggles to accommodate new arrivals and does not want to damage its relations with North Korea. Chapter 4 - The issue of North Korea’s inclusion on the U.S. list of terrorismsupporting countries has arisen twice in recent U.S.-North Korean diplomacy. In 2000, North Korea demanded that the Clinton Administration remove North Korea from the terrorism-support list before North Korea would send a high level envoy to Washington and accept the Clinton Administration’s proposal to begin negotiations with the United States over the North Korean missile program. In 2003, multilateral negotiations involving six governments began over North Korea’s nuclear programs in the wake of North Korea’s

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actions to terminate its obligations under the Nuclear Non-Proliferation Treaty and the 1994 U.S.-North Korean Agreed Framework. In the six party talks, North Korea demanded that in return for a North Korean “freeze” of its plutonium nuclear program, the United States agree to a number of U.S. concessions, including removing North Korea from the U.S. terrorism-support list. On June 26, 2008, President Bush announced that he was officially notifying Congress of his intent to remove North Korea from the list of state sponsors of terrorism after the 45 calender-day notification period to Congress as required by U.S. law. The White House stated that North Korea would thus be removed on August 11, 2008. This announcement was part of the measures the Bush Administration took on June 26 to implement a nuclear agreement that it negotiated with North Korea in September 2007 and finalized details of in April 2008 at a U.S.- North Korean meeting in Singapore. The President also announced that he was immediately lifting sanctions on North Korea under the U.S. Trading with the Enemy Act. North Korea’s obligations under this nuclear agreement are to allow the disabling of its plutonium facility at Yongbyon and present to the United States and other government in the six party talks a declaration of its nuclear programs. North Korea submitted its declaration on June 26, 2008. The Bush Administration increasingly took the position that the issue of North Korea’s kidnapping of Japanese citizens was not linked to removing North Korea from the terrorism list, from the standpoint of U.S. law or policy. The Japanese government objected to this position. The State Department continued to declare that North Korea had not committed a terrorist act since 1987. However, reports from French, Japanese, South Korean and Israeli sources described recent North Korean programs to provide arms and training to Hezbollah in Lebanon and the Tamil Tigers in Sri Lanka, two groups on the U.S. list of international terrorist organizations. Moreover, a large body of reports describe a long-standing, collaborative relationship between North Korea and the Iranian Revolutionary Guard Corps. For Congress to prevent President Bush from removing North Korea from the terrorism support list, it would have to pass legislation (not resolutions) that would be subject to a presidential veto. Chapter 5 - This article summarizes U.S. assistance to the Democratic People’s Republic of North Korea (DPRK, also known as North Korea). It will be updated periodically to track changes in U.S. provision of aid to North Korea. Since 1995, the United States has provided North Korea with over $1 billion in assistance, about 60% of which has paid for food aid and 40% or so paying for energy assistance. As shown in Table 1 below, U.S. aid fell significantly in the mid-2000s, bottoming out at zero in FY2006. The Bush Administration resumed assistance in FY2007. In the fall of 2007, when progress began to be made in the six-party talks over North Korea’s nuclear program, the United States began providing heavy fuel oil (HFO) in return for Pyongyang freezing and disabling its plutonium-based nuclear facilities in Yongbyon. The United States also is expected to provide technical assistance to North Korea to help in the disabling and dismantling processes. In May 2008, the Bush Administration announced it would resume food assistance to North Korea by providing 500,000 metric tons (MT). The first shipment was sent on June 29, 2008, after an agreement on monitoring was signed. Food aid to the DPRK has been scrutinized because Pyongyang restricts the ability of donor agencies to operate in the country. Compounding the problem is that South Korea and China, which in recent years have been North Korea’s two most important providers of food aid, have little to

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Preface

xi

no monitoring systems in place. In 2008, U.N. officials have called for international donations of food to avert a “serious tragedy” in North Korea, as hunger has deepened. Chapter 6 - The admission by North Korea in 2002 that it abducted several Japanese nationals — most of them nearly 30 years ago — continues to affect significantly the Six-Party Talks on North Korea’s nuclear weapons program. This article provides background information on the abductee issue, summarizes its effect on Japanese politics, analyzes its impact on U.S.-Japan relations, and assesses its regional implications. Congress has indicated considerable interest in the abductions issue. The North Korean Human Rights Act (P.L. 108-333) includes a sense of the Congress that non-humanitarian aid be contingent on North Korean progress in accounting for the Japanese abductees. A House hearing in April 2006 focused on North Korea’s abductions of foreign citizens, with testimony from former abductees and their relatives. Some Members of Congress have sponsored legislation (S.Res. 399 and H.R. 3650) that support Japan’s call for settlement of the abductions controversy before North Korea is removed from the U.S. state sponsors of terrorism list. Chapter 7 - Strong indications exist that the North Korean (Democratic People’s Republic of Korea or DPRK) regime has been involved in the production and trafficking of illicit drugs, as well as of counterfeit currency, cigarettes, and pharmaceuticals. It appears that drug trafficking has declined and counterfeiting of cigarettes may be expanding. Reports indicate that North Korea may engage in insurance fraud, human trafficking, and wildlife trafficking as a matter of state policy. DPRK crime-forprofit activities have reportedly brought in important foreign currency resources and come under the direction of a special office under the direction of the ruling Korean Worker’s Party. With the caveat that dollar value estimates of clandestine activities are highly speculative, conservative estimates suggest North Korean criminal activity has generated as much as $500 million in profits per year (about a third of DPRK’s annual exports) but has decreased in recent years. A core issue is whether the income from the DPRK’s reportedly widespread criminal activity is used to finance the development of weapons of mass destruction or other key military programs, thereby contributing to the DPRK’s reluctance to curb its aggregate level of such activity. Some also speculate that the DPRK’s criminal smuggling networks could help facilitate the illicit movement of nuclear or other materials in and out of the country. Policy analysts in the past have suggested that North Korean crime-for-profit activity has been carefully controlled and limited to fill specific foreign exchange shortfalls. However, some concern exists that North Korean crime-for-profit activity could become a “runaway train” that once established could escape control. If the DPRK’s crime-for-profit activity has become entrenched, or possibly decentralized, some analysts question whether the current Pyongyang regime (or any subsequent government) would have the ability to effectively restrain such activity, should it so desire. Moreover, some suggest that proposals to shift DPRK crime-related income toward legitimate-source income ignore the fact that the current regime diverts some illicit earnings to slush funds designed to sustain the loyalty of a core of party elite and to underwrite weapons development programs. A challenge facing U.S. policy makers is how to balance pursuing anti-drug, counterfeiting, and crime policies vis-à-vis North Korea against effectively pursuing several other high priority foreign policy objectives, including (1) nuclear nonproliferation negotiations via the SixParty talks, (2) limiting ballistic missile production and export, (3) curbing terrorism, and (4) addressing humanitarian needs. As the Six-Party process has proceeded in 2008, it appears that the U.S. overriding goal of denuclearization outweighs concerns related to DPRK illicit activity

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(with the exception of proliferation of nuclear weapons technology and materials). Such illicit activity, however, could surface again as an issue as talks proceed on diplomatic normalization with the DPRK.

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In: North Korea: Issues and U.S. Policy Editor: Samuel P. Massingame, pp. 1-54

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Chapter 1

THE NORTH KOREAN ECONOMY: L EVERAGE AND P OLICY A NALYSIS

*

Dick K. Nanto and Emma Chanlett-Avery ABSTRACT

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North Korea’s dire economic straits provides one of the few levers to move the Democratic Peoples Republic of Korea (DPRK) or North Korea to cooperate in attempts by the United States, China, South Korea, Japan, and Russia to halt and dismantle its nuclear program. These five countries plus North Korea comprise the “six parties” who are engaged in talks, currently restarted, to resolve issues raised by the DPRK’s development of a nuclear weapon. This article provides an overview of the North Korean economy, its external economic relations, reforms, and U.S. policy options. In June 2008, the Bush Administration announced that it was lifting restrictions under the Trading with the Enemy Act and was starting the process to remove the DPRK from the list of State Sponsors of Terrorism. Other sanctions, including U.N. sanctions imposed following North Korea’s nuclear test, still remain in place. The economy of North Korea is of interest to Congress because it provides the financial and industrial resources for the Kim Jong-il regime to develop its military and to remain in power, constitutes an important “push factor” for potential refugees seeking to flee the country, creates pressures for the country to trade in arms or engage in illicit economic activity, is a rationale for humanitarian assistance, and creates instability that affects South Korea and China in particular. The dismal economic conditions also foster forces of discontent that potentially could turn against the Kim regime — especially if knowledge of the luxurious lifestyle of communist party leaders becomes better known or as poor economic performance hurts even the elite. Economic conditions in North Korea have been improving since the disastrous conditions in the mid-1990s but still are dismal for those out of the center of power. Crop failures and flooding have reportedly increased the potential for mass starvation in 2008, although progress in the Six Party Talks have open the way for deliveries of humanitarian assistance from the United States and South Korea. The DPRK has embarked on a program of limited economic reforms that include allowing open markets, allowing prices to better reflect market values, reducing dependence on rationing of essential commodities, trimming *

This is an edited, excerpted and augmented edition of a CRS Report RL32493, dated August 26, 2008

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2

Dick K. Nanto and Emma Chanlett-Avery centralized control over factory operations, and opening areas for international investment. North Korea has extensive trading relationships with China and South Korea and more limited trade with Russia. Because of economic sanctions U.S. and Japanese trade with North Korea in 2006 and 2007 was virtually nil. The DPRK has been running an estimated $1.5 billion deficit per year in its international trade accounts that it funds primarily through receipts of foreign assistance and foreign investment as well as through various questionable activities.

MAJOR POINTS AND RECENT DEVELOPMENTS • •

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•

• •

•

•

The economy of the DPRK (North Korea) is one of the few policy levers that countries can use to induce Pyongyang to abandon its nuclear program. The economy of the DPRK is in dire straits with a considerable share of its population on the edge of starvation and in need of outside food aid. In 2008, Pyongyang is placing more emphasis on feeding its people. This likely is one reason that North Korea has been more cooperative in disclosing and ending its nuclear weapons program. China and South Korean investments and trade with the DPRK are helping the country to secure needed imports of energy, food, and machinery for factories. North Korea’s trade deficit is being financed primarily through foreign aid, investments, and remittances from overseas workers, as well as through various illicit activities. ! Other than recent financial sanctions, economic sanctions appear to have had little effect on the Pyongyang regime because China, Russia, South Korea, and other nations have traded and provided assistance to the DPRK, and the Kim Jong-il regime seems willing to allow starvation rather than open the country to outsiders. A fall of the Kim Jong-il regime seems unlikely at this time, although pressures apparently are building in some quarters in North Korea to look beyond the aging leader Kim. Economic reforms (“adjustments”) in the DPRK are gradually being implemented, but the pace is slow and reversals of reform measures are frequent. A February 2007 Six-Party Agreement calls for providing fuel and eventual normalizing of relations with the DPRK in response to specific actions by Pyongyang in regard to its nuclear program.[1] H.R. 2764 (P.L. 110-161) appropriated $53 million for energy assistance for North Korea. In May 2008, the Bush Administration announced it would resume food assistance to North Korea by providing 500,000 metric tons.[2] Options for Congress include increasing its role in the Six-Party Talks through oversight, hearings, legislation, and policy discussions with the Executive Branch; continuing with the status quo (primarily a State Department effort) including an emphasis on human rights, non-proliferation, and actions to counter illicit activities; or to take a more rigid stance toward Pyongyang until it fulfills its commitments under the 2007 Six-Party Agreement.

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The North Korean Economy: Leverage and Policy Analysis

3

RECENT EVENTS •

On July 11, 2008, Park Wang-ja, a 53-year-old housewife, was shot dead by a North Korean soldier while taking a pre-dawn stroll near a South Korea-managed resort on Mount Kumkang in North Korea. South Korea halted further tourist visits to the mountain resort (worth about $10 million per year to North Korea). (There is some speculation that this could be the DPRK military’s attempt to derail denuclearization under the Six-Party process.) On July 12, 2008, North Korea agreed to disable its nuclear facilities by the end of October and, in return, the other parties pledged to provide promised energy aid to the North by that time. In June 2008, the DPRK disclosed additional detail on its nuclear program. The Bush Administration announced that it was lifting restrictions under the Trading with the Enemy Act and was starting the process to remove (August 11, 2008, at the earliest) the DPRK from the list of State Sponsors of Terrorism. Other sanctions, including U.N. sanctions imposed following North Korea’s nuclear test, remain in place. .

•

•

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INTRODUCTION On June 26, 2008, President Bush announced the lifting of the application of the Trading with the Enemy Act (TWEA) with respect to the Democratic People’s Republic of Korea (DPRK, or North Korea), and notified Congress of his intent to rescind North Korea’s designation as a State Sponsor of Terrorism.[3] According to the State Department, these actions were taken following the DPRK’s submission of a declaration of its nuclear programs as agreed to under the Six Party Talks. The Secretary of State is able to (but has not yet) rescind North Korea’s designation as a State Sponsor of terrorism (as of August 11, 2008, following the 45 day period in which Congress could have passed a joint resolution blocking the proposed rescission). The United States reportedly is waiting for more complete verification of the DPRK nuclear program.[4] Recent progress being made under the Six Party Talks on the denuclearization of the Korean Peninsula also enabled the United States to resume shipments of humanitarian aid to North Korea. A shipload of food and another of heavy fuel oil arrived in North Korea shortly after the announcement by President Bush of the above actions. In 2008, the confluence of several forces is complicating the economic situation faced by Pyongyang. The first is the global food shortage and concomitant high prices combined with a poor crop outlook for farms and halting recovery in industries within North Korea. The second is the hardening of attitudes by the new South Korean President Lee Myung Bak who has declared an end to unrequited South Korean economic assistance to the North and reciprocal criticism of the South by Pyongyang. These negative factors are offset somewhat by progress being made in North Korea’s relations with Japan over the problem of abductees (Japanese citizens kidnapped by the D P R K ) t h a t m a y l e a d t o a normalization of relations and a large payment by Japan of reparations to the DPRK for Japan’s occupation of the K orean pe ninsula an d also b y investments in North Korean industrial production by China in the northern region and by South Korea

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Dick K. Nanto and Emma Chanlett-Avery

primarily in the Kaesong Industrial Complex. These investments have created new exports for the DPRK. The progress under the Six-Party Talks and the apparent willingness on the part of both the United States and the DPRK to compromise in order to move the Six Party Agreement on denuclearization forward has opened the way for deliveries of U.S. humanitarian aid, and if sanctions are lifted, for possible Western investment in North Korea. The outlook for growth in 2008 is for an increase in real gross domestic product of about 2.1%, down slightly from the 2.4% in 2007.[5] North Korea at a Glance Land Area: 120,540 sq km, slightly smaller than Mississippi Population: 23.3 million (2007 est.) Head of State: Kim Jong-il Capital: Pyongyang Life expectancy: 72 years GDP: estimated $40-$71 billion at purchasing power parity in 2007 GDP Per Capita: $1,900 (CIA) to $3,094 (Global Insight) at PPP in 2007 GDP Composition: agriculture: 30% industry: 39%, services: 31% Exports: $1.9 billion (2007) Export Commodities: minerals, metallurgical products, manufactures (including armaments), textiles, and fishery products Imports: $3.2 billion c.i.f. (2007) Import Commodities: petroleum, coking coal, machinery and equipment; textiles, grain

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Sources: CIA, World Factbook; Global Insight. CRS calculations for trade.

The Stalinist state of North Korea (Democratic People’s Republic of Korea or DPRK) faces a dilemma as its economy stagnates, goods are unequally distributed, and much of the population undergoes severe privation. In the ongoing Six-Party Talks on the DPRK’s nuclear weapons, economic assistance has been the primary incentive for Pyongyang’s leaders to proceed with commitments relating to the closure of its nuclear weapon’s program despite resistance from domestic interests (particularly the military). North Korea’s leaders seem to perceive themselves as being in a policy dilemma. They see the United States as a hostile power and perceive themselves as a possible target of U.S. military action. They have pushed to become a nuclear power despite warnings not to do so even from China, their major ally. Yet North Korea’s nuclear weapon development has become a rallying point for national pride and what they see as a deterrent against hostile action. Yet a January 2008 joint newspaper editorial by the Communist Party, military, and youth militia stated that “at present, no other task is more urgent or more important than solving the people’s food problem and eating problem.”[6] In January 2008, Kim Jong-il reportedly stated, “The most important and urgent issue for us now is to bring about a turnabout in the building of the economy and in the lives of the people.”[7] Pyongyang currently faces the archetypical economic trade-off between “guns and butter,” but in their

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case the question is whether to retain the “guns” (nuclear weapons) or give them up in order to obtain “butter” (food imports). In negotiating with the DPRK, the United States has five major policy levers: international political pressure, economic assistance, economic sanctions, diplomatic isolation, and the threat of preemptive military action. This article examines the economic side of U.S. leverage with North Korea. The security side is addressed in other CRS reports.[8] Here we provide an overview of the North Korean economy, survey its economic relationships with major trading partners, and conclude with a discussion of U.S. policy options. Information on the DPRK’s economy is scanty and suspect. The closed nature of the country and the lack both of a comprehensive data-gathering structure using modern economic concepts and a systematic reporting mechanism make quantitative assessments difficult. Still, sufficient information is available to provide a sketch of the North Korean economy that has enough details to address different policy paths. U.S. interest in the moribund North Korea economy goes beyond the leverage that economic assistance provides in negotiations over Pyongyang’s nuclear weapons. The economy provides the financial and industrial resources for Pyongyang to support its military and nuclear weapons program. It constitutes an important “push factor” for refugees seeking to flee the country. It creates pressure for the country to engage in illicit trade. When the economy is performing poorly, it diverts international food aid that could be used elsewhere and creates instability that raises the risk of desperate action by Pyongyang. Dismal economic conditions may foster forces of discontent in the DPRK that potentially could turn against the ruling regime of Kim Jong-il — especially if knowledge of the luxurious lifestyle of regime leaders and the higher standard of living in South Korea spreads or if the poor economic performance hurts even Pyongyang’s elite. Despite over a decade of hardship, however, most dissatisfaction or opposition to the regime seems to be muted. This CRS report notes that the worst of North Korea’s economic crisis reached in the mid1990s seems to have passed, but the economy is still struggling and heavily dependent on foreign assistance to stave off starvation among a sizable proportion of its people. In a 2008 survey, the U.N. World Food Programme (WFP) found that food availability, accessibility, and utilization have deteriorated sharply since 2007; close to three quarters of the households have reduced their food intake; and that more malnourished and ill children are being admitted to hospitals and institutions. The conclusion was that millions of people in the DPRK are experiencing hunger not seen in almost a decade.[9] Severe floods in 2007 worsened a situation that had been improving. So far, deliveries of food aid, Pyongyang’s reforms, and increasing trade with South Korea and China have enabled the country to bridge to some extent its shortfall between food production and basic human needs. U.N. trade sanctions along with U.S. financial sanctions may have had some effect, judging by the complaints coming out of Pyongyang and progress in the Six- Party Talks. U.S. trade sanctions alone, however, tend to have little impact because the United States already has virtually no trade with the DPRK. The country can turn to other nations for needed imports, and sanctions do not halt humanitarian aid shipments. The Six-Party Agreement of February 13, 2007, included an economic incentive of heavy fuel oil and humanitarian food aid, as well as the prospect of the normalization of diplomatic relations between the DPRK and the United States and Japan in exchange for North

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Korea’s freezing and allowing inspections of the activity at its Yongbyon nuclear reactor. The Agreement is being implemented on the basis of action-for-action.

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OVERVIEW OF THE DPRK ECONOMY The North Korean economy is one of the world’s most isolated and bleak.[10] It was completely bypassed by the Asian “economic miracles” of the past three decades that brought modern economic growth and industrialization to South Korea, Taiwan, Singapore, and Hong Kong, as well as rapid growth and trade liberalization to China, Thailand, Malaysia and other Asian nations. The “Stalinist” North Korean economy can be characterized by state ownership of means of production; centralized economic planning, command, and monitoring of political attitudes; and an emphasis on military development. The economic system is designed to be self-reliant and closed. The irony of the situation is that the longer the economy tries to remain selfsufficient, the poorer its performance and the more dependent the country becomes on the outside world just to survive. During the 1990s, major portions of the North Korean population survived primarily through transfers of food and other economic assistance from abroad. The worst of the food crisis has passed, but shortages are still there, and the country depends on staples from China, South Korea, and, when allowed, from the U.N. World Food Program to stave off mass starvation.[11] During the 1990s, the inefficiencies of North Korea’s centrally planned economy, especially its promotion of state-owned heavy industries, along with high military spending — about 15-25% of GDP — joined with drought and floods to push the economy into crisis. In addition, the collapse of the Soviet bloc meant the loss of Russian aid, export markets, and cheap oil. Trade with the former Soviet Union dropped from as much as $3.58 billion in 1999 and has recovered to only $230 million (mostly petroleum) by 2005.[12] This added to disastrous domestic economic conditions in North Korea.[13] Food has been so scarce that North Korean youth are shorter than those in other East Asian nations.[14] Since 1998, the military reportedly has had to lower its minimum height requirement in order to garner sufficient new recruits. Life expectancy has been contracting. With the help of the WFP, which had been feeding more than a quarter of North Korea’s 23 million people, chronic malnourishment among children reportedly fell from 62% in 1998 to about 37% in 2004. About one-third of mothers are considered to be both malnourished and anemic.[15] The Food and Agriculture Organization of the United Nations estimated that 7.6 million North Koreans were undernourished in the 2002- 2004 period.[16] North Korea refers to this period of hardship as the “arduous march,” an apparent comparison to the “long march” in Chinese revolutionary history. In January 2006, Pyongyang ordered the WFP to stop food deliveries to the DPRK, but limited food assistance (about 75,000 tons annually) was resumed after an agreement in May 2006.[17] Over the winter of 2007-2008, the abnormally dry and cold weather reportedly has seriously affected the growth of autumn wheat and barley. When combined with severe flooding during the summer of 2007, the WFP predicted the DPRK will be short about 1.4 million tons of food in 2008.[18] An extensive analysis of the famine in the 1990s concludes that the “ultimate and deepest roots of North Korea’s food problems must be found in the very nature of the North Korean economic and political system.”[19] Since 2002, Pyongyang has allowed some reforms that may

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ease the economic pressures over the long term. In a sense, these reforms legitimized what was already occurring following the collapse of the centrally planned economy.[20] The Kim regime refuses to call the economic measures “reforms,” but as will be discussed later in this article, that in essence is what they are. North Korea prefers to characterize the reforms as “utilitarian socialism.” This includes the introduction domestically of market economy elements (called the July 1, 2001 measures) and in the international arena, the pursuit of normalization of relations with countries that have traditionally been hostile toward their country. The DPRK’s gross national product in 2007 in purchasing power parity prices (PPP) — prices adjusted to international levels — has been estimated at $40 billion (CIA estimate). This amounts to national income of about $1,800 to $2,964 per capita in PPP values or roughly in the range of that of Zimbabwe, Uzbekistan, Bangladesh, or the Sudan. This is considerably lower than that of China ($6,572),[21] Indonesia ($3,842), or Japan ($30,821). It is also dramatically lower than South Korea’s $21,868 in PPP values or $16,200 at market prices.[22] According to the Bank of Korea, in market prices, North Korea’s GDP in 2006 was an estimated $25.6 billion compared with $888 billion for South Korea. Global Insight, an econometric consulting firm, estimated North Korea’s GDP in 2006 at $22.9 billion ($23.9 billion in 2007).[23] A remarkable fact is that in the post-Korean War and into the mid-1970s, living standards were higher in North Korea than in either South Korea or China. Now, North Korea is far behind its rapidly growing neighbors. As shown in Figure 1, growth in estimated real gross domestic product (GDP) in the DPRK was dropped into the negative for most of the 1 990s before beginning to recover in 1999. In 2004 to 2006, growth has been continuing at about 2%, up slightly from earlier years. In 2006, the economy shrank by 1.1% and continued to decline in 2007 by an estimated 2.3%. In essence, the economy appears to have recovered moderately after the 1990s but has contracted again over 2006-2007. It should be noted that various scholars and government officials produce a variety of estimates of North Korean growth rates and GDP. Some estimates show gradual recovery, but others argue that real per capita GDP has been stagnant or even declining over the past decade. One problem is that estimates of inflation are difficult to obtain and are inherently unreliable. The reason is that households in different sectors of the economy may pay different prices for the same commodities — particularly staples that have been distributed through official channels to some but must be purchased in markets by others. Rice, for example, may be sold in an official market for one price, sold in an irregular market for another, or distributed as a ration to certain households basically for free. Another problem is that officials who report data often are under pressure to meet certain targets. Unlike in the West where data may be “sugar coated” to make them more palatable, in the DPRK, the underlying statistics often are “rubberized.” They may be stretched or compressed according to official expectations.

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Source: Data from Bank of Korea.

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Figure 1. Estimated Real Annual Growth in North Korea’s GDP 1986-2007.

Another problem with North Korean data is that there is a huge difference between the official exchange rate and the free market rate. This problem is avoided in PPP estimates that compare purchasing power and adjust for exchange rate differences. In estimates of GDP expressed in dollars, however, the exchange rate is used to convert North Korean won to U.S. dollars. According to Global Insight, the official exchange rate in North Korea has been 2 per dollar while the free market rate has ranged between 200 to3,000 won per dollar.[24] What can be said for certain is that a sizable part of the DPRK population lives on the edge of existence. In few countries today does a small decline in GDP or summer flooding cause massive starvation and growth stunting as it does in the DPRK. Also, despite the threat of imprisonment for crossing the border into China and being repatriated to North Korea, a large number of refugees still attempt to flee the economic and political conditions in the country. In this land of scarcity, consumer necessities have been rationed and used to reward party loyalists. Under Pyongyang’s economic reforms, this system appears to be phasing out, but in the fall of 2005, North Korea backtracked on some of its economic reforms by forbidding private sales of grains and reinstituting a centralized food rationing system. Pyongyang also reportedly closed its food markets but then opened consolidated markets that carried food and other items. The combination of a weak economy unable to provide basic food and necessities and a ruling regime intent on maintaining its power has created economic divisions within society. North Korea reportedly officially classifies its citizens into three ranks and fifty-one categories based on their ideological orientation. However, in actuality, the economy has created five classes of people. The official categories are used to allocate rations for daily

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necessities, jobs, and housing.[25] The de facto categories have resulted from the intrusion of market forces and trading on the official class divisions. The top class consists of the elite who claim the first rewards from society. They are the party cadres who are leaders in the military and bureaucracy and who enjoy privileges far above the reach of the average household. While starvation haunts the provinces, many of the privileged class live in Pyongyang (where provincial North Koreans cannot enter without special permission); some drive foreign cars, acquire imported home appliances, reside in apartments on a lower floor (so they do not have to climb too many stairs when the electricity is out), and buy imported food, medicines, and toiletries at special hard currency stores.[26] The elite have a strong vested interest in maintaining the current economic system, despite its problems. Their incomes originate from the treasury, from foreign investors (mostly South Korean), remittances from ethnic Koreans in Japan (although these have been curtailed), and the country’s shadowy trade in everything from missile technology to fake banknotes and narcotics.[27] After the elites surrounding Kim Jong-il, the second group comprises business traders with access to foreign capital and international transactions; the third consists of “organized thugs” who make their money through public trading and markets. The fourth class is composed of urbanites and others who scrape by on government rations, while the fifth class is farmers who support their way of life through farming private plots and selling goods in markets.[28] Despite hushed grumbling about economic deprivation, forced food deliveries to the central government, a rationing system with insufficient stocks to deliver, and new prohibitions on markets that are difficult to understand and rationalize, dissent in North Korea remains stifled. Support for the ruling regime appears strong — even among the lower classes of people — although this support is often enforced by severe squashing of even the slightest hint of dissent. Even suspicious comments in casual conversations may be reported to the authorities. The country is far from developing a middle class with independent economic means, personal sources of information, and a thirst for more democratic institutions. In 2007, South Korea’s new President Lee Myung-bak stated in his plan, “Vision 3000: Denuclearization and Openness,” that if North Korea denuclearizes and opens, his administration will help to make North Korea’s national income $3,000 per person within ten years. The plan, however, does not provide an alternative if North Korea does not denuclearize.[29]

ECONOMIC PHILOSOPHY The Pyongyang regime has pursued a policy of self-sufficiency and isolation from the world economy that they call juche or self-reliance. Juche goes beyond economics as it has been used since the 1 950s to perpetuate power by the central government and to build an aura of the supernatural around their supreme leaders Kim — both father and son.[30] Although the regime does not emphasize the connection, the current system of dynastic succession with a paramount father figure also harkens back to Confucianism and the powerful dynastic tradition that united the Korean peninsula for hundreds of years.

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The economic practice of juche has minimized international trade relations, discouraged foreign direct investment, and fostered what it considers to be core industries — mostly heavy manufacturing. While promoting such heavy industry, for most of the post-Korean War period, Pyongyang has emphasized the parallel development of military strength. Current head of state, Kim Jong-il (often referred to as “Dear Leader”), has given highest priority to the military. This places the army ahead of the working class for the first time in the history of North Korea’s so-called revolutionary movement.[31] Under Kim Il-sung (Kim Jong-il’s father), the juche ideology placed equal emphasis on political independence, selfdefense, and economic self-support capabilities. Kim Jong-il, however, insists that North Korea can be a “country strong in ideology and economy” only when its military is strong.[32] The country, therefore, has been developing its industries within the context of a military-industrial complex with strong links between heavy industry and munitions production. Some of North Korea’s munitions industries (manufacturing dual use products) are virtually indistinguishable from those supplying civilians.[33] In 1998 at the 10th Supreme People’s Assembly, the military’s National Defense Commission arguably eclipsed the Politburo as the supreme national decision making body in North Korea. In the years since, the term “military-first politics” has been used to signify the privileged status the Korean People’s Army holds and to stress the ascendant position of the military relative to the power of the Korean Workers’ Party, the traditional center of the DPRK’s decision making.[34] Of course, the ultimate decision maker in Pyongyang is the Dear Leader, Kim Jong-il. In 2006, Pyongyang’s defense budget was an estimated $2.3 billion to maintain its 1.1 million member military.[35] South Korea estimated the North’s military expenditures at $5 billion in 2003. In 2005, North Korea stated that the defense budget was 15.9% of its total annual budget,[36] but others had put the figure at 27.2% in 2003. Even a defense budget of $2.3 billion, however, implies an expenditure of $2,090 per member of the military, a woefully small amount. This implies that the tug of war between “guns and butter” within the North Korean regime must be quite intense given the scarcity of resources throughout the country even though the military does operate businesses that bring in additional revenues. The heavy weight of the military in Pyongyang’s decision making may help explain what to outsiders seem to be inexplicable actions by the North Korean government. For example, almost immediately after negotiators had issued the September 19, 2005, Six-party Statement in which North Korea ostensibly committed itself to abandoning all nuclear weapons and existing nuclear programs, Pyongyang began backtracking and within two months announced a boycott of future Six-Party Talks.[37] It also may help explain North Korea’s carrying out its first nuclear test on October 9, 2006, despite being warned not to do so by the United States, China, and other nations. Recent progress in the six-party talks under which North Korea shut down its Yongbyon nuclear reactor as required in phase I of the February 13, 2007 agreement arguably represents a defeat for the military, but the slow progress in phase II to date could indicate strong resistance by military interests to cutting more deeply into North Korea’s nuclear program.[38] When juche is combined with central planning, a command economy, and government ownership of the means of production, economic decisions that in a market economy would be made by private business and farmers have to go through a few elite in Pyongyang. These decisionmakers may or may not understand advances in agronomy or manufacturing and tend to be motivated by non-economic factors, such as maintaining political power or avoiding

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blame for initiatives gone awry. Farming methods based partly on crop rotation or new varieties of rice, for example, may be viewed as too risky.[39] Foreign investment also is hindered partly because the regime abhors being “exploited” by capitalists who seek to make profits on their business ventures in North Korea and partly because of their deep-seated mistrust of Westerners, Japanese, and South Koreans.

INDUSTRIAL SECTORS

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North Korea’s industrial sectors are shifting rapidly. At the end of World War II, the DPRK represented the industrialized part of the Korean peninsula. Under Japanese colonialism, heavy industry, water power, and manufacturing were concentrated in the North, while agriculture flourished in the less mountainous South. Even in 1990, 49% of the North Korean economy was in mining, manufacturing, and construction, while 23% was in services (including government and utilities) and 27% in agriculture. In recent years, however, the DPRK’s nonmilitary industries have almost collapsed. By 1997, mining, manufacturing, and construction had dropped from 49% to 32% of the economy but in 2003 had risen somewhat to 36%. In 2003, services had risen to 37% of the economy, while agriculture has remained fairly constant at 27%. In 2007, mining, manufacturing, and construction were making a slow recovery to 40% of the economy. Services had gained slightly to 39%, and agriculture had declined to 21% of GDP. (See Figure 2.) Some of the most advanced industries in North Korea are associated with its military, and in 2006, $73.7 million worth of goods was produced in the Kaesong Industrial Complex by South Korean firms using North Korean labor.[40]

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The drop in the share of manufacturing in GDP has come about largely because of the rapid decline in production from factories, not because of large absolute increases in services or agricultural production. One report indicated that in 2003 factories were running at about 30% of their capacity. The economy lacks food for workers, raw materials, energy, and foreign currency to buy new equipment and imported inputs into the manufacturing process.[41] Much industrial capital stock is nearly beyond repair as a result of years of underinvestment and shortages of spare parts. Recently, the government has emphasized earning hard currency, developing information technology, addressing power shortages, and attracting foreign aid, but it appears unwilling to do so in any way that jeopardizes its control. North Korea’s mining sector is recovering somewhat. In 2007, 57% of China’s imports from North Korea were in mineral fuels ($170 million, mostly coal) and ores ($164 million, mostly iron, zinc, precious metal, lead, and molybdenum).[42] North Korea is rich in minerals and ores.[43] The regime looks askance, however, at exporting ores or commodities that were typical of “economic imperialism” during the colonial era when the foreign companies “exploited” the resources of less developed economies. The DPRK leadership, in their joint editorial at the beginning of 2008, however, emphasized the need for rebuilding the national economy, particularly mining and the metal, chemical, and light industries. They noted the construction of a large-scale hydroelectric power plant completed in 2007 and set out the goal of constructing an economically powerful state by 2012.[44] The agricultural sector also is in dire straits. The economy depends heavily on collective farms that have been devastated by drought or floods, lack of fertilizers and other inputs, antiquated farming methods, and a lack of incentives for private production. A report in 2003 from North Korea indicated that the situation along the border with China had deteriorated to the point that rates of starvation, disease, and even suicides were reaching a crisis point.[45] In recent years, there has been a new emphasis on fishing — using both traditional methods and new aquaculture technology. According to the U.N. Food and Agriculture Association, in 2007, North Korea’s harvesting of winter crops and potatoes (accounting for about 10% of total production) had risen by 18% to 523,000 tons due primarily to increased potato production.[46] However, severe flooding had damaged grain crops in the southern “cereal bowl” provinces. This resulted a 7% decline to some 3.8 million tons in overall 2007 food crop production.[47]

ECONOMIC REFORMS AND FREE TRADE ZONES As with other isolationist economies in the contemporary world of globalization and interlinked societies, North Korea has been plagued with the negative effects of its attempts at self sufficiency: technological obsolescence, uncompetitive exports, economic privation, and lack of foreign exchange. These difficulties, together with advice from China and Russia, have compelled the Pyongyang regime to introduce some economic reforms. To a large extent, they are adopting the sequence of Chinese reforms with economic reforms preceding political reforms while eschewing the Russian model of political reform preceding and concurrent with economic reforms.[48] The DPRK also has been examining the

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Vietnamese model of development and do moi (reform). Kim Jong-il reportedly prefers the Vietnamese style of gradual economic reform rather than the abrupt Chinese style.[49] The reforms began in July 2002 when Pyongyang announced a series of measures that some surmise may mark the beginning of the end of the Stalinist controls over the economy and the onset of more use of the market mechanism to make economic decisions, particularly production and consumer purchases. Although the government has dubbed the reforms an “economic adjustment policy,”[50] the actions appear to be a desperate attempt to revive the moribund economy. The reforms also dovetail with North Korea’s “military first” policy. As Kim Jong-il has given first priority to the military, the rest of the population has suffered.[51] This, in turn, has raised pressures on Pyongyang to reform its economic system. The adjustments (reforms) featured an end to the rationing system for daily commodities (except for food), a huge increase in prices of essentials and in wages, a major devaluation of the currency (official exchange rate), abolishment of the foreign exchange coupon system, increased autonomy of enterprises, authorization of the establishment of markets and other trading centers, and a limited opening of the economy to foreign investment. Prices still remain under centralized control but at levels closer to those existing in peasant (free) markets. North Korea has not abandoned the socialist planned economy, but it has been compelled to “adjust” certain aspects of it. Under the reforms, overall prices were increased by 10 to 20 times. Government prices for many essential items, however, rose by much more. The price for rice rose by 550 times, for corn 471 times, for diesel oil 38 times, and for electricity 60 times. Wages also were raised but not enough to keep pace with skyrocketing consumer prices. Wages rose by 18 times for laborers and 20 times for managers.[52] Even though not all workers received the promised wage increases, the price and wage reforms caused households to face rampant consumer inflation, and many people ended up worse off financially than before the reforms. In North Korean factories, reforms include greater control over prices, procurement, wages, and some incentives to increase profits in order to distribute them based on individual performance. The regime also is looking to implement reforms in agriculture similar to those implemented in China (along the lines of the rural household contract system). In the mid1990s, North Korea’s agricultural work squads had already been reduced in size. Now they are moving toward family oriented operations with farmers allowed to retain more of any production exceeding official targets. Although small farmers’ markets have long existed in North Korea, Pyongyang did not legalize such farmers’ markets until June 2003. This followed the formal recognition of commercial transactions between individuals and the 1998 revision to the constitution that allowed individuals to keep profits earned through legitimate economic activities.[53] Now free markets and shopping centers that use currency, not ration coupons, are spreading. The Pyongyang Central Market, for example, became so crowded that a new, three-story supermarket had to be built. Pyongyang’s Tongil market with its lines of covered stalls stocked with items such as fruit, watches, foreign liquor, clothes, Chinese-made television sets, and beer from Singapore also is bustling with sellers and consumers reminiscent of those in other Asian countries.[54] Visitors to Pyongyang in late 2006 indicated that the market was thriving with all types of products and shoppers driving European cars.[55] The North Korean population is gradually becoming re-accustomed to operating in open markets. This has raised fears by the DPRK regime of encroachment by capitalism into their

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socialist economic system. On August 26, 2007, Kim Jong-il announced that “markets have become anti-socialist, Western-style markets.” This has led to a steady stream of government edicts restricting market activity across the country. At first, authorities prohibited women under the age of 40 from selling goods in Pyongyang markets. Then on December 1 the authorities banned women under the age of 49 from running businesses in Pyongyang. (Since males are officially required to be at their assigned workplaces, women generally run the businesses.) Certain products, such as videos of South Korean dramas, movies, and other so-called nonsocialist elements are also banned from central markets.[56] Enforcement of the new regulations at first was spotty, but in late 2007, it appears to have become more strict. According to news reports, policing is also being conducted by central government security agencies, organizations that normally deal with issues such as intelligence gathering and sedition.[57] The extent of the Kim regime’s attempts to control the development of a market economy can be illustrated by the increased difficulty of acquiring travel permits for persons suspected of being wholesale merchants intending to carry goods from one place to another. This crackdown on travel also is affecting normal tourist and family trips. Corruption, however, allows some businesses to continue, as certain officials reportedly are receptive to bribes. Secret peddling on streets and other banned activity also continues out of sight of the authorities (particularly by young and nimble traders).[58]

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Foreign Investment North Korean economic reforms also include opening certain areas to foreign investment. Under the Joint-Operation Act of 1984 to 1994, there were 148 cases of foreign investment worth about $200 million into North Korea. Of these 148 cases, 131 were from pro-North Korean residents of Japan. In 1991, Pyongyang opened the Rajin-Sonbong free trade zone and established the Foreigner Investment Act. To 1997, some 80 investments totaled $1.4 million. Other areas receiving foreign investment include Nampo, Pyongyang, Kosung-gun, Shimpo, Wonsan, and Mt. Kumkang. Foreign companies in North Korea include 50 South Korean companies (e.g., Hyundai, daewoo, Taechang, LG, Haeju, and G-Hanshin), DHL, ING Bearing Bank; Japan’s Hohwa, Saga, and New Future Ltd. companies; Taiwan’s JIAGE Ltd., and the China Shimyang National Machinery Facility Sales Agency Corporation.[59] The U.N. Development Programme is promoting the Tumen River Valley Development Project which aims to develop business based on transit transportation, tourism, and commissioned processing trade.[60] Mt. Kumkang has been developed with the cooperation of South Korea’s Hyundai corporation into a tourist destination for South Koreans and a venue for reunions of families separated by the DMZ. According to data compiled by the United Nations Conference on Trade and Development (UNCTAD) since 1987, the DPRK had a cumulative $1.56 billion in foreign direct investment (FDI) as of the end of 2006. Annual FDI flows have been sporadic, even negative in some years, but since 2003, they have been rising. (See Figure 3.) In 2007, both South Korea and China increased their investments in North Korea.

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Source: United Nations Conference on Trade and Development. Foreign Direct Investment database.

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Figure 3. Foreign Direct Investment Flows and Stocks in the DPRK, 1987-2006.

The industrial sector is receiving some help from Chinese investments and from South Korean firms operating in the Kaesong Industrial Complex. It also is able to attract a limited amount of foreign investment from other nations. For example, in January 2008, Orascom Telecom, the fourth-largest Arab phone operator based in Cairo, Egypt,[61] announced that its subsidiary in North Korea (CHEO Technology — 25% owned by the state-owned Korea Post and Telecommunications) had received a license to be the first provider of mobile telephone services throughout the country. The company is to invest up to $400 million in network infrastructure over the first thee years and to provide service to Pyongyang and other major cities within one year.[62] North Korea’s mining sector is recovering somewhat. In 2007, 57% of China’s imports from North Korea were in mineral fuels ($170 million, mostly coal) and ores ($164 million, mostly iron, zinc, precious metal, lead, and molybdenum)[63] North Korea is rich in minerals and ores.[64] The regime looks askance, however, at exporting ores or commodities that were typical of “economic imperialism” during the colonial era when the foreign companies “exploited” the resources of less developed economies. Since 2000, the DPRK has attempted to emulate China’s highly successful free trade zones (FTZ) by establishing the Sinuiju Special Administrative Region (SAR) on the northwestern border with China and Kaesong (Gaesong) Industrial Complex along the border with South Korea. Since being established in 2002, the development of the Sinuiju SAR has been stymied partly because of the arrest by Beijing of Chinese businessman Yang Bin, a Chinese-Dutch entrepreneur who was named as its governor, on charges of illegal land use, bribery and fraud. After Kim Jong-il’s visit to China in 2006, Sinuiju appears to be

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receiving new attention. Foreign currency management groups reportedly are moving in, and ordinary citizens are being replaced by residents of Pyongyang and other areas.[65]

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Kaesong Industrial Complex[66] Currently, the most significant effort at creating free-trade zones is the Kaesong Industrial Complex (KIC). This joint effort between the North and South is developing rapidly, despite tensions over North Korea’s testing of ballistic missiles and a nuclear weapon. The KIC is managed by South Korea’s Hyundai Asan and Korea Land Corporation. Located just over the border 43 miles north of Seoul on the route to Pyongyang, this 810-acre complex aims to attract South Korean companies, particularly small and medium sized enterprises, seeking lower labor and other costs for their manufactured products and who may not be able to establish subsidiaries in China or other countries. By September 30, 2007, 52 companies had begun operations in Kae song. They were employing 15,158 North Korean personnel (another 2,025 North Koreans were working in construction in the complex and 599 in administrative offices).[67] To be completed in three stages, the first stage (2002- 2007) had 3.3 million square meters of a total of 66 million square meters being constructed or under construction in 2006. Hyundai Asan and the Korea Land Corporation plan to eventually attract 300 businesses in the first stage, 700 in the second, and 1,000 businesses in the third stage with an estimated total of 300,000 workers. Of the $374 million initial cost for the first stage, $223 million was to be provided by the South Korean government. In December 2006, the Korea Electric Power Corporation connected North and South Korea by a 100,000 kilowatt power-transmission line for use by the companies in the KIC. The initial 15 companies operating in Kaesong and their products included Living Art (kitchenware), Shinwon (apparel), SJ Tech (semiconductor component containers), Samduk Trading (footwear), Hosan Ace (fan coils), Magic Micro (lamp assemblies for LCD monitors), Daewha Fuel Pump (automobile parts), Taesung Industrial (cosmetics containers), Bucheon Industrial (wire harness), Munchang Co. (apparel), Romanson (watches, jewelry), JY Solutec (automobile components and molds), TS Precision Machinery (semiconductor mold components), JCCOM (communication components), and Yongin Electronics (transformers, coils).[68] In 2006, the KIC produced some $7.5 million worth of goods each month.[69] In September 2007, monthly production had reached $17.1 million. Over the January 2005 to September 2007 period, production in Kaesong totaled $213.8 million with $92.3 million in textiles, $26.6 million in chemical products, $54.0 million in metals and machinery, and $41.0 million in electric and electronic products.[70] Kaesong developed partly from South Korea’s sunshine policy of economic engagement with the North. The KIC serves both geopolitical and economic purposes. Geopolitically, it provides a channel for rapproachment between North and South Korea, a bridge for communication, a method of defusing tensions, and a way to expose North Koreans to outside ideas and ways of doing business. Economically, the KIC provides small- and medium-sized South Korean firms with a low-cost supply of labor for manufacturing products, provides jobs for North Korean workers, and provides needed hard currency for Pyongyang. Even after the North Korean nuclear test in 2006, KIC operations continued.

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A controversial issue has arisen with respect to the KIC and the proposed South Korea-U.S. Free-trade Agreement. South Korea had requested that products exported from the complex be considered to have originated in South Korea in order to qualify for duty free status under the proposed FTA. Such a provision had been included in other South Korean FTAs. The language of the proposed Korea-United States FTA (signed but not yet approved by Congress) does not provide for duty-free entry into the United States for products made in Kaesong. Annex 22-B to the proposed FTA, however, provides for a Committee on Outward Processing Zones (OPZ) to be formed and in the future to designate zones, such as the KIC, to receive preferential treatment under the FTA. Such a designation apparently would require legislative approval by both countries. Other issues raised by the KIC have been the conditions for North Korean workers, whether they are being exploited,[71] as well as the hard currency funds the industrial complex provides for the ruling regime in Pyongyang. South Korean officials, as well as other analysts, point out that average wages and working conditions at Kaesong are far better than those in the rest of North Korea. The monthly minimum wage is $50 ($57.50 including the cost of social insurance). General workers receive $50, team leaders receive $52-$55, and heads of companies receive $75 per month. After the government, takes its share of the wages, the workers receive about $37 per month. Workers also receive overtime pay.[72] The North Korean government derives hard currency from several sources in the KIC project, including leasing fees and its taxes and fees deducted from the wages of North Korean workers. The wages are first paid in hard currency to a North Korean government agency that takes a certain percentage before paying the North Korean workers in won. If the government collects about $20 per month (in social insurance taxes plus its cut of wages) for each of the 10,000 workers now at Kaesong, its monthly take from wages would amount to approximately $200,000 per month or $2,440,000 over a year. One estimate is that Pyongyang has earned a total of about $20 million from the Kaesong Industrial Complex.[73]

Investment from China China has a direct interest in economic reform and recovery in the DPRK. Chinese business interests with support from Beijing are beginning to invest widely in the North Korean economy. Unlike, South Korean investors, Chinese are allowed to invest in enterprises fully integrated into the DPRK economy. They also have provided machinery and equipment to existing North Korean factories. Chinese investment in mineral extraction in the DPRK seems to represent an easing the DPRK constitutional ban against “cultural infiltration (Article 41). This has been interpreted to include international economic integration and globalization.[74] However, Pyongyang seems to be treating investment from China as being “not contaminated” relative to those from South Korea or other nations. South Korean investments are carefully walled off from the average North Korean citizen, whereas China has been able to invest in production facilities in various locations. According to Chinese sources, from January to October 2006, the Chinese side approved 19 new investments in the DPRK, with negotiated investment of $66.67 million. Cumulative investment up to the end of October 2006 included Chinese government approval of 49 investments in the DPRK with negotiated investment of $135 million.[75] These figures

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seem understated. Since 2006, Chinese investmentshave increased significantly. The projects of the investment covered such fields as food products, medicine, light industry, electronics, chemical industry and minerals. Major Chinese investments involving mining and minerals in the DPRK include the following:[76] •

•

•

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• •

•

•

•

China Tonghua Iron and Steel Group has invested 7 billion yuan (approximately $875 million) in developing the DPRK’s Musan Iron Mine. Two billion yuan (approximately $250 million) is to be used for the preliminary construction of communication facilities and cables from Tonghua, China, to the DPRK’s Musan area; 5 billion yuan (approximately $625 million) is to be used mainly on technology and equipment in developing the mine as well as in Musan’s overall planning.) This mine is the largest open-cut iron mine in Asia with verified iron-rich ore reserves reaching seven billion tons. On October 20, 2007, China’s Tangshan Iron and Steel Company (China’s third largest steel company) and the DPRK’s Department of Foreign Economic Cooperation and Taep’ung International Investment Group signed a letter of cooperation intent. The two sides are to cooperate on the DPRK Kimch’aek Metallurgy Park Project, and the DPRK So’ngjin Iron, Steel, Coal, and Electricity Project. Tangshan is to build a steel smelting plant in the DPRK with an annual steel output of 1.5 million tons. It is to be jointly funded by the DPRK side and is to involve joint development and utilization of nearby iron ore. The China Iron and Steel Group reportedly is ready to develop a molybdenum mine in the DPRK with a goal of producing more than 10,000 tons of molybdenum concentrate per year. China and the DPRK have signed a “PRC-DPRK Inter-Governmental Agreement on Joint Development of Offshore Oil” to pursue joint energy projects. China’s Jilin Province also has cooperated with the Hyesan Youth Copper Mine (containing the largest copper deposit in Asia), Manp’o Zinc and Lead Mine, and the Hoeryo’ng Gold Mine in the DPRK. One project is to transmit electricity from Jilin’s Changbai County to the DPRK in exchange for the gold, copper, and other ores. The joint project is to install power transmission facilities with an estimated total investment of 220 million yuan ($27.5 million). China’s Heshi Industry and Trade Company along with the International Mining Company have set up a joint venture with the DPRK’s So’gyo’ng 4 Trade Company called the “DPRK-China International Mining Company.” The Chinese side is to provide equipment and capital, while the DPRK side is to contribute mineral resources and the existing facilities. In October 2005 China Minmetals also signed with the DPRK side an “Agreement on Establishing A Joint Venture in Coal Industry in the DPRK,” which called for establishing a joint venture with the DPRK at the Ryongdu’ng Coal Mine. On August 23, 2004, China’s Zhaoyuan Shandong Guoda Gold Stockholding Company and the DPRK Committee for the Promotion of External Economic Cooperation agreed to establish a joint venture mining company to mine the gold in the DPRK’s Mt. Sangnong and to ship all the mined gold concentrate to Zhaoyuan for smelting. The DPRK’s Sangnong Gold Mine is estimated to have at least 150 tons of

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mineable gold. However, due to a shortage of capital and backward technology, it has been in a state of semi-stoppage of production. Guoda is to provide equipment and technology and is to ship the mineral ores by sea to Zhaoyuan for smelting.

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INTERNATIONAL TRADE Despite North Korea’s isolation and emphasis on juche, it does trade with other countries. According to trade statistics compiled by the International Monetary Fund, the DPRK had at least some trade with 80 of the 182 countries or customs territories that report their trade data to the Fund.[77] For Pyongyang, the foreign economic sector plays an important role in that it allows the country to import food, technology, and other merchandise that it is unable to produce in sufficient quantities at home. Since North Korea does not export enough to pay for its imports, it generates a deficit in reported merchandise trade that must be financed by other means. Pyongyang has to find sources of foreign exchange — other than from its overtly traded exports — to pay for the imports. Experts point out that the DPRK has used its military threat to “extort” aid and other transfers from the United States, Japan, South Korea, and the humanitarian agencies. This, along with various illicit activities, has helped Pyongyang to finance a surfeit of imports. Detailed data on the country’s external economic relations suffer from reliability problems similar to those associated with the domestic economy. The foreign economic data on actual commercial transactions, however, tend to be more accurate since they also are reported by trading partner countries and are compiled by the International Monetary Fund and United Nations. Individual countries, for example, report on their imports from and exports to North Korea. These mirror statistics, however, differ from North Korea’s actual annual numbers because of differences in data gathering methods, coverage, timing, and reporting. Countries also may misreport trade with the Republic of Korea as trade with the Democratic People’s Republic of Korea. Detailed and reliable data on trade in military equipment and illegal drugs also are notoriously difficult to obtain and to verify. South Korea also compiles statistics on trade with North Korea that differ from its data reported to the United Nations. South Korea considers trade with the North as inter-Korean trade, not foreign trade. The trade figures that South Korea reports to the IMF for its commercial transactions with the North are considerably lower than the figures that it reports as inter-Korean trade [usually available from the Korea Trade-Investment Promotion Agency (KOTRA)]. The inter-Korean trade data reported by South Korea also include more detail on non-transactional trade (mostly foreign aid) with North Korea. IMF data also differ somewhat from those reported by data vending companies (such as Global Trade Atlas and Global Insight). This article uses a combination of trade totals (mirror statistics) from the IMF, partner country data from the Global Trade Atlas, intra-Korean trade from South Korea’s KOTRA, and references some estimates of total trade from Global Insight. The DPRK’s policy of juche, its suspicion of foreign countries, and the collapse of its industrial production, has resulted in a minimal level of commercial relations with other nations in the world. This trade has been rising in recent years, although much of this increase can be attributed to investments by South Korea and China in DPRK mining and manufacturing. As shown in Table 1, in 2007 North Korea exported an estimated $1,854 million in merchandise

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(down from $2,048 million in 2006) while importing $3,242 million (up from $2,962 million in 2006) for a merchandise trade deficit of $1,388 million. In recent years, North Korea’s exports to and imports from China and South Korea have risen. South Korea and China account for 73% of North Korean exports and 75% of North Korean imports. Economic sanctions imposed by Japan have reduced that bilateral trade to almost nothing. Table 1. Estimated North Korean Trade by Selected Trading Partner, Selected Years, 1994-2007 ($ in millions)

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World China Japan S. Korea Russia India* Thailand Germany

World China Japan S. Korea Russia India Thailand Germany Balance of Trade

North Korean Exports to: 1994 1999 2000 1,039 1,030 1,307 181 42 37 328 201 257 176 122 152 44 7 8 13 17 20 9 3 19 57 24 25 North Korean Imports from: 1994 1999 2000 1,286 1,353 1,859 467 329 451 171 148 207 18 212 273 70 48 38 41 35 173 13 38 189 59 32 53 -247 -323 -552

2001 1,148 167 226 176 17 3 24 23

2002 1,278 271 235 272 11 5 45 29

2003 1,251 395 174 289 3 1 57 24

2004 1,524 586 164 258 5 4 91 22

2005 1,683 499 132 340 7 8 133 45

2006 2,048 468 78 520 20 9* 148 17

2007 1,854 584 0 765 34 41* 34 16

2001 3,083 573 1,066 227 62 162 106 80 -1,935

2002 1,970 468 133 370 69 182 172 139 -692

2003 2,049 628 92 435 111 157 204 71 -799

2004 2,615 799 89 439 205 121 239 68 -1,090

2005 3,093 1,081 62 715 206 55 207 63 -1,410

2006 2,962 1,232 44 830 190 105 216 63 -914

2007 3,242 1,393 9 1,032 126 660 184 34 -1,388

Source: S. Korean data from S. Korea, Unification Ministry. World trade data from U.N. COMTRADE Database, accessed via U.S. Department of Commerce, Trade Policy Information System, August 2008. Country data from Global Trade Atlas and U.N. COMTRADE Database. World trade totals mirror data derived from U.N. reporter country trade with North Korea plus inter-Korean trade reported by South Korea and adjusted Indian data for 2006 and 2007. * Data for Indian imports from North Korea seem in error for 2006 and 2007. (Items such as electrical machinery and parts, in particular, likely actually were imported from South Korea.) After comparing reported Indian data with that for China, 2006 imports by India from North Korea of $475 million were reduced to $9 million, and 2007 imports of $173 million were reduced to $41 million.

North Korea’s major trading partners have been China, South Korea, Japan, Russia, Germany, Thailand and India (as well as Brazil, Singapore, and Hong Kong). As shown in Figure 4 and Table 1, North Korea’s major import sources have been China, South Korea, Russia, Japan, and Thailand. Germany and India also are major suppliers. Major imports by North Korea include machinery, minerals, plant products, and chemical products.[78] In particular, imports of energy materials and foods reflect Pyongyang’s attempts to remedy these fundamental shortages.

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Source: Data from U.N. COMTRADE Database, Global Trade Atlas, and (South) Korea Unification Ministry.

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Figure 4. North Korean Imports of Merchandise by Major Country of Source, 1994-2007.

Despite current tensions over Pyongyang’s nuclear program, imports appear to be growing and are estimated to have exceeded their peak in 2001 when a large shipment of food aid from Japan artificially increased the import total. Fuel imports from China, food imports from various countries, and supplies of material and components for assembly in the Kaesong Industrial Complex account for most of the increases. In 2007, imports from the United States and Japan were virtually nonexistent. It is apparent that China and South Korea increasingly are becoming the largest sources of imports for the DPRK. Major export markets for the DPRK have been China, Japan, and Thailand with South Korea developing as a major market following the easing of relations. (See Figure 5 and Table 1.) In Europe, Germany has been North Korea’s major trading partner, and in Latin America, Brazil is developing as a market for North Korea’s exports. Since 2003, exports to Japan have declined — due to trade sanctions and friction over the DPRK’s admitted kidnappings of Japanese citizens. North Korea’s major exports include ores, coal, animal products, textiles, machinery, electronic products, and base metals. A recent remarkable development has been North Korea’s increase in exports of primary products (such as fish, shellfish and agro-forest products) as well as mineral products (such as base metallic minerals). Pyongyang reportedly has imported aquaculture technology to increase production of cultivated fish and agricultural equipment to increase output of grains and livestock. It also has imported equipment for its coal and mineral mines. Much of the coal and mineral exports have resulted from partnering with Chinese firms through which the Chinese side provides modern equipment in exchange for a supply of the product being mined or manufactured. The production from the Kaesong Industrial Complex also has become significant. North Korean imports from South Korea and China both exceeded $1

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billion in 2006, and North Korean exports to South Korea reached $765 million and to China $582 million.

Sources: United Nations, COMTRADE Database and Global Trade Atlas using partner trade data. South Korean data from Korea Unification Ministry

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Figure 5. North Korean Exports of Merchandise by Major Country of Destination, 1994-2007.

Meanwhile, traditional exports of textiles and electrical appliances have been declining. This reflects North Korea’s unstable power supply, lack of raw materials and components imported from abroad, and the need to ship finished goods to China or another third country for final inspection. This diminishing ability of North Korea to provide a reliable manufacturing platform for the least complicated assembly operations without help from foreign investors does not bode well for the country’s future ability to generate the exports necessary to balance its trade accounts.

OTHER SOURCES OF FOREIGN EXCHANGE North Korea’s annual merchandise trade deficit of about $1 billion implies that Pyongyang must either be receiving imports without immediate payment required (aid and capital flows) or be generating foreign exchange through some means — either legal or illegal. Legal means include borrowing, foreign investments, foreign aid, remittances from overseas North Korean workers, selling military equipment not reflected in trade data, and by selling services abroad. Illegal methods include the counterfeiting of hard currency, illegal sales of military equipment or technology, sales of illegal drugs, or by shipping illegal cargo between third countries. The country also can dip into its foreign exchange reserves.[79]

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Legal Sources of Funds North Korea is able to borrow on international capital markets. As of the fourth quarter of 2007, the country had loans from foreign located banks that report to the Bank of International Settlements (BIS) of $50 million (down from $116 million at the end of 2006 and $121 million at the end of 2005, $81 million in 2004, and $190 million in 2003). The amount of loans for 2007 is a relatively small amount, only about $2 per capita. Total liabilities to BIS banks (including those located in North Korea) came to $1,532 million for the fourth quarter of 2007 (up considerably from $489 million in first quarter 2007). Most of these liabilities appear to be export credits. North Korea also had deposits of $388 million in BIS banks at the end of 2007.[80] International bond issues are not a major source of funds for North Korea. In May 2003, the country issued ten-year bonds — the first since 1950 — but since its sovereign securities are not rated by major Western credit rating agencies, the issue has generated little interest on international financial markets and is aimed at domestic investors. Pyongyang claims that a million people had signed up to receive the bonds, but many speculate that the deductions from the salaries of North Korean purchasers in amounts equivalent to four months’ wages to buy the bonds is not voluntary.[81] North Korea does not pay interest on the bonds. Rather the government holds a lottery in which the winners receive monetary prizes greater than the foregone interest on the bonds.[82] Table 2. North Korea: Total Net Receipts by Major Source/Donor, 2000-2006

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($millions)

U.S. Germany France Australia Norway Sweden Switzerland UK EC Multilateral World Food Program Arab Countries Total

Total Receipts Net 2000 2001 1.6 0.3 -2.4 34.1 28.4 12.8 7.9 4.8 4.6 7.9 3.5 3.4 1.0 6.1 -7.4 1.1 25.0 40.3 46.4 65.0 0.6 0.6

2002 131.2 35.0 -656.4 5.4 5.5 4.3 2.1 -15.9 61.2 40.1 0.1

2003 42.9 11.8 447.7 2.1 9.5 4.9 4.0 44.8 30.9 51.7 3.2

2004 56.5 54.2 1,151.1 3.9 5.6 46.2 3.9 142.3 31.4 47.5 7.5

2005 6.9 6.5 6.2 5.3 5.3 59.4 4.2 0.2 19.4 41.5 8.4

2006 0.4 3.2 -16.9 4.5 3.8 -74.8 7.0 .. 12.1 23.3 1.8

..

.4

1.8

1.3

10.8

5.7

2.1

76.07

188.6

-440.2

593.4

1,529.6

148.7

59.6

Source: Organisation for Economic Cooperation and Development. Source OECD, International Development Statistics, on-line database. [http://stats.oecd.org] Note: Data are from OECD members, multilateral agencies, and 12 other reporting nations excluding South Korea, China, and Russia. Multilateral Agencies include the UN, International Fund for Agricultural Development, Arab Agencies, and European Community. EC = European Community. Total Receipts include Official Development Assistance + Other Official Flows + Private Flows. In 2006, the DPRK received $101.8 million from the Netherlands.

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Although North Korea is not a major recipient of foreign direct investment (FDI), in 2006, the stock of foreign direct investment in the DPRK was $1,565 million. The inflow that year was $135 million, up from the inflow of $50 million in 2005, but less than the $197 million in 2004, and $158 million in 2003.[83] The FDI comes mainly from South Korea and China. North Korea’s free trade zones, particularly the Kaesong Industrial Complex, however, are attracting more foreign direct investment. In addition, South Korea’s Hyundai Corporation secretly paid North Korea nearly $500 million, partly in money borrowed from the South Korean government just a week before the two nations held a historic summit in June 2000. This was part of an estimated billion dollars or more Hyundai was to pay for exclusive rights to engage in seven major economic projects there.[84] A major source of funding for imports into the DPRK has been foreign aid or direct government transfers. Both developmental and humanitarian aid and past assistance under KEDO (Korean Peninsula Energy Development Organization, created under the 1994 Agreed Framework, but construction was terminated in 2003) to build two light water nuclear reactors and provide heavy fuel oil have enabled imports into North Korea without financing from Pyongyang. North Korea also receives funds in the form of official development assistance (ODA) from aid donor nations, multilateral development banks, and other organizations; other official flows; and private flows. The Organisation for Economic Co-operation and Development (OECD) compiles these data from its member nations plus 12 others and from multilateral agencies. The OECD data, however, do not include reporting from South Korea (Seoul considers transactions with the North as intra-country, not as foreign), China, or Russia (not members of the OECD). As shown in Table 2, in 2004, net total receipts for North Korea came to $1,529.6 million from donors, primarily because of a $1.15 1.1 million receipt from France, $142.3 million from the United Kingdom, and $56.5 million from the United States. In 2005, however, the net total dropped to $148.7 million as the dispute over North Korea’s nuclear program escalated, and fell further to $59.6 million in 2006 as North Korea made significant repayments of previously received funds. Table 3. North Korea: Net Official Development Assistance by Major Source/Donor (Excluding Russia, South Korea, and China), 1999-2006 ($ in millions) Total Net Official Development Assistance 2000 2001 2002 2003 1.6 0.3 131.2 42.9 1.5 27.0 33.2 7.2 1.7 0.3 0.5 -0.4 7.1 4.6 2.0 2.1 3.3 2.5 3.6 4.4 3.5 3.4 4.3 4.9 2.6 4.5 3.4 4.0 25.0 40.3 61.2 30.9 1.6 1.8 3.1 4.0

2004 2005 2006 U.S. 56.0 7.9 0.4 Germany 7.5 5.2 2.9 France -0.5 -0.4 0.6 Australia 3.3 4.6 2.7 Norway 5.6 5.3 3.8 Sweden 5.4 5.5 5.1 Switzerland 3.9 4.2 6.0 European Community 31.4 19.4 12.1 Multilateral Agencies 1.1 2.7 1.7 (not EC) Non DAC* — 0.4 1.87 1.4 11.1 5.9 2.3 Total 73.3 117.6 265.2 131.0 160.8 86.8 54.5 Source: Organisation for Economic Cooperation and Development, Development Statistics database. *Non DAC=Non-OECD Development Assistance Committee, such as Thailand and Poland.

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As shown in Table 3, much of the total receipts by North Korea came in the form of official development assistance. In recent years, the country has received between $46 and $286 million in net official development assistance (ODA) from the countries and agencies that report such data to the OECD (does not include Russia, China, and South Korea). In 2004, total net ODA was $120.8 million, in 2005 was $64.7 million, and in 2006 was 45.7 million. The major donors have been the multilateral agencies, European Community, the United States, Sweden, Norway, and Germany. The United States also has paid North Korea to search for remains of American servicemen missing from the Korean War. In 2003, it paid $2.1 million to conduct four searches.[85] As indicated in Table 4, between 2000 and 2004, South Korean government assistance to North Korea ran at around $500 million per year. South Korean civilian organizations also provided assistance to North Korea ($71 million in 2003).[86] The KEDO item is for energy and funds provided to the Korean Peninsula Energy Development Organization in exchange for North Korea’s pledge to dismantle its existing nuclear program. This program has been halted.[87]

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Table 4. Economic Aid and Other Official Flows From South Korea to North Korea, 2000-2004 and Total 1995 to 2004 ($ in millions) Year/ Type Total KEDOa Food Aid Pledges Fertilizer Pledges Road & Rail Links Payment for 2000 Summit Mt. Kumgang Toursb Aid to ROK Business Kaesong Industrial Complexb Family Reunions Otherc

2000 706.5 308.9 93.4

2001 453.2 271.1 17.3

2002 584.9 288.7 120.4

2003 650.4 333.0 122.2

2004 543.3 137.1 164.6

Total 1995-2004 3,279.7 1,365.2 794.9

83.4

49.5

66.6

70.1

89.8

387.9

12.9

69.6

53.5

94.1

92.6

322.7

—

34.8

43.9

5.1

6.8

90.6

0.4

0.8

2.2

10.7

11.9

26.1

21.8

21.8

200.0

2.4

1.0

1.6

2.5

2.8

10.7

5.0

9.1

7.9

12.8

15.9

50.7

Source: CRS Report RL31785, Foreign Assistance to North Korea, by Mark E. Manyin, Appendix A. See report for data sources and analysis. a . Korean Peninsula Energy Development Organization b . Republic of Korea Export-Import Bank’s “DPRK Support Fund” c. Includes Cultural Exchanges and Aid to non-governmental organizations

Another major source of income for certain North Korean families has been in remittances from overseas Koreans, particularly those who live in Japan.[88] Most of the North Koreans in Japan either remained there after World War II or are descendants of those people. Some had been forcibly brought there to work in coal mines or factories during the

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50-year Japanese occupation of Korea. Currently, of the approximately 650,000 ethnic Koreans who live in Japan, an estimated 56,000 to 90,000 are from the North Korean area, and many are reported to be actively involved in supporting the Pyongyang regime. Ethnic Koreans in Japan work in a variety of businesses and occupations, but they face discrimination in Japanese society and are known for operating pachinko (pinball) parlors and other enterprises providing entertainment and night life as well as being involved with Japan’s yakuza or gangsters. Many of these, as well as managers of North Korean-related credit unions, regularly have sent remittances to relatives or associates in North Korea. One unusual method of smuggling money to North Korea has been to hide 10,000 yen bills (worth roughly $90 each) under expensive melons being shipped to Kim Jong-il as gifts.[89] Given the decade of stagnation of the Japanese economy and rising tensions between Japan and North Korea, these remittances have reportedly been declining. A 2003 Japanese newspaper report placed the amount at between $200 million and $600 million per year, but that figure could be exaggerated.[90] In testimony before parliament, Japan’s Finance Minister stated that in Japan’s FY2002, $34 million had been sent from Japan to North Korea through financial channels that required reports to the Japanese government.[91] A working estimate would be approximately $100 million per year in such remittances. Anecdotal evidence indicates that considerable amounts of currency from Japan are simply carried by individuals on ships and not reported. More than 1,000 North Korean freight vessels had been traveling between North Korea and Japan each year. Japan, however, has tightened inspections of North Korean ships and curtailed operations of ferry boats traveling between the two countries.[92] In summary, the DPRK’s net total receipts plus remittances, aid and investments from South Korea, and special food and fuel assistance in connection with negotiations over Pyongyang’s nuclear program, constitute most of the overt resource inflows that North Korea receives each year over and above its export earnings. These amount to perhaps $700 million on net per year. North Korea must finance the remainder of its trade deficit — about $800 million — by other means. It appears that these other means include exports of military equipment and illicit activity.

ILLEGAL OR QUESTIONABLE SOURCES OF FUNDS[93] Data on North Korean sales of military equipment abroad is understandably murky, but the country is thought to have sold hundreds of ballistic missiles to Iran, Iraq, Syria, Pakistan, and other nations in the past decade to earn foreign currency.[94] The interdiction by Spain of an unmarked vessel in December 2002 containing parts for 12 to 15 Scud missiles (valued at about $4 million each) bound for Yemen from North Korea is one example of such arms sales.[95] In testimony before the House Committee on International Relations, the Undersecretary of State for Arms Control and International Security pointed out that North Korea possesses Scud and NoDong missiles and is developing the Taepo-Dong 2. He stated that the country is by far the most aggressive proliferator of missiles and related technologies to countries of concern. These sales are one of the North’s major sources of hard currency.[96] According to a U.S. military officer quoted in the Japanese press, North Korea exported $580 million worth of ballistic missiles to the Middle East in 2001.[97] Between 1998 and 2001, North Korea is estimated to have exported some $1 billion in conventional arms to developing nations.[98]

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With respect to illegal drug trade, officials from the U.S. military command in Seoul reportedly said that North Korea is earning between $500 million and $1 billion annually from the narcotics trade.[99] North Korea is thought to produce more than 40 tons of opium per year which would make it the world’s third-largest opium exporter and sixth-largest heroin exporter. The regime also is accused of trafficking in methamphetamine stimulants. U.S. counter-narcotics officials are reported to have said that since 1976, there have been at least 50 arrests or drug seizures involving North Koreans in more than 20 countries. Japanese authorities say that nearly 50% of illegal drug imports into Japan come from North Korea.[100] According to the U.S. State Department, although such reports have not been conclusively verified by independent sources, defector statements have been consistent over years and occur in the context of regular narcotics seizures linked to North Korea. The State Department’s International Narcotics Control Strategy Report for 2007 stated its view is “that it is likely, but not certain, that the North Korean government has sponsored criminal activities in the past, including narcotics production and trafficking, but notes that there is no evidence for several years that it continues to traffic in narcotics.” During 2006, the Japanese media reported that drug trafficking occurred along the DPRK-PRC border with Japanese criminal figures traveling to the border area to purchase methamphetamine for smuggling back to Japan. According to the State Department, in March 2006, a new decree warned citizens, state factories and groups in the DPRK to “...not sell, buy, or use drugs illegally” and that “organizations, factories and groups should not illegally produce or export drugs.” Punishment is severe, up to death, and the family members and shop mates of offenders face collective responsibility and punishment with the perpetrator.[101] In a blatant incident in May 2003, the Australian navy and special forces commandeered a North Korean ship (Pong Su) off the country’s southern coast that allegedly was moving 110 pounds of almost pure heroin valued at $50 million. The ship apparently picked up the heroin elsewhere in Asia and took a circuitous route to Australia.[102] Allegations also have been made that North Korea engages in counterfeiting operations, particularly of U.S. $100 notes. It is believed that the country has earned $15 million to $20 million per year in counterfeiting,[103] but it is not clear that North Korea currently engages in counterfeit currency production, although such notes still reportedly circulate. In the opinion of a North Korean expert at Seoul’s Sejong Institute, “North Korea’s economy had received a death sentence long ago, but it keeps afloat thanks to international aid and the country’s trading in weapons and illicit goods.”[104] Since late 2005, the United States has taken several measures to reduce illicit financial activities by North Korea. On June 28, 2006, President Bush issued Executive Order 13382 (Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters).[105] On October 21, 2005, pursuant to Executive Order 13382, the U.S. Treasury designated eight North Korean entities as proliferators of weapons of mass destruction and their delivery vehicles. The action prohibited all transactions between the designated entities and any U.S. person and froze any assets the entities may have had under U.S. jurisdiction.[106] On September 15, 2005, the U.S. Treasury designated Banco Delta Asia SARL as a “primary money laundering concern” under Section 311 of the Patriot Act because it represented an unacceptable risk of money laundering and other financial crimes. Treasury stated that “Banco Delta Asia has been a willing pawn for the North Korean government to engage in corrupt financial activities through Macau ...”[107] On March 14, 2007, the Treasury finalized

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its rule against Banco Delta Asia, barring the bank from accessing the U.S. financial system, but allowing the $25 million in North Korean funds held to be released.

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U.S.-DPRK TRADE RELATIONS U.S. trade with the DPRK is quite limited. The United States does not maintain any diplomatic, consular, or trade relations with North Korea, and the country does not have normal trade relations (most favored nation) status. This means that North Korean exports are subject to the relatively high tariffs existing before World War II in the United States. For example, women’s blouses of wool or cotton carry a 90% import duty if from North Korea but are duty free if from free-trade agreement countries, such as Canada, Israel, or Mexico, or are subject to 9 to 10% duty if from most other nations. As a communist nation, North Korea also does not qualify for duty-free treatment of certain products that are imported from designated developing countries under the generalized system of preferences program.[108] The United States, moreover, maintains various economic sanctions on North Korea because the country is on the U.S. State Department list of state supporters of international terrorism, is considered a threat to national security, is a communist state, and it proliferates weapons of mass destruction.[109] In June 2008, however, the Bush Administration announced that it was lifting restrictions under the Trading with the Enemy Act and was starting the process to remove the DPRK from the list of State Sponsors of Terrorism. Other sanctions, including U.N. sanctions imposed following North Korea’s nuclear test, still remain in place. The United States resumed shipments of food and heavy fuel oil to North Korea as humanitarian aid. Travel to and trade with North Korea in other than dual-use goods are allowed if overarching requirements are met, and there are no restrictions on the amount of money Americans may spend in the DPRK. The sanctions related to the proliferation of weapons of mass destruction generally target the offending entities. North Korean assets in the United States frozen prior to June 19, 2000, remain frozen. North Korea is on the most restricted list of countries for U.S. exports (Country Group E list) of items such as computers, software, national security- controlled items, items on the Commerce Control List,[110] and service or repair of such items. Economic sanctions on North Korea, however, are essentially unilateral by the United States. Most other nations (except Japan) allow relatively free trade in non-sensitive goods with the DPRK. In October 2007, President Bush reportedly approved the lifting of some sanctions imposed on the DPRK under an act governing human trafficking. This easing allowed the United States to provide assistance in educational and cultural exchanges to the extent that the aid doesn’t damage its national interest.[111] In February 2008, the New York Philharmonic Orchestra performed in Pyongyang.[112] In October 2007, the White House requested $106 million “to provide Heavy Fuel Oil or an equivalent value of other assistance to North Korea on an “action-for-action” basis in support of the Six-Party Talks in return for actions taken by North Korea on denuclearization.[113] The Consolidated Appropriations Act, 2008 (H.R. 2764, PL 110-161, Signed December 26, 2007) provided for up to $53 million for energy-related assistance for North Korea. The United States uses trade with North Korea as leverage and to send a message of disapproval for various activities by Pyongyang. As the six-party nuclear talks have progressed,

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however, the United States has expressed its willingness begin discussions to normalize relations with the DPRK, has taken steps to remove it from the terrorism list,[114] and has indicated its willingness to negotiate a peace treaty to formally end the Korean Conflict. The way also could be opened for North Korea’s admission to membership in international financial institutions (such as the World Bank, International Monetary Fund, and Asian Development Bank). This would allow the DPRK to receive development assistance that would help finance additional imports from countries such as the United States. Table 5 shows U.S. trade with North Korea for 2004-2007. In 2004, U.S. exports to the DPRK of $23.8 million were mostly for food provided as humanitarian aid. In 2005, food aid was down to $5.8 million, and in 2006 had ceased. In 2006, the only U.S. exports were books and newspapers worth $3,000. With some progress in the Six-Party Talks, in 2007, U.S. exports of white wheat to North Korea rose to $1.728 million. As for imports, in 2004, the United States imported $1.5 million in organic chemicals plus $77,000 in woven apparel from North Korea. In 2005, imports had dropped to $3,000 worth of tools and cutlery, and were nil in 2006 and 2007. Table 5. U.S. Trade by Commodity With the Democratic People’s Republic of Korea (North Korea) in 2004-2006 ($ in thousands) SITC Category Year Cereals and Cereal Preparations Fixed Vegetable Fats and Oils Vegetables Preparations of Cereal, Flour, Starch or Milk; Bakers Wares Misc. Grain, Seed, Fruit Dairy Products and Birds’ Eggs Misc. Textile Articles Organic Chemicals Woven Apparel Tools, Cutlery Books, Newspapers Total

U.S. Exports 2004 2005 10,285 2,277

2006 0

2007 1,728

U.S. Imports 2004 2005 0 0

2006 0

2007 0

4,259

0

0

0

0

0

0

0

3,461 2,459

1,806 0

0 0

0 0

0 0

0 0

0 0

0 0

1,573

0

0

0

0

0

0

1,157

0

0

0

0

0

0

0

191 0 0 0 0 23,750

0 0 0 0 0 5,757

0 0 0 0 3 3

0 0 0 0 0 1,728

0 1,418 77 0

0 0 0 3 0 3

0 0 0 0 0 0

0 0 0 0 0 0

1,495

Source: U.S. Department of Commerce accessed through World Trade Atlas.

Table 6 shows U.S. merchandise exports, imports, and trade balances with North Korea since 1990. Imports have been zero or relatively low with a peak of $1,495,000 in 2004. Almost all of these imports from North Korea were organic chemicals and woven apparel. A possible concern is that imports of books, newspapers, and manuscripts have dropped to zero. For a country with great strategic importance to the United States, information on North Korea is not flowing directly into the U.S. market. U.S. exports at $23,750,000 in 2004 rose from $32,000 in 1990 to $25,012,000 in 2002. Another peak occurred in 1995 when U.S. exports totaled

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$11,607,000. Of this amount, $10,810,000 was in cereals. The small annual deficit in U.S. trade with North Korea arises primarily from food aid that has been provided to the DPRK. Table 6. U.S. Merchandise Exports, Imports, and Trade Balances with North Korea, 1990-2007 ($ in thousands) Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

U.S. Exports 32 484 83 1,979 180 11,607 541 2,409 4,454 11,265 2,737 650 25,012 7,977 23,750 5,757 3 1,728

U.S. Imports 0 10 0 0 0 0 0 0 0 29 154 26 15 0 1,495 3 0 0

Balance 32 474 83 1,979 180 11,607 541 2,409 4,454 11,236 2,583 624 24,997 7,977 22,255 5,754 3 1,728

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Source: U.S. Department of Commerce through World Trade Atlas.

According to the U.S. Department of Commerce, the United States has no direct investment in North Korea.[115] An American company interested in doing business in North Korea, particularly establishing a company, likely would work through an overseas subsidiary. Some American business executives with the U.S. Chamber of Commerce in South Korea, for example, reportedly travel to North Korea for business purposes,[116] and some U.S. enterprises reportedly are working as subcontractors in the development of North Korea’s Kaesong industrial complex.[117]

NORTH-SOUTH KOREAN ECONOMIC RELATIONS Economic relations have been a major route for opening relations between North and South Korea. Seoul has a major stake in relations with the DPRK and the outcome of the current Six-Party Talks.[118] It seeks a “soft landing” for the current standoff over the North’s nuclear program — one that will lead to a lessening of tensions and steady integration of North Korea’s economy into the global economic and financial system. As with other countries divided by ideology and a history of hostilities as “pawns” on the chess board of the Cold War, the two halves of the peninsula face numerous issues to be resolved before they can normalize relations — let alone contemplate reunification. South Korea has much to gain from rapprochement with the North. Its strategy has been to use its economic leverage and family reunions (families separated by the division of the Korean Peninsula) to open channels with the North Korean people while maintaining a credible military

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deterrent to overt hostile action by Pyongyang. South Korea recognizes that essentially it has won the Cold War on the Korean peninsula, but it recoils at the prospect of funding economic rehabilitation in the DPRK as West Germany did with East Germany. Seoul also recognizes that its economic ties are gradually shifting from reliance on the American market to greater integration with China, Japan, and other countries of Asia. Its labor costs are rising, and many of its companies are remaining competitive only by manufacturing in China and other lowwage markets. For them, the prospect of abundant cheap labor just a short distance to the north is appealing and perhaps an alternative to cheap labor in China. In 2007, total merchandise trade between the two Koreas increased to $1,797.9 million, up from $1,349.7 million in 2006 and more than triple the $403.0 million just six years earlier. The largest increases have been in South Korean exports which reached $1,032.6 million, up 24% from $830.2 million in 2006. Imports from North Korea also rose to $765.3 million, up 47% from $519.6 million in 2006. Much of the increase in exports has been in the form of food and industrial goods. In 2006, $419.3 million in South Korean exports to the North were actually South Korean aid shipments. The major items purchased by South Korea from the North include food/aquatic/forestry products, textiles, steel/metal products, and electronics. The major South Korean exports to North Korea include chemicals, textiles, machinery, steel/metal products, and food/forestry products. Since 1992, particularly under the Sunshine Policy of former South Korean President Kim Dae Jung and under the Policy for Peace and Prosperity of former President Roh Moo-hyun, Seoul has permitted its corporations to pursue business interests in North Korea. In 2003, the government allowed activities by 89 companies including 35 involved in contract processing (assembly, sewing, or other processing done under contract) by North Koreans.[119] The companies included Daewoo (jackets, bags), Samsung Electronics (communications center, switchboard), Samcholi Bicycle, Green Cross (medicine), International Corn Foundation (corn seeds), Hyundai (Mt. Kumkang tourism, development), and Hanshin Co. (glass). The Korea Electronic Power Corporation’s work on the construction of a light water nuclear power plant under the U.S.-North Korean 1994 Agreed Framework has been halted.[120] One global strategy of South Korean businesses is to develop processing sites in North Korea to take advantage of low labor costs there; in some cases, labor costs are competitive with those in China. The two countries also have taken some halting steps toward linking their economic systems. In addition to the business relationships, since September 2002, the two countries have been reconnecting the Gyeongui (Seoul-Sinuiju) and Donghae (East Sea) railway lines and adjacent highways. As discussed in the section above on Economic Reforms and Free Trade Zones, the focus of North-South economic cooperation now is the Kaesong Industrial Complex (KIC). Managed by South Korea’s Hyundai Asan and Korea Land Corporation and located just over the border in North Korea, this 810 acre complex already has attracted small and medium sized enterprises from South Korea. The KIC accounts for much of the increased commercial trade between the North and the South. In 2006, the KIC produced some $7.5 million worth of goods each month.[121] It provides small- and medium-sized South Korean firms with a low-cost supply of labor for manufacturing products, provides jobs for North Korean workers, and provides needed hard currency for Pyongyang. North Korea depends more on South Korea in international trade than South Korea does on the North. North Korea accounts for less than 1% of total South Korean exports, while North Korean exports to South Korea account for more than a third of total North Korean

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exports. South Korea has access to global markets for many of its world class industries (automobiles, semiconductors, consumer electronics, etc.), while North Korea faces restricted markets for its limited array of exports. In his inaugural speech on February 25, 2008, President Lee Myung-bak indicated that South Korea attitude toward inter-Korean relations should be pragmatic, not ideological. He reiterated his plan to provide assistance in order to raise the per capita income of North Korea to $3,000 within ten years if Pyongyang denuclearizes.[122] Table 7. South Korean Merchandise Trade with North Korea, 1990-2007 ($ in thousands) Year

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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

South Korean Imports 12,278 105,719 162,863 178,167 176,298 222,855 182,400 193,069 92,264 121,604 152,373 176,170 271,575 289,252 258,000 340,300 519,563 765,346

South Korean Exports 1,188 5,547 10,563 8,425 18,249 64,436 69,639 115,270 129,679 211,832 272,775 226,787 370,155 434,965 439,000 715,500 830,198 1,032,550

Total Trade 13,466 111,266 173,426 186,592 194,547 287,291 252,039 308,339 221,943 333,436 425,148 402,957 641,730 724,217 697,000 1,055,800 1,349,761 1,797,896

Balance -11,090 -100,172 -152,3 -169,742 -158,049 -158,419 -112,761 -77,799 37,415 90,228 120,402 50,617 98,580 145,713 181,000 375,200 310,635 267,204

Sources: South Korea Ministry of Unification, KOTRA.

CHINA-DPRK ECONOMIC RELATIONS China remains North Korea’s chief ally. In addition to sharing its status as one of the last communist regimes in the world, China views the Korean peninsula as vital to its strategic interests. Beijing values North Korea as a buffer between the democratic South Korea and the U.S. forces stationed there, as a rationale to divert U.S. and Japanese resources in the Asia Pacific toward dealing with Pyongyang and less focused on the growing military might of China, and as a destination for Chinese foreign investment and trade. Beijing arguably has more influence in Pyongyang than any other nation. Cooperation between the two countries is extensive but often strained. In 1961, China and the DPRK signed a mutual defense pact, but recently a Chinese official reportedly said that they are not “well informed of the internal situation of the North Korean military” and that the DPRK “does not listen to what China has to say.”[123] (This presumably referred to Pyongyang’s missile and nuclear tests.) Also with respect to North Korean refugees, their first destination is usually northeastern China. According to Human Rights Watch, China labels North

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Korean border-crossers as illegal economic migrants, rather than refugees or asylum seekers, and usually sends them back to North Korea.[124] China also is hosting and facilitating the ongoing Six-Party Talks that seek a resolution to the North Korean nuclear problem. In August 2001, Chinese President Jiang Zemin visited Pyongyang and promised increased humanitarian and economic assistance. In April 2004, Kim Jong-il visited Beijing to discuss food aid and nuclear issues. According to Jane’s Information Group, several issues have arisen to cause friction in the Sino-North Korean relationship. These include • • • • • •

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• •

Chinese exasperation at the DPRK’s failure to reform its economy; Pyongyang’s prevarication over the nuclear and peace treaty issues and the consequent dangerous stimulus this provides to proliferation in the region; The nuclear standoff with the United States and Pyongyang’s possession of nuclear weapons; Growing economic and political rapport between Pyongyang and Taipei; The North Korean refugee problem on the China-DPRK border; Pyongyang’s missile testing, prompting Japan to acquire a Theater Missile Defense system, with Taiwan wishing to be included; North Korea’s construction of underground missile sites close to the Chinese border; and North Korea’s cavalier attitude towards business. (China occasionally suspends shipments of humanitarian aid to the DPRK because Pyongyang regularly ‘forgets’ to return Chinese railroad rolling stock.)[125]

In 2006, Pyongyang’s missile and nuclear tests severely strained relations between China and the DPRK. Beijing had warned the DPRK not to conduct either of the tests and “lost face” when Pyongyang went ahead with them anyway. As a result, for the first time China agreed to UN resolutions imposing sanctions on the DPRK[126] and also took measures to halt banking transactions with North Korean entities and to curtail shipments of petroleum. China, however, did not agree to conduct inspections of shipments along its borders with North Korea. Some analysts indicate that Pyongyang may be growing weary of its lop-sided relations with Beijing and may be attempting to become more independent. Pyongyang may view nuclear weapons as a “trump card to intimidate China as much as the United States.”[127] Since the collapse of the Soviet Union, China has been the DPRK’s largest trading partner and supplier of concessional assistance (through subsidized trade and direct transfers). As an export market and source of imports, however, North Korea plays a relatively minor role for China. In 2007, the DPRK ranked 68th among China’s export markets — smaller than Peru, Egypt, or Hungary. As a source of imports, North Korea also ranked 68th — below Gabon, Yemen, or Belgium. Table 8 shows China’s merchandise trade with the DPRK. China is a major source for North Korea of imports of petroleum. According to Chinese data, exports to the DPRK of crude oil reached $282.0 million and shipments of oil (not crude) totaled $95.4 million. These two categories accounted for 27% of all Chinese exports to the DPRK. China, however, does not appear to be selling this oil to North Korea at concessionary prices. In 2007, the average price for Chinese exports of crude oil to North Korea was $0.54 per kilogram, while it was $0.49 for such exports to the United States, $0.43 for South Korea, $0.48 for Japan, and $0.29 for Singapore.[128]

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Dick K. Nanto and Emma Chanlett-Avery Table 8. China’s Merchandise Trade with the DPRK, 1995-2007 ($ in millions) Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

China’s Imports 63.609 68.638 121.610 51.089 41.722 37.214 166.797 270.863 395.546 582.193 496.511 467.718 581.521

China’s Exports 486.037 497.014 534.411 356.661 328.634 450.839 570.660 467.309 627.995 794.525 1,084.723 1,231.886 1,392.453

Total Trade 549.646 565.652 656.021 407.750 370.356 488.053 737.457 738.172 1,023.541 1,376.718 1,581.234 1,699.604 1,973.974

China’s Balance 422.428 428.376 412.801 305.572 286.912 413.625 403.863 196.446 232.449 212.332 588.212 764.168 810.932

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Sources: Chinese (PRC excluding Hong Kong) data as supplied by World Trade Atlas.

China also provides aid directly to Pyongyang. By bypassing the United Nations, China is able to use its assistance to pursue its own political goals independently of the goals of other countries. It is widely believed that Chinese food aid is channeled to the military. This allows the World Food Program’s food aid to be targeted at the general population without risk that the military-first policy or regime stability would be undermined by foreign aid policies of other countries.[129] In November 2003, China reportedly transferred responsibility for securing its border with North Korea from the police to its army.[130] Many of China’s two million ethnic Koreans live along this border, and it is a favorite crossing point for refugees from North Korea. In 2006, China built a 20-kilometer long fence along its border with North Korea. It is located primarily along areas where the Yalu River dividing the two countries is narrow and the river banks low.[131] Much of China’s trade with the DPRK goes through the port of Dandong on the Yalu River. In 2002, 40% of Chinese exports to and 11% of its imports from North Korea passed through Dandong.[132] China’s major imports from North Korea include mineral ores, mineral fuels (coal), woven apparel, fish and seafood, iron and steel, and wood. China’s major exports to North Korea include mineral fuels and oil, meat, electrical machinery, machinery, plastic, man-made filament, vehicles, and iron and steel. (See section of this article on foreign investments for activity by Chinese firms in the DPRK.)

JAPAN-DPRK ECONOMIC RELATIONS Japan’s economic relations with North Korea have declined sharply as tension over Pyongyang’s nuclear and missile programs has spiked. After North Korea test launched several missiles in July 2006 and then detonated a nuclear device in October 2006, Japan imposed strict unilateral sanctions, causing bilateral trade to plummet. Japan banned imports and most North Korean nationals from entering Japan, prohibited all North Korean ships from entering Japanese ports, and outlawed the export of “luxury goods” to North Korea, including caviar, jewelry, liquor, and any food known to be favored by North Korean leader Kim Jong-il. Tokyo

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has also ceased sending any humanitarian aid to North Korea, and has refused to provide economic or energy assistance until their concerns with Pyongyang are resolved. This pattern is a reversal of earlier economic relations. Although Japan and North Korea have never established official diplomatic relations, the two nations maintained significant economic ties for well over a decade. From the end of the Cold War, Japan was second only to China among North Korea’s top trading partners. Bilateral trade declined considerably in the 1980s, but the drop was attributed primarily to the steep overall downturn of the North Korean economy as much as the state of bilateral relations. Before relations deteriorated, Japanese leaders made several efforts to normalize relations with North Korea, promising considerable economic assistance to the country. Since 2002, however, North Korea’s provocative missile and nuclear device tests, along with the issue of Japanese citizens kidnapped by North Korean agents in the 1 970s and 1 980s, has stalled any further diplomatic progress and retarded economic relations. From 2001-2005, Japan’s share of North Korean trade declined as China, South Korea, and Russia expanded trade with Pyongyang.

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Table 9. Japan’s Merchandise Trade with the DPRK, 1994-2007 ($ in millions) Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Japan’s Imports 328.313 338.073 290.745 301.796 219.489 202.564 256.891 225.618 235.840 174.390 164.299 132.277 77.776 0.000

Japan’s Exports 17 1.092 253.798 226.480 178.942 175. 137 147.839 206.760 1,064.5 19 132.645 91.445 88.743 62.505 43 .8 16 9.33 1

Total Trade 499.405 591.871 517.225 480.738 394.626 350.403 463.651 1,290.14 368.485 265.835 253.042 194.782 12 1.592 9.33 1

Japan’s Balance -157.22 1 -84.275 -64.265 -122.854 -44 .3 52 -54.725 -50. 13 1 838.901 -103.195 -82.945 -75.5 56 -69.772 -33.96 9.33 1

Source: Japanese data as supplied by World Trade Atlas.

As indicated in Table 9, by 2007, total trade between Japan and the DPRK had fallen to $9 million from $1,290 million in 2001. In 2007, Japan had no imports from the DPRK and reported exports of $3 million in bicycles, $2 million in trucks, and $0.3 million in public transport vehicles. North Korea is Japan’s 168th largest export market, below Namibia, Bhutan, and Botswana. Before Japan stopped importing from North Korea, seafood made up almost half of the North’s exports to Japan, followed by electrical machinery, aluminum and articles thereof, mineral fuels, and apparel. North Korean clams and mats utake mushrooms are particularly prized in the Japanese market. Japan sent items such as vehicles, electrical machinery, boilers/reactors, manmade filaments, wool, and articles of iron or steel to North Korea. Some Japanese lawmakers have argued that Japan should expand the ban on imports from North Korea to cover exports as well. Japan’s food aid to North Korea has also dwindled as relations soured. The pattern of Japanese aid reflects developments in the political relationship between Tokyo and Pyongyang: shipments began in 1995 and 1996 when relations warmed, were temporarily suspended

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periodically as tensions mounted, and eventually ceased altogether in late 2004 because of disagreement over the abduction issue. Between 1995 and 2004, Japan provided 1.2 million metric tons of humanitarian food aid to North Korea, mostly through the United Nations World Food Program.[133] A group of pro-Pyongyang ethnic Koreans living in Japan known as the Chosen Soren (Chongryun in Korean) in the past provided North Korea with additional funds in the form of cash remittances and, possibly, facilitated illicit trade such as drug trafficking and counterfeiting. Although the exact amount of remittances is unknown, the total appeared to be in the neighborhood of $100 million per year but declined sharply since the early 1 990s. A series of scandals involving ethnic Korean banks in Japan revealed that money was illegally channeled to North Korea through the network of Chosen Soren-affiliated credit unions. Following the missile tests in 2006, Japan froze fund transfers and overseas remittances by 15 groups and one individual suspected of links to North Korean weapons programs, and established rules that require financial institutions to report to the Japanese government remittances overseas of more than 300 million yen.

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RUSSIA-DPRK ECONOMIC RELATIONS Russian reforms and the end of the Cold War greatly reduced the priority of the DPRK in the strategy of Russian foreign policy. Following Soviet support of North Korea in the Korean War, the USSR provided assistance to Pyongyang that helped equip its military and create its heavy industrial sector. In 1998, at the peak of the bilateral relationship, about 60% of North Korea’s trade was with the Soviet Union. Much of the trade was in raw materials and petroleum that Moscow provided to Pyongyang at concessional prices. Relations between the two cooled in the 1 990s as Russia recognized South Korea, announced that trade with North Korea was to be conducted in hard currencies, and opted out of its bilateral defense agreement.[134] Recently, overall relations between Russia and North Korea have been improving. Russia is upgrading its railway connections with the DPRK and has been participating in an ambitious plan to build a trans-Korean railway. As is the case with China and South Korea, Russia is critical to North Korean security, since Russia shares a border with the DPRK, and Russian cooperation would be necessary to enforce any security guarantee. As fuel aid from abroad has decreased, moreover, North Korea has turned again toward Russia as a source of supply. An observer of Russia-DPRK relations views Russian policy toward North Korea as an important component of Moscow’s general strategy toward what it considers the critically important Asia-Pacific region. Russia’s strategic course includes a calculating and pragmatic approach toward North Korea and the Korean Peninsula in general. Moscow has gained unique and exclusive communications capabilities with Pyongyang based on the development of trust between the leadership of the two states at the highest political levels[135] This observer also points out that the perspective of Russia on the North Korea nuclear issue does not fully coincide with that of the United States. While Moscow has insisted on a denuclearized Korean peninsula and the irreversible dismantlement of North Korea’s nuclear weapons and nuclear development programs, it also firmly supports the peaceful resolution of the issue. Russia is a participant in the Six-Party Talks. Moscow apparently has concluded that the

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Kim Jong-il regime does not face impending collapse, and therefore, outside pressure and economic sanctions intended to bring about regime change work only to increase tensions and the probability of a military confrontation. Russia also does not favor a Korean Peninsula unified by military force with American help. This would put U.S. forces on the Russia-Korean border. Rather, Russia supports a unified Korea that would maintain friendly relations with all countries, including Russia, and opposes foreign interference in the unification process.[136] As is the case with China, Russia also is concerned that economic hardships in the DPRK push refugees across the border into Russian territory. Moscow also supported U.N. Security Council Resolutions in 2006 that condemned North Korea’s missile and nuclear tests. This has cooled the relationship to some extent. The DPRK’s trade with Russian lags behind what it has been in the past. In 2007, North Korea ranked 88th among Russia’s sources of imports (below Jamaica and Ghana) and 81st in terms of markets for Russian exports (below the Virgin Islands and Gibraltar). The increasing volume of Russian mineral fuel exports to the DPRK has moved Russia past Japan, Germany, and Thailand to become North Korea’s third largest trading partner. Major Russian exports to the DPRK include mineral fuels, aircraft, iron/steel, wood and pulp, paper, and non-rail vehicles. The large increase in Russian exports have come mostly in mineral fuels which increased from $20 million in 2002 to a peak of $224.4 million in 2005 before declining to $190.6 million in 2006 and $73.5 million in 2007. Of these, solid fuels from coal and oil accounted for the majority of the exports. Pyongyang has had to turn to Russia as a source for energy as supplies of fuel oil from the United States, Japan, and South Korea were curtailed as the Six-Party Talks bogged down. Major Russian imports from North Korea include machinery, electrical machinery, and manmade staple fibers. Table 10. Russia’s Merchandise Trade with the DPRK, 1994-2006 Copyright © 2009. Nova Science Publishers, Incorporated. All rights reserved.

($ in millions) Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Russia’s Imports 44.00* 15.00* 347.00* 16.790 8.463 7.208 7.633 14.664 10.317 2.903 4.575 6.862 20.076 33.539

Russia’s Exports 52.00* 70.00* 525.00* 72.449 56.497 48.507 35.631 56.099 47.404 112.343 204.665 224.402 190.563 126.068

Total Trade 96.00* 85.00* 872.00* 89.239 64.960 55.715 43.264 70.763 57.721 115.246 209.240 231.264 210.639 159.607

Balance 8.00* 55.00* 178.00* 55.659 48.034 41.299 27.998 41.435 37.087 109.440 200.090 217.540 170.487 92.529

Sources: Russian data as supplied by World Trade Atlas. *1994-96 data from International Monetary Fund. Direction of Trade Statistics.

In December 2006, Russia reportedly agreed to write off some 80% of the $8 billion in debt owed it by the DPRK. North Korea had borrowed the funds in the 1 960s to build

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power plants. This opens the way for Russia to engage in more economic cooperation with the DPRK and to facilitate progress in the Six-Party Talks.[137]

U.S. INTERESTS, STRATEGY, AND POLICY The three legs of any grand strategy toward the DPRK include economic, diplomatic, and military means to accomplish U.S. goals and protect U.S. national interests. This article examines the economic side of this triad of strategic policy instruments but also reviews the diplomatic and military aspects of U.S. policy in order to provide a policy context.

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U.S. Interests, Goals, and Strategy The DPRK threatens several U.S. national interests. It threatens U.S. security through its development and potential proliferation of nuclear weapons as well as other weapons of mass destruction. North Korea’s missile delivery systems currently can reach South Korea and Japan, and it is reportedly developing a missile (Taep’odong 2) that can reach the continental United States.[138] Its conventional forces are concentrated along the demilitarized zone within striking distance of South Korean population centers and U.S. forces. North Korea’s dictatorial, communist, and oppressive regime headed by Kim Jong-il runs counter to U.S. values of freedom, liberty, human rights, democracy, and economic choice. The national security strategy of the United States touches on North Korea mainly through the following broadly stated goals: (1) to prevent enemies from threatening the United States, allies, and friends with weapons of mass destruction; (2) to strengthen alliances to defeat global terrorism and to work to prevent attacks against the United States or friendly countries; (3) to work with others to defuse regional conflicts; (4) to ignite a new era of global economic growth through free markets and trade; and (5) to champion aspirations for human dignity.[139] As applied to the DPRK, the immediate U.S. goals include (1) to halt or eliminate North Korea’s development of nuclear or other weapons of mass destruction; (2) to prevent/halt proliferation of weapons of mass destruction, particularly to terrorist groups; (3) to curtail illegal and questionable activities by North Korea to include illicit sales of missiles,[140] dealing in illegal drugs, and counterfeiting of currency; (3) to reduce the threat of war on the Korean peninsula; to ensure that North Korea does not participate in international terrorist activity; to induce economic, political, and societal change in the country that could bring about favorable changes in the Kim regime, in governance, in the standard of living of its people, and in attitudes toward the United States; and (6) to enhance the security of South Korea and Japan with respect to the DPRK. Conventional wisdom with respect to North Korea includes the following assumptions: (1) without stringent monitoring mechanisms, Pyongyang probably will cheat on any agreement; (2) North Korea regularly engages in illicit activity and may take actions opposed to normally accepted international law or standards of national behavior; (3) economic privation in North Korea mainly affects the population outside of the political and military elite, particularly in the countryside; (4) popular sentiment opposing the current regime, although reportedly on the rise, appears weak or suppressed sufficiently for Kim Jong-il to remain in power

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for an indefinite period of time; (5) a U.S. military attack on North Korea would result in an immediate counter-attack on Seoul and other targets in South Korea using existing conventional weaponry that would cause extensive damage; and (6) any North Korean use of nuclear bombs on the United States or its allies would trigger retaliation that likely would destroy Pyongyang, its military installations, and other targets. Other factors to be considered include the following: (1) South Korea has been pursuing a policy of rapproachment and eventual normalization of relations with North Korea, although it maintains considerable distrust and hostility toward the country; (2) among the countries with interest in North Korea, China appears to have the most influence and economic and political interaction, although ties with Russia still are strong, and South Korea has been a major source of economic assistance and trade; (3) Japan would likely provide a large monetary settlement to Pyongyang in return for its years of occupation should a peace settlement be reached; (4) the border between China and North Korea is porous, particularly in the winter when the rivers are frozen and electricity so scarce that few lights operate at night; (5) centrally planned, communist economies, that have been operating for several decades create distortions and consumer dissatisfaction that enable rapid transition to a market economy once those economies are liberalized; (6) economic reform and the opening of trade and investment in North Korea would likely induce large increases in production and economic well-being, but most DPRK production facilities are so lacking in new machinery and equipment that major investments would be needed to raise them to world standards; and (7) the level of distrust between the United States and the DPRK is deep and long-standing. Given U.S. interests and goals, it appears that U.S. strategy may include the following: (1) convincing the Pyongyang regime that developing nuclear weapons decreases, not increases, its security; (2) creating tension within the regime over the allocation of resources between nuclear and conventional weapons and between the military and civilian economies; (3) weakening the hold by Pyongyang on the daily lives of its citizens and support of Kim Jong-il by fostering alternative centers of power, facilitating the transition to a market economy, and increasing information flows into the country; (4) depriving the central government of revenues derived from illicit activities; and (5) eliciting greater cooperation from China and Russia to induce them to apply more pressure on Pyongyang to make suitable concessions and carry through on commitments deriving from the Six-Party Talks. An economic strategy would be to generate interests in and dependency on international trade, investment, and greater interaction with the outside world that could weaken the hold by Pyongyang on the daily lives of citizens and bring the country more into the globalized world. Such economic liberalization also could reduce pressures on North Korea to engage in illicit trade in order to cover its trade deficit and diminish the need for Pyongyang to saber rattle in order to divert attention from its domestic problems. Major U.S. policy options, given the above interests, goals, assumptions, and strategies with respect to the DPRK, include the following. • •

Continue current policies of negotiations with the promise of lifting sanctions as DPRK denuclearization progresses under the Six-Party process. Intensify negative pressures on the DPRK (tighten economic and financial sanctions, restrict trade between North Korea and countries such as China, Japan, South Korea, and Europe, and discourage foreign investment in the DPRK).

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Dick K. Nanto and Emma Chanlett-Avery •

•

Increase engagement to include positive incentives for reform over the long term (loosen sanctions, encourage reforms, facilitate foreign investment, promote trade, and allow North Korea to join the International Monetary Fund and Asian Development Bank). Combine policy options into a package of incentives.

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Current U.S. Policy Current U.S. policy with respect to the DPRK includes (1) diplomatic engagement through the Six-Party Talks and related bilateral meetings; (2) nonproliferation efforts, including the Proliferation Security Initiative; (3) international efforts to counter trafficking by North Korea in illegal drugs, counterfeit currency, or other contraband; (4) maintenance of U.S. military forces in South Korea, Japan, and elsewhere in the Pacific as a credible deterrent against North Korean aggression; (5) economic sanctions and diplomatic isolation; and (6) keeping North Korea from joining international financial institutions. As the Bush Administration nears a close, it has shown a new willingness to negotiate directly with the DPRK, although it maintains the umbrella of the Six-Party Talks. The February 13, 2007, Six-Party Agreement includes a provision that North Korea is to freeze its nuclear installations at Yongbyon and invite back the International Atomic Energy Agency to monitor the freeze. North Korea also is to discuss with the other six parties “a list of all its nuclear programs, including plutonium extracted from used fuel rods” from the five megawatt reactor (which North Korea claims to have reprocessed into nuclear weapons-grade plutonium). In exchange, South Korea is to provide financing for 50,000 tons of heavy oil to be shipped to the North. The DPRK and the United States also are to start talks “aimed at resolving bilateral issues and moving toward full diplomatic relations” and the United States was to settle the Banco Delta Asia issue. Under the Agreement, North Korea and Japan also were to “start bilateral talks” toward normalization of relations on the basis of settlement of “outstanding issues of concern” (which Japan interprets as requiring a settlement of the issue of North Korea’s kidnapping of Japanese citizens). The February 2007 Agreement represented a clear change in strategy by the United States and other parties to the talks. For the first time, the Banco Delta Asia action was linked by the United States to the Six-Party Talks and nuclear issues. In essence, the United States agreed to see that the Banco Delta issue was settled before Pyongyang would have to take action to invite International Atomic Energy Agency inspectors back into the country and to shut down its nuclear plant. For the DPRK, this meant that the $25 million in frozen funds from Banco Delta accounts would be released first. This was done. The Agreement also implied that a strategy of regime change appeared to be off the table. The question now is whether the DPRK will live up to its commitments under the Agreement and what leverage the United States, China, and other participants have to ensure Pyongyang’s compliance. As a result of the February 2007 Six-Party Agreement, the United States has begun providing fuel and food aid and has held out the prospect of eventual normalization of relations with the DPRK in response to specific disclosure and other actions by Pyongyang in regard to its nuclear program.[141] On June 26, 2008, President Bush announced the lifting of the application of the Trading with the Enemy Act (TWEA) with respect to the DPRK and notified Congress of his intent to rescind North Korea’s designation as a State Sponsor of

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Terrorism.[142] According to the State Department, these actions were taken following the DPRK’s submission of a declaration of its nuclear programs as agreed to under the Six Party Talks. The earliest date (August 11, 2008) for the State Sponsor of Terrorism recision has passed. The Secretary of State reportedly is waiting for more complete verification on the part of the DPRK before proceeding. What is evident from the experience of the past seven years is that Pyongyang’s stalling and the United States’ refusal to negotiate bilaterally (even under the umbrella of the Six-Party Talks) provided time for Pyongyang to continue to pursue its nuclear program. Given North Korea’s nuclear test in 2006, it is now obvious that the DPRK actually had created a nuclear device and may still have as many as five or six still in its arsenal.[143] North Korea claims that the reasons for its nuclear program are to deter an attack by the United States and to use the bombs if South Korea starts a war or to devastate Japan in order to prevent the United States from participating in such a war.[144] The nuclear program also enables it to gain international prestige, to exercise a degree of hegemony over South Korea, and to extract economic assistance from other countries. Pyongyang is unlikely to abandon this nuclear program without significant changes to the underlying reasons for the program’s existence. Its fear of being attacked had been exacerbated by its inclusion in the “axis of evil,” the Bush doctrine of preemptive strikes, and the U.S.-led invasion of Iraq.[145] Some also consider Pyongyang’s nuclear program to be a bargaining chip to be traded for economic assistance and to gain international recognition. What also can be said about U.S. policy is the renewed willingness to negotiate bilaterally under the Six-Party process, the Banco Delta Asia action, poor economic conditions and crop harvests in the DPRK, and pressures by China, South Korea, and Japan have brought some apparent progress in situation with North Korea. Precisely what Pyongyang’s intentions are is still murky, but it is clear that the DPRK is now placing a higher priority on food supply and economics in policymaking. After North Korea’s 2006 nuclear test, moreover, it became evident that even China opposed the path Pyongyang was taking. Following the nuclear test, the United States took the issue to the United Nations. The resulting UN Security Council Resolution 1718 (October 14, 2006), called on North Korea to abandon its nuclear and missile programs and imposed several sanctions. The resolution imposed an arms embargo on North Korea, banned trade in materials related to ballistic missiles or weapons of mass destruction, and barred exports of luxury goods to the DPRK. It also froze funds and other financial assets owned by people connected with North Korea’s unconventional weapons program and banned travel by such people. China and Russia supported this resolution. Japan responded by curtailing imports from and travel to North Korea, banned North Korean ships from entering its ports, and prohibited exports of 24 luxury products to the DPRK. It appears, however, that despite deep privation and negative growth during the mid-1990s, economic sanctions had little effect on Pyongyang’s behavior in ways that would achieve U.S. ends. The ruling elite and military have first priority on scarce food and other supplies. The Kim regime allots economic privileges to its insiders. Peasants may starve, but ranking communist party members live in a separate world of relative luxury.[146] The poor economic conditions also do not appear to have materially undermined the Kim regime. Experts consider internal dissident forces too weak and Kim’s control over his military too strong for a domestic coup to occur.[147] Pyongyang has taken halting steps toward opening its economy to international investment and has allowed more private markets, but these are

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similar to policies nearly all centrally planned economies are taking, and China and Russia have been recommending that North Korea adopt them also. Irrespective of whether the U.S. economic sanctions worsened North Korea’s economy, the poor state of the North Korea’s agriculture and industries has indirectly affected U.S. national interests. It has necessitated humanitarian aid and has generated a deficit in trade that Pyongyang has attempted to fill by dealing in illegal drugs and missiles. Food scarcity also has pushed numerous refugees into China and South Korea. In terms of non-proliferation, the Proliferation Security Initiative now has more than 60 governments participating (including Russia). Although aimed at stopping trade in weapons of mass destruction and their components, the prospect of ships being inspected complicates North Korean efforts to smuggle illicit weapons, drugs, and counterfeit currency.[148]

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The Six-Party Talks Current engagement with North Korea is being conducted under the Six-Party Talks plus bilateral discussions between Pyongyang and other nations. The Talks include the United States, DPRK, China, Japan, South Korea, and Russia. This brings all major players to the table, exposes China and Russia to North Korean obstinacy, enables China and Russia to exert pressure on Pyongyang, and includes Japan and South Korea who have direct interests in a peaceful resolution of the problem and are likely to be the major providers of aid to the DPRK. (For discussion of the talks, see CRS Report RL33590, North Korea’s Nuclear Weapons Development and Diplomacy, and CRS Report RL33 567, Korea-U.S. Relations: Issues for Congress, both by Larry Niksch.) Table 11 summarizes the major negotiating priorities and bargaining chips for each side in the Six-Party Talks. Any policy package would have to address at least some of the priorities of each nation. The highest priority for the United States, Japan, and Russia reportedly is for North Korea to scrap its nuclear weapons program in a manner that is verifiable. Japan also is concerned about North Korean missiles (which have been fired over Japan) and a full accounting for the abduction of its citizens. In addition, the United States, China, Russia, and Japan seek a stop to weapons proliferation, while Japan also seeks normalization of relations with the DPRK, and South Korea seeks a framework for rapprochement, possible reunification with the North, less military tension along the demilitarized zone (DMZ), and access to cheap labor and markets in the North. Pyongyang’s primary goals appear to include (1) preservation of communist rule under Kim Jong-il, (2) obtaining a security guarantee that would preclude a possible preemptive attack by the United States or its allies, (4) maintaining key elements of its nuclear weapons programs, (3) establishing diplomatic relations with the United States and Japan, (4) reunification with the South on its own terms, and (5) obtaining economic assistance for its ailing economy while maintaining its juche philosophy. A risk of any policy package, such as the February 13, 2007 Agreement, is that North Korea might not scrap its nuclear program once energy and other aid starts to flow again, or the economy recovers sufficiently to become more self sustaining. Some surmise that the DPRK military is still resisting a complete shut-down and dismantling of the DPRK’s nuclear program. If Pyongyang does not follow through on the Agreement, tensions could escalate,

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and punitive measures could be considered.[149] Absent a settlement of the nuclear issue, the world may have to learn to live with a nuclear-armed North Korea much as it has learned to live with a nuclear-armed Pakistan and India. Japan and South Korea would have to consider whether to develop nuclear capability themselves. Another risk of providing a policy package that includes real incentives could be that the United States would be perceived as being blackmailed and giving away too much to a dictator who regularly violates the human rights of his people. Table 11. Major Priorities and Bargaining Chips by Country in the Six-Party Talks with North Korea Country United States

North Korea

South Korea

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Japan

China

Russia

Priority Complete, verifiable, and irrevocable scrapping of nuclear weapons; nonproliferation; human rights; peace treaty Guarantee security and regime; establish diplomatic relations with the U.S. and Japan; reunification with South Korea on own terms; peace treaty Set framework for peaceful resolution and prosperity on the peninsula; reunification; access to North Korean labor and markets, non-nuclear Korean peninsula; human rights; peace treaty Scrap nuclear weapons program and missiles; resolve abductions of Japanese citizens Non-nuclear Korean peninsula, nonproliferation; continued influence on peninsula, weakening U.S. alliance with Japan and with South Korea; peace treaty Scrap N. Korean nuclear weapons; nonproliferation; promote stability in N.E. Asia

Bargaining Chips Guarantee security and regime, economic aid, normalized diplomatic and trade relations Scrap nuclear weapons and missiles, reduce tensions along DMZ

Economic support, energy, business investment

Normalized diplomatic relations, economic support Economic support, alliance support

Buffer diplomacy, energy assistance, business investment

Source: Adapted from: The Seoul Economic Daily, 22 August 2003, cited in Hong Soon-Jick, “North Korean Nuclear Crisis: Prospects and Policy Directions,” East Asian Review, Vol. 15, No. 3, Autumn 2003, p. 31.

The costs of a diplomatic solution to tensions with North Korea, however, seem relatively small compared with a nuclear arms race in Northeast Asia, the possibility of nuclear proliferation, or a preemptive military action. Opening trade and diplomatic relations would be of relatively low cost for the United States, but this would require resolution of certain issues. It also appears that in the final year of its second term, the Bush Administration is seeking a diplomatic success story with the DPRK. Negotiations with Pyongyang bilaterally and under the Six-Party Talks have proceeded in earnest. Humanitarian aid has been resumed. It is now up to Pyongyang to

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follow through on its commitments under the Six-Party Agreement, particularly to disclose all of its nuclear programs.

Possible Economic Incentives

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The February 2007 Six-Party Agreement includes various economic incentives for the DPRK. The short-term incentives included providing fuel and releasing the Banco Delta funds, removing the DPRK from the U.S. terrorist list and recinding its designation as a State Sponsor of Terrorism, while long-term incentives include normalization of economic relations, and allowing North Korea to join multilateral financial institutions, such as the Asian Development Bank and International Monetary Fund. The list of potential economic incentives, include the following:

Normalizing Diplomatic Relations Normalization of diplomatic relations with the DPRK would apply to the United States, Japan, and South Korea. North Korea already has diplomatic relations with China, Russia, and the European Union (including an embassy in London). Associated with normalizing relations would be a peace treaty formally ending the Korean War. For Japan, the DPRK would have to resolve certain issues, including a full accounting of the status of kidnapped Japanese citizens, North Korea’s missile firings over Japan, and incursions by suspected DPRK espionage and drug-running ships into Japanese waters. Upon conclusion of these normalization talks, Japan is likely to offer $5 billion to $10 billion to North Korea in compensation for its occupation.[150] Normalizing diplomatic relations allows countries to communicate with each other in a more direct fashion, enables diplomats to gather information directly, and provides more interaction on a personal level. Normalized relations can help to overcome the Pyongyang propaganda machine both within the DPRK and on the world stage. Normalization, however, can imply that the United States is willing to tolerate conditions in North Korea. This may be unacceptable to some. Absent normalized relations, Washington could seek a relationship similar to that with Cuba. Even without diplomatic ties, the U.S. mission in Havana is attached to that of Switzerland and maintains a staff similar in size to a regular embassy. (North Korea has been a member of the United Nations since 1991 and has representatives in New York.) Japan has initiated talks with Pyongyang that could lead to normalized relations, and South Korea has been seeking diplomatic ties and possibly some form of reunification in the future. In 2007, bilateral talks between Japan and the DPRK on normalization were stymied by the abduction issue, but they have resumed in 2008. Negotiating a Trade Agreement After normalization, the United States could negotiate a trade agreement with the DPRK that would cover goods, services, and investments and could be modeled after the 2001 bilateral trade agreement concluded between the United States and the Socialist Republic of Vietnam.[151] Upon implementation of the trade agreement, each country would accord the other normal trade relations (most favored nation) status. The immediate effect would be to allow North Korean exports to the United States to enter at the lower rates of duty accorded to nearly all other

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nations of the world. The trade agreement also could cover investment and other U.S. interests. While the DPRK’s market currently is small, eventually it could re-industrialize and become a larger economic player in the region. Liberalization of North Korean trade and investment relations, moreover, can work through the economy in the same way that it did in China and Russia by exposing the public to the benefits of increased wealth. The major negative to establishing trade with North Korea is that, unless it is part of a larger package that includes other concessions, the United States could be viewed as exchanging an important bargaining chip for minimal gain.

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Easing U.S. Sanctions The United States could ease economic sanctions on North Korea if the country resolves the issues that caused the sanctions to be imposed initially. Since North Korea’s other trading partners have more liberal trade with North Korea, it is mainly American companies and traders that are impacted by the sanctions. Pyongyang can spend its available foreign exchange in any of a number of world markets — in China, Russia, South Korea, Europe, or elsewhere. Moreover, as North Korea opens its economy, U.S. businesses would be able to decide whether or not to invest there based on their own economic interests and not because they are hindered from doing so by U.S. law. Allowing the DPRK to Join International Financial Institutions (IFIs) The United States could stop blocking the DPRK from joining the major IFIs, particularly the Asian Development Bank, World Bank, and International Monetary Fund.[152] Pyongyang is particularly interested in joining the Asian Development Bank, but IFI procedures require membership first in the International Monetary Fund. The IMF requires certain economic data which the World Bank or Asian Development Bank needs to evaluate projects and loan requests. Membership in IFIs requires that a country establish data gathering and reporting mechanisms as well as open their country to visits, surveys, or assessments by the IFI. As an incentive, a special fund could be set up in the World Bank or Asian Development Bank to assist North Korea in its economic transition. This fund could be financed by Japan or South Korea in conjunction with their normalization of relations with the DPRK. Removing the DPRK from the Terrorism List The 45-day period for notification to Congress of the U.S. intent to rescind the listing of the DPRK as a State Sponsor of Terrorism passed on August 11, 2008. If the President rescinds this listing, North Korea would become eligible for U.S. foreign aid, loans from the U.S. Export-Import Bank, loans from any international financial organizations in which it has membership, and an easing of U.S. export control requirements.[153] Fuel and Food Aid The Bush administration resumed shipping fuel and food aid on a humanitarian basis to the DPRK. South Korea also has resumed shipments of fuel, but it has insisted that food and fertilizer aid be sent only if requested by North Korea.

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Products from the Kaesong Industrial Complex When South Korea was negotiating the proposed Korea-U.S. Free Trade Agreement (signed but not yet approved by Congress), they asked that products from the Kaesong Industrial Complex in North Korea be included under the FTA and be accorded duty-free entry into the United States. The resulting FTA language, however, does not provide for duty-free entry into the United States for products made in Kaesong. Annex 22-B to the proposed FTA, however, does provide for a Committee on Outward Processing Zones (OPZ) to be formed and to designate zones (such as the Kaesong Industrial Complex) to receive preferential treatment under the FTA. Such a designation apparently would require legislative approval by both countries.

LEGISLATIVE ACTION Major congressional action with respect to security and human rights aspects of U. S.DPRK relations is included in CRS Report RL33567, Korea-U.S. Relations: Issues for Congress, by Larry A. Niksch; North Korea’s Nuclear Weapons: Latest Developments, by Mary Beth Nikitin; and North Korea: Terrorism List Removal? by Larry A. Niksch.

REFERENCES For details on the Six-Party Talks, see CRS Report RL33590, North Korea’s Nuclear Weapons Program, and CRS Report RL33 567, Korea-U.S. Relations: Issues for Congress, both by Larry A. Niksch. [2] For information on U.S. aid to the DPRK, see CRS Report RS2 1834, U.S. Assistance to North Korea, by Mark E. Manyin and Mary Beth Nikitin. [3] U.S. Department of State. “North Korea: Presidential Action on State Sponsor of Terrorism (SST) and the Trading with the Enemy Act (TWEA).” Fact Sheet, June 26, 2008. This began the clock on a 45-day period of prior notification of Congress (ending August 11) for delisting North Korea as a state sponsor of terrorism. [4] Kellerhals, Merle D., Jr. “North Korea Must Provide a Verification Plan, U.S. Officials Say.” U.S. Department of State. Available at [http://www.america.gov]. [5] Global Insight (subscription econometric forecasting service). “North Korea” (updated July 23, 2008). [6] Full text of North Korea’s 2008 New Year’s joint editorial, BBC Monitoring Asia Pacific. London. January 2, 2008. p. 1. [7] Kim Ung-ho. Main Attack Front in Building a Powerful State. Rodong Sinmun, January 19, 2008. Translated Open Source Center, document # KPP200801 19029003. [8] See CRS Report RL33590, North Korea’s Nuclear Weapons Program, and CRS Report RL33567, Korea-U.S. Relations: Issues for Congress, both by Larry A. Niksch. [9] U.N. World Food Program. DPRK Survey Confirms Deepening Hunger for Millions. New-Press Release, July 30, 2008. [10] For an in-depth study of the North Korean economy, see Marcus C. Noland, Avoiding the Apocalypse: The Future of the Two Koreas, Institute for International Economics, 2000.

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[1]

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[11] In January 2008, a program for recovery assistance for vulnerable groups in the DPRK lasting from April 2006 to May 2008 had appealed for $102,234,076 and had received 56% of the income against that appeal. The largest donors were South Korea, Russia, Switzerland, Germany, and Australia. World Food Program. Resourcing Update, Project No. 10488.0, January 15, 2008. [12] Data from Global Insight. Subscription database. [13] Global Insight. Korea, North: Economic Trends: Economic Growth: Background. March 4, 2003. [14] Chao, Julie. Economic Devastation Visible in Pyongyang. Korea Is like a Land Time Forgot, and Crisis with U.S. Isn’t Helping. The Austin American Statesman, May 3, 2003. P. A17. [15] Watts, Jonathan. Where Are You, Beloved General? In a Land Where Paranoia, Propaganda, and Poverty Are the Norm, an Albino Raccoon Reassures North Koreans That Good Times Are Ahead. Mother Jones, Vol. 28, No. 3, May 1, 2003. p. 52. [16] Food and Agriculture Organization. Food Security Statistics. Online at [http://www.fao.org/statistics/faostat/foodsecurity/Files/NumberUndernourishment_en .xls]. [17] U.N. World Food Programme. WFP Set to Resume Operations in North Korea, Press Release, May 10, 2006. [18] Kim, Hyung-jin. North Korea Winter Threatens Food Supply, Associated Press, Seoul, March 3, 2008. [19] Stephan Haggard and Marcus Noland. Famine in North Korea, Markets, Aid, and Reform (New York: Columbia University Press, 2007). P. 3. [20] Georgy Toloraya. The Economic Future of North Korea: Will the Market Rule? Korea Economic Institute, Academic Paper Series, Volume 2. No 10, December 2007. [21] A recent World Bank Study indicates that China’s PPP values should be reduced by about 40% for 2005 and subsequent years. World Bank. 2005 International Comparison Program, Preliminary Results, December 17, 2007. [22] PPI figures are from the World Bank. World Development Indicators. [23] Global Insight (subscription service), “North Korea, Economic Growth: Outlook,” updated July 23, 2008. [24] Global Insight (subscription econometric forecasting service), “North Korea.” (Updated July 23, 2008). [25] South Korea. Ministry of Unification. North Korea Today, August 14, 2001 (Internet edition). [26] UN World Food Programme. World Hunger — Korea (DPR). Available at [http://www.wfp.org/country_brief/indexcountry.asp?country=408]. [27] Desperate Straits, Special Report (1). The Economist, May 3, 2003 (U.S. Edition). [28] Class Divergence on the Rise as Market Economics Spread in DPRK, Institute for Far Eastern Studies, North Korea Brief. September 21, 2007. Cited in NAP SNet, September 21, 2007. [29] Analysis team of the Daily NK. Lee Myung-Bak’s Administration: A Breakthrough in North Korea’s Opening, The Daily NK (Internet edition), December 12, 2007. [30] See, for example: Natural Wonders Prove Kim Jong-il’s Divinity: North Korean Media, Agence France Presse. May 3, 2003.

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[31] British Broadcasting Corporation. N. Korea: Paper Supports Leader Kim Jong-il’s Military-first Ideology, April 26, 2003. Reported by BBC from KNCA News Agency (Pyongyang). [32] Toyama, Shigeki. Expert on Kim Chong-il’s “Military-First Politics,” South-North Issues, Tokyo Gunji Kenkyu (in Japanese, translated by FBIS), August 1, 2002. P. 108-117. [33] Nam, Woon-Suk. Guidelines of Economic Policies. KOTRA, January 9, 2001. [34] Gause, Ken E. North Korean Civil-military Trends: Military-first Politics to a Point. Army War College, September 2006. P. [35] The International Institute for Strategic Studies. The Military Balance, 2006. London, Routledge, 2006. P. 276. Also, The Military Balance, 2007, p. 357. Note: in the 2008, edition of the Military Balance, the DPRK’s defense budget is listed as “definitive data not available.” [36] “DPRK Allocates 15.9 Percent of State Spending for Military.” People’s Daily Online, April 12, 2005. [37] Asia: The deal that wasn’t; North Korea. The Economist. London: September 24, 2005. p. 81. [38] For a description of decisionmaking in the DPRK, see Former DPRK Diplomat’s Book on DPRK National Strategy, Inner Circle Politics (2). Open Source Center document KPP200709 18037001. August 20, 2007. (Translated by Open Source Center from Korean) [39] Current experiments in agriculture are directed from Pyongyang with seven major tasks that include replacing chemical fertilizers with organic and microbial ones. See Yonhap News. N. Korea Eyes China as a Model for Development. May 11, 2004. [40] See CRS Report RL34093, The Kaesong North-South Korean Industrial Complex, by Dick K. Nanto and Mark E. Manyin. [41] Former North Korean Professor Interviewed on Pyongyang’s Economic Reform. Choson Ilbo, April 14, 2003. Translated and reported by BBC Worldwide Monitoring, April 18, 2003. [42] Global Trade Atlas using Chinese data. [43] Shanghai Northeast Asia Investment & Consultancy Company. A Study Report on the DPRK Mineral Resources. Shanghai Northeast Asian Forum website, in Chinese, December 7, 2007. Reported by Open Source Center, document #KPP20080123032002. [44] Pak, Yo’n. Basic Spirit That Runs Consistently in This Year’s Joint Editorial, Rodong Sinmun, in Korean, January 4, 2008. Translated by Open Source Center, document #KPP20080 104053004. [45] Gifford, Rob. North Korea (audio report), NPR Morning Edition, April 30, 2003. [46] UN Food and Agriculture Organization. Democratic People’s Republic of Korea text. October 1, 2007. Available under country profiles on UN FAO website. [http://www.fao.org]. [47] N. Korea more and more open to U.N. aid: rapporteur. Yonhap, (in English), January 18, 2008. [48] For a history of DPRK reforms in light of interaction with China, see Mika Marumoto. North Korea and the China Model: The Switch from Hostility to Acquiescence . Korea Economic Institute. Academic Paper Series, Vol. 2, No. 5, May 2007.

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[49] The DPRK Learns Vietnam, Kookmin Ilbo, Seoul, October 25, 2007. CanKor Report #296. DPRK-Vietnamese Relations, November 1, 2007. Jung Sung-ki.. Kim Jong-il Interested in Vietnamese-style Reform Policy, Korea Times. October 28, 2007. [50] Hong, Ihk-pyo. A Shift Toward Capitalism? Recent Economic Reforms in North Korea. East Asia Review, vol. 14, Winter 2002. Pp. 93-106. [51] In January 2007, the communist party’s central committee reportedly asked families to “voluntarily” offer food to the army, since the food shortage in the people’s army was severe. Yang, Jung A. Citizens Exploited as the Nation Cannot Produce its Own Income. The Daily NK (Internet edition), January 24, 2007. [52] Hong, Ihk-pyo, A Shift Toward Capitalism?, East Asia Review, Winter 2002. Pp. 96. [53] Jeong, Chang-hyun. Capitalist Experiments Seen Expanding into DPRK. Joong Ang Ilbo, October 19, 2003. Translated in CanKor #160 by Cananda-DPR Korea e-clipping Service, April 13, 2004. [54] Lintner, Bertil. North Korea, Shop Till You Drop, Far Eastern Economic Review, May 13, 2004. P. 14-19. [55] Pritchard, Charles L. Siegfried S. Hecker, and Robert Carlin. News Conference: Update from Pyongyang, sponsored by the Korea Economic Institute, held at the National Press Club, Washington, DC, November 15, 2006. [56] Institute for Far Eastern Studies. State of the Market in the DPRK, North Korea Brief No. 07-12-5-1. Posted December 11, 2007. [57] Han Young Jin. Even the National Security Agency Participates in the Control of the Jangmadang. The Daily NK (electronic version). December 26, 2007. [58] Good Friends: Centre for Peace, Human Rights and Refugees, North Korea Today, No. 103, December 2007. [59] KOTRA, North Korea, Status of Induced Foreign Capital. [60] K. Park. A Report on Visit to Rajin-Seonbong Region, January 4, 2001. KOTRA, [61] Orascom also reportedly is investing $115 million in a North Korean cement manufacturer for a 50% stake in the firm. [62] Arab Firm Earns First Mobile License In DPRK. Yonhap, January 30, 2008. [63] Global Trade Atlas using Chinese data. [64] Shanghai Northeast Asia Investment & Consultancy Company. A Study Report on the DPRK Mineral Resources. Shanghai Northeast Asian Forum website, in Chinese, December 7, 2007. Reported by Open Source Center, document #KPP20080123032002. [65] Institute For Far Eastern Studies. Interest Revived in the Sinuiju Special Administrative Region. Reported by Nautilus Institute, Policy Forum Online 06-25A, March 30, 2006. [66] For details, see CRS Report RL34093, The Kaesong North-South Korean Industrial Complex, by Dick K. Nanto and Mark E. Manyin. [67] Republic of Korea. Ministry of Unification. Key Statistics for Gaeseong Industrial Complex. September 30, 2007. [68] Republic of Korea. Ministry of Unification. Gaeseong Industrial Complex Project — Status and Tasks, June 2005. [69] South Korea to Continue “Utmost Efforts” for Inter-Korean complex — Minister. Yonhap News Agency. Reported by BBC Monitoring Asia Pacific. London, December 8, 2006.

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[70] Republic of Korea. Ministry of Unification. Key Statistics for Gaeseong Industrial Complex. September 30, 2007. [71] Rights Body Criticizes South Korea Over Refugee Protection, Inter-Korean Complex. Yonhap News Agency, Seoul. Reported by BBC Monitoring Asia Pacific. London, January 12, 2007. [72] South Korea Considers Expanding Joint Industrial Complex in North. Yonhap News Agency, Seoul. Reported by BBC Monitoring Asia Pacific. London, July 26, 2006. Ministry of Unification (South Korea). The Gaesong Industrial Complex. Status of North Korean Workers. November 14, 2006. Online at [http://www.unikorea. go.kr/english/EUP/ EUP020 1R.j sp]. [73] CRS Report RL33435, The Proposed South Korea-U.S. Free Trade Agreement (KORUS FTA), by William H. Cooper and Mark E. Manyin. [74] See Eberstadt, Nicholas. The North Korean Economy, Between Crisis and Catastrophe (New Brunswick, NJ, Transaction Publishers, 2007). p. 227. [75] Embassy of the People’s Republic of China in the Democratic People’s Republic of Korea. A brief account of the economic and trade relations between China and the DPRK. Online at [http://kp.china-embassy.org/eng/zcgx/jmwl/t306852.htm]. [76] Shanghai Northeast Asia Investment & Consultancy Company. A Study Report on the DPRK Mineral Resources. Shanghai Northeast Asian Forum website, in Chinese, December 7, 2007. Reported by Open Source Center, document #KPP20080123032002. [77] International Monetary Fund. Direction of Trade Statistics. It should be noted that countries occasionally misreport trade with South Korea as trade with the DPRK. at [http://kp.china-embassy.org/eng/zcgx/jmwl/t306852.htm]. [78] (South) Korea Trade-Investment Promotion Agency. [79] For an examination of North Koreas external relations, see Stephan Haggard and Marcus Noland, North Korea’s External Economic Relations, Peterson Institute for International Economics Working Paper No. WP07-7, August 2007. [80] Data are from Joint BIS-IMF-OECD-WB External Debt Hub at [http://devdata.worldbank.org/sdmx/jedh/jedh_home.html]. [81] Gittings, Danny. Kim Can’t Kill the Free Market. The Wall Street Journal (Brussels), May 30, 2003. P. A11. [82] DPRK Holds Annual Lottery for Government Bond Repayments. Institute for Far Eastern Studies, NK Brief No. 08-1-3-2, January 3, 2008. [83] United Nations Conference on Trade and Development. World Investment Report, 2007. New York, United Nations, FDISTAT database showing Major FDI Indicatiors. [84] Seo, Soo-min. Questions Linger Despite President’s Statement. Korea Times, February 14, 2003. Dorgan, Michael. Secret Payment to North Korea Disclosed, Knight Ridder Newspapers, January 30, 2003. [85] U.S. to Pay N. Korea for MIA Search. Associated Press. July 15, 2003. For details on U.S. assistance to North Korea, see CRS Report RS2 1834, U.S. Assistance to North Korea: Fact Sheet, by Mark E. Manyin. [86] Republic of Korea, Ministry of Unification. Inter-Korean Relations on the Occasion of the 4th Anniversary of the June 15 Joint Declaration. June 18, 2004. p. 9. [87] CRS Report RS2 1834, U.S. Assistance to North Korea: Fact Sheet, by Mark E. Manyin.

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[88] For details, see CRS Report RL32 137, North Korean Supporters in Japan: Issues for U.S. Policy, by Emma Chanlett-Avery. DPRK workers also are countries such as those in the Middle East, China, and Russia. [89] Melons Used to Smuggle Cash to N Korea. Japan Today News (Online), January 1, 2003. [90] Remittance Law Reinterpreted Cash Transfers to Pyongyang May Be Suspended as Deterrent. The Daily Yomiuri (Tokyo), May 19, 2003. p. 1. [91] Japanese Finance Minister Says “At Least” 34m US Dollars Sent to North Korea. Financial Times Information, Global News Wire — Asia Africa Intelligence Wire. June 6, 2003. [92] See, for example, Masaki, Hisane. N Korea’s Missiles Met by Japanese Sanctions, Asia Times Online, July 6, 2006. [93] For details, see CRS Report RL33885, North Korean Crime-for-Profit Activities, by Liana Sun Wyler and Dick K. Nanto. [94] Asano, Yoshiharu. N. Korea Missile Exports Earned 580 Mil. Dollars in ‘01. Daily Yomiuri, May 13, 2003. [95] Solomon, Jay. U.S. Debates North Korean Exports, Asian Wall Street Journal, May 5, 2003. p. A1. [96] Testimony of John R. Bolton, Under Secretary for Arms Control and International Security, U.S. Department of State. U.S. House Committee on International Relations, June 4, 2003. [97] Asano, Yoshiharu. N. Korea Missile Exports Earned 580 Mil. Dollars in ‘01. Daily Yomiuri, May 13, 2003. Pearson, Brendan. Illicit Boost for N Korea Economy. Australian Financial Review, May 14, 2003. p. 12. [98] CRS Report RL33696, Conventional Arms Transfers to Developing Nations, 1998-2005, by Richard F. Grimmett. p. 53. This figure is rounded to the nearest $100 million. [99] Paddock, Richard C. and Barbara Demick. N. Korea’s Growing Drug Trade Seen in Botched Heroin Delivery, Washington Post, May 21, 2003. Also see CRS Report RL33885, North Korean Crime-for-Profit Activities, by Liana Sun Wyler and Dick K. Nanto. [100] Kim, Ah-young, Halt North Korea’s Drug Habit; a Narcotic State, International Herald Tribune, June 18, 2003. p. 8. [101] U.S. Department of State. International Narcotics Control Strategy Report, 2007. March 2007. [102] Struck, Doug. Heroin Trail Leads to North Korea. Washington Post Foreign Service, May 12, 2003. p. A01. [103] For details, see CRS Report RL33324, North Korean Counterfeiting of U.S. Currency, by Raphael F. Perl and Dick K. Nanto. [104] Choe, Sang-Hun. N. Korea Sees Sanctions Amid Tough Times. Associated Press Online, June 12, 2003. [105] Available at [http://www.whitehouse.gov/news/releases/2005/06/20050629.html]. [106] U.S. Department of the Treasury. Treasury Targets North Korean Entities for Supporting WMD Proliferation. Press Release JS-2984, October 21, 2005. [107] U.S. Department of the Treasury. Treasury Designates Banco Delta Asia as Primary Money Laundering Concern under USA PATRIOT Act. Press Release JS-2720, September 15, 2005. [108] See CRS Report 97-389, Generalized System of Preferences, by William H. Cooper.

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[109] See CRS Report RL3 1696, North Korea: Economic Sanctions, by Dianne E. Rennack. [110] [http://w3 .access.gpo.gov/bis/ear/ear_data.html] [111] Yoon, Won-sup. US Eased Sanctions on North Korea in 2007, Korea Times, February 12, 2008. [112] Daniel J. Wakin. North Koreans Welcome Symphonic Diplomacy. New York Times, February 27, 2008. p. 1. [113] White House. Office of the Press Secretary. Fact Sheet: 2008 War Funding Request, October 22, 2007. [http://www.whitehouse.gov/news/releases/2007/1 0/print/20071 0227.html] [114] The North Korean Counterterrorism and Nonproliferation Act (H.R. 3650, Ros-Lehtinen, Ileana ) provides for the continuation of restrictions against the government of North Korea (imposed as a result of the DPRK being deemed a supporter of international terrorism) unless the President certifies to Congress that North Korea has met certain benchmarks respecting: (1) missile or nuclear technology transfers; (2) support of terrorist groups and terrorist activities, (3) counterfeiting of U.S. currency, (4) release of South Korean POWs, Japanese journalists, and Kim Donk-Shik; and (5) Bureau 39’s closure. [115] U.S. Bureau of Economic Analysis. U.S. Direct Investment Abroad Detail for Historical- Cost Position and Related Capital and Income Flows, 2001. Survey of Current Business, September 2002, p. 94. [116] Meeting with President of the American Chamber of Commerce and CRS analysts, April 7, 2003, Washington, DC. [117] Koo, Kyung-hee. U.S. Enterprises Participate in Developing the Gaeseong Industrial Complex. KOTRA-North Korea Team. January 30, 2004. Reprinted in KOTRA Bulletin, February 11, 2004. [118] The Six-Party Talks are made up of representatives from the United States, Japan, North Korea, South Korea, Russia, and China. [119] Speech by Minister Jeong Se-hyun on the 34th Anniversary of the Ministry of Unification. Korean Unification Bulletin, No. 53, March 2003. [120] In March 1996, KEPCO was designated the prime contractor for the construction of two 1,000MW light water nuclear reactors in North Korea for KEDO (Korean Peninsula Energy Development Organization). It broke ground near Sinpo in August 1997. By the end of 2001, the project was 16% completed with some 1,200 workers employed. For details on the Agreed Framework, see CRS Report RL33590, North Korea’s Nuclear Weapons Development and Diplomacy, by Larry Niksch. For the approval list, see KOTRA, Companies Approved for South-North Korean Economic Cooperation. [121] South Korea to Continue “Utmost Efforts” for Inter-Korean complex — Minister. Yonhap News Agency. Reported by BBC Monitoring Asia Pacific. London, December 8, 2006. [122] Inauguration Speech of President Lee Myung-bak, February 25, 2008. On website of the South Korean Ministry of Foreign Affairs and Trade. [http://www.mofat.go.kr/ index.jsp]. [123] Chu, Wan-chung. These Days, North Korea Does not Even Listen to China. Chosun Ilbo, August 7, 2006. Reprinted by BBC Monitoring Asia Pacific, August 10, 2006. [124] Human Rights Watch. China: Protect North Korean Refugees, March 9, 2004. James D. Seymour. China: Background Paper on the Situation of North Koreans in China, A

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Writenet Report by commissioned by United Nations High Commissioner for Refugees, Protection Information Section, January 2005. [125] Jane’s Information Group, op. cit. [126] See UN Security Council Resolution 1718, October 14, 2006. [127] Kahn, Joseph. China May Press North Koreans. The New York Times, October 20, 2006. P. A1. [128] Average price calculated by World Trade Atlas using Chinese trade statistics. [129] Babson, Bradley O. Towards a Peaceful Resolution with North Korea: Crafting a New International Engagement Framework Paper presented at a conference sponsored by the American Enterprise Institute, Korea Economic Institute, and Korea Institute for International Economic Policy, Washington, DC, February 12-13, 2004. [130] Foley, James. China Steps Up Security on North Korean Border. Jane’s Intelligence Review, November 1, 2003. [131] China Erects Massive Fence on N. Korean Border After Test. World Tribune.com, October 25, 2006. Schafer, Sarah. Threatening the Whole World, on China’s Border with North Korea, Local Villagers Fear the Fallout from Pyongyang’s Nuclear Aspirations, Newsweek, October 12, 2006. (Internet edition). [132] Lee, Chang-hak. China’s Trade with N.K. Via Dandong Exceeds US $200 million. KOTRA, February 21, 2003. [133] CRS Report RL3 1785, Foreign Assistance to North Korea, by Mark Manyin. [134] Lunev, Stanislav. New Era in Russian-North Korean Relations. Newsmax.com, August 23, 2000. [135] Vorontsov, Alexander. Current Russia — North Korea Relations: Challenges and Achievements. The Brookings Institution Center for Northeast Asian Policy Studies, February 2007, 24 p. [136] Ibid. [137] Russia to Forgive Most of N. Korea’s Debt. The Chosun Ilbo (digital version), January 5, 2007. [138] See CRS Report RS2 1473, North Korean Ballistic Missile Threat to the United States, by Andrew Feickert. [139] The White House. The National Security Strategy of the United States of America. September 2002. [140] See CRS Report RS2 1473, North Korean Ballistic Missile Threat to the United States, by Steven A. Hildreth. [141] For details on the Six-Party Talks, see CRS Report RL33 590, North Korea’s Nuclear Weapons Program, and CRS Report RL33567, Korea-U.S. Relations: Issues for Congress, both by Larry A. Niksch. [142] U.S. Department of State. “North Korea: Presidential Action on State Sponsor of Terrorism (SST) and the Trading with the Enemy Act (TWEA).” Fact Sheet, June 26, 2008. This began the clock on a 45-day period of prior notification of Congress (ending August 11) for delisting North Korea as a state sponsor of terrorism. [143] For details, see CRS Report RL34256, North Korea’s Nuclear Weapons: Latest Developments by Mary Beth Nikitin. [144] Jane’s Information Group. Armed Forces, Korea, North. Jane’s Sentinel Security Assessment, March 4, 2003.

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[145] Laney, James T. and Jason T. Shaplen. “How to Deal With North Korea,” Foreign Affairs, March/April 2003. p. 20-21. [146] BBC Monitoring, Asia Pacific. Former Bodyguard of North Korean Leader Interviewed, October 13, 2003, p. 1. [147] The only significant power base that might challenge the regime is the military. Since Kim Jong-il became Chairman of the National Defence Commission, however, he has promoted 230 generals. Most of the army’s 1,200-strong general officer corps owe their allegiance to him. Jane’s Information Group, “Internal Affairs, Korea, North,” Jane’s Sentinel Security Assessment. June 10, 2003. [148] The White House. Proliferation Security Initiative, Fact Sheet. September 4, 2003. U.S. Department of State. U.S. Notes First Anniversary of Proliferation Security Initiative. Press Release, June 1, 2004. [149] See OPLAN 5026 - Air Strikes.[http://www.globalsecurity.org/military/ops/oplan5026.htm] [150] See CRS Report RL32 161, Japan-North Korea Relations: Selected Issues, by Mark Manyin. [151] The White House, George W. Bush. “Presidential Proclamation: To Implement the Agreement Between the U.S. and Socialist Republic of Vietnam on Trade Relations,” June 1, 2001. [152] For information on requirements to join the International Monetary Fund, see Primorac, Marina. How Does a Country Join the IMF? Finance & Development, June 1991, vol. 28, Issue. 2; pp 34-5. [153] See CRS Report RL33567, Korea-U.S. Relations: Issues for Congress, by Larry A. Niksch.

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In: North Korea: Issues and U.S. Policy Editor: Samuel P. Massingame, pp. 55-84

ISBN: 978-1-60692-845-5 © 2009 Nova Science Publishers, Inc.

Chapter 2

N ORTH K OREA : E CONOMIC S ANCTIONS * Dianne E. Rennack ABSTRACT

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U.S. economic sanctions are imposed against North Korea for five primary reasons: (1) North Korea is seen as posing a threat to U.S. national security; (2) North Korea is designated by the Secretary of State as a state sponsor or supporter of international terrorism; (3) North Korea is a Marxist-Leninist state, with a Communist government; (4) North Korea has been found by the State Department to have engaged in proliferation of weapons of mass destruction; and (5) North Korea has been found by the President to have detonated a nuclear explosive device. The United States has also taken steps to isolate the Macau-based Banco Delta Asia for counterfeiting and money-laundering activities, actions North Korea has characterized as attacks against it. In accordance with U.S. law, the United States limits some trade, denies trade in dual-use goods and services, limits foreign aid, and opposes entry into or support from international financial institutions. At the President’s discretion, North Korea would also be subject to the economic sanctions pursuant to the International Religious Freedom Act of 1998, under which the administration has identified North Korea as a “country of particular concern” since 2001, and pursuant to the Trafficking Victims Protection Act of 2000, under which the administration has classified North Korea in the category of most severe offender (Tier 3) since 2003. In October 2002, after meetings between high-level U.S. and North Korean government officials, the United States reported that North Korea had confirmed suspicions that it had reactivated its nuclear weapons development program. An international crisis ensued, with North Korea expelling International Atomic Energy Agency (IAEA) inspectors and declaring that it would withdraw from the NonProliferation Treaty. Participants in the Korean Energy Development Organization (KEDO) — including United States, Japan, South Korea and European Union — in turn suspended shipments of fuel oil. KEDO also suspended construction of the light-water reactors, the completion of which had been planned for 2003. North Korea officially withdrew from the Nuclear Nonproliferation Treaty on January 10, 2003 (effective three months hence), the first signatory country to do so. *

This is an edited, excerpted and augmented edition of a CRS Report RL31696, dated January 12, 2007.

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Dianne E. Rennack In August 2003, North Korea joined the United States, Japan, South Korea, China and Russia in six-party talks. The six nations have met for five rounds, most recently in December 2006, after North Korea’s nuclear test in October 2006. This paper explains the U.S. economic sanctions currently in place, and summarizes recent events as they relate to the potential application of additional restrictions. It will be updated as necessary.

BACKGROUND

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U.S. Economic Sanctions Against North Korea The United States imposes economic sanctions on North Korea for five primary reasons: (1) North Korea poses a threat to U.S. national security, as determined by the President and renewed annually under the terms of the Trading with the EnemyAct and National Emergencies Act; (2) North Korea is designated by the Secretary of State as a state sponsor or supporter of international terrorism, pursuant to the Export Administration Act of 1979; (3) North Korea is a Marxist-Leninist state, with a Communist government, and stated as such in the Export-Import Bank Act of 1945, and further restricted under the Foreign Assistance Act of 1961; (4) North Korea has been found by the State Department to have engaged in proliferation of weapons of mass destruction pursuant to the Arms Export Control Act, Export Administration Act of 1979, and Iran, North Korea, and Syria Nonproliferation Act of 2000; and (5) the President has determined that North Korea has detonated a nuclear explosive device, pursuant to the Arms Export Control Act and the Atomic Energy Act. The U.S. Treasury also has identified Banco Delta Asia, a bank based in Macau and used by the North Korean government, as engaging in activities “of primary money laundering concern” as part of the Treasury Department’s law enforcement efforts under new authority granted by the USA PATRIOT ACT to curtail international counterfeiting and money laundering. The U.S. action led to Macau seizing Banco Delta Asia and closing North Korea’s accounts. At the President’s discretion, North Korea also could be subject to economic sanctions provided in three provisions of law addressing human rights conditions: the Foreign Assistance Act of 1961, under which North Korea is annually castigated for its human rights record; International Religious Freedom Act of 1998, under which the administration has identified North Korea as a “country of particular concern” since 2001; and Trafficking Victims Protection Act of 2000, under which the administration has, since 2003, classified North Korea as a Tier 3 (most severe) offender of standards pertaining to the trafficking of persons for slavery or sex trade. Any sanctions imposed pursuant to these acts would be largely redundant, however, with penalties already prescribed to North Korea for the abovestated reasons. In October 2002, it came to light in negotiations between U.S. and North Korean government officials that North Korea was pursuing nuclear weapons capability. Over July 56, 2006, North Korea tested short-range and long-range ballistic missiles with varying degrees of success, the first tests since 1998. On October 8, 2006, North Korea reported that it had detonated a nuclear explosive device. The international community responded to the missile tests and nuclear detonation in the United Nations, adopting U.N. Security Council Resolutions that included the imposition of economic sanctions.

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Recent Turn of Events

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North Korea’s Renewal of Nuclear Weapons Program Even with the advantage of hindsight, there is no consensus as to when the nuclear weapon crisis began. Some would see the beginning in the President’s 2002 State of the Union speech, in which he declared North Korea part of an “axis of evil.”[1] The subsequent escalation of threat against another member of the of the axis — Iraq — some contend, left North Korea feeling vulnerable to the threat of attack in the foreseeable future. Some would cite the October 2002 meeting between State Department and North Korean government officials, after which U.S. officials reported that North Korea acknowledged U.S. accusations that it was renewing its nuclear weapons program[2] and thus breaking the terms of the 1994 Agreed Framework and several other international agreements and obligations to which it is party. Other analysts might point to the crisis of 1993-1994, during which North Korea announced it was withdrawing from the Non-Proliferation Treaty, asserting that the crisis never ended but instead has evolved into the current situation.[3] Still others contend that origins of the crisis might be found in the nuclearization of India and Pakistan in 1998, by which the concept of nuclear weapons states and non-nuclear weapons states as a basis for international agreements was challenged, and the subsequent world reaction toward those events, which many cast as short-lived and relatively mild. North Korea officially withdrew from the Nuclear Nonproliferation Treaty on January 10, 2003 (effective three months hence), the first signatory country to do so. In response, the IAEA Board of Governors adopted a resolution on February 12, 2003, declaring North Korea in noncompliance with its nuclear safeguard obligations and referring the matter to the U.N. Security Council.[4] The U.N. Security Council, in turn, on April 9, 2003 (when the withdrawal went into effect), discussed the matter but declined to consider a resolution of condemnation or sanctions, reportedly because of the opposition of Russia and China — two Security Council permanent members with veto power.[5] Six-Party Talks The Bush administration’s position has evolved in the years since the October 2002 meeting, after which the United States reported that North Korea was pursuing nuclear weapons capability. The United States participated in six-party talks — along with North Korea and its major trading partners and neighbors Japan, South Korea, China, and Russia — hosted by China in August 2003, February 2004, June 2004, July/August 2005, September 2005, and — after North Korea’s nuclear test — December 2006. The September 2005 talks, in waning moments, produced a preliminary agreement signed by all parties on September 19th. North Korea agreed to end its pursuit of nuclear weapons, rejoin the Nuclear Nonproliferation Treaty, and readmit IAEA inspectors. The other signatory states would provide North Korea with new security commitments and aid — including electricity from South Korea. Longerterm commitments included the United States taking steps to normalize its relations with North Korea, and all signatories would consider taking steps to provide a lightwater reactor to that country.[6] The September preliminary agreement did not state a timeline or sequence of events; it is generally agreed that all parties could not have signed it if it had. It was intended that subsequent meetings would be hosted by China, beginning probably in November 2005, to negotiate the implementation of the agreement.[7] These multilateral meetings did not take

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place. Barely one day after the signing, President Bush stated that North Korea’s compliance with terms of the agreement relating to dismantlement required verification, and North Korea’s foreign minister declared it would not abandon its nuclear weapons program before the United States and others provided the civil-use light-water reactor.[8] The September preliminary agreement was essentially scuttled as increasingly tense exchanges followed. The December 2006 round resulted in a stalemate, and was followed by new threats from North Korea that it would test its nuclear weapons capability again soon.

United States Imposes Financial Sanctions Around the same time, the United States pursued two paths to increase attention to North Korea’s illicit financial activities and proliferation pursuits.[9] On June 28, 2005, the President initiated additional steps to impede financial transactions related to proliferation of weapons of mass destruction, targeting the financial and trade dealings of eight entities, of which three were North Korean (the remaining were Iranian).[10] And on September 12, 2005, coinciding with a convening of the six-party talks, the Treasury Department found that Banco Delta Asia — a Macau-based bank in which North Korea had substantial holdings — was a “financial institution of primary money laundering concern.”[11] Treasury Department’s Financial Crimes Enforcement Center found that North Korea may reap as much as $500 million annually from counterfeiting, and another $100-to-$200 million annually from narcotics trafficking.[12] The use of financial sanctions, particularly those imposed on Banco Delta Asia, dominated post-September Accord speeches from North Korean officials. North Korea used the Banco Delta Asia action as its justification for not attending six-party talks, though many analysts suggest that North Korea would have stayed away in any event and the bank action just provided a convenient rationale. After the last round of six-party talks, in December 2006, North Korea’s chief negotiator cited the United States’ financial sanctions as his country’s primary obstacle to discussing other matters. U.S. negotiators contend that the financial sanctions have no direct relation to the international community’s concerns about North Korea’s nuclear pursuits.[13] North Korea’s Ballistic Missiles Tests On July 5, 2006, North Korea test-launched seven ballistic missiles, ending a selfimposed moratorium of eight years. In response, the U.N. Security Council, on July 15, 2006, unanimously adopted Security Council Resolution 1695. In it, the Security Council condemned the multiple launches, demanded North Korea recommit to a moratorium, and required all member states: “to exercise vigilance and prevent missile and missilerelated items, materials, goods and technology being transferred to DPRK’s missile or WMD programmes; [and...] prevent the procurement of missiles or missile related-items, materials, goods and technology from the DPRK, and the transfer of any financial resources in relation to DPRK’s missile or WMD programmes....”[14] North Korea’s Nuclear Weapons Test On October 8, 2006, North Korea announced that it had tested a nuclear explosive device.[15] In response, on October 14, 2006, the United Nations Security Council unanimously adopted Resolution 1718 to condemn the test and call on North Korea to return to the six-party talks. UNSCR 1718 invoked Chapter VII of the United Nations Charter —

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but barred military enforcement that could be allowed under Article 41 — to require member states to:[16] •

• •

•

•

•

•

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•

prevent the direct or indirect supply, sale, or transfer to North Korea of conventional weapons, spare parts, delivery systems, or related items as identified by the newly established Committee of the U.N. Security Council; prevent the direct or indirect supply, sale, or transfer to North Korea of luxury goods; cease the procurement from North Korea of any conventional weapons, spare parts, delivery systems, or related items as identified by the newly established Committee of the U.N. Security Council; prevent the transfer to/from North Korea of training, advice, services, or assistance related to the provision, manufacture, maintenance, or use of such weapons or systems; freeze the assets and funds of individuals identified by the Committee of the U.N. Security Council “as being engaged in or providing support for, including through other illicit means, DPRK’s nuclear-related, other weapons of mass destructionrelated and ballistic missile-related programmes, or by persons or entities acting on their behalf or at their direction...,” but with significant exceptions;[17] prevent the entry into or transit through a territory of any person, or family member of such a person, designated by the Committee of the U.N. Security Council “as being responsible for, including through supporting or promoting, DPRK policies in relation to the DPRK’s nuclear-related, ballistic missile-related and other weapons of mass destruction-related programs...,” but with exceptions; [18] prevent illicit trafficking in nuclear, chemical, or biological weapons, their means of delivery, and related materials, by engaging in “cooperative action including through inspection of cargo to and from the DPRK...”; and “intensify ... diplomatic efforts, o refrain from any actions that might aggravate tension and to facilitate the early resumption of the Six-Party Talks...” with a view to implement the September 19, 2005 agreement.

The U.N. Security Council, in UNSCR 1718, also demanded that North Korea: • • • • • • •

•

not conduct further tests of nuclear weapons or ballistic missiles; resume its self-proclaimed missile moratorium; abandon its pursuit of nuclear weapons capability; rejoin the Treaty on the Non-Proliferation of Nuclear Weapons; return to IAEA safeguards and inspections; abandon any other program in pursuit of weapons of mass destruction capability; cease the export of all conventional weapons, spare parts, delivery systems, or related items as identified by the newly established Committee of the U.N. Security Council; and return to the six-party talks to work toward the implementation of the September 19, 2005, agreement.

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Member states of the United Nations are left to work within their own laws to implement the UNSCR 1718 (2006). Secretary of State Rice traveled to Asia from October 17 to 22, 2006, to meet with senior officials of most of North Korea’s major trading partners.[19]

Overall State of Relations Since 2004, North Korea has maintained that it would consider any imposition of sanctions under the auspices of the United Nations an act of war. On October 17, 2006, a spokesperson from North Korea’s Foreign Ministry was credited with stating: “It is quite nonsensical to expect the DPRK to yield to the pressure and threat of someone at this time when it has become a nuclear weapons state.... The DPRK wants peace but is not afraid of war.”[20] While few states have fully normalized relations with North Korea, only the United States has, until North Korea’s nuclear test, maintained fairly comprehensive economic sanctions against that country since the 1950-53 conflict. Indeed, in 2002 some analysts proffered that North Korea’s coyness about its nuclear weapons pursuits was calculated, in part, to increase pressure to remove the remaining U.S. sanctions — particularly those associated with its designation as a supporter of international terrorism. A desire for increased economic assistance, normalization of economic and diplomatic relations, and a nonaggression pact between North Korea and the United States might also be motivating factors. In response to the nuclear program start-up in 2002, and other foreign relations matters pending between the various neighboring states and North Korea, and without a U.N. Security Council resolution, North Korea’s trading partners imposed unilateral economic and diplomatic sanctions. For example, Japan suspended rice shipments and later required all ships using its ports to have substantial environmental and accident liability insurance, a cost that few North Korean shippers could likely bear. Japan also has stated that relations between the two countries will not be normalized until North Korea is verifiably denuclearized. In December 2002, Japan, South Korea, and the United States suspended oil shipments promised under the 1994 Agreed Framework. Australia delayed opening an embassy in Pyongyang, originally scheduled to open by mid-2003, until the nuclear weapons issue is resolved. Reportedly in 2003, China briefly shut off deliveries through its oil pipleline to North Korea to pressure North Korea to join the first round of six-party talks, though subsequently declined to take this step a second time. The new economic sanctions mandated by the United Nations barely tax the United States economy because of its relative lack of economic engagement with North Korea.[21] North Korea’s neighbors — China, Japan, and South Korea — however, conduct everincreasing trade with North Korea, and account for 78.7% of North Korea’s exports. In 2005, trade between North Korea and South Korea exceeds $1 billion. Trade with China, Thailand, and Japan account for 48.4% of North Korea’s imports.[22] Trade between China and North Korea nearly doubled between 2002 and 2004, to $1.39 billion. Trade between North Korea and Russia skyrocketed from $80.7 million in 2002 to $218.4 million in 2004.[23] Efforts to isolate and contain the country would require some economic sacrifice from all of North Korea’s trading partners. The economic and social costs to North Korea, on the other hand, could be enormous, as it has come to rely on South Korea and China for food and energy, and in times of crisis has relied on all the six-party talk participants — including the United States — for substantial food aid and fuel oil shipments. One concern far greater than trade loss, of

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course, at least for North Korea’s geographic neighbors, is that severe economic restrictions push the country and its government toward failure and collapse.[24] Following a North/South summit in 2000, South Korean companies began to invest in an industrial zone along the North Korea-South Korea border, in part to alleviate South Korea’s domestic labor shortage. The industrial zone in Kaesong (Gaesong) hosts 15 South Korean businesses overseeing and financing the productions of garments and kitchenware, and is subsidized by the South Korean government.[25] North Korea, after years of negotiation with South Korea, enacted a law in November 2002 to guarantee visa-free access and corporate tax incentives to encourage cross-border development and investment. It is likely that North Korea sees benefits in South Korea’s Sunshine Policy of greater engagement, inasmuch as its own gross domestic product (GDP) per capita at $1,000 pales to that of $18,000 in South Korea. While the goods, services, and materials that cross the North/South border to support Kaesong or as Kaesong’s output would not be subject to the U.N. sanctions — because the goods and services, at this time, do not have a military application — a debate has emerged within South Korea as to the wisdom of continuing inter-Korean ties. South Korea’s Choo Kyu-ho, spokesperson for the Foreign Ministry, stated after the U.N. Security Council vote: “We judged that the contents of the resolution of the U.N. Security Council do not directly affect the economic cooperation programs between the two Koreas, including Kaesong and Kumgang Mountain. We will go ahead with the economic cooperation programs in harmony with the resolution.”[26] It is reported that inter-country cooperation at the Kaesong Industrial Complex generates about $0.6 million each month in wages in North Korea, of which the government takes some cut. Another South Korean project in North Korea, a tourist resort at Mount Kumgang (Geumgang), generates some $1.0 million each month for the north.[27]

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U.S. ECONOMIC SANCTIONS CURRENTLY IN PLACE Because of what has been found to be a demonstrated threat to U.S. national security, support of international terrorism, maintenance of a communist, nonmarket economy, engagement in the proliferation of weapons of mass destruction, and illicit use of currencies, U.S. law authorizes the President to restrict trade, aid, arms sales and arms transfers to North Korea, and that country’s access to assets held under U.S. jurisdiction.

Trade National Emergency Because of Threat to U.S. National Security Three days after North Korea’s Armed Forces launched a full-scale invasion of South Korea in June 1950, the United States invoked a total embargo on exports to North Korea.[28] The Department of Commerce imposed the most restrictive export controls available against North Korea. Over the years, export controls were restated as the Export Administration Regulations, or EARs. In 1965, for example, the EARs were revised to sort countries into categories of relative restriction; North Korea was classified as a member of Country Group Z, the most restricted lot.[29]

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In 1989, the EARs were again modified to allow the export to North Korea of commercially-supplied goods intended to meet basic human needs. The regulations stipulated that shipments would require validated licenses on a case-by-case basis. In 1995, as part of the United States’ engagement of North Korea under the 1994 Agreed Framework, and again in September 1999, in response to North Korea’s willingness to cease missile testing, President Clinton announced the lifting of most export restrictions applied to that country. Regulations issued in June 2000 amended the EARs to reflect North Korea’s new relatively unfettered status. Many items that previously had required a license were now eligible for export without a license; certain items on the Commerce Control List (CCL) moved from a policy of denial status to case-by-case review.[30] Departments issuing the new regulations, however, stated that “[t]his easing of sanctions does not affect U.S. antiterrorism or nonproliferation export controls on North Korea, including end-user and end-use controls maintained under the Enhanced Proliferation Control Initiative.”[31] Today, the remaining export restrictions against North Korea include a range of terms related largely to that country’s place on the State Department’s list of state supporters of international terrorism.[32] Thus, items that are controlled for national security concerns generally are not available to North Korea. The country is on the most restrictive list — Country Group E — which severely limits its access to computers, software, national security-controlled items, items on the CCL, and service or repair of such items. North Korea also is limited as an end-user by some licenses because it is a communist state, though this problem can be overcome by license exceptions issued by the Department of Commerce.[33] The President currently has authority to ease export restrictions imposed against North Korea. Even if considered a supporter of international terrorism, licensing exceptions may be considered by the Commerce Department. To lift all the export controls applied to North Korea, that country would, at a minimum, have to be removed from the list of countries supporting acts of international terrorism maintained by the State Department pursuant to section 6(j) of the Export Administration Act of 1979. The President holds the authority to make such a change in the sec. 6(j) list.

Terrorism Following the November 29, 1987, destruction of Korean Air Lines 858, in flight, by a bomb reportedly planted by two North Korean agents, Secretary of State George Shultz placed North Korea on the list of countries supporting international terrorism. Most elements of trade, Beneficiary Developing Country status, sales of items on the U.S. Munitions List, most foreign aid, Export-Import Bank funding, and support in international financial institutions are denied to countries found to be supporting international terrorism under the Export Administration Act of 1979.[34] North Korea was added to the list effective January 20, 1988.[35] Placement on the sec. 6(j) list not only results in the constriction of trade possibilities; placement also may trigger denial of beneficial trade designation (NTR or GSP), unfavorable tax status for investors, new limits on diplomatic relations, opposition in international financial institutions, and stricter licensing requirements for trade with the United States in food and medicine.[36] Following the easing of sanctions that pertained to trade, travel, and related transactions in 2000, there was some speculation that North Korea would be removed from the sec. 6(j) list of state sponsors of terrorism. North Korea was particularly interested in changing its status so that it could effectively apply for membership in the World Bank and the

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International Monetary Fund. The United States is required by law to oppose membership in the international financial institutions of, or financial support to, terrorist states. The United States discussed the matter with South Korea and Japan in 2000. South Korea supported North Korea’s bid for this step toward normalization; Japan opposed a change in status until the matter of kidnaped Japanese citizens was resolved.[37] North Korea remains on the United States’ sec. 6(j) list. North Korea is also among those countries listed as being in violation of section 40A of the Arms Export Control Act, which prohibits the selling or licensing of defense articles or defense services to any country that the President finds “is not cooperating fully with United States antiterrorism efforts.” The President is required to make such a determination annually, and the prohibition may be waived on grounds that it is in the national interest to do so.[38]

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Nonmarket State The Trade Agreement Extension Act of 1951 required the suspension of Most-FavoredNation trade status (which has since been replaced by Normal Trade Relations status) for all communist countries except Yugoslavia. As a result, North Korea was denied MFN trade status on September 1, 1951. North Korea remains listed in the headnotes of the Harmonized Tariff Schedule of the United States (HTSUS) as a Rate of Duty Column 2 country (along with Cuba). As a result, while trade is not prohibited with North Korea under the relevant trade laws, tariffs are set at the highest rates for imports from that country.[39] A side result of being denied MFN or NTR is that any such country is also denied preferential trade treatment under the Generalized System of Preferences (GSP), pursuant to the Trade Act of 1974.[40] Proliferator On several occasions, North Korean entities have been found to be in violation of U.S. missile nonproliferation laws.[41] Once a finding is made, the imposition of sanctions is mandatory, though sanctions may be waived if the President finds it “essential to the national security of the United States” to do so. The severity of the sanction depends on the type of material or technology transferred. The duration of the sanction also depends on the material or technology involved; generally sanctions are imposed for two years. Sanctions include, at a minimum, a denial of contracts with agencies of the U.S. government, denial of licenses for items on the U.S. Munitions List (USML), and, at a maximum, a denial of all licenses for importing into the United States for the foreign person or entity. Because North Korea is a nonmarket economy, all relevant activities of the government of North Korea are also sanctioned when entities in North Korea are found to have engaged in proliferation under U.S. law. With the nuclear weapons test of October 8, 2006, the President has statutory authority — and in some cases is required — to cut off all foreign aid except humanitarian and food aid, deny sales or transfers of defense articles and defense services, deny export licenses for items on the U.S. Munitions List (USML), deny foreign military financing, deny credit underwritten or provided by government coffers, withhold U.S. support in the international financial institutions, deny export licenses for dual-use items, and withhold Export-Import Bank support.[42] The United States already maintained a fairly comprehensive sanctions regime on North Korea, thus most of these relationships were already broken or limited.

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Aid Terrorism Because the Secretary of State has identified the government of North Korea as a state sponsor of acts of international terrorism, it is denied most aid under the Foreign Assistance Act of 1961.[43] North Korea’s access to U.S. foreign assistance is also limited in annual foreign operations appropriations measures. In most instances, it is not expressly stated that the restriction or prohibition is associated with North Korea’s place on the terrorist list. Even if the appropriations law prohibits the availability of foreign aid, there are numerous exceptions to the law. Thus, programs in nonproliferation, demining, child survival, conservation and biodiversity, food aid, debt buybacks, health and disease prevention, unanticipated contingencies, international disaster assistance, antiterrorism, may be funded or supported in spite of country-specific restrictions. Under the current Foreign Operations, Export Financing, and Related Programs Appropriations Act,[44] North Korea is denied direct foreign aid and direct loans, credits, insurance and guarantees of the Export-Import Bank. In the same Act, supporters of international terrorism, of which North Korea is one, are denied bilateral assistance and participation in programs designed to provide debt relief to the poorest nations. Under the current Department of Defense Appropriations Act, North Korea is denied assistance “unless specifically appropriated for that purpose.”[45] At the President’s discretion, North Korea would also be subject to the economic sanctions provided in three provisions of law addressing human rights conditions: the Foreign Assistance Act of 1961,[46] under which North Korea is annually castigated for its human rights record; the International Religious Freedom Act of 1998,[47] under which the administration has identified North Korea as a “country of particular concern” since 2001; and the Trafficking Victims Protection Act of 2000,[48] under which the administration has, since 2003, classified North Korea as a Tier 3 (most severe) offender of standards pertaining to the trafficking of persons for slavery or sex trade. Any sanctions imposed pursuant to these acts would be largely redundant, however, with penalties already prescribed to North Korea for the above-stated reasons. Nonmarket State The Export-Import Bank Act of 1945 also singles out Marxist-Leninist countries for denial of guarantees, insurance, credit, or other Bank funding programs. North Korea is specifically cited as a Marxist-Leninist country for purposes of the Export-Import Bank.[49] The Foreign Assistance Act of 1961 denies most non-humanitarian foreign assistance to any Communist country. North Korea is among five countries so designated, though the law is not limited to those countries named.[50] Several laws deny benefits or assistance to communist countries, but do not explicitly name any particular state. Because North Korea has been denied such benefits or aid in the course of the events of the early 1950s and thereafter, these other sections of law would probably be redundant if applied to or cited for North Korea. In some instances, the President may determine that, for purposes of a particular law, North Korea is no longer a “Marxist-Leninist state.” If, however, all other aspects of the U.S.North Korea relationship were to improve, it would probably be necessary for Congress to remove North Korea from the list set out in the Export-Import Bank Act and the Foreign

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Assistance Act of 1961, or necessary for the President to exercise waiver authority made available to his office under those Acts, to make these other laws inapplicable to North Korea.[51]

Arms Sales and Arms Transfers The International Traffic in Arms Regulations (ITAR), administered by the Department of State, begins: It is the policy of the United States to deny licenses and other approvals for exports and imports of defense articles and defense services, destined for or originating in certain countries. This policy applies to Belarus, Cuba, Iran, Libya, North Korea, Syria and Vietnam. This policy also applies to countries with respect to which the United States maintains an arms embargo (e.g., Burma, China, Liberia, Somalia, and Sudan) or whenever an export would not otherwise be in furtherance of world peace and the security and foreign policy of the United States.[52]

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The first ITAR was issued on August 26, 1955; North Korea has been listed as a restricted country from the ITAR’s inception. The ITAR further states that any country found to be a supporter of international terrorism is subject to the ITAR prohibitions and those stated in section 40 of the Arms Export Control Act, which denies the export, directly or indirectly, of any munitions item, lease or loan, credits, guarantees, or other financial assistance to a terrorist country. Section 40 further prohibits U.S. individuals from engaging in such trade or support of such a country. Importing of defense articles and defense services is similarly restricted by the Department of the Treasury’s Bureau of Alcohol, Tobacco, and Firearms, the regulations of which state: It is the policy of the United States to deny licenses and other approvals with respect to defense articles and defense services originating in certain countries or areas. This policy applies to Cuba, Iran, Iraq, Libya, Mongolia, North Korea, Sudan, Syria, Vietnam, and some of the states that comprised the former Soviet Union (Armenia, Azerbaijan, Belarus, and Tajikistan). This policy applies to countries or areas with respect to which the United States maintains an arms embargo (e.g., Burma, China, the Federal Republic of Yugoslavia (Serbia and Montenegro), Haiti, Liberia, Rwanda, Somalia, Sudan, UNITA (Angola), and Zaire). It also applies when an import would not be in furtherance of world peace and the security and foreign policy of the United States.[53]

Again, the President has the authority to change these regulations by removing North Korea from the list of restricted countries.

Access to Assets Declaration of National Emergency On December 16, 1950, President Truman invoked authority granted his office under the Trading With the Enemy Act to declare that a U.S. national emergency existed because of

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recent events in Korea (and elsewhere, as “world conquest by communist imperialism is a goal of the forces of aggression that have been loosed upon the world”).[54] A few days later, the Department of the Treasury issued Foreign Assets Control Regulations (FACR) to forbid any financial transactions involving, or on behalf of, North Korea and China, including transactions related to travel or the access to North Korean assets that were subject to U.S. jurisdiction.[55] Korea-related FACR have been modified on numerous occasions to take into consideration new circumstances (i.e., transactions relating to technology not in existence at the time the regulations were issued) or to ease restrictions in response to changing conditions (i.e., signing of the Agreed Framework, emerging reports of famine, North Korea’s announced moratorium on missile testing). Today the regulations continue to forbid transactions except in the following instances, in which the regulations: • • • • •

•

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• •

•

• •

unblock assets of North Koreans who emigrated and established U.S. residency (1976) (41 F.R. 16554); ease travel-related restrictions for special activities (1989) (54 F.R. 5231); allow freer flow of informational materials (change in legislation not specifically targeting North Korea, 1989) (54 F.R. 5231; subsequently amended); establish telecommunication between the two countries (1992) (57 F.R. 58986; subsequently amended); authorize travel-related transactions, greater telecommunications, news bureaus, banking, and importing magnesite from North Korea after the Agreed Framework was reached (1995) (60 F.R. 8934); authorize donations targeting basic human needs after flooding and famine events (1996) (61 F.R. 9344); authorize certain aviation-related fee payments (1997) (62 F.R. 17548); allow transactions related to the exporting of computer hardware and software, provided there is adherence to the relevant Export Administration Regulations (2000) (65 F.R. 38165); allow North Koreans to invest in property under U.S. jurisdiction, provided the property interest is created on or after June 19, 1999 (the date of President Clinton’s announcement to ease U.S.-North Korea relations) (2000) (65 F.R. 38165); allow imports from North Korea that do not violate various proliferation laws and regulations (2000) (65 F.R. 38165); and engage in transactions with the government of North Korea provided those transactions do not constitute a donation to a U.S. individual and do not violate laws and regulations relating to terrorism (2000) (65 F.R. 38165).

Generally, the President has the authority to change regulations, as long as those changes meet the requirements of any relevant law.[56] He also annually renews the state of national emergency, in place against North Korea since 1950. He could allow the declaration to expire or he could lift it at any time. Congress could terminate a declaration of national emergency by passing a joint resolution, under terms of the National Emergencies Act.

Proliferation of Weapons of Mass Destruction On June 28, 2005, President Bush expanded the authority granted his office to address the threat posed by the proliferation of weapons of mass destruction — authority first exercised North Korea: Issues and U.S. Policy : Issues and U.S. Policy, Nova Science Publishers, Incorporated, 2009. ProQuest Ebook Central,

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by President George H.W. Bush in 1990 — to freeze assets and property of those engaged in the proliferation of weapons of mass destruction. The 41st President had declared that the United States faced a national emergency relating to weapons proliferation (in the absence, at the time, of a reauthorized Export Administration Act), and thus took steps in 1990 to control the exports of certain goods and services, and authorized a ban on foreign aid and credit, procurement contracts, imports and exports, support in international financial institutions, and landing rights.[57] The 43rd President’s order took additional steps to block property and assets under U.S. jurisdiction of any person found, in part — ... to have engaged, or attempted to engage, in activities or transactions that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery (including missiles capable of delivering such weapons), including any efforts to manufacture, acquire, possess, develop, transport, transfer or use such items, by any person or foreign country of proliferation concern;

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... to have provided, or attempted to provide, financial, material, technological or other support for, or goods or services in support of, any activity or transaction described [above]...or any person whose property and interests in property are blocked pursuant to this order ...[58]

The Executive Order identifies eight foreign entities, of which three are North Korean. Department of the Treasury’s Office of Foreign Assets Control has subsequently added another eight North Korean entities to this restricted list, as well as a Swiss company that was found to engage in transactions with one of the North Korean restricted companies.[59] On January 9, 2007, the Department of the Treasury announced that it had designated Bank Sepah, a state-owned Iranian financial institution, as an entity materially contributing to Iran’s proliferation activities. Bank Sepah, coincidentally, according to Treasury, is credited with transferring more than $500,000 for an associate of the Korean Mining Development Corporation. That entity was cited onDecember 28, 2006, under the Iran, North Korea, and Syria Nonproliferation Act of 2000, for exporting missile technology to Iran.[60]

Counterfeiting and Money-Laundering On September 12, 2005, the Treasury Department found that Banco Delta Asia — a Macau-based bank in which North Korea had substantial holdings — was a “financial institution of primary money laundering concern.”[61] Treasury Department’s Financial Crimes Enforcement Center found that North Korea may reap as much as $500 million annually from counterfeiting, and another $100-to-$200 million annually from narcotics trafficking. The finding authorizes the Secretary of the Treasury to require “special measures”[62] on the part of U.S. financial institutions and financial agencies that involve increased record keeping and reporting on Banco Delta Asia’s transactions. Though the Department of the Treasury has only issued a “proposed rulemaking” to impose the most stringent fifth special measure — to prohibit certain bank transactions — a regulation implementing this action has not yet been issued. Nonetheless, the finding and proposed rulemaking has had a chilling effect on Banco Delta Asia’s international business relations. Department of the Treasury officials have testified that “some two dozen financial institutions across the globe have voluntarily cut back or terminated their business with North Korea,

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68

Dianne E. Rennack

notably including institutions in China, Japan, Vietnam, Mongolia, and Singapore. The result of these voluntary actions is that it is becoming very difficult for the Kim Jong-Il regime to benefit from its criminal conduct.”[63]

APPENDIX I: OTHER CRS PRODUCTS RELATING TO NORTH KOREA Overview CRS Report RL33567, Korea-U.S. Relations: Issues for Congress, by Larry A. Niksch. CRS Report RL33389, North Korea: A Chronology of Events in 2005, by Emma ChanlettAvery, Mark E. Manyin, and Hannah Fischer. CRS Report RL32743, North Korea: A Chronology of Events, October 2002-December 2004, by Mark E. Manyin, Emma Chanlett-Avery, and Helene Machart. CRS Report RL32493, The North Korean Economy: Background and Policy Analysis, by Dick K. Nanto and Emma Chanlett-Avery.

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Proliferation CRS Report RL33709, North Korea’s Nuclear Test: Motivations, Implications, and U.S. Options, by Emma Chanlett-Avery and Sharon Squassoni. CRS Report RL33590, North Korea’s Nuclear Weapons Development and Diplomacy, by Larry A. Niksch. CRS Report RS21391, North Korea’s Nuclear Weapons: Latest Developments, by Sharon A. Squassoni. CRS Report RS21582, North Korean Crisis: Possible Military Options, by Edward F. Bruner. CRS Report RS21473, North Korean Ballistic Missile Threat to the United States, by Steven A. Hildreth. CRS Report RL31900, Weapons of Mass Destruction: Trade Between North Korea and Pakistan, by Sharon Squassoni.

Counterfeiting, International Narcotics Control CRS Report RL32167, Drug Trafficking and North Korea: Issues for U.S. Policy, by Raphael F. Perl. CRS Report RL33324, North Korean Counterfeiting of U.S. Currency, by Raphael F. Perl and Dick K. Nanto.

Foreign Aid CRS Report RS21834, U.S. Assistance to North Korea: Fact Sheet, by Mark E. Manyin. CRS Report RL31785, U.S. Assistance to North Korea: Issues and Options for U.S. Policy, by Mark E. Manyin.

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APPENDIX II: NORTH KOREA — ECONOMIC SANCTIONS CURRENTLY IMPOSED IN FURTHERANCE OF U.S. FOREIGN POLICY OR NATIONAL SECURITY OBJECTIVES RATIONALE

RESTRICTION

General foreign policy reasons

Limits the export of goods or services

General foreign policy reasons General foreign policy reasons

Limits proportionate share to international organizations which, in turn, expend funds in North Korea Prohibits assistance from defense appropriations

Diplomatic relations severed National security controls, communism

Prohibits most foreign aid and agricultural sales under P.L. 480 Limits the export of goods or services

Communism

Prohibits foreign aid

Communism

Limits proportionate share to international organizations which, in turn, expend funds in North Korea Prohibits Export-Import Bank funding to Marxist-Leninist states Prohibits support in the IFIs

Communism Communism Communism Communism Nonmarket economy and emigration Nonmarket economy and emigration

Limits the export of goods or services Denies favorable trade terms Denies favorable trade terms Denies favorable trade terms

STATUTORY BASIS [REGULATION] Export Administration Act of 1979 (P.L. 96-72; 50 U.S.C. 2401 et seq.) [15 CFR Part 730-774] Sec. 307, Foreign Assistance Act of 1961 (P.L. 87-195; 22 U.S.C. 2227)

AUTHORITY TO IMPOSE President, Secretary of Commerce, generally

AUTHORITY TO LIFT OR WAIVE President, Secretary of Commerce, generally

Statutory requirement

Sec. 8042, Department of Defense Appropriations Act, 2007 (P.L. 109289; 120 Stat. 1257) Sec. 620(t), Foreign Assistance Act of 1961 (P.L. 87-195; 22 U.S.C. 2370(t)) Sec. 5, Export Administration Act of 1979 (P.L. 96-72; 50 U.S.C. 2404) [15 CFR Part 730-774] Sec. 620(f), Foreign Assistance Act of 1961 (P.L. 87-195; 22 U.S.C. 2370(f)) Sec. 307, Foreign Assistance Act of 1961 (P.L. 87-195; 22 U.S.C. 2227)

Statutory requirement

No waiver; exemption for certain IAEA programs No waiver

Statutory requirement

No waiver

President

President

Statutory requirement

President

Statutory requirement

Sec. 2(b)(2), Export-Import Bank Act of 1945 (P.L. 79-173; 12 U.S.C. 635(b)(2)) Sec. 43, Bretton Woods Agreements Act (P.L. 79-171; 22 U.S.C. 286aa) Sec. 5(b), Export Administration Act of 1979 (P.L. 96-72; 50 U.S.C. 2404(b)) Sec. 401, Trade Act of 1974 (19 U.S.C. 2431) Sec. 402, Trade Act of 1974 (19 U.S.C. 2432) Sec. 409, Trade Act of 1974 (19 U.S.C. 2439)

Statutory requirement

No waiver; exemption for certain IAEA programs President

Statutory requirement Statutory requirement

Secretary of the Treasury President

Statutory requirement

President

Statutory requirement

President

President

President

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RATIONALE

RESTRICTION

Communism and market disruption Communism

Denies favorable trade terms

Terrorism

Denies Generalized System of Preferences designation Limits the export of goods or services

STATUTORY BASIS [REGULATION] Sec. 406, Trade Act of 1974 (19 U.S.C. 2436) Sec. 502(b), Trade Act of 1974 (19 U.S.C. 2462(b)) Sec. 6(j), Export Administration Act of 1979 (P.L. 96-72; 50 U.S.C. 2504(j))

AUTHORITY TO IMPOSE President

AUTHORITY TO LIFT OR WAIVE President

President

President

Secretary of State

Secretary of State

Secretary of State, after the President notifies Congress Secretary of State

Terrorism

Prohibits licenses for arms exports/imports

Terrorism, proliferation

Prohibits transactions related to defense articles and defense services

Sec. 38, Arms Export Control Act (P.L. 90-629; 22 U.S.C. 2778) [22 CFR Part 126.1, 27 CFR Part 447.52] Sec. 40, Arms Export Control Act (P.L. 90-629; 22 U.S.C. 2780)

Terrorism, failure to cooperate with U.S. efforts

Prohibits transactions related to defense articles and defense services

Sec. 40A, Arms Export Control Act (P.L. 90-629; 22 U.S.C. 2781)

President

Terrorism

Prohibits most aid under the Foreign Assistance Act of 1961, Agricultural Trade Development and Assistance Act of 1954, Peace Corps Act, and Export-Import Bank Act of 1945

Sec. 620A, Foreign Assistance Act of 1961 (P.L. 87-195; 22 U.S.C. 2371)

Secretary of State

Terrorism

Prohibits imports

Sec. 505, International Security and Development Cooperation Act of 1985 (P.L. 99-83; 22 U.S.C. 2349aa-9)

President

Secretary of State

Secretary of State, after the President notifies Congress. President may also waive per each transaction. Congress may block a rescission by joint resolution. President, at annual review, or waived by the President if he finds it “important to the national interests of the United States.” Secretary of State, after the President notifies Congress. Waived by President if he finds “that national security interests or humanitarian reasons justify a waiver...” President

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(Continued). RATIONALE

RESTRICTION

Terrorism

Denies Export-Import Bank financing

Terrorism

Opposes loans or funding through international financial institutions

Terrorism

Opposes loans or funding through the International Monetary Fund

Sec. 6, Bretton Woods Agreements Act Amendments of 1978 (P.L. 95-435; 22 U.S.C. 286e-11)

Terrorism

Prohibits bilateral assistance

Terrorism (though not explicitly stated as such)

Prohibits bilateral assistance

Terrorism

Prohibits participation in programs of special debt relief for the poorest

Terrorism

Limits export licensing for food and medicine; prohibits government financing for such exports

Sec. 527, Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2006, as continued (P.L. 109-102; 119 Stat. 2205) Sec. 507, Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2006, as continued (P.L. 109-102; 119 Stat. 2197) Sec. 565, Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2006, as continued (P.L. 109-102; 119 Stat. 2225) Secs. 906, 908 Trade Sanctions Reform Act of 2000 (P.L. 106-387; 22 U.S.C. 7205, 7207)

Terrorism

Limits provision of services to security forces, law enforcement, military, intelligence community Prohibits the acquisition of property in U.S. for diplomatic mission

Terrorism, Communism

STATUTORY BASIS [REGULATION] Sec. 2(b)(1)(B), Export-Import Bank Act of 1945 (P.L. 79-173; 12 U.S.C. 635(b)(1)(B)) Sec. 1621, International Financial Institutions Act (P.L. 95-118; 22 U.S.C. 262p-4q)

Sec. 40, State Department Basic Authorities Act (P.L. 84-885; 22 U.S.C. 2712) Sec. 205, State Department Basic Authorities Act (P.L. 84-885; 22 U.S.C. 4305)

AUTHORITY TO IMPOSE President

AUTHORITY TO LIFT OR WAIVE President

Secretary of the treasury, if a country is listed under §6(j), EAA, or §620A, FAA’61. Secretary of the treasury, if a country is listed under §6(j), EAA, or §620A, FAA’61. President

Secretary of the Treasury (no waiver authority) Secretary of the Treasury (no waiver authority)

Statutory requirement

President, if he finds it in the national security interest, or for humanitarian reasons No waiver

Statutory requirement

No waiver

Statutory requirement

Secretary of State

President, based on national security interests or humanitarian reasons Secretary of State

Secretary of State

Secretary of State

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RATIONALE

RESTRICTION

Terrorism, excessive military expenditure, human rights violations National emergency

Prohibits the cancellation or reduction of certain debt

National emergency, proliferation of weapons of mass destruction

Blocks assets of named proliferators of weapons of mass destruction

Proliferation of weapons of mass destruction: issiles

Prohibits a range of transactions — USG contracts, export licenses, imports into US

Proliferation of weapons of mass destruction: nuclear enrichment transfers Proliferation of weapons of mass destruction: nuclear reprocessing transfers, nuclear detonations

Prohibits foreign aid, military aid,

Prohibits foreign aid (except humanitarian), military aid, USG defense sales and transfers, export licenses for USML goods and services, USG-backed credits, support in the IFIs, agricultural credits or financing, US commercial bank financing, licenses for export of certain goods and services Prohibits Export-Import Bank financing

Proliferation of weapons of mass destruction: nuclear detonations

Prohibits imports, exports, transactions related to transportation

STATUTORY BASIS [REGULATION] Sec. 501, Miscellaneous Appropriations, 2000 (H.R. 3425, enacted by reference in P.L. 106-113; 22 U.S.C. 2395a note) Trading With the Enemy Act (P.L. 6591; 50 U.S.C. app. 5(b)); International Emergency Economic Powers Act (P.L. 95-223; esp. at 50 U.S.C. 1702); National Emergencies Act (P.L. 94-412; 50 U.S.C. 1601 et seq.) [31 CFR Part 500] International Emergency Economic Powers Act (P.L. 95-223; esp. at 50 U.S.C. 1702); National Emergencies Act (P.L. 94-412; 50 U.S.C. 1601 et seq.) Sec. 73, Arms Export Control Act (P.L. 90-629; 22 U.S.C. 2797b)

AUTHORITY TO IMPOSE Statutory requirement

AUTHORITY TO LIFT OR WAIVE President

President (Proclamation 2914; December 16, 1950; 15 F.R. 9029)

President

President [see Executive Order 13382, June 28, 2005; 50 U.S.C. 1701 note]

President

President

President

Sec. 101, Arms Export Control Act (P.L. 90-629; 22 U.S.C. 2799aa)

President

President

Sec. 102, Arms Export Control Act (P.L. 90-629; 22 U.S.C. 2799aa-1)

President

President

Sec. 2(b)(4) of the Export-Import Bank Act of 1945 (P.L. 79-173; 12 U.S.C. 635(b)(4))

Statutory requirement

President

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(Continued). RATIONALE

RESTRICTION

Proliferation of weapons of mass destruction: nuclear detonations

Prohibits Export-Import Bank financing

Proliferation of weapons of mass destruction: missiles Proliferation of weapons of mass destruction

Prohibits a range of transactions — contracts, export licenses, imports into US Prohibits a range of transactions — arms sales and exports, dual-use exports, procurement contracts, assistance, imports, support in the IFIs, credit, landing rights Prohibits non-humanitarian foreign aid, cultural exchanges, support in international financial institutions

Human rights (trafficking in persons) Counterfeiting, moneylaundering

Prohibits certain commercial bank transactions

STATUTORY BASIS [REGULATION] Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2006, as continued (P.L. 109-102; 119 Stat. 2172) Sec. 11B, Export Administration Act (P.L. 96-72; 50 U.S.C. app. 2410b)

AUTHORITY TO IMPOSE Statutory requirement

AUTHORITY TO LIFT OR WAIVE No waiver

President

President

Sec. 3, Iran, North Korea, and Syria Nonproliferation Act of 2000 (P.L. 106178; 50 U.S.C. 1701 note)

President

President

Sec. 110, Trafficking Victims Protection Act of 2000 (P.L. 106-386; 22 U.S.C. 7107)

President

President, waiver if in the national interest

31 U.S.C. 5318A (generally referred to by its amendatory vehicle — Sec. 311, USA PATRIOT Act)

Secretary of the Treasury

Secretary of the Treasury

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APPENDIX III: NORTH KOREAN ENTITIES CITED FOR PROLIFERATION ACTIVITIES UNDER U.S. LAW Effective Date/Cite March 6, 1992 (57 F.R. 11767)

North Korean Entity

Possible Trading Partner (cited in same finding)

Activity/Statute

Ministry of Defense a nd Armed Forces (Iran)

August 6, 1997 (62 F.R. 44302)

— Lyongaksan Machineries and Equipment Export Corporation; — Changgwang Credit Corporation — Lyongaksan Machineries and Equipment Export Corporation; — Changgwang Credit Corporation Changgwang Sinyong Corporation (Korea Mining Development Trading Bureau) Lyongaksan General Trading Corporation

August 6, 1997 (62 FR. 44302)

Korea Pugang Trading Corporation

Unnamed entity cited on same date, separate finding

April 17, 1998 (63 F.R. 24585)

Changgwang Sinyong Corporation (Korea Mining Development Trading Corporation) Changgwang Sinyong Corporation

Khan Research Laboratories (Pakistan)

Category I missile proliferation; contribution to MTCR nonadherent §73(a)(2)(B), (C), AECA §11B(b)(1)(B)(ii), (iii), EAA Category I missile proliferation; contribution to MTCR nonadherent §73(a)(2)(B), (C), AECA §11B(b)(1)(B)(ii), (iii), EAA Category II missile proliferation §73(a)(2)(A), AECA §11B(b)(1)(B)(i), EAA Category II missile proliferation §73(a)(2)(A), AECA §11B(b)(1)(B)(i), EAA Category II missile proliferation §73(a)(2)(A), AECA §11B(b)(1)(B)(i), EAA Category I missile proliferation; contribution to MTCR nonadherent §73(a)(2)(B), (C), AECA §11B(b)(1)(B)(ii), (iii), EAA Category I missile proliferation; contribution to MTCR nonadherent §73(a)(2)(B), (C), AECA §11B(b)(1)(B)(ii), (iii), EAA

June 23, 1992 (57 F.R. 29924)

May 24, 1996 (61 F.R. 29785)

April 6, 2000 (65 F.R. 20239)

— Syrian Scientific Research Center; — Ministry of Defense (Syria)

— Ministry of Defense Armed Forces Logistics (Iran); — State Purchasing Office (Iran) Unnamed entity cited on same date, separate finding

— Ministry of Defense and Armed Forces Logistics (MODAFL) (Iran); — Aerospace Industries Organization (AIO) (Iran); Shahid Hemmat Industrial Group (SHIG) (Iran); — SANAM Industrial Group (Iran) (Determination was made for an unnamed entity April 7, 2000)

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(Continued). Effective Date/Cite January 2, 2001 (66 F.R. 4050) June 14, 2001 (66 F.R. 33988)

North Korean Entity

Possible Trading Partner (cited in same finding)

Activity/Statute

Changgwang Sinyong Corporation Changgwang Sinyong Corporation

Iranian entity/ies

WMD proliferation §§2 and 3, INA

Iranian entity/ies

WMD proliferation §§2 and 3, INA

August 16, 2002 (67 F.R. 54693)

Changgwang Sinyong Corporation

Unnamed entity cited on same date, separate finding

March 24, 2003 (68 F.R. 16113)

Changgwang Sinyong Corporation

Unnamed entity cited on same date, separate finding

June 26, 2003 (68 F.R. 40011)

Changgwang Sinyong Corporation

Iranian entity/ies

Category II missile proliferation §73(a)(2)(A), AECA §11B(b)(1)(B)(i), EAA Category I missile proliferation; contribution to MTCR nonadherent §73(a)(2)(B), (C), AECA §11B(b)(1)(B)(ii), (iii), EAA WMD proliferation §§2 and 3, INA

July 25, 2003 (68 F.R. 44136)

Changgwang Sinyong Corporation

Unnamed

April 1, 2004 (69 F.R. 18415)

Changgwang Sinyong Corporation

Iranian entity/ies

September 23, 2004 (69 F.R. 58212) November 24, 2004 (69 F.R. 69989)

Changgwang Sinyong Corporation

Iranian entity/ies

WMD proliferation §§2 and 3, INA

Changgwang Sinyong Corporation

Iranian entity/ies

WMD proliferation §§2 and 3, INA

Category I missile proliferation, contribution to MTCR nonadherent §73(a)(2)(B), (C), AECA §11B(b)(1)(B)(ii), (iii), EAA WMD proliferation §§2 and 3, INA

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Effective Date/Cite December 27, 2004 (70 F.R. 133) June 28, 2005 (70 F.R. 38567)a,b

October 21, 2005c

December 7, 2006 (Presidential Determination No. 2007-07; Public Papers of the President, December 18, 2006)

North Korean Entity

Possible Trading Partner (cited in same finding)

Activity/Statute

Paeksan Associated Corporation

Iranian entity/ies

WMD proliferation §§2 and 3, INA

— Korea Mining Development Trading Corporation (Changgwang Sinyong Corp.); — Korea Ryonbong General Corporation; — Tanchon Commercial Bank (Changgwang Credit Bank) — Hesong Trading Corp.; — Korea Complex Equipment Import Corp.; — Korea International Chemical Joint Venture Company; — Korea Kwangsong Trading Corp.; — Korea Pugang Trading Corp.; — Korea Ryonha Machinery Joint Venture; Tosong Technology Trading Corp. Government of North Korea

N/A

WMD proliferation E.O. 13382; E.O. 12938; IEEPA; NEA

N/A

WMD proliferation E.O. 13382; E.O. 12938; IEEPA; NEA

N/A

Detonating a nuclear explosive device §102(b)(2), AECA §129 AEA

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(Continued). Effective Date/Cite December 28, 2006 (72 F.R. 606)

North Korean Entity

Possible Trading Partner (cited in same finding)

Activity/Statute

— Korea Mining Development Corporation

N/A [Iran mentioned in press accounts around the same time]

WMD proliferation §§2 and 3, INKSNA

MTCR = Missile Technology Control Regime WMD = Weapons of Mass Destruction AECA = Arms Export Control Act EAA = Export Administration Act of 1979 AEA = Atomic Energy Act INA = Iran Nonproliferation Act of 2000 ISNA = Iran and Syria Nonproliferation Act of 2000 (INA, as amended 11/22/2005) INKSNA = Iran, North Korea, and Syria Nonproliferation Act of 2000 (ISNA, as amended 10/13/2006) E.O. = Executive Order IEEPA = International Emergency Economic Powers Act NEA = National Emergencies Act OFAC = Office of Foreign Assets Control, Department of the Treasury a . In testimony before the House Committee on Financial Services, Subcommittee on Oversight and Investigations, OFAC Director Robert Werner identified the Korea Mining Development Trading Corporation as “Pyongyang’s premier arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons”; “the North Korean defense conglomerate Korea Ryonbong General Corporation...” as a specialist “in acquisition for North Korean defense industries and support to Pyongyang’s military-related sales...identified in export control watch lists in the United States and among U.S. allies...”; and “Tanchon Commercial Bank, headquartered in Pyongyang, inherited from the Korea Changgwang Credit Bank Corporation...the role as the main North Korean financial agent for sales of conventional arms, ballistic missiles, and good[s] related to the assembly and manufacture of such weapons. Since the late 1980s, Tanchon’s predecessor, [Changgwang...]collected revenue from weapons-related sales that were concentrated in a handful of countries mainly located in the Mid-East and several African states. These revenues provide North Korea with a significant portion of its export earnings and financially aid Pyongyang’s own weapons development and arms-related purchases.” Capitol Hill Hearing Testimony, Congressional Quarterly. February 16, 2006. b . On March 30, 2006, the Department of the Treasury announced it would add Kohas AG, a Swiss company, and its president, Jakob Steiger, on the Blocked Entities list under E.O. 13382, because if its financial ties to Korea Ryonbong General Corporation. A subsidiary of Ryonbong owns nearly half the outstanding shares of Kohas. Department of the Treasury, Office of Foreign Assets Control. Amendment of final rule. 31 CFR Chapter v. 71 F.R. 39708 (July 13, 2006). Effective June 27, 2006. Aversa, Jeannine. “U.S. Freezes Assets of Swiss Company Tied to North Korea,” Associated Press. March 30, 2006. Stuart Levey, Under Secretary for Terrorism and Financial Intelligence, Department of the Treasury. Testimony before Senate Committee on Banking, Housing, and Urban Affairs, April 4, 2006, Congressional Quarterly. c. In his February 16, 2006 testimony before the House Committee on Finance, Subcommittee on Oversight and Investigations, OFAC Director Werner identified Hesong Trading Corporation and Tosong Technology Trading Corporation as owned or controlled by parent company Changgwang Sinyong Corporation. He further cited Korea Ryonbong General Corporation as the parent company of the remaining six entities identified for purposes of E.O. 13382.

78

Dianne E. Rennack

REFERENCES [1]

[2]

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[3]

[4] [5] [6]

[7] [8]

The language used by both the United States and North Korea over the last several years, some contend, has been part of the problem. The President’s “axis of evil” reference in 2002 gave way to then-Secretary of State nominee Condoleezza Rice’s “outposts of tyranny” testimony in 2005 before the Senate Committee on Foreign Relations. For North Korea’s part, President Bush has been called a “philistine,” a “half-baked man in terms of morality,” and “a hooligan bereft of any personality as a human being,” to note the more colorful. See President George W. Bush. State of the Union. January 29, 2002. [http://www.whitehouse.gov/news/releases/2002/01/ 20020129-11.html] “Opening Remarks By Secretary of State-Designate Dr. Condoleezza Rice,” FDCH/Congressional Quarterly, Inc. January 18, 2005. Sang-hun, Choe. “U.S.-North Korea Insults Get Personal,” International Herald Tribune. May 2, 2005, p. 3; Initially, North Korea denied the claim. Though it announced in March 2005 that it had a nuclear weapon, participants in the six-party talks other than the United States, particularly China and South Korea, publicly expressed doubts about North Korea’s true capability or emerging arsenal. See Kahn, Joseph. “China Doubts U.S. Data on North Korean Nuclear Work,” The New York Times. March 7, 2005. p. 7; and Herman, Burt. “Electricity Is Carrot in North Korea Talks,” Associated Press Online. March 16, 2005. Even U.S. officials, on occasion, doubted the veracity of North Korea’s announcements: Powell, Bill. “Walking the Tightrope; Kim Jong Il’s Nuclear Brinkmanship Has China, South Korea, and the U.S. at Odds Over How Best to Bring Him Back to the Bargaining Table,” Time International. February 28, 2005. p. 24. The scope of this paper is to consider economic sanctions; other CRS products discuss in detail specific aspects of the U.S.-North Korea relationship. See CRS bibliography at end of this paper. International Atomic Energy Agency document GOV/2003/14. “Nuclear Ban Expires for N. Korea: U.N. Refuses to Condemn Treaty Pullout,” Associated Press. April 11, 2003. Kessler, Glenn. “U.S. Officials Wary of N. Korean Statement,” Washington Post. June 8, 2005. p. A17. Testimony of Christopher Hill, Assistant Secretary of State, Bureau of East Asian and Pacific Affairs, and Richard Lawless, Deputy Assistant Secretary of Defense, Asian and Pacific Affairs, Bureau of International Security Affairs, before the House Committee on International Relations, Subcommittee on Asia and the Pacific. Hearing on U.S. and Northeast Asia. May 26, 2005. Kahn, Joseph. “North Korea Says It Will Abandon Nuclear Efforts,” The New York Times. September 19, 2005. p. 1. Kahn, Joseph and David E. Sanger. “U.S.-Korean Deal on Arms Leaves Key Points Open,” The New York Times. September 20, 2005. p. 1. Kahn, Joseph. “North Korea Says It Will Abandon Nuclear Efforts,” The New York Times. September 19, 2005. p. 1. “North Korea’s Nuclear Deal Needs to Verified: Bush,” Agence France Presse. September 19, 2005; U.S. Department of State, briefing, September 20, 2005; “U.S. Stance on North Korea Clear: No Compliance, No Nuclear Energy — First Step Must

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North Korea: Economic Sanctions

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[14]

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Be End To Nuclear Weapons Programs, U.S. Officials Say,” State Department Press Releases and Documents. September 20, 2005. The prohibition of certain financial activities, some contend, could turn out to be a real can of worms. Could such actions marginalize the U.S. dollar in world trade, or could such actions transform the manner in which all countries exchange, verify, and protect, currencies? See, for example, Weisman, Steven R. “U.S. Pursues Tactic of Financial Isolation,” The New York Times. October 16, 2006. p. 10. Executive Order 13382 of June 28, 2005 (70 F.R. 38567) and related Executive Orders may be found at 50 U.S.C. 1701 note (see especially, Executive Order 12938 (November 14, 1994)). Pursuant to 31 U.S.C. 5318A, as enacted by the USA PATRIOT Act (§ 311 of P.L. 107-56; 115 Stat. 298). In title III of that Act (International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001), Congress found that money laundering fuels transnational criminal enterprises, including international terrorism, and threatens to “undermine the integrity of U.S. financial institutions and...global financial and trading systems upon which prosperity and growth depend...” 31 U.S.C. 5318A(b) authorizes the Secretary of the Treasury to take “special measures” relative to financial institutions operating outside U.S. jurisdiction largely requiring transparent recordkeeping and reporting of financial transactions. Effective September 12, 2005, the Treasury Department’s Financial Crimes Enforcement Network issued a finding (70 F.R. 55214) and a notice of proposed rulemaking (to amend 31 CFR Part 103; 70 F.R. 55217). 70 F.R. 55215, which in turn cites Perl, Raphael. Drug Trafficking and North Korea: Issues for U.S. Policy, CRS Report RL32167. Kahn, Joseph. “Talks End on North Korea’s Nuclear Weapons,” The New York Times. December 23, 2006. p. 9. United Nations Security Council Resolution 1695 (2006) (UNSCR 1695), July 15, 2006, adopted 15 - 0. See also U.N. press release of the same date: “United Nations Security Council Condemns Democratic People’s Republic of Korea’s Missile Launches,” which includes a summary and statements of support/condemnation from representatives of Japan, the United States, China, United Kingdom, Russian Federation, Argentina, Tanzania, France, South Korea, and North Korea. In hearings before the Senate Committee on Banking, Housing and Urban Affairs on September 12, 2006, Treasury Deputy Under Secretary Daniel Glaser stated that the administration was using Executive Order 13382, issued June 2005, to implement the requirements of UNSCR 1695. On December 7, 2007, President Bush determined that North Korea, a nonnuclearweapon state, had detonated a nuclear explosive device, citing sec. 102(b) of the Arms Export Control Act and sec. 129 of the Atomic Energy Act Presidential Determination No. 2007-07. Public Papers of the President. December 18, 2006. UNSCR 1718 (2006) may be found on-line at [http://www.un.org/Docs/sc/unsc_ resolutions06.htm]. See also: “Security Council Condemns Nuclear Test by Democratic People’s Republic of Korea, Unanimously Adopting Resolution 1718 (2006),” US Fed News. October 14, 2006, which includes text of the Resolution and supporting statements of representatives of the United States, France, China, United Kingdom,

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[17]

[18]

[19]

[20]

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[21]

[22] [23]

[24] [25]

Dianne E. Rennack Russian Federation, Argentina, Japan, South Korea, and North Korea. U.N. Charter may be found online at [http://www.un.org/aboutun/charter/]. Para. 9 of UNSCR 1718 (2006) exempts from freezing those financial or other assets or resources “(a) [t]o be necessary for basic expenses, including payment for foodstuffs, rent or mortgage, medicines and medical treatment, taxes, insurance premiums, and public utility charges, or exclusively for payment of reasonable professional fees and reimbursement of incurred expenses associated with the provision of legal services, or fees or service charges, in accordance with national laws, for routine holding or maintenance of frozen funds, other financial assets and economic resources... (b) [t]o be necessary for extraordinary expenses... or (c) [t]o be subject of a judicial, administrative or arbitral lien or judgement...” Para. 10 of UNSCR 1718 (2006) exempts “travel that is justified on the grounds of humanitarian need, including religious obligations, or where the Committee [of the U.N. Security Council] concludes that an exemption would otherwise further the objectives of the present resolution”. Secretary Rice traveled to Japan, South Korea, China, and Russia from October 17 to 22, 2006, to discuss implementation of UNSCR 1718 (2006) and other issues. [http://www.state.gov/secretary/trvl/2006/74017.htm] Some policy analysts have expressed concern that Taiwan, Japan, and South Korea face near-term decisions about pursuing nuclear capability, which, in turn raises very difficult questions about a regional arms race, Korea’s reunification, and China’s relations with Taiwan. Giacomo, Carol, “U.S. Reassuring Allies On Its Asia Role,” Reuters. October 12, 2006; “Rice Goes To Korea, Via China,” USA Today.com. October 16, 2006. Kim, Jack. “North Korea Defiant Amid Fears of Second Nuclear Test,” Reuters. October 17, 2006; Chang, Jae-Soon. “N. Korea: Sanctions Are War Declaration,” Associated Press. October 17, 2006. In 1999, President Clinton announced that most export restrictions against North Korea would be lifted; new regulations were implemented the following year. According to the U.S. International Trade Commission, in the first year, 2000, the United States exported $2.7 million in goods to North Korea. U.S. exported in subsequent years: 2001, $0.65 million; 2002, $25.01 million; 2003, $7.98 million; 2004, $23.75 million; 2005, $5.76 million; and 2006 (through August), $0.0 million. [http://dataweb.usitc.gov] Export and import figures are as of 2004. [http://www.cia.gov/cia/ publications/factbook/geos/kn.html] Faiola, Anthony. “Despite U.S. Attempts, N. Korea Anything But Isolated; Regional Trade Boom Reflects Division Between Bush Priorities, Asian Interests,” The Washington Post. May 12, 2005. p. A18. “The Nightmare Comes to Pass — North Korea,” The Economist. October 14, 2006. “Seoul to Ensure Inter-Korean Cooperation Projects Continue Uninterrupted,” BBC Monitoring International Reports. February 15, 2005. Separate from the current crisis, the Kaesong Industrial Complex has complicated free trade agreement negotiations between the United States and South Korea; see CRS Report RL33435, The Proposed South Korea-U-S. Free Trade Agreement (KORUS FTA), by William H. Cooper and Mark E. Manyin.

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[26] Onishi, Norimitsu, “Questions Grown Over U.N. Curbs on North Korea,” The New York Times. October 16, 2006. p. 1. [27] “UN Sanctions Divide S. Korea Amid Questions of Their Usefulness,” Asia Pulse. October 17, 2006; “Suspension of Inter-Korean Business Only Hurts S. Korea: Official,” Yonhap News Agency. October 14, 2006; “Intelligence Body Wants InterKorean Ties Cooled,” BBC Monitoring Asia Pacific. October 17, 2006. [28] Pursuant to authority in sec. 3 of the Export Control Act of 1949 (P.L. 11, 81st Congress; 63 Stat. 7). Superceded by subsequent export administration laws. [29] The Export Administration Regulations are currently set at 15 CFR Parts 730-774; the regulations have been rewritten numerous times over the past 50 years for reasons of changing foreign policy, trade policy, and the administration of both. [30] The Commerce Control List may be found at 15 CFR Part 774 Supplement No. 1. [31] 65 FR 38148-38166 (June 19, 2000), in which Departments of Commerce, Transportation, and the Treasury each issued changes to regulations (15 CFR Part 730 et seq., 44 CFR Part 403, and 31 CFR Part 500, respectively) to implement the President’s June 1999 announcement. Items for which licensing was eased included computers, software, and related technology. [32] Terrorist states comprise those countries found by the Secretary of State to be supporters of international terrorism pursuant to sec. 6(j) of the Export Administration Act of 1979 (P.L. 96-72; 50 U.S.C. app. 2405), currently North Korea, Cuba, Iran, Syria and Sudan. [33] The Export Administration Regulations (15 CFR Part 730 et seq.) at Part 744 address the matter of issuing a license based on the end-user’s status. For example, the issuing of export licenses for goods and services to South Korea is guided by that country’s placement on the Country Chart (at 15 CFR Part 738 Supplement No. 1), the item’s placement on the Commerce Control List (15 CFR Part 774 Supplement No. 1), and other factors particular to South Korea. But if an item is exported to South Korea as an intermediate point, with an end-user in North Korea, the latter country’s status relative to the Commerce Control List comes into consideration. This is a contentious issue as South Korea pursues the development of industrial zones in North Korea, such as Kaesong. [34] Section 6(j) of P.L. 96-72 (50 U.S.C. app. 2405). Also currently listed as supporters of international terrorism are Cuba, Iran, Syria, and Sudan. See also sec. 40 of the Arms Export Control Act (22 U.S.C. 2780) and sec. 620A of the Foreign Assistance Act of 1961 (22 U.S.C. 2371). Each of these sections of law authorizes the promulgation of a list of supporters of international terrorism, though no list has been generated under either section. It is generally considered that the list maintained pursuant to the Export Administration Act of 1979 applies to all three laws. [35] Once a country is designated as a supporter of international terrorism pursuant to sec. 6(j) of the Export Administration Act of 1979, restrictions in several other laws are triggered. For example, any third country is likely to be denied U.S. aid if it has conducted business with a country listed under sec. 6(j), pursuant to secs. 620G and 620H of the Foreign Assistance Act of 1961 (P.L. 87-195; 22 U.S.C. 2377, 2378), or the annual foreign aid appropriations act. [36] See sec. 502 of the Trade Act of 1974 (P.L. 93-618;19 U.S.C. 2462); sec. 901(j) of the International Revenue Code (26 U.S.C. 901(j)); 10 United States Code § 2327 (General

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[37]

[38]

[39]

[40] [41]

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[42]

[43]

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Dianne E. Rennack Military Law); sec. 40 of the State Department Basic Authorities Act of 1956 (P.L. 84885; 22 U.S.C. 2712); sec. 205 of the State Department Basic Authorities Act of 1956 (P.L. 84-885; 22 U.S.C. 4305); sec. 1621 of the International Financial Institutions Act (P.L. 95-118; 22 U.S.C. 262p-4q); sec. 501 of Miscellaneous Appropriations, 2000 (H.R. 3425, enacted by reference in P.L. 106-113; 22 U.S.C. 2395a note); and sec. 906 of the Trade Sanctions Reform and Export Enhancement Act (H.R. 5426, enacted by reference in P.L. 106-387; 22 U.S.C. 7205), as amended. See sec. 1621 of the International Financial Institutions Act (P.L. 95-118; 22 U.S.C. 262p-4q). See also Niksch, Larry A. and Raphael Perl. North Korea: Terrorism List Removal? CRS Report RL30613. 22 U.S.C. 2781. The most recent certification, issued by the Secretary of State on May 8, 2006 (71 F.R. 28897), included Cuba, Iran, North Korea, Syria, and Venezuela. This section of law was added to the AECA in late 1996; North Korea is included on the list each year. Harmonized Tariff Schedule of the United States, general note 3(b). See also section 402 of the Trade Act of 1974, popularly referred to as the Jackson-Vanik amendment (19 U.S.C. 2432). Section 502(b)(1) of P.L. 93-618 (19 U.S.C. 2461). Section 73 of the Arms Export Control Act (P.L. 90-629; 22 U.S.C. 2797b), sec. 11B of the Export Administration Act (P.L. 96-72; 50 U.S.C. App. 2410b), and secs. 2 and 3 of the Iran, North Korea, and Syria Nonproliferation Act of 2000 (P.L. 106-178; 50 U.S.C. 1701 note), as amended. North Korea was added to the latter Act on October 13, 2006, with the signing into law of the North Korea Nonproliferation Act of 2006 (P.L. 109353; 120 Stat. 2015). See appendix II for a list of North Korean entities cited for proliferation activities, and the country in which the trading partner was likely based (when available). Section 102 of the Arms Export Control Act (P.L. 90-629; 22 U.S.C. 2799aa-1), popularly referred to as the Glenn amendment; sec. 2(b)(4) of the Export-Import Bank Act of 1945 (P.L. 79-173; 12 U.S.C. 635(b)(4)); and the current Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2006, as continued (P.L. 109-102; 119 Stat. 2172), relating to Export-Import Bank funding. On December 7, 2006, President Bush determined that North Korea, a non-nuclear-weapon state, had detonated a nuclear explosive device, citing sec. 102(b) of the Arms Export Control Act and sec. 129 of the Atomic Energy Act Presidential Determination No. 2007-07. Public Papers of the President. December 18, 2006. Section 620A of that Act (P.L. 87-195; 22 U.S.C. 2371) prohibits most aid under its auspices as well as that of the Agricultural Trade Development and Assistance Act of 1954 (P.L. 480; 7 U.S.C. 1691 et seq.), Peace Corps Act (P.L. 87-293; 22 U.S.C. 2501 et seq.), and Export-Import Bank Act of 1945 (P.L. 79-173; 12 U.S.C. 635 et seq.). The section, however, also provides the President the authority to waive its application on humanitarian or national security grounds in some instances. P.L. 109-102 (119 Stat. 2172), extended by sec. 101(a)(3) of division B of the Department of Defense Appropriations Act, 2007 (P.L. 109-289; 120 Stat. 1257 at 1312), as amended, until an FY2007 Act is signed into law. In P.L. 109-102, see particularly sec. 507 —Prohibition Against Direct Funding for Certain Countries (119 Stat. 2197); sec. 527 — Prohibition on Bilateral Assistance to Terrorist Countries (119

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North Korea: Economic Sanctions

[45] [46] [47] [48] [49] [50]

[51]

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[52] [53] [54]

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Stat. 2205); and sec. 565 — Special Debt Relief for the Poorest (119 Stat. 2225). Subsequent to its nuclear tests, North Korea would also be denied U.S. Export-Import Bank support under this Act — see title I (119 Stat. 2172). Section 8042 of the Department of Defense Appropriations Act, 2007 (P.L. 109-289; 120 Stat. 1257). Sections 116 and 502B of P.L. 87-195 (22 U.S.C. 2151n and 2304, respectively), as amended. P.L. 105-292 (22 U.S.C. 6401 et seq.). P.L. 106-386 (22 U.S.C. 7101 et seq.). Section 2(b)(2) of P.L. 79-173 (12 U.S.C. 635(b)(2)); amended in 1986 to include this ban on funding to Marxist-Leninist states. Section 620(f) of P.L. 87-195 (22 U.S.C. 2370(f)). Consider also subsec. (h) of that section, which requires the President to “adopt regulations and establish procedures to insure that United States foreign aid is not used in a manner which, contrary to the best interests of the United States, promotes or assistants the foreign aid projects or activities of any country that is a Communist country for purposes of subsection (f).” Consider also sec. 5(b) of the Export Administration Act of 1979, which requires the President to “establish as a list of controlled countries those countries set forth in section 620(f) of the Foreign Assistance Act of 1961...” For example: sec. 620(h) of the Foreign Assistance Act of 1961 (P.L. 87-195; 22 U.S.C. 2370(h)), secs. 502(b)(1) and (b)(2)(A) of the Trade Act of 1974 (P.L. 93-618; 19 U.S.C. 2462(b)(2)(A)), sec. 5(b) of the Export Administration Act of 1979 (50 U.S.C. App. 2404(b)), and sec. 43 of the Bretton Woods Agreements Act (P.L. 79-171; 22 U.S.C. 286aa), the latter of which requires the U.S. Executive Directors to the International Monetary Fund “to actively oppose any facility involving use of Fund credit by any Communist dictatorship...”. 22 CFR Part 126.1, authorized pursuant to sec. 38 of the Arms Export Control Act (P.L. 90-629; 22 U.S.C. 2778). 27 CFR Part 447.52, also authorized under sec. 38 of the Arms Export Control Act. Proclamation No. 2914 (December 16, 1950; 15 F.R. 9029). Section 5(b) of the Trading With the Enemy Act (TWEA) (P.L. 65-91; 50 U.S.C. app. 5(b)), at the time of the Korean crisis, authorized the President to curtail a range of transactions between the United States and a targeted country “[d]uring time of war or during any other period of national emergency declared by the President.” Today, the presidential authority to declare that a national emergency exists is stated in the National Emergencies Act (P.L. 94-412; 50 U.S.C. 1601 et seq.), and the authority to prohibit transactions because of a national emergency is stated in the International Emergency Economic Powers Act (IEEPA) (title II of P.L. 95-223; 50 U.S.C. 1701 et seq.) TWEA is amended to apply only during the time of war, except any exercise of authorities therein that was taken prior to amendment may continue if renewed annually by the President pursuant to authorities stated in IEEPA. The actions against North Korea are renewed annually. 31 CFR Part 500; 15 F.R. 9040; December 19, 1950, subsequently amended. In instances pertaining to other countries (most notably, Cuba), Congress has legislated what should be covered in regulations, as well as their flexibility or duration. Congress has also influenced specific regulations as they pertain to aspects of using sanctions in foreign policy, most recently by determining that food and medicine should not

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[58] [59]

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Dianne E. Rennack generally be restricted when sanctions are applied. That action required a restatement of several sections of regulations. Executive Order 12735 of November 16, 1990. On the same day, the President announced his intention to pocket veto H.R. 4653 — the Omnibus Export Amendments Act of 1990 — with which Congress intended to reauthorize the then-expired Export Administration Act of 1979. In his announcement, President Bush stated his intentions to curtail significantly trade in goods and services that lent themselves to the proliferation of weapons of mass destruction. See “Memorandum of Disapproval for the Omnibus Export Amendments Act of 1990,” Public Papers of the President, November 16, 1990. 26 Weekly Comp. Pres. Doc. 1839. E.O. 12735 was subsequently overhauled by President Clinton with the issuance of Executive Order 12938 (November 14, 1994; 59 F.R. 59099; 50 U.S.C. 1701 note). The national emergency therein is renewed annually. Executive Order 13382, Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters (June 28, 2005; 70 F.R. 38567). Department of the Treasury. Office of Foreign Assets Control. “Nonproliferation: What You Need to Know About Treasury Restrictions.” Information Bulletin, most recently updated August 15, 2006, [http://www.treas.gov/offices/enforcement/ofac/ programs/wmd/wmd.shtml]. See also testimony of Robert W. Werner, Director of the Office of Foreign Assets Control, Department of the Treasury, before the House Committee on Financial Services, February 16, 2006. Department of the Treasury. Press release. Iran’s Bank Sepah Designated by Treasury: Sepah Facilitating Iran’s Weapons Program. January 9, 2007. HP-219; Weisman, Steven. “U.S. Prohibits All Transactions with a Major Iranian Bank,” The New York Times. January 10, 2007. p. 3. Pursuant to 31 U.S.C. 5318A, as enacted by the USA PATRIOT Act (§ 311 of P.L. 107-56; 115 Stat. 298). Effective September 12, 2005, the Treasury Department’s Financial Crimes Enforcement Network issued a finding (70 F.R. 55214) and a notice of proposed rulemaking (to amend 31 CFR Part 103; 70 F.R. 55217). 31 U.S.C. 5318A(b) defines “special measures” as (1) record keeping and reporting of certain financial transactions; (2) collection of information relating to beneficial ownership; (3) collection of information relating to certain payable-through accounts; (4) collection of information relating to certain correspondent accounts; and (5) prohibitions or conditions on opening or maintaining in the United States correspondent accounts or payable-through accounts. Senate Committee on Banking, Housing and Urban Affairs hearings, September 12, 2006, testimony of Treasury Deputy Under Secretary Daniel Glaser. Congressional Quarterly.

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In: North Korea: Issues and U.S. Policy Editor: Samuel P. Massingame, pp. 85-120

ISBN: 978-1-60692-845-5 © 2009 Nova Science Publishers, Inc.

Chapter 3

N ORTH K OREAN R EFUGEES IN C HINA AND H UMAN R IGHTS I SSUES : I NTERNATIONAL R ESPONSE AND U.S. P OLICY O PTIONS * Rhoda Margesson, Emma Chanlett-Avery and Andorra Bruno ABSTRACT

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North Koreans have been crossing the border into China, many in search of refuge, since the height of North Korea’s famine in the 1990s. The State Department estimates that 30,000-50,000 North Korean refugees currently live in China (some nongovernmental organizations estimate the number is closer to 300,000) and believes those who are repatriated may face punishment ranging from a few months of “labor correction” to execution. A number of reports also document the difficult conditions faced by North Koreans who remain in China. The plight of the North Koreans focuses attention not only on those seeking refuge and their refugee status, but also points to the factors driving their decision to leave, primarily food shortages, deteriorating humanitarian conditions, and human rights violations. North Korea is generally characterized as one of the world’s worst violators of human rights and religious freedom, an issue that some Members of Congress and interest groups say should assume greater importance in the formation of U.S. priorities towards North Korea. Congressional concern about human rights in North Korea and conditions faced by North Korean refugees led to the passage of the North Korean Human Rights Act (NKHRA) in 2004. North Korean refugees in China and human rights issues are frequently raised simultaneously, particularly in a congressional context. Although the situation for North Koreans seeking to leave their country and for those who remain inside its borders pose different questions and may call for separate responses, both focus on the nature of the regime in Pyongyang. Critics of the North Korean government have raised both issues together to put pressure on the regime, particularly when nuclear weapons program negotiations stalled. Some advocates do not want to link refugee and human rights issues, claiming that the former calls for a quieter, cooperative approach, while the latter requires a more outspoken response to the North Korean government’s practices. Although some policy experts insist that the United States has a moral imperative to stand up for the oppressed, *

This is an edited, excerpted and augmented edition of a CRS Report RL34189, dated January 18, 2008

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Rhoda Margesson, Emma Chanlett-Avery and Andorra Bruno others say that this creates obstacles in the nuclear disarmament negotiations. In 2007, the Bush Administration entered into bilateral talks with North Korea and linked the prospect of diplomatic relations and Pyongyang’s re-entry into the international community with only the nuclear issue, leaving out human rights and refugee concerns. Nevertheless, North Korean human rights and refugee issues remain significant concerns and also have broader regional importance. China and South Korea want to avoid a massive outflow of refugees, which they believe could trigger the instability or collapse of North Korea. North Korean refugees seeking resettlement often transit through other Asian countries, raising diplomatic, refugee, and security concerns for those governments. South Korea, as the final destination of the vast majority of North Koreans, struggles to accommodate new arrivals and does not want to damage its relations with North Korea.

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OVERVIEW The increased international attention given to the situation of North Koreans seeking refuge, primarily in China, has led Congress to take a greater interest in the refugee situation and the underlying causes within North Korea and across its borders.[1] Food shortages, persecution, and human rights abuses have prompted thousands and perhaps hundreds of thousands of North Koreans to go to China where they often become victims of further abuse, neglect, and lack of protection. Those who remain in North Korea (formally known as the Democratic Republic of North Korea, or DPRK) also continue to suffer from a lack of food and other basic humanitarian provisions. Both the House and Senate have held hearings and passed resolutions addressing the status of the refugees. Additionally, several Members of Congress have written letters regarding the issue to the U.S. and Chinese governments. In 2004 the 108th Congress passed, and President Bush signed, the North Korean Human Rights Act (H.R. 4011; P.L. 108-333). The North Korean Human Rights Act (NKHRA) authorizes the President new funds to support human rights efforts, improve the flow of information, and to require the President to appoint a Special Envoy on human rights in North Korea. It also identifies the need for humanitarian food assistance and refugee care. North Korea has been viewed as a threat to U.S. interests for a number of important security reasons that go well beyond refugee concerns and human rights issues. These include the pursuit of nuclear weapons and missile programs; a history of proliferating missiles; reported threats to export parts of its self-declared nuclear arsenal; and possible possession of chemical and biological weapons programs.[2] North Korea is also on the U.S. list of states that sponsor terrorism.[3] Amid an atmosphere of continuing tensions over North Korea’s nuclear program, the potential remains for worsening humanitarian conditions and a possible increase in North Koreans fleeing the country. The situation raises the questions of what more, if anything, can and should be done — by the United States and the international community — not only to focus attention on the abuses of the DPRK regime, but to alleviate the suffering of North Koreans. Increasingly, some argue it is the suffering of ordinary North Koreans that brings into sharp relief the continuing violation of fundamental rights — rights pertaining to food security, refugee status, and individual freedoms — and raises questions about how those rights should be protected and by whom.

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PROTECTING REFUGEES China generally refuses international agencies and non-governmental organizations (NGOs) access to the North Koreans who cross its border; this and its periodic practice of deportation, have led many to ask about international law and the protection of refugees in China. China’s obligations under international refugee law will be discussed later in the article.

The U.N. Convention Relating to the Status of Refugees The international instruments that provide protection to refugees include the 1951 United Nations Convention Relating to the Status of Refugees (Refugee Convention) and the 1967 Protocol to that Convention.[4] A refugee is legally defined in the Refugee Convention as a person fleeing his or her country because of persecution or “owing to well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country... .”[5] Parties to the Refugee Convention have an obligation to abide by the principle of “non-refoulement,” which means that “No contracting State shall expel or return (“refouler”) a refugee in any manner whatsoever to the frontiers of territories where his life or freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or political opinion.”[6] China and South Korea are parties to the Refugee Convention and its 1967 Protocol; North Korea is not a party to either instrument.[7]

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The United Nations High Commissioner for Refugees (UNHCR) The United Nations High Commissioner for Refugees (UNHCR) is the U.N. agency dedicated to the protection of refugees and other populations displaced by conflict, famine, and natural disasters.[8] Its mandate is to lead and coordinate international action for the protection of refugees and the resolution of refugee problems worldwide. Refugees are granted a special status under international law. Once an individual is considered a refugee, that individual automatically has certain rights, and states that are parties to the Refugee Convention and its Protocol are obligated to provide certain resources and protection. UNHCR ensures these rights, works to find permanent, long-term solutions for refugees, and coordinates emergency humanitarian relief for refugees and, increasingly, other persons of concern. Enforcement of the Refugee Convention can present challenges. For example, the national laws of a state may not be developed sufficiently to allow full implementation of the provisions of the Refugee Convention. Often becoming a party to the Refugee Convention is a first step and UNHCR serves as an important resource. Sometimes the Refugee Convention may contradict bilateral agreements between states, such as the repatriation agreement between North Korea and China described later in this article. From UNHCR’s point of view, international law overrides other bilateral agreements, but governments may not agree. UNHCR may try to assist in creating a solution or states may use ad hoc procedures to determine whether an individual has a well-grounded fear of persecution and thus is protected from deportation.

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Rhoda Margesson, Emma Chanlett-Avery and Andorra Bruno

UNHCR often works with governments behind the scenes in asylum cases to push for application of the principles of the Refugee Convention and protection of the rights of the individual, even though there may not be agreement on legal jurisdiction.[9]

PROFILE OF NORTH KOREAN REFUGEES[10] Scope of the Problem

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Numbers There is little reliable information on the size and composition of the North Korean population located in China. Estimates range from as low as 10,000 (the official Chinese estimate) to 300,000 or more.[11] Press reports commonly cite a figure of 100,000 - 300,000. In 2006, the State Department estimated the number to be between 30,000 and 50,000, down from the 75,000 to 125,000 range it projected in 2000. UNHCR also uses the 2006 range (30,000 - 50,000) as a working figure. UNHCR has not been given access to conduct a systematic survey. Estimating the numbers is made more difficult because most North Koreans are in hiding, some move back and forth across the border — either voluntarily to bring food and or hard currency from China or North Korea — or because they are forcibly repatriated. Amnesty International has estimated that, on average, each year about 10% of those who cross the border back to North Korea do so as a result of force. A much smaller number is estimated to make their way to third countries.[12] Clearly, the refugees’ need to avoid detection, coupled with a lack of access by international organizations, make it difficult to assess the full scope of the refugee problem; however, based on anecdotal reports, the number of people crossing the border does not seem to have overwhelmed the resources of the Chinese economy, in part because the movement has been gradual. Gender Representation According to some recent reports, it is thought that nearly 75 percent of the refugees are women.[13] UNHCR says the number of males may be underestimated and they may be in hiding, but the proportion of women among those hoping eventually to resettle in South Korea is striking. Three years ago, reportedly 50 percent of the refugees were women; four to five years ago, 20 percent were women. It has become a trend, but the reasons are unclear. In North Korea the conditions of poverty and failed marriages could also be contributing factors as to why women choose to leave. An element of family reunification for men who left several years ago may also be a factor. Some also believe that men may be more tied to their enterprises, which could make them less mobile.

Conditions in China Crossing Point Most North Koreans are believed to enter China from North Korea’s northeastern provinces in search of food and/or employment. The destination favored by most refugees, the Yanbian Korean Autonomous Prefecture of China, is home to an estimated one million Chinese

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of Korean descent. Many of these ethnic Koreans have assisted their newly arrived North Korean kin, for a mix of reasons, including family connections, financial motivations, a sense of altruism, and a desire to reciprocate the help that North Koreans gave those Korean Chinese who crossed the border during the political turbulence of China’s Cultural Revolution in the 1960s and 1970s. It is unlikely that large numbers of North Korean refugees are living elsewhere in China.

Exploitation at the Border Reports express concern for those exploited at the border, citing organized gangs and intermediaries who target the refugees.[14] Human smuggling, trafficking, extortion and exploitation are thought to be a growing problem. Women are particularly vulnerable to prostitution, rape, arranged marriages, and bride traffickers; many otherwise face the option of imprisonment or hunger in North Korea. The State Department rates North Korea as a Tier 3 country in human trafficking, the poorest rating, due to the fact that it has not implemented international standards or prosecuted trafficking.[15] It has also engaged in forced labor. It is reported that perhaps 80%-90% of North Koreans in China end up as trafficking victims. There appears to be an increase in the numbers, but this could also be attributed to greater awareness of the problem.[16]

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Living Situation North Koreans who remain in China (and their local protectors) live in danger not only of being discovered by the Chinese authorities, but by anyone who turns them in as undocumented immigrants for payment of a reward. While northeast China is generally far more economically developed and stable than North Korea, some non-governmental organizations (NGOs) report the poverty in the broader region of northern China is extreme and that conditions for the poor in both China and North Korea are roughly similar. Reports indicate that many refugees live in dire conditions, forced to survive by working in menial, low-paying jobs.

Push and Pull Factors People cross borders for many different reasons — some choose to do so voluntarily, others are forced to leave or flee as a matter of life or death. “Push” and “Pull” factors are terms used to explain why people move. As in many refugee situations, there are push and pull factors that influence certain people to leave their country. The reasons North Koreans seek refuge in China may vary based on individual circumstances, but despite limited access and information, it is clear that two key elements driving North Koreans across the border into China include deteriorating humanitarian conditions — mainly due to food shortages — and human rights violations.

Food Shortages Extreme poverty within the DPRK in general, and food shortages in particular, appear to have a significant impact on movement across the border into China. The DPRK began experiencing a food shortage of increasing severity beginning in the early 1990s, after the collapse of the Soviet Union and the resulting cut-off of economic benefits North Korea had received from the communist bloc. Disastrous floods in the summer of 1995 plunged the

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country into a severe famine that by some estimates was responsible for 600,000 to two million deaths, approximately 5 to10 percent of North Korea’s population.[17] Some argue food shortages are inextricably linked to the regime itself, in part because food distribution favors the ruling elite and military and is tied to the government’s ongoing broader political and military motivations.[18] In September 1995, North Korea appealed for international food assistance, contradicting its national ideology of juche, or self- reliance. Shortly thereafter, the United Nations World Food Program (WFP) moved into North Korea, and its activities there gradually expanded to become at one point the WFP’s largest single-country operation. Until 2005, the United States was by far the largest donor to the WFP’s North Korea operation. China and South Korea provided — and continue to provide — even larger amounts of food bilaterally to North Korea.[19] Though the famine apparently abated by 1997 and the DPRK made incremental progress in agricultural production, the WFP says that food conditions worsened for most North Koreans after North Korea introduced economic reforms in 2002.[20] By 2005 the WFP estimated that nearly half of North Korea’s 24 million people did not have enough to eat and that more than a third of the population was chronically malnourished.[21] According to the WFP, food security continues to be a daily struggle for one third to one half of all North Koreans. In March 2007, the WFP indicated that the government had acknowledged an expected shortfall of one million metric tons of food and the possibility of a willingness to increase food assistance.[22] Flooding and reduced WFP and bilateral food assistance in 2006 only compounded the problems that are ongoing in 2007. Torrential rains between August 7 and 14, 2007 caused significant and widespread flooding in nine provinces in central and northern DPRK. The international community provided emergency relief and conducted needs assessments and continues to monitor the humanitarian impact.[23] According to the United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA), 1 million people were affected, with nearly 454 people killed, 156 missing, and nearly 170,000 displaced. A typhoon between September 17-20 resulted in further loss, including 1,649 people made homeless.[24]

Human Rights Violations The State Department’s Country Reports on Human Rights Practice for 2006 and reports from private organizations have portrayed a similar pattern of extreme human rights abuses by the North Korea regime for many years.[25] There appears to be no prospect of appreciable change at least in the near future. The reports paint a grim picture of human rights conditions and stress three general categories of abuse: 1

2

A total denial of political, civil, and religious liberties: The regime’s list of proscribed offenses is extensive, and severe punishments are established by North Korean laws and the constitution. No dissent or criticism of Kim Jong-il is allowed. The regime totally controls all media organs. Most North Koreans have no access to media sources other than the official media. Severe physical abuse meted out to citizens who violate laws and restrictions: The U.S. Committee for Human Rights in North Korea published a lengthy report in 2003, describing a system of concentration camps, organized like the Soviet “gulag” system, that houses an estimated 150,000 to 200,000 inmates, including many political prisoners.[26] Reports from survivors and escapees from the camps indicate that

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conditions in the camps for political prisoners are extremely harsh and that many political prisoners do not survive. Other evidence of violations of human rights: The State Department’s 2006 report cites “anecdotal evidence from refugees” that North Korean refugees who crossed into China for strictly economic reasons “were generally being treated less harshly than in past years,” but that the regime continued to inflict severe punishments for repatriated North Koreans who went to China for political reasons, had contacts with South Korean groups (including religious groups), and sought asylum in third countries.[27] Recent reports by Amnesty International and Human Rights Watch confirm the State Department’s description of human rights conditions within North Korea. However, Human Rights Watch presents a different description of North Korea’s policy toward refugees who went to China for economic reasons. Human Rights Watch asserts that “North Korea appears to be punishing its citizens with longer sentences in abusive prisons if they are caught crossing the border to China or have been forcibly repatriated by Beijing” and that this “ominous hardening of policy” since the summer of 2004 has been applied to all repatriated North Koreans regardless of their reasons for going to China.[28]

The United Nations confirms these findings. The U.N. Special Rapporteur on the DPRK (Special Rapporteur) states that despite some legislative improvements, there are continuing reports of violations of basic freedoms such as security of the person, humane treatment, and justice.[29] According to the Special Rapporteur, “despite [North Korea’s] formal commitment to human rights in various national laws and under the human rights treaties mentioned, the human rights situation remains grave in a number of areas.” Many violations of rights persist throughout the country, and as well as in countries of first asylum.[30] Some of these rights are the focus of specific international treaties and conventions, to which North Korea and China are each a party, and others are cited in numerous reports and discussions or are part of evolving custom or practice between states. North Korea has not cooperated with the Special Rapporteur despite repeated requests. In its response to the Human Rights Council, China focused mostly on its unwillingness to view illegal migrants as refugees.

DPRK Policy towards those Seeking Refuge in China North Korea considers those who cross the border into China to be criminals, though it is difficult to get a fuller sense of how North Korea views the problem. It is possible that North Korean leaders have calculated that the refugee situation poses little threat to the regime. Because the flows of refugees have been going on for years, it is likely that the refugees have already been politically triaged, in that most individuals of any political importance have either already left or been caught. New border-crossers could be considered politically insignificant by North Korea’s leadership. Indeed, in some sense, China’s provinces have provided North Korea with a useful way to export its economic problems as the migration may have protected thousands more people from starvation.

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Travel Limitations within DPRK Travel by North Koreans within and outside of their country is strictly controlled, and violators who are caught are subject to punishment. Any movement outside an individual’s home village requires a travel pass, although in recent years the government has tended to turn a blind eye toward those violating the travel rules in search of food. Officials and trusted celebrities, such as athletes and artists, are the only people granted exit visas. Border Security and Enforcement According to reports, Article 47 of the 1987 North Korean penal code lists defection or attempted defection as a capital crime, stating that a defector who is returned to North Korea “shall be committed to a reform institution for not less than seven years. In cases where the person commits an extremely grave concern, he or she shall be given the death penalty.”[31] It is unclear how “grave concern” is defined. Minor offenders appear to be subject to up to six months imprisonment at labor training centers where conditions are extremely harsh and inhumane. Enforcement reportedly varies, in part due to rampant bribery and corruption inside North Korea. Some repatriated North Koreans are subjected to brutal treatment, including detention, torture, placement in concentration camps, forced labor, and even execution. North Korean authorities are particularly brutal toward those suspected of making contact with South Koreans, missionary groups, or other foreigners. Returnees who cross the border in search of food reportedly receive milder treatment. Many repatriated pregnant women carrying the children of Chinese men — often husbands to whom the women were sold by human traffickers — are reportedly subjected to forced abortions. Whether or not an individual committed crimes in China, what the person has done since leaving North Korea, and what he or she was trying to escape from, all reportedly factor into the punishment of returnees to North Korea. UNHCR has received reports that some people deported one to three times by China back to North Korea receive little punishment while others endure hard labor or beatings. Even if UNHCR could assess who is at risk before deportation, it would be difficult to determine and weigh the risk factors and the seeming arbitrariness of the system in North Korea. Families are classified by loyalty to the regime — those “blacklisted” are more at risk. When a person is deported, if China passes along information that indicates he or she was trying to get in touch with an embassy or foreigners, there might be greater consequences.

CHINA’S POLICY TOWARDS NORTH KOREANS SEEKING REFUGE Application of the Refugee Convention and Protocol Despite being a party to the Refugee Convention and Protocol, China has not allowed U.N. agencies, in particular UNHCR, to have access to North Koreans who are residing in China because it views these individuals as economic migrants (rather than political refugees) who cross the border illegally, primarily in search of food.[32] UNHCR has therefore been unable to determine what percentage of these individuals (North Koreans in China) qualify as refugees, but believes a number may meet that definition.[33] In 1995

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UNHCR established an office in Beijing under an agreement with China. At the time, issues were focused on limited numbers of refugees coming from Vietnam. During visits to the northeast in the late 1990s, UNHCR determined that some of the newly arrived North Koreans were refugees. But China saw the problem as an internal matter and subsequently prohibited UNHCR from all direct access to the border.[34] The Chinese are suspicious of UNHCR’s intentions and have prevented aid agencies from entering the region to monitor the situation and possibly set up refugee camps. Although it continues to push its case for access, UNHCR cannot provide assistance to the refugees in an open, transparent manner. First-hand information is not available to UNHCR, which relies heavily on those “working on the ground.” UNHCR officials interviewed for this article say that they have worked behind the scenes with Chinese officials to assist with the challenges posed by refugees and asylum seekers and believe this is the most productive way forward.

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The Status of North Koreans in China China does not usually allow North Koreans to apply for political asylum.[35] Moreover, China indicates it is obliged under a bilateral 1986 repatriation agreement with North Korea to return all border crossers. Despite this agreement Chinese officials have generally ignored the agreement, tolerating the inflows of refugees and the activities of foreign NGOs so long as such activities were carried out quietly. Definitions of status are not always easily determined and motivations — be they economic or political — are not so easily separated. UNHCR recommends that no one be deported until a determination of refugee status can be made.[36] According to UNHCR, even those who arrive in search of food may have a claim to refugee status sur place because they would be at risk of persecution if they returned.[37] Thus, some experts argue that because it is known what might happen to North Koreans who are deported, the North Koreans in essence become refugees. Furthermore, China’s deportations raise the question of a violation of international law, that is, China’s violation of its obligations to abide by the principle of nonrefoulement under the Refugee Convention and Protocol. In March 2006, these issues were raised for the first time in high-level talks between the U.N. High Commissioner for Refugees and the Chinese Foreign Ministry. The creation of a refugee program raises difficulties for China. It does not want to provoke an ally, destabilize the Korean peninsula, or create a “pull”factor for individuals wanting to cross into China. UNHCR is concerned, too, about the treatment by North Korea and China of the victims who are repatriated and those who become victims of exploitation at the border.

China’s Policy Considerations In addition to being a formal ally with North Korea, the Chinese government wants to avoid a situation that could destabilize the broader region, such as the collapse of the North Korean regime. It believes such an event would bring thousands of North Koreans across its border and have a huge impact on its economic development, adding to the unemployment problem in its industrial Northeast.[38] Moreover, it could strain China’s relations with North Korea, perhaps weakening China’s influence over North Korea’s behavior in other

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matters, such as its nuclear weapons program. Given North Korea’s ability to destabilize the region quickly through military provocations, China may be reluctant to antagonize its neighbor. Some experts also contend that China wants to maintain distance from the U.S. troops in South Korea with North Korea serving as a buffer. China favors a peaceful resolution to the border issues through dialogue and negotiation with North Korea. Chinese officials undoubtedly are also concerned that allowing international groups access could set an unwanted precedent that could be used in future refugee scenarios involving other ethnic groups in other parts of China, such as Tibetans or Uighurs. China is considered to have significant leverage over North Korea. It is North Korea’s most important diplomatic and economic backer, and provides significant food aid annually. China is also North Korea’s largest trade partner and supplies the bulk of North Korea’s energy imports. However, China’s leverage is limited if the DPRK sees any threat of withdrawing aid as empty, for it would only lead to instability in North Korea.[39]

TRANSIT AND FINAL DESTINATIONS FOR REFUGEES The Role of Non-Governmental Organizations (NGOs)

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Because the influx of refugees across the border has been gradual, rather than sudden, a network of South Korean, Japanese, U.S., and European NGOs have had time to develop and to provide food, shelter, and employment. Smaller numbers of North Koreans have also surfaced in Cambodia, Mongolia, Thailand, Vietnam, and Laos, suggesting that these groups may have successfully set up escape routes akin to the Underground Railroad in the United States for slaves seeking freedom in the 1 9th Century. NGOs assisting the refugees often adopt a low profile to avoid detection by the Chinese authorities.[40]

High-Profile Bids for Asylum According to NGOs assisting the refugees, for reasons that are not clear, beginning in 2001 and away from the public eye, Chinese authorities began cracking down on the North Korean refugee population and those who assisted them. This led some individuals and NGOs, many of which were foreign, to begin orchestrating high-profile rushes of North Koreans into foreign diplomatic compounds and into schools, where the refugees requested asylum, with most seeking resettlement in South Korea. The asylum bids were well publicized. In most of these high-profile asylum cases, China decided on humanitarian grounds to allow the North Koreans to travel to a third country and then transit to Seoul.[41] As a consequence of the asylum bids, reports indicated that the Chinese were arresting Korean-Chinese accused of helping North Koreans. (According to some reports, there are apparently more than 1,000 ethnic Korean-Chinese helping the North Koreans who cross over into China.) From time to time, the press mentioned arrests of NGO workers. China increased roundups, repatriations, border patrols, and security around foreign diplomatic buildings. The goal of this harsh response appeared to be to discourage similar high-profile acts. The publicized actions of the asylum seekers raised the visibility of the issue, but it alarmed

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China, and the repressive solution on the part of the Chinese may have had a negative impact on a far greater number of refugees than the relative few who sought asylum. At different points like this, China has come under considerable international pressure — felt most keenly by the Chinese Foreign Ministry — to recognize the North Koreans as political refugees and allow the international community openly to assist them.

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South Korea South Korea remains the primary destination for North Korean refugees. In addition to granting South Korean citizenship, the South Korean government administers a resettlement program and provides cash and training for all defectors.[42] In February 2007, South Korean government officials announced that the number of North Korean defectors arriving in South Korea since the end of the Korean War in 1953 topped 10,000. What began as a trickle in the decades following the war swelled beginning in the late 1990s due to the North Korea famine. According to the South Korean Unification Ministry, up to 1,578 refugees arrived in 2006, exceeding the previous record of 1,139 in 2002.[43] However, there have also been reports about problems in the integration of North Koreans resettled in South Korea with some wanting to return to North Korea or resettle elsewhere. South Korea is party to the Refugee Convention and its Protocol. UNHCR has an office in Seoul to provide assistance to resettlement programs. Some observers say that Seoul adjusted its stance on North Koreans to mollify Pyongyang and that this was reinforced by two new measures announced by the South Korean Unification Ministry in 2004: the traditional lump sum amount provided to North Korean refugees was reduced by two-thirds (with the difference going to job-training incentive programs), and screening of asylum seekers in diplomatic missions was strengthened to identify possible criminals or spies. Critics say the changes in policy are designed to discourage defections, but South Korean officials defend the changes as necessary to discourage exploitative brokers who charge the defectors for facilitating passage from North Korea. In addition, officials claim, the enhanced screening prevents Korean-Chinese from gaining illegal entry into South Korea.

Escape Routes through Third Countries Southeast Asia It is believed that only a small percentage of North Koreans in China make their way to third countries in order to seek asylum. North Korean refugees seeking passage to a third country face largely uncooperative governments even if they get through China. Cambodia, Laos, Vietnam and Burma have diplomatic relations with both Seoul and Pyongyang. Fear of offending Pyongyang and, for Vietnam and Laos, the shared characteristic of nominally communist governments make them generally unwilling to assist defectors. After the Vietnamese government allowed 480 North Korean defectors to fly into South Korea on chartered planes in July 2004, the underground network for refugees in Vietnam was reportedly nearly eliminated as an escape route because of Hanoi’s unwillingness to upset North Korea again. However, Vietnam reportedly still plays a reduced role in the underground railroad that assists North Korean asylum-seekers.[44] Cambodia is party to the Refugee

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Convention and its Protocol; Laos, Vietnam, and Burma are parties to neither, which means they are not obligated to provide resources and protection to refugees. Thailand’s reputation for relative tolerance for refugees, as well as crackdowns in other recipient countries, has attracted an increasing number of North Korean asylum-seekers. Media sources say that 1,000 North Koreans were detained in Bangkok, and 500 were sent on to Seoul in 2006.[45] Thailand has traditionally quietly cooperated with sending the North Koreans on to South Korea for resettlement, but by 2006 the rise in volume reportedly had strained the system and led Bangkok authorities to intensify measures to prevent illegal entry by North Koreans. In an indication of the Thai government’s fraying patience, the Foreign Ministry complained in December 2006 that international and local NGOs — by shepherding North Koreans to Thailand — were hurting its ability to prevent the illegal entry of North Korean defectors. Activists claim that some North Koreans in Thailand may be seeking resettlement in the United States. Thailand is not a party to the Refugee Convention or its Protocol.

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Mongolia For some North Korean refugees, traveling north to Mongolia is preferable as an escape route out of China. The Mongolian government maintains a policy of not repatriating North Koreans and its practices are considered humane by international refugee organizations. Although some advocates had been pushing for the establishment of an official refugee camp in Mongolia, experts have since concluded that camps would not be suitable, in part because North Koreans transit through Mongolia so quickly. Mongolia’s official relations with both South Korea and North Korea are strong, including a guest worker program with Pyongyang that allows hundreds of North Koreans to work in mine and construction projects. UNHCR maintains regular contact with the Mongolian government. Although Mongolia is not a party to the Refugee Convention or its Protocol, it has been both cooperative and diplomatic in dealing with the North Koreans, an approach that appears to be acceptable to its neighbors.[46]

CONGRESSIONAL RESPONSE Human Rights and Refugee Issues in Overall North Korea Policy In general, under the Clinton Administration, security issues with North Korea were explicitly separated from human rights concerns: the 1994 Agreed Framework was limited to economic incentives in exchange for Pyongyang freezing its nuclear weapons program. The Bush Administration policy on North Korea has undergone several shifts, from refusing to meet with the North Koreans to pushing aggressively for a negotiated deal on dismantling the North’s nuclear weapons programs. Until the 2007 Six-Party Agreement, the Bush Administration had regularly drawn attention to North Korean human rights violations by supporting resolutions that criticize the North Korean record at the United Nations Human Rights Council and General Assembly. High-level officials, including the President and Secretary of State, also periodically criticized the regime in Pyongyang for its human rights practices. Some observers note that focus on human rights issues appears to have increased during periods when nuclear weapons negotiations have stalled. With a few exceptions, references to the refugee situation have generally been limited to lower-level meetings.

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As efforts to push forward the Six-Party talks have accelerated in 2007, the Administration has not proposed any negotiations with North Korea over human rights but has asserted that human rights is one of several issues to be settled with North Korea after the nuclear issue is resolved. The Six-Party Agreement of February 13, 2007, calls for the United States and North Korea to “start bilateral talks aimed at resolving bilateral issues and moving toward full diplomatic relations.” Prior to the Agreement in 2007, the Bush Administration held that it would not agree to normalization of diplomatic relations with North Korea until there was progress on human rights (presumably including refugees) and other issues. This position was criticized by China and South Korea, which called on the Administration to offer North Korea full diplomatic relations in exchange for a satisfactory nuclear settlement. However, since the signing of the agreement in February 2007, Assistant Secretary of State for East Asian and Pacific Affairs Christopher Hill increasingly has linked normalization of U.S.-North Korean relations solely to a satisfactory settlement of the nuclear issue.[47]

The North Korean Human Rights Act Congressional attention to North Korean human rights and refugee issues has been consistent and critical. Several hearings specifically devoted to the topics called on expert witnesses as well as executive branch officials to testify about the conditions faced by North Koreans, both those within the country and those attempting to escape. The 1 08th Congress passed by voice vote, and President Bush signed, the North Korean Human Rights Act of 2004 (NKHRA).[48] The legislation

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•

•

authorizes up to $20 million for each of the fiscal years 2005-2008 for assistance to North Korean refugees, $2 million for promoting human rights and democracy in North Korea and $2 million to promote freedom of information inside North Korea; asserts that North Koreans are eligible for U.S. refugee status and instructs the State Department to facilitate the submission of applications by North Koreans seeking protection as refugees; and requires the President to appoint a Special Envoy to promote human rights in North Korea.

The NKHRA also expresses the sense of the Congress that human rights should remain a key element in negotiations with North Korea; all humanitarian aid to North Korea shall be conditional upon improved monitoring mechanisms for the distribution of food; support for radio broadcasting into North Korea should be enhanced; and that China is obligated to provide UNHCR with unimpeded access to North Koreans inside China. Some have hailed the NKHRA as an important message that human rights will play a central role in the formulation of U.S. policy towards North Korea. They believe the issue should be addressed in the U.S.-North Korea normalization working group established by the February 13, 2007 Six-Party Talks agreement. Passage of the legislation was also driven by the argument that the United States has a moral responsibility to stand up for human rights for those suffering under repressive regimes. Advocates claim that, in addition to alleviating a major humanitarian crisis, the NKHRA will ultimately enhance stability in Northeast Asia by promoting international cooperation to deal with the problem of North Korean refugees.

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Critics say the legislation risks upsetting relations with South Korea and China, and ultimately the diplomatic unity necessary to make North Korea abandon its nuclear weapons program through the Six-Party Talks. Further, they insist that the legislation actually worsens the plight of North Korean refugees by drawing more attention to them, leading to crackdowns by both North Korean and Chinese authorities and reduced assistance by Southeast Asian countries concerned about offending Pyongyang. They point to reports that Chinese soldiers nearly shut down the border between China and North Korea following a series of embassy stormings in 2002, preventing any further flow of refugees. Since passage of the NKHRA, it does not appear that China has altered its practices in response to pressure from the United States to deal more humanely with North Korean refugees.

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Congressional Complaints on Pace of Implementation Critics have complained that implementation of NKHRA has been halting. Most publicly, no North Korean refugees were resettled in the United States until May 2006 and Jay Lefkowitz was not appointed as the Special Envoy for Human Rights in North Korea until August 2005, ten months after President Bush signed the bill into law. At three House hearings in the 108th Congress devoted to NKHRA, lawmakers repeatedly expressed frustration at the pace and lack of robust implementation of NKHRA. Others complained that the Administration did not request any of the annual $24 million authorized under NKHRA until $2 million was requested for FY2008. When Ambassador Lefkowitz testified at the April 2006 hearing, a Member questioned him on the number of hours he was able to devote to the issue, questioning whether he could fulfill his duties as the Special Envoy as a part-time employee of the State Department. Lawmakers also raised reports that U.S. embassy officials in China had turned away or discouraged North Koreans seeking asylum, an accusation made by a witness at the October 2005 hearing.[49] Difficulties of Implementation Some observers contend that good-faith implementation of NKHRA’s refugee provisions may be counterproductive. They argue that the legislation on North Korean refugee admissions could send a dangerous message to North Koreans that admission to the United States as a refugee is assured, encouraging incursions into U.S. diplomatic missions overseas. State Department officials say that given the tight security in place at U.S. facilities abroad, unexpected stormings could result in injury or death for the refugees. Secondly, granting of asylum status to North Korean refugees involves a complex vetting process that is further complicated by the fact that the applicants originate from a state with which the United States does not have official relations. In congressional hearings, State Department officials have cautioned that effective implementation of the NKHRA depends on close coordination with South Korea, particularly in developing mechanisms to vet potential refugees given the dearth of information available to U.S. immigration officials on North Koreans.[50] Funding The State Department has not requested funding explicitly under the NKHRA, but officials assert that the mission of the NKHRA is fulfilled under a number of existing programs. The State Department’s Population, Refugees, and Migration (PRM) Bureau provided $7.56 million in FY2006 for UNHCR’s annual regional budget for East Asia, which includes assistance for North Korean refugees, among other refugee populations. PRM funds international organizations

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such as UNHCR or the ICRC. For democracy promotion in North Korea, the State Department’s Democracy, Human Rights, and Labor (DRL) Bureau gives grants to U.S.-based organizations: in the FY2008 budget, DRL requested $1 million for North Korea human rights programs, as well as $1 million for media freedom programs. DRL also considers $1 million expended in FY2006 in the National Endowment of Democracy account specific to North Korea as fulfilling part of the NKHRA’s mission. In FY2008, the Broadcasting Board of Governors (BBG) requested $2.9 million for increased radio broadcasting into North Korea, according to the BBG Congressional Budget Justification. The authorizations of the NKHRA expire in FY2008. Some government officials and NGO staff familiar with providing assistance to North Korean refugees say that funding explicitly associated with the NKHRA is problematic because of the need for discretion in reaching the vulnerable population. Refugees are often hiding from authorities and regional governments do not wish to draw attention to their role in transferring North Koreans, so funding is labeled under more general assistance programs. In addition, many of the NGOs that help refugees do not have the capacity to absorb large amounts of funding effectively because of their small, grass roots nature.

Radio Broadcasting into North Korea The NKHRA authorizes the President to “take such actions as may be necessary to increase the availability of information inside North Korea by increasing the availability of sources of information not controlled by the Government of North Korea, including sources such as radios capable of receiving broadcasting from outside North Korea” and authorizes the appropriation of $2 million annually for this purpose.[51] In the FY2008 budget request, the Broadcasting Board of Governors requested $2.9 million in order to increase broadcasting into North Korea by establishing a 10-hour coordinated stream of Voice of America (VOA) and Radio Free Asia (RFA) daily programming. The radio broadcasts into North Korea, through medium- and short-wave, were modestly enhanced beginning in 2006, and original programming was added in FY2007. Content includes news briefs, particularly news involving the Korean peninsula, interviews with North Korean defectors, and international commentary on events happening inside North Korea. The BBG cites an InterMedia survey of escaped defectors that indicates that North Koreans have some access to radios, many of them altered to receive international broadcasts.[52] Freedom House Conferences In FY2005, $2 million was appropriated to Freedom House[53] to organize international conferences to raise awareness of human rights conditions in North Korea. The second forum, held in Seoul in December 2005, raised political tension between U.S. officials in attendance and the South Korean government. As South Korean ruling party officials maintained a distance from the event, opposition leaders and Special Envoy Lefkowitz called for the Roh Administration to speak out against North Korea’s human rights abuses. Lefkowitz also urged the South Korean government to tie its humanitarian aid shipments to improvements in Pyongyang’s human rights record. A third conference held in Brussels in March 2006, was attended by Lefkowitz, the Japanese Special Envoy for Human Rights Issues Humiko Saigo, and several North Korean defectors. The Brussels conference coincided with an unprecedented hearing on human rights issues in a European Union parliamentary session, resulting in a resolution condemning human

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rights conditions in North Korea. A second, similar resolution was passed by the same body after the fourth Freedom House conference was held in Rome in July 2006.[54]

The Resettlement of North Korean Refugees in the United States The NKHRA has as one of its goals the resettlement of North Korean refugees in the United States.[55] Section 302 of the Act states that “North Koreans are not barred from eligibility for refugee status or asylum in the United States on account of any legal right to citizenship they may enjoy under the Constitution of the Republic of Korea.” Given the quick availability of citizenship, as well as the presence of historical and cultural ties and the provision of benefits to North Korean arrivals, South Korea historically has been viewed by the United States and other countries as the preferred resettlement country for North Koreans. Section 304 expresses the sense of the Congress that UNHCR and its donor governments, including the United States, “should persistently and at the highest levels continue to urge the Government of China” to allow access to North Koreans within China to determine whether they qualify for refugee protection. More general in nature, Section 303 of the NKHRA directs the Secretary of State to “undertake to facilitate the submission of applications” under the Immigration and Nationality Act (INA) by prospective North Korean refugees. Some of the challenges to implementing this provision were highlighted in a report the NKHRA required the Secretary of State to submit to Congress. Noting opposition by governments hosting North Korean refugees, particularly China, to U.S. refugee admissions processing on their territory, the report stated:

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Without cooperation of such governments, the multi-step, often-lengthy admissions procedures leading to the departure of North Koreans for the United States will not be possible in the region.

The report suggested, however, that it might be possible to admit some North Korean refugees to the United States from South Korea “after appropriate vetting.” This reference to vetting suggests another significant obstacle to North Korean refugee resettlement in the United States — the difficulty in completing security checks. The House International Relations Committee report on the bill that became the NKHRA cited “genuine security concerns” related to North Korean refugee resettlement in the United States. Acknowledging “the Department of Homeland Security’s obligation and authority to assess North Koreans ... on a case-by case basis,” the report stated that “such requirements may present natural limits to the number and pace of North Korean refugee admissions into the United States.” Challenges to North Korean refugee resettlement in the United States and efforts to address them were discussed at an April 2005 hearing on implementation of the NKHRA by the House International Relations Committee’s Subcommittees on Asia and the Pacific, and on Africa, Global Human Rights and International Operations. In written testimony, Arthur E. Dewey, then-Assistant Secretary of State for PRM, described actions being taken to obtain access to North Koreans in China: The State Department continues to fund UNHCR’s efforts to obtain access to, protection of, and solutions for North Koreans. The United States consistently and at high levels continues to urge the PRC to adhere to its international obligations....

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At the same time, Assistant Secretary Dewey emphasized limits on the ability of the United States to provide direct assistance. He maintained that direct U.S. involvement with North Koreans in certain states could increase the vulnerability of those individuals. With respect to security concerns, he noted that the U.S. government lacked ready access to information about individual North Koreans necessary to complete required background checks. He cited the need for a “reliable mechanism” to complete these security checks and indicated that consultations with governments in the region were essential to developing viable mechanisms to facilitate applications of North Korean refugees for U.S. resettlement. Testifying before the same subcommittees in April 2006, the Special Envoy, Jay Lefkowitz, reported progress in addressing challenges to gain access to North Korean refugees and conduct security screenings. In May 2006, the first six North Korean refugees were admitted to the United States from an unidentified nation in Southeast Asia. In written testimony prepared for a March 1, 2007 hearing of the House Foreign Affairs Committee’s Subcommittee on Asia, the Pacific, and the Global Environment, Special Envoy Lefkowitz stated that “our government has opened America’s doors to North Korean refugees.” He further stated, “While we expect that most North Korean refugees will continue to choose to resettle in South Korea, we impose no quota or limit on the number we are willing to accept.” As of December 31, 2007, a total of 37 North Korean refugees had been admitted to the United States from undisclosed transit states.

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Linking Security and Human Rights The Six-Party Talks remain focused primarily on the nuclear weapons issue and Bush Administration negotiators in 2007 have linked establishing diplomatic relations and facilitating Pyongyang’s re-entry into the international community with only the nuclear weapons issue rather than human rights and other issues. The appointment of a special envoy on human rights theoretically allows for a separate track, but, according to many observers, the predominant attitude of the Bush Administration in 2007 reflects the view that raising the profile of North Korea’s human rights violations jeopardizes the progress of the nuclear disarmament negotiations.[56] The NKHRA pressures Executive Branch policymakers to link human rights and overall negotiations with Pyongyang. The NKHRA conveys the Sense of Congress that human rights should be a “key element” in talks with North Korea and that the United States should pursue a human rights dialogue modeled on the Helsinki process with North Korea and other regional states.[57] In addition to these suggestions, the requirements for admission of refugees and the funds authorized to aid human rights and refugee NGOs alters the diplomatic environment in which the State Department has pursued talks with the North Koreans because of the reactions of other regional powers. Some observers disagree that a linkage policy based on the Helsinki process is an effective approach to dealing with North Korea. They argue that several factors that existed in Eastern European countries — a nascent civil society, minority groups, semi-autonomous institutions such as the Catholic Church, dissident organizations, armed uprisings against the rulers, deeper contacts with the outside world, and an overall political “thaw” — were necessary prerequisites for the approach to take hold. Few or none of these factors reportedly exist in the closed state of

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North Korea and, as a result, outside NGOs have very limited local forces with whom to partner to develop political movements.[58]

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Regime Change as a Motivation? Some critics of the NKHRA charge that a desire for regime change in Pyongyang motivated the legislation. Passage of the NKHRA was driven in part by the activities of a network of NGOs devoted to North Korean issues. The network includes groups explicitly committed to precipitating the collapse of the regime in Pyongyang. The predecessor to the NKHRA, the North Korean Freedom Act,[59] proposed language that more harshly criticized South Korea and China, provided less flexibility to the President to negotiate a security agreement, explicitly linked security and human rights issues, and, according to some analysts, associated itself with regime change.[60] Critics of the regime-change approach point to some of Lefkowitz’s public statements that characterize Pyongyang as “a government that inflicts on its citizens repression reminiscent of the most cruel totalitarian rulers of the 20th century... [and] is today counterfeiting U.S. currency, trafficking in narcotics, building a nuclear arsenal, and threatening other nations.”[61] In 2005 and 2006 critics questioned whether the Administration was committed to working with the existing North Korean government in the Six-Party Talks if a highlevel envoy could describe the regime in Pyongyang in such negative terms. Lefkowitz also criticized aspects of South Korea’s “sunshine policy” of engaging North Korea, words that some say have periodically strained relations with Seoul. However, in 2007, the Bush Administration entered into bilateral talks with North Korea, and Assistant Secretary of State Hill visited Pyongyang in June 2007. The Administration also resolved financial restrictions against banks in Macau that engaged in activities that were implicated in North Korean counterfeiting operations. Lefkowitz, though still serving as Special Envoy, has kept a lower profile in 2007. The House International Relations Committee report accompanying the NKHRA, however, explicitly disavowed an interest to bring down the Pyongyang government: “[NKHRA] is motivated by a genuine desire for improvements in human rights, refugee protection, and humanitarian transparency. It is not a pretext for a hidden strategy to provoke regime collapse or to seek collateral advantage in ongoing strategic negotiations.”[62] Former Chairperson of the Subcommittee of Asia and the Pacific James Leach reiterated at a congressional hearing in 2005 that “... I would like to affirm that the motivations for the North Korean Rights Act (sic) were and are solely humanitarian, not geo-strategic.... [NKHRA] is agnostic about regime change, but emphatic about behavior change.”[63] Despite this public statement, many observers say that securing cooperation from China and South Korea to deal with North Korean human rights and refugee issues is more difficult because of the distrust of the goals of some U.S. government officials. South Korean Unification Minister Lee Jong-seok, for instance, told a parliamentary committee in July 2006: “Personally, I oppose a Northeast Asian version of the Helsinki Process.... Because there is a wide perception that the Helsinki Process is premised on regime change, (applying the process to North Korea) would have no effect,” adding that “In the U.S., the people who have been calling for a change of the North Korean regime are raising the [human rights] issue.”[64]

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REGIONAL RESPONSES TO NKHRA

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South Korea Passage of the NKHRA raised uncomfortable issues for South Korea, adding another irritant to U.S.-South Korea bilateral relationship that grew strained under the Bush and Roh Myoohyun Administrations. Many observers say that NKHRA draws sharp attention to the plight of North Korean citizens and refugees and therefore has illuminated the gulf between the U.S. and South Korean approaches to dealing with North Korea. However, the turn of Bush Administration policy in 2007 has brought U.S. policy closer to South Korea’s conciliation strategy. According to regional analysts, the December 2007election of Lee Myung-bak as president may further warm ties between Seoul and Washington. Immediately after his election, Lee told a press conference that “...there will be a change from the previous government’s practice of avoiding criticism of North Korea and unilaterally flattering it.... Criticism that comes with affection can help make North Korean society healthy and improve the lives of its people in the long run.”[65] As part of its policy of increasing economic integration and fostering warm ties with North Korea, South Korea has generally refrained from criticizing Pyongyang’s human rights record and downplayed its practice of accepting North Korean refugees. South Korea has abstained from voting on several U.N. resolutions calling for improvement in North Korea’s human rights practices. In November 2006, in the wake of Pyongyang’s July 2006 missile tests, South Korea for the first time voted in favor of a U.N. General Assembly resolution that criticized North Korea for torture, public executions, past abductions of foreigners, severe prison conditions, and failing to allow access to the Special Rapporteur on North Korean human rights.[66] However, when a nearly identical resolution came up in a United Nations human rights panel in November 2007, Seoul abstained from voting, citing a “consideration of North-South Korean relations.” The tension between Washington and Seoul on human rights issues may threaten bilateral cooperation on refugee problems. The admission of North Korean refugees for resettlement in the United States could benefit from information sharing with South Korean intelligence services for vetting purposes. It is unclear if South Korea has been willing to provide cooperation in light of its reluctance to antagonize Pyongyang. Complicating any U.S. effort to “burden-share” with South Korea by accepting North Korean refugees is the South Korean law that grants automatic citizenship to all North Korean residents who defect to the South. Shortly before the acceptance of the first six refugees under the NKHRA, another North Korean defector who had settled in South Korea in 1998 was granted asylum by a Los Angeles immigration court. After South Korean officials, including then Foreign Minister Ban Ki-Moon, criticized the ruling, unnamed State Department sources explained that the case did not reflect U.S. refugee policy and did not fall under NKHRA because of the established citizenship of the defector. Seoul officials have chafed at the suggestion by some North Korean defectors that they are discriminated against in South Korea because of their North Korean origins.

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China Passage of the NKRHA, and the issue of human rights in general, raises difficult issues with China, the host of the Six-Party Talks and a crucial part of the Administration’s strategy to pressure North Korea into giving up its nuclear weapons. NKHRA describes in harsh language the conditions refugees face in China and Beijing’s policy of repatriation to North Korea. During hearings on NKHRA’s implementation, several Members of Congress strongly criticized Beijing for its policy on North Korean refugees, including the suggestion that the United States should boycott the 2008 Olympics in protest. Beijing fears the NKHRA might serve as a beacon to refugees and encourage a greater number of North Koreans to cross the border into China. Although the Bush Administration has spoken out on Chinese human rights abuses, some analysts say that the criticism has been muted because of the need for Beijing’s cooperation with the war on terrorism, the Six-Party Talks, and Iran. However, the White House elevated one individual’s case to an unusually high profile: Kim Chun Hee, a 31-year old North Korean who sought asylum at two Korean schools in China before being deported to North Korea, according to various press reports. With her fate uncertain, the White House issued a statement on March 30, 2006, expressing its grave concern for her and calling on China to honor its obligations as a party to the Refugee Convention and Protocol. Urged on by activist groups, including an influential church from Bush’s hometown, President Bush raised the case directly with Chinese president Hu Jintao during their April 2006 summit. According to White House officials, Hu offered no response.

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Japan In the first term of the Bush Administration, the United States and Japan found common ground on the issue of confronting North Korea on human rights violations. Since Kim Jong-il’s 2002 admission that the Pyongyang government abducted Japanese nationals in the 1 970s and 1 980s, the Japanese government has increasingly taken a tougher stance on North Korea, including imposing strict sanctions on Pyongyang after the North’s 2006 tests of missiles and then a nuclear device. Former Prime Minister Shinzo Abe rose to prominence based largely on his hardline stance toward North Korea, from insisting on a full accounting of the abductees to stepping up military cooperation with the United States in response to Pyongyang’s provocations. Japan has maintained pressure on the United States to include the issue of human rights in the ongoing Six-Party Talks. The North Korea-Japan normalization working group, one of five established by the February 13, 2007 Six-Party Talks agreement, focuses on resolution of the abduction issue as well as Pyongyang’s historical grievances for the Japanese annexation of the Korean peninsula from 1910-1945. A provision of the agreement that states that the United States will “begin the process of removing the designation of the DPRK as a statesponsor of terrorism” has alarmed Japan, which has urged the United States to keep North Korea on the terrorism list until North Korea resolves Japan’s concerns over the kidnappings. In 2004, the Administration noted that the kidnapping of Japanese citizens justified, in part, North Korea’s inclusion on the state sponsors of terrorism list. Japanese lawmakers passed their own version of the NKRHA in 2006. The Japanese Act calls for greater awareness on North Korean human rights violations in general, with an

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emphasis on the abductions of Japanese citizens, as well as enhanced international coordination to prevent further human rights abuses by the North Korean government. Solving the plight of North Korean refugees is mentioned, but no specific measures to assist refugees are outlined. The law calls for economic sanctions if human rights violations, specifically the abduction issue, fail to improve, although similar sanctions are already applied for North Korea’s missile and nuclear tests. The Japanese abductee issue has been elevated in Congress. The NKHRA includes a sense of the Congress that non-humanitarian aid be contingent on North Korean progress in accounting for the Japanese abductees. A House hearing in April 2006 focused on North Korea’s abductions of foreign citizens, with testimony from former abductees and their relatives. Among the witnesses was Sakie Yokota, the mother of Megumi Yokota, abducted at the age of 13. The following day, President Bush met with Yokota and other relatives of abductees, emphasizing the link between U.S. policy and Japan’s most pressing priority in its relations with North Korea. Some Members of Congress have been vocal in supporting Japan’s call for resolution of the abductions controversy before North Korea is removed from the U.S. state sponsors of terrorism list.

OPTIONS FOR CONGRESS AND OTHER POLICYMAKERS

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Formulating policy toward North Korea has been characterized as deciding among a range of bad options. The following outlines some basic approaches to dealing with North Korea’s human rights and refugee issues advocated by various constituencies, with an analysis of some of the possible diplomatic and security- related ramifications. United States policy has adopted elements of several of these strategies in the past and future policies will likely be a combination of approaches.

Encourage Refugee Flows to Destabilize the North Korean Regime Putting aside the significant humanitarian concerns about North Korean refugees, some commentators have advocated the use of refugee flows for the political ends of weakening the regime in Pyongyang. Liberal U.S. resettlement policies and official encouragement to North Korean refugees to seek asylum at American diplomatic posts in the region could act as a magnet for drawing larger numbers of North Koreans over the border. If the United States weighed in as an official advocate for fleeing North Koreans, it could arguably foster the underground railroad system by pressuring Beijing to assist in the relocation process.[67] Some calculate that a large outflow could lead to the collapse of the precarious system of political control enforced by the North Korean government. Such advocates argue that regime change in North Korea is the only solution given the scale of human rights abuses in the country. Critics of this approach point out that the more likely response to a massive movement of people across the border would be a bloody crackdown by Chinese and North Korean authorities, not necessarily leading to a regime collapse. In addition, some argue that a sudden political collapse would lead to a chaotic aftermath in which human rights and lives would be direly threatened.

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Provide Protection Versus Status to Refugees The United Nations High Commissioner for Refugees has examined the legal aspects of who among the North Koreans in China qualifies for refugee status. South Korea recognizes that once refugees are on South Korean territory, it has an obligation to protect them; however, it cannot protect the North Korean refugees while they are in China. Politically, it is both a domestic and bilateral problem for China to acknowledge refugee status for the North Koreans. And given the circumstances, UNHCR believes there may be overriding, practical reasons not to do so. First, it is possible that there could be relatively few cases that might technically qualify as refugees. Second, it is probable that granting refugee status decreases China’s tolerance dramatically for the refugees in general, at least in the short- and medium-term. The question thus becomes whether it is helpful to push the refugee status issue or find another way to achieve the solution being sought: Protect the North Korean refugees in China. Granting some form of humanitarian status — rather than refugee status — is one way to provide a broader definition of who can be helped that may be more politically acceptable to China. The UNHCR Department of International Protection, which is responsible for the agency’s core protection mandate, in March 2006 proposed a humanitarian program, or enclave, be developed with other humanitarian agencies to make sure the refugees have or gain access to humanitarian services. Discussions between UNHCR and representatives suggest that China could justify a “good neighbor approach” on the one hand, without pushing human rights or asylum, or on the other hand, pushing for deportation. China has expressed a willingness to consider the option of protection in the form of such a humanitarian enclave, but no further progress has been made. UNHCR also believes there may be too much emphasis on the “pull factor” on the part of China and others. Unfettered travel in North Korea is difficult and both countries have demonstrated their ability to control their respective borders. China clearly does not want a political confrontation or fallout with North Korea. UNHCR has been opening the dialogue with China behind the scenes because it also views open confrontation with China as unproductive, given China’s current political structure. The proposal to give humanitarian status as a means of increasing protection for the North Koreans in China is seen by some as far less provocative than granting refugee status and as offering a practical solution that can be implemented. Although not necessarily the approach sought by some high-profile NGOs, UNHCR believes it has to minimize its visibility and publicity to make the most progress.

Resettle Larger Numbers of North Korean Refugees in the United States Some advocates support a program that builds considerably on the past acceptance of a few dozen North Korean refugees. Advocates of granting U.S. asylum to North Koreans say it would help share the burden of accepting the refugees with the South Korean government. Some Korean-American groups have indicated that their community is willing to facilitate increased resettlement in the United States. Other supporters of the NKHRA applaud the admission of refugees but insist that South Korea will remain the primary destination for defectors from the North. Administration officials have cited reluctance by China and Southeast Asian countries to be involved in transferring North Korean refugees to American officials, as well as the complicated vetting procedure required by American immigration officials, particularly for

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citizens from a country on the state sponsors of terrorism list. Refugee experts have also voiced concern about North Koreans’ ability to adjust to an American lifestyle, particularly if language skills are not strong upon arrival.

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Implement the Responsibility to Protect While the U.N. Charter obligates U.N. members to promote respect for human rights and asserts as a primary purpose of the Organization is the promotion of human rights and fundamental freedoms for all, it also recognizes the doctrine of non-intervention. Thus, Article 2, Paragraph 7, of the U.N. Charter states that “nothing in the Charter authorizes the United Nations to interfere in matters which are essentially within the domestic jurisdiction of any state.” Because of the traditional approach towards human rights as a matter exclusively within the domestic jurisdiction of sovereign states, Article 2(7) has been viewed by some as an obstacle to the implementation of the human rights provisions of the Charter. States accused of human rights violations frequently cite this provision in response to criticisms by other states (or international organizations) relating to human rights conditions within their borders. However, many advocates argue that there is substantial justification for state responsibility for the protection of the human rights of individuals and for some level of “interference” by the international community on behalf of those whose rights have been infringed. Activity for the protection of human rights has been constantly subjected to tension between state sovereignty as protected by the doctrine of nonintervention and state obligations to protect human rights and fundamental freedoms. Increasingly, protection of populations affected by conflict within a country is seen as partly the responsibility of the international community. For example, some observers have more recently argued that the DPRK government is a threat to its own people and that North Korea has violated its responsibility to protect its own citizens from crimes against humanity. They suggest that action by the international community and the U.N. Security Council is warranted.[68] At the 2005 U.N. World Summit, the “Responsibility to Protect” was introduced, putting forward the idea that each state has a responsibility to protect its people from genocide, war crimes, ethnic cleansing and crimes against humanity and that human rights violations committed in one state are the concern of all states.[69] It is an agreement in principle that speaks to the obligations of a state to protect its own people and the obligations of all states when that fails, but this U.N. Resolution does not make action easy or even probable. Lee Feinstein, Senior Fellow for U.S. Foreign Policy and International Law at the Council on Foreign Relations, observes that “Adoption of the responsibility to protect begins to resolve the historic tension between human rights and states’ rights in favor of the individual. Where the state had been erected to protect the individual from outsiders, the responsibility to protect erects a fallback where individuals have a claim to seek assistance from outsiders in order to substitute for or protect them from the state.”[70] Still, as the case of North Korean refugees demonstrates, translating principle into action remains an enormous challenge.

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Encourage North Korea and China to Honor International Treaty Obligations As members of the United Nations, both China and North Korea are bound by the U.N. Charter. Both China and North Korea have ratified several key international treaties that could be used as leverage to change their human rights practices. China is party to the Refugee Convention and Protocol, which obligates China to cooperate with UNHCR and prohibits China from repatriating refugees to any countries where they are at risk for serious human rights abuses. China also ratified the U.N. Convention Against Torture and Other Cruel Inhuman or Degrading Treatment or Punishment, which states that no government shall repatriate “a person to another State where there are substantial grounds for believing that he would be in danger of being subjected to torture.” In addition, China has ratified the Convention on the Elimination of All Forms of Discrimination Against Women, the International Convention on the Elimination of All Forms of Racial Discrimination, the Convention on the Rights of the Child, and the International Covenant on Economic, Social and Cultural Rights. North Korea is party to two international treaties that prohibit human rights violations: the Convention on the Elimination of All Forms of Discrimination Against Women and the Convention on the Rights of the Child. It is also party to two covenants: the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social, and Cultural Rights. To the extent that Beijing and Pyongyang wish to be acknowledged as legitimate members of the international community, the argument that their governments have a responsibility to uphold widely recognized human rights principles might be invoked.

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Call Attention to North Korea’s Human Rights Record Supporters of the NKHRA point out the value of having U.S. officials raise human rights issues to the international community. Special Envoy Jay Lefkowitz has been charged with leading this effort, and insists it can be done on a track parallel to the security negotiations. Some analysts have dubbed this approach a “name and shame” strategy that depends on the regime in North Korea feeling sufficient pressure from the international community to curb its human rights practices. An extension of this strategy may involve singling out the Chinese and South Korean governments for their failure to publicly condemn Pyongyang’s human rights violations, therefore pressuring officials in Beijing and Seoul to take a more proactive stance. Security analysts warn that the high-profile nature of this approach threatens to derail existing talks on the nuclear weapons issue given North Korea’s demonstrated sensitivity to international criticism and past boycotts of the talks based on similar condemnation from State Department human rights reports or statements from U.S. officials. However, others point out that North Korea has used many issues as a pretext for boycotting talks, and that the human rights issue will not be an insurmountable obstacle if Kim Jong-il is committed to a deal.

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Address Human Rights as Part of a Package Deal The strategy of offering diplomatic recognition and other incentives in exchange for dialogue on human rights and other issues has been adopted by European countries. After establishing normalized relations with North Korea in 2001, the European Union became a significant trade partner with North Korea, in addition to offering food aid and technical and humanitarian assistance. Modest “human rights dialogues” between Pyongyang officials and ambassadors from E.U. countries have been held. Supporters of the policy argue that having regular exchanges and embassies on the ground in Pyongyang may eventually build up the trust necessary to make progress on human rights.[71] By most accounts, North Korea’s human rights record has not demonstrably improved since relations were established, although supporters of the approach point to isolated cases of progress.[72] Some observers insist that increased contact with North Korean leadership is the only way to improve human rights in the state, and argue as a result for early normalization of relations between the United States and DPRK. However, the U.S. offer is conditional upon thorough and verifiable nuclear disarmament.

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Conduct Quiet Diplomacy Some advocates argue that behind-the-scenes discussions with Pyongyang and Beijing are the most effective way to improve human rights in North Korea. By staying out of the public eye, the danger of appearing to be interfering in internal affairs could be reduced. Although there were few direct exchanges between high- level North Korean and U.S. officials when the SixParty Talks stalled, a revival in direct bilateral contact may provide more opportunities to discreetly raise human rights concerns. In terms of protecting individual North Korean refugees, some refugee advocates argue that Beijing is receptive to their appeals to take small humanitarian steps if the exchange remains out of the public eye. For example, China might be convinced to quietly stop deportations and arrests, and perhaps even offer legal resident status to North Koreans who have married Chinese nationals.[73] High-level U.S. officials could raise the issues quietly with their counterparts in bilateral talks. In addition, quiet pressure on other regional countries not to repatriate North Korean refugees and to streamline asylum seekers’ cases with the South Korean government and UNHCR could help alleviate humanitarian concerns for fleeing North Koreans.

Introduce Additional Legislation on Human Rights The Bush Administration’s hope that a normalization of diplomatic relations between the United States and DPRK could begin after the successful elimination of North Korea’s nuclear weapons and related programs is further demonstrated by discussion of other plans, such as the negotiation of a permanent peace treaty on the Korean peninsula, development of a multinational security organization for Northeast Asia, and economic aid to North Korea.[74] However, not mentioned in these headlines are humanitarian and human rights issues, at least for the moment. Depending upon the outcome of the current negotiations with North Korea and fulfillment

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of its obligations, refocusing attention on the humanitarian and human rights issues may support the need for additional legislation and oversight by Congress. One option that Congress might consider is developing legislation that requires North Korea to make progress on addressing human rights conditions in exchange for diplomatic relations and an end to U.S. economic sanctions. For example, although the political situations are very different in these two countries, the Burmese Freedom and Democracy Act of 2003 could provide a useful model for such legislation. Since 1988 the United States has imposed a wide range of sanctions against Burma, which, by 2004, meant that nearly all economic relations with Burma had terminated. The Burmese Freedom and Democracy Act bans imports from Burma into the United States, which affects mainly imports of Burmese textiles. The United States has not had an ambassador to Burma since 1992 when the Senate Foreign Relations Committee refused to confirm the nomination of an ambassador because of the human rights abuses. The conditions set forth in the Burmese Freedom and Democracy Act for the lifting of sanctions show that the sentiment in Congress favors maintaining the full range of U.S. sanctions (once again renewed in August 2007) until the ruling State Peace and Development Council (SPDC) and the Burmese military terminate major human rights abuses and make fundamental political concessions to the democratically elected government.[75] It should be noted, however, that the President has the authority to exercise these options under existing legislation.

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APPENDIX A. OVERVIEW OF THE U.S. REFUGEE PROGRAM The admission of refugees to the United States and their resettlement here are authorized by the Immigration and Nationality Act (INA), as amended.[76] Under the INA, a refugee is a person who is outside his or her country and who is unable or unwilling to return because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. In special circumstances, a refugee also may be a person who is within his or her country and who is persecuted or has a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Excluded from the INA definition of a refugee is any person who participated in the persecution of another. Each fiscal year, following consultations with Congress, the President issues a presidential determination setting the refugee admissions ceiling and regional allocations for that year. For FY2008, the worldwide refugee ceiling is 80,000. This total includes 70,000 “admissions numbers” allocated among the regions of the world and an unallocated reserve of 10,000 “numbers.” An unallocated reserve is to be used if, and where, a need develops for refugee slots in excess of the allocated numbers. Refugees are processed and admitted to the United States from abroad. The State Department handles overseas processing of refugees, which is conducted through a system of three priorities for admission. These priorities are separate and distinct from whether such persons qualify for refugee status. Priority assignment, however, reflects an assessment of the urgency with which such persons need to be resettled. Priority One (P-1) covers compelling protection cases and individuals for whom no durable solution exists, who are referred to the U.S. refugee program by UNHCR, a U.S. embassy, or a non-governmental organization (NGO). North Koreans, like all nationalities, are eligible for P-1 processing. Priority Two (P-2) covers groups of special

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humanitarian concern to the United States. It includes specific groups within certain nationalities, clans, or ethnic groups, such as Iranian religious minorities. North Koreans are not among those eligible for P-2 processing. Priority Three (P-3) comprises family reunification cases involving spouses, unmarried children under age 21, and parents of persons who were admitted to the United States as refugees or granted asylum. Seventeen nationalities, including North Koreans, are eligible for P-3 processing in FY2008. All refugee applicants are checked through the State Department’s Consular Lookout and Support System (CLASS).[77] Certain applicants are subject to additional security checks. Individuals who are preliminarily determined to qualify for a processing priority are presented to the Department of Homeland Security’s U.S. Citizenship and Immigration Services (DHS/USCIS) for an in-person interview. USCIS makes determinations about whether individuals are eligible for refugee status and are otherwise admissible to the United States.

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APPENDIX B. MAPS OF NORTH KOREA

Figure 1. Regional Perspective on North Korea and China.

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Source: Central Intelligence Agency (CIA) provided by Relief Web; see [http://www.reliefweb.int/rw/rwb.nsf/db900sid/LPAA-6RUPAJ?OpenDocument&rc=3&cc=prk]. Figure 2. North Korea: Administrative Divisions (as of 2005).

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Source: World Food Programme (WFP), DPR Korea, map provided to CRS, April 2007. Figure 3. Counties to Receive WFP Assistance 2006-2008.

REFERENCES [1]

Use of the term “refugee” in this report does not connote that these persons would necessarily meet the legal standard for being designated refugees as stipulated under the 1951 U.N. Convention Relating to the Status of Refugees and its 1967

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Rhoda Margesson, Emma Chanlett-Avery and Andorra Bruno Protocol. See Appendix B, Figures 1 and 2, for maps of the region and of North Korea. For more information, see CRS Report RL33590 North Korea’s Nuclear Weapons Development and Diplomacy, by Larry Niksch. For more information, see CRS Report RL30613 North Korea: Terrorism List Removal?, by Larry Niksch and Raphael Perl. Under the 1951 Convention, mainly Europeans involved in events occurring before 1 January 1951 could apply for refugee status. In response to the emergence of large refugee movements since 1951, the 1967 Protocol incorporates the measures in the original 1951 Convention but imposes no time or geographical limits. For texts, please see [http://www.unhcr.org/protect/3c0762ea4.html]. Text of the 1951 United Nations Convention Relating to the Status of Refugees, Chapter 1, Article 1 (A) 2. Text of the 1951 United Nations Convention Relating to the Status of Refugees, Chapter 1, Article 33.1. The issue of non-refoulement is also considered part of customary international law. Countries that are used as escape routes by North Koreans include Cambodia, which is a party to the Refugee Convention and its Protocol, and Laos, Vietnam, Burma, Thailand, and Mongolia, all of which are not parties to either instrument. UNHCR was established by the U.N. General Assembly Resolution 428 (V) of December 14, 1950, and made operational in 1951. For more information, see CRS Report RL3 1690 United Nations High Commissioner for Refugees (UNHCR) and International Crises and Disasters: U.S. Humanitarian Assistance, Budget Trends, and Issues for Congress, by Rhoda Margesson, Specialist in International Humanitarian Assistance. Some of the research for this section was provided by Tom Coipuram, Information Research Specialist, Knowledge Services Group, CRS. Seymour, James D., Commissioned by the United Nations High Commissioner for Refugees, Protection Information Section, “China: Background Paper on the Situation of North Koreans in China,” January 2005, p. 16. A number of reports highlight the scope of the North Korean refugee issue. See, for example, Migration Policy Institute (Hiroyuki Tanaka) “North Korea: Understanding Migration to and from a Closed Country,” January 2008; International Crisis Group, “Perilous Journeys: The Plight of North Koreas in China and Beyond,” Asia Report No. 122, October 26, 2006. Seymour, p. 26. Amnesty International Report 2007. Amnesty International Report 2007; State Department, 2006 Human Rights Report. Since enactment of the Victims of Trafficking and Violence Protection Act of 2000 (P.L. 106-386) or TVPA, the Administration and Congress have given priority to the human trafficking problem. In June 2001, the State Department issued its first congressionally- mandated Trafficking in Persons (TIP) report. The State Department issued its seventh congressionally mandated Trafficking in Persons (TIP) Report on June 12, 2007. Each report categorized countries into four groups according to the efforts they were making to combat trafficking. Those countries (Tier Three) that do not cooperate in the fight against trafficking have been made subject to U.S. sanctions since

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[16]

[17]

[18]

[19]

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[20]

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2003. The group named in 2007 includes a total of sixteen countries. They are: Algeria, Bahrain, Burma, Cuba, Equatorial Guinea, Iran, Kuwait, Malaysia, North Korea, Oman, Qatar, Saudi Arabia, Sudan, Syria, Uzbekistan and Venezuela. The President must make a determination by mid-September of a given year on whether to impose sanctions on any or all of these countries. Note: This year the Presidential determination has been postponed until October 2007. The Tier rankings for each can be found at [http://www.state.gov/g/tip/rls/tiprpt]. China was on the Tier 2 watch list in 2006 and 2007. For more information on trafficking, see CRS Report RL3 0545, Trafficking in Persons: U.S. Policy and Issues for Congress by Clare Ribando, Analyst in Latin American Affairs. Although natural disasters were the immediate causes of the food crisis, several experts have found the root causes of the famine in decades of economic and agricultural mismanagement. For instance, see Andrew Natsios, The Great North Korean Famine (U.S. Institute of Peace: Washington, DC, 2001), especially chapters 1 and 2. Among the cited policies that over time led to the famine were excessive use of chemical fertilizers and the excessive conversion of land into agricultural uses. The latter practice contributed to the massive deforestation and soil erosion that led to increasingly severe annual floods. Moreover, lack of agricultural machinery and inputs and a severe energy crisis also mean that production remains well below standard. See U.S. Committee for Human Rights in North Korea, “Hunger and Human Rights: The Politics of Famine in North Korea,” by Stephen Haggard and Marcus Noland, 2005. For more information, see CRS Report RS21 835, U.S. Assistance to North Korea: Fact Sheet by Mark Manyin, Specialist in Asian Affairs. A 2004 nutritional survey conducted jointly by the North Korean government and by the United Nations (UNICEF and WFP) also indicated that, although malnutrition rates fell significantly after the late 1990s, more than one-third of the population remained malnourished and anemic. It concluded that people’s growth was stunted from lack of food and nutrition. In this survey, among children, 37% were stunted, 23% were underweight, and 7% were wasted. NAPSNET Special Report, “World Food Programme Press Conference on the DPRK,” by Tony Banbury, WFP Regional Director for Asia, March 31, 2005. WFP News Release, “6.5 Million Vulnerable North Koreans Still in Desperate Need of Food Aid,” January 27, 2005. World Food Programme, “WFP Concerned About Food Shortfalls in DPRK; Seeks to Increase Aid,” March 28, 2007. See Appendix II, Figure 3 for WPF Assistance. United Nations Office for the Coordination of Humanitarian Affairs, “DPR Korea Floods: Flash Appeal 2007), August 27, 2007. Potential ongoing flood-related food security is still under discussion. UNOCHA, “DPR Korea: Floods OCHA Situation Report No. 16,” December 4, 2007. These disaster situations are not addressed further in this report. In the 1 970s, Congress formalized the responsibility of the United States to promote respect for international human rights standards in several ways, one of which was through annual written country reports. Sections 116(d) and 502B(b) of the Foreign Assistance Act of 1961, as amended, require the State Department annually to submit to Congress a

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[26] [27]

[28] [29]

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[30]

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[33]

Rhoda Margesson, Emma Chanlett-Avery and Andorra Bruno report on human rights conditions in all countries that receive U.S. assistance or are members of the United Nations. The U.S. Committee for Human Rights in North Korea, The Hidden Gulag: Exposing North Korea’s Prison Camps,2003. The State Department report on North Korea is more general in nature than for other countries. Many of the specific incidents and events cited occurred in 2005 or previously. This reflects the closed nature of North Korean society and the difficulty in securing information on up-to-date events in the country. The 2006 report acknowledges the difficulties in securing information, much of which comes from sources outside North Korea. Human Rights Watch, “North Korea: Border-Crossers Harshly Punished on Return,” March 20, 2007, and “North Korea’s Cruelty,” March 17, 2007, by Kay Seok. Vitit Muntarbhorn was appointed U.N. Special Rapporteur on the Situation of Human Rights in Democratic People’s Republic of Korea in 2004 by the former U.N. Commission on Human Rights (now U.N. Human Rights Council) “to investigate and report to the Commission and the General Assembly on the situation of human rights in the country, including compliance with its obligations under both international human rights instruments and international humanitarian law.” Annual reports examine a wide range of human rights issues (civil, political, economic, social and cultural). For the latest report, see “Report of the Special Rapporteur on the Situation of Human Rights in the DPRK, Vitit Muntarbhorn,” 7 February 2007, A/HRC/4/15. The Special Rapporteur visited Mongolia from December 15-21, 2007, with the purpose of assessing the impact of the human rights situation in the DPRK on Mongolia. The Special Rapporteur is expected to visit the Republic of Korea from January 19-24, 2008. In his report, the U.N. Special Rapporteur focuses on definitions of refugee status; the response of the first asylum countries; the need for international burdensharing in finding durable solutions; and links between patterns of arrivals of those seeking asylum and the attitudes and practices of neighboring countries. U.S. Committee for Refugees, World Refugee Survey 2002. China has been a party to both instruments since September 1982, but has not adopted legislation to implement the treaties. For example, the entry and exit of aliens being granted political asylum under Chinese law is based solely on the approval of “competent authorities.” China’s policy towards refugees in general has varied over the decades. Two large groups of foreigners in China who have claimed refugee status include the Vietnamese and the Kachin Burmese. It is estimated that there are up to 300,000 people from Vietnam residing in China, many of whom arrived during the Sino-Vietnam war in 1979. UNHCR has provided some assistance to these refugees over time. They have mostly integrated and been accepted by the Chinese, although not granted permanent status. Much less is known about the Kachin Burmese, of which there could be hundreds of thousands in China, mainly in the Yunnan Province. Other small groups of refugees that have been certified by UNHCR have been allowed to stay; still others have been repatriated without UNHCR being granted access. Under the 1951 Convention and the 1967 Protocol, contracting States agree to cooperate with UNHCR and facilitate its supervisory function. Seymour, p. 21.

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[34] The UNHCR mandate in the 1995 agreement with China was not implemented because of China’s objection to UNHCR involvement with the North Koreans in the Northeast. [35] Complementary forms of protection are occasionally available, usually negotiated on a case-by-case basis, such as granting humanitarian status temporarily or arranging political asylum in third countries. See “Complementary Forms of Protection: Their Nature and Relationship to the International Refugee Protection Regime,” Executive Committee of the High Commissioner’s Programme, 9 June 2000, and “Complementary Forms of Protection,” Global Consultations on International Protection, 4 September 2001. [36] In addition, some experts have questioned whether the level of deprivation in North Korea could be considered a reason to grant refugee status as the poverty is so extreme, and perhaps no different from other political reasons that cause people to flee. While this gives the Chinese explanation some basis, it is not directly linked to political persecution, but rather to the conditions under which people are forced to try to survive. The general criteria used to determine the status of a refugee have not been expanded to include this observation. [37] A person who was not a refugee when he or she left his or her country, but who later becomes a refugee is considered a refugee sur place. [38] The official registered unemployment in China as a whole is about 4 percent. However, substantially greater unemployment and underemployment exist in rural areas. [39] For more background information, see CRS Report RL33877, China-U.S. Relations: Current Issues and Implications for U.S. Policy by Kerry Dumbaugh, Specialist in Asian Affairs. [40] According to one source at InterAction, a coalition of more than 160 U.S.-based private relief, development and refugee assistance agencies, many NGOs do not want to talk on the record as further publicity is likely to prompt China to clamp down on their activities. [41] China claims that foreign diplomatic missions have no right to provide asylum on Chinese territory and that embassies should not harbor refugees. The Refugee Convention is supposed to override bilateral agreements between states. In practice, China continues to allow virtually all asylum seekers who successfully enter foreign diplomatic compounds and schools to quietly leave for South Korea via a third country. [42] A South Korean law grants automatic citizenship to all North Korean residents who defect to the South. [43] “Number of N. Korean Defectors to S. Korea Tops 10,000,” KoreaNet.News. February 16, 2007. [44] “Perilous Journeys: The Plight of North Koreans in China and Beyond,” International Crisis Group Report. October 26, 2006. [45] “Thailand Playing a Key Role in Aiding N. Korean Asylum Seekers,” The Nation (Thailand). February 27, 2007; and “Land of Smiles for N. Korean Refugees,” Straits Times. March 5, 2007. [46] See United Nations Human Rights Council, “Visit of the United Nations (UN) Special Rapporteur on the Situation of Human Rights in the Democratic People’s Republic of Korea to Mongolia: December 2007,” December 21, 2007. [47] “Pact with North Korea Draws Fire From a Wide Range of Critics in U.S.,” by Helene Cooper and Jim Yardley, New York Times, February 14, 2007, p. A10; “No Partial Solution,” New York Times, May 31, 2007, p. A14; and “North Korea ‘Prepared’ to Shut

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[48] [49]

[50]

[51] [52] [53]

[54] [55] [56]

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[57]

[58] [59] [60] [61] [62] [63]

Rhoda Margesson, Emma Chanlett-Avery and Andorra Bruno Down Reactor, U.S. Envoy Says,” by Choe San Hun, New York Times, June 23, 2007, p. A5. H.R. 4011; P.L. 108-333; and 22 U.S.C. 7801. Transcript of October 27, 2005 joint hearing of the Subcommittee on Asia and the Pacific and the Subcommittee on Africa, Global Human Rights, and International Operations entitled, “An Update on the Implementation of the North Korean Human Rights Act,” accessed at [http://www.foreignaffairs.house.gov/archives/1 09/24202.pdf]. Transcript of April 28, 2005 joint hearing of the Subcommittee on Asia and the Pacific and the Subcommittee on Africa, Global Human Rights, and International Operations entitled, “The North Korean Human Rights Act: Issues and Implementation,” accessed at [http://www.foreignaffairs.house.gov/archives/1 09/2091 9.pdf]. Section 104, 22 U.S.C. 7814. Broadcasting Board of Governors, Executive Summary of Fiscal Year 2008 Budget Request. Freedom House is a Washington, D.C.-based, independent, non-profit organization, nongovernmental but funded predominantly by the U.S. government, that supports civic initiatives promoting human rights and democracy world-wide. Texts of the two European Parliament resolutions can be found at [http://www.nkfreedomhouse.org/resources/resolutions/]. For background, see CRS Report RL3 1269 Refugee Admissions and Resettlement Policy, by Andorra Bruno, Specialist in American National Government. “U.S., in Shift, Plans Talk in North Korea on Arsenal,” by David Sanger and Norimitsu Onishi, New York Times, June 21, 2007, p. A8; and “U.S. Envoy Outlines N. Korea Agenda - Peace Process in Works by ‘08,” by Nicholas Kralev, Washington Times, June 26, 2007, p. A1. The Final Act of the Conference on Security and Cooperation in Europe, known as the Helsinki Final Act, Helsinki Accords or Helsinki Declaration, was the final act of the Conference on Security and Co-operation in Europe held in Helsinki, Finland in December, 1975 among the United States and Canada, the Soviet Union and the countries of Eastern and Western Europe. The 33 signatories committed themselves to “respect human rights and fundamental freedoms, including the freedom of thought, conscience, religion or belief, for all without distinction as to race, sex, language, or religion.” The participating governments further committed themselves to foster “freer movement and contacts,” improved access to information, and cultural and educational exchanges. Feffer, John. “The Forgotten Lessons of Helsinki Human Rights and U.S.-North Korean Relations,” World Policy Journal. Fall 2004. S. 1903, 109th Congress Lee, Karin, “The North Korean Human Rights Act and Other Congressional Agendas.” Nautilus Policy Forum Online. October 7, 2004. Lefkowitz, Jay, “Freedom For All North Koreans,” Wall Street Journal, April 28, 2006. The full House Report (H.Rept. 108-478) can be found at [http://www.congress.gov/ cgi-lis/cpquery/R?cp 1 08:FLD0 10: @1 (hr478)]. Statement made at House International Relations Subcommittee on Africa, Global Human Rights and International Operations and Subcommittee on Asia and the Pacific joint hearing on April 28, 2005.

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[64] “Seoul Refuses to Duplicate ‘Helsinki Process’ on N. Korea,” Yonhap English News. July 24, 2006. [65] “Lee Myung-bak to Revise ‘Sunshine’ Policy,” Korea Times. December 24, 2007. [66] U.N. General Assembly Resolution GA/SHC/3874. [67] See Nicholas Eberstadt and Christopher Griffin, “Saving North Korea’s Refugees: The Case for Action,” International Herald Tribune. February 20, 2007. [68] U.S. Committee for Human Rights in North Korea, “Failure to Protect: A Call for the UN Security Council to Act in North Korea,” October 30, 2006. [69] General Assembly Resolution 60/1 and confirmed by the Security Council Resolution 1674 (2006). [70] Feinstein, Lee, “Darfur and Beyond: What is Needed to Prevent Mass Atrocities,” Council on Foreign Relations, Council Special Report, No. 22, January 2007. [71] See, for example, Roberta Cohen, “Talking Human Rights With North Korea,” Washington Post opinion page. August 29, 2004. [72] For example, Pyongyang officials agreed to discuss individual human rights cases with British diplomats and human rights experts, contingent upon “more trust and confidence.” See Karin J. Lee, “The North Korean Human Rights Act and Other Congressional Agendas,” Policy Forum Online, Nautilus Institute. October 7, 2004. [73] See Acts of Betrayal: The Challenge of Protecting North Koreans in China by Refugees International, or at [http://www.refugeesinternational.org/content/publication/detail/563 1/]. [74] “Still Waiting on North Korea: The Bush Administration is Eager to Believe that Kim Jong Il Will - For the First Time - Fulfill his Promises,” Washington Post, June 24, 2007, p. B6. [75] For more information on Burma, see CRS Report Rl33479, Burma-U.S. Relations by Larry A. Niksch, Specialist in Asian Affairs. [76] Act of June 27, 1952, ch. 477; 8 U.S.C. 1101 et seq. The Refugee Act (P.L. 96-212, March 17, 1980) amended the INA to establish procedures for the admission of refugees to the United States. For additional information on the U.S. refugee program, see CRS Report RL3 1269, Refugee Admissions and Resettlement Policy, by Andorra Bruno, Specialist in American National Government. [77] CLASS contains records on people ineligible to receive visas, including individuals who are suspected or known terrorists and their associates or who are associated with suspected or known terrorist organizations.

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In: North Korea: Issues and U.S. Policy Editor: Samuel P. Massingame, pp. 121-150

ISBN: 978-1-60692-845-5 © 2009 Nova Science Publishers, Inc.

Chapter 4

N ORTH K OREA :T ERRORISM L IST R EMOVAL ? * Larry Niksch ABSTRACT

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The issue of North Korea’s inclusion on the U.S. list of terrorism-supporting countries has arisen twice in recent U.S.-North Korean diplomacy. In 2000, North Korea demanded that the Clinton Administration remove North Korea from the terrorismsupport list before North Korea would send a high level envoy to Washington and accept the Clinton Administration’s proposal to begin negotiations with the United States over the North Korean missile program. In 2003, multilateral negotiations involving six governments began over North Korea’s nuclear programs in the wake of North Korea’s actions to terminate its obligations under the Nuclear Non-Proliferation Treaty and the 1994 U.S.-North Korean Agreed Framework. In the six party talks, North Korea demanded that in return for a North Korean “freeze” of its plutonium nuclear program, the United States agree to a number of U.S. concessions, including removing North Korea from the U.S. terrorism-support list. On June 26, 2008, President Bush announced that he was officially notifying Congress of his intent to remove North Korea from the list of state sponsors of terrorism after the 45 calender-day notification period to Congress as required by U.S. law. The White House stated that North Korea would thus be removed on August 11, 2008. This announcement was part of the measures the Bush Administration took on June 26 to implement a nuclear agreement that it negotiated with North Korea in September 2007 and finalized details of in April 2008 at a U.S.- North Korean meeting in Singapore. The President also announced that he was immediately lifting sanctions on North Korea under the U.S. Trading with the Enemy Act. North Korea’s obligations under this nuclear agreement are to allow the disabling of its plutonium facility at Yongbyon and present to the United States and other government in the six party talks a declaration of its nuclear programs. North Korea submitted its declaration on June 26, 2008. The Bush Administration increasingly took the position that the issue of North Korea’s kidnapping of Japanese citizens was not linked to removing North Korea from the terrorism list, from the standpoint of U.S. law or policy. The Japanese government objected to this position. The State Department continued to declare that North Korea had not committed a *

This is an edited, excerpted and augmented edition of CRS Report RL30613, dated July 10, 2008.

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Larry Niksch terrorist act since 1987. However, reports from French, Japanese, South Korean and Israeli sources described recent North Korean programs to provide arms and training to Hezbollah in Lebanon and the Tamil Tigers in Sri Lanka, two groups on the U.S. list of international terrorist organizations. Moreover, a large body of reports describe a long-standing, collaborative relationship between North Korea and the Iranian Revolutionary Guard Corps. For Congress to prevent President Bush from removing North Korea from the terrorism support list, it would have to pass legislation (not resolutions) that would be subject to a presidential veto.

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PRESIDENT BUSH’S ANNOUNCEMENT OF NORTH KOREA’S DELISTING On June 26, 2008, the North Korean government and the Bush Administration took measures to implement a nuclear agreement that they originally negotiated in September 2007 and finalized details of in April 2008 at a meeting of the chief U.S. and North Korean negotiators in Singapore.[1] As part of this, President Bush announced that he had sent to Congress notification of his intent to remove North Korea from the list of state sponsors of terrorism after 45 calender days. Under U.S. law, the President is required to notify Congress 45 days before removing a country from the list. If Congress does not approve legislation to block North Korea’s removal during the 45-day period, the President is free to remove North Korea. Any congressional legislation to block removal would have to be signed by the President and would be subject to a presidential veto. The White House said that the President’s intention is to remove North Korea on August 11, 2008, at the end of the 45-day notification period.[2] The U.S.-North Korean nuclear agreement consists of two obligations each that North Korea and the Bush Administration have agreed to fulfill. North Korea is to allow a process of disablement of its plutonium nuclear facilities at Yongbyon. The disablement process began in October 2007. The Bush Administration claims that eight of eleven components of the disablement process have been completed and that close to 50% of nuclear fuel rods in the Yongbyon nuclear reactor have been removed.[3] North Korea’s second obligation is to provide the United States and other members of the six party talks on North Korea’s nuclear program with a “complete and correct” declaration of nuclear programs. The United States’ two obligations under the agreement are to terminate economic sanctions on North Korea under the U.S. Trading with the Enemy Act and remove North Korea from U.S. list of state sponsors of terrorism.

BACKGROUND U.S.-North Korean Negotiations Three Stages in Diplomacy over the Terrorism List The issue of North Korea’s inclusion on the U.S. list of state sponsors of terrorism has been in U.S.- North Korean diplomacy since 2000, but three stages are of particular importance: the first in 2000 in Clinton Administration-North Korean negotiations; the second during the 2003-2004 Six Party negotiations over the North Korean nuclear issue; and the

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third in the diplomacy around the Six Party nuclear agreement of February 2007. Until 2000, the core element of U.S.-North Korean diplomacy was the Agreed Framework, which Washington and Pyongyang signed in October 1994. It dealt primarily with North Korea’s nuclear program, but U.S. obligations specified in the Agreed Framework included economic and diplomatic measures. However, the issue of removal of North Korea from the U.S. terrorism list was omitted from the Agreement. The issue appears not to have been a major object of the negotiations in 1994. In October 1999, the Clinton Administration unveiled the Perry Initiative toward North Korea. Formulated under the direction of William Perry, former Secretary of Defense, the Perry initiative primarily sought a new round of U.S.-North Korean negotiations over North Korea’s missile program. The Perry Initiative report of October 1999 stated that if North Korea agreed to a “verifiable cessation” of its missile program, the United States would provide a series of economic and diplomatic benefits to North Korea leading to normalization of U.S.-North Korean relations.[4] The Clinton Administration sought an early visit of a high level North Korean official to Washington to obtain substantive negotiations.[5] North Korea, however, began to demand several pre-conditions for a high level visit. Beginning in February 2000, one of these was removal of North Korea from the U.S. list of terrorism- supporting countries. North Korea reportedly persisted in this demand well into the summer of 2000 before finally relenting. The high level envoy visited Washington in October 2000. The terrorism list issue receded until 2003 when a new round of U.S.-North Korean diplomacy ensued. This round was precipitated by the Bush Administration’s assertion that North Korea admitted in October 2002 to U.S. diplomats that it was operating a secret uranium enrichment program. The Administration declared the secret program a violation of the Agreed Framework and began to end U.S. obligations under the Agreed Framework. North Korea retaliated by reopening nuclear facilities that had been frozen under the Agreed Framework, expelling monitors of the International Atomic Energy Agency, and withdrawing from the Nuclear Non-Proliferation Treaty. Multilateral negotiations began in April 2003 hosted by China and ultimately involving six governments (the United States, North Korea, South Korea, China, Russia, and Japan). At six party talks in August 2003, North Korea demanded that in return for North Korean concessions on the nuclear issue, the United States agree to a number of U.S. concessions, including removing North Korea from the U.S. list of terrorism-supporting countries. North Korea made its demand more specific in December 2003 when it issued a revised proposal centered on a “freeze” of North Korea’s plutonium nuclear programs (but not the uranium enrichment program). This proposal restated North Korean demands for multiple concessions in return for a freeze. Removal from the terrorism support list was near the top of the list.[6] North Korea reiterated its demand at the six party meetings in February and June 2004 in the context of its freeze proposal. The third stage began after North Korea’s test of an atomic bomb in October 2006. Bilateral meetings between Assistant Secretary of State Christopher and North Korean Vice Foreign Minister Kim Gye-gwan in November 2006 and January 2007 contained discussions of the terrorism list issue as the two diplomats laid the groundwork for the nuclear agreement that the six parties announced on February 13, 2007. That agreement created a “working group” on North Korea-U.S. normalization of relations. The agreement stated The DPRK and the U.S. will start bilateral talks aimed at resolving bilateral issues and moving toward full diplomatic relations. The U.S. will begin the process of

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removing the designation of the DPRK as a state sponsor of terrorism, and advance the process of terminating the application of the Trading with the Enemy Act with respect to the DPRK.

U.S. Responses: The Clinton Administration in 2000 The Clinton Administration reportedly presented to North Korea in February 2000 four steps that North Korea would have to take to be removed from the terrorism list: (1) issue a written guarantee that it no longer is engaged in terrorism; (2) provide evidence that it has not engaged in any terrorist act in the past six months; (3) join international anti-terrorism agreements; and (4) address issues of past support of terrorism.[7] In consulting U.S. allies, South Korea stated that the United States need not consider North Korean terrorism against South Korea in responding to North Korea’s demand and that the Kim Dae-jung administration in Seoul favored removal of North Korea from the U.S. list of terrorism-supporting countries.[8] Japan, however, strongly urged the Clinton Administration to make a redress of North Korean terrorist acts against Japan conditions for removing North Korea from the list. Japan specifically cited North Korea’s kidnapping of at least ten Japanese citizens and North Korea’s harboring of Japanese Red Army terrorists since the 1970s.[9] The U.S. State Department had cited North Korea’s harboring of Japanese Red Army terrorists as a reason for North Korea’s inclusion on the U.S. list of terrorism-supporting states. A State Department official stated on April 25, 2000, that the United States considers “resolving this issue as an important step in addressing [U.S.] concerns about North Korean support of terrorism.”[10] Moreover, according to informed sources, U.S. officials began to raise the kidnapping issue with the North Korea in negotiations over the terrorism list. Japan intensified diplomacy on the terrorism issue in September and October 2000 as the United States prepared to receive the high ranking North Korean official and as Japan prepared for bilateral normalization talks with North Korea. Japan urged the Clinton Administration to raise Japan’s concerns over terrorism in the high level U.S.-North Korean exchanges of October 2000 and not to remove North Korea from the terrorism list.[11] The visit to Washington of North Korean military leader, Jo Myong-rok on October 9-12, 2000, produced two general U.S.-North Korean statements opposing terrorism. However, the State Department’s North Korea policy coordinator, Wendy Sherman, said on October 12 that Secretary Albright’s planned visit to Pyongyang did not mean that the Clinton Administration would remove North Korea from the terrorism list. North Korea, she said, “knows what it needs to do.”[12] The impact of Japan’s entreaties were demonstrated during Albright’ s visit to North Korea. In the first ever meeting between an American official and North Korean leader, Kim Jong-il, Albright raised the issue of the kidnapped Japanese. She reported to Japanese Foreign Minister Kono Yohei that in her meetings with Kim Jong-il, “I brought up the [abduction] issue time and again. I told him that this issue was important not only to Japan but also to the United States as well.” Kono reportedly expressed satisfaction, saying “She seems to have thought about Japan.”[13] The Clinton Administration thus decided in late 2000 to give Japan’s concerns over terrorism a higher priority in U.S. negotiations with North Korea over the U.S. terrorism list. This, in effect, lowered the priority of South Korea’s position in U.S. policy.

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U.S. Responses: The Bush Administration in 2002-2004 There were at least three components to the Bush Administration’s policy regarding North Korea’s inclusion on the terrorism-supporting list after the Agreed Framework collapsed and the six party talks began in 2003. The first was the U.S. response to North Korea’s demand at the six party talks for removal from the list. A second was the raising by U.S. officials of the danger that North Korea would provide nuclear, biological, or chemical weapons to terrorist groups like Al Qaeda. The third was the emphasis given to the Japanese kidnapping in State Department statements on North Korea’s inclusion on the list of terrorism-supporting countries. Until June 2004, the Bush Administration took the position that it would not discuss issues in U.S.-North Korean relations, including the terrorism-support list, until North Korea agreed to and took concrete steps to dismantle it nuclear programs. In line with this stance, the Administration refused to submit any comprehensive U.S. proposal at the six party talks. The Administration’s position changed in June 2004, apparently because of pressure from U.S. allies, Japan and South Korea, and heightened criticism of the Administration’s position from China. At the six party meeting in June 2004, the Administration proposed a detailed plan in which North Korea would freeze its nuclear programs and submit to international verification during a threemonth preparatory period followed by a full dismantlement of all nuclear programs. Once North Korea had met the requirements of the preparatory period, the United States would begin negotiations with North Korea on other issues, including the terrorism-support list.[14] The Bush Administration has linked North Korea’s kidnapping of Japanese citizens to the six party talks and to the terrorism-support list. When the Bush Administration took office in 2001, it reportedly assured Japan, including the families of suspected kidnapping victims, that the United States would continue to raise the kidnapping issue with North Korea and would not remove North Korea from the U.S. list of terrorism-supporting countries.[15] In the six party talks, U.S. Assistant Secretary of State James Kelly stated several times to the North Korean delegates that North Korea should settle the kidnapping issue with Japan. In April 2004, the State Department emphasized the kidnapping of Japanese in its justification for North Korean’s inclusion on the U.S. list of terrorism-supporting countries, as part of the Department’s annual report on international terrorism.[16] The State Department’s Patterns of Global Terrorism 2003 described Kim Jong-il’s admission of North Korean kidnapping during his meeting with Japanese Prime Minister Koizumi in September 2002 and that JapanNorth Korea negotiations over the issue were continuing. Coffer Black, the State Department’s top counterterrorism official, stated upon the release of the report that the kidnapping issue was a key factor in the report’s designation of North Korea as a state sponsor of terrorism.[17] During this period, President Bush, Vice President Cheney, and National Security Adviser Condoleezza Rice made public statements pledging to support Japan. At his summit meeting with Prime Minister Koizumi in May 2003, President Bush stated: “Abduction is an abominable act. The United States supports Japan completely until we find out the whereabouts of each and every Japanese citizen who has been abducted by North Korea.”[18] Condoleezza Rice described the kidnapping issue as “a priority also for the United States, that we abhor what the North Koreans have done.”[19] In April 2004, Vice President Cheney said in Tokyo that Americans shared Japan’s “outrage” over North Korea’s kidnappings and that the Bush Administration supported Japan’s demand for a “resolution of all the issues surrounding the criminal abduction of your citizens by the regime in Pyongyang.”[20]

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In mid-2002, Japan and North Korea went into secret negotiations regarding the kidnapping issue. In September 2002, Prime Minister Koizumi Junichiro flew to Pyongyang where North Korean leader Kim Jong-il admitted that North Korea had abducted 13 Japanese citizens; of these, he claimed that 8 had died and that 5 were alive. The five subsequently went to Japan. In May 2004, Koizumi again traveled to Pyongyang and secured the release of 6 children of the 5 Japanese. However, the issue quickly reached an impasse. Japan harbored doubts about the truthfulness of North Korea’s claim that 8 of the 13 kidnapped Japanese were dead and that the remains of all 8 had been washed away by floods and were not available for identification. In 2006, the Japanese government added 3 other missing Japanese citizens to its list of Japanese kidnapped by North Korea. In Japan, publicized claims also emerged that North Korea had kidnapped up to several hundred Japanese. The Bush Administration supported Koizumi’s efforts but reportedly pressed the Japanese government not to reciprocate with financial aid to North Korea before the nuclear and missile issues with North Korea were resolved. The Administration urged Koizumi prior to each visit to press North Korea for policy changes on the nuclear issue. Japan reportedly complied with the U.S. urgings.[21] These urgings pointed up the overall importance of Japan to U.S. policy toward North Korea and thus the broader influence of the kidnapping issue. As a participant in the six party talks, Japan was viewed as crucial in any settlement of the nuclear or missile issues that involved reciprocal economic or financial benefits to North Korea. As far back as the Perry initiative in 1999-2000, U.S. officials acted on the assumption that any settlement of the nuclear and missile issues with North Korea would require a major Japanese financial contribution.[22] Japan promised North Korea billions of dollars in aid as part of a normalization of relations, but Japan specified that normalization depends on a settlement of the nuclear, missile, and kidnapping issues.[23] The Bush Administration pressed Japan to condition aid first to the nuclear issue. At the six party talks in June 2004, the Bush Administration put forth a detailed settlement proposal under which North Korea would receive heavy oil in the initial stage of a settlement process, financed by Japan and South Korea. The United States also offered North Korea negotiations on resolving North Korea’s broader energy and electricity needs, which also undoubtedly would require a substantial Japanese financial input. On the other hand, the Bush Administration discussed with Japan the imposition of economic sanctions on North Korea. Japan joined the Proliferation Security Initiative in 2003, which President Bush proposed to stifle the proliferation activities of states like North Korea. In 2006, Japan imposed strong economic sanctions on North Korea when the United Nations Security Council approved sanctions in response to North Korea’s missile tests of July 2006 and atomic bomb test of October 2006.

U.S. Responses: The Bush Administration Moves toward Removal, October 2006-May 2008 Although the Bush Administration sought and obtained U.N. Security Council sanctions after North Korea’s atomic bomb test in October 2006, it changed its policy on the North Korean nuclear issue in more fundamental ways — one of which was to bring the terrorism list issue more directly into negotiations. The change was directed by Secretary of State Condaleeza Rice and Assistant Secretary of State Christopher Hill. There have been three fundamental changes in Bush Administration policy since the North Korean nuclear test that have implications for the terrorism list issue. Tactically, the Administration abandoned its

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opposition to bilateral talks with North Korea and actively sought bilateral meetings with Pyongyang. Moreover, Assistant Secretary of State Christopher Hill used these meetings, in late November 2006 and mid-January 2007, to negotiate actively the details of the six party agreement that was announced on February 13, 2007. The second change under the Rice-Hill strategy has been in the U.S. policy objective toward North Korea’s nuclear programs and weapons. Dismantlement of Pyongyang’s nuclear programs and weapons remains as the official Bush Administration policy goal, but the February 2007 Six Party Agreement says little about dismantlement. The two phases outlined in the agreement focus on freezing North Korean nuclear facilities in the first phase, to be completed in 60 days, then “disablement of all existing nuclear facilities” and disclosure by North Korea of “all nuclear programs” in the second phase that has no time deadline.” The February 2007 agreement thus signals an apparent policy objective of containment of North Korea’s nuclear programs and nuclear weapons development, limiting their size and scope. The Bush Administration continues to cite full nuclear dismantlement as its goal for 2008. However, in the limited number of months left of an actively functioning Bush Administration (prior to the U.S. presidential election campaign starting in September 2008), the most realistic prospect of success is negotiating and implementing the two phases of this Six Party Agreement or at least a partial implementation. The dismantlement issue likely will be left for the U.S. Administration that comes into office in January 2009. Consequently, this scenario appears to have influenced the Bush Administration to delink total dismantlement as a primary condition for removal of North Korea from the terrorism list and to link removal with lesser North Korean steps in the February 2007 agreement, particularly “disablement” of the Yongbyon plutonium nuclear facilities and a declaration of its nuclear programs. Thus, the third change under the Rice-Hill strategy has been to link removal from the terrorism exclusively to a successful North Korean implementation of its obligations under Phase Two of the February 2007 nuclear agreement. Beginning with the Hill-Kim Kye-gwan meeting of November 28-29, 2006, and especially in their meeting in Berlin in January 2007, Hill reportedly said that the Bush Administration would remove North Korea from the U.S. list of state sponsors of terrorism if North Korea dismantled its nuclear programs.[24] In the February 2007 agreement, the Administration agreed to begin the process of removing the DPRK from the list.[25] North Korea also may have increased the incentive for the Bush Administration to strengthen this linkage. The South Korean newspaper, JongAng Ilbo, quoted “a diplomatic source knowledgeable on the New York talks” between Hill and Kim Kye-gwan on March 56, 2007, that Kim asserted that if the United States took steps to normalize relations, North Korea could disable the Yongbyon nuclear installations within a year (i.e., March 2008). Kim specifically mentioned as a key step the removal of North Korea from the list of state sponsors of terrorism.[26] Kim repeated this during the six party meeting in July 2007. As the Bush Administration moved toward this exclusive linkage, it began to separate the Japanese kidnapping issue from the terrorism-support list. During Japanese Prime Minister Abe’s visit to the White House in May 2007, Secretary of State Rice told him that the Bush Administration had no legal obligation to link the kidnapping and terrorism list issues.[27] State Department officials subsequently emphasized this “no legal obligation” position but also that Hill had urged North Korea to negotiate progress on the kidnapping issue with Japan.[28] In a press conference with foreign correspondents on August 30, 2007, President Bush evaded a direct answer to a reporter’s question whether progress on the kidnapping issue

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was a condition for North Korea’s removal; Bush instead repeated his concern over the kidnappings and his feelings when he received the families of kidnapped Japanese at the White House.[29]2In September 2007 meetings between Assistant Secretary of State Hill and North Korean negotiator Kim Gye-gwan, they agreed to complete the implementation of Phase Two of the February 2007 nuclear agreement by December 31, 2007, including North Korea’s obligations to disable the Yongbyon installations and declare its nuclear programs. Kim Gye-gwan and North Korea’s Foreign Ministry asserted that Hill had stated that part of this implementation would be the removal of North Korea from the terrorism list.[30] Hill did not confirm this, but it has been reported widely and believed by many observers that he made a specific commitment to Kim Gye-gwan regarding the terrorism list.[31] On October 3, 2007, the six parties issued a statement on the implementation of Phase Two, which included a target deadline of December 31, 2007. The statement implied a U.S. commitment to remove North Korea as part of the implementation process. Referencing the U.S. commitments in the February 2007 nuclear agreement to begin the process of removing North Korea from the list of state sponsors of terrorism and the Trading with the Enemy Act, the statement read that “the United States will fulfill its commitments to the DPRK in parallel with the DPRK’s actions based on consensus reached at the meetings on the working group on normalization of DPRK-U.S. relations.” Christopher Hill stated at an October 25 congressional hearing that fulfilling these commitments “will depend on the DPRK’s fulfillment of its Second-Phase commitments on providing a complete and correct declaration and disabling its nuclear facilities, as well as on satisfaction of legal requirements ... set forth in U.S. law.”[32] The October 3, 2007, six party statement represented what might be termed a “two for two deal” between the Bush Administration and North Korea. The United States and North Korea undertook two reciprocal obligations toward each other. North Korea agreed to allow disablement of its Yongbyon nuclear installations and provide the other six parties with a “complete and correct” declaration of its nuclear programs. The Bush Administration agreed to reciprocate by removing North Korea from the U.S. list of state sponsors of terrorism and from the sanctions provisions of the U.S. Trading with the Enemy Act that have been applied to North Korea since the Korean War. The two sides then negotiated the implementation of this deal; they reached an important agreement in Singapore in April 2008. The Bush Administration has expressed satisfaction that North Korea has allowed a significant disabling of the Yongbyon installations. However, implementation of the “complete and correct” declaration of nuclear programs has been held up by North Korea’s unwillingness to disclose elements of its plutonium program, its uranium enrichment program, and its proliferation activities with Syria. The Syria issue arose when Israel bombed a facility in Syria that the Bush Administration and most informed experts concluded was a nuclear reactor under construction with North Korean assistance.[33] The Bush Administration has dealt with the declaration issue by lowering the requirements for the information that North Korea must supply in the declaration, limiting the requirements to certain elements of North Korea’s plutonium program.[34] The Bush Administration reaffirmed its intension to proceed with its two obligations, including removal of North Korea from the list of state sponsors of terrorism, once its reaches an agreement on a declaration with North Korea and the six parties approve the declaration.[35] The State Department’s annual Country Reports on Terrorism, issued in April 2008, stated: “As part of the six-party talks process, the United States reaffirmed its intent to fulfill its commitments regarding the removal of the designation of the DPRK as a state

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sponsor of terrorism in parallel with the DPRK’s actions on denuclearization and in accordance with criteria set forth in U.S. law.” On January 22, 2008, the State Department’s coordinator for counterterrorism stated that “it appears that North Korea has complied with those criteria” for removal from the terrorism support list because North Korea had not committed an act of terrorism for the past six months. He added that despite the unresolved Japanese kidnapping issue, “we think that even with that on the table that they still comply with the ... delisting criteria.”[36] A potential obstacle to the Administration’s plan is a provision of H.R. 5916, the Security Assistance and Arms Export Control Reform Act of 2008, passed by the House of Representatives in May 2008. It provided that North Korea shall not be removed from the list until the President certifies to Congress that North Korea is no longer engaged in the transfer of nuclear technology to Iran, Syria, or any country that is a state sponsor of terrorism.

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TERRORIST STATE ACTIVITY DESIGNATIONS In April 2007, the Department of State released its annual global terrorism report to Congress, Country Reports on Terrorism, 2006 [Country Reports, 2006].[37] North Korea is prominently mentioned in the yearly report, which include data on terrorist trends and activity worldwide and serves as the basis for the U.S. list of state sponsors of terrorism that are subject to U.S. sanctions. Emerging, or ongoing, problem areas “areas of concern” are identified as well. In addition to data on terrorist trends, groups, and activities worldwide, Country Reports provide a description as to why countries are on the U.S. list of state sponsors of terrorism that are subject to U.S. sanctions. Thus, included in Country Reports are detailed data on the five countries currently on the “terrorism list”: Cuba, Iran, North Korea, Sudan, and Syria.[38] U.S. Administration officials maintain that the practice of designating and reporting on the activities of the state sponsors of terrorism list and concomitant sanctions policy has contributed significantly to a reduction in the overt — and apparently overall — activity level of states supporting terrorism in the past decade. Libya and Sudan are frequently cited as examples of such success, but to date, not North Korea. North Korea is also included on a concomitant list of states “not fully cooperating” with U.S. anti-terrorism efforts. This list includes the five state sponsors of terrorism currently on the Department of State’s list and Afghanistan.

State Sponsors/Supporters List North Korea remains one of five countries currently on the list that the Secretary of State maintains have “repeatedly provided support for acts of international terrorism.”[39] Data supporting this list are drawn from the intelligence community. Listed countries are subject to severe U.S. export controls — particularly of dual-use technology and selling them military equipment is prohibited.[40] Providing foreign aid under the Foreign Assistance Act is also prohibited. Section 6(j) of the 1979 Export Administration Act stipulates that a validated license shall be required for export of controlled items and technology to any country on the list, and that the Secretaries of Commerce and State must notify the House Committee on

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Foreign Affairs, and the Senate Committees on Banking, Housing, and Urban Affairs, and Foreign Relations at least 30 days before issuing any validated license for goods and services that could significantly enhance a nation’s military capability or its ability to support terrorism as required by this act.[41] In addition, Section 509(a) of the 1986 Omnibus Diplomatic Security and Antiterrorism Act (P.L. 99-3 99) bars export of munitions list items to countries on the terrorism list. A restriction potentially related to North Korea is found in Section 1621 of the International Financial Institutions Act (P.L. 95-118). Entitled “Opposition to Assistance by International Financial Institutions to Terrorist States,” Section 1621 states: “The Secretary of the Treasury shall instruct the United States executive director of each international financial institution to use the voice and vote of the United States to oppose any loan or other use of the funds of the respective institution to or for a country for which the Secretary of State has made a determination under section 6(j) of the Export Administration Act of 1979 or section 620A of the Foreign Assistance Act of 1961.” In short, the United States must oppose financial assistance from institutions like the World Bank and the International Monetary Fund to any state on the U.S. terrorism list. Given the influence of the United States in these institutions, U.S. opposition would constitute a huge obstacle to any proposals for financial aid to North Korea. Section 1621, however, does not require the United States to oppose North Korean membership in the IMF and World Bank. North Korean membership is the near term goal of the South Korean government, which views this as an initial step toward financial aid. P.L. 109-5 8, the Energy Policy Act of 2005 prohibits the export, re-export, transfer or retransfer of U.S. nuclear materials and technologies to any country identified by the Secretary of State as a sponsor of terrorism. This provision, in Section 632 of the act, was authored specifically to foreclose the possibility of civilian nuclear cooperation between the United States and North Korea, either directly or through third countries that have access to U.S. nuclear technology.[42]

Nations Not Fully Cooperating Category The DPRK also remains on a list (required by P.L. 104-132), which prohibits, absent a presidential waiver, the sale of arms to nations not fully cooperating with U.S. anti-terrorism efforts.[43]

ADDING AND REMOVING COUNTRIES ON THE LIST In late January each year, under the provisions of Section 6(j) of the Export Administration Act of 1979, as amended, the Secretary of Commerce, in consultation with the Secretary of State, provides Congress with a list of countries supporting terrorism. Compilation of the list is the result of an ongoing process. Throughout the year the Department of State gathers data on terrorist activity worldwide, and then beginning about November, the list is formally reviewed. Each new determination under Section 6(j) of the act must also be published in the Federal Register. Congressional report language provides guidelines for designation. A House Foreign Affairs Committee report approving the Anti-Terrorism and Arms Export Amendments Act of 1989

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(H.Rept. 101-296) included as criteria (1) allowing territory to be used as a sanctuary; (2) furnishing lethal substances to individuals/groups with the likelihood that they will be used for terrorism; (3) providing logistical support to terrorists/groups; (4) providing safe haven or headquarters for terrorists/organizations; (5) planning, directing, training or assisting in the execution of terrorist activities; (6) providing direct or indirect financial support for terrorist activities; and (7) providing diplomatic facilities such as support or documentation to aid or abet terrorist activities. A Senate report had similar criteria (S.Rept. 101-173). Paragraph 6(j)(4) of the Export Administration Act prohibits removing a country from the list unless the President first submits a report to the House Committee on Foreign Affairs, and the Senate Committees on Banking, Housing, and Urban Affairs, and Foreign Relations. When a government changes (i.e., a government is significantly different from that in power at the time of the last determination), the President’s report, submitted before the proposed rescission would take effect, must certify that (1) there has been a fundamental change in the leadership and policies of the government of the country concerned (an actual change of government as a result of an election, coup, or some other means); (2) the new government is not supporting acts of international terrorism; and (3) the new government has provided assurances that it will not support acts of international terrorism in the future. When the same government is in power, the current situation with North Korea, the President’s report — submitted at least 45 days before the proposed rescission would take effect — must justify the rescission and certify that (1) the government concerned has not provided support for international terrorism during the preceding six-month period; and (2) the government concerned has provided assurances that it will not support acts of international terrorism in the future. Congress can let the President’s action take effect, or pass legislation to block it, the latter most likely over the President’s veto. Since enactment of this procedure in 1989, the Bush Administration has removed two countries from the list of state sponsors of terrorism — Libya and Iraq. The Administration has stated that in the case of North Korea, it will adhere to the legal requirement of providing Congress with a 45-day notice before removal that would include the required certification.[44] Congress has passed several resolutions on North Korean support for terrorism since 2005. In January 2005, the entire Illinois delegation in Congress sent a letter to North Korea’s United Nations Ambassador demanding information on the Reverend Kim Dongshik, who was kidnapped by North Korean agents in China in 2000. The Illinois delegation stated that it would oppose removing North Korea from the list of state sponsors of terrorism until his fate is resolved. H.R. 3650, a bill introduced in the House of Representatives in September 2007 with 27 sponsors as of December 10, 2007, would continue to designate North Korea as a state sponsor of terrorism until North Korea met a number of conditions related to cessation of nuclear and missile proliferation, arms and training to terrorist groups, the counterfeiting of U.S. currency; and the release of kidnapped Japanese and Kim Dong-shik and South Korean prisoners of war from the Korean War. A complex challenge facing those charged with compiling and maintaining the list is the degree to which diminution of hard evidence of a government’s active involvement indicates a real change in behavior, particularly when a past history of active support or use of terrorism as an instrument of foreign policy has been well established. For example, Iraq, which was removed in 1982, was again placed on the list in 1990, to be again removed in 2004.

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Some observers suggest that one reason that countries have not been dropped from the list is the reluctance of the executive branch to confront Congress on the issue.

RATIONALE AND BACKGROUND FOR DPRK RETENTION ON THE TWO LISTS North Korea was added to the “official” list of countries supporting terrorism because of its implication in the bombing of a South Korean airliner on November 29, 1987, which killed 115 persons. According to the State Department, North Korea has not been conclusively linked to any terrorist acts since 1987. A North Korean spokesman in 1993 condemned all forms of terrorism, and said his country resolutely opposed the encouragement and support of terrorism. A similar statement was made in November 1995 and again in 2001, in the wake of the 9/11 attacks. Country Reports, 2006, continues to contain language that could be used to justify retention of the DPRK on the list of state supporters of terror: ... The DPRK continued to harbor four Japanese Red Army members who participated in a jet hijacking in 1970. The Japanese government continued to seek a full accounting of the fate of the 12 Japanese nationals believed to have been abducted by DPRK state entities; five such abductees have been repatriated to Japan since 2002....”[45]

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Using language similar to the 2006 Report, Country Reports, 2005, in a brief twoparagraph section on North Korea states that The Democratic People’s Republic of Korea (DPRK) is not known to have sponsored any terrorist acts since the bombing of a Korean Airlines flight in 1987. Pyongyang in 2003 allowed the return to Japan of five surviving abductees, and in 2004 of eight family members, mostly children, of those abductees. Questions about the fate of other abductees remain the subject of ongoing negotiations between Japan and the DPRK. In November, the DPRK returned to Japan what it identified as the remains of two Japanese abductees, whom the North had reported as having died in North Korea. The issue remained contentious at year’s end. There are also credible reports that other nationals were abducted from locations abroad. The ROK government estimates that approximately 485 civilians were abducted or detained since the 1950-53 Korean War. Four Japanese Red Army members remain in the DPRK following their involvement in a jet hijacking in 1970; five of their family members returned to Japan in 2004.[46]

Perhaps most revealing of United States’ policy rationale for keeping nations such as North Korea on the terrorism list is text contained in the “State Sponsors Of Terror Overview” section of Country Reports, 2005, and partially reprinted in Country Reports, 2006. Prominently mentioned are two factors: (1) maintaining ties to terrorist groups and (2) “the capability to manufacture WMD and other destabilizing technologies that can get into the hands of terrorists.” Libya and Sudan continued to take significant steps to cooperate in the global war on terror. Cuba, Iran, North Korea, and Syria, however, continued to maintain their ties to terrorist groups. Iran and Syria routinely provide unique safe haven, substantial resources and guidance to terrorist organizations.

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State sponsors of terrorism provide critical support to non-state terrorist groups. Without state sponsors, terrorist groups would have much more difficulty obtaining the funds, weapons, materials, and secure areas they require to plan and conduct operations. Most worrisome is that some of these countries also have the capability to manufacture WMD and other destabilizing technologies that can get into the hands of terrorists. The United States will continue to insist that these countries end the support they give to terrorist groups. [Emphasis and italics added][47]

NORTH KOREA PREVIOUSLY CITED FOR POSSIBLE REMOVAL In its “Introduction,” the Patterns 1999 report cites North Korea as a possible candidate for removal from the list of state sponsors of terrorism. The Patterns 1999 report states:

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The designation of state sponsors is not permanent, however. In fact, a primary focus of U.S. counterterrorist policy is to move state sponsors off the list by delineating clearly what steps these countries must take to end their support for terrorism and by urging them to take these steps ...There have been some encouraging signs recently suggesting that some countries are considering taking steps to distance themselves from terrorism. North Korea has made some positive statements condemning terrorism in all its forms. We have outlined clearly to the Government of North Korea the steps it must take to be removed from the list, all of which are consistent with its stated policies.

The report states that “if a state sponsor meets the criteria for being dropped from the terrorism list, it will be removed — notwithstanding other differences we may have with a country’s other policies and actions.” In June 15, 2000, testimony before the Senate Foreign Relations Committee, Michael Sheehan, the State Department Coordinator for Counterterrorism, testified that We need to take into account all relevant considerations in connection with moving states onto or off of the list, and we also need to explore whether it would be appropriate in any cases to identify states as “not fully cooperating” rather than as state sponsors of terrorism if doing so was warranted by the facts and would advance U.S. counterterrorism objectives ... I have been considering what intermediate steps could be taken to give state sponsors a clearer look at how they might “graduate” off the list. It may be possible that in appropriate cases state sponsors could step off the state sponsor list and be left only on the “not fully cooperating” list, with an eye towards stepping off of that list when they fully cooperate with U.S. antiterrorism efforts. Similarly, in July 12 testimony before the House International Relations Committee, Ambassador Sheehan confirmed that his earlier statements were intended as a clear signal to terrorist supporting countries that the United States would consider taking them off the list if they take the necessary steps to cease their support for terrorism.

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PROSPECTS FOR REMOVAL ARE SET BACK Patterns 2000, issued in 2001 under the new Bush Administration, changed the tone. It does state that “the Department of State is engaged in ongoing discussion with North Korea and Sudan with the object of getting those governments completely out of the terrorism business and off the terrorism list.” It cites the North Korean statement in the U.S.-North Korean joint statement of October 12, 2000, in which “the DPRK reiterated its opposition to terrorism and agreed to support international actions against such activity.” However, as stated previously, Patterns 2000 was more specific in citing evidence of North Korean support of other terrorist groups, particularly in the Philippines. The report also asserts that “the US has a long memory and will not simply expunge a terrorist’s record because time has passed.” Patterns 2001 and Patterns 2002, arguably, softened language to designed to provide a rationale for retaining the DPRK on the terror list. For example, Patterns 2002, although noting that “Pyongyang continued to sell ballistic missile technology to countries designated by the United States as state sponsors of terrorism, including Syria and Libya,” concluded with the statement that “North Korea is a party to six of the twelve international conventions and protocols relating to terrorism.”[48] Contrast such language to Patterns 2003: “Although it is a party to six international conventions and protocols relating to terrorism, Pyongyang has not taken any substantial steps to cooperate in efforts to combat international terrorism. [italics provided]”[49] Patterns 2003, which covers the year North Korea was designated a member of the “axis of evil” by President Bush in his 2003 State of the Union Address, appears to take a somewhat more confrontational position.[50] The 2003 report begins with text to the effect that the DPRK is not known to have sponsored any terrorist acts since 1987. The report notes, however, that North Korea continued to give sanctuary to hijackers affiliated with the Japanese Red Army. Although Patterns 2003 arguably indicates that North Korea’s support for international terrorism appears limited at present, it offers no promising language to suggest that DPRK removal from the terrorism list may occur anytime soon. Country Reports, 2004, again offers no promising language to suggest that DPRK removal from the terrorism list may occur anytime soon, but notes what can be interpreted as progress in resolving the issue of kidnapped Japanese citizens. Again restated is language to the effect that the DPRK is “not known” to have sponsored any acts of terrorism since 1987. Pyongyang, however, is cited for lack of “substantial steps” in cooperating in efforts to combat international terrorism, although it has signed six international conventions and protocols relating to terrorism. The Democratic People’s Republic of Korea (DPRK) is not known to have sponsored any terrorist acts since the bombing of a Korean Airlines flight in 1987. At a summit with Japanese Prime Minister Koizumi in Pyongyang in September 2002, National Defense Commission Chairman Kim Jong Il acknowledged the involvement of DPRK “special institutions” in the kidnapping of Japanese citizens and said that those responsible had already been punished. Pyongyang in 2003 allowed the return to Japan of five surviving abductees, and in 2004 of eight family members, mostly children, of those abductees. Questions about the fate of other abductees remain the subject of ongoing negotiations between Japan and the DPRK. In November, the DPRK returned to Japan what it identified as the remains of two Japanese abductees whom the North had reported as having died in North Korea. Subsequent DNA testing in Japan indicated that the remains

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were not those of Megumi Yokota or Kaoru Matsuki, as Pyongyang had claimed, and the issue remained contentious at year’s end. Four Japanese Red Army members remain in the DPRK following their involvement in a jet hijacking in 1970; five of their family members returned to Japan in 2004. Although it is a party to six international conventions and protocols relating to terrorism, Pyongyang has not taken substantial steps to cooperate in efforts to combat international terrorism.[51]

PROCESS FOR REMOVAL MOVES FORWARD In a dramatic shift in U.S. position regarding DPRK removal from the terrorist list, Country Reports, 2006, clearly states that the United States has agreed to begin the process of removing the DPRK from the list of state supporters of terror: The Democratic People’s Republic of Korea (DPRK) was not known to have sponsored any terrorist acts since the bombing of a Korean Airlines flight in 1987. The DPRK continued to harbor four Japanese Red Army members who participated in a jet hijacking in 1970. The Japanese government continued to seek a full accounting of the fate of the 12 Japanese nationals believed to have been abducted by DPRK state entities; five such abductees have been repatriated to Japan since 2002. In the February 13, 2007 Initial Actions Agreement, the United States agreed to “begin the process of removing the designation of the DPRK as a state-sponsor of terrorism.” [Emphasis added][52]

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The Country Reports, 2006, reflected the new Rice-Hill strategy of linking removal of North Korea to fulfillment of the February 2007 nuclear agreement. While it mentions the Japanese kidnapping issue, there is less discussion of it than in prior reports. Moreover, it did not describe progress or a settlement of the kidnapping issue as a condition for North Korea’s removal.

NEW REPORTS OF SUPPORT OF TERRORIST GROUPS The State Department’s long-standing claim that North Korea “was not known to have sponsored any terrorist acts since 1987” was particularly important in 2007 in view of the clear goal of the Rice-Hill strategy to remove North Korea from the list of state sponsors of terrorism. However, questions about the accuracy of the claim are relevant in view of two types of reported information. One is from the State Department, itself. In the Department’s Country Reports, 2005, the section on North Korea discusses the Japanese kidnapping issue and then states that there is “credible reports that other nationals were abducted from locations abroad.” The State Department does not appear to have provided clarification or details regarding these “credible reports.” This assertion in Country Reports, 2005 could be seen as contradicting the assertion that North Korea has not sponsored any terrorist acts since 1987. The second type of reports, coming from several diverse sources, asserts that North Korea has provided arms and possibly training to Hezbollah in Lebanon and the Tamil Tigers in Sri Lanka and that it maintains an intimate relationship with the Iranian Revolutionary Guard. Hezbollah and the Tamil Tigers are two of the most active terrorist groups on the U.S. list of

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international terrorist groups. The Iranian Revolutionary Guard has been designated by the State Department as a supporter of terrorism.

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Hezbollah There have been several reports of North Korean support for Hezbollah from Europe-based sources that report regularly on the Middle East. U.S. media publications have not reported on it. In September 2006 and April 2007, Intelligence Online, a French internet publication specializing in political and economic intelligence in the Middle East, published two reports detailing an extensive program by North Korea to provide arms and training to Hezbollah.[53] The reports described Iran as the facilitator of the North Korea-Hezbollah relationship. According to Intelligence Online, the program began in the late 1 980s and early 1990s with visits by Hezbollah cadre to North Korea. These visits were reported to involve training courses of several months run by the North Koreans. The September 2006 Intelligence Online report cited three current top Hezbollah officials who, it says, received training in North Korea during this earlier period: Hassan Nasrallah, Hezbollah’s secretarygeneral and head of Hezbollah’ s military organization; Ibrahim Akil, the head of Hezbollah’s security and intelligence service; and Mustapha Badreddine, Hezbollah’s counter-espionage chief. Intelligence Online reported that after 2000, the program expanded with the dispatch of North Korean trainers to southern Lebanon where they instructed Hezbollah cadre in the development of extensive underground military facilities, including tunnels and bunkers. Takashi Arimoto, Washington correspondent for the Japanese newspaper, Sankei Shimbun, has reported “a document of an international organ” that in 2004, Syrian President Bashar Al-Asad met with North Korean officials in Damascus and requested North Korean assistance in helping Hezbollah to design and construct underground military installations.[54] (North Korea is believed to have extensive underground military installations inside North Korea.) Another report, from the London-based newspaper, Al-Sharq al-A ws at, cited “a high- ranking officer in the [Iranian] Revolutionary Guard” that one such North Korean- assisted facility in southern Lebanon was a sophisticated, 25-kilometer, underground tunnel with numerous assembly points that Hezbollah used to move and concentrate troops.[55] These underground tunnels and bunkers, according to numerous reports, significantly improved Hezbollah’s ability to fight the Israelis during the 2006 IsraelHezbollah war. These reports asserted that Hezbollah was able to hide many of its 1,000-1,500 rocket launchers underground; and thus, Israeli aerial surveillance had only limited effectiveness in locating the rocket launchers before Hezbollah fired rockets into Israel. When Israeli ground troops entered southern Lebanon, Hezbollah troops used networks of underground tunnels and bunkers to move from location to location and often to attack the Israelis from the rear. Deep underground bunkers also were found to have large storage rooms.[56] Additional information on North Korean assistance to Hezbollah in constructing underground tunnels and bunkers has come from Lenny Ben-David, a former Israeli diplomat who served as Israel’s deputy ambassador to the United States. Ben-David specified that North Korean experts and equipment were brought into southern Lebanon by the Korea Mining Development Trading Corporation. He asserted “The description of North Korean tunnels and cooperation with Iran are based on fact.”[57]

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An Israeli report from Jerusalem Update asserted that North Korean also had sent trainers into Lebanon to engage in the psychological training of Hezbollah cadre who are to be suicide bombers.[58] Another report of the North Korea-Hezbollah relationship appeared in the South Korean newspaper, JoongAng Ilbo, in November 2007. The author of this report was Professor Moon Chung-in, a professor at South Korea’s Yonsei University.[59] Professor Moon is a specialist on Korean security issues and was a close adviser to the South Korean government of former President Roh Moo-hyun. This advisory role has given him access to the U.S. government and other foreign governments. He is well-known to American experts on Korean issues, and he has advocated policies to improve relations with North Korea. It is noteworthy that Professor Moon cited Mossad, the Israeli government’s main intelligence agency, as the source of an assessment that “vital missile components” of Hezbollah missiles fired into Israel during the 2006 war came from North Korea. Dr. Moon stated that Mossad believes that the missiles with North Korean components were assembled in Iran and were transported to Hezbollah in Lebanon via Syria. (North Korea also has sold Syria an assortment of missiles since the 1980s.) According to Professor Moon, Mossad “partially blames North Korea” for the effectiveness of Hezbollah’ s missile strikes into Israel. In 2008, the Israeli government reported that Hezbollah has received new missiles from Iran with longer ranges than the missiles that Hezbollah used in the 2006 war. These include 10,000 long-range missiles with a range up to 185 miles compared to a maximum range of 45 miles during the 2006 war.[60] Hezbollah leaders reportedly admit that their missile arsenal has increased since the 2006 war.[61] The Intelligence Online report of April 20, 2007, asserted that top Hezbollah leaders, including Hassan Nasrallah, visited Tehran in early April 2007, where Iran pledged to deliver new medium-range missiles to Hezbollah.[62] If the Israeli estimate is correct and if the reported Mossad assessment of North Korea’s role in providing components to missiles supplied to Hezbollah prior to the 2006 war is correct, it would appear highly possible the missiles that Iran is supplying to Hezbollah continue to have North Korean components. The Intelligence Online report of April 20, 2007, asserted that North Korea and Hezbollah were strengthening their relationship in the aftermath of the IsraelHezbollah war. Citing sources in “the Pasadaran [Iranian Revolutionary Guard] leadership, the report stated that Iran and North Korea had reached an agreement under which about 100 Hezbollah field commanders would receive training in North Korea from North Korea’s elite commando infiltration units and also training on intelligence-gathering and counter-espionage.[63] This report suggests the possibility that Hezbollah has sought training in infiltration tactics from North Korean military units that U.S. commanders in South Korea have described as trained to infiltrate deeply into South Korea in time of war through tunnels, by air, and by sea, to attack bases, command centers, and transportation and communication facilities. The object of such training could be to give Hezbollah the capability to infiltrate troops into Israel in another war.

Tamil Tigers Reports of North Korean arms shipments to the Tamil Tigers appeared in the Japanese newspaper, Sankei Shimbun, in September 2007.[64] Sankei Shimbun is Japan’s fifth largest national newspaper with a circulation of two million daily. It is considered to be right of center

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politically and generally is critical of North Korea. Two reports described several North Korean attempts in late 2006 through the spring of 2007 to smuggle conventional arms, including machine guns, automatic rifles, and anti-tank rocket launchers, to the Tamil Tigers in Sri Lanka. The Sri Lankan navy intercepted and attacked three North Korean ships carrying arms in October 2006, February 2007, and March 2007. It sunk two of the vessels, seized some of the North Korean arms, and may have captured several North Korean crewmen. Sankei Shimbun published photographs of the North Korean weapons it says were seized by the Sri Lankan navy. According to Sankei Shimbun, the Sri Lankan government filed an official protest with the North Korean government. U.S. intelligence agencies, using spy satellites, may have conveyed information about the North Korean ships to the Sri Lankan government, according to the reports. Press reports in September 2006, February 2007, and March 2007 cited incidents of the Sri Lankan navy intercepting and attacking large, unidentified cargo ships, which, according to the Sri Lankan navy, were attempting to smuggle arms into Sri Lanka for the Tamil Tigers.[65] The Sri Lankan navy cited four such ships with no flags or other indentifying markers — two on March 18, 2007. In each incident, the Sri Lankan navy contacted the ships, which gave false identifications and refused to allow a search. When the ships fired on Sri Lankan naval vessels, the navy attacked. The Sri Lankan navy claimed to have seized weapons aboard the ship in the incident of February 28, 2007. However, neither the Sri Lankan navy nor the Sri Lankan government made public any subsequent information on the identity of the ships, the crewmen, or the origins of the weapons aboard the ships. Moreover, the reported arms supply link between North Korea and the Tamil Tigers appears to be one of long duration. In 2000, the Far Eastern Economic Review reported that, according to foreign intelligence sources in Bangkok, the Tamil Tigers had received a sizeable portion of its weapons from North Korea.[66] In its Patterns of Global Terrorism reports for 2001, 2002, and 2003, the State Department cited evidence that North Korea had supplied arms to terrorist groups. Patterns of Global Terrorism, 2002 stated that North Korea “has sold weapons to several terrorist groups.” An analysis done by Jane’s Intelligence Review of the video of a Tamil Tiger ship attack on a Sri Lanka navy-operated passenger vessel in October 2000 revealed that the attackers used an exclusively North Korean-version of a 107 millimeter Katyusha rocket, using dual launch tubes instead of the standard single launch tube.[67]

Iranian Revolutionary Guard The State Department’s Fact Sheet of October 25, 2007, on Iranian entities involved in proliferation and terrorism support activities asserted that the Iranian Revolutionary Guard (IRG) was providing “material support” for the Taliban, Hezbollah, Hamas, Iraqi Shia militants, and other terrorist groups.[68] In 2006, U.S. District Judge Royce Lambert issued a ruling that the IRG recruited people who attacked the U.S. military facility in Saudi Arabia, Khobar Towers, in 1996 and manufactured the bombs used in the attack. General David Petraeus and U.S. Ambassador to Iraq Ryan Crocker testified to Congress in 2008 that the IRG was directing and supporting the attacks of the Iraqi Shia “special groups” against U.S. and Iraqi military and government targets.[69] Many reports describe a close relationship between the IRG and Hezbollah. The State Department’s Fact Sheet stated that the IRG has a “long history” of supporting Hezbollah with guidance, funding, weapons, intelligence and logistical support. Other reports describe IRG

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training of Hezbollah personnel in both Iran and Lebanon, the supply of missiles to Hezbollah by the IRG, IRG cadre in southern Lebanon directing Hezbollah’ s development of military facilities (including missile sites), and IRG coordination of missile attacks against Israel during the 2006 Israel-Hezbollah war.[70] The State Department’s Fact Sheet asserted that the IRG “has assisted Hizballah [Hezbollah] in rearming” since the 2006 war, presumably including the supply of new longer-range missiles described by the 2008 Israeli intelligence estimate. The State Department’s October 2007 Fact Sheet also described the IRG as heavily involved in Iran’s program to develop ballistic missiles. It said that the IRG is “one of the primary organizations tied to developing and testing the Shahab 3” missile (the Iranian version of North Korea’s Nodong missile) and that, as recently as 2006, the IRG was procuring “sophisticated and costly equipment that could be used to support Iran’s ballistic missile and nuclear programs.” The Iranian announcement of its tests of Shahab-class missiles, including the Shahab 3, on July 9-10, 2007, came from commanders of the IRG. North Korea’s relationship with the IRG appears to be in two areas: (1) coordination in support for Hezbollah and (2) cooperation in ballistic missile development. Reports also suggest that North Korea cooperates with the IRG and other Iranian entities in the development of nuclear capabilities or nuclear weapons. Given the close relationship between the IRG and Hezbollah, the IRG could have facilitated the North Korean training of Hezbollah personnel by North Korea in the late 1 980s and 1 990s, as discussed above. The Paris Intelligence Online report of September 7, 2006, describing the role of North Korean instructors in the construction of Hezbollah’s underground military installations in southern Lebanon in the period before the 2006 war, asserts that IRG General Mir Faysal Baqer Zadah supervised the construction of the underground facilities.[71] Other reports describe IRG cadre in southern Lebanon prior to the 2006 war, as assisting in the building of underground military bases, including missile bases.[72] The IRG reportedly has been the main supplier of missiles to Hezbollah.[73] Thus, the reported utilization of North Korean components on these missiles prior to the 2006 war undoubtedly would have been coordinated between the IRG and North Korea as well as any North Korean components in the large number of missiles the IRG has supplied to Hezbollah since the war. Cooperation between North Korea and the IRG in the development of ballistic missiles appears to be of long standing. North Korea supplied Iran with Scud B and Scud C missiles after 1987. In 1993, the overall commander of the IRG, Major General Mohsen Rezaei, and IRG Brigadier General Hossein Mantiqi visited North Korea heading Iranian delegations.[74]Another delegation, headed by Iran’s Defense Minister and reportedly including IRG officials, visited Pyongyang in December 1993. Press reports, citing statements by Central Intelligence Agency officials, described the goal of these missions as arranging for Iran’s purchase of up to 150 newly-developed North Korean Nodong intermediate range missiles.[75] North Korea first tested the missile in 1993. Paul Beaver, military expert for the Janes publications, said in an interview that the delegations negotiated an agreement with North Korea to establish a plant in Iran to produce the Nodongs.[76] At that time, there reportedly were North Korean missile experts in Iran helping Iran to manufacture Scud missiles based on North Korean technology.[77] Beaver’s assessment appears to have been correct. By 1997, there reportedly were North Korean missile experts in Iran working on the construction of Shahab 3 and Shahab 4 missiles, Iranian versions of the Nodong. Like the State Department’s October 2007 Fact

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Sheet, a 1997 London Daily Telegraph report stated that the IRG was directing the Shahab program.[78] In November 1997, the IRG announced that it had conducted a successful test launch of a Shahab 3 prototype.[79] A fully successful test flight of the Shahab 3 was conducted in 1998. North Korea reportedly continued to supply components for the Shahab 3.[80] Recent reports indicate continuing North Korean-Iranian collaboration in trying to develop longer range ballistic missiles. A detailed report in the Los Angeles Times in August 2003 stated that “many North Koreans are working on nuclear and missile projects in Iran.”[81] One report of March 2006 was issued by the National Council of Resistance of Iran, an exile opposition group. In 2002, the National Council had revealed correctly the existence of secret Iranian nuclear facilities at Natanz and Irak. Several subsequent claims of the National Council have not been verified, but the Iranian government places severe obstacles on the International Atomic Energy Agency and other international groups that could engage in verification work. The National Council’s March 2006 report asserted that North Korean experts were working at the Memot Missile Industries Complex in Iran in the development of an intermediate range missile with a range of 1,900 miles and in the continuing development of the Shahab 4 missile.[82] Later in 2006, it was reported that North Korea had made an initial shipment to Iran of its new Musudan intermediate range missile. U.S. Secretary of Defense Robert Gates stated in November 2007 that North Korea had supplied Iran with missiles with a range of 1,562 miles[83] (probably the Musudan). North Korea and Iran reportedly carried out joint tests of the Musudan.[84] In April 2008, several publications reported the existence of a new Iranian missile research and development site that had the same appearance as North Korea’s Taepodong missile assembly facility inside North Korea.[85] In short, these reports and the State Department’s characterization of the IRG as a major player in Iran’s missile program point to a likely continuing relationship between North Korea and the IRG, including a kind of joint venture partnership to develop missiles inside Iran. The State Department’s 2007 Fact Sheet asserted that “the IRGC attempted, as recently as 2006, to procure sophisticated and costly equipment that could be used to support Iran’s ballistic missile and nuclear program.” The National Council of Resistance of Iran asserted in a 2006 report that the IRG was directing the nuclear program. Other recent reports have alluded to IRG leadership in at least some elements of Iran’s nuclear program.[86] The IRG reportedly directs Iran’s Nuclear Control Center, which supervises the nuclear program and reports directly to Iran’s Supreme Leader Ayatollah Ali Khomeini.[87] Thus North Korea’s apparent main interlocutor in missile development was in a position to bring North Korea into the Iranian nuclear program. Numerous public reports have appeared since 1993 describing elements of North Korean-Iranian collaboration in the development of nuclear capabilities. Some cite the Central Intelligence Agency or Western intelligence sources as sources of information. Other reports seem to be based, at least in part, on Israeli intelligence sources. Specific events or factors in the alleged North Korean-Iranian nuclear collaboration are described in multiple reports. Nuclear cooperation reportedly began at the same time North Korea negotiated with the IRG for cooperation in developing and manufacturing Nodong missiles in Iran. The first reports, in 1993 and 1994, said that North Korea and Iran had signed an initial agreement for nuclear cooperation. An Economist Foreign Report cited “CIA sources” that Iran was helping to finance North Korea’s nuclear program and that North Korea would supply Iran with nuclear

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technology and equipment.[88] A report of the U.S. House Republican Research Committee claimed that Iran would provide $500 million to North Korea for the joint development of nuclear weapons.[89] The “CIA sources” cited by the Economist Foreign Report reportedly mentioned the development of enriched uranium as a goal of the new North Korean-Iranian agreements. Recent information has disclosed that North Korea had negotiated with Pakistan for Prime Minister Benazir Bhutto to turn over to North Korean officials detailed data on developing highly enriched uranium when she visited North Korea in 1993.[90] U.S. officials at the time reportedly concluded that Iran was the most likely customer for North Korean nuclear weapons; the CIA reportedly was concerned that nuclear cooperation, including the transfer of materials, would be difficult to detect.[91] The next reported stage in North Korean-Iranian nuclear cooperation, in 2003 and afterwards, appears to have been influenced by the reported joint advancement of the Nodong (Shahab) program in Iran, by North Korea’s development and reported sale to Iran of the more advanced Musudan intermediate range ballistic missile (originally designed by the Soviets to launch nuclear warheads[92]), and by the reported initiation of joint development of the Taepodong long-range missile after 2000. Stepped up visits to Iran by North Korean nuclear specialists in 2003 reportedly led to a North Korean-Iranian agreement for North Korea to either initiate or accelerate work with the Iranians to develop nuclear warheads that could be fitted on the North Korean Nodong missiles that North Korea and Iran were jointly developing. Iran was reported to have offered shipments of oil and natural gas to North Korea to secure this joint development of nuclear warheads.[93] North Koreans reportedly were seen at Iranian nuclear facilities in 2003. By this time, a large number of North Korean nuclear and missile specialists reportedly were in Iran.[94] The German news magazine, Der Spiegel, quoted “western intelligence service circles” as describing Iran in 2005 as offering North Korea economic aid if Pyongyang “continues to cooperative actively in developing nuclear missiles for Tehran.”[95] During this period, Israeli officials began to assert that Iran was trying to develop nuclear warheads and that North Korea might be helping Tehran. Israeli President Shimon Peres was quoted that “there is no doubt” that Iran is developing long-range missiles to outfit with nuclear warheads. U.S. intelligence officials reportedly disclosed in early 2006 that Iran was trying to expand the nose cone of the Shahab 3 (Nodong) missile so that it could carry a nuclear warhead. They described an Iranian Project 111 as “a nuclear research effort that includes work on missile development.[96]6 In March 2006, Reuters reported “an intelligence report given to Reuters by a non-U.S. diplomat” that described Iran’s plans to develop nuclear warheads for the Shahab 3 missiles.[97] Most recently, it has been reported that the International Atomic Energy Agency has evidence that Iran had developed designs of what appeared to be a nuclear warhead and that the nuclear smuggling ring linked to Pakistan’s nuclear czar, A.Q. Khan, had acquired blueprints for an advanced warhead that could be mounted on a Nodong missile. Both North Korea and Iran had received other types of missile and nuclear technology from Khan.[98] The February 2008 report of the National Council of Resistance of Iran also claimed North Korean-Korean-Iranian collaboration in nuclear warhead development at secret sites inside Iran.[99] It alleges that the Iranian Defense Ministry has a secret facility at Khojir on the edge of Tehran, code-named B1-Nori-8500, that is engaged in the development of nuclear warheads for intermediate range ballistic missiles. North Korean specialists are at this facility, according to the National Council. The National Council’s report so far has not been verified or refuted by governments or other organizations.

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European and Israeli defense officials stated in early 2007 that North Korea and Iran had concluded a new agreement for North Korea to share data from its October 2006 nuclear test with Iran.[100] In February 2008, an Iranian delegation reportedly visited North Korea that included officials from Iran’s Nuclear Energy Agency.[101] Two other forms of North Korean-Iranian nuclear collaboration have been reported recently. At least one involved direct North Korean-IRG collaboration. In 2005, the Iranian leadership is reported to have initiated a huge project to develop underground bunkers and tunnels for Iran’s nuclear infrastructure, estimated to cost hundreds of million of dollars. The project reportedly includes the construction of 10,000 meters of underground halls for nuclear equipment connected by tunnels measuring hundreds of meters branching off from each. Specifications reportedly called for reinforced concrete tunnel ceilings, walls, and doors resistant to explosions and penetrating munitions. The IRG implemented the project. North Korea is said to have participated in the design and construction of the bunkers and tunnels. In early 2005, Myong Lyudo, a leading North Korean expert on underground facilities, traveled to Tehran to run the program of North Korean assistance.[102] Thus, as in the case of reported North Korean assistance to Hezbollah in the construction of underground bunkers and tunnels, the IRG apparently made further use of North Korea’s skills in developing underground military facilities. The second reported form of collaboration involved joint assistance to Syria in developing the Syrian nuclear reactor that Israel bombed in September 2007. The Bush Administration has said nothing about Iranian involvement in the Syrian reactor. However, the online service of the German news publication Der Spiegel has cited “intelligence reports seen by Der Spiegel” that North Korean and Iranian scientists were working together at the reactor site at the time of the Israeli bombing. Some of the plutonium production slated for the reactor was to have gone to Iran, which viewed the reactor as a “reserve site” to produce weapons-grade plutonium as a supplement to Iran’s own highly enriched uranium program.[103] Such Iranian involvement also would raise the possibility of North-Korean Iranian collaboration in developing plutonium reprocessing facilities in either Syria or Iran.

POLICY IMPLICATIONS OF REMOVING NORTH KOREA FROM THE LIST OF STATE SPONSORS OF TERRORISM The final stage in the Bush Administration’s negotiations with North Korea in June 2008 focused on North Korea’s obligation under the “two for two” deal embodied in the October 3, 2007, six party statement to provide a declaration of nuclear programs. However, the Administration’s real objective in removing North Korea from the terrorism support list is to achieve the completion of the disablement of North Korea’s plutonium nuclear installations at Yongbyon. The shutting down of Yongbyon would prevent North Korea from producing more weapons grade plutonium for atomic bomb production. Given the reported progress achieved toward disablement of Yongbyon, removal of North Korea from the terrorism support list would appear likely to achieve this goal. This would be the immediate achievement in removing North Korea. Christopher Hill and others reportedly have argued within the Bush Administration that the Administration should give the highest priority in its North Korea policy

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to limiting and eliminating North Korea’s plutonium program because the plutonium is the known source of North Korea’s production of atomic bombs; other issues, such as the alleged North Korean highly enriched uranium program and North Korea’s proliferation activities, therefore should be given less priority or deferred into the future.[104] Removing North Korea from the list of state sponsors of terrorism also will open the way for what Assistant Secretary of State Hill has described as a Phase Three of nuclear negotiations beyond the February 2007 six party nuclear agreement. U.S. goals in a Phase Three negotiation would be the full dismantlement of Yongbyon, securing control over North Korea’s plutonium stockpile, and eliminating North Korea’s stockpile of nuclear weapons. This prospect, however, is much more uncertain, since North Korea is certain to present new demands for U.S. concessions as part of any deal for a further reduction of its plutonium program. There are potential negative consequences for U.S. policy in removing North Korea from the list of state sponsors of terrorism. Japanese officials have warned that there would be short-term damage to U.S. relations with Japan if the Bush Administration removes North Korea without any substantive progress on the Japanese kidnapping issue.[105] U.S. Ambassador Thomas Schieffer has expressed such concerns since October 2007. Some U.S. experts also believe there may be damage.[106] However, a sizeable number of members of Japan’s Diet has voiced opposition to the Bush Administration removing North Korea from the list of state sponsors of terrorism. Japanese press and majority public opinion also appears to oppose such a U.S. action.[107] There also could be potential for longer-term damage to the U.S.-Japan alliance that could affect future Japanese policies toward U.S. military bases in Japan and support for future U.S. military operations against Muslim terrorist groups. Removing North Korea likely will encourage Pyongyang to continue and possibly expand its support for terrorist groups and other state sponsors of terrorism in the Middle East. North Korea’s expansion of these activities since 2000 appear to constitute a major threat to U.S. national security policy interests in the Middle East. Relatedly, the United States will no longer have the terrorism support list as a negotiating lever if it ever decided to address North Korean activities in the Middle East in negotiations with Pyongyang.

REFERENCES [1]

[2] [3] [4] [5] [6]

Bush OKs Singapore agreement: WH [White House], Yonhap News Agency, April 14, 2008. Melanie Lee and Daryl Loo, Nuclear talks with N. Korea make progress, US says, Reuters News, April 8, 2008. White House Press Spokesman, Fact Sheet: Presidential Action on State Sponsor of Terrorism (SST) and the Trading with the Enemy Act (TWEA), June 26, 2008. Ibid. Review of United States Policy Toward North Korea. Report by Dr. William J. Perry, Special Advisor to the President and the Secretary of State. October 12, 1999. Pomfret, John. “North Korea Threatens To Skip Talks.” Washington Post. March 29, 2000. p. A20. North Korean Foreign Ministry statement on talks. Reuters News Agency, December 9, 2003.

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Larry Niksch Agence France-Presse (Hong Kong) report, February 8, 2000. Yonhap News Agency (Seoul) report, February 8, 2000. ROK to press US to remove DPRK from terrorism list. Korea Herald, internet version, June 21, 2000. U.S. to question DPRK on kidnappings of Japanese nationals. JIJI News Agency (Tokyo) report, February 16, 2000. U.S. Department of State Daily Press Briefing [by James P. Rubin], April 25, 2000. p. 8. Varied Aspects of Japan-North Korean Relations. Mainichi Shimbun (Nikkei Telecom Database version), October 28, 2000. Jiji Kokkoku Column. Asahi Shimbun (internet version), October 8, 2000. Carter, Tom. Clinton Plans First-ever Presidential Trip to North Korea. Washington Times, October 13, 2000. p. A1. Varied Aspects of Japan-North Korean Relations, Mainichi Shimbun, October 28, 2000. Philip P. Pan and Glenn Kessler, U.S. revises proposal at North Korea nuclear talks, Washington Post, June 24, 2004, p. A17. See CRS Report RL33590, North Korea’s Nuclear Weapons Development and Diplomacy, by Larry A. Niksch. National Association for the Rescue of Japanese Kidnaped by North Korea. Report of Mission to the U.S. from February 25 to March 3, 2001. U.S. Department of State. Patterns of Global Terrorism 2003. p. 92. Washington links N. Korea abductions of Japanese with terrorism, Yonhap News Agency, April 30, 2004. Growing US distrust of South Korea, Tokyo Sentaku, June 2003, p. 6-9. Bush’s National Security Adviser Rice says DPRK abduction issue priority topic, Mainichi Shimbun (internet version), May 31, 2003. Bill Gertz, “Cheney backs Koizumi on Iraq stance,” Washington Times, April 13, 2004, p. A3. “Japan, U.S. agree to put pressure on Pyongyang.” Yonhap New Agency, May 1, 2004. “Japan PM says Bush supportive on North Korea trip.” Reuters News Agency, September 12, 2002. Howard W. French, “Japan-North Korea talks conclude with deep splits,” New York Times, October 31, 2002, p. A13. James Brooke, “North Korea’s Aarms project jeopardizes aid, Japan says,” New York Times, October 22, 2002, p. A6. Niksch, Larry A., North Korea and Terrorism: The Yokita Megumi Factor. The Korean Journal of Defense Analysis. Spring 2002. pp. 14-16. For ex-Prime Minister Koizumi’ s statement of these conditions, see Kim, Jack and Kitano, Masayuki. Japan, S. Korea urge N. Korea to move on crisis. Reuters News Agency, July 22, 2004. What ‘new ideas’ did Washington offer Pyongyang? Chosun Ilbo (Seoul, internet version), December 4, 2006. U.S. offered to remove N. Korea from terror list — South Korea. Dow Jones International News, December 26, 2006. Arimoto Takashi, Six-party talks: Japan, PRC concerned about US-DPRK pre-talk coordination becoming regularized, suspect ‘secret deal’, Sankei Shimbun (internet version), August 14, 2007. See [http://www.state.gov/s/ct/rls/crt/2006/82736.htm] at p. 147.

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[26] Yi Sang-il and Chin Se-ku. Yongbyon nuclear facility can be disabled within a year. JongAng Ilbo (internet version), March 13, 2007. [27] Abductions by N. Korea not related to US terrorist list, Chosun Ilbo (internet version), May 14, 2007. [28] Pyongyang fallout, The Wall Street Journal Asia, November 16, 2007, p. 12. Statement by Tom Casey, State Department spokesman. [29] The White House, Roundtable Interview of the President by Foreign Print Media, August 30, 3007. [30] Choe Sang-hun and David E. Sanger, North Korea claims U.S. will remove sanctions, International Herald Tribune, September 4, 2007, p. 5. [31] Japanese abductions unlikely to stop U.S. from removing N. Korea, Yonhap News Agency, September 6, 2007. Ser Myo-ja, Kang Chan-ho, Cheong Yong-whan, North: US ready to lift sanctions, adjust terror list, JoongAng Ilbo (internet version), September 3, 2007. [32] Statement of Christopher R. Hill, Assistant Secretary of State, before the House Committee on Foreign Affairs, Subcommittee on Asia, the Pacific and the Global Environment, and Subcommittee on Terrorism, Nonproliferation, and Trade, October 25, 2007. [33] David E. Sanger, Video links North Koreans to Syria reactor, U.S. says, New York Times, April 24, 2008, p. A1 6. Arshad Mohammed and Tabassum Zakaria, White House: North Korea gave Syria nuclear help, Reuters News, April 24, 2008. [34] Demetri Sevastopulo, US softens demands on North Korea, Financial Times, April 14, 2008, p. 6. Nicholas Kralev and Jon Ward, N. Korea’s nuclear past stays sealed, Washington Times, April 18, 2008, p. A1. [35] Abduction not an issue for terror list removal: Vershbow, Yonhap News Agency, May 14, 2008. Statement by U.S. Ambassador to South Korea, Alexander Vershbow. Nicholas Kralev, N. Korea told not to delay deal, Washington Times, March 19, 2008, p. A1. [36] Arshad Mohammed, N. Korea seems to meet US criteria on terror listing, Reuters News, January 22, 2008. [37] Country Reports (formerly Patterns of Global Terrorism; hereinafter, “Patterns”) is an annual report to Congress required by Title 22 of the United States Code, Section 2656f(a). See [http://www.state.gov/s/ct/rls/crt/2006/]. [38] The degree of support for, or involvement in, terrorist activities typically varies dramatically from nation to nation. For 2005 and 2006, of the five on the U.S. terrorism list, Iran continued to be characterized on one extreme of the spectrum of terrorist list states as an active supporter of terrorism: a nation that uses terrorism as an instrument of policy or warfare beyond its borders. Closer to the middle of the spectrum is Syria. Although not formally detected in an active role since 1986, Country Reports asserts that the Assad regime reportedly uses groups in Syria and Lebanon to export terror into Israel and allows groups to train in territory under its control. On the less active end of the spectrum, one might place countries such as Cuba or North Korea, which at the height of the Cold War were more active, but in recent years have seemed to settle for a more passive role of granting ongoing safe haven to previously admitted terrorists. Also at the less active end of the spectrum, and arguably falling off it, is Sudan, which reportedly has stepped up counterterrorism

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[39] [40] [41]

[42] [43]

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[44] [45] [46] [47]

[48]

[49] [50]

Larry Niksch cooperation with the United States. An area of concern for some observers is the impact DPRK removal from the state sponsors list may have on prospects for Cuba’s removal. Note that Libya was certified by the Secretary of State as being eligible for removal from the list on May 12, 2006. See Presidential Determination No. 2006-14, May 12, 2006, which went into effect June 28, 2006 [http://www.whitehouse.gov/news/releases/2006/05/ 20060515-5 .html] with the end result of Libya’s designation as a state sponsor of terrorism being rescinded on June 30, 2006. Sanctions against Iraq pursuant to its inclusion on the terrorism list were suspended on May 7, 2003, by Presidential Determination No. 2003-23 (Federal Register of May 16, 2003), Vol. 68, No. 95, p. 26459). Iraq was removed from the list by a recision of determination on October 7, 2004 (Federal Register, October 20, 2004, Vol. 69, No. 202, p. 61702). U.S. Department of State, Country Reports on Terrorism, 2006. See CRS Report RL3 1696, North Korea: Economic Sanctions, by Dianne E. Rennack. The interpretation of these “significant dual use items,” especially when items such as aircraft parts are involved, is often the subject of considerable discussion within the executive branch as well as the subject of informal consultations with Congress. Letter from Representative Edward J. Markey to Secretary of State Condoleezza Rice, October 3, 2007. Representative Markey was a principle author of Section 632. Periodically, discussions have been held under differing administrations to provide for graduated sanctions within this category to make it a more effective tool, but no substantive action, to date, has been taken on this issue. Note that P.L. 104-132 also requires the withholding of foreign assistance to nations providing lethal military aid to countries on the list of state sponsors. Letter from Jeffrey T. Bergner, State Department, Assistant Secretary for Legislative Affairs to Representative Edward J. Markey, November 6, 2007. See [http://www.state.gov/s/ct/rls/crt/2006/82736.htm] (p. 147 of the published version). See [http://www.state.gov/s/ct/rls/crt/c17689.htm], p. 175. Country Reports, 2005, p. 171, at [http://www.state.gov/s/ct/rls/crt/c17689.htm] and Country Reports, 2006, p. 145, at [http://www.state.gov/s/ct/rls/crt/2006/82736.htm]. The italicized text appears identically in Country Reports for both 2005 and 2006. Patterns 2002, p. 81. On the other hand, the section covering North Korea begins with text characterizing the DPRK’s response to international efforts to combat terrorism as “disappointing throughout 2002.” Patterns 2003, p. 92. See text in preceding paragraph regarding lack of international cooperation. Note that arguably, a factor that may affect whether the DPRK is removed from the terrorism list is whether any other nations — notably Libya and possibly Sudan — are removed first. In the wake of one or two successful cases of removal, a political climate may well be created that is less risk adverse to chancing removal of a third state. Conversely, removing the DPRK from the list prior to removing other nations would arguably create a climate more favorably disposed to removal of additional states as well. In the past, the list has been subject to criticism that it is governed by political criteria not necessarily connected to a nation’s level of support for terrorism. See CRS Report

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[51] [52] [53]

[54]

[55]

[56]

[57] [58]

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[59] [60] [61] [62] [63] [64]

[65]

[66]

147

RL32417, The Department of State’s Patterns of Global Terrorism Report: Trends, State Sponsors, and Related Issues, by Raphael Perl. See [http://www.state.gov/s/ct/rls/crt/c 14813 .htm], p. 90 of the full pdf file, or the “North Korea” section at the end of Chapter 5 — Country Reports B. See [http://www.state.gov/s/ct/rls/crt/2006/82736.htm] (p. 147 of the published version). Hezbollah a North Korea-Type Guerrilla Force, Intelligence Online, September 7, 2006. Hezbollah training in North Korea, Intelligence Online, April 20, 2007. Intelligence Online is put out by the Indigo Publications of Paris, France. It is one of several reports on Middle East security and political affairs put out by Indigo Publications. Takashi Arimoto, International document points concretely to close cooperation between North Korea, Syria; Syria also asked for assistance to Hizballah, Sankei Shimbun (internet version), January 7, 2008. Ali Nuri Zadah, Iranian officer: Hezbollah has commando naval unit, Al-Sharq AlAwsat (London), July 29, 2006. Also cited in the American Enterprises Institute’s report, Iranian Influence in the Levant, Iraq, and Afghanistan. February 2008, p. 7; and by BBC Monitoring Middle East, August 3, 2006. Jonathan Finder, Israeli soldiers find a tenacious foe in Hezbollah, Washington Post, August 8, 2006, p. O1. Molly Moore, Israelis confront ‘new kind of war’; high-tech tactics fail to halt rocket fire, Washington Post, August 9, 2006, p. A1 1. Paul Moorcraft, Hezbollah rising; the surprising success of Iran’s client, Washington Times, August 15, 2006, p. A15. Lenny Ben-David, Mining for trouble in Lebanon, Jerusalem Post (internet version), October 29, 2007. Roots of Hezbollah’s war against Israel and the Islamic revolution, Jerusalem Update, June 17, 2008. Moon Chung-in, The Syrian nuke connection, JoongAng Ilbo (internet version), November 26, 2007. Matti Friedman, Israel: Hezbollah increases rocket range, Associated Press, March 27, 2007. Nicholas Blanford, Hizbullah regroups amid war jitters, Christian Science Monitor, April 14, 2008, p. 7. Hezbollah training in North Korea, Intelligence Online, April 20, 2007. Ibid. Kubota Ruriko, DPRK plotted to export weapons to terrorist organ, Sankei Shimbun (internet version), September 26, 2007. Kubota, Ruriko, Busting of DPRK arms smuggling part of US psychological war aiming at weakening dictatorial regime, economic damage, Sankei Shimbun (internet version), September 26, 2007. See reports of Agence France Presse of September 19 and October 15, 2006, and February 28 and March 18, 2007. See also Ranga Sirilal, Sri Lanka says sinks big rebel arms transport ship, Reuters News, February 27, 2007. Bharatha Mallawarachi, Sri Lankan navy destroys ships smuggling arms, attacks rebel flotilla, Associated Press, February 28, 2007. Lanka navy destroys two Tiger ships, The Press Trust of India Limited, March 18, 2007. Tigers buy North Korean arms, Far Eastern Economic Review, June 8, 2000, p. 12.

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[67] Roger Davies, Sea tigers, stealth technology and the North Korean connection, Jane’s Intelligence Review, March 2001, p. 2-3. [68] U.S. Department of State, Fact Sheet: Designation of Iranian Entities and Individuals for Proliferation Activities and Support for Terrorism, October 25, 2007. [69] Peter Spiegel, Another top threat emerges; Iranian-backed ‘special groups’ now roil Iraq, General Petraeus testifies, Los Angeles Times, April 10, 2008, p. A1. [70] American Enterprise Institute, Iranian Influence in the Levant, Iraq, and Afghanistan. February 2008, p. 5-6.Gavin Rabinowitz, Israel, Hezbollah fight to a draw, Associated Press, August 15, 2006. See also Kenneth Katzman, The Warriors of Islam: Iran’s Revolutionary Guard. Bounder, Westview Press, 1993, pp. 96-98. [71] Hezbollah a North Korea-type guerrilla force — Lebanon, Paris Intelligence Online, August 25, 2006. [72] American Enterprise Institute, Iranian Influence in the Levant, Iraq, and Afghanistan. February 2008, p. 5-6. [73] Ibid. Hezbollah firing Iranian missiles into Israel, Forecast International/Missile Forecast, July 17, 2006. [74] Iran, N. Korea army chiefs want closer military ties, Korea Herald, January 14, 1993, p. 4. [75] Douglas Jehl, Iran is reported acquiring missiles, New York Times, April 8, 1993, p. 7. N. Korea’s air force chief visits Iran for closer ties, Washington Times, February 25, 1994, p. A1 5 Iran said to place order for 150 DPRK missiles, Yonhap News Agency, July 14, 1993. [76] Interview with Paul Beavers, military commentator for Janes, Fuji Television Broadcast Network, April 11, 1994. [77] Martin Sieff, N. Korean missiles may be tested in Iran this year, Washington Times, June 16, 1994, p. 13. [78] Con Coughlin, China, N. Korea send experts to hone Iran’s long-range missiles, November 23, 1997, p. A5. [79] Ibid. [80] Buill Gertz, North Korea sends missile parts, technology to Iran, Washington Times, April 18, 2001, p. A3. Critical N. Korea missile parts seen aiding Iran’s program, Washington Times, February 10, 2000. P. A3. Yi Chol-hui, North’s air cargo: missiles, Chungang Ilbo (internet version), June 16, 2003. [81] Douglas Frantz, Iran closes in on ability to build a nuclear bomb, Los Angeles Times, August 4, 2003, p. A1. [82] Resistance group claims Iran hiding long-range missiles, working with North Korea, Associated Press, March 6, 2006. [83] Jim Mannion, ROK, US express concerns over DPRK’s development of long-range missiles, Agence France Presse, November 7, 2007. [84] Iran develops missile with 4,000-km range, Middle East Newsline, March 2, 2006. Charles P. Vick, Has the No-DongB/Shahab-4 finally been tested in Iran for North Korea, Global Security (internet version), May 2, 2006. Takashi Arimoto, North Korea may have tested engine combustion of a new type missile in Iran — the two countries may share data, Sankei Shimbun (internet version), June 21, 2007. [85] Michael Evans, Spy photos reveal ‘secret launch site’ for Iran’s long-range missiles, The Times (London, internet version), April 11, 2008. Masato Kimura,

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Iranian rocket test-firing space center resembles Taepo Dong 2 facility, Sankei Shimbun (internet version), April 17, 85 2008. [86] Dafna Linzer, Strong leads and dead ends in nuclear case against Iran, Washington Post, February 8, 2006. P. AO1. [87] Robin Hughes, Tehran takes steps to protect nuclear facilities, Jane’s Defence Weekly, January 25, 2006. P. 4. [88] An Israeli lesson for North Korea? Economist Foreign Report, April 22, 1993, p. 2. See also: DPRK reportedly aids Iranian nuclear project, Yonhap News Agency, January 26, 1993. DPRK military delegation’s Iran visit reported, Seoul KBS-1 Radio Network, February 24, 1994. [89] U.S. report on DPRK-Iran missile deal cited, Yonhap News Agency, July 16, 1993. The $500 million figure also was cited in: Iran funds North Korea’s drive to build nuclear bombs, U.S. News and World Report, March 29, 1993, p. 18. [90] Glenn Kessler, Bhutto dealt nuclear secrets to N. Korea, book says, Washington Post, June 1, 2008, p. A16. [91] Bill Gertz, N. Korea as nuclear exporter, Washington Times, June 8, 1994, p. 1. [92] Gordon Fairclough, Pyongyang’s Iran sales fan concerns about ties, Wall Street Journal Asia, July 6, 2006. P. 1 [93] Douglas Frantz, Iran closes in on ability to build a nuclear bomb; Tehran’s reactor program masks strides toward weapons capability, a Times investigation finds, Los Angeles Times, August 4, 2003, p. A1. Military source: DPRK, Iran planning joint development of nuclear warheads, Sankei Shimbun (internet version), August 6, 2003. [94] Iranian nuke experts visited N. Korea this year, Kyodo World Service, June 10, 2003. Douglas Frantz, Iran closes in on ability to build a nuclear bomb, Los Angeles Times, August 4, 2003, p. A1. Military source: DPRK, Iran planning joint development of nuclear warheads, Sankei Shimbun (internet version), August 6, 2003. [95] Mullahs helping Stalinists, Der Spiegel (internet version), November 28, 2005. [96] Dafna Linzer, Strong leads and dead ends in nuclear case against Iran, Washington Post, February 8, 2006, p. AO1. [97] Louis Charbonneau, Iran said to step up plans for Shahab missiles, Reuters News, March 6, 2006. [98] David E. Sanger, Nuclear agency says Iran has used new technology, New York Times, February 23, 2008, p. A3. Joby Warrick, Smugglers had design for advanced warhead, Washington Post, June 15, 2008, p. A1. [99] Iran still developing nuclear warheads: exiled opposition group, Agence France Presse, February 20, 2008. Marc Champion, Iran arms claim is lodged — Tehran is developing nuclear warheads, exile group tells U.N., Wall Street Journal Asia, February 21, 2008, p. 9. [100] Jin Dae-woong, Concerns grow over missile links between N. Korea, Iran, Korea Herald (internet version), January 28, 2007. UK press: North Korea aids Iran in nuclear testing, Dow Jones International News, January 24, 2007. Israel PM to charge NKorea link with Iran, Syria, Agence France Presse, February 26, 2008. [101] Takashi Arimoto, Iranian delegation makes top secret visit to North Korea in late February; for discussions on nuclear issue? Sankei Shimbun (internet version), March 20, 2008.

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[102] Robin Hughes, Tehran takes steps to protect nuclear facilities, Jane’s Defence Weekly, January 25, 2006. Pp. 4-5. [103] Asad’s risky nuclear game, Spiegel Online, June 23, 2008. [104] Glenn Kessler, Mid-level official steered U.S. shift on North Korea, Washington Post, May 26, 2008, p. A1. Helene Cooper, Past deals by N. Korea may face less study, New York Times, April 18, 2008, p. A5. Siegfried S. Hecker and William J. Perry, The right path with N. Korea, May 13, 2008, p. A15. [105] Ignore abductees at your peril, Japan warns the United States, JoongAng Ilbo (internet version), October 26, 2007. [106] James Morrison, Bad impact feared, Washington Times, July 3, 2008, p. A20. The Nelson Report, July 10, 2008. [107] League of Parliamentarians for Early Repatriation of Japanese Citizens Kidnapped by North Korea, Urgent Resolution Urging Refrain from Unprincipled Concessions to North Korea on Nuclear and Abduction Issues, May 27, 2008. The League is made up of 203 members of the Diet. Akiko Yamamoto and Blaine harden, Japan await abduction answers, Washington Post, December 23, 2007, p. 18.

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ISBN: 978-1-60692-845-5 © 2009 Nova Science Publishers, Inc.

Chapter 5

U.S. A SSISTANCE TO N ORTH K OREA

*

Mark E. Manyin and Mary Beth Nikitin ABSTRACT

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This article summarizes U.S. assistance to the Democratic People’s Republic of North Korea (DPRK, also known as North Korea). It will be updated periodically to track changes in U.S. provision of aid to North Korea. Since 1995, the United States has provided North Korea with over $1 billion in assistance, about 60% of which has paid for food aid and 40% or so paying for energy assistance. As shown in Table 1 below, U.S. aid fell significantly in the mid-2000s, bottoming out at zero in FY2006. The Bush Administration resumed assistance in FY2007. In the fall of 2007, when progress began to be made in the six-party talks over North Korea’s nuclear program, the United States began providing heavy fuel oil (HFO) in return for Pyongyang freezing and disabling its plutonium-based nuclear facilities in Yongbyon. The United States also is expected to provide technical assistance to North Korea to help in the disabling and dismantling processes. In May 2008, the Bush Administration announced it would resume food assistance to North Korea by providing 500,000 metric tons (MT). The first shipment was sent on June 29, 2008, after an agreement on monitoring was signed. Food aid to the DPRK has been scrutinized because Pyongyang restricts the ability of donor agencies to operate in the country. Compounding the problem is that South Korea and China, which in recent years have been North Korea’s two most important providers of food aid, have little to no monitoring systems in place. In 2008, U.N. officials have called for international donations of food to avert a “serious tragedy” in North Korea, as hunger has deepened.

*

This is an edited, excerpted and augmented edition of CRS Report RS21834, dated July 31, 2008.

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FOOD AID Since 1996, the United States has sent over 2 million metric tons (MT) of food assistance, worth about $700 million, to help North Korea alleviate chronic, massive food shortages that began in the early 1990s. A severe famine in the mid-1990s killed an estimated 600,000 to two million North Koreans. Over 90% of U.S. food assistance to Pyongyang has been channeled through the U.N. World Food Program (WFP), which has sent over 3.7 million MT of food to the DPRK since 1996. The United States has been by far the largest cumulative contributor to the WFP’s North Korea appeals.[1] After 2002, U.S. shipments fell steadily, bottoming out at zero in FY2006 and FY2007.

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U.S. Assistance to North Korea, 1995-2008

Calendar or Fiscal Year (FY)

Food Aid (per FY) Commodity Value ($ Metric million) Tons

KEDO Assistance per calendar yr; $ million)

1995

0

$0.0

1996

19,500

1997

6-Party Talks-Related Assistance (per FY; $ million) Fuel Oil

Nuclear Disablement

Medical Supplies & Other (per FY; $ million)

$9.5

—

—

$0.2

$9.7

$8.3

$22.0

—

—

$0.0

$30.3

177,000

$52.4

$25.0

—

—

$5.0

$82.4

1998

200,000

$72.9

$50.0

—

—

$0.0

$122.9

1999

695,194

$222.1

$65.1

—

—

$0.0

$287.2

2000

265,000

$74.3

$64.4

—

—

$0.0

$138.7

2001

350,000

$102.8

$74.9

—

—

$0.0

$177.7

2002

207,000

$82.4

$90.5

—

—

$0.0

$172.9

2003

40,200

$25.5

$2.3

—

—

$0.0

$27.8

2004

110,000

$52.8

$0.0

—

—

$0.1

$52.9

2005

22,800

$7.5

—

—

—

—

$7.5

2006

0

$0.0

—

—

—

$0.0

$0.0

2007

0

$0.0

—

$25.0

$20.0

$0.0

$45.0

$0.0

$106.0

—

$15.0

$5.3

$1,276.0

2008

500,000

n.a.

—

2009 (Request)

—

n.a.

—

$15.0

$106.0b — —

Total

2,586,694

$701.0

$403.7

$146.0

$20.0

a

Total ($ million)

Sources: USAID; US Department of Agriculture; State Department; KEDO (Korean Peninsula Energy Development Organization). a Some of this 500,000 MT may be distributed in FY2009. 37,000 MT was delivered starting June 30, 2008. b As of the end of May 2008, $53 million of this total had been allocated.

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Assistance provided by the WFP also has fallen dramatically since 2001, when over 900,000 MT were shipped. The goal of the WFP’s most recent appeal, which stretches from April 2006 through the end of August 2008, is 150,000 MT. There are two primary reasons for the decline in WFP assistance. The first is “donor fatigue,” as contributing nations objected to the North Korean government’s continued development of its nuclear and missile programs as well as tightened restrictions on the ability of donor agencies to monitor food shipments to ensure food is received by the neediest. Various sources assert that some — perhaps substantial amounts — of the food assistance going to North Korea is routinely diverted for resale in private markets or other uses.[2] The emergence of other emergency food situations around the globe also has stretched the food aid resources of the United States and other donors. It is unclear whether rising global food prices in 2008 will affect the response to the WFP’s current appeal. Second, in 2006 the WFP drastically scaled down its program in response to new restrictions placed upon it by the North Korean government. In response, the WFP and Pyongyang negotiated a new agreement that would feed 1.9 million people, less than a third of the 6.4 million people the WFP previously had targeted. North Korea’s total population is approximately 22 million. In the deal, the WFP expatriate staff was cut by 75%, to 10 people, all of whom are based in Pyongyang. Before 2006, the WFP had over 40 expatriate staff and six offices around the country conducting thousands of monitoring trips every year.[3] In 2008, the WFP has warned that food shortages and hunger had worsened to levels not seen since the late 1990s. In April 2008, the agency issued a call for more international donations and for the North Korean government to relax its restrictions on donor activities.[4] The following month, the United States Agency for International Development announced that the United States would resume food assistance to North Korea by providing 500,000 MT for one year beginning in June 2008. 400,000 MT would be channeled through the WFP. In a new innovation, approximately 100,000 tons would be funneled through non-governmental organizations (NGOs), including World Vision and Mercy Corps. The announcement stated that the resumption was made possible by an understanding reached with Pyongyang that allowed for “substantial improvement in monitoring and access in order to allow for confirmation of receipt by the intended recipients.”[5] On June 27, an agreement was signed with Pyongyang that stipulated terms for increased WFP personnel and access for monitoring the delivery of the food aid. It allows WFP to expand its operations into 128 counties, versus an earlier 50, in regions at particular risk of famine. The NGO portion of the distribution is to be done in the two northwestern provinces of Chagang and North Pyongan.[6] On June 30, a US ship delivered 37,000 tons of wheat to North Korea.[7] U.S. official policy in recent times has de-linked food and humanitarian aid from strategic interests. Since June 2002, the Bush Administration officially has linked the level of U.S. food aid to three factors: the need in North Korea, competing needs on U.S. food assistance, and “verifiable progress” in North Korea allowing the humanitarian community improved access and monitoring.[8] In practice, some argue that the timing for U.S. pledges sometimes appears to be motivated also by a desire to influence talks over North Korea’s nuclear program, and that the linkage between U.S. donations and improvements in North Korea’s cooperation with the WFP occasionally has been tenuous.[9]

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ENERGY ASSISTANCE KEDO From 1995 to 2002, the United States provided over $400 million in energy assistance to North Korea under the terms of the 1994 Agreed Framework, in which the DPRK agreed to halt its existing plutonium-based nuclear program in exchange for energy aid from the United States and other countries. The planned assistance, to be managed by the Korean Energy Development Organization (KEDO), consisted of the construction of two light-water nuclear reactors (LWRs) and the provision of 500,000 tons of heavy fuel oil while the reactors were being built. KEDO halted fuel oil shipments after an October 2002 dispute over North Korea’s alleged clandestine uranium enrichment program. The Bush Administration then sought to permanently end the KEDO program.[10] In 2003 and 2004, KEDO’s Executive Board (the United States, South Korea, Japan, and the European Union) decided to suspend construction on the LWRs for one year periods. In the fall of 2005, the KEDO program was terminated. In January 2006, the last foreign KEDO workers left the LWR construction site.

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Assistance Related to the Six-Party Talks For years, Administration officials, including President Bush, have said that U.S. development assistance would be forthcoming if North Korea begins dismantling its nuclear programs. In January 2003, President Bush said that he would consider offering the DPRK a “bold initiative” including energy and agricultural development aid if the country first verifiably dismantles its nuclear program and satisfies other U.S. security concerns dealing with missiles and the deployment of conventional forces.[11] In June 2004, the United States offered a proposal that envisioned a freeze of North Korea’s weapons program, followed by a series of measures to ensure complete dismantlement and, eventually, a permanent security guarantee, negotiations to resolve North Korea’s energy problems, and discussions on normalizing U.S.-North Korean relations that would include lifting the remaining U.S. sanctions and removing North Korea from the list of terrorist-supporting countries.[12] In September 2005, the Six Parties issued a joint “statement of principles,” in which they agreed to “promote economic cooperation in the fields of energy, trade and investment, bilaterally and/or multilaterally,” and the United States, China, South Korea, Japan, and Russia “stated their willingness to provide energy assistance to the DPRK.” The agreement stated that the parties would discuss the provision of a light water reactor to North Korea “at the appropriate time.” North Korea tested a nuclear device in October 2006, resulting in the passage of UN Security Council Resolution 1718, which imposed international sanctions banning trade of military goods, WMD and missile-related goods, and luxury items to North Korea. In the six-party talks held in December 2006, as well as meetings held earlier that month with North Korean negotiators, U.S. officials reportedly spelled out a detailed package of humanitarian, economic, and energy aid that would be available to Pyongyang if it gave up nuclear weapons and technology.[13] The resulting Denuclearization Action Plan of February 2007 called for a first phase to include the shut-down and disablement of key nuclear facilities and initial provision of 50,000 tons of heavy fuel oil to North Korea. In the second phase, the parties agreed to provide

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North Korea with “economic, energy and humanitarian assistance up to the equivalent of 1 million tons of heavy fuel oil, including the initial shipment of 50,000 tons of heavy oil.” The shipments of fuel oil or equivalent assistance were to happen on an “action for action” basis, as North Korea made progress on the second phase (nuclear disablement at Yongbyon and declaration of nuclear facilities and activities). An October 2007 joint statement on “SecondPhase Actions” confirmed these commitments. North Korea has received a total of 330,000 tons of heavy fuel oil and 60,000 tons of fuel equivalent (i.e., steel products to renovate aging power plants).[14] The United States has so far contributed 134,000 tons of heavy fuel oil.[15] North Korea has equated actions on disablement with the shipments of energy assistance, and has thus slowed down removal of the spent fuel rods at Yongbyon, saying that while 80% of the disablement steps have been completed, only 36% of energy aid has been delivered.[16] Of the planned aid, half is heavy fuel oil provided by the United States and Russia, and the rest is to be energy facilities/equipment equivalent to 500,000 tons of heavy oil provided by China and South Korea. The parties plan to conclude disablement and heavy fuel oil delivery contracts by the end of October 2008.[17] The Departments of State and Energy are working to disable the nuclear facilities at the Yongbyon complex in North Korea. The State Department’s Nonproliferation and Disarmament Fund (NDF) has provided approximately $20 million for this purpose to date. NDF is paying the North Korean government for the labor costs of disablement activities, and is also purchasing related equipment and fuel. DOE has contributed $15 million in its own personnel costs related to phase two.[18] NDF funds may be used “notwithstanding any other provision of law” and therefore may be used in North Korea. North Korea’s nuclear test triggered sanctions under Section 102 (b) (the “Glenn Amendment” U.S. C. 2799aa-1) of the Arms Export Control Act which prohibits assistance to a non-nuclear weapon state under the NPT that has detonated a nuclear explosive device. DOE funds cannot be spent in North Korea due to this restriction. In the FY2008 supplemental appropriations act, P.L. 110-252, Congress gave the President authority to waive the Glenn Amendment restrictions for the purpose of eliminating WMD and missile-related programs in North Korea.[19] The Congressional Budget Office estimated that nuclear dismantlement in North Korea will cost approximately $575 million and take about four years to complete.[20] Beyond the Glenn amendment restrictions, Department of Defense funds must be specifically appropriated for use in North Korea. Section 8045 of the FY2008 Defense Appropriations Act (P.L. 110-116) says that “none of the funds appropriated or otherwise made available in this act may be obligated or expended for assistance to the Democratic People’s Republic of Korea unless specifically appropriated for that purpose.” However, this year authorization was given for CTR funds to be used globally (see Section 1305). The FY2008 Defense Authorization Act (P.L. 110-181) specifically encourages “activities relating to the denuclearization of the Democratic People’s Republic of Korea” as a potential new initiative for CTR work. Currently, the Department of Defense is not working on disablement efforts, but there may be a future role for DOD as the Six Party process progresses to dismantlement work.

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THE NORTH KOREAN HUMAN RIGHTS ACT In the fall of 2004, the 108th Congress passed and President Bush signed H.R. 4011 (P.L. 108333), the North Korea Human Rights Act. The act included provisions dealing with U.S. assistance to North Korea, including a requirement that U.S. non-humanitarian assistance to North Korea be contingent upon North Korea making “substantial progress” on a number of specific human rights issues, and hortatory language stating that “significant increases” above current levels of U.S. support for humanitarian assistance should be conditioned upon “substantial improvements” in transparency, monitoring, and access. A measure to reauthorize the act in the 1 10th Congress, H.R. 5834, would drop these provisions, though it does retain a requirement that USAID report annually to Congress on efforts to improve transparency and monitoring in U.S. humanitarian assistance to the DPRK. The House passed H.R. 5834 on May 15, 2008.

REFERENCES The second largest donor of food aid to North Korea through WFP is South Korea, and the third largest is Russia. [2] See, for instance, Stephan Haggard and Marcus Noland, Hunger and Human Rights: The Politics of Famine in North Korea (Washington, DC: U.S. Committee for Human Rights in North Korea, 2005), in which the authors argue that up to half of the WFP ’s aid deliveries did not reach their intended recipients. [3] WFP Press Release, “WFP Set to Resume Operations in North Korea,” 11 May 2006; undated WFP document, Projected 2007 Needs for WFP Projects and Operations, Korea, DPR. [4] WFP Press Releases: “WFP Warns of Potential Humanitarian Food Crisis in DPRK Following Critically Low Harvest, April 16, 2008; “DPRK Survey Confirms Deepening Hunger for Millions, July 30, 2008. [5] USAID Press Release, “Resumption of U.S. Food Assistance to the North Korean People,” May 16, 2008. [6] “Agreement reached as first US ship arrives in DPRK with food aid,” World Food Program Press Release, June 30, 2008. [http://www.wfp.org/english/?ModuleID=1 37&Key=2877] [7] “U.S. Wheat Begins New Aid to North Korea,” The Washington Post, July 1, 2008. [8] USAID Press Release, June 7, 2002. [9] Andrew S. Natsios, The Great North Korean Famine, United States Institute of Peace Press, Washington, DC, 2001, pp. 135, 143-148. Mark Noland, Avoiding the Apocalypse: The Future of the Two Koreas, Peterson Institute of International Economics, June 2000, pp. 159, 186, 189. [10] State Department Daily Press Briefing by Adam Ereli, Deputy Spokesman, November 5, 2003. [11] The Administration reportedly was preparing to offer a version of this plan to North Korea in the summer of 2002, but pulled it back after acquiring more details of Pyongyang’s clandestine uranium nuclear weapons program. Testimony of Richard

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[1]

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[12] [13] [14] [15] [16] [17] [18] [19]

Armitage, State Department Deputy Secretary, before the Senate Foreign Relations Committee, February 4, 2003. See CRS Report RL30613, North Korea: Terrorism List Removal? by Larry Niksch. Helene Cooper and David Sanger, “U.S. Offers North Korea Aid for Dropping Nuclear Plans,” New York Times, December 6, 2006. As of the Six-party Working Group Meeting on Economic and Energy Cooperation, June 10- 11, 2008. Condoleezza Rice, “Diplomacy on North Korea Is Working,” The Wall Street Journal, June 26, 2008. [http://www.state.gov/secretary/rm/2008/06/1 06282.htm] Lee Chi-dong, “N Korea Complains About Slow Provision of Energy Aid,” Yonhap News, June 5, 2008. Christopher Hill, Testimony to the Senate Armed Services Committee, July 31, 2008. William H. Tobey, Testimony to the Senate Armed Services Committee, July 31, 2008. A version of the waiver that includes certifications to Congress that North Korea is verifiably dismantling its program is contained in H.R. 5916, which passed the House on May 15, 2008. Congressional Budget Office, “Cost Estimate: S. 3001 National Defense Authorization Act for Fiscal Year 2009,” June 13, 2008. [http://www.cbo.gov/ftpdocs/93xx/ doc9390/s300 1 .pdf]

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In: North Korea: Issues and U.S. Policy Editor: Samuel P. Massingame, pp. 159-165

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Chapter 6

N ORTH K OREA’ S A BDUCTION OF J APANESE CITIZENS AND THE SIX-PARTY TALKS *

Emma Chanlett-Avery

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ABSTRACT The admission by North Korea in 2002 that it abducted several Japanese nationals — most of them nearly 30 years ago — continues to affect significantly the Six-Party Talks on North Korea’s nuclear weapons program. This article provides background information on the abductee issue, summarizes its effect on Japanese politics, analyzes its impact on U.S.-Japan relations, and assesses its regional implications. Congress has indicated considerable interest in the abductions issue. The North Korean Human Rights Act (P.L. 108-333) includes a sense of the Congress that non-humanitarian aid be contingent on North Korean progress in accounting for the Japanese abductees. A House hearing in April 2006 focused on North Korea’s abductions of foreign citizens, with testimony from former abductees and their relatives. Some Members of Congress have sponsored legislation (S.Res. 399 and H.R. 3650) that support Japan’s call for settlement of the abductions controversy before North Korea is removed from the U.S. state sponsors of terrorism list.

The forcible seizure of Japanese citizens by North Korean agents in the 1970s and 1980s continues to be a pivotal issue in the ongoing Six-Party Talks on North Korea’s nuclear weapons program. Tokyo’s participation in the international forum is dominated by its efforts to achieve progress on the abduction issue. While the United States is now aggressively pursuing a deal that provides energy and economic assistance to North Korea in exchange for the dismantlement of its nuclear weapons program, Japan has refused to contribute aid without satisfactory progress on the kidnappings. This had led to Japan’s relative isolation in the multilateral talks, although better relations between new leaders in Japan and South Korea may provide some flexibility to end the impasse.

*

This is an edited, excerpted and augmented edition of CRS Report RS22845, dated March 19, 2008.

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U.S. interest in the abductions issue is driven by its needs for Japan’s diplomatic and economic assistance in the negotiations, as well as concerns that friction in the U.S.-Japan relationship will damage one of the United States’ most important alliances in the world.[1] U.S. negotiators maintain that they strongly support Japan’s position on the abductees, but also indicate that the issue will not block a nuclear deal. This stance contrasts with the pre-2007 approach of the Bush Administration, in which the abductions issue provided a platform for Tokyo and Washington’s strategic priorities to converge. In the earlier Six- Party Talks, the United States and Japan joined to pressure North Korea on not only nuclear weapons, but also on human rights, refugees, and the abductions. The next several months are likely to be decisive for how the abductions issue will affect the U.S.-Japan relationship. Foremost is how progress in the Six-Party Talks proceeds: if time pressure and proliferation concerns lead the Bush Administration to accept a nuclear deal with North Korea that does not appear to enhance Japanese security, leaders in Tokyo may find it difficult to convince their citizens to steadfastly support U.S. strategic interests, including military basing. However, amid some indications that Tokyo may be reconsidering its priorities in the negotiations, a deal that extracts significant concessions from Pyongyang could reinforce the fundamentally strong U.S.-Japan alliance.

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BACKGROUND In the 1 980s and 1 990s, circumstantial evidence began to surface that North Korean agents were responsible for the disappearance of several Japanese citizens. Isolated press reports addressed the suspicion, but the Japanese government initially dismissed the accounts and reacted slowly to the allegations. As Tokyo moved to re-establish diplomatic relations with Pyongyang in the early 1 990s, some Japanese politicians saw the issue as a possible obstacle to normalization, and may have suppressed information that suggested North Korea’s responsibility.[2] Unconfirmed reports from North Korean defectors emerged that Japanese nationals were held by North Korea, but the mainstream media largely ignored them. Then, in 1996, an article appeared in which a North Korean defector spoke about his experience at a “spy school” where native Japanese trained agents in Japanese language and culture. Support groups for the victims’ families formed in Japan, and politicians — particularly those opposed to negotiating with Pyongyang — mobilized support in the Diet (parliament). In 1998, Pyongyang’s test of an intermediate-range ballistic missile over Japan raised security fears about the threat from North Korea and made the general Japanese public more suspicious of its behavior. Eventually, the kidnappings became part of the diplomatic agenda with North Korea and, in September 2002, Prime Minister Junichiro Koizumi traveled to Pyongyang to “resolve” the abductions issue and move toward normalizing relations. At the 2002 summit, North Korean leader Kim Jong-il admitted to and apologized for North Korean agents’ abduction of 13 Japanese citizens. The kidnappings took place in Japan and Europe between 1977 and 1983. He claimed that only five remained alive.[3] The Japanese public, shocked at the revelations, became fixated on the drama, with attention reaching its height a month later when the five abductees were returned to Japan. In May 2004, Koizumi returned to Pyongyang to secure the release of five of the abductees’ children.[4] Coverage of

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the abductees saturated the press, and the issue quickly became the top priority in Japan’s North Korea policy. Given North Korea’s record of truculence and denial, many analysts expressed surprise that Kim Jong-il admitted the kidnappings and allowed the abductees and their families to return to Japan. However, when Tokyo pressed for proof of the remaining abductees’ deaths, Pyongyang produced apparently forged death certificates and traffic accident reports. When asked for physical evidence, North Korean officials provided cremated human remains that most Japanese felt to be of dubious origin (see below) and also claimed that some remains were washed away in floods. The inconsistency and apparent deception compounded the Japanese public’s anger at North Korea and reinforced the views of many conservative politicians that Pyongyang should not be trusted. Because of the shaky evidence, Tokyo determined that its policy would be based on the premise that all the remaining abductees are alive.

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THE EFFECT OF THE ABDUCTIONS ON JAPAN’S POLITICAL LANDSCAPE As the abductee drama has played out, three Japanese prime ministers have navigated the issue in subtly different ways, though always mindful of the emotional reaction of the public. Koizumi’s bold initiative to visit Pyongyang in 2002 brought the issue to the surface, although he may not have anticipated the strong response from the public. Koizumi’s position toward North Korea gradually hardened as the public’s criticism of North Korea swelled and the Bush Administration indicated a reluctance to aggressively pursue a negotiated settlement with Pyongyang. His successor, Shinzo Abe, rose to prominence based on his hardline position toward North Korea, specifically on the kidnappings. Upon taking office, Abe established a headquarters in the Cabinet Secretariat to coordinate abductee affairs; led efforts to impose international and unilateral sanctions and restrictions when North Korea tested missiles and a nuclear device in 2006; and called for the immediate return and safety of all the abductees, on the assumption that all were still alive. Since assuming the premiership in 2007, Yasuo Fukuda has stated his interest in re-engaging more actively in the Six-Party Talks, but has not indicated that he will adjust Japan’s policy on the abductees. Advocacy groups for the abductees note that he has retained the office that Abe created, but voice some doubt that his stance will mirror Abe’s approach. Due to the overwhelming public reaction, there has been little open opposition to the official policy on the abductions. Opposition political parties have not challenged the ruling party’s orthodoxy on the issue, and politicians from all parties have formed special Diet committees to indicate their support for the victims. Advocacy groups have gained particular clout as the controversy grew: the Association of the Families of Victims Kidnapped by North Korea, made up exclusively of relatives of the abducted, have become major media figures. Other groups of conservative activists, some explicitly committed to regime change in Pyongyang, have elevated their political influence and public profile.[5] Among the most active of these are the National Association for the Rescue of Japanese Kidnapped by North Korea (NARKN).

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THE YOKOTA CASE As with many popular movements, the outrage over the abductees’ fates has a powerful poster child. Megumi Yokota was only 13 years old when she was reportedly snatched by North Korean agents on her way home from school. North Korean officials claimed that she committed suicide in 1993. Her case had drawn widespread media attention, both domestically and internationally, as the subject of documentaries and even an American folk song. As leaders of the Association of the Families of Victims Kidnapped by North Korea and in frequent media appearances, Yokota’s parents have become the face of the abductee cause. In 2006, President Bush invited the Yokotas to the White House, later calling the encounter “one of the most moving meetings since I’ve been the president.” Earlier that day, Yokota’s mother testified in front of a House Subcommittee on Asia and the Pacific and Subcommittee on Africa, Global Human Rights and International Operations joint hearing. Because of Yokota’s high profile, any progress or setbacks to resolve her case is of particular symbolic importance. The public reacted with outrage when North Korea provided what they claimed were her cremated human remains to Japan, only to have Japanese officials later announce that they were not Yokota’s.[6] At the 2002 summit, North Korea relayed that Yokota had a fifteen-year-old daughter. A reunion of Yokota’s parents with their granddaughter has been floated as a possible path to reconciliation, and observers maintain that any settlement of the Yokota case would make a significant impact on the public perception of the issue.

THE ABDUCTIONS ISSUE IN THE SIX-PARTY TALKS

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U.S.-Japanese Tension As the Bush Administration has moved aggressively to reach a deal on denuclearization with North Korea in the Six-Party Talks since early 2007, distance has emerged between Washington and Tokyo. Japanese officials have expressed alarm that the United States may remove North Korea from its list of state sponsors of terrorism.[7] The removal, considered likely by many analysts, is one of a series of phased actions agreed to in the SixParty Talks in exchange for Pyongyang allowing the disablement of the Yongbyon reactor and providing a declaration of nuclear programs. In the past, U.S. leaders have linked North Korea’s inclusion on the list to the abduction issue, although State Department officials reportedly claim that the issue is not a legal obstacle for removal. In December 2007, the Committee on Abduction of Japanese Citizens by North Korea of Japan’s Lower House adopted a resolution urging the United States to refrain from “de-listing” North Korea. The resolution read, in part, “We are concerned that if North Korea is removed from the list without repatriation of the detained victims, the Japan-U.S. alliance will be adversely affected and the Japanese people will be greatly disappointed.” A U.S. decision to delist North Korea is unlikely to shake the foundations of the fundamentally strong alliance, but Japanese analysts say that the U.S.-Japan relationship could suffer in the short-term if Washington accepts a weak deal. If the Japanese public views Washington as abandoning the abductees, Japanese leaders may have difficulty convincing their public to continue to support the United States on a range of strategic interests, including the

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hosting and realignment of U.S. military bases in Japan. If, however, the government can point to enhanced Japanese security because of North Korean concessions on disarmament, the public may be more accepting, particularly if the United States continues to press Pyongyang for more information on the kidnappings.

Japan-North Korean Bilateral Talks One of the five working groups established by the breakthrough February 13, 2007 agreement in the Six-Party Talks is dedicated to resolving Tokyo’s and Pyongyang’s bilateral controversies.[8] The agreement states that the working group will hold talks to work toward the normalization of relations on the basis of settlement of “outstanding issues of concern,” a phrase interpreted to mean the abductions and compensation to North Korea for Japan’s colonial rule of the Korean peninsula from 1910-1945. Two rounds of consultations in Vietnam and Mongolia yielded no major progress on the stalemate. Only one other working group is dedicated to strictly bilateral issues (the U.S.-North Korean normalization process), which some say indicates the high priority of the abduction issue. On the other hand, relegation of the abductions to a separate track could demonstrate a willingness to move the rest of the process forward without satisfactory resolution of the kidnappings.

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Prospects for a Change in Tokyo’s Policy Although the issue remains politically sensitive in Japan, many commentators acknowledge some degree of “abductee fatigue” among the Japanese public. Government officials and influential opinion leaders also privately voice concern that the abductee issue has led to Japan’s marginalization in the multilateral negotiations on North Korea’s nuclear weapons program. The combination of fears of diplomatic isolation and concern about a range of security threats from North Korea may lead the defense establishment and policy elite to support any shift or adjustment to the current policy on North Korea. Fukuda’s reputation as a pragmatist who places special emphasis on developing closer ties with Asian nations suggests that he would be amenable to a compromise approach to North Korea, particularly if Pyongyang indicated any movement on the issue. In addition, his rhetoric when speaking about Japan’s interests in North Korea signifies a shift from Abe’s singular focus on the abductions issue: Fukuda describes the kidnappings as one of three areas of concern, the others being Pyongyang’s nuclear and missile programs. However, Fukuda’ s tenuous hold on power and the threatened collapse of his ruling party have precluded any serious foreign policy initiatives.

THE ABDUCTIONS ISSUE AND REGIONAL RELATIONS Since the Six-Party talks began, Tokyo’s focus on the abductions issue has isolated it from the other parties, particularly China and South Korea. Some critics say that the abductions issue allows Japan to play the victim while refusing to take responsibility for its own historical

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offenses, particularly in the World War II era.9 Thorny historical controversies between Japan and its neighbors, however, have showed significant signs of easing in the past few years. After a period of rocky relations under Koizumi, Abe and Fukuda made strides in warming ties with Seoul and Beijing. Amid an overall detente in Sino-Japanese relations, Fukuda visited China in January 2008. When asked about the abductions issue during the visit, Chinese Premier Wen Jiabao reportedly stated that “we understand Japan’s position, and we are confident that a resolution can be reached through dialogue.” New South Korean President Lee Myungbak has stated explicitly that he does not intend to press Japan to apologize for historical grievances as his predecessor did. In his capacity of a Special Envoy, Lee’s brother, who is also the vice speaker of South Korea’s National Assembly, reportedly told Japanese officials that the new leader “understands and supports” Japan’s position on the abductee issue. Lee has also indicated that he is more willing to raise human rights issues with the North than his predecessor. Most observers think it is unlikely that Chinese or South Korean negotiators will actively champion the abductees’ cause, but both capitals appear to recognize the need for Japanese involvement (and funding) in any diplomatic arrangement with North Korea. Optimistic observers say that new leadership in Tokyo and Seoul, combined with Beijing’s interest in maintaining smooth relations before the 2008 Summer Olympics and the Bush Administration’s determination to reach a negotiated agreement this year, provide an environment ripe for a breakthrough.

REFERENCES

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[1]

[2]

[3]

[4]

[5]

For more information, see CRS Report RL33436, Japan-U.S. Relations: Issues for Congress, coordinated by Emma Chanlett-Avery, and CRS Report RL33740, The Changing U.S.-Japan Alliance: Implications for U.S. Interests, by Emma ChanlettAvery. Johnston, Eric. “The North Korea Abduction Issue and Its Effect on Japanese Domestic Politics,” Japan Policy Research Institute. JPRI Working Paper No. 101 (June 2004). Koizumi had presented a list of 13 names of suspected abductees, of which the North Korean side said eight had died, four were alive, and one never entered North Korea. They also confirmed that one abductee not on the list was alive. Since then, the Japanese government has added three more names to the list, for a total of 17 abductees. One return abductee’s husband, Charles Jenkins, and two children did not return to Japan with the others. Jenkins, an American soldier who defected to North Korea in 1965, feared facing desertion charges from the U.S. military if he came to Japan. Japanese officials arranged for the family to reunite in Indonesia, and eventually for all four of them to come to Japan in July 2004. Turning himself into U.S. authorities, Jenkins served a 25-day sentence at a U.S. naval base in Japan. In November 2004, he was released and joined his family in northern Japan. Japan and North Korea: Bones of Contention, International Crisis Group Report. June 2005.

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[7]

Controversy over the remains ensued, with scientific laboratories providing conflicting reports on the DNA analysis. The science journal Nature published an article questioning the integrity of the analysis performed by one of the labs in which one of the forensic experts who tested the remains said he could not rule out that the samples had become contaminated and therefore incapable of producing accurate results. See Nature, Volume 433-434, February-April 2005. For more information, see CRS Report RL30613, North Korea: Terrorism List Removal? by Larry A. Niksch. For more information, see CRS Report RL33590, North Korea’s Nuclear Weapons Development and Diplomacy, by Larry A. Niksch.

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[8]

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In: North Korea: Issues and U.S. Policy Editor: Samuel P. Massingame, pp. 167-184

ISBN: 978-1-60692-845-5 © 2009 Nova Science Publishers, Inc.

Chapter 7

N ORTH K OREAN C RIME - FOR -P ROFIT A CTIVITIES

*

Liana Sun Wyler and Dick K. Nanto ABSTRACT

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Strong indications exist that the North Korean (Democratic People’s Republic of Korea or DPRK) regime has been involved in the production and trafficking of illicit drugs, as well as of counterfeit currency, cigarettes, and pharmaceuticals. It appears that drug trafficking has declined and counterfeiting of cigarettes may be expanding. Reports indicate that North Korea may engage in insurance fraud, human trafficking, and wildlife trafficking as a matter of state policy. DPRK crime-forprofit activities have reportedly brought in important foreign currency resources and come under the direction of a special office under the direction of the ruling Korean Worker’s Party. With the caveat that dollar value estimates of clandestine activities are highly speculative, conservative estimates suggest North Korean criminal activity has generated as much as $500 million in profits per year (about a third of DPRK’s annual exports) but has decreased in recent years. A core issue is whether the income from the DPRK’s reportedly widespread criminal activity is used to finance the development of weapons of mass destruction or other key military programs, thereby contributing to the DPRK’s reluctance to curb its aggregate level of such activity. Some also speculate that the DPRK’s criminal smuggling networks could help facilitate the illicit movement of nuclear or other materials in and out of the country. Policy analysts in the past have suggested that North Korean crime-for-profit activity has been carefully controlled and limited to fill specific foreign exchange shortfalls. However, some concern exists that North Korean crime-for-profit activity could become a “runaway train” that once established could escape control. If the DPRK’s crime-for-profit activity has become entrenched, or possibly decentralized, some analysts question whether the current Pyongyang regime (or any subsequent government) would have the ability to effectively restrain such activity, should it so desire. Moreover, some suggest that proposals to shift DPRK crime-related income toward legitimate-source income ignore the fact that the current regime diverts some illicit earnings to slush funds designed to sustain the loyalty of a core of party elite and to underwrite weapons development programs. *

This is an edited, excerpted and augmented edition of CRS Report RL33885, dated August 25, 2008.

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Liana Sun Wyler and Dick K. Nanto A challenge facing U.S. policy makers is how to balance pursuing anti-drug, counterfeiting, and crime policies vis-à-vis North Korea against effectively pursuing several other high priority foreign policy objectives, including (1) nuclear nonproliferation negotiations via the Six-Party talks, (2) limiting ballistic missile production and export, (3) curbing terrorism, and (4) addressing humanitarian needs. As the Six-Party process has proceeded in 2008, it appears that the U.S. overriding goal of denuclearization outweighs concerns related to DPRK illicit activity (with the exception of proliferation of nuclear weapons technology and materials). Such illicit activity, however, could surface again as an issue as talks proceed on diplomatic normalization with the DPRK.

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OVERVIEW[1] Allegations of North Korean (Democratic People’s Republic of Korea, or DPRK) drug production, drug trafficking, and other crime-for-profit activities have been an issue of concern for Congress, the Administration, the media, and the diplomatic community.[2] The issue is twofold. First is general U.S. interest in halting criminal behavior (upholding the rule of law and protecting U.S. citizens and assets from illicit activity). Second is how to deal with a government suspected of countenancing or sponsoring activity that may threaten U.S. diplomatic and security interests. A challenge facing policy makers is how to balance pursuing anti-drug, counterfeiting, and crime policies vis-à-vis North Korea against effectively pursuing other high-priority U.S. foreign policy objectives, including (1) limiting possession and production of weapons of mass destruction, (2) limiting ballistic missile production and export, (3) curbing terrorism, and (4) addressing humanitarian needs. A core issue is whether the income from the DPRK’s reportedly widespread criminal activity has financed the acquisition of weapons of mass destruction and has strengthened the DPRK’s ability to maintain, until recently, truculent, no- compromise positions on the issue of its nuclear weapons program. Some also speculate that the DPRK’s criminal smuggling networks could help facilitate the illicit movement of nuclear materials in and out of the country.[3] U.N. Resolution 1718 (2006) provides for economic sanctions against persons or entities engaged in or providing support for, including through illicit means, DPRK’s nuclear-related, other weapons of mass destruction-related and ballistic missile-related programs.[4] Counterfeiting, copyright and trademark violations, and other illicit activity occur in virtually all countries of the world, but in the North Korean case, numerous sources indicate that the state apparently had — and may continue to be — sponsoring some of these activities. In this view, if the DPRK is to join the larger international community of nations, it would be expected to cease state-sponsorship of such activities and to take appropriate measures against private parties engaged in such production and/or distribution. As the Six-Party Talks on North Korea’s nuclear program have proceeded in 2008, it appears that the U.S. goal of denuclearization has outweighed concerns related to DPRK illicit activity (with the exception of proliferation of nuclear weapons technology and materials). Such illicit activity by North Korea, however, could resurface as the Six-Party process proceeds and attention turns toward normalizing diplomatic ties with the DPRK by the United States, Japan, and South Korea and allowing North Korea to join international financial institutions such as the Asian Development Bank, International Monetary Fund, and the World Bank.

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The role of Congress in this issue includes overseeing U.S. policy, eliciting information and raising public awareness of the issue, and balancing U.S. interests when foreign policy goals may conflict with anti-crime activities. Congress also authorizes and appropriates funds for humanitarian and other economic assistance for North Korea. Areas of DPRK criminal activity commonly cited have included production and trafficking in (1) heroin and methamphetamine; (2) counterfeit cigarettes; (3) counterfeit pharmaceuticals (e.g., “USA” manufactured Viagra®); and (4) counterfeit currency (e.g., U.S. $100 bill “supernotes”).[5] Media reports also have indicated that North Korea may be engaged in insurance fraud, endangered species trafficking, and human trafficking as a matter of state policy.[6] News reporting on the subject reached its height in 2003, when the Bush Administration was activity raising the issue of DPRK’s crime-for-profit activities at the highest levels. Since then, fewer public reports have surfaced to indicate that DPRK illicit activities are continuing. At the same time, no public reports indicate that DPRK has completely halted its crime-forprofit activities. In 2008, the State Department reports that while DPRK’s drug trafficking appears to have declined substantially, “DPRK-tolerance of criminal behavior may exist on a larger, organized scale, even if no large-scale narcotics trafficking incidents involving the state itself have come to light.”[7] The estimated aggregate scale of DPRK’s crime-for-profit activity has been and may still be significant — and arguably provides important foreign currency resources to the heavily militarized North Korean state. DPRK crime-for-profit activities are reportedly orchestrated by a special office charged with bringing in foreign currency under the direction of the ruling Korean Worker’s Party. North Korean drug trafficking, trade in counterfeit products, and the counterfeiting of U.S. currency, to the extent that it does indeed exist, have been a matter of concern in Asian, European, and U.S. law enforcement, foreign policy, and national security communities. At least 50 documented incidents, over decades, many involving arrest or detention of North Korean diplomats, have linked North Korea to drug trafficking. Such activity, particularly production and trafficking of methamphetamine and trade in counterfeit cigarettes, appears to be continuing.[8] With the caveat that dollar value estimates of clandestine activities are highly speculative, conservative estimates suggest North Korean criminal activity generates as much as $500 million in profit per year, with some estimates reaching the $1 billion level. One recent economic study by Stephan Haggard and Marcus Noland, however, places current illicit activity at a much lower level and considers the lower end of the various published estimates of profit as the upper bound. For example, the Haggard/Noland study estimates drug trafficking in 2005-2006 at about $20 to $35 million.[9] In contrast, the (South) Korea Institute for Defense Analysis reportedly stated that North Korea earns between $700 million and $1 billion per year from exporting weapons and trading drugs and counterfeit money.[10] In 2003, an official from U.S. Forces Korea reportedly stated that North Korea’s annual revenue from exports of illegal drugs was estimated at $500 million and from counterfeit bills at $15 to $20 million. The official also stated that in 2001, North Korea exported ballistic missiles worth $580 million to the Middle East.[11] More recently, some sources report that North Korea has been exporting conventional military weapons to Burma (Myanmar) in contravention to current U.N. prohibitions against North Korea.[12] One basis for the $500 million to $1 billion figure for illicit exports is that it can be inferred from international trade data and from reported anecdotes that markets in Pyongyang have ample supplies of imported foreign goods. In 2004, North Korea is estimated to have incurred a

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trade deficit of $1.8 billion. This deficit rose to about $2.0 billion in 2005, dropped to an estimated $1.3 billion in 2006, and rose to an estimated $2.7 billion in 2007.[13] Some of this imbalance is financed through food and other aid, capital inflows, borrowing, remittances from North Korean laborers working abroad (especially in Russia and the Middle East), and tourism. Pyongyang, however, does little borrowing on international markets, and Tokyo has been cracking down on remittances from ethnic North Koreans in Japan. Inflows of capital also seem small, although they are rising as China and South Korea invest in enterprises in the North. As a result, some surmise that in some years as much as $1 billion has been financed by illicit activity.[14]

ILLICIT DRUG PRODUCTION AND TRAFFICKING

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Allegations of State Involvement There has been evidence to suggest that the North Korean government is supporting drug production and trafficking as a matter of state policy. Since 1976, North Korea has been linked to more than 50 verifiable incidents involving drug seizures in at least 20 countries.[15] A significant number of these cases has involved arrest or detention of North Korean diplomats or officials. Concerns about North Korean drug trafficking and production were further expressed in the International Narcotics Control Board’s 1997 annual report, which referred to such DPRK drug trafficking incident claims as “disquieting.” In 1999, substantial seizures of North Korean methamphetamine occurred in Japan (35% of the total methamphetamine seizures in Japan that year). Large seizures of heroin and methamphetamine with a link to the DPRK have since occurred in Taiwan, and in April of 2003, the “Pong Su,” a DPRK state enterprise-owned, seagoing vessel of around 4,000 metric tons apparently delivered a large quantity of DPRKtrafficked and also possible DPRK- origin heroin to Australia. Although members of the vessel’s North Korean crew were subsequently acquitted on charges relating to the smuggling of the drugs, experts have little doubt of a North Korean connection to the drug shipment.[16] Since 2003, however, no incidents definitively and directly linking the DPRK State apparatus to such drug trafficking activity have come to light. The State Department’s March 1, 2008, International Narcotics Control Strategy Report states that drug trafficking with a connection to North Korea “appears to be down sharply and there have been no instances of drug trafficking suggestive of state-directed trafficking for five years.”[17] Many analysts suggest that any decline in DPRK state-linked drug trafficking activity would likely be in response to enhanced international attention paid to such activity in the wake of the April 2003 seizure of heroin carried on the North Korean Vessel the “Pong Su.” Others, however, remain skeptical and offer an alternative explanation. They suggest that the decline in seizures is because North Korean source methamphetamine is now regularly being mistakenly identified as “Chinese source,” given growing links of Chinese criminal elements to North Korea’s drug production/trafficking activities. In line with such a conclusion are press reports in late 2006 of the arrests in China in differing locations of North Korean nationals involved with Chinese criminals in the trafficking of methamphetamine. However, it is not clear from the reports whether the drugs were of DPRK origin or whether the North Koreans arrested had links with DPRK officials.[18]

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Reported Scope of Illicit Drug Activity North Korea has reportedly produced three main types of illicit drugs: (1) opiates, including opium and heroin; (2) synthetic drugs, especially methamphetamine; and (3) counterfeit pharmaceutical drugs. In 2008, the amount of illegal drug production and trafficking is unlikely to be large enough for North Korea to be cited on the State Department’s drug “majors list,”which could make Pyongyang subject to the drug certification process applicable to “major” producers and potentially liable to discretionary trade sanctions and restrictions on non- humanitarian aid.[19]

Opiates According to press reports and North Korean defectors, farmers in certain areas have been ordered to grow opium poppies in the past. In 2006 congressional testimony, a representative of the State Department reported that North Korea cultivates 4,000 to 7,000 hectares of opium poppy, producing approximately 30 to 44 metric tons of opium gum annually.[20] Though such estimates appear reasonable, they are nevertheless based on indirect and fragmented information. With the caveat that conclusive “hard” data is lacking, U.S. government investigative agency sources estimate North Korean raw opium production capacity at 50 tons annually. North Korean government chemical labs reportedly have the capacity to process 100 tons of raw opium poppy into opium and heroin per year.[21]

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Methamphetamine North Korea’s maximum methamphetamine production capacity is estimated to be 10 to 15 metric tons of the highest quality product for export. This coincides with a time when markets for methamphetamine are dramatically expanding in Asia, especially in Thailand, Japan, the Philippines, and more recently in Cambodia and China.[22] Pharmaceuticals North Korea also has an advanced pharmaceutical industry, and it is widely believed that large-scale production of expertly packaged pharmaceuticals such as knock-off erectile enhancement drugs (particularly, Viagra® and Cialis®) has been orchestrated by Pyongyang. However, public source data on such alleged activity is sketchy. At issue is not the existence of the knock-off drugs, but whether the DPRK is indeed the manufacturer, with some speculating that China may be the source of production.[23]

Rising Domestic Drug Production and Abuse? An emerging genre of reports, yet to be substantiated, suggests that as state control of drugs in the DPRK becomes looser, a growing amount of stimulants for domestic sale and consumption are being produced privately by scientists in the DPRK and funded by private investors. Some reports suggest drug abuse is becoming widespread among senior military officials and also among the poor as a means to dull hunger. Others suggest that drug addiction is spreading among cadres such as the officer corps of the People’s Army Security Department and high-ranking party officials. A scenario is being presented of drugs sold openly at farmers markets, at times being used instead of currency in transactions.[24]

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MANUFACTURE AND DISTRIBUTION OF COUNTERFEIT U.S. CURRENCY Besides the production and distribution of illicit drugs, DPRK appears to have been involved in the production and distribution of counterfeit foreign currencies as a means of generating foreign exchange.[25] The United States has accused DPRK of counterfeiting U.S. $100 Federal Reserve notes (supernotes) and passing them off in various countries.[26] Officials familiar with the bogus currency in question note its exceptional quality — so good that many cashier-level bank personnel would likely not be able to detect the forgeries. In an April 2008 hearing, a Treasury official stated that it has continued to work with the U.S. Secret Service to counteract North Korea’s counterfeiting of U.S. currency and that highquality counterfeit bills produced by North Korea, known as the “Supernote,” continue to surface.[27] Media reports indicate that counterfeit $100 bills are used in North Korean markets as currency and are valued at about the equivalent of $70.[28] It is not clear, however, whether the counterfeit bills circulating are from existing stocks or are currently being produced. The anti-counterfeiting security features incorporated into new U.S. bills make counterfeiting much more difficult. In 2006, U.S. officials cited the figure of $45-$48 million detected or seized since 1989.[29] However, because counterfeiting is a form of clandestine criminal activity and North Korea is a closed society, the amount of alleged DPRK-produced counterfeit currency in circulation is speculative at best. Estimates of the profit such transactions bring to the Pyongyang regime — to the extent they are based on open source material — are also speculative. Amounts commonly cited, which take into account many factors, range from $15 million to $25 million in profit per year.

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Incidents Linking the DPRK to Counterfeiting Activity At least 13 reported incidents between 1994 and 2005 show North Korean involvement in counterfeiting and smuggling or distributing U.S. currency. All of these incidents occurred in either Asia or Europe. The use of DPRK diplomatic passports and the involvement of DPRK diplomats, embassy personnel, and employees and officers of DPRK state-owned and operated trading companies connect most of these incidents to the government of North Korea in varying degrees. Taken collectively, the link is seen as even stronger. Of these 13 incidents, 6 occurred after 1999.[30] Counterfeiting of foreign currency is apparently a phenomenon that is not new to the government of North Korea. Seoul’s War Memorial Museum reportedly contains DPRKmanufactured South Korean currency from the 1950s, the production of which reportedly continued into the 1 960s. South Korean media reports cite a 1998 South Korean National Intelligence Service (IS) Report to the effect that North Korea had forged and circulated U.S. $100 banknotes worth $15 million a year. Subsequent reports to the South Korean National Assembly in the same year and in 1999 are cited in the media as stating that North Korea operates three banknote forging agencies and that more than $4.6 million in bogus dollar bills had been uncovered on 13 occasions between 1994 and 2005.[31]

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Arrests and indictments point to DPRK trafficking in bogus U.S. currency as recently as 2005. In August 2005, federal law enforcement authorities completed two undercover operations that focused on the activities of members of China’s Triad criminal syndicates. The operations, named Royal Charm and Smoking Dragon, reportedly netted some $4 million in supernotes believed to be of North Korean origin. Illicit narcotics, counterfeit brand cigarettes and pharmaceuticals were seized as well. U.S. government authorities indicate there is the potential that any scheduling of trials and/or the plea bargaining process will reveal direct links between some of the smugglers and North Korean officials or government entities.[32]

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Banco Delta Asia Bank Action The Banco Delta Asia (BDA) bank is located and licensed in the Macau Special Administrative Region of China. According to the U.S. Treasury Department, BDA played an important role in laundering money that had been derived from DPRK’s crime-for-profit activities. Treasury claims that senior BDA officials worked with DPRK officials “to accept large deposits of cash, including counterfeit U.S. currency, and agreeing to place that currency into circulation.”[33] In addition, BDA clients were reportedly known to include a DPRK front company, which had been involved for more than a decade in distributing counterfeit money, smuggling counterfeit tobacco products, and suspected in being involved in drug trafficking. On March 19, 2007, the Treasury Department finalized a rule based on Section 311 of the USA PATRIOT Act (31 U.S.C. 531 8A), which prohibited U.S. financial institutions from opening or maintaining correspondent accounts for or on behalf of BDA.[34] This order, which continues to remain in effect, has also led banks, not only from the United States but from other nations as well, to refuse to deal with even some legitimate North Korea traders. North Koreans appear to have moved some of their international bank accounts to alternative banking institutions, including those in China, Austria, and Switzerland.[35] The DPRK also enacted an AntiMoney Laundering Law partly to ease foreign concerns over alleged money laundering by North Korean entities.[36] Pyongyang cited the BDA action in the past when it refused to return to the Six- Party Talks on its nuclear program and received a pledge by the United States as an aside in the process of negotiating the Six-Party Agreement of February 13, 2007, to resolve the BDA issue.[37] In the process of seeking to resolve the issue, the United States agreed to release blocked assets — some $25 million — to DPRK authorities. After considerable effort, the $25 million in Banco Delta funds were returned to North Korea via the U.S. Federal Reserve and a Russian bank in June 2007 as a condition for restarting the Six-Party talks.[38] This decision was both praised and criticized by observers. Some described the release of funds as one of the Administration’s “notable foreign-policy successes” because it was seen as having contributed to bringing DPRK back to the negotiating table for the Six-Party Talks.[39] Others argued that returning the funds to North Korea compromised the spirit of international agreements the United States has supported, including U.N. Resolution 1718, which condemns the alleged use of crime-forprofit activities to finance DPRK’s nuclear ambitions.[40] In addition to the issue of returning the frozen funds, some analysts claim that the BDA issue brought to the surface lingering questions about the way the international banking community treats DPRK accounts. Specifically, the financial effects of the BDA action were larger than expected. It caused a run on accounts at the bank that compelled the government of

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Macau to take over BDA’s operations and place a temporary halt on withdrawals. It also appears to have obstructed some legitimate North Korean financial interests, as the BDA action caused other banks around the region, including Chinese, Japanese, Vietnamese, Thai, and Singaporean banks, to impose voluntarily more stringent regulations against North Korean account holders. As North Korean traders and others move forward, some question whether the situation will return to “business as usual,” “business with caution,” or remain as “no business at all.” In the case of China, a media report indicates that the country is allowing North Koreans to open bank accounts in China to settle business transactions in Chinese yuan. This enables them to conduct transactions in the Chinese currency.[41]

OTHER ILLICIT ACTIVITY

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Counterfeit Cigarettes Counterfeit cigarette production may have replaced illegal drug trafficking as a major source of crime-for-profit revenue for North Korea. In 2008, the State Department reports that “the continuing large-scale traffic in counterfeit cigarettes from DPRK territory suggests, at the least, that enforcement against notorious organized criminality is lax, or that a lucrative counterfeit cigarette trade has replaced a riskier drug trafficking business as a generator of revenue for the DPRK state.”[42] Reports from the past several years have charged the DPRK with producing counterfeit cigarettes for export of seemingly genuine Japanese brand cigarettes (Mild Seven) and U.S. brands such as Marlboro. According to the Wall Street Journal, U.S. authorities seized more than a billion of the “fake smokes” in California in 2005. Millions more packs of fake Marlboros, Mild Sevens, and other cigarettes made in North Korea have been seized in Taiwan, the Philippines, Vietnam, and Belize.[43] Officials from Philip Morris, which launched a major undercover operation to investigate the trade, have been cited as stating that DPRKmade knock-offs of its Marlboro brand have been discovered in more then 1,300 places. They cite DPRK knock-off cigarette production capacity as being in the range of more than two billion packs a year, making Pyongyang one of the largest producers of such contraband in the world.[44] Press reports cite a confidential report prepared by a consortium of tobacco manufacturers to the effect that the DPRK regime could be earning some $80 to $160 million in payoffs alone from manufacturers of such counterfeits. Gross revenues from such sales, according to the report, could generate between $520 and $720 million annually. One of the main hubs of such activity is reportedly Rajin, a free trade zone port city on North Korea’s east coast.[45] Many of the cigarette factories in Rajin are reportedly owned and financed by Chinese criminal groups. According to one report, the DPRK regime allows specific deep-sea smuggling vessels to use its ports and provides the gangs with a secure delivery channel.[46] North Korean state- owned enterprises, mostly located in the Pyongyang area, also reportedly produce contraband cigarettes.[47] A 2006 article on North Korean cigarette production found that DPRK cigarette manufacturers have been turning more toward producing domestic low-priced brand cigarettes instead of counterfeit products. The article states that relative to the price of rice, the price of a package of cigarettes has been falling and their quality has been rising.[48] In 2007, the DPRK imported

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$12.95 million ($14.1 million in 2006 and $13.5 million in 2005) in tobacco products from China. Domestic brands now are taking market share from imports, and North Korean cigarette producers — even the factories operated by the No. 39 Department of the Workers’ Party, which accumulates and manages Kim Jong-il’s slush funds — reportedly have been producing more for the domestic market than counterfeits of brands such as Mild Seven, Crown (both Japanese brands), and Dunhill.[49] Media reports indicate that Greek authorities seized some four million cartons of contraband cigarettes through the fall of 2006, of which three million were aboard North Korean vessels. For example, on September 25, 2006, Greek officials detained a North Korean freighter that was carrying 1.5 million cartons of contraband cigarettes and arrested the seven seamen on board. According to information from Greek customs authorities, the ship’s load of counterfeit, duty-unpaid cigarettes would have brought 3.5 million euros in taxes.[50]

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Insurance Fraud Media reports from late 2006 suggested that the DPRK may be involved in insurance fraud as a matter of state policy. Some industry experts are concerned that claims for property damage are vastly overstated; circumstances of accidents are being altered; and that claims for deaths are not accident-related.[51] A recent example cited in media reports of possible DPRK state involvement in insurance fraud involves a ferry accident that reportedly occurred in April 2006 near the coastal city of Wonsan. After the accident, North Korea declared that 129 people had died, all of whom were provided life insurance coverage when they bought a ticket. It was claimed that most of the victims had died of hypothermia, although weather data apparently indicated that temperatures were warmer than reported by Pyongyang’s Korea National Insurance Corporation.[52] In another case, in July 2005, a medical rescue helicopter apparently crashed into a government owned disaster supply warehouse, setting it on fire. It reportedly took the DPRK authorities only 10 days to file a claim that included a detailed inventory of hundreds of thousands of items — a task which insurance industry officials say normally takes most governments many months.[53] Although a practice of North Korean state initiated insurance fraud has not been confirmed, criminal conduct of this nature would appear consistent with a well- established pattern of DPRK crime-for-profit activity. One industry source estimated in 2006 that the extent of fraudulent DPRK insurance claims could have exceeded $150 million.[54]

Endangered Species Trafficking Several reports link North Korean officials with trafficking in endangered species, which is in contravention to the U.N. Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITE S).[55] The DPRK is not a member of CITES; however, DPRK diplomats allegedly have been caught trafficking in CITES-protected species between treaty member states, including France, Russia, and Kenya.[56] According to the State Department, known DPRK violations of CITES began in the 1 980s and have mainly involved trafficking in elephant ivory and rhino horn.[57] Although some may argue that cases of endangered species smuggling by DPRK

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diplomats may have been for personal use, the sheer size of confiscated shipments — as much as several hundred kilograms each — suggests that endangered species trafficking could have been planned by a North Korean government entity.[58]

Human Trafficking

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According to the State Department, North Korea is a source country for men, women, and children trafficked for forced labor and commercial sexual exploitation and has been listed by the U.S. government as a “Tier 3” country for as long as it has been included in the State Department’s Trafficking in Persons annual reports. As a Tier 3 country, North Korea reportedly does not comply with minimum standards for eliminating trafficking and is not making significant efforts to do so. It remains unclear to what extent DPRK profits from human trafficking activities as a source of revenue. However, the State Department indicates that North Korea directly contributes to labor trafficking by maintaining a system of force labor prison camps inside the country, where an estimated 150,000 to 200,000 prisoners are forced to log, mine, and tend crops.[59] According to Mark Lagon, Director of the U.S. Office to Monitor and Combat Trafficking in Persons, the most common form of DPRK trafficking are North Korean women and children who voluntarily cross the border into China and are picked up by trafficking rings and sold as brides in China and elsewhere, including Russia and Mongolia.[60] The 2007 Trafficking in Persons report further states that North Korean women and girls may also be lured out of DPRK with promises of food, jobs, and freedom, only to be forced into prostitution, marriage, or exploitative labor arrangements in China.

POLICY AND PROSPECTS U.S. policy has addressed North Korea’s crime-for-profit activities through several tracks, including diplomacy, law enforcement, economic sanctions, and economic incentives. In some instances, the various tracks may overlap considerably, while in other cases, they may work at cross-purposes. Congress has played an active role in the oversight of U.S. policy toward North Korea and may further consider evaluating U.S. efforts to reduce North Korea’s crime-for-profit activities or explore in more detail the dynamics and trends related to the regime’s illicit financial channels. One strategy on the diplomatic front has been to use fora such as the Six-Party Talks on nuclear proliferation to address issues such as North Korea’s illicit activities. This was the initial preference of the Bush Administration, but since sometime after the BDA action in 2007, this tactic no longer appears evident. As the Bush Administration comes to a close, denuclearization is the primary emphasis of policy on North Korea. Also, if the DPRK is able to earn foreign exchange and receive more economic assistance, the pressure to generate foreign currency through illicit activities arguably will diminish. The policy debate heretofore has been divided between those who argue to pressure North Korea with unilateral tactics that cut DPRK off from access to its illicitly generated profits through economic sanctions[61] and a second group of policymakers more in favor of

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engagement who seek to resolve the North Korean problem mainly by negotiations. Its goal is to change DPRK’s “bad behavior” by bringing the country into the circle of peaceful nations and inducing it to act in accord with international standards.[62] In 2008, the latter argument seems to be carrying the day. Following recent developments in the Six-Party talks, a continued policy challenge for the United States is to receive a commitment by Pyongyang to curtail its alleged crime-for-profit activities. A possible vehicle for this discussion could be the working team on the normalization of diplomatic relations between the DPRK and the United States. Since Japan, South Korea, and China also have considerable interest in protecting themselves from North Korean illicit activity, it also may be addressed in the working team on normalizing relations between the DPRK and Japan as well as in other negotiations. So far, however, the working teams have not appeared to have addressed North Korean crime-for-profit activities.[63] On the law enforcement side are actions such as the prosecution of criminal behavior and those resulting from the Bush Administration’s Illicit Activities Initiative (IAI). The IAI was established in 2003 as an interagency effort aimed at curtailing North Korean involvement in narcotics trafficking, counterfeiting, and other illicit activities. The major purposes of the initiative have been to provide policy support for the Six-Party Talks and to hold North Korea to internationally accepted standards of behavior by enforcing relevant U.S. and other laws. The IAI has come to involve fourteen different U.S. government departments and agencies, and it has received cooperation from fifteen different governments and international organizations.[64] The Banco Delta Macau action stemmed partly from the work of the IAI. The United States and other nations also are taking direct measures to halt shipments of illicit cargo from North Korea. The Proliferation Security Initiative (PSI), for example, is aimed at stopping shipments of weapons of mass destruction, their delivery systems, and related materials by tracking and searching suspected ships or other conveyances transporting such cargo.[65] Fourteen nations have signed on to the PSI, and many more have endorsed the principles.[66] Although not directed at illicit activities per se, the prospect of ships being inspected complicates North Korean efforts to smuggle items such as illegal drugs, fake pharmaceuticals, and counterfeit currency.[67] A weakness of the PSI, however, is that the DPRK’s immediate neighbors, China and South Korea, have not joined the effort, though there is some speculation that Seoul may join under new President Lee Myung-bak. In addition, no North Korean ships or airplanes have been halted by a PSI operation. The role of Congress in this issue includes oversight of U.S. policy, eliciting information and raising public awareness of the issue, and in balancing U.S. interests when foreign policy goals may conflict with anti-crime activities. Congress also may be asked to provide funding for energy and food assistance to North Korea as part of a resolution of the DPRK’s nuclear weapons program, because some contend that additional supplies of energy and food could reduce the need to rely on illicit activities in some North Korean quarters. Congressional action also could be required to enable North Korea to earn more foreign exchange through an increase in its legitimate exports or by attracting investments from U.S. businesses. This could include, for example, granting the DPRK normal trading nation status (most favored nation status) with respect to U.S. import duties,[68] or by allowing goods from North and South Korea’s Kaesong Industrial Complex to be included in the proposed Korea-U.S. Free Trade Agreement.[69] For those assuming that the Pyongyang regime wants to curb its crime-for-profit activity, an important question yet unresolved is the degree to which the leadership will be able to do so. Analysts point out that in nations or regions where the crime has become institutionalized,

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income from such activity often becomes “addictive” to those involved in the criminal conduct. In such instances, a class of criminal entrepreneurs is created and, in the case of North Korea, analysts point to the systematic criminalization of the state, over years, and its growing intimate relationships with organized crime elements throughout Asia.[70] That is not to say that North Korean criminals, like other criminals, would not be able to switch emphasis from risky criminal activity, such as narcotics trafficking, to less risky and potentially even more lucrative large-scale manufacture and trade in counterfeit cigarettes and pharmaceuticals — a trend that may well be underway. Indeed, state countenanced — if not state sponsored — production of seemingly genuine Japanese and U.S. cigarettes appears to be flourishing, as may large scale production of expertly packaged pharmaceuticals such as Viagra®. Whereas the capacity to produce opium is dependent on the availability of suitable land and climatic conditions, methamphetamine production and a wide range of counterfeiting activities are not limited by agricultural production constraints. Reports of substantial DPRK imports of ephedrine — an essential precursor for methamphetamine production — support the theory that the DPRK has developed a significant production capacity for methamphetamine. Such activity is occurring at a time when (1) North Korea urgently needs foreign currency, and (2) the southeast Asian methamphetamine market continues to expand. Some see promise in the efforts by the international community to entice and/or pressure Pyongyang into reducing its involvement in crime-for profit activity.[71] Others, however, argue that the more legitimate the source of income, the greater the pressure for accountability on the regime, since revenue from illicit activities does not usually enter official records. Hence, they maintain that proposals to shift DPRK crime-related income toward legitimate-source income ignore the fact that the current regime diverts some illicit earnings to slush funds designed to sustain the loyalty of a core of party elite and to underwrite weapons development programs. They suggest, therefore, that prospects for a decrease in crime-for-profit activity are not good and that the current regime is likely to be neither willing nor able to change its dependence on income where no accountability is involved. Still, it appears that Pyongyang is reducing much of its illicit activity as it finds other means to export and earn foreign exchange.

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the United States issued in 2005 and the ongoing work of several corporate investigative teams employed by the holders of major United States and foreign cigarette and pharmaceutical trademarks have provided compelling evidence of DPRK involvement in trademark violations carried out in league with criminal gangs around the world, including trafficking in counterfeit cigarettes and Viagra. The DPRK is also associated with production of high- quality counterfeit U.S. currency (“supernotes”). On the issue of counterfeiting of U.S. currency, in July 2004, for example, the U.S. Secret Service reportedly uncovered a network selling counterfeit North Korean made cigarettes, pharmaceuticals, and $100 bills. See Frederik Balfour et al., “Fakes,” Business Week, February 7, 2005. Criminal indictments subsequently ensued. See generally BBC News, “What is a Superdollar?,” June 20, 2004. See section on insurance fraud, supra. U.S. Department of State, INCSR (2008). For more details, see CRS Report RL33324, North Korean Counterfeiting of U.S. Currency, by Raphael Perl and Dick Nanto, and CRS Report RL32167, Drug Trafficking and North Korea: Issues for U.S. Policy, by Raphael Perl. See also U.S. Department of State, INCSR (2008). Haggard, Stephan and Marcus Noland. “North Korea’s External Resources and Constraints” in Korea’s Economy 2008, Volume 24, c. 2008. Pp. 83-91. “PSI ‘Will Hit N. Korea Where It Hurts,’” The Chosun Ilbo [digital version], October 27, 2006. “USFK Details DPRK’s Drug, Missile Exports, Counterfeit Bills,” Chosun Ilbo (Internet Version-WWW), May 12, 2003. Translated by Open Source (Article No. KPP200305 14000056). See for example “Oslo-Based Website: Burma’s Purchase of North Korean Arms Threatens Stability,” BBC Monitoring Asia Pacific, April 6, 2008; “Thai-Based Website: U.S. Concerned over Reports of North Korean Weapons to Burma,” BBC Monitoring Asia Pacific, April 6, 2008; and Michael Green and Derek Mitchell, “Asia’s Forgotten Crisis: A New Approach to Burma,” Foreign Affairs, Vol. 86, Iss. 6 (November/December 2007). Note that the United Nations does not have an arms embargo on Burma. CRS Report RL3 2493, The North Korean Economy: Background and Policy Analysis, by Dick Nanto and Emma Chanlett-Avery. For example, see Statement of David L. Asher, Ph.D., Before the Subcommittee on Federal Financial Management, Government Information, and International Security, Senate Homeland Security and Government Affairs Committee, April 25, 2006, footnote 2. Statement of William Bach, Office Africa, Asia, and Europe Programs, Bureau for International Narcotics and Law Enforcement, State Department, before the Subcommittee on Financial management, the Budget, and International Security, Senate Government Affairs Committee, May 20, 2003. Notable here is the DPRK registry of the Ship, the DPRK nationality of its crew, and the presence on the ship of as least one DPRK non-crew political officer. For more detail see CRS Report RL32 167, Drug Trafficking and North Korea: Issues for U.S. Policy, by Raphael Perl. U.S. Department of State, INCSR (2008).

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[18] See “China Busts Huge N. Korean Drug Ring,” Bangkok Post, January 11, 2007 [DPA report]. Note, however, that it is not clear from the reports whether the drugs were of DPRK origin or whether the North Koreans arrested had links with DPRK officials. [19] Since 1992, Congress has required that the President submit annual reports, which identify major drug transit and major drug producing countries, known as the “drug majors.” Major illicit drug producing countries are defined by section 481 (e)(2) of the Foreign Assistance Act of 1961 (22 U.S.C. 2291(e)(2)) as a country in which (1) 1,000 hectares or more of illicit opium poppy is cultivated or harvested during a year, (2) 1,000 hectares or more of illicit coca is cultivated or harvested during a year, or (3) 5,000 hectares or more of illicit cannabis is cultivated or harvested during a year, unless the President determines that such illicit cannabis production does not significantly affect the United States. Major drug-transit countries are defined by section 481 (e)(5) of the Foreign Assistance Act of 1961 (22 U.S.C. 2291 (e)(5)) as a country (1) that is a significant direct source of illicit narcotic or psychotropic drugs or other controlled substances significantly affecting the United States, or (2) through which are transported such drugs or substances. A second certification process was enacted by Congress as part of the Combat Methamphetamine Epidemic Act of 2005. This law amends the Foreign Assistance Act of 1961 to require the State Department to report the five largest importing and exporting countries of two precursor drugs, ephedrine and pseudoephedrine, commonly used to produce methamphetamine, and certify whether these countries are fully cooperating with the United States on methamphetamine chemical precursor control. Nations deemed not to be fully cooperating face a loss of U.S. bilateral assistance and U.S. opposition to multilateral assistance in the multilateral development banks. [20] Statement of Peter Prahar, Office Africa, Asia, and Europe Programs, Bureau for International Narcotics and Law Enforcement, State Department, before the Subcommittee on Federal Financial Management, Government Information, and International Security, Senate Homeland Security and Government Affairs Committee, April 25, 2006. [21] See generally, INCSR , March 2000, p. VIII-39 and CRS Report RL32 167 (archived), Drug Trafficking and North Korea: Issues for U.S. Policy, by Raphael Perl, pp. 8-9. [22] See generally, INCSR, March 2006 and CRS Report RL32 167, Drug Trafficking and North Korea: Issues for U.S. Policy, by Raphael Perl, pp. 8-9. [23] Note that “knock- off” Viagra® and Cialis® are readily available in China, notably in Dandong on the DPRK border. For allegations/reports linking the DPRK in the past to such activity, see Statement of David L. Asher before the Subcommittee on Federal Financial Management, Government Information, and International Security of the Senate Homeland Security and Government Affairs Committee, April 25, 2006. See also, U.S. News and World Report, White House Week, May 30, 2005. [24] See “Widespread Drug Use in North Korea; Drug Control; Domestic Circulation, Alternative to Food Shortage,” Sankei Shimbum (Internet Version), June 20, 2006, TO3:13:1OZ. [25] For detail, see CRS Report RL33324, North Korean Counterfeiting of U.S. Currency, by Raphael F. Perl, and Dick K. Nanto. Note that allegations have been reported that

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Russia protects an “array of sophisticated criminal networks stretching from Russia through Georgian territory” (South Ossetia) that includes counterfeit U.S. $100 bills “minted” at a press inside this area. See Michael Bronner, “When the war Ends, Start to Worry,” New York Times, August 16, 2008, p. 19. Several sources, however, refute the U.S. position. For example, in 2006, South Korea’s intelligence agency, the National Intelligence Service, reportedly claimed it had no evidence that North Korea has made forged supernotes since 1998. In May 2007, Switzerland’s federal law enforcement agency, the Bundeskriminalpolizei, also reportedly cast doubts on DPRK’s ability to print supernotes. Most recently in January 2008, an independent news agency conducted its own ten-month investigation and reported that evidence to support DPRK counterfeiting claims as “uncertain at best.” See “N Korea ‘Not Forging US Dollars,’” BBC News, February 2, 2006 and Kevin G. Hall, “U.S. Counterfeiting Charges against N. Korea Based on Shaky Evidence,” McClatchy Newspapers, January 10, 2008. U.S. Department of the Treasury, Under Secretary for Terrorism and Financial Intelligence Stuart Levey, Testimony Before the Senate Committee on Finance, April 1, 2008, Press Release HP-898. Kwo’n Cho’ng-hyo’n and Sin Chu-hyo’n, “Counterfeit Dollars Are Being Circulated as Official Currency’ in North Korean Markets — Inflation Is Extreme — [People] Pay With Supernotes,” The Daily NK (Internet version), July 31, 2007. Translated by Open Source Center, document # KPP20070831031008. See Esther Pan, North Korea’s Capitalist Experiment, Council on Foreign Relations Backgrounder, June 8, 2006. David L. Asher, Statement, April 25, 2006, op. cit. Statement of Peter A. Prahar, Director, Office of Africa, Asia and Europe Programs, Bureau for Narcotics and Law Enforcement Affairs, Department of State, Before the Subcommittee on Federal Financial Management, Government Information, and International Security, Senate Homeland Security and Government Affairs Committee, April 25, 2006. See “The ‘Soprano State?’ North Korean Involvement in Criminal Activity and Implications for International Security,” by Sheena E. Chestnut (hereinafter cited as Chestnut), Stanford University Honors Thesis, May 20, 2005, p. 144-145. See “Seoul’s U-Turn on N. Korean Counterfeiting Could be Fatal,” Chosun Ilbo (English Edition), December 25, 2005. The title of the 1988 report is cited as “A New Threat in the 21st Century: Realities and Responses to International Crimes.” See generally, remarks of Acting Assistant Attorney General, John C. Richter of August 22, 2005, available at [http://www.usdoj.gov/criminal/press_room/speeches/ 2005_4 1 93_ rmrksOprSmokngDrgnNroylChrm082405O.pdf]. The Department of the Treasury. Treasury Designates Banco Delta Asia as Primary Money Laundering Concern under USA Patriot Act. Press Release JS-2720. September 15, 2005. Federal Register, Vol. 72, No. 52, March 19, 2007 (Final Rule), pp. 12730-12740. See also, The Department of the Treasury, Treasury Designates Banco Delta Asia as Primary Money Laundering Concern under USA Patriot Act, Press Release JS-2720, September 15, 2005; Federal Register, Vol. 70 No. 181, September 20, 2005(Notices), p. 55214; and FINCEN Advisory of December 13, 2005, on Guidelines to Financial Institutions on the Provision of Banking Services to North Korean Government

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Liana Sun Wyler and Dick K. Nanto Agencies and Associated Front Companies Engaged in Illicit Activities which encourages financial institutions worldwide to take precautions that they are not used as a conduit for the laundering of proceeds of DPRK illicit activities. “Major Chinese Banks Refrain From Dealing with N. Korean Firms,” Kyodo News, March 13, 2006. “Foreign Trade of the Democratic People’s Republic of Korea (via Naenara Internet), May 13, 2008. Open Source Document No. KPP20080513971062. King, Neil Jr. And Evan Ramstad. “Politics & Economics: What Drove the North Korea Deal; U.S. Hungered for Diplomatic Victory, Pyongyang for Financial Relief,” Wall Street Journal, February 14, 2007, p. A.4. See also David L. Asher, Statement Before the Subcommittee on Federal Financial Management, Government Information, and International Security, Senate Homeland Security and Government Affairs Committee, April 25, 2006. “N Korea Confirms Funds Transfer,” BBC News (International Version On line), June 25, 2007. See, for example, John K. Cooley, “N. Korea: Tell The Truth on Forged Dollars,” The Christian Science Monitor, Op-ed, November 19, 2007. David L. Asher, Statement before a joint hearing of the Committee on Foreign Affairs, U.S. House of Representatives, Subcommittee on Terrorism, Non-proliferation, and Trade, and Committee on Financial Services, Subcommittee on Domestic and International Monetary Policy, April 18, 2007. Reuters. “New China system eases N. Korea sanctions,” April 7, 2008. U.S . Department of State, INCSR (2008). See “Dispatch: Export boom: Tobacco Companies Trace Fake Cigarettes to North Korea,” by Gordon Fairclough, Wall Street Journal, January 27, 2006. Ibid. Note that legal cigarette production and distribution in North Korea is done partly by a joint venture between the British American Tobacco company and Sogyong General Trading Corporation, a Pyongyang-based state trader. See Lora Saalman, “Smoke Signals From BAT’s North Korea Venture,” Online Asia Times, February 8, 2006. See, for example, U.S. Department of State, INCSR (2008). See Production of Counterfeit Cigarettes in the Democratic People’s Republic of Korea (DPRK), June 29, 2005, potentially available from Philip Morris, USA, the American tobacco unit of New York-based Altria Group, Inc. Note that the report does not touch upon the potential role played by South Korean authorities, who, whether by design or lack of customs, law enforcement resources, or political will, may facilitate or countenance the trade. Fairclough, Gordon. “Dispatch: Export boom: Tobacco companies trace fake cigarettes to North Korea,” Wall Street Journal, January 27, 2006. Moon, Sung Hwee. “North Korean Cigarette Production: Chinese Cigarettes Disappear,” The Daily NK (in English), August 12, 2008. Ibid. Note that the Greek Merchant Marine Ministry reported that the ship, the Evva, was discovered about eleven kilometers southwest of the port of Katakolo on the Peloponnesus Peninsula in southern Greece. The cargo appeared to be destined for

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Greece. See “N. Korean Ship with Contraband Cigarettes Nabbed,” Chosun Ilbo, September 26, 2006. See George Russell, “North Korea Suspected of Collecting Millions in Reinsurance Fraud,” Fox News report of December 4, 2006, which cites Michael Payton, an attorney representing several of the insurance companies involved with the DPRK. Ibid. See also North Korea’s Insurance Fraud, Dong-A Ilbo, 22:23 GMT, December 5, 2006. Ibid. Russell, “North Korea Suspected of Collecting Millions in Reinsurance Fraud,” op. cit. See generally CRS Report RL34395, International Illegal Trade in Wildlife: Threats and U.S. Policy, by Liana Sun Wyler and Pervaze A. Sheikh. “Smuggling of Specimens of CITES-listed Species by Diplomats,” CITES 42nd Meeting of the Standing Committee, Lisbon (Portugal), 1999, Doc. SC.42.12.7, at [http://www.cites.org/eng/com/sc/42/42-1 2-7.pdf]. Statement of Peter Prahar, Office Africa, Asia, and Europe Programs, Bureau for International Narcotics and Law Enforcement, State Department, before the Subcommittee on Federal Financial Management, Government Information, and International Security, Senate Homeland Security and Government Affairs Committee, April 25, 2006. For arguments to this effect, see Statement of William Bach, Office Africa, Asia, and Europe Programs, Bureau for International Narcotics and Law Enforcement, State Department, before the Subcommittee on Financial management, the Budget, and International Security, Senate Government Affairs Committee, May 20, 2003. U.S. Department of State, Trafficking in Persons Report, section on “country narratives,” June 2007, at [http://www.state.gov/g/tip/rls/tiprpt/2007/82806.htm]. According to the State Department, a trafficking victim “need not be physically transported from one location to another” in order for the crime to fall within Congress’ definition of “severe forms of trafficking in persons” (as defined in the Trafficking Victims Protection Act of 2000, P.L. 106-386, as amended). “Director Lagon Speaks at Woodrow Wilson International Center for Scholars,” U.S. Fed News Service, March 3, 2008. See for example, John R. Bolton, “Salvaging Our North Korea Policy,” Op-ed, The Wall Street Journal, March 17, 2008. See for example, David Sanger, “Questions without Answers: The Korean Conundrum,” The New York Times, January 19, 2006. For the status of current and ongoing political developments involving the DPRK see CRS Report RL33567, Korea-U.S. Relations: Issues for Congress, by Larry Niksch and CRS Report RL33590, North Korea’s Nuclear Weapons Development and Diplomacy, by Larry Niksch. See David L. Asher, Statement Before the Subcommittee on Federal Financial Management, Government Information, and International Security Senate Homeland Security and Government Affairs Committee, April 25, 2006. See also CRS Report RL34327, Proliferation Security Initiative (PSI), by Mary Beth Nikitin.

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[66] U.S. Department of State. The Proliferation Security Initiative, June 2004. [http://usinfo.state.gov/products/pubs/proliferation/] [67] The White House. Proliferation Security Initiative, Fact Sheet. September 4, 2003. U.S. Department of State. U.S. Notes First Anniversary of Proliferation Security Initiative. Press Release, June 1, 2004. [68] Only Cuba and North Korea do not have normal trade relations (NTR) status with the United States. Usually, countries first normalize relations with the United States, then sign a trade agreement that provides temporary NTR status, and then seek permanent NTR status. Without NTR, imports are assessed the duties that were applied to U.S. imports in the 1930s before being reduced by various rounds of multilateral negotiations and other agreements. [69] See CRS Report RL34330, The Proposed U.S.- South Korea Free Trade Agreement (KORUS FTA): Provisions and Implications, coordinated by William H. Cooper. [70] Note that in the case of drug trafficking relationships, indications are mounting that the DPRK is using Chinese criminal groups to traffic in — and mask the source of — DPRK produced drugs. See for example, China ‘Ailing’ from North Korean-Made Drugs — Drugs now bigger problem than North Korea Escapees by Kang Ch’olhwan, Seoul Chosun Ilbo (Internet Version), October 9, 2004. [71] For information on the internal dynamics and situation in the DPRK, see Assessing Internal North Korea by Larry A. Niksch, a paper prepared for a conference on North Korea sponsored by the Keck Center for International and Strategic Studies, Claremont McKenna College, October 26-27, 2006.

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In: North Korea: Issues and U.S. Policy Editor: Samuel P. Massingame, pp. 185-228

ISBN: 978-1-60692-845-5 © 2009 Nova Science Publishers, Inc.

Chapter 8

B RIEFING AND H EARING BEFORE THE C OMMITTEE ON F OREIGN A FFAIRS , H OUSE OF R EPRESENTATIVES , O NE H UNDRED T ENTH C ONGRESS , F IRST S ESSION , J ANUARY 18 AND F EBRUARY 28, 2007 *

U.S. Government Printing Office

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NORTH KOREA THURSDAY, JANUARY 18, 2007 HOUSE OF REPRESENTATIVES, COMMITTEE ON FOREIGN AFFAIRS, Washington, DC. The committee met, pursuant to notice, at 1:32 p.m., in room 2172, Rayburn House Office Building, Hon. Tom Lantos (chairman of the committee) presiding. Chairman LANTOS. The committee will come to order. Seven years ago, one of our nation’s great strategic thinkers outlined a new and bold approach to the North Korean challenge. He said that the United States should pursue a comprehensive and integrated approach toward the nuclear and missile programs of what so many have come to accept as the hermit kingdom. But this time, we would be equally prepared to wield both carrots and sticks to entice the hermit into a meaningful dialogue. Pyongyang’s verifiable steps to eliminate their nuclear and missile programs would be met with a package of incentives structured in a carefully modulated, step-by-step fashion, and if Pyongyang refuses to negotiate a verifiable deal, America and its allies would move assertively to contain the North Korean threat and protect the international security.

*

This is an edited, excerpted and augmented edition of a U.S. Government Printing Office Publication.

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I am very pleased that the author of that ground-breaking and tough-minded plan, former Secretary of Defense Dr. William J. Perry, is here with us today to present his views on the forward course with North Korea. Given the dramatic increase in the threat posed to the United States by Pyongyang over the past 7 years, one must wonder if our national interests would have been better served by fully implementing Dr. Perry’s thoughtful recommendations instead of deriding any and all foreign policy initiatives of the Clinton administration. The initiation of the Six-Party Talks was smart policy, but the deep divisions within the administration have hobbled the negotiations from Day One. Until recently, the administration seemed satisfied with sending an American delegation who read canned talking points instead of engaging in a meaningful dialogue. I have great confidence in Ambassador Christopher Hill, but I must wonder whether Pyongyang, having witnessed the first few years of this administration, has already made the strategic decision to delay serious negotiations until the next President is on the job. It is my hope that this is not the case. But North Korea’s decision to test a nuclear device just 3 months ago would seem to indicate that a deal may not be in the offing. In the meantime, we must have a simple goal. We must work assiduously to keep the door open for diplomacy. Ambassador Hill must be given maximum flexibility to deal with the North Koreans to advance the ball toward a verifiable and comprehensive deal. I was very encouraged by Ambassador Hill’s comments yesterday in Berlin, opening the door to an eventual bilateral dialogue with the North Koreans on normalization of relations after the nuclear issue has been resolved. In order to break down decades of mutual mistrust, we must also open up new channels of communication between North Koreans and the American people through increased cultural contacts. I will continue to do my modest part. I have led two substantive trips to North Korea to meet Pyongyang’s negotiating team, and relations with my hosts at the highest levels of government improved significantly over time. I will return to North Korea again this spring to underscore the importance of continuing a meaningful and substantive dialogue between our two nations, with the goal of establishing a Korean peninsula free of nuclear weapons. Concrete progress toward a comprehensive deal may prove elusive unless we return to the approach outlined by Dr. Perry 7 years ago: Sustained, high-level, carefully calibrated, and reciprocal diplomacy. Short of this, we may very well see additional nuclear and missile tests from the North. I am delighted to acknowledge the outstanding contributions made to peace on the Korean peninsula by our other distinguished witness today, Ambassador James Lilley. As ambassador to South Korea and, subsequently, China, Jim really played a crucial role in developing and implementing American policy in the region for decades. We greatly appreciate his penetrating insights into the North Korean regime and his recommendations on how we can improve our policy toward the Korean peninsula. As our two witnesses today know very well, North Korea policy is bereft of easy options: Military, economic, or political. That said, the North Korean nuclear and missile threat is on a sharp rise, and it is imperative that our nation find a way, with the cooperation of China, South Korea, Japan, and Russia, to check this threat before the security of North Asia is further destabilized. The stakes are enormous. North Korea could sell bombs or plutonium to third parties. It could complete a large reactor capable of producing 10 bombs every single year, and nuclear proliferation in Asia could be on its way. We must prevent this from happening.

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Before turning to our witnesses today, I am delighted to recognize my good friend, the distinguished ranking member of the committee, Congresswoman Ileana Ros-Lehtinen, for her opening comments. Ms. ROS-LEHTINEN. Thank you so much, Mr. Chairman. Thank you for the time, and let me begin by thanking our witnesses for their testimony today. North Korea’s increasingly reckless behavior represents an immediate and growing threat not only on the Korean peninsula but to the entire Asia-Pacific region. This region has enjoyed an unprecedented period of peace and prosperity for several decades and has been transformed into an engine of the global economy. However, North Korea’s repeated provocations, including last year’s July 4th missile launches and the October nuclear test, pose a great threat to the stability required for the region’s continued growth. The impact of a major crisis would be felt far beyond Korea, not only in Tokyo and Hong Kong but in London and New York as well. Concerns have been raised that Kim Jong Il and his regime may conduct a second nuclear test in the near future. This, in turn, could trigger a nuclear arms race in the region, with Japan, South Korea, and perhaps even Taiwan reevaluating their fundamental security needs. The threat posed by North Korea’s nuclear program has wider, even global, implications. The regime has long been a major proliferator of nuclear and other weapons-of-massdestruction materials and technology. Its ties to the Dr. A.Q. Khan nuclear black market network have been extensively documented. In addition, Pyongyang has been involved for many years in missile sales to Iran and other rogue states in the Middle East. The damage caused to the northern cities of Israel last summer from North Korea missiles supplied by Iran to Hezbollah is a stark example of the threat posed by the regime’s continuing proliferation. We are seeking answers today on how to counter North Korea’s increasingly provocative behavior. What steps can the United States take, working with specific allies, through the SixParty Talks, and at the U.N. Security Council, to put the North Korean nuclear genie back in the bottle? A regional proliferation problem needs a regional solution, as this is a concern which extends beyond the outstanding bilateral issues which separate Washington and Pyongyang. That will require a greater commitment and concrete action from other countries in the region, especially China. Greater attention must also be focused on the various issues and the means by which North Korea has accessed the hard currency needed to finance its proliferation activities. Following the clampdown on the Macau-based Banco Delta Asia in 2005, Kim’s regime was forced to resort to even more desperate and illicit activities to keep the cash flowing. These activities included ongoing schemes, such as fraudulent insurance claims and other financial scams, involving the United Nations Development Program and other U.N. agencies. We must work to deny these resources to the regime in North Korea. I expect this committee to devote continued attention to this problem in the months ahead. Regarding the subject of the United Nations and North Korea, it should be noted that the U.N.’s most recent special envoy for North Korea was Canadian businessman and disgraced former U.N. official Maurice Strong. I remind my colleagues that Mr. Strong received $1 million from Saddam Hussein, via Tongsun Park, who was convicted last year in a United

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States Federal court. Mr. Strong also received a number of gifts from Mr. Park, including subsidized rent of Strong’s New York office. I will be very interested to see who the new secretary-general selects to be Maurice Strong’s replacement as the special envoy. Given that Mr. Strong remains and retains strong friends in high places at the U.N., he may seek to play a role in selecting his own replacement. The U.N. has the potential to play a positive role in 2007 with respect to North Korea. But it may choose to continue to play a very negative role by serving as a conduit for cash for the North Korean regime. Kim Jong Il’s past eagerness to engage in illicit activities, including drug trafficking in Japan and counterfeiting of United States currency, indicates that the Dear Leader would have no hesitation in striking a deal of proliferation for profit. This is an issue of utmost urgency, and I welcome the comments of our distinguished panel of experts. Thank you very much, as always, Mr. Chairman. Chairman LANTOS. Thank you very much, Congresswoman RosLehtinen. Before I turn to other members of the panel, let me just say, the last 2 days, we had the opportunity of hosting the incoming secretary general of the United Nations, Ban Ki-moon. Yesterday morning, he met with the Foreign Affairs Committee and the night before we hosted him at a dinner, and I am convinced that he is determined to change the culture of the United Nations, and he is approaching his very complex and difficult task with a firm determination to introduce the highest ethical standards within the U.N.’s structure, and I have every confidence that his appointments to the position you mentioned and all others will meet with our approval. I am very pleased to recognize the distinguished chairman of the Asia Subcommittee for 3 minutes. Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. I certainly would like to offer my personal welcome to Secretary Perry and Ambassador Lilley and look forward to their comments and certainly commend the outstanding services that they have rendered for our nation, especially on our foreign policy questions in this important region of the world. Mr. Chairman, despite tough rhetoric from the administration, North Korea continues to have enough nuclear grade plutonium for six to eight atomic bombs, and, in October of last year, North Korea defied the international community and conducted its first nuclear test. Most will agree, the Six-Party Talks have not proven successful. For obvious reasons, it is time for the United States to reassess its policies in the Korean peninsula. Bilateral discussions between the United States and North Korea should seriously be considered by the Bush administration. What is the administration afraid of? There is no harm in talking. Ironically, during the time of our number one enemy that we have confronted for some 40 years, which happens to be the Communist-Marxist Government of the Soviet Union, and yet we constantly communicated with the Soviet Union. We had dialogues. Disagreements, yes, but we had a dialogue. We do not have to accept what North Korea says; neither should we place ourselves in a position where North Korea dictates what the policy should be. On the other hand, and in the interest of defusing a dangerous situation, we should not fear dialogue. I have always been concerned that we are at war in Iraq at a time when North Korea is pointing missiles at our own country and, I suspect, probably even in other countries of the region. Add a nuclear warhead to the missiles, and North Korea will become a distinguished member of the nuclear

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club, thereby challenging the military and strategic dynamics of the entire Asia-Pacific region. Japan, as an economic power second only to the United States, is not a permanent member of the United Nations Security Council and does not have a nuclear capability to defend itself if and when North Korea chooses to perhaps point Japan with its nuclear missiles and its capabilities. Furthermore, with the United States preoccupation with Iraq at this time, will the United States defend Japan at all costs, or will Japan have to go nuclear to protect its own interests? If Japan does go nuclear, how comfortable with China feel? And then there is the issue of Pakistan. The United States continues to subsidize Pakistan’s military at about $80 million per month, which is roughly equal to one-quarter of Pakistan’s total defense expenditures. What the public may not know is that North Korea and Pakistan have been engaged in conventional arms trade for over 30 years, and then last year, 2006, General Musharraf admitted that Pakistan has transferred nuclear technology to North Korea and other rogue nations as well. What does a Pakistan-North Korea alliance mean for India, and why does the United States continue to turn a blind eye. I do not know. These questions are daunting, and given the dangerous circumstances of our times and the potential for nuclear proliferation in the Asia-Pacific region, I believe our most important responsibility is to do all in our power to further peace. As we can all agree, the most valuable resource of any nation is its people, and under no circumstances should we expend our lives if alternatives to war can be found. This is why I am hopeful that the United States will seriously consider bilateral discussions with North Korea and reconsider its position toward Iraq. I am happy to say that there was a recent article in today’s papers, the New York Times and the Washington Post, that Secretary Chris Hill has recently held 2-day sessions with the North Korean leaders, I believe, in Berlin, after consultations with our Secretary of State, Condi Rice, and shortly our subcommittee definitely plans to hold hearings with Secretary Hill on this issue and see where we need to go from there. Thank you, Mr. Chairman, and I look forward to hearing from our witnesses. Chairman LANTOS. Thank you very much. Mr. Royce. Mr. ROYCE. Thank you, Mr. Chairman, and welcome, Ambassador Lilley, and welcome, Mr. Perry. Last Congress, this committee passed legislation that I and others on this panel championed, the North Korean Nonproliferation Act of 2006, and that bill became law, and I am pleased that this committee is keeping a focus on North Korea, and I look forward to building on last year’s work. I do, though, come to this hearing a little surprised. A press report this week noted that the Treasury Department is scrutinizing the $24 million frozen in the Banco Delta Asia case—now that is in Macau—looking to segregate the so-called legitimate and illegitimate North Korean accounts. At a November hearing with Under Secretary Burns, I asked that we not go wobbly on financially pressuring Pyongyang. It would seem to me very difficult, if not impossible, to differentiate between these activities, given that most of the country’s financial system is based on a broad range of illicit, state-sanctioned activity, such as trade in missile technology

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to state sponsors of terrorism, such as counterfeiting and narcotics trafficking. Now that is the main source of income coming into the country. It seems that some are reasoning that nothing should get in the way of brokering a deal with North Korea on its nuclear weapons. Chairman LANTOS. I am sorry. The gentleman’s time is up. Mr. Ackerman. Mr. ACKERMAN. If this morning’s papers are to be believed, Mr. Chairman, we have finally arrived at a point that many of us have been advocating since the beginning of the Bush administration: Direct negotiations with North Korea. If it were not so horrendously late in the game, I would make a motion to give three cheers for the victory of rationalism over ideological purity. While the administration dithered externally and bickered internally, North Korea went about the business of reprocessing plutonium and, last fall, testing a nuclear weapon. Those inside the administration who believed that if we simply sanction, isolate, and pressure the North long enough they will collapse, have misread the situation from the beginning. North Korea’s obvious willingness to defy China, its closest ally and largest provider of foreign aid, should be a clear signal to all concerned that Kim Jong Il thinks he can survive the wave of international sanctions and still have his bombs. We know what the outlines of the deal look like. We get a nuclear-free Korean peninsula. They get security guarantees, economic assistance, and integration into the community of nations. Now that the Bush administration has gotten over its fear of direct negotiations, it is time to get to work, and I look forward to hearing from our two very distinguished witnesses. Ms. ROS-LEHTINEN. Mr. Chairman, if I could ask a question about the time element. It seems to me that Mr. Royce still had a minute and 30 seconds to go on his time, and then when Mr. Ackerman started to speak, it took a minute to get his time up on the board. I do not want to have a petty, time-issue discussion with you, Mr. Chairman. You are my good friend, and I know you want to work in a bipartisan way, but if you want to have those time-element issues, we really need to be fair, and I know that you are a fair man, and I am not blaming the timekeeper either, but—— Chairman LANTOS. Well, let me advise the ranking member, the policy of the Chair is as follows: The ranking member and the Chair make opening statements without time limit. The chairman and the ranking member of the relevant committee get 3 minutes. The ranking member of the Asia Subcommittee is not present. Mr. Royce, as all other members, receives 1 minute time. I hope this clarifies the picture. Ms. ROS-LEHTINEN. That would be fine if—— Mr. SHERMAN. Mr. Chairman, if I could be recognized. I fully understand your policy. I think these hearings are so involved with proliferation that perhaps there would be two subcommittee chairs that would be accorded the extra time. Chairman LANTOS. That seems like a reasonable suggestion and the ranking member of the Nonproliferation Subcommittee and the chairman will each be recognized for 3 minutes. Ms. ROS-LEHTINEN. Thank you, Mr. Chairman. Chairman LANTOS. Mr. Chabot. Mr. CHABOT. I am not the ranking member, Mr. Chairman. Chairman LANTOS. But you are recognized for a minute. Mr. CHABOT. Well, thank you very much. I think we look forward to the testimony of both of the excellent witnesses we have here today.

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I guess, just in response to some of Mr. Ackerman’s remarks, and this committee tends to be bipartisan, but there are some partisan remarks which occur, and I think blaming this administration for dithering, et cetera, sort of begs the question of the previous administration, and some of the problems that we see right now with North Korea, I think, are a direct result of the botched negotiations that took place and the mess that this administration found itself in because of the mistakes of the previous administration. I guess there goes bipartisanship. I yield back the balance of my time. Chairman LANTOS. I thank the gentleman. I am pleased to recognize the chairman of the Nuclear Nonproliferation Subcommittee for 3 minutes, Mr. Sherman. Mr. SHERMAN. Thank you, Mr. Chairman. We had a strategy laid out: Carrots and sticks in order to achieve CVID, complete, verifiable, irreversible disarmament. The strategy has failed. It has failed because we have not had enough carrots, and we have not had enough sticks, not because it was poorly conceived. We need more carrots. We ought to be offering, as now Secretary Hill has finally done so, normal diplomatic relations. We ought to be offering trade. We ought to be offering a nonaggression pact. We should not be offering carte blanche to counterfeit American currency. But with more carrots, we stand a better chance of achieving the objective. We also need more sticks. Now, where do you go in this world when you need something? When you need a shirt, you need a radio, you need sticks, you go to China. That is why we are running a $200 billion trade deficit with China. Well, in this case, we need to import from China some sticks. Now, we could go to China and beg and plead and lecture them and tell them that it is in their interest to inform North Korea that their oil might be turned off if they turn down this plethora of carrots that America is offering. We have tried that. China does not need lecturing. It does not need begging. It does not respond to begging. What we need to do is inform the Chinese that how we deal with the currency issue will be dramatically affected by whether they are willing not only to look at their own national interest in preventing North Korea from having nuclear weapons but are willing to look at our even greater concerns in that area. To dismiss this and to say, well, China does not want North Korea to have nuclear weapons, so whatever China chooses to do must be the right thing for China to do, is to continue business as usual, continue to have inadequate sticks, and no doubt will lead to the same results that we have had so far. The problem we have in Washington is that those who are concerned with national security are far less powerful than those who profit from imports. If we can galvanize the American people to say that we are going to have to get tougher with Beijing in order to get them to do more to achieve what is a joint concern and a joint goal, then we may succeed. To ask Secretary Hill to go meet, at a two-sided table or a six- sided table, to offer an inadequate collection of carrots and to tap a pencil because he has no sticks guarantees continued failure. I yield back. Chairman LANTOS. Thank you. If Mr. Royce would like additional time, I am delighted to give it to him. Mr. ROYCE. Mr. Chairman, I appreciate that very much. I would just wrap up by saying that I want to end the North’s nuclear program as well, but brushing aside things like counterfeiting of $100 bills, counterfeiting of hundreds of millions of dollars in $100 bills, which is a direct attack on a protected national asset, which is our dollar, not to mention

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North Korea’s record on human rights, ignores the reality of this regime and makes me wonder if there is a deal that the North will abide by. We know the history here, and it seems to me that you have got a mafia state that is counterfeiting our currency, and, under that circumstance, it would seem a better concept to freeze the assets, to keep them frozen, and to deny that state the ability to have the hard currency to put into its nuclear weapons program, as well as stopping its trafficking in narcotics, and bringing the pressure to bear financially to change that regime. That would seem to be the solution to me. Mr. Chairman, I appreciate the time. Thank you. Chairman LANTOS. Surely. Congresswoman Sheila Jackson Lee for 1 minute. Ms. JACKSON LEE. Mr. Chairman, thank you very much to you and the ranking member for, I think, this important hearing. Let me thank and welcome Secretary Perry and Ambassador Lilley. As Secretary Albright indicated yesterday, in this business of diplomacy and negotiations, silence is not golden. I hope that we will look forward into the 21st century and engage not only in bilateral talks but any manner of negotiations and diplomacy that will generate the kind of resolution we need between North and South Korea. Our soldiers now are placed on the very important military demarcation line that has stayed over 50 years. We owe them engagement, and I would hope that we would cease using terms like “axis of evil,” and I hope we would engage in discussions about the misuse and abuse of our currency, but we cannot solve any problems by the deafening silence that I am hearing from the present administration. With that, Mr. Chairman, I yield back. Chairman LANTOS. Thank you. Mr. Rohrabacher. Mr. ROHRABACHER. Thank you, Mr. Chairman. Let me compliment you on the way you just handled your first little crisis here, and your wisdom has shown through, and thank you very much. Let me note that we do not have enough carrots and sticks to affect any policy decisions on the part of North Koreans as long as we feed the people of North Korea. We have taken the pressure off North Korea by making them the recipients, the largest recipients, of American foreign aid in Asia. They have been receiving hundreds of millions of dollars of food aid. Why would they care what our other carrots and sticks are as long as we are feeding their army and feeding their people? Let us note that no matter what type of negotiations we have, we have taken away our own leverage there. We should be supporting regime change and, with the strongest and harshest language, condemning this brutal dictatorship and siding with those elements in North Korea, trying to foster them, who would oppose this dictatorship. We need to hold them accountable for the counterfeiting and drug dealing. We need to make sure that the people of that country know what type of regime they have, and we have not taken the steps to do that. Finally, we need to hold China accountable for its relationship with Korea, which is nefarious. Chairman LANTOS. The gentleman’s time has expired. Mr. Scott. Mr. SCOTT. Thank you very much, Mr. Chairman. Again, I would like to welcome you to the committee as well. I think that paramount to me and, I think, to a lot of the American people is they get a very sober, sober opinion from the two of you as to whether or not South Korea is

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maintaining this sort of cat-and-mouse game to kind of relay it over to the next administration, which could be 2 years. What would be the consequences of that, particularly given, if we are correct, that their capability is to make at least 10 nuclear weapons in each 1-year period, which would come to about 20? What is the probability, or what is our intelligence telling us about the probability, of them selling them to third parties or to a variety of terrorist groups, remembering that what I think is their most crucial problem is that their people are starving? It could very well be that they are using these nuclear weapons as collateral—— Chairman LANTOS. The gentleman’s time has expired. Mr. SCOTT. I look forward to your testimony. Chairman LANTOS. Mr. Inglis. Mr. INGLIS. Mr. Chairman, I look forward to hearing from the witnesses and very much appreciate the hearing. Chairman LANTOS. Thank you. Mr. Delahunt. Mr. DELAHUNT. Thank you, Mr. Chairman. I will be very brief. I want to commend you, Mr. Chairman, for indicating that you are contemplating a trip to North Korea. I think that is very important, and I would look forward to joining you on that effort. I think that is significant. I also want to express my concerns about the statement by the ranking member relative to the appointment to replace Mr. Strong, Mr. Michael Strong, and I would hope that, in camera, so to speak, she could share with us the evidence that he is attempting to influence that appointment. I think that is something that we all should be made aware of, and with that, I yield back. Chairman LANTOS. Thank you. Mr. Tanner. Mr. TANNER. Thank you, Mr. Chairman. I just want to enjoy an unexpressed opinion here and look forward to the witnesses. I wanted to come hear you all. Thank you for being here. Chairman LANTOS. Thank you very much. Ms. Woolsey. Ms. WOOLSEY. Mr. Chairman, I echo the remarks of the gentleman just before me. Chairman LANTOS. Thank you. Mr. Wu. Mr. WU. I will join the gentleman from Tennessee in his eloquence. Thank you, Mr. Chairman. Chairman LANTOS. We thank all three of you, and I am delighted to welcome Secretary Perry. We are grateful that you are willing to share your wisdom and experience with us. You are one of our nation’s most distinguished strategic thinkers, and we look forward to your testimony. Could you push the right button? Mr. PERRY. I have submitted written testimony, with your permission, to enter into the record. Chairman LANTOS. Without objection. Mr. PERRY. And I will only summarize it in my comments. Chairman LANTOS. Without objection.

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STATEMENT OF THE HONORABLE WILLIAM PERRY, SENIOR FELLOW AT THE HOOVER INSTITUTION, FORMER SECRETARY OF DEFENSE Mr. PERRY. In October of last year, the North Koreans tested a nuclear bomb. This test, the culmination of 6 years of failed diplomacy with North Korea, poses a serious threat to the United States and to our allies in the region. My testimony today will discuss the North Korea nuclear program by asking three related questions: Why should we care, how did they get there, and what should we do about it? We should care, not because North Korea is going to put its bombs in missile warheads and fire them at us. They are still far from having that capability, and even if they get it, deterrence would still be effective. The North Korea regime is not seeking to commit suicide. We should care because the North Korea nuclear program can stimulate a nuclear arms race in the Pacific with a host of dangerous consequences. We should care because, as North Korea proceeds unchecked, there will be very little chance of stopping Iran, and we should care because a Korean or Iranian bomb could end up in the hands of a terror group who could detonate it in one of our cities. North Korea has been working to achieve a nuclear weapons program for more than 20 years, and the United States has been working that same period of time to contain or delay that program. In my written testimony, I explain how their actions and our counteractions have played out these past 20 years, leading to five nuclear crises, which I will briefly summarize now. The first crisis occurred in 1990 and resulted in the freezing of the North Korea nuclear production under international inspection, but this freeze did not occur until they had produced a small amount of plutonium, enough to make one or two nuclear bombs. In 1994, we came close to a second Korean war over North Korea’s nuclear weapons program. In May 1994, North Korea ordered the international inspectors to leave and began preparations to reprocess their reactor fuel, which would have given them enough weaponsgrade plutonium to make a half-a-dozen nuclear bombs. I was secretary of defense at that time, and I publicly warned North Korea that the United States considered the making of plutonium to be a red line. I then requested that the Joint Chiefs prepare a contingency plan for conducting a strike on the nuclear facility Yongbyon, using conventionally armed, precision-guided missiles, and I directed preparations to augment our deployment in Korea with tens of thousands of troops. I was literally in the cabinet room briefing President Clinton on the reinforcement plan when the call came from Pyongyang that Kim Il Sung was ready to freeze activities at Yongbyon and begin serious negotiations. So, in the end, that crisis was resolved not by war but by a diplomatic agreement known as the “Agreed Framework.” The Agreed Framework called for North Korea to continue indefinitely the freeze at Yongbyon, to be followed in time by the dismantlement of those facilities. South Korea and Japan agreed to build new, commercial, light-water reactors for North Korea and the United States agreed to supply fuel oil to North Korea until the lightwater reactors were completed. In 1998, we appeared to be headed for another crisis like the one in 1994. North Korea had begun the deployment of medium-range, ballistic missiles that could target Japan and the

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design of two long-range missiles that could target parts of the United States. Our concern over these programs came to a head in August 1998, when North Korea flew an ICBM over Japan, landing in the Pacific west of Hawaii. In response, President Clinton established a sweeping review of our North Korea policy, which he asked me to head. I was, by this time, out of government and back at Stanford University. The key finding of that review was that North Korea was undergoing terrible economic hardship, including widespread famine, but these hardships were unlikely to cause the regime to be overthrown. Therefore, I said, we had to deal with the North Korean regime as it was, not as we would wish it to be. In dealing with North Korea, I recommended two alternative strategies. If North Korea would forego its long-range missile program and nuclear weapons program, the allies would move to a comprehensive normalization of relations. Alternatively, if North Korea did not remove the threat, the allies agreed to take necessary actions to contain that threat. In May 1999, I led an American delegation to Pyongyang to present those alternatives to the North Koreans, with the full backing of the Japanese and South Korean Governments. That meeting was followed by substantial evidence of a general thawing underway, including the first-ever summit meetings between North and South Korea. Kim Jong Il sent a senior emissary, Marshall Jo, to Washington, where he met with President Clinton. On his way to Washington, Marshall Jo stopped off at Stanford to consult with me about his upcoming meeting with the President. Based on my discussions with Marshall Jo, I believed that the United States was very near to the desired agreement with North Korea. But at that critical junction, the Bush administration took office. Engagement with North Korea was broken off, and for 11⁄2 years there was neither a dialogue nor a new policy. Whatever policy might have originated was preempted by the discovery, in 2002, that North Korea had undertaken to covertly start another nuclear program based on highly enriched uranium. As this new crisis unfolded, Dr. Carter and I wrote an op-ed piece urging the administration to deal with this emerging uranium program but not to abort the Agreed Framework. The Agreed Framework, in its 8 years of operations, had, in fact, kept the North Koreans from building 50 to 100 nuclear weapons. Nevertheless, the Bush administration cut off the fuel oil they had been supplying under the Agreed Framework and persuaded Japan and South Korea to stop work on the reactor. North Korea, in response to this cutoff, declared the Agreed Framework terminated, ejected the inspectors at Yongbyon, reopened their reactor, and announced they were starting to reprocess the fuel rods. The United States, which had, in 1994, made reprocessing a “red line,” chose not to establish any red lines this time, and the reprocessing proceeded. During this period, China became increasingly concerned and pressured North Korea to participate in multilateral meetings in Beijing. The first three Six-Party meetings made no apparent progress. The fourth meeting, held on September 5th with a new negotiator, Ambassador Chris Hill, resulted in an understanding that entailed North Korea giving up their nuclear weapons and the United States pledging not to initiate military force to overthrow the North Korea regime. All sides agreed that North Korea was entitled to have a peaceful nuclear program. But the day after the meeting concluded, first, Washington and then Pyongyang backed off from an essential part of the agreement. In the meantime, the North Korean nuclear

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program moved ahead at full speed, and it is clear that North Korea is well embarked on building a sizable nuclear arsenal. Given this background, the report, in June 2006, that North Korea was preparing to test an ICBM was particularly ominous. At that point, Dr. Carter and I wrote another op-ed piece recommending that the administration tell the North Koreans to take their ICBM off the launch pad and return it to the storage area, or the United States would destroy it. Instead, the administration responded to North Korean preparations with a press statement that they would consider the launch of an ICBM as “unacceptable.” North Korea launched the ICBM. To add insult to injury, they launched it on the Fourth of July and added to their fireworks display the launch of four medium-range missiles. The administration then released another press statement deploring the action. Late in September, we saw activity underway in North Korea indicating that a nuclear test was in preparation. The administration again warned that such a test would be “unacceptable.” On 6 October, North Korea conducted the test. Shortly after the nuclear test, I wrote another op-ed. I pointed out that because of past inactions on the part of the United States and the international community, there were no attractive options left for stopping North Korea from having a meaningful nuclear capability, but we could still formulate a strategy whose minimum objective is to keep the problem from getting worse, with a primary focus on two future dangers. The first danger is that North Korea will sell some of their bombs or plutonium to a third party. The Proliferation Security Initiative, designed to prevent the illegal transfer of nuclear material, is a good program, but we should never believe that it has a high probability of preventing an experienced smuggler like North Korea from transferring enough plutonium to make a nuclear bomb. That plutonium would be about the size of a grapefruit. The United States should issue a statement warning North Korea of the grave consequences to North Korea if a North Korean bomb is detonated in the United States, Japan, or South Korea, whether the bomb is delivered by North Korea or by a third party. That statement should be as unambiguous as the one President Kennedy made at the time of the Cuban missile crisis, and I would invite you to go back to your news accounts to read that statement. The second danger is that North Korea will finish work on their large reactor, which would give them the capability of making about 10 nuclear bombs a year. We should be prepared to exercise coercive diplomacy to keep that from happening. The United States should return to the negotiating table with a viable negotiating strategy which includes a credible, coercive element and which includes significant buy-in from the other interested parties. The most feasible form of coercion, or sticks, could come from the Chinese and the South Koreans, who could threaten to cut off their supply of grain and fuel oil if North Korea does not stop work on the large reactor. That alternative has always been resisted by China and South Korea, but the danger of a North Korean nuclear program should, by now, be obvious to them. An additional inducement for China and South Korea would be the concern that if they did not provide the coercion, the United States might take the only meaningful course of action available to it, which is destroying the reactor before it could come on line. This, of course, is a dangerous alternative, but, in fact, we have reached the stage where there are no

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alternatives left that are not dangerous, and allowing North Korea to move ahead with their robust program, building 10 nuclear bombs a year, could prove to be even more dangerous. The press reports that bilateral discussions may be underway between the United States and North Korea pointed to a new understanding about stopping the North Korea nuclear program. One can hope that these talks will be successful, and I, for one, have great confidence in the ability of our negotiator, Ambassador Chris Hill. But if not, the United States should be prepared to rally the concerned regional powers to cooperate in applying meaningful coercive diplomacy. If we are creative and energetic in applying our diplomacy, we can still contain this danger, and if we do, our children and our grandchildren will thank us. [The prepared statement of Mr. Perry follows:]

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PREPARED STATEMENT OF THE HONORABLE WILLIAM PERRY, SENIOR FELLOW AT THE HOOVER INSTITUTION, FORMER SECRETARY OF DEFENSE In September of last year the North Koreans conducted a test of an atomic bomb. This test, the culmination of six years of failed diplomacy with North Korea, poses a serious threat to the United States and to our allies in the region. My testimony today will discuss the North Korean nuclear program by asking three related questions: Why should we care? How did they get there? What should we do about it? We should care not because North Korea is going to put its bombs in missile warheads and fire them at us. They are still far from having that capability, and even if they get it, deterrence would still be effective. The North Korean regime is not seeking to commit suicide. We should care because a North Korean nuclear program can stimulate a nuclear arms race in the Pacific, with a host of dangerous consequences. We should care because if North Korea proceeds unchecked, there will be very little chance of stopping Iran. And we should care because a Korean or Iranian bomb could end up in the hands of a terror group who in turn could detonate it in one of our cities. North Korea has been working to achieve a nuclear weapon program for more than twenty years. And the United States has been working that same period of time to contain or delay that program. The first part of my testimony will explain how their actions and our counteractions have played out these past twenty years. I will organize this discussion around what I call the five nuclear crises, which curiously enough have occurred in four-year intervals coinciding with America’s off-year elections: 1990, 1994, 1998, 2002, and 2006. The first crisis had its roots in the 1960s, when the Soviet Union provided North Korea a research reactor and some training for Korean engineers. As the Koreans became more proficient at this new technology, Kim Il Sung apparently decided to use it to make a North Korean nuclear bomb. During the 70s, he asked in turn the Russians and the Chinese to help him do this, but was turned down by both. Apparently he concluded that North Korea would have to get its bomb the hard way and the slow way, through its own efforts. In 1989,

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American satellites saw evidence that this effort was reaching fruition. They detected a large facility in an advanced state of construction near the town of Yongbyon, and correctly concluded that this was a nuclear bomb program underway. The first Bush administration appealed to the Russians to pressure the North Koreans to join the NPT and submit their nuclear facilities to international inspection. But there was no real progress until the American government pulled its tactical nuclear weapons out of Korea in 1991. Within a few months of that action, the governments of North Korea and South Korea agreed to maintain the Peninsula free of nuclear weapons. And North Korea agreed to submit to international inspection. But they delayed the acceptance of inspectors long enough to reprocess the spent fuel from the reactor. When the inspectors did arrive, they made a quite thorough inspection and concluded from forensic evidence that North Korea had made more plutonium than the small amount they had declared. So the result of the 1990 crisis was a freezing of the North Korean nuclear production, but this freeze did not occur until they had produced a small amount of plutonium, probably enough to make one nuclear bomb. In 1994, we came close to a second Korean War over North Korea’s nuclear weapons program. In May of 1994, as the Yongbyon reactor completed its fuel cycle, the North Koreans announced that they were withdrawing from the NPT, and ordered the international inspectors to leave. They then began preparations to reprocess the fuel, which would have given them enough weapons-grade plutonium to make about a half-dozen nuclear bombs. The United States, Japan, and South Korea announced their intention to impose severe sanctions if North Korea made the plutonium. But North Korea said that they would consider the imposition of these sanctions as an act of war, and proclaimed that they would turn Seoul into a “sea of flames.” Some said this was only rhetoric, but as the secretary of defense at the time, I had to take North Korea’s threats seriously. So I warned North Korea that the United States considered the making of plutonium to be a “red line,” and that if they began reprocessing they faced military action from the United States. I then requested that the Joint Chiefs prepare a contingency plan for conducting a strike on the nuclear facilities at Yongbyon, using conventionally-armed cruise missiles. But I put that plan far to the back of the table to be brought forward only in the event of failure of the diplomacy then underway, the coercive element of which was a very severe sanction program. In the meantime, I undertook a detailed review of our contingency plans for responding to a North Korean attack. This review indicated that, while the allies would achieve a decisive victory, there would be very high casualties on all sides. It was also clear that we could significantly reduce casualties by reinforcing our troops in Korea before hostilities began, so I directed preparations to augment our deployment in Korea with tens of thousands of troops. This is the only time during my tenure that we came close to a major war, but at that moment, we were very close. Indeed, I was literally in the Cabinet room briefing President Clinton on the reinforcement plan when the call came from Pyongyang that Kim Il Sung was ready to freeze activities at Yongbyon and begin serious negotiations. So, in the end, that crisis was resolved not by war, but by a diplomatic agreement known as the Agreed Framework, negotiated for the United States by Ambassador Gallucci. The Agreed Framework called for North Korea to continue indefinitely the freeze at Yongbyon, to be followed in time by the dismantlement of those facilities. And it called for South Korea and Japan to build new commercial light water reactors for North Korea, and the United States to supply fuel oil to North Korea until the light-water reactors were completed. The agreement envisaged that the North Koreans would not have the capability to reprocess the

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spent fuel from their light- water reactor, and would have to send the spent fuel out of the country for reprocessing, so that the reactor could not be used for making weapon grade plutonium. With these safeguards, Japan and South Korea agreed to build the light-water reactor, and the Americans agreed to supply fuel oil to North Korea to compensate for the loss of electricity entailed by the shutdown of the reactor at Yongbyon. From 1994 until 2002 the facilities at Yongbyon remained frozen. That result was critical for security on the Peninsula, since during those eight years these facilities could have produced enough plutonium to make perhaps fifty to a hundred nuclear bombs. The dismantlement of Yongbyon was not called for until construction of the light-water reactor was completed, and that was still a few years away in 2002. Therefore production of plutonium could have been restarted in a few months if the Agreed Framework were terminated. So we always understood that the crisis had been postponed, not resolved. In 1998 we appeared to be headed for another crisis like the one in ’94. North Korea had built a large number of underground facilities that we assessed were for military applications. Particular concern was expressed over the facility under construction near the small town of Kumchang Ni, because this facility was large enough to house a reactor and processor like the ones at Yongbyon. We feared that this was evidence that the North Koreans intended to cheat on the Agreed Framework. At the same time, North Korea had begun the serial production and deployment of medium-range ballistic missiles. Additionally, they had undertaken the design of two long-range missiles, the Taepo Dong 1 and Taepo Dong 2. The two long- range missiles could reach targets in parts of the United States, as well as all of Japan. This missile program again raised a serious concern about North Korea’s nuclear aspirations, since an ICBM makes no military logic without a nuclear warhead. This concern came to a head in August, 1998, when North Korea flew a Taepo Dong over Japan, landing in the Pacific West of Hawaii. This test firing led to calls in the Congress and the Diet for a termination of the funding which supported the Agreed Framework. But if the Agreed Framework were to be aborted, there was no doubt that North Korea would respond with a reopening of the nuclear facility at Yongbyon. And this in turn would put North Korea in the position of producing the plutonium that would allow them to put nuclear warheads on their missiles. During this turbulent and dangerous period President Clinton established an outside Policy Review, which he asked me to head. After an intensive review, done jointly with South Korea and Japan, and coordinated with Russia and China, I submitted our conclusions and recommendations. The key finding was that North Korea was undergoing terrible economic hardship, including widespread famine—BUT that those hardships were unlikely to cause the regime to be overthrown. Therefore we had to deal with the North Korean regime as it was, not as we would wish it to be. In dealing with North Korea, I recommended that the allies should establish two alternative strategies. If North Korea would forego its long-range missile program as well as its nuclear weapons program, the allies would move step-by-step to a comprehensive normalization of political and economic relations, including the establishment of a permanent peace. Alternatively, if North Korea did not demonstrate by their actions that they were willing to remove the threat, the allies agreed to take necessary actions to contain the threat. In May of 1999 I led an American delegation to Pyongyang to present those alternatives to the North Koreans, with the full backing of the Japanese and South Korean governments. During the talks, it was clear that North Korea was seriously interested in the positive

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alternative. They saw that this would open the path to economic development in North Korea, which they desperately needed. But they feared that the communication entailed in economic contact with the outside world would put at risk the closed society that has kept their regime in undisputed control of North Korea. So when our delegation left Pyongyang, we were not sure how North Korea would respond. But within a few months, we saw substantial evidence of a general thawing underway. South Korea and Japan each held first-ever summit meetings with North Korea. Kim Jong Il made a visit to the Shanghai Stock Exchange. Secretary Albright made an official visit to Pyongyang, where she met with North Korean senior officials, and invited Kim Jong Il to come to Washington. Kim Jong Il responded to that invitation by sending a senior emissary, Marshall Jo, to Washington, where he met with President Clinton. On his way to Washington, Marshall Jo stopped off at Stanford to consult with me about his upcoming meeting with the president. Based on my discussions with Marshall Jo, I believed that the United States was within a few months of getting the desired agreement from North Korea. But at that critical junction, the Bush administration took office in the United States. Two months after the inauguration, President Kim Dae Jung visited Washington for a confirmation that this engagement policy would continue. On his arrival, Secretary Powell vowed to continue the North Korea policy set by President Clinton. But the next day, when President Bush met with President Kim, Bush disowned the Clinton policy and said he would create a new policy. Engagement with North Korea was broken off, and for one and a half years, there was neither a dialog nor a new policy. Whatever policy might have originated was preempted by the discovery in 2002 that North Korea had undertaken to covertly start another nuclear program. And so began the fourth nuclear crisis with North Korea. The new program, at a covert location separate from Yongbyon, was based on highlyenriched uranium instead of plutonium. In September 2002, Assistant Secretary Kelly went to Pyongyang and confronted the North with our findings. They at first denied the existence of the uranium program, then became defiant and said that it was necessary because of our hostile attitude. As this new crisis unfolded, Dr. Carter and I wrote an op-ed piece urging the administration to deal with this emerging program in uranium, but not to abort the Agreed Framework, since this would allow the North Koreans to restart their plutonium program, which was far more dangerous and certainly more imminent than the new Uranium program. Nevertheless, a few months after Kelly’s visit to Pyongyang, the Bush administration cut off the fuel oil they had been supplying under the Agreed Framework, and persuaded Japan and South Korea to stop work on the reactor called for under the Agreed Framework. North Korea, in response to this cutoff, ejected the inspectors at Yongbyon, reopened their reactor, and announced they were starting to reprocess the fuel rods. The United States, which had in 1994 made reprocessing a “red line,” chose not to establish any red lines and the reprocessing proceeded. For the next nine months the United States and North Korea were at an essential standoff, with no real dialog and with North Korea continuing to operate their facilities at Yongbyon. During this period, China became increasingly concerned and pressured North Korea to participate in multilateral meetings. As a result, there have been five meetings in Beijing, the last four involving six parties (United States, North Korea, China, Russia, Japan, and South Korea). The first three meetings in Beijing, all in the first term of the Bush administration, made no apparent progress. The

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fourth meeting, held in September 2005 by our new negotiator, Ambassador Chris Hill, resulted in an understanding. The essence of the understanding was: North Korea said that they were prepared to give up their nuclear weapons; The United States said that it was prepared to pledge not to initiate military force to overthrow the North Korean regime; and All sides agreed that North Korea was entitled to have a peaceful nuclear program. But the day after the meeting concluded, there were conflicting reports from Pyongyang and Washington as to what the third component of the understanding really said. Washington said that full disarmament had to be the first step; only then would they “consider” North Korea’s request for a light-water reactor. Pyongyang says that the light-water reactor must be agreed to before any disarmament begins . Thus there was a fundamental misunderstanding about the “understanding.”In the meantime, the North Korean nuclear program moved ahead at full speed. Unlike the faulty intelligence information the United States had on Iraq before the Iraq War, we had substantial and solid information about North Korea’s plutonium- based weapon program. My assessment of their status as of last June was as follows: It was certain that they had the fuel for making about 8 nuclear bombs; It was highly probable that this fuel had been reprocessed to make plutonium; It was highly probable that the resulting plutonium had already been used to make some or all of the bombs; It was likely that North Korea would conduct tests with some of these bombs; and It was certain that North Korea had restarted their research reactor at Yongbyon to produce more plutonium. We had much less confidence in information about their uranium-based weapon program: American government officials have said that North Korea has a covert weapons program based on highly-enriched uranium. North Korea says they do not. A Pakistani scientist says that he gave technology and materials to North Korea for a highly-enriched uranium program. Libya reports that they have bought material and equipment for a highly-enriched uranium program from North Korea. A reasonable conclusion was that North Korea did have a highlyenriched uranium program, but that it was probably not close to production. In sum, the evidence in June was strong that North Korea was well embarked in building a sizable nuclear arsenal. Given this background, the report in late June that North Korea was preparing to test an ICBM was particularly ominous. Dr. Carter and I were sufficiently concerned that we wrote an op-ed piece for the Washington Post. Our op-ed recommended that the United States take a very hard line with the North Koreans, telling them to take the ICBM off the launch pad and return it to their storage area or the United States would destroy it. Of course, we did not really want to have to carry out such an attack. We hoped that the op-ed would cause the parties involved to realize how serious the situation had become. That it would stimulate China to get serious about real pressure on North Korea; that it would stimulate North Korea to stop playing at brinksmanship; and that it would stimulate the United States to get serious about negotiating with North Korea. Instead the administration responded to the North Korean preparations with a press statement that they would consider the launch of an ICBM as “unacceptable.” North Korea launched the ICBM. To add insult to injury, they launched it on the 4th of July, and added to their fireworks display the launch of 4 medium- range missiles. The administration then released another press statement deploring the action. And so the fifth nuclear crisis began in 2006, right on schedule.

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Late in September we saw activity underway in North Korea indicating that a nuclear test was in preparation. The administration again warned that such a test would be unacceptable. The Chinese government sent an envoy to North Korea to urge them not to conduct the test. The United Nations released a resolution demanding that North Korea not conduct the test. On 6 October, North Korea conducted a nuclear bomb test. It was low yield, so it is reasonable to conclude that it was not a complete success, but it was a nuclear bomb, fueled by plutonium. On the basis of that test and certain other information, I revised my estimate of North Korea’s nuclear capability. My October estimate is similar to the estimate I made in June, except that the word “likely” is replaced by the word “certain.” Shortly after the nuclear test I wrote another op-ed for the Washington Post. I pointed out that because of past inactions on the part of the United States and the international community, there were no attractive options left for stopping North Korea from having a meaningful nuclear capability. In sum, I believe that we are in a very deep hole today with North Korea. So how should we proceed—is there a way we can dig out of that hole? Of course we would like North Korea to roll back their entire program, but it will be very hard to get North Korea to give up a capability they already have. But we should be able to formulate a strategy whose minimum objective it to keep the problem from getting worse, with a primary focus on two future dangers. The first danger is that North Korea will sell some of their bombs or plutonium to a third party. The administration established some years ago an international initiative (Proliferation Security Initiative) designed to prevent the illegal transfer of nuclear material. This is a good program, but we should never believe that it has a high probability of preventing an experienced smuggler like North Korea from transferring enough plutonium to make a bomb, which is about the size of a grapefruit. To deal with the danger of selling nuclear material, the United States should issue a statement warning North Korea of the grave consequences to North Korea if a North Korean bomb is detonated in the United States, Japan, or South Korea, whether the bomb is delivered by North Korea or a third party. The statement should be as unambiguous as the one Kennedy made at the time of the Cuban missile crisis. The second danger is that North Korea will finish work on their large reactor, which would give them the capability of making about 10 nuclear bombs a year. We should be prepared to take coercive actions to keep that from happening. The best venue for coercive diplomacy would be the 6-party talks. But we have spent more than three years in those talks with no results, so the talks are a necessary but not a sufficient condition for success. Indeed, the most recent 6-party talks were held last month with no apparent progress. The United States should go back to these talks with a viable negotiating strategy, which includes a credible coercive element, and which includes significant buy- in from the other parties. The most feasible form of coercion could come from the Chinese and South Koreans, who could threaten to cut off their supply of grain and fuel oil if North Korea does not stop work on the large reactor. This alternative has always been resisted by China and South Korea. But the danger of the North Korean nuclear program is by now obvious to them and they should now be willing to join the United States in a concerted diplomatic initiative. An additional inducement for China and South Korea would be the concern that if they did not provide the coercion, the United States might take the only meaningful coercive action available to it—destroying the reactor before it could come on line. Clearly, this is a dangerous alternative. If China and South Korea do not agree to applying coercion, the United States may be forced to military action which, while it certainly

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would be successful, could lead to dangerous unintended consequences. But in fact there are no alternatives left that are not dangerous. And allowing North Korea to move ahead with a robust program that is building ten nuclear bombs a year could prove to be even more dangerous than exercising coercive diplomacy. We desperately need to get serious negotiations underway with North Korea. And all of our negotiating experience with North Korea tells us that success depends on the diplomacy being backed with a credible threat of force. If the United States and the concerned regional powers prove to be willing to cooperate in applying meaningful coercive diplomacy, we still could contain this danger. And if we did, our children and our grandchildren would thank us. Chairman LANTOS. Thank you very much, Secretary Perry. Ambassador Lilley.

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STATEMENT OF THE HONORABLE JAMES LILLEY, FORMER UNITED STATES AMBASSADOR TO SOUTH KOREA Mr. LILLEY. Thank you. I am going to take a slightly different tack on this. If you have North Korea, with one-thirtieth of the economic strength of South Korea and half the population, and if that state is surrounded by three successful powers, economically and militarily, Japan, South Korea, and China, and if we are backing them, it seems to me that the tides of history are on our side, not on theirs, and it seems to me, too, that over the past 10 years, we have been working hard to get cohesion with our friends and allies in the area to bring effective pressure to bear on North Korea to change its behavior. What do I mean by that? Well, first of all, Sun Tzu, the old Chinese strategist, said, “If you get involved with one of these things, know your enemy, know your opposite number.” What is North Korea up to, in stark terms? Survive, remain in power, keep an iron grip on the people, and we know from high defector reports that Kim Jong Il is a control freak, number one. Number two, he is trying to help win an election for himself by backing the ruling party in South Korea and a possible trip by Kim Jong Il to South Korea to buoy up the existing party. So far, that has backfired on him in South Korea. He wants to exploit what they perceive as widespread anti-Americanism. They are attempting to exploit U.S./ROK differences, and they are going to play the nationalist theme. That is obvious. We know that. I think they are also going to try to get former President Clinton to North Korea after the United States 2008 elections and try to get back to the two light-water reactors and food and oil, the 500,000 tons of heavy oil a year and perhaps several hundred million dollars of food aid, largely unmonitored. They are going to make enough short-term concessions to keep food, energy, money coming in, principally from South Korea and China. They are going to try to split five-power cohesion, pointing the finger at United States as the cause of tension. The trend of policy in North Korea has evolved from a massive military intervention in 1950, through frequent terrorist threats and actions, to its current strategy. What have they tried to do in the past? Let us look at it briefly.

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In 1968, they tried to send a team in to assassinate President Park Chung-hi. It failed. In the 1970s, they built tunnels under the DMZ. They failed. In 1983, they tried to kill the South Korean cabinet in Rangoon. Half of them got killed; half of them did not. In the 1990s, they started their submarine infiltrations into the South, and their first submarine hit a reef. The infiltration team fled onto shore, and all committed suicide. My friend in the Center of Naval Analysis said, “Bad seamanship, strong morale.”Now, a tactical change is taking place with this focus on weapons of mass destruction. Their threat of proliferation is a more effective means to survive but still is single-minded on their part. It is quite clear they are going to try to keep their nuclear weapons, to the extent they can. They have, however, been forced into ostensible economic reforms, and we note that, in their New Year’s address this year, 2007, they stress economic first over their fascination with putting the military first. This has led to unexpected consequences for them: The flourishing of the Gaesong Industrial Zone, with a number of Korean companies pushing in there, hiring North Korean labor, setting up factories, expanding their presence, expanding into the whole area. We know for a fact, and I know this certainly personally, that this is the way China changed economically. It is starting in North Korea. Inchon Airport, if you have been there, Mr. Chairman, I am sure, it is one of the best airports in the world. It makes JFK look like something in Indonesia in 1957. It is there sitting right next to the border, the DMZ. It is obviously a force of history. If you have gone through that North Korean airport, Pyongyang, it could fit into one-fiftieth of the Inchon airport. That is a trend. You see increasing Chinese trade relations in North Korea. They are all over the place, businesses flowing in. They are setting up a glass factory. They are everywhere. It is increasing, much to South Korea’s concern, and we also see growing consumer goods availability in North Korea for the elite class. Going into the other powers, we all know that a fragile but aggressive North Korea, if it implodes, has negative consequences for its neighbors. I think this is particularly appreciated in Peking. Millions of refugees flowing into Russia, South Korea, and China are going to cause great consternation all over the area. A unified Korea, under Seoul, allied with the United States is a nightmare for China, certainly. To have these horrible warlords— Kim Jong Il is one thing—those stone-faced men that sit there with medals from their neck to their groin, if they get their hands on nukes, you have got a real problem. But you have to realize, in dealing with this problem, that China has long, intimate, intense relationships with the Korean Peninsula including North Korea. One instance—I think we should pay attention to this because it is talked about as the “Northeast Project” in China. They have laid claim to the entire North Korean part of the peninsula, through what they say is Koguryo Dynasty discussions as part of China, debate. South Korea says, no such thing; that is our Korean dynasty. The South Koreans know, and we who follow China know, that it is allegory and it made a lot of sense in the Cultural Revolution and other times, that when they start using allegories, pay attention because what they are saying is that this territory, by definition, belongs to us: [A] if you collapse, we move in, with justification. That really is a shot across the bow. Chinese involvement in the Imjin defeat in 1596 of the Japanese invasion by Hideyoshi; the Chinese helped the South Koreans do it. The role of China in suppressing dissent on the

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Korean peninsula; they certainly did that, too, in the Tonghak rebellion. And China rescued North Korea in 1950. MacArthur had knocked them flat on their back. They were finished. Kim Il Sung was sitting up there on a mountain top with his medals on, trying to give orders. Nobody paid any attention to him. China came in and bailed them out. North Korea has not shown one ounce of gratitude for this. China tried to help set up free trade zones in North Korea, in Sinuiju up on their border, and they moved it down to Gaesong, and the Chinese, I think, breathed a tremendous sigh of relief because Chinese Premier Zhu Rongji had gone to Kim Il Sung and said, Do not put it here. The Chinese knew very clearly who the North Koreans were going to pick: Yang Bin, who is in a Chinese jail for 17 years on corruption. In Sinuiju it would turn out to be a center of prostitution, drugs, counterfeiting, everything else, and China helped push it over to Gaesong. I do give you here two, I would say, illustrative examples of differing authoritative opinions in China. One, Shen Dingli comes out and says, North Korea is an essential buffer zone to China, and we need it to offset the Americans if there is a crisis in the Taiwan Strait. He says that right out. The second Chinese, Zhu Feng, comes in and says, It is far less of a strategic buffer zone than it was in the past. If sanctions do not move North Korea, China will use a variety of means to accomplish this goal, including coercive diplomacy and perhaps, ultimately, regime transformation. All I am saying is, in China, and I found this out when I was there in 2004, there is a propagandistic level where they talk, and this is very depressing to hear, the problems in the Korean peninsula started with American involvement in the Korean Civil War, and goes downhill from that. If you get to the second level, you hear people talking very frankly about North Korea. Americans, you do not lecture us on it. We know better than you what they are like. And, third, if you talk to some of the military people, you get a sense that they will not stand still for a North Korea really trying to create instability by going to the missile and nuclear business in a series of tests. I would like to point out to you that, given the North Korean intentions, the Six-Party Talks are a nightmare for them. They have in fact provoked the increasing cooperation among the other five powers, especially after their nuclear and missile tests, and the U.N. resolutions, with Chinese and Russian support. This was never done before, this was the first time. China has moved troops to the North Korean border. They have inspected vehicles going to North Korea. They have shut down some of the North Korean bank accounts. That is just the beginning of what they have done. South Korea has suspended fertilizer and food shipments. The revenue from the Macau bank is suspended, which hits the North Korean elites. We are trying to stop, of course, the narcotics and counterfeiting. And ASEAN has kicked in again, telling North Korea—this is the Association of Southeast Asian Nations—to stop the nuclear program, and even Vietnam, where the South Koreans worked with us in the Vietnam War, has come in and started to put sanctions on North Korean banks. The above actions lead to a loss of face and sustenance in North Korea. They have turned, as you pointed out, to a highly enriched uranium program. We have put restrictions on the Macau bank. But we know the North Koreans’ reaction to these actions. We cannot be jerked around by what they are doing.

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The latest speeches they make, what they are building and their nuclear weapons; these are important, but we cannot let them take the initiative on this. They will resort to their standard practice of signing agreements, then adding conditions, and then blaming the other side for the breakdown. This is standard. We have looked at their negotiating tactics for 50 years. That is the way they act, no surprise. North Korea is also seeking to find fellow travelers: United Front work. Support and create a new generation of Korean-oriented Edgar Snows to explain to the West what North Korea really is, and most of it is bunk. But I still insist, the accumulation experiences and attitudes indicate that the North Korean extreme, sudden violence has been curtailed and that economic reform is eating into their system. They are beginning to pay a price right now for their behavior, and it is hurting them. One tendency is to go all the way and force our hand by carrying out the nuclear tests. The other one is react to this accumulation of pressures and leverage on them. I think it is very important that the United States be careful in what it says on this issue because we never want to get on the wrong side of the unification issue. I have had this argument many times with the South Koreans. They said that Rusk and Bonesteel divided Korea at the 38th parallel in 1945, and that was the essence of the problem. I pointed out that many, many Americans died in 1950 trying to unify that country. The conversation stopped. But I think, basically, there is a trade-off among the powers now in terms of what we are trying to get done in North Korea. Counterproliferation. As Secretary Perry points out, this is our number one concern, that they put those weapons in the hands of the crazies, al-Qaeda, et cetera. What we have to do is to get our friends and allies, and the Chinese have come along two-thirds of the way on this, and the South Koreans perhaps half, to work with us to stop proliferation in the Proliferation Security Initiative, but also in other ways: Inspecting their cargoes, alerting people on intelligence if we get a tip off, boarding the ships if you have to, checking them as they go through China, in air and land. I think we have got this moving. But the purpose in all of this would be to allow South Korea and China the opportunity to carry out what they might consider the transformation of the regime through policies which they believe can lead to economic influence and seduction of the North Korean state; ergo, they are looking for more time; we are looking for immediate action. That is a negotiator’s challenge, and we have come a long way in pulling together on this thing and beginning to get countries to work together. I think our indications are that we are going to try to transform the policies, if not the system, while recognizing that North Korea will fight relentlessly to get the goods but keep our contamination out and stage spectaculars to grab world attention. We find this to be true, but we also find to be true, if you examine the track record of what the North Koreans did under Kim Il Sung and what they did under Kim Jong Il, there is a difference. They tend to be somewhat more cautious now, in terms of what they do. Kim Il Sung would shoot down a KC–135. He would seize the PUEBLO. He would carry out axe murders in the DMZ in 1976. He would do these things. You find a hesitation now to get involved that deeply. Kim Jong Il does not seem ready to take those chances, and I think it is the accumulation of pressures on him, where he knows that he is going to be forced to give his people a better deal. Finally, I will just indulge myself in quoting one of the great passages in the Bible, John 8:32: “And you shall know the truth and the truth shall make you free.” It is emblazoned on

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the wall of the CIA, where I worked for a number of years, and I wish they took it more literally. The North Korean version of this is keep the truth out, and you can survive unfree. Thank you. [The prepared statement of Mr. Lilley follows:]

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Chairman LANTOS. Thank you very much, Secretary Perry and Ambassador Lilley. You have both given us tremendous insight and analytical prowess, and we are all grateful to you. Let me begin by asking both of you basically the same question. In various forums, you have both been advocating effective coercive diplomacy, and that surely is the preferred option for all of us. Now, during my various visits to North Korea, I had as my goal, modest as it was, to urge the North Koreans to return to the Six- Party Talks, and while I certainly do not claim credit for their having done so, unless they return to the Six-Party Talks, it is very unlikely we will get much action, and now they are back at the Six- Party Talks. What specific steps can the various players in the Six-Party Talks take to bring about a policy change in North Korea? Clearly, neither Japan nor Russia nor we have enough leverage to bring about significant change; only the South Koreans and the Chinese do. Since they clearly have not done so in the past, I would be grateful if each of you would address the reasons why the Chinese and the South Koreans have not taken the effective measures that are within their capability, and what policies should we pursue to persuade Beijing and Seoul to move in the direction of effective coercive diplomacy vis-à-vis Pyongyang. Secretary Perry? Mr. PERRY. I think the most effective coercive element in the negotiations comes from the Chinese and the South Koreans, where they have to threaten to stop the shipment of oil and grain. This would be huge, huge factor with North Korea. As I indicate in my testimony,

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they have so far refused to do this, but I do believe that the North Korean behavior in actually testing the nuclear bomb might have put a new element, a newer thinking about this, in China and South Korea. So I would return to China and South Korea and lay this on them very heavily, that they must provide that coercive element. Those are the sticks that one of your members was asking about. The carrots can come primarily from South Korea and Japan, the economic carrots, because they have the interest and the wherewithal to help North Korea develop economically. The one carrot incentive that the United States can provide is an agreement, on certain conditions, not to use our military to overthrow their regime. This, in fact, was one of the things we promised to them at the September 2005 discussions. Also, we can offer to turn the armistice into a peace agreement, and that, from our point of view, would be a desirable thing to do anyway. So those, I think, are the elements we have at our hands that ought to be on the table in the negotiations. Chairman LANTOS. Ambassador Lilley? Mr. LILLEY. Tracking what the Chinese have done to bring their own type of pressure on North Korea. It is not our type of pressure; it is their type because they do not trust our tactics or techniques, and it seems to me there is something going on there because the North Koreans are very difficult bargainers. The Chinese have found this out. If they, in fact, Chinese, cut the grain supplies to North Korea, the North Korea answer is, You can feed our people in China, or you can feed them in North Korea. Take your choice. And then they probably get another 500,000 tons of grain. My indications are there has been movement, both by South Korea and China. As far as I know, South Korea has not resumed the fertilizer and rice shipments, and what the North Koreans have done to the South Koreans is to say to them, That great emotional factor in your existence is the reunification of families. If you want that, and we have suspended it all, resume the fertilizer sales. That is bargaining from the North. That is the way they bargain. So it seems to me, the fact that they are doing this indicates that something is happening. I think, also, the element of giving the North Koreans enough delay on our aid plays into the psychological aspects of, let us say, China’s support for them, and we can bring up the Koguryo Dynasty problem, which is a shot across their bow, as opposed to their so-called treaty that they have now, it puts the whole relationship in question. I think, also, the United Nations’ sanctions that came out of the resolutions that were passed cut back on any trade that is related in any way with the North Korea military program. This is a way to develop pressures on them. My whole point of what I was saying was that the North Korea position, horrible as it is, has evolved. They have been obliged to adopt different methods to get what they want. Do not give up on it now. Do not tell the Chinese that they have to cut off all of the grain, or the South Koreans. They will not pay any attention to us because the South Koreans are convinced that the way to bring about a successful outcome to the situation in North Korea is to influence them through economic seduction. We know them much better than you do, they tell us. We have had thousands of meetings with them in the Korean language. We know where their weaknesses are, and their weaknesses are in their economic vulnerability, and when that point comes when we have a

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large presence there in North Korea, those weapons will be taken and thrown into the Pacific Ocean. That will be the outcome, and that is the solution. The Chinese, of course, have a much more complicated position. They want to retain their influence on the peninsula, but they do not back losers. They are into South Korea, as you know, up to here: Largest trading partner, a number of things they are doing in South Korea which indicate a movement there where the Chinese are shifting more and more of their emphasis to South Korea and away from North Korea. North Korea is a liability; South Korea is an asset. Watch this process. This is not coercive diplomacy; this is longterm leverage over North Korea, and North Korea, I believe, gets the point. Mr. ACKERMAN. Mr. Chairman, may I comment? Chairman LANTOS. Please. Mr. ACKERMAN. I fully agree with Ambassador Lilley’s emphasis on the economic absorption of North Korea. I think that is the longterm strategy which we should be pursuing. I do not think that helps with the short term and the nuclear weapon program, and I do believe, in the short term, to deal with the nuclear weapon program, we need to have an effective coercive strategy beyond that. Chairman LANTOS. Well, pursuing that for just another minute, recently, we had a very high-level, United States cabinet delegation go to Beijing, which, in my judgment, was spectacularly unsuccessful. The Chinese ambassador visited with me not long ago, and I pointed out this fact to him, and I indicated that we expect our Chinese counterparts to deal with the matters that are of vital interest to United States national security interests, namely, their proposed $16 billion investment in Iran and the nuclear program in North Korea. What mechanism would both of you find useful in persuading our Chinese and North Korean counterparts to take more effective action? Mr. PERRY. I think I would offer two unrelated points. First of all, in order to persuade them, over the near term, to take coercive action relative to the nuclear program, we have to convince them that the nuclear program is a threat to them as much as it is to us. Chairman LANTOS. Do they so consider it now? Mr. PERRY. I think they can believe that. I think they understand that. So I think that is probably doable. But, secondly, I think, quite aside from the nuclear issue, the United States should be seeking to work cooperatively with China in the development of energy. Both the United States and China are heavy users of energy. Both of us have a shortage of energy, and we are going to end up competing in the world markets for energy unless we can find a way of cooperating. And I think there is a very good basis for cooperating with China in that regard, in that we have the technology to help develop alternative energy supplies, and they have the need for them. So I think there are possibilities of working in cooperation with China in that regard. Chairman LANTOS. Ambassador Lilley, would you like to add something? Mr. LILLEY. I think Secretary Perry made a point: The South Korean long-term absorption of North Korea does not take care of our immediate problem. What I am proposing is that there is a tradeoff here between our acceptance of their techniques of absorbing the North and their cooperation with us on the PSI and other matters. All I can say is my sources indicate that that is taking place. It is not taking place in the Chinese joining the PSI Initiative or the South Koreans openly interdicting their ships but it is happening.

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Chairman LANTOS. A few days ago, this committee held a hearing on Iran, and the witnesses were Secretary Tom Pickering and former CIA Director Jim Woolsey, and we had a very useful dialogue about a proposal of establishing an international entity that would provide nuclear fuel and reprocessing to any country, guaranteeing that the supply is steady and preventing the need for each country developing its own enrichment and reprocessing facilities. Since both of you are knowledgeable in this field, may I ask you, Dr. Perry, to comment on this proposal? Mr. PERRY. I think this is an excellent proposal. I believe that the international entity for supplying nuclear fuel, relative to Iran, is a necessary condition for curtailing Iran’s nuclear program. It is not a sufficient condition. It does not scratch all of their itches, but it does take away their excuse, coming into this program. So I think we should do that, but we should not believe that that will be sufficient. Chairman LANTOS. Ambassador Lilley? Mr. LILLEY. I think that it is a good program. It is a good conceptual idea. I just do not think the North Koreans will play ball, no. Let me just make another point, though. I think, basically, this trade-off, what I am talking about is to seek South Korean and Chinese and Japanese and Russian cooperation in neutralizing the military capabilities of North Korea in proliferation in return for allowing them the chance to transform North Korea. That is the deal. Chairman LANTOS. Thank you very much. Congresswoman Ileana Ros-Lehtinen. Ms. ROS-LEHTINEN. Thank you so much, Mr. Chairman, and thank you, panelists, for excellent testimony. Secretary Perry and Ambassador Lilley as well, how can we call the Agreed Framework a success or anything remotely successful? At the very time that Secretary Albright was meeting with the Dear Leader in Pyongyang, the North Koreans were enriching under her very nose. During the Clinton administration’s implementation of the Agreed Framework, North Korea was trading its missile technology with AQ Khan for highly enriched uranium technology, at that same time. I believe that it is a revisionist view of history to label the Clinton administration’s North Korea policy as anything but a failure, a disaster. In 1994, North Korea pledged to freeze its nuclear program in exchange for international assistance to build its nuclear reactors. Four years later, North Korea fired a missile into the Pacific Ocean in 1998. The response from the Clinton administration was to essentially reward North Korea for its behavior by engaging in high-level talks and, in September 1999, easing sanctions against this rogue regime. The one lesson I believe that was learned from North Korea from this exchange is that it could blackmail the international community and the United States into concession. Many would argue that Iran has similarly learned this lesson well and has adopted the same approach. The chairman used a great phrase that I would apply in a different way. I think that the Clinton administration’s North Korea Doctrine has been spectacularly unsuccessful. I would like for you to comment on that, and I am just going to string them together, Mr. Chairman, if I might. On the issue of human rights, when Jimmy Carter went to North Korea in 1994 and met with Kim Il Sung, he talked about nuclear issues but said not one word about the gulags, the massive human rights violations. Jimmy Carter, as we know, is known far and wide as the human rights President, and he criticized South Korea’s human rights program vigorously

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during his administration but said not one word about the suffering of the North Korean people and who was responsible for that suffering, nor did Secretary Albright make this a priority issue when she visited Pyongyang. So why was the Clinton administration silent about the greatest human rights tragedy in Asia since Pol Pot? And, lastly, on the China issue, we have repeatedly gone to Beijing, asking for its help regarding North Korea. The Chinese always say that they are doing all they can, but there is very little result. However, when China, which is North Korea’s only ally and the conduit for most of its energy and food, wants something, it has no problem using its leverage, including cutting off oil to North Korea, with immediate results. Why is China jerking us around in this manner? Do they want a resolution, or do they benefit from having the United States bogged down in a crisis that we cannot resolve but which keeps us coming back to Beijing with hat in hand over and over again? Lastly, Secretary Perry, you had mentioned the op-eds that you had written some months ago, one of them advocating a possible surgical strike on North Korea’s nuclear missile. You said: “If North Korea persists in its launch preparations, the United States should immediately make clear its intention to strike and destroy the North Korean Taepodong missile before it can be launched. This could be accomplished, for example, by a cruise missile launched from a submarine carrying a high-explosive warhead. The blast would be similar to the one that killed terrorist leader Abu Musab al-Zarkawi in Iraq, but the effect on the Taepodong would be devastating.”Do you still hold those feelings, as you were pointing out in your statement, and is a military strike on North Korea’s nuclear facility feasible? Do we have enough information about their capacity and the facilities to be able to destroy them with great confidence? Thank you, Mr. Chairman. Mr. PERRY. Let me comment on the several different issues you raised, Congresswoman, and, first of all, the Agreed Framework. The Agreed Framework, in my judgment, in no way solved all of our problems with North Korea. It did not solve, or even address, the human rights problem. It did not solve the counterfeiting problem. It did not cause North Korea to give up its nuclear aspirations. All of those things you can say flat out. All that it did, all that it did, was it stopped North Korea from building 50 to 100 nuclear bombs between 1994 and 2002. That is probably worth having, though. In addition to that, with the absence of an Agreed Framework in the last few years, they have built six nuclear bombs, and they have restarted a reactor which could allow them to build 10 nuclear bombs a year. So the Agreed Framework focused on this one problem, and on that problem, it did pretty well. It did not have any effect at all on other problems which we care a lot about. On the Chinese, in my judgment, the Chinese are not doing all that they can. I am puzzled about that. My own rationalization of that is that the Chinese agree with us and concur with us that they want no nuclear weapons on the Korean peninsula, but they totally disagree with us on how to achieve that. In particular, they are fearful of a regime collapse in North Korea, which would cause hundreds of thousands, or even millions, of refugees to flow into North Korea.

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So we have different goals, I think, in the negotiation. If we could find some way of getting a concurrence with the Chinese on what our goals are, we might be able to get some agreement on how to apply the right kind of diplomatic pressure. Ambassador Lilley? Mr. LILLEY. I heard, at the National Press Club last month, a highly experienced, technical man who—— Chairman LANTOS. Could you pull the mike a little closer? Mr. LILLEY [continuing]. Who was just in North Korea, and he says the 50-megawatt reactor is a mess. It is in terrible shape, and thought that they could probably produce no more than one nuclear bomb a year. This is one man’s opinion, but a very experienced man who knows these things a lot better than I do. My sense is, with the Chinese, you go along with them, but you have got means to cause them some problems. We know where they are sensitive. You could do these things, but you have to be fairly subtle about it, and whatever they are achieving in North Korea, you have got to watch for the specific actions that North Korea takes. Now, again, you had the nuclear test, but, look, that nuclear test was not a very successful one, and the first missile they tried blew up in the sky. It is disturbing that they are doing this, but look carefully at the limitations of these guys. How much of it is bravado? How much is it really a bargaining technique to get you to come around because that technique works? When you use blackmail of this kind, we come through with goods and various things, and I think they are trying to do that now. But you have got to get to the bottom of their capabilities and not make broad assumptions about what they can do because they have very serious limitations on their capabilities. I think, basically, these are increasing. Chairman LANTOS. Mr. Ackerman. Mr. ACKERMAN. Thank you, Mr. Chairman. I cannot help but be amused when some of our colleagues criticize us for being too partisan in trying to deal with the failures of the administration, which we have now, and then spend so much time going back to blaming everything on Bill Clinton and Jimmy Carter and Madeleine Albright, and maybe we should take a look at what Herbert Hoover did about this. I was curious about my friend from California, whose position I would like to flesh out with our witnesses. Chairman LANTOS. Which friend are you referring to? Mr. ACKERMAN. My very good friend—thank you for the clarification—whose approach is a legitimate approach. It is basically starve them out. Why should we give them anything? Do not give them any food, oil, or anything else, and do not help them. Knowing of Ronald Reagan’s point of view that food and humanitarian aid should never be used as a political weapon, I was just wondering if my friend, when he was Reagan’s writer in the White House, penned those lines for him, but we will deal with that later. I was in Pyongyang. It was 1994, in October. I met with Kim Il Sung, discussed at great length the switching of the heavy to the light water reactor, an international group paying for the costs, and somebody supplying oil while the thing changed and turned around, and he was very receptive. It was disappointing to me that when I returned, the Clinton administration did not accept that as real, and it was not until several months later, on Jimmy Carter’s visit, and I am the last one to defend Jimmy Carter these days, that he announced right after the meeting very publicly what then became the Framework Agreement.

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When the Republicans came in, as Dr. Perry pointed out, and I am going to ask him the question, the administration walked away from the talks and the table and thought that hating Bill Clinton was a substitute for foreign policy and came up with nothing else. After listening to the criticism of the Clinton administration’s policy that my colleague from Florida described as a total failure, could you tell us, if that policy was not in place, how many weapons, nuclear weapons, the North Koreans would have today? Mr. PERRY. If the North Koreans had operated their facilities according to the plan that they had already laid out, and if we had done nothing about it, between 1994 and 2002, they could have built somewhere between 50 and 100 nuclear bombs. Mr. ACKERMAN. So you would consider that policy, while it was in effect, a success or an abject failure? Mr. PERRY. That was the benefit of the Agreed Framework. As I said, there were many other things they might have done that they did not do, but it did stop them from building 50 to 100 nuclear bombs, which was no small accomplishment. Mr. ACKERMAN. How do we better engage the Chinese, who seem to have much more leverage and levers than do we, to convince them what is in their national interest? You point out, and this is the question that comes back to what Mr. Rohrabacher was advocating, it is in the Chinese interests to make sure that the North Koreans remain in North Korea rather than go to China, the theory of implosion rather than explosion. If we did take the hard line and said, Nothing more from the United States, no more humanitarian aid, if that became our policy, what do the Chinese do? Do they just fill the void, or do they try to change North Korea’s policy so that the rest of the world is engaged as well? Mr. PERRY. I think probably the Chinese would fill the void, and the real question is, what can we do to get the Chinese on the same negotiating track that we are on in dealing with North Korea? That is the big issue. If we and the Chinese can agree on how to approach North Korea, I think we could be successful. Mr. ACKERMAN. Ambassador Lilley, do you agree with that? How do we better engage them? Mr. LILLEY. Let me come to the defense of Herbert Hoover. He was not an ideal President, but he was one of the most effective aid administrators we ever had. When he went into the Ukraine during the period of horrible Soviet starvation, he laid down the rules for the Soviet Union. He said, “I will monitor the whole thing. You are not going to put the party in here. I am going to go all the way to the bottom on this,” and he conducted a program that probably saved 5 million Ukrainian lives but he got Stalin. I will not play mathematical games with you in terms of human lives, but if you do something successful, as he did, you get unintended consequences. As far as the Chinese are concerned, as I pointed out, they have taken a number of actions, that they are split on this issue, that they tend to move more in the direction of being a responsible stakeholder. We are beginning to see that happening. Chairman LANTOS. Thank you very much. Mr. Rohrabacher. Mr. ROHRABACHER. Thank you, and thank you, Mr. Ackerman, for highlighting my questions. Let me note that I was working for President Reagan when he took a position on food in relationship to basically hostile countries. Let me note that he never advocated us sending food aid to countries that were hostile to the United States and democracies. The reference you are talking about dealt with Ronald Reagan’s belief that we should be willing to

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sell food to anyone, including hostile powers, because if you sell it to them, they are using their hard currency for food rather than using their hard currency to develop weapons systems, and that is a huge distinction that we should be aware of here. If we were not providing food freely to the North Koreans, they would have to use their hard currency for something other than developing nuclear weapons. Now, my researchers have shown me the statistics, and we seem to have provided over $1 billion worth of medical, food, and energy assistance to the North Korean Government in a 10-year period. That is $1 billion that they have now that is available to produce nuclear weapons and to stabilize their control over their population. This makes no sense to me at all, and in the testimony that we have heard today, and let me compliment the chairman again, we have had such high-level people here, and I know you are setting a precedent, and I have gotten a lot out of your testimony, and I am going to ask a couple of, you know, probing questions, but do not think that I did not appreciate the expertise that we have just had and have benefitted from it, because I have. But it just seems to be aversion among both of you to the idea that North Korea, this horrible, brutal dictatorship, might implode, and I will tell you, I think it would have been a very good idea to let the Soviet Union, under Joseph Stalin, implode rather than have fed his people. I am sorry, but I disagree with Mr. Hoover at that time. Perhaps we could have sold Stalin food, sold it to him so that he would not have used his hard currency to set up the monstrous gulag regime and militaristic regime that he set up. But why is it that we have to fear that there is going to be some sort of dislocation going on in a short period of time on the North Korean peninsula? Do they not have a better chance for absorption by the South, or at least as great a chance, as they had in Germany, for example? It did take 10 years for Germany to absorb that, but that did not create havoc in Europe. In fact, I believe that the implosion of the Communist regimes in Europe has actually led to a great stride forward for humankind. So why is it so different in North Korea, especially with this cuckoo regime that threatens us with nuclear weapons? I just throw that out to you, either one. If neither one has a comment, I have more points to make. Mr. LILLEY. What was the question? Mr. ROHRABACHER. Why is there such an aversion to the implosion of the North Korean regime? Why is there such a fear that the dislocation will be so disruptive that the benefits of getting rid of that regime that now threatens to build nuclear weapons would not be offset by some of that, as compared to what happened in Eastern Europe when those regimes imploded, and now we have a better world? Mr. LILLEY. First, I think you have different kinds of Communist-nationalist regimes in Eastern Europe and in Asia. The Asian regimes have what you might call authenticity. The Eastern Europeans did not. They were puppets of the Soviet Union. The Vietnamese, the Chinese, and the North Koreans have a very high sense of nationalism, which never existed in Eastern Europe. I think, second, implosion; I do not think we fear implosion. The people that really fear the implosion are South Korea and China. They are the ones that would have the real problem on that one. As I pointed out, millions of refugees, warlords with nukes, a unified Korea allied with the United States; these are not pleasant concepts for their neighbors. What we are using, the “in” word now is not “regime change” or “implosion”; it is “transformation.”Mr. ROHRABACHER. Right.

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Mr. LILLEY. Yes. Okay. “Transformation” means you are going to bring about, over time, changes in that regime’s policies, and if that does not work, in the people. Mr. ROHRABACHER. My time is up, and let me just say, I have not seen any transformation. We have spent billions of dollars. The only thing I have seen—in China as well, by the way, I do not see any great liberalization going on in China. Let us note, behind the scenes—I disagree with both of you—behind the scenes, China is playing a much more villainous role in the development of nuclear weapons in North Korea than what we have heard today. Thank you very much, Mr. Chairman. Chairman LANTOS. Thank you very much. Mr. Faleomavaega. Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. It is always a difficult act for me to follow my good friend’s, the gentleman from California, line of questioning and his comments on our committee hearing, but I just wanted to ask a couple of questions. Secretary Perry, you did share with us your experience and involvement with the Agreed Framework that was established during the Clinton administration, and I am always trying to figure out the failures, as has been alluded to earlier by our colleague from Florida. I have always felt that it was a successful effort on the part of the Clinton administration. I do not want to point fingers, but I just wanted to ask, Mr. Secretary, not only preventing the North Koreans from building 50 to 100 nuclear bombs, but Secretary Albright was the first secretary of state ever to visit North Korea, even met with Kim Jong Il and all of that. Did you think that perhaps this was a greater success on the part of the Clinton administration to actually dialogue, people-topeople, even though we may disagree with the behavior, the type of leadership displayed by Kim Jong Il, the fact of the matter is there was a constant dialogue with the North Korean leaders, and was there an earnest effort made not only to prevent them from building nuclear bombs but getting into other aspects of establishing a better and closer relationship with North Korea? Mr. PERRY. I believe that dialogue and economic cooperation are very important with North Korea because, over the long term, I agree with Ambassador Lilley that that is what could lead to the absorption of North Korea, which is the long-term solution to the problem there. But I must say that I think that the South Korea- North Korea dialogue and cooperation is more important than the North Korea-United States dialogue and cooperation, and I would hope that South Korea could to it and do it more effectively than they have done it recently. But I do think that that is the key to this long-term absorption. I would be interested in Ambassador Lilley’s comments on that. Mr. LILLEY. I think, in South Korea’s case, they have been pillaged, colonized, raped by their neighbors for 1,000 years, and they have become a little bit pugnacious on the basis of that. The people from Cholla-Namdo are real good boxers, for instance. The sense of foreigners playing with them is always very much in their mind. The Japanese occupied them for 35 years. The Russians were in there. The Chinese were in there. Chairman LANTOS. Could you get the mike a little closer, Ambassador Lilley? Mr. LILLEY. Yes. So foreign powers are resented, and there is a sense in South Korea, they are really torn on this one. Their blood ties to the North are strong. They sing the same songs. They drink the same booze. They eat the same food. They like the same poetry. This is a strong tie, and we have been there a long time, and there is no question that the continued presence of a large military contingent causes social problems, and they have caused some serious social problems for us. But you have a very, in my experience, strong body of people in South Korea, including the President, that feel that the United States is

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indispensable to their future. But this does not mean they are going to follow our orders. It does not mean that at all, as it does in China. They do not follow us on these things. They do it their way. The thing that Chris Hill has done, I think, his real achievement, is to bring the powers together and get the Chinese to do what they can do, get the South Koreans to do what they can do, and we do what we can do. The result, I claim, although you had this nuclear test, and you had the missile test, is that, in the North Korean case, it is largely bravado, and they are beginning to have to make adjustments in their policy because of our policies, and I would not be discouraged by what we have done. I am not arguing the Agreed Framework was a total disaster. There are flaws in it, but it was all right in some ways. But we are now going into the next stage and support Chris Hill on this one. Mr. FALEOMAVAEGA. I just wanted to say that I think myself and two other of our colleagues were the first Members of Congress that went to Gaesong in North Korea, and I personally witnessed the tremendous potential there is on this North Korea-South Korea economic relationship, and I think it all means we should promote, and we should encourage the North Koreans and South Koreans to see if they can find some means where there is not only closer economic cooperation but the fact that they are the same people, and we should do all we can to promote that unification process for whatever it relates to. Not only politically, but as a people, they are the same people. Chairman LANTOS. Thank you very much. Mr. FALEOMAVAEGA. I just want to say, from the South Korean leader, he said to me, “You know, the United States, you are our friends, but the North Koreans are our brothers.” I think that is the distinction there. Thank you, Mr. Chairman. Chairman LANTOS. Thank you very much. Congresswoman Sheila Jackson Lee. Ms. JACKSON LEE. Mr. Chairman, thank you very much, and, again, I would like to join my colleagues in thanking you for your leadership on both South and North Korea, your previous visits, and I look forward to the upcoming visit and the leadership of this committee that, I think, will offer a new direction in American foreign policy. Let me thank our distinguished witnesses for your service to this country, and we respect it greatly. I mentioned in my opening comments the military demarcation line. I continue to remind myself of that because now, for more than 50 years, the United States military, men and women from our neighborhoods and our communities, have been, if you will, on the dividing line between North and South Korea. That is something that deserves our commendation and respect, but it also, I believe, requires a serious focus on this moving target, North Korea and its leadership, and, of course, the sensitivity of South Korea. I believe that we cannot cease our involvement and, frankly, view the Iraq War as an enormous distraction from, I think, important business that had been started at the end of the Clinton administration. Secretary Perry, I would like to have you simply edify or educate us on any value that you could give to the terminology, “axis of evil,” and how far that took us in our interaction with South Korea and North Korea. Then I would like to ask, again, the question— I know you have answered it somewhat in many facets or many ways, but I watched Secretary Albright, at the end of the Clinton administration, engage, and no diplomacy is perfect. We

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have already defined North Korea’s methods. They have done it to every administration: Agreements made, agreements broken. It is not unique. But the idea is that we were engaged. Can you assess how far back we were taken by the immediate cessation of the talks that Secretary Albright had begun and was ongoing when the Bush administration came in? So if you would comment on the axis of evil, and where did we wind up after ending those talks when we were seemingly in the middle of some very productive discussions? Mr. PERRY. To comment on a few of your points, in terms of the military demarcation line, we have our troops that are exposed in a very forward location for one reason, and that is because if the North Koreans were to attack, they could very, very quickly be in Seoul, which is half the population of South Korea, and our troops are there to help the South Koreans stop that attack before it gets to Seoul. Ms. JACKSON LEE. And I do not disagree. I am saying, because they are there, we owe them a viable foreign policy with North and South Korea. Mr. PERRY. You bet we do. I never agreed with the use of the term, “axis of evil.” I think it has not achieved any benefits for the United States and has caused us unnecessary problems. Ms. JACKSON LEE. And the ending of the talks that Secretary Albright, at least, seemingly not picking those talks up immediately as the Bush administration took office. Mr. PERRY. I always believe it is better to talk with countries that you have problems with, and the more you dislike the country, the bigger problems there are, the more reason you have to talk with them. I do not think we need to fear from talking as long as we go into those talks with a confidence in what we are trying to do and with strength. Ms. JACKSON LEE. Ambassador Lilley, I understand this administration’s preference for Six-Party Talks. As I understand it, it is to, one, not give deference, respect, or status to North Korea, as well as the fact that North Korea has rebuked or, if you will, broken a number of previous agreements. It is to, in essence, make them behave. But is it not possible to engage in Six-Party Talks with the possibility of bilateral talks, prospectively or simultaneously? There are times when the Six-Party Talks are in order. I would like to say, humorously, China is in the mood, but there are times when they are not. I am delighted to hear that Secretary Hill may be en route. Can not we combine our approaches, particularly in this very difficult and tricky region of the world where we need stability, I think, most definitively? Mr. LILLEY. Well, I think that is precisely what we are doing. We are contacting them bilaterally, and we are contacting them through the Six-Party framework. The fact that they are so concerned about the Six-Party framework, it seems to me, you must be doing something right, and I think that Chris Hill’s ability to pull the parties together and to get some sort of a cohesion on North Korea has caused them to really rethink what they are doing. Also, I go back, in my own experiences in Asia, that we had the coming of democracy to South Korea in 1987. I happened to be there. You do not get a democracy that is going to be your friend necessarily. You get a populous President who comes into his victory on an antiAmerican theme. Nevertheless, he is somebody we can deal with. I think, also, when you bring democracy to Taiwan, which we helped do, that you get somebody who is elected who pushes the course of independence, which causes our foreign policy people considerable grief.

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So a democracy itself is not the solution, but it certainly is the best process for politically running a country, as Churchill said, than all of the others. So, yes, of course, you are going to deal with them, but I do not think you want them to keep setting down the terms of your dealing with them. They say you must deal with us at an authoritative level, or you will not get anything done. Therefore, we will then deal with them on an authoritative level. You find out what they want, and then you use that as a bargaining tool to get them to give you things that you want. You do not just give it to them and move on it. I agree with Secretary Perry that this process of dealing with your enemy is a process that can work and has worked for us in the past, but do not get wrapped around this business of you have got to have high-level, bilateral talks with North Korea, or nothing is going to happen. The real factors that make things happen are the squeeze you put on them, the psychological, economic pressures, the infiltration of their system, the use of your friends and allies to begin to corner them; that is the way to do it. Chairman LANTOS. Thank you very much. Congressman Scott. Mr. SCOTT. Thank you very much, Mr. Chairman. Let me just commend the both of you for an excellent presentation. We have benefitted greatly from it, and thank you, Mr. Chairman, for bringing such an illuminating presentation to us. Let me ask the both of you this question: What if North Korea either transferred or sold a nuclear weapon to al-Qaeda or any other terrorists? Should not we, in our policy, have what we call a “red line” at some point? What would be our military reaction, not for that one point, that if they sold it or transferred it, and we knew it? That is one. Two, should a device, a nuclear device, from North Korea be exploded in one of our cities—New York, Washington, or even Moscow, Paris—any major city, what should that response be if either one of those scenarios were to occur? I say that, with the world knowing now, in October, after being warned, after being told, North Korea went ahead with a nuclear test. I agree with you, Ambassador, it may not have been that successful, but we know one thing now that we did not know. We know two things: One, that they have a nuclear capacity; and, two, we did nothing about it. What should we do if one of their nuclear devices got into the hands of a terrorist group; and, second, what should the military response be should one of those explode in one of our cities? Mr. PERRY. Mr. Scott, it seems to me that our policy now ought to be to deter that from happening. Once it happens, it is a different story, but we should try to deter that from happening. Our best chance, I think, of deterring that from happening is to make sure that North Korea understands that we would consider such an attack to be an attack from North Korea and respond accordingly, even though the actual attack came from a third party. I referred to the statement that President Kennedy made at the time of the Cuban missile crisis, where he said that a nuclear missile launched from Cuba against the United States or other countries in the Southern Hemisphere would be considered an attack by the Soviet Union on the United States, even if the Cubans launched the missile, and we would respond with full retaliation against the Soviet Union. I believe that statement by President Kennedy went a long way toward deterring the catastrophe that could have happened in Cuba at that time. I think we should do a similar thing. Chairman LANTOS. Ambassador Lilley?

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Mr. LILLEY. You can correct me on this, Bill, if you choose. It seems to me that President Clinton made the same point in 1993 to North Korea: If you ever use your nuclear weapons, you face massive retaliation and elimination. I think that is burned in there, and the question is, can you trace something through the terrorist network back to North Korea? These guys are very accomplished smugglers, and they are capable of almost anything, but it seems to me the policy that we carried out has led to them progressively backing away from a sudden violent action directly against us. You are not seeing that happening in the last 10, 15 years. You see them adopting these tactics of using WMD as a tool that they can blackmail us to get food and money and oil without ever getting into that business of putting it in al-Qaeda’s hands. I think, as Secretary Perry says, you have got to do everything possible to stop them from doing that. That is the main thing. Mr. PERRY. I would add to that that the statement we made in the past was of North Korea using a nuclear weapon against us. We need to amend that statement to a third party using a North Korea nuclear weapon. In general, it is very hard to determine the source of a bomb. In this case, and, in particular, in the case of North Korea, we have had international inspectors and American inspectors at that facility making measurements for many, many years, and I believe we could, through forensics, determine whether the bomb came from North Korea or not. So I think we can make a credible threat. Chairman LANTOS. Thank you very much. The gentleman’s time has expired. Mr. Sherman. Mr. SHERMAN. Thank you, Mr. Chairman. A few preliminary points. I think it is simply unacceptable how the State Department has recently cheapened our diplomatic language, particularly, the word “unacceptable,” since we have accepted so many things that we have branded unacceptable. I do not think we should put our faith in regime change, whether that be the violent overthrow of this regime that some in the United States harkens for or China’s hope that somehow North Korea becomes more like China. First, it is unlikely; but, second, if that regime sees itself going under, they could very well do a number of desperate things with nuclear weapons. The ambassador points out that the tide of history is on our side, in the sense that powerful nations with large economies all agree that this puny, little country, with its puny economy, should not have nuclear weapons. The problem we have is that since the dawn of the Nuclear Age, the tide of history does not work the way it used to. Only in a Nuclear Age do people in Tokyo have to fear North Korea, whereas in any other time in our history, a powerful nation and its capital would not have to worry about being exploded by a country that was far smaller and had a far smaller economy. Our colleague, Mr. Rohrabacher, calls for us to use the stick of cutting of food aid. I am informed, and I will ask our witnesses to interject if this is, in any way, wrong, that, in 2005, our total food aid to North Korea was $7.5 million. Obviously, South Korea and China provide far more, but if we just cut off our own, I do not think that is enough to bring the North Koreans to heel. So I think, as the ambassador points out, whether we meet at the highest level or just a high level, or whether we talk to a six- sided table or a two-sided table, does not so much matter. It is what we say, what we do, and what realities we create, and the realities on the

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ground now are that North Korea can survive without our $7.5 million worth of food aid, and as long as they get support from China, they will continue to develop nuclear weapons, particularly when they are not being offered the kind of sincere security guarantees and nonaggression pacts that they might aspire to. So this leaves the issue of how do we change Chinese policy? So I will ask both of our witnesses. I have been told that China does not want North Korea to continue to have nuclear weapons, but it values stability far more than nonproliferation, and it may derive some joy in the pain caused here in the United States by the North Korean nuclear program. Are we going to be able to get China to threaten to cut off North Korea’s oil just by going to the Chinese and saying, we think that is what they should do, in their own interest, and we will send smart people over there to tell them that they do not understand their own interest all that well, but once they talk to us, they will understand that it is in their own interest to change what has been their policy for the last 5 years. Mr. Secretary? Mr. PERRY. I will preface what I am going to say by observing that I tried for 4 years to change Chinese policy relative to North Korea, and I was quite unsuccessful. Mr. SHERMAN. Mr. Secretary, were you ever authorized to tell China that we needed that change, and if we did not get it, it could change our trade policy? Mr. PERRY. I was never authorized to say that. Mr. SHERMAN. Okay. So that leads me to the next point, and that is—— Chairman LANTOS. The gentleman is quickly running out of time, and we will not get an answer from our witnesses. Mr. SHERMAN. Could you have been more successful if you had been able to say that the next boat load of tennis shoes headed to our harbors might be turned around if they did not listen to you more clearly? Mr. PERRY. Probably, if that threat had been credible, but China, I think, fully understands that cutting off trade with China is a double-edged sword. Mr. SHERMAN. I am not talking about cutting of all trade. Chairman LANTOS. Ambassador Lilley, do you want to comment? Mr. LILLEY. Well, we went down that path when I was in China. We threatened to lift MFN if they did not shape up on human rights. Their answer was, go to hell. Then one year we turned around, and we said, “Well, let us go back to the drawing board.”I tried to make the point that what is happening is we are turning the screws on North Korea. That is happening. Now, our intelligence perhaps is not that good, and we are being disappointed or jilted again, but this is going on. This is happening. Do you want them to cut off all of the oil? No. The Chinese are not going to do that. They are not going to get these guys cornered because they know they will do something horrible. Do not do it that way; do it our way. Gradually, the water torture, a thousand drips on your head; this is the way to do it, not your way. Mr. SHERMAN. I wish I was more confident that continuing the present course would yield results, and I yield back my time. Mr. PERRY. We will see. Chairman LANTOS. Ambassador Watson. Ms. WATSON. Thank you, Mr. Chairman, and I want to thank our two ambassadors. This is very, very helpful. We have had reduction in our forces over there. We had a pretty large component in South Korea, and I was in that part of the world for quite a number of

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years. Our bases have been closed, and the number of U.S. troops that we have had have been reduced. I would like to know what impact has this force restructuring had on our relationships, United States and South Korea relationships, and has it impacted the Six-Party Talks in any way? Let me start off with Ambassador Lilley. Mr. LILLEY. Well, we are going through a very difficult phase of renegotiating our status of forces and our forces in Korea right this minute, which is moving from Yongson to Pyongtaek, which is 70 kilometers away. We are trying to get out of that. When I was there in Korea, we had the 8th Army golf course in the middle of Seoul. It was a blight on Korean nationalism. It took us 21⁄2 years to move that out because there were elements in the United States Government that did not want to do that, but we got it done. We have to lower our profile. We have got to get into this command control in an emergency, and we are dealing with that right now with them. And it turns out, when we push it to the wall and say, “Let us do it by 2009,” they say, “2012. Okay?” You will get your wartime control back in 2012? They are very concerned that if America pulls out precipitously our security support for South Korea, they could go into economic decline. This was very much on the South Korean President’s mind. Be careful on this one. Talk to us about it before you move, he said. I think they understand that we can be quite offended by some of the editorials and demonstrations and the labor unions and the crazy young students coming after us and damning American imperialism as the cause, and this happens all of the time. But I think we are moving in the right direction. The combined forces command in South Korea is going to go. We cannot manage that anymore with an American four star in command of their troops in a crisis situation. You will not be able to do that. You will have to change that. I think what we are doing is we are trying to build up the U.N. command. There were 16 U.N. countries contributing to the forces when we fought for Korea. That anachronism still exists, but I think General Bell has been saying, “Look, take the U.N. here and use that as an instrument to establish a presence that the North and South Koreans can have confidence in to sustain our ability.”But there is always a drawback to this, and there was in these elections where the current populist President got elected. Their two little girls were killed by one of our Humvees, and this turned into a really violent, anti-American move because we took the two guys out and acquitted them. These things come up, but my sense is that we are moving in the right direction on this one, and we are shifting out of downtown Seoul, and we are giving them back the command structure and yet maintaining a deterrent to North Korea that is reliable. That is the problem. I think we are doing it. Chairman LANTOS. Secretary Perry? Mr. PERRY. I think that it is very important, both for United States policy and for South Korea policy, for the United States to maintain a modest force in South Korea for the indefinite future. The move out of Seoul to south of Seoul, I think, is a good move, and I commend the administration for doing that. The modest reduction in forces we are making there, I think, is also an acceptable move. I have concerns about the reduction in forces along the DMZ, and I have concerns about the change in the command structure, but, on balance, I think the actions taken by the administration on South Korea and troop forces, I think, have been good measures, and I support them.

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Ms. WATSON. Let me just end by this, and it will be real quick. It has been suggested that South Korea could repulse an attack by North Korea without our support. I would like to hear your opinions on that, and thank you, Mr. Chairman, for the indulgence. Chairman LANTOS. Surely. Secretary Perry? Mr. PERRY. I think it would be a catastrophe for both North and South Korea. Ultimately, probably the South would win, but the real issue is what happens to the northern part of South Korea? What happens to Seoul and environments? They would be devastated by such an attack. The only chance of stopping that attack before it gets to Seoul is to have United States power at the DMZ and, most importantly, United States air power to blunt that attack before it could get into Seoul. The South Koreans could not stop that from happening. Chairman LANTOS. Ambassador Lilley? Mr. LILLEY. I just would add to what Secretary Perry said. I would say that North Korea has over 10,000 artillery pieces aimed right at Seoul, with conventional arms. If the balloon goes up, these could take out probably three-quarters of Seoul, and you would lose millions of people right away. So we have to do everything possible to prevent that from happening, and we are going to have our air power remain there at Osan. I think we have F–16s there now. We are able to deliver a punch. We can have the carriers based in Japan come up along the Korean coast, and they could launch attacks on North Korea, if provoked. If the North Koreans know one thing, and I went up to Juche Tower, this tower they have in the middle of Pyongyang, and looked down, and the little girl guide said to me, “Do you realize, in the Korean War, the United States obliterated this whole place?” Now, I am supposed to feel guilt. I said to her, “Look, I was in the nose of a B–26 that flew from Seoul down to Pusan and Japan, and I looked out, and I saw the absolute destruction of South Korea all the way, every tree, every village smashed.” We left it at that. Chairman LANTOS. Thank you very much. Mr. LILLEY. I had no sense of guilt. Chairman LANTOS. Thank you very much. Congressman Payne. Mr. PAYNE. Thank you very much. Good to see both of you, and, Mr. Perry, remember our troop to Goma, Lake Goma, when the cholera took over and the 2 million—— Mr. PERRY. I remember it very well. Mr. PAYNE. I left Rwanda after the genocide, and I have always admired the work that you have done, and it is good to see Ambassador Lilley. I also agree that the talks with North Korea were very helpful, and you have already laid out where they could have been and where they are as a result of the talks. We have this new policy: Do not talk to certain people. We cannot talk with Syria. We cannot talk to Iran. I think it is a bad policy. I also agree with Ambassador Lilley that, you know, you talk about Most Favored Nations status with China. Then we went in and gave them permanent trade relations. That is even worse. This is in there, and, I think, if we had not given China permanent trade relations, we could have had some real leverage over them, and I think we need to revisit that, the way China is behaving in Sudan and dropping all kinds of human rights conditions for loans to countries in Africa. I think that China could be very destructive in the future. And also, Mr. Hoover, Ambassador Lilley, waited a little while before—you know, that starvation had gotten pretty bad in the Ukraine before we really laid the line down. I think Ukraine was one of the worst genocides that really went on at that time.

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Also, on the Asian Communists, too, I certainly agree that many of them were just fighting against the imperialists and colonization, and that was a big difference, where, in Eastern Europe, it was just under Soviet domination. But the countries were fighting against the French in Vietnam, and I think a lot of our support for our allies, the NATO countries, even in Africa and in Asia, pushed many countries to Communists, where they were really, I think, freedom fighters or national liberation movements and that kind of thing. However, I do have a question. The business—and I hope we have a hearing sometime on China and where we are going. Are they going to be our friends? We have our business people that have a love fest going with them. We have some of our defense people who are saying, you know, they are building up a Navy. They are starting to go up into space. I think we need to make a decision on, are we love with China, or are we going to hate them, because we really get such crossed signals that it is confusing, I think, and it is going to get worse in the future. Just this question: With the population of South Korea aging, like everywhere else, and the younger people not having the same feel toward the United States that defended South Korea and held it from being overrun by the Communists, the older people being very proUnited States—I think you touched on it a little bit, but if you could tell me, where do you think we are going in the future because the younger people, even though they have not had the direct relation, seem to be more sympathetic to North Korea than the older people who remember what the United States did to prevent South Korea from North Korea? And it seems, in opinion polls, that the younger Koreans in the South have a stronger feel and not are as anti-North Korea and almost some anti-United States. So, as time goes on, how do you see that playing out, since, I guess, older people will be less and less, and younger people will be more and more, both of you, if you would? Mr. PERRY. That is a very good question, Congressman Payne. I agree with your observation that there is a big difference between the older and the younger people, in terms of their view of the United States. I believe that the younger ones can be won over, particularly as they get a little older. And I observed that the people that I worked with when I was the secretary, the ones in their thirties and forties who were in the Government of South Korea then, in their college days, had been leading the demonstrations against the United States, and they changed. When I was over there on my last visit to South Korea, I met with this younger generation. I had a special meeting of the people, of the firebrands, who were very much antiU.S. and I have the same view about them. They can be won over, too. One of the things we are doing to help on that is removing the aggravation of having all of our troops in the middle of Seoul. I think that is a very positive action. Secondly, if we can get going solidly on the negotiations with North Korea, that, I think, would make the biggest difference. We want to do that for our own reasons alone, but I think it would also very much help the relationship in South Korea. Chairman LANTOS. Ambassador Lilley? Mr. LILLEY. I am not trying to belittle in any way the so-called anti-Americanism in South Korea, but when I arrived in South Korea in 1986, I was burned in effigy before I arrived. There were probably about 20,000 or 30,000 people in the square, and the South Korean police, in their Darth Vader costumes, pushing them back. All of that continued in the summer of 1987, we went through huge demonstrations that were against the government and against the United States.

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So all I can say is this has been around for a long time. My predecessor in Korea wrote, I think, 10 cables saying, anti-Americanism, this is the end, and, of course, it was not. There will be elections in South Korea in December of this year. The leading party in the polls is the conservative party; the opposition party—it is the GNP. The polls are all in their favor. We see the spectaculars, but there seems to be a body of people that are voting in—I guess I should not use this—in a responsible way. I would agree with Secretary Perry in the sense that one of the firebrands, when I was in Korea, is now the head of the ruling party. You find this happening in Korea. It is an evolutionary process. You have got to eliminate the things that are causing real friction and then get on with the fact that, still, an awful a lot of South Koreans migrate to the United States. The communities here are large, and the church plays an important role in stabilizing South Korea. Chairman LANTOS. Thank you very much. Congressman Costa. Mr. COSTA. Thank you, Mr. Chairman, again for this level of expertise testimony that we are having this afternoon. It is very, I think, informative for all of us. As I listened to the two witnesses testify about a history of policy that has gone on now for five decades-plus, through both Democratic and Republican administrations, I am mindful of the fact that if the judgment for success is that South Korea has been a viable democracy and a successful economy, then, by and large, notwithstanding whatever mistakes have been made, it has worked, more or less. I think we are in the long haul as it relates to North Korea, as we have been over the last five decades, and I am wondering about what information you might enlighten us with regards to the stability, given the current regime and its history from father to son. You have laid out several scenarios this afternoon as to what if, as we look down the road. The successor from father to son, I think, was pretty clear, but what happens if he is to be either toppled or has health problems? What would be, in your view, the reaction? Could the government, in some fashion, still, with the military, stand in some way? What are your thoughts as to after the current ruler is no longer there? Mr. PERRY. I believe that, unfortunately, the present regime is stable; that is, through their control of information and through their secret police, they maintain very adequate control of their country. I do not expect to see a Romanian- or Albanian-type popular overthrow of the government there. What you could see is a coup. With the passing of Kim Jong Il, you could see a coup of some sort or a military push, which brought, among the people who are contending to succeed him, there might be a competition as to which one. This would not, I think, bring about a fundamental change in our relationship with North Korea. It would be another one of the same. Ambassador? Mr. COSTA. Ambassador? Mr. LILLEY. I would agree with Secretary Perry that NK control is formidable, and you do not see the major cracks coming, but there are minor cracks: The refugees that are coming out, and, as the chairman knows very well, when the refugees come out, the regime begins to sink. The Chinese are watching the refugee flow, and they are sending enough refugees back to North Korea to keep the North Koreans placated at the same time they are shipping them over to South Korea. The refugees are a real problem because they really have been brought up in this hothouse atmosphere where they cannot do anything.

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But the real control that Kim Jong Il has, despite the fact that his sons turned out to be a mess—the oldest one, you know, got caught in Japan on a false passport trying to get into Disneyland. It is something out of a bad movie, but his control over the elites, the military, the Korea Workers Party, is very strong, and it is done in terms of coercion, and it is done in terms of buying them off. He has got all of these palaces, the Remy-Martin, the lovely Korean ladies. All of these things are available to them. They live on top of the world, a million, 2 million of them, and if they did not have this, they would be shining shoes in Seoul because they have no talents to do anything except kill and create a military-industrial enterprise. So I am saying that I agree, but there is no reason to give up on this because you are beginning to get into them: Gaesong, the cross-border between China and North Korea. You are beginning to get signs that the economy is not working, and they have to change. You get this from middle-level bureaucrats. So you see some of the seeds are there, but we cannot jump in and say it is going to change quickly. No. That is not going to happen. Mr. COSTA. So you see the ruling class able to continue the status quo for—— Mr. LILLEY. They have got a vested interest in doing that, but, again, the intelligence is not good, and in a fragile situation like that, we could all be very surprised that something could happen suddenly, but all of the signs are it is not happening. Chairman LANTOS. Thank you very much. I know, gentlemen, I speak for every member of this committee and, I think, for the American people, that we are extremely lucky to have the two of you willing to give many years of your life to public service. This has been an extraordinarily valuable and analytical presentation, and we are in your debt. Thank you very much. Mr. CHABOT. Mr. Chairman, before you bang the gavel, and I apologize, I just wanted to echo what the chairman said. Having been to North Korea twice, not professing to be any kind of an expert, I was listening to your testimony from the TV, and I just want to say thank you both so much for everything that you do and for being enlightening to us. Secretary Perry, I had the honor of traveling with you when you were defense secretary, and my opinion of you was great then, and it is as great today. Thank you. Ambassador, thank you for all of your good work. Thank you, Mr. Chairman. Chairman LANTOS. Thank you for your comment. This hearing is adjourned. [Whereupon, at 3:55 p.m., the committee was adjourned.]

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Chapter 9

N ORTH K OREAN H UMAN R IGHTS : A N U PDATE , H EARING BEFORE THE S UBCOMMITTEE ON A SIA , THE PACIFIC , AND THE G LOBAL E NVIRONMENT OF THE C OMMITTEE ON F OREIGN A FFAIRS , H OUSE OF R EPRESENTATIVES O NE H UNDRED T ENTH C ONGRESS F IRST S ESSION M ARCH 1, 2007 *

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U.S. Government Printing Office THURSDAY, MARCH 1, 2007 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ASIA, THE PACIFIC, AND THE GLOBAL ENVIRONMENT, COMMITTEE ON FOREIGN AFFAIRS, Washington, DC. The subcommittee met, pursuant to notice, at 2:06 p.m. in room 2172, Rayburn House Office Building, Hon. Eni Faleomavaega (chairman of the subcommittee) presiding. Mr. FALEOMAVAEGA. The subcommittee hearing will come to order. I am sure that my good friend, the distinguished ranking member is on his way, and should be here any second. In the meantime, I am going to begin the hearing, and certainly appreciate the presence also of one of our distinguished senior members of the committee, the gentleman from California, Mr. Royce. On behalf of the subcommittee, I would like to welcome Mr. Jay Lefkowitz, who serves as Special Envoy for North Korean Human Rights, a position to which he was appointed by President George Bush pursuant to the North Korean Human Rights Act of 2004. Mr. Lefkowitz is also a senior partner in the law firm of Kirkland & Ellis. Previously to that, Mr.

*

This is an edited, excerpted and augmented edition of a U.S. Government Printing Office Publication.

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Lefkowitz served as Deputy Assistant to the President for domestic policy and general counsel to the Office of Management and Budget for President Bush. He was also Director of Cabinet Affairs and Deputy Executive Secretary to the Domestic Policy Council for the President. In 2004 Mr. Lefkowitz was appointed to be a member of the U.S. Delegation to the International Conference on Anti-Semitism in Berlin, Germany, sponsored by the Organization for Security and Cooperation in Europe. Mr. Lefkowitz also serves as a member of the U.S. Delegation to the United Nations Human Rights Commission in Geneva, Switzerland. Mr. Lefkowitz did his undergraduate law studies at Columbia University, and I welcome you, Mr. Lefkowitz. At this time if my good friend and the author of the North Korean Human Rights Act of 2004, one of the founding stalwarts of giants in passing this very important legislation, my good friend the gentleman from California, Mr. Royce, if he has an opening statement. Mr. ROYCE. Mr. Chairman, I will give a brief opening statement, and Mr. Lefkowitz, I certainly welcome you, and I wanted to share with you, Mr. Lefkowitz, I have taken a number of trips to the peninsula, and had an opportunity to talk in Korea to many people who survived their experiences in some of these work camps, and one of the memories that brings back to me is when I was very young my father who had served in the Second World War and had taken photographs when Dachau was liberated, took pictures there of what he found that day, and he now goes out and speaks about it on campuses. The photographs which some of the survivors of these war camps have shown me of emaciated individuals basically in striped pajamas are so eerily reminiscent of the photographs that I saw as a child when I snuck into his Army trunk and opened it up and looked at copies of the pictures that he had taken at Dachau that I find it absolutely, absolutely horrific. And when I talked with one of the senior defectors, he had been the minister basically of propaganda, he told me actually close to 2 million people perished by starvation because the regime was putting the money into a military buildup rather than feeding the people. And you know human rights in North Korea remain abysmal. There is no improvement. The gulags still operate. Political executions are commonplace. I talked to people who lost loved ones as a result. North Koreans remain oppressed in every manner possible. I was very pleased to read some of the op eds—and I have read some of your work too— in which concerns have been raised about the Kaesong Industrial Complex, and I just want to talk about that for a minute. North Korea laborers are not benefitting from this investment. The regime is. They are not being paid. The regime is being paid. They are basically work gangs, and I have counseled the administration to hold firm and reject the South Korean push to include Kaesong made goods in the Free Trade Agreement. I am for the Free Trade Agreement but not with that provision in it for North Korea, for the regime and not for the North Korean people. As I say, I have chaired the United States interparliamentary exchange with South Korea for a number of years, and this is just a non starter for me, and I think something has to be done about it. Yesterday the full committee heard testimony from Chris Hill, our Chief Six-Party Talks Negotiator, and I am a bit uncomfortable with the symbolism of us treating human rights separately. I will let you know that. I look forward to hearing today about human rights, and how they are going to be a factor hopefully in the Six- Party Talks.

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Whatever the fate of the talks—and there are many reasons to be skeptical—we have got to keep pushing for the human rights agenda. As you know, that did help in making changes to the east bloc, and I think it can make change here. A free North Korea would be far less threatening, and I am pleased that the administration is providing more resources for radio broadcasting to North Korea aimed at freeing the North Korean people. I had authored legislation in the past to expand those broadcasts. We should be doing more for the North Korean refugees too. And lastly I would like to submit something for the record, Mr. Chairman. I would like to submit a statement by Adrian Hong, the Executive Director of the NGO Liberty in North Korea. Mr. Hong has been working tirelessly to aid North Korean refugees at considerable personal risk. He raises some key concerns over the implementation of the North Korean Human Rights Act. As you know, by some estimates there are 300,000 North Korean refugees trying to survive in China today, and China is not living up to its responsibilities under the U.N. Convention of Refugees. So without objection if I could submit that testimony. Mr. FALEOMAVAEGA. Without objection the gentleman’s statement will be made a part of the record. Mr. ROYCE. Thank you, Mr. Chairman. [The information referred to follows:]

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Mr. FALEOMAVAEGA. I purposely withheld giving my opening statement with the hope that my good friend, the distinguished ranking member, would be here so that he will have an opportunity to listen and hear what I have to say concerning the issue, and now that he is here the gentleman from Illinois, I will proceed. Since 1946 when the Soviet Union placed Kim Jong Il’s father in power, North Korea has maintained a totalitarian regime based on Stalin’s system. North Koreans have no freedom of expression or movement. No dissent of Kim Jong Il is allowed. Most North Koreans have no access to media sources other than the official media. Severe physical abuse is meted out to citizens who violate laws and restrictions. An important component of Kim Jong Il’s system is the North Korean elite class. The largest estimate of the elite class is nearly 6 million out of some 23 million people that make up the population of North Korea. The elite have access to food, business opportunities, and luxury goods while millions in North Korea are starving. While the Bush administration has given priority to the nuclear issue, not so much attention it seems to me has been paid to human rights. In fact, the administration has proposed no negotiations with North Korea over human rights but has asserted that human

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rights is one of the several issues to be settled with North Korea after the nuclear issue is resolved. For now the Six-Party Agreement of February 13 calls for the United States and North Korea to start bilateral talks aimed at resolving bilateral issues and moving toward full diplomatic relations. I will be interested in hearing from our witness if this means beginning discussions about human rights as well, and if so, what will the role of the Special Envoy be if Six-Party Talks include this important topic? I would also like to know how the Bush administration plans to address the unresolved issues of Japanese citizens kidnapped by North Korean officials. How concerned is Japan if the administration might agree to move North Korea from the terrorism list even though the kidnapping issue has not been settled? Also, given that China and South Korea believe that diplomatic relations with North Korea should be established once the nuclear issue is resolved, even though the United States believes otherwise, would a United States Embassy and United States ambassador in North Korea influence the human rights situation in North Korea? What about North Korea’s prison camps? The U.S. Committee for Human Rights in North Korea published a report which describes a system of concentration camps that houses some 150 to 200,000 inmates including many political prisoners. Reports cite harsh conditions, executions and tortures. Finally, there is the issue of North Korean refugees. The State Department estimates that between 30 to 50,000 North Korean refugees live in China. It is my understanding that China considers the North Koreans to be illegal economic immigrants, and does not allow the North Koreans to apply for asylum. There are also some suggestions that China punishes those who attempt to defect to South Korea. The State Department reports that North Korean women are trafficked for sexual exploitation and forced marriages with Chinese men while North Korean men are trafficked for forced labor. Congress has attempted to take action by passage of the North Korean Human Rights Act of 2004. The question is: Where are we now, and is this legislation being effectively implemented given that the legislation authorizes up to $20 million annually for assistance? To my knowledge, a total of about 30 North Korean refugees have been brought to the United States. I am sure there are many factors influencing why this number is so low, and I look forward to hearing from our witness regarding this point. Again, I do welcome our Special Envoy, Mr. Lefkowitz, and I thank him for taking time from his busy schedule to be with us this afternoon, and now I recognize our distinguished ranking member from Illinois for his opening statement, Mr. Manzullo. [The prepared statement of Mr. Faleomavaega follows:]

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PREPARED STATEMENT OF THE HONORABLE ENI F.H. FALEOMAVAEGA, A REPRESENTATIVE IN CONGRESS FROM AMERICAN SAMOA, AND CHAIRMAN, SUBCOMMITTEE ON ASIA, THE PACIFIC, AND THE GLOBAL ENVIRONMENT Since 1946 when the Soviet Union placed Kim Jong-il’s father in power, North Korea has maintained a totalitarian regime based on Stalin’s system. North Koreans have no freedom of expression or movement. No dissent of Kim Jomg-il is allowed. Most North Koreans have no access to media sources other than the official media. Severe physical abuse is meted out to citizens who violate laws and restrictions. An important component of Kim Jong-il’s system is a North Korean elite class. The largest estimate of the elite is nearly 6 million, or 30 percent of the population. The elite have access to food, business opportunities, and luxury goods while millions in North Korea are starving. While the Bush Administration has given priority to the nuclear issue, not so much attention has been paid to human rights. In fact, the Administration has proposed no negotiations with North Korea over human rights but has asserted that human rights is one of several issues to be settled with North Korea after the nuclear issue is resolved. For now, the Six Party Agreement of February 13th calls for the United States and North Korea to “start bilateral talks aimed at resolving bilateral issues and moving toward full diplomatic relations.” I will be interested in hearing from our witness if this means beginning discussions about human rights and, if so, what will the role of the Special Envoy be if Six Party talks include this topic? I would also like to know how Bush Administration plans to address the unresolved issue of Japanese citizens kidnapped by North Korea. How concerned is Japan that the Administration might agree to move North Korea from the terrorism list even though the kidnapping issue has not been settled? Also, given that China and South Korea believe that diplomatic relations with North Korea should be established once the nuclear issue is resolved, even though the US believes otherwise, would a US Embassy and US Ambassador in North Korea influence the human rights situation in North Korea? What about North Korea’s prison camps? The US Committee for Human Rights in North Korea published a report which describes a system of concentration camps that houses 150,000 to 200,000 inmates, including many political prisoners. Reports cite harsh conditions, executions and tortures. Finally, there is the issue of North Korean refugees. The State Department estimates that 30,000–50,000 North Korean refugees live in China. It is my understanding that China considers the North Koreans to be illegal economic immigrants and does not allow the North Koreans to apply for asylum. There is also some suggestion that China punishes those who attempt to defect to South Korea. The State Department reports that North Korean women are trafficked for sexual exploitation and forced marriages with Chinese men while North Korean men are trafficked for forced labor. Congress has attempted to take action by passage of the North Korean Human Rights Act in 2004.

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But the question is, where are we now, and is this legislation being effectively implemented given that the legislation authorizes up to $20 million annually for assistance but, to my knowledge, only a total of 30 North Korean refugees have been brought to the US. I am sure there are many factors influencing why this number is so low and I look forward to hearing from our witness regarding this point. Again, I welcome Special Envoy Lefkowitz and I thank him for being with us today. I now recognize the Ranking Member for any opening statement he may have. Mr. MANZULLO. I would just ask that my opening statement be made a part of the record. I look forward to your testimony. Mr. FALEOMAVAEGA. Without objection. [The prepared statement of Mr. Manzullo follows:]

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PREPARED STATEMENT OF THE HONORABLE DONALD A. MANZULLO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS Good afternoon and welcome to today hearing on the implementation of the North Korea Human Rights Act. I am pleased to extend a warm welcome to Special Envoy Jay Lefkowitz. This is a good time to discuss North Korea human rights since we just met with Assistant Secretary Hill yesterday. I am interested to hear your assessment regarding the implementation of the North Korea Human Rights Act of 2004. As I mentioned during yesterday’s hearing on the Six-Party Talks, I fully support the Administration’s efforts to denuclearize the Korean peninsula. At the same time, I fully recognize that the North has an abysmal record on human rights. The balance between diplomatic and human rights priorities must be difficult given the North’s actions. As the Administration continues to negotiate in the Six-Party Talks, I want to emphasize my position that human rights must not be forgotten. I look forward to your testimony, and I will have some follow-up questions about the implementation of the Act. Mr. FALEOMAVAEGA. I would also like to note the presence of another distinguished member of our committee, my good friend the gentleman from California, Mr. Rohrabacher, who has joined us for this hearing this afternoon. Dana, did you have an opening statement? Mr. ROHRABACHER. Thank you very much, Mr. Chairman, and let me congratulate you for holding this hearing, and making this so early on into your chairmanship which demonstrates to all of us and should demonstrate to the people of Korea that you hold the human rights issue very high on your agenda, and that you believe especially in Korea that the people there should understand that all of us are concerned about the incredible violation of the rights of the people of North Korea. In fact, North Korea is the world’s—and as far as my calculation and I am anxious to hear from the witness—the world’s worst human rights abuser. We should be standing shoulder-to-shoulder with the people of Korea, both North and South, demanding that North Korea become in line with and have humane values and democratic values that treat people decently and do not have the type of repression.

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Let me just note this: There is no area in the world that is a starker contrast of the difference between freedom and tyranny than on the Korean peninsula. These very same people in North Korea not only are their lives incredibly regimented and repressed but they are deprived, and they are four inches shorter in average than what the people are in South Korea. So let us applaud the people of South Korea and the freedom in South Korea. Condemn the North Korean tyranny. And one last note and that is: All of us if we stand together with the people of Korea, Mr. Chairman, the people of South Korea need to stand together with the people of North Korea. That we have so many refugees in China and all the people in North Korea who know if they escape that tyranny that the current Government of South Korea will not permit these fellow Koreans to come to South Korea is a travesty. And the people of South Korea should demand that Koreans who are fleeing tyranny be permitted refuge in South Korea if nothing else. Thank you very much, Mr. Chairman, and I am looking forward to the testimony. Mr. FALEOMAVAEGA. I want to certainly compliment the gentleman’s statement in this hearing this afternoon, and in all the years that I have served as a member of this committee there is one person that I would count on when you talk about human rights is none other than my good friend from California, and I want to assure the gentleman that in my capacity as the chairman of this subcommittee that I always will want to work very closely with my distinguished members of the other side of the aisle, and to work on a bipartisan basis because after all, this is not a Republican or Democratic issue. This is a moral issue that affects all human beings, and I thank the gentleman again for his observation, and we would all like to hear now from Mr. Lefkowitz. Please proceed.

STATEMENT OF THE HONORABLE JAY LEFKOWITZ, SPECIAL ENVOY FOR HUMAN RIGHTS IN NORTH KOREA Mr. LEFKOWITZ. Thank you, Mr. Chairman, and members of the committee. I cannot help but comment that I am in heartfelt agreement with really all of the sentiments that I have heard this morning from all of you, and I really appreciate the fact that this is a bipartisan representation on the committee. As the chairman said, human rights is not a Republican or a Democratic issue. It is an issue where America ultimately will be tested in the court of public opinion. I had the privilege of working for President Bush for several years in the White House, and one of the most memorable meetings that I attended was a meeting when the President was deciding whether or not to launch the largest program ever designed to assist the people in Africa and the Caribbean who were suffering from AIDS, and at one point the President simply said, we are too wealthy and too compassionate a nation not to take this step, not to do whatever it takes because otherwise how will history judge us? Members of the committee, history has judged America well and poorly based on how we have dealt with the sufferings of other people. Sometimes unfortunately we have turned our backs, and oftentimes we have stood strong with people around the world who are suffering, and I think it is testament to this Congress, to this body, and to the President in his

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administration that we are working together in the pursuit of a better life for the people of North Korea. I am very pleased to appear once again before the committee to discuss the North Korean human rights situation and our efforts to help the North Korean people. I would like to make some introductory observations about where we have come in the last couple of years, where we hope to go, and touch on a number of the questions, Mr. Chairman, that you asked, and then obviously answer any other questions apart from that. The promotion of human rights is not just a noble end in itself although it surely is just that but it is also fundamentally something much more. It is a means to a broader foreign policy and national security objective. Modern history has repeatedly demonstrated—most recently in the waning years of the Cold War— that human rights is a means to peace. It is a means to freedom, and I believe that that can and will be true with respect to North Korea in the coming years. Since my testimony a year ago, the North Korean Government regrettably has taken no significant steps to improve its abysmal human rights record. Its conduct stands as an affront to its own citizens and to the norms of the international community. It is, I would submit, as Mr. Rohrabacher said, probably the worst human rights abuser in the world. The regime ignores the fundamental prerogative laid out in the University Declaration of Human Rights. Many of the human rights abuses in North Korea are all too familiar to the members of this committee but a few points bear repeating. There are anywhere from 150 to 200,000 North Koreans who live in a vast network of political concentration camps, and let us not sugar coat the conditions in which these people live. They are concentration camps. The rights of free speech, worship, assembly, press, fair trial, the right to emigrate, the basic fundamental rights that we take for granted in the United States and throughout the free world are ignored. The regime conducts mandatory political indoctrination sessions, attempts to control all information, and supports a cult of personality around Kim Jong Il that is reminiscent of the very worse dictators of the 20th century. North Korea has been sanctioned under the International Religious Freedom Act since 2001. The North Korean Government also has grossly negligent policies that exact a shocking humanitarian toll and put its population at risk of severe mass starvation. We believe that the regime could feed its population if it wanted to but its highly centralized economy fails each year to produce even enough food for the country to subsist and that which is produced is often diverted to support military objectives, and indeed to feed the military not the civilian population. In the mid-1990s, these policies resulted in a food shortage and a famine that killed an estimated 1–2 million North Koreans and sparked a refugee exodus. According to the World Food Program— and this surprised even me—I just learned last week that the World Food Program director has said that the average 7-year-old North Korean boy is eight inches shorter and 20 pounds lighter, and has a 10-year shorter life expectancy than his 7-year-old South Korean counterpart. That is just a shocking statistic. While information is limited, we have indications that the food shortage this spring in North Korea could be more acute than it has been since the famine years of the 1990s. Our policy is to separate food aid from policy issues, and we would genuinely like to provide humanitarian assistance to the North Korean people, whether food aid or health care aid or other genuine humanitarian aid.

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But as with humanitarian assistance anywhere in the world, we must insist on minimum international standards for monitoring and for distribution in order to ensure reasonably that it reaches those for whom it is intended because humanitarian aid that does not reach the people for whom it is intended does not serve a humanitarian purpose, and it is not worthy of that name, and we suspect, strongly suspect North Korea of diverting foreign assistance to its military, to the elite, and for the black market. What has changed in the last year is not regrettably the conduct of North Korea with respect to human rights but the response by the United States and other countries to this tragedy. Transforming the situation in North Korea will require pressure from within fundamentally but it will also need strong backing from the international community. Our Government has opened its doors to North Korean refugees. True, not in sufficient quantities yet but there are a lot of hurdles internationally to working with countries in the region to facilitate the movement of refugees. When President Bush appointed me as his Special Envoy, he made it clear to me that refugees should be my number one priority. It should be the first thing I should try to tackle, and there were a number of barriers—both domestically and internationally—to moving forward but with the cooperation of people from many agencies of our own Government, and with the cooperation of many of our friends and allies in Asia, we have been able to open our doors. In 2006, in May, the first group of six refugees from North Korea was brought to the United States. We have now, as the chairman said, had many others but far too few given the 50, 100, 150,000 refugees living in northeast China. We do not even know precise numbers. And while we expect that most North Korean refugees will continue to choose to resettle in South Korea, for obvious reasons and for proper reasons, we impose no quota or limit at all on the number of North Korean refugees we are willing to accept and resettle in the United States. The United States has the highest number of refugee resettlements throughout the world. It is something we are very proud of, and we will continue to demonstrate that leadership when it comes to North Korean refugees. To encourage a peaceful, long-term transformation, we need to enhance significantly the quantity and quality of information going into North Korea that is not subject to censorship. Voices that are not part of the government’s propaganda apparatus can open people’s minds and provide encouragement to those who seek freedom. Through means such as radio broadcasting, North Koreans can learn that they do not live in a socialist paradise, and that contrary to the claims of the regime, people who live outside of North Korea actually enjoy a remarkable degree of freedom and prosperity. Last year the Broadcasting Board of Governors provided increased resources to the Korean services of Voice of America and Radio Free Asia. For the next fiscal year, beginning this October, the administration has requested a significant increase for these services, from $4.6 million to $8 million, and along with many other improvements this increase will allow Radio Free Asia to begin transmitting in medium wave which we believe will be a highly effective supplement to its current shortwave broadcasting. I would ask this committee to support this important budgetary request. Appropriated funds have also contributed partially to broadcasts by independent groups. Some of the most persuasive voices are not those of U.S. Government employees but of private citizens who can sympathize with those living under repression. These include the voices of Korean democracy activists, defectors from North Korea and Korean Americans.

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Some Japanese groups have also tried limited broadcast attempts in an effort to reach those abducted in Japan by the North Korean Government. And for the first time, President Bush’s budget requests funds specifically for the promotion of North Korean human rights. We have a $2 million request in the State Department budget, and when combined with the BBG request that we are making, we are asking Congress for a total of $10 million in fiscal year 2008 to promote North Korean human rights, and additional funds will also be provided from accounts related to refugees and victims of trafficking in persons. I believe, members of the committee, that we can deploy these funds effectively, and I would ask that you support our request. Other changes in the last year include a greater focus on North Korean human rights abuses by the international community. In October, the U.N. General Assembly’s Human Rights Committee voted 91 to 21 in favor of a resolution on North Korean abuses. I have to say I am aghast that 21 countries could have objected to such a resolution but most significantly and most promisingly, the Government of South Korea abandoned its past practice of abstaining from the vote on this resolution, and it voted in favor. In addition, the European Parliament passed a resolution addressing North Korea’s human rights abuses. We certainly hope that Japan will now take the lead in offering a resolution on North Korea at the U.N. Human Rights Council in Geneva, despite the significant weaknesses of that body. A resolution on North Korea would be a good test case for the Human Rights Council, and indeed we look forward to the leadership of the new Secretary General who certainly understands the human rights abuses in North Korea better than almost anyone on the international stage, and we look forward and call upon him to demonstrate real leadership on this issue. A direct dialogue with North Korea on human rights has been elusive in the past year. The Governments of North and South Korea invited me twice to visit the Kaesong Industrial Complex, just inside of North Korea above the DMZ, in July and November of last year. I had planned to commence the human rights discussion in the context of that trip. Unfortunately that trip was postponed each time in response to North Korea’s aggressive activities. First, a ballistic missile test and then nuclear weapons testing. In the coming months I intend to seek a human rights dialogue with North Korea. The February 13 agreement reached in the Six- Party Talks creates five working groups, one of which will involve discussions on the normalization of our relations, and as I have said repeatedly, if the North Korean Government wants to be seen a legitimate by the international community—and certainly by the United States—it will have to make progress on human rights. We believe a discussion on human rights should take place prior to a full normalization of relations. This administration remains committed to this cause. It is an issue of particular importance to President Bush, and one which he speaks about frequently. Last April in a one-on-one meeting with Chinese leader Hu Jintao the President expressed his grave concern about China’s treatment of North Korean refugees. Just 4 weeks earlier the White House had expressed its serious concern with China’s treatment of a specific North Korean refugee, Kim Chun-Hee, a young woman thought refuge in a Korean school in Beijing only to be returned forcibly to North Korea by the Chinese Government despite being implored by the United States and other governments and the United Nations to protect her. The week after President Hu’s visit to Washington, President Bush met in the Oval Office with defectors from North Korea and a Japanese family whose daughter was abducted

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by North Korea. It was one of the most moving meetings that I have ever participated in. We plan to continue our diplomacy and our communication efforts, and to expand our support to the NGOs and to those programs that we believe will have a positive effect. Our strategy is to support the aspirations of the North Korean people, to attempt to alleviate their suffering, and to build an international consensus that North Koreans and that the North Korean Government must begin to recognize the rights of its own citizens. I thank you very much, Mr. Chairman, other members of this committee for your activities in this effort. It is a critical, critical issue on which the soul of the United States will be tested, and I commend you for your bipartisan leadership on this important issue. [The prepared statement of Mr. Lefkowitz follows:]

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PREPARED STATEMENT OF THE HONORABLE JAY LEFKOWITZ, SPECIAL ENVOY FOR HUMAN RIGHTS IN NORTH KOREA I am pleased to appear once again before the Committee to discuss the North Korean human rights situation and our efforts to help the people of North Korea. Few would doubt that working to secure for all North Koreans the inalienable and fundamental rights that we possess is work toward a worthy and noble end. But the promotion of human rights is not just a noble end in and of itself. It is something much more. It is also a means to a broader foreign policy objective. Modern history has repeatedly demonstrated that the human rights is also a means to peace, and I believe this is true in regard to North Korea. Since my testimony last April, the North Korean government regrettably has taken no significant steps to improve its abysmal human rights record. Its conduct stands as an affront to its citizens and also to the norms of the international community. The regime ignores the fundamental prerogatives laid out in the Universal Declaration of Human Rights, which are recognized by the majority of the society of nations. Many of the human rights abuses in North Korea are all too familiar to members of this Committee, but certain points bear repeating. There are an estimated 150,000 to 200,000 North Koreans in a vast network of political concentration camps. The rights of free speech, worship, assembly, press, fair trial and emigration are ignored. The regime conducts mandatory political indoctrination, attempts to control all information, and supports a cult of personality around Kim Jong Il that is reminiscent of the worst dictators of the 20th century. North Korea has been sanctioned under the International Religious Freedom Act since 2001. The North Korean government also has grossly negligent policies that exact a shocking humanitarian toll and put its population at risk of mass starvation. The state’s highly centralized economy fails each year to produce even enough food for the country to subsist. Nonetheless, we believe the regime could feed its population if it wanted, but instead squanders revenue and foreign assistance on a massive military, weapons development and a small but pampered elite. In the mid-1990s, these policies resulted in a food shortage and famine that killed an estimated 1–2 million North Koreans, and sparked a refugee exodus. According to the World Food Program, the average 7-year-old North Korean boy is eight inches shorter, 20 pounds lighter and has a 10-year-shorter life expectancy than his 7-yearold counterpart in South Korea. While information is limited, we have indications that the food shortage this spring in

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North Korea could be more acute than it has been since the famine years of the 1990s. Our policy is to separate food aid from policy issues, and we would like to provide humanitarian assistance to the North Korean people, regardless of any political differences that exist between our governments. However, as with humanitarian assistance anywhere in the world, we must insist on minimum international standards for monitoring aid distribution, in order to ensure reasonably that it reaches those for whom it is intended. We suspect North Korea of diverting foreign assistance to its military, the elite, and the black market. What has changed in the last year is the response by the U.S. and other countries to this human rights and humanitarian tragedy. Transforming the situation in North Korea will require pressure from within, but it will also need strong insistence on reform from the international community. Our government has opened America’s doors to North Korean refugees. When President Bush appointed me as his Special Envoy, he directed that this should be my highest priority. In May, 2006, the first group of 6 North Korean refugees was brought to the U.S. We have now resettled a total of 18 refugees, and we expect this rate to increase. While we expect that most North Korean refugees will continue to choose to resettle in South Korea, we impose no quota or limit on the number we are willing to accept. With the highest number of refugee resettlements worldwide, America continues to demonstrate its leadership as a refuge for the oppressed. To encourage a peaceful, long-term transformation, we need to enhance significantly the quantity and quality of information going into North Korea that is not subject to censorship. Voices that are not part of the government’s propaganda apparatus can open peoples’ minds and provide encouragement to those who seek freedom. Through means such as radio broadcasting, North Koreans can learn that they do not live in a ‘socialist paradise,’ and that contrary to the claims of the regime, people who live in freedom can enjoy a remarkable degree of prosperity. Last year, the Broadcasting Board of Governors (BBG) provided increased resources to the Korean services of Voice of America and Radio Free Asia. For the next fiscal year beginning this October, the Administration has requested a significant increase for these services, from $4.6 to $8 million. Along with many other improvements, this increase will allow Radio Free Asia to begin transmitting in medium wave, which we believe will be a highly effective supplement to its current shortwave broadcasting. I ask the Committee to support this important increase. Appropriated funds have also contributed partially to broadcasts by independent groups. Some of the most persuasive voices are not those of U.S. government employees, but private citizens who can sympathize with those living under repression. These include the voices of Korean democracy activists, defectors from North Korea, and Korean-Americans. Some Japanese groups also have limited broadcasts that attempt to reach those abducted in Japan by the North Korean government. For the first time, the President’s budget requests funds specifically for the promotion of North Korean human rights: specifically $2 million the State Department’s request. When combined with the aforementioned BBG programming, we are asking the Congress for a total of $10 million in FY2008 to promote North Korean human rights. Additional funds will be provided from accounts related to refugees and victims of trafficking in persons. I believe we can deploy these funds effectively and I ask that you support this request.

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Other changes in the last year include a greater focus on North Korean human rights abuses by the international community. In October, the UN General Assembly’s human rights committee voted 91–21 in favor of a resolution on North Korean abuses. Most significantly, South Korea abandoned its past practice of abstaining from the vote on this resolution, and voted in favor. In addition, the European Parliament passed a resolution addressing North Korea’s human rights abuses. We hope that Japan will take the lead in offering a resolution on North Korea at the UN Human Rights Council in Geneva, despite the weaknesses of that body. A direct dialog with the North Korean government on human rights has been elusive in the past year. The governments of North and South Korea invited me to visit the Kaesong Industrial Complex, which is inside North Korea just above the demilitarized zone. I had planned to commence a human rights discussion in relation to that. However, this trip was postponed twice in response to North Korean ballistic missile and nuclear weapons testing. In the coming months, I intend to seek a human rights dialog with North Korea. The February 13 agreement reached in the Six Party Talks creates five working groups, one of which will involve discussions on the normalization of our relations. As I have said repeatedly, if the North Korean government wants to be seen as legitimate by the international community, it will have to make progress on human rights. We believe a discussion on human rights should take place prior to a full normalization of relations. The Administration remains committed to this cause. This is an issue of importance to President Bush. Last April, in a one-on-one meeting with Chinese leader Hu Jintao, the President expressed his concern about China’s treatment of North Korean refugees. Just four weeks earlier, the White House expressed grave concern with China’s treatment of a specific North Korean refugee, Kim Chun-Hee. Ms. Kim sought refuge in a Korean school in Beijing only to be returned forcibly to North Korea by the Chinese despite being implored by other governments and the UN to protect her. The week after President Hu’s visit, President Bush met in the Oval Office with defectors from North Korea and a Japanese family whose daughter the North Koreans abducted. We plan to continue our diplomacy and communications efforts, and to expand our support to NGOs and programs that we believe will have a positive effect. Our strategy is to support the aspirations of the North Korean people, attempt to alleviate their suffering, and build an international consensus that the North Korean government must begin to recognize the rights of its citizens. Mr. FALEOMAVAEGA. Thank you for a most eloquent statement. I do have some questions but I would like to give this opportunity to my good friend from California for his questions. Mr. ROHRABACHER. Thank you very much, Mr. Chairman. Considering we have a vote on now, I will try to be very quick. The idea of the diversion of humanitarian aid if we are to provide humanitarian aid, any humanitarian aid to North Korea, and I believe that starving people and people who are dying of illnesses because of malnutrition, wherever they are, certainly we should want to reach out to them. But is there not a lot of evidence now that some of the largesse that we have offered to the people of North Korea has been diverted from them by their own Government? Mr. LEFKOWITZ. I think there is certainly evidence of diversion. I believe that it is critical that we try to provide humanitarian aid but we have to insist on the humanitarian aid being monitored tightly and strictly so that we can ensure that it is received by the people who

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need it, and frankly one of the real problems that we have had is that when some of the other countries in the region provide unrestricted aid in significant quantities it makes the aid that we want to provide less relevant, and as a result the people who need the aid do not get it from the former donors, and we do not have the leverage to exact the conditions. Mr. ROHRABACHER. In the end, if we do not demand on this type of accountability we are actually doing more damage because we actually end up putting more power in the hands of the elite and the military rather than food in the mouths of the people, and, Mr. Chairman, I hope that we will follow up on that and be very careful on how we watch over that situation. You mentioned the Kaesong Industrial Complex. Is this not just being set up as a means to exploit even further the poor people of North Korea so that businessmen—not only in South Korea but elsewhere—can come in and virtually use them as slave labor? Mr. LEFKOWITZ. I think it may well have in many respects that effect. I do not know that that is why it was set up certainly by both parties. I cannot speak for what the motivation of the North Korean regime is, and certainly anything they do in this area is suspect but—— Mr. ROHRABACHER. But the end result is that you have North Korean people working almost as slaves, and their pay is going not to themselves but to the government, and they get a pittance left over. I would hope, Mr. Chairman, that we see to it that not one item, not one item manufactured in this complex is able to be imported into the United States. And very quickly one last point about the idea of refugees. I certainly am proud of the fact that the United States takes in as many refugees as we do. I again would join with my colleagues in calling upon the Government of South Korea. If they want us to stand together with them for freedom and to try to make the world better, they have got to at least be loyal to their fellow Korean people who live under tyranny in North Korea. Those North Koreans who escape the tyranny of the North should know that their fellow Korean people care about them, and the fact that the South Korean Government has been restrictive of those people coming into their country—and I talked directly to the leadership there in South Korea today, and they did not have any apologies about not permitting this to happen. I was aghast, and so let us with a strong voice emphasize that we expect that those North Koreans who are refugees be taken care of. Let us do our part but the people in South Korea have to demand that their government step up and do its part. If not, it really is a travesty. Mr. LEFKOWITZ. If I can respond. First on the Kaesong point, I certainly think that an economic project like Kaesong certainly has the potential to lead to a real opening with North Korea and to enhance the freedom for people in North Korea and give them exposure to the outside world, but I think as with anything that takes place in North Korea we have to verify, and my interest in going to visit that site and to talk to the people there and to do it in a very unrestricted way is to learn whether or not the Kaesong project is being used for positive objectives or as you suggest really just providing a cheap source of labor. With respect to refugees, I think certainly the voice of this committee speaks eloquently. I think the other half of the equation is the Chinese Government. The South Korean Government actually does take quite a number of refugees every year, and is certainly working cooperatively with us to help facilitate the movement of those North Korean refugees who want to come to the United States. But the fact that the Government of China is not honoring its international commitments, is not providing genuine access as it is required to the U.N. High Commissioner on Human Rights, I think is really the single most significant issue we have outside of the North Korean

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Government’s own emigration policies that is a barrier now to the free movement of people in that region. Mr. FALEOMAVAEGA. If my good friend would forebear with us, we have a vote in about 6 minutes, and one of the privileges now allotted to such humble delegates as myself— much to the dismay of my distinguished friends from the other side of the aisle—I now have the privilege of casting a symbolic vote on the floor of the House, and I would ask if you could please—I have many questions I want to raise with you—if you could just give me about 5 or 6 minutes? Mr. LEFKOWITZ. Absolutely. Mr. FALEOMAVAEGA. And I will be right back to continue this. Mr. LEFKOWITZ. Okay. Mr. FALEOMAVAEGA. We will be in recess. [Recess.] Mr. FALEOMAVAEGA. I want to again extend my sincere apologies to Mr. Lefkowitz for the obstruction if you will but I thank you for your patience. I suppose you might say that this is the uniqueness of American democracy where we from the legislative side have an opportunity to debate and discuss issues that concern the interests of our national government, and this is part of the process, and again I really, really appreciate your patience. I want to thank you again for your statement, and some of the observations that my colleagues and the committee have already raised some questions and concerns about the situation in North Korea. Probably no other country in the world maybe among the two countries in the world that have raised so much questions internationally, if you will, and it seems that the nuclear issue is always the upper most concern by our national leaders as well as the leaders of other countries and especially the Asia-Pacific region. On the question of the World Food Program as you said it always seems to be the classic question that has gotten even some of the members of this committee and Members of Congress, food versus the extent of the authority of the administration of aid that is given to a country like North Korea where always the government is the one that controls the issuance of food items especially as it is supposed to go to the people of North Korea, and I wanted to ask you—and it is always the question—what can we do here in the Congress to give assurances that the government and the leaders of North Korea will be in compliance with the fact that when we send food items or aid items that—especially commodities of food—that it should go to the people and not by way as it has been suggested by others and say that only the elite and the army are the ones that are fed and leaving the rest of the people of North Korea near starvation? And I would like to hear what may be your recommendations on how we could alleviate this problem. But in a closed society and the situation the way it is, I would welcome your suggestions as to how we might overcome this issue. Mr. LEFKOWITZ. Mr. Chairman, I think that part of the problem is that it lies outside of our own control. To the extent that other countries—even if they are fueled by the best of intentions—provide unrestricted aid to North Korea, to the extent that the North Korean regime diverts that aid for its elite and its military, it may have no real interest in additional international aid because we know it does not care much for its own population. So I think part of the challenge for us is to continue to build an international consensus, and then act in unison with our partners. Obviously the U.N. can play a very strong role in facilitating that, and certainly when we contribute to international agencies like the World

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Food Program, I think it is incumbent upon us to make very, very clear under what conditions we will make those donations, and obviously Congress has a very important and direct role to play whenever we are appropriating funds. So I think there is work that we can do directly, and I think there is work that we can try to do through the powers of diplomacy and working as we are trying in this area to work multilaterally but I think it is important—as you pointed out—that the human rights issues always be elevated and make part of the overall dialogue. Mr. FALEOMAVAEGA. And you did state it quite correctly, for which I agree, that two basic categories of food aid and the policy issues for which our committee held a hearing where Assistant Secretary Chris Hill reported on the latest results of the Six-Party Talks, and this framework of an agreement that was made with North Korea. And I raised the question with Secretary Hill: What prompted the North Koreans to have such a dramatic shift of their whole negotiation posture for all these years that we have always wondered? They have exploded a nuclear device. They have become very well in conducting their missile testings, and that just about fulfills their sense of being a member of the nuclear club. But then with the outcome of the recent results of the Six-Party Talks, what do you think motivated the North Korean leaders to take an about face change of their whole attitude looking at now obviously for economic purposes more so than saying that they have got the bomb, they have got the missiles? Of course you cannot eat bombs and missiles. But I would ask you, what may be your observation and see why the shift, a dramatic shift, on how they have negotiated for these things for all these years. Mr. LEFKOWITZ. Well there certainly appears to have been a significant shift, and obviously the proof will be in the pudding. We will see really in a very short period of time what the bona fides are. But I think that the pressure that the international community has brought to bear over the last year, the really uniform probation by the international community over the increasing nuclear belligerence by the regime, and the fact that we were able to work in a multilateral framework bringing China very significantly to the table, along with Japan and South Korea. And the full Six-Party apparatus I think really woke the North Koreans up, and made them really realize that they were in danger of genuine isolation, and even a powerful regime and an authoritarian regime like the North Koreans I think have to recognize that their power in many respects is really illusory because it does not flow from the wellspring of any popular support, and as some of their international funds were being restricted, I think there was probably some real concern by the leadership there about their own continued vitality. Mr. FALEOMAVAEGA. On our recent visit to South Korea where we held a parliamentary conference there and I recall that one of the comments made by one of the parliamentarians from South Korea saying that you are our friends, referring to the United States, but the North Koreans are our brothers and sisters. What is your observation? I realize that the Sunshine Policy has always been up and down, and I was not quite sure where exactly the Bush administration stood on this for which I for one certainly support the Sunshine Policy. I did look at the ideologies of the political, economic. I am looking at the fact that these are the same people, same blood, same families, and being separated I suppose for all these years, do you think that the Sunshine Policy is still relevant given the fact that we have made a breakthrough with the February 13 agreement?

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Mr. LEFKOWITZ. Well, I have always thought that a genuine Sunshine Policy would be a policy designed to let the sun shine in and give real exposure to what is going on in North Korea, and let the North Korean people see the sunlight outside of North Korea. To me that would be a genuine Sunshine Policy. I am somewhat baffled by the fact that sometimes the Government of South Korea— even though it has achieved an incredible amount of prosperity and genuine democracy over a relatively short period of time—has not been more forthcoming in terms of supporting some of our objectives in the region. I think there certainly have been signs of improvement, and I have applauded the Government of South Korea for joining in the resolution at the United Nations this past fall but I think that the real objective here for us is to help open up the North Korean society, and to do that we need to be able to broadcast, to alert the people to what is going on. When you meet with North Korean defectors—even folks who have been highly placed in the North Korean military—what they often tell you is their first awakening came from listening to radio, listening to South Korean radio and understanding that there really was a world outside of North Korea. Mr. FALEOMAVAEGA. My friend from California. I know he has got to go back to the floor to vote. I have already voted four times. So I would like to give my good friend a chance to raise some more questions before he has to go back and vote. Mr. Royce. Mr. ROYCE. Thank you, Mr. Chairman. I appreciate that very much, and I was going to make the point that we hope this nuclear agreement goes through. It may not. Either way we should be pressing on human rights in these international forums, and I would just like to add that I have co-chaired the International Parliamentarians Coalition on North Korean Human Rights. We have European members, Korean members, Mongolian, Japanese, American, and part of our focus is what we can do in the international community. You talked a little bit about the radio broadcasts which I co-authored legislation to do that. There is support for refugees which is something we are working on but what else can we do? And specifically, I noticed you are working a Special Envoy, Mr. Lefkowitz. You are doing this part-time. I am wondering about ramping that up because I noticed when Ambassador Hill was going to Pyongyang that trip he was going to go with you and that got scuttled. And I want to see what kind of progress we are making to get you on that flight so that you can travel with him and engage and ramp up your role on human rights. I think you do a very good job on that front. So let us hear about other things that we could be doing. Mr. LEFKOWITZ. Well I think a lot is obviously going to depend on how we proceed on the normalization track as an aftermath to the Six-Party Agreement, and I obviously take direction from the Secretary and from the President in terms of priorities and objectives and also methods, and I will be speaking with them in the very near future, consulting about next steps. Chris and I have a regular dialogue, and I think we had talked quite some time ago about traveling to the region together to focus on these broad basket of issues, and I think now that we are moving into the aftermath of this agreement there will be a much greater opportunity and receptivity by the North Koreans to enter into this type of dialogue. And I think the sine qua non for normalization frankly is going to have to be a recognition that human rights is a critical and legitimate issue for dialogue. Mr. ROYCE. Well the bar has not been set that high. I mean when we look at the statement we believe a discussion on human rights should take place prior to a full

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normalization or relations. In the bureaucratic world, a belief that a discussion on human rights should take place—especially a discussion with North Koreans—is about as low a bar for normalization as you could get. So I just want to make certain that you are engaged front and center in this, and I want to also make absolutely certain that your role as I say ramped up, and I wondered if you had travel plans in the near future on this front. Mr. LEFKOWITZ. I am not prepared to announce dates for travel but I am planning to travel to the region, and as I said in my opening statement, even prior to the developments in the Six-Party Talks I had been invited by both Governments of North and South Korea to visit Kaesong, and I had planned on making that an entree for some direct dialogue on human rights. We will either proceed along those paths or in connection with the Six-Party. Mr. ROYCE. Well let us see if we cannot get things set so that instead of basically pressing people into servitude to work that they can actually get a check. The North Korean workers will actually get a check rather than the check be sent to the government. This is unique in the world, and I do not know of any other system where the check does not go to the workers but instead goes to the government. Last question. I want to be direct about this. How easily are you acquiring refugee information within the State Department? I want to know if bureaucratic barriers exist that hinder you from getting the best information about what is happening on the ground in China. I really want to know more. It seems that when we go to the region we learn an awful lot from refugees, and yet we do not hear a lot of that or we do not read a lot of that in the newspapers until we get on the ground out there. I want to know about the State Department and how they are doing in terms of acquiring that information. Mr. LEFKOWITZ. I have spent several years in government really cutting through bureaucracy. Mr. ROYCE. Yes, sir. Mr. LEFKOWITZ. And I have actually found on this issue—and I would not say that about all issues—but on this issue a great deal of information flow within the Department. I have very close relationships and dialogues with the individuals who run the PRM Bureau, and obviously if we were not in open session I would be happy to answer your questions about individual refugee cases. We would be happy to do that in another forum with members of this committee. Mr. ROYCE. Excellent. I will look forward to that. In the meantime, I think we have got about 2 minutes left, Mr. Chairman, so I will just yield back to you. Mr. FALEOMAVAEGA. Thank you, and I appreciate the gentleman returning to raise these questions with Mr. Lefkowitz, and I do have a couple more questions I wanted to raise with you, Mr. Lefkowitz. If the media reports are accurate, it is my understanding that Secretary Rice has had to go through several layers or loopholes in getting this agreement and endorsement by President Bush, and one of the indicators was our former Ambassador to the United Nations, Mr. Bolton, was very much against the proposed February 13 agreement, and I was wondering if you have any opinions on what seems to be the problem. There is a major breakthrough after all these years in negotiating the Six-Party Talks with North Korea. Mr. LEFKOWITZ. Well, Mr. Chairman, I would not necessarily believe everything you read in the newspaper. I do not think the Secretary has to go through any layers to reach the President and have a dialogue with the President. I worked closely with both of them in the White House for a number of years, and they have a very direct relationship. I also have great admiration for Ambassador Bolton. He is a very close friend and someone I admire.

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I think with respect to the situation here in North Korea, we made a great deal of progress recently. It may not turn out to be a success. Those are the chances you always take in diplomacy but I think the upside here is very significant, very tangible, and most importantly will be potentially very immediate. We will start to see some real progress. If we do not, I do not think we are any worse off than had we not taken this chance and taken this step. So I think I probably come out on the much more optimistic side right now although cautiously optimistic than my friend Ambassador Bolton. Mr. FALEOMAVAEGA. Some of my colleagues have raised questions and concerns about the Kaesong project and you as well. Well you might be interested to know that myself and Congressman McDermott and Congressman Mike Honda are the first Members of Congress that went to Kaesong, and my understanding this was the ancient capital of the Korean people this Kaesong. I come away impressed by the fact that this was a form of as a way I suppose that South Korea, the private sector through its businesses have taken the initiative to establish factories or a manufacturing base and allowing the people of North Korea to be employed and to work. And of course the question that comes along with it: Does the money really go to them rather than to the government? And that seems to be the concern but looking at the bigger picture, the fact of just being exposed to something like this where you see how you say the richness or the amount of development that has come through South Korea and the people, how much they develop in one of the big economic powers of the world, at least in that region of the world. I kind of like to think more positively about the Kaesong project but I think I hear some views otherwise, and I would like to hear a little more specific, and I sincerely hope that you will have a chance to visit Kaesong. Mr. LEFKOWITZ. I certainly hope I have the opportunity to go in the near future, and I hope that I am very pleasantly surprised at what I see. I also have made clear that I have no doubt that the North Korean workers who are working in Kaesong may well be much better off than the North Korean workers who are not working in Kaesong. The question though is twofold. It is: Number one, are those workers nonetheless being exploited, and if so is the Government of South Korea complicit in that activity, and most importantly, if the Government of South Korea has so much leverage here in North Korea by virtue of its enormous capital investment and infusion, are they utilizing that influence in the best possible way? I think that Kaesong could turn out to be an enormous game changer. It could really help open up North Korea, and if it expands and it expands consistent with worker protection and worker freedom and actual payments that go directly to the workers it could turn out to be an enormous positive but I think the jury is really out, and again because the North Koreans are running it I think we have to be very skeptical until we are proved otherwise. Mr. FALEOMAVAEGA. What do you see as a potential in terms of one day—I am not talking about ideology—or somewhere along the line that there may be a possibility of unification between North and South Korea under a different system where the people will be paramount in terms of them making the decisions rather than being manipulated by leaders? Mr. LEFKOWITZ. I think our wish is obviously for a peaceful peninsula first and foremost, and for a free peninsula where the people on the Korean peninsula can choose their own form of government and choose their own leadership. The example that South Korea has set by being a vibrant market-based democracy is a wonderful example. They have achieved

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North Korean Human Rights

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enormous success. It is utterly tragic that their brethren just to the north are living under the most repressive dictatorship in the world, and our hope is that the peninsula will at some point soon be reunited in a peaceful way. Mr. FALEOMAVAEGA. As much as both Iraq and North Korea seems to be making the headlines, just about every day with a different set of issues and a different set of problems, but I noted with interest and I do not know if the media reports are accurate, that currently our administration is in the process of bringing in some six to 7,000 refugees from Iraq. Now compare that to the six as you had indicated earlier involving North Korea. What would be your suggestion on how maybe we can improve the numbers given the fact that if we are doing this for Iraq why are we not doing similar or at least raise the ante to do the same for a more dire circumstance, living conditions and the problems affecting the people of North Korea? Mr. LEFKOWITZ. Well as I indicated in my testimony, the 30 refugees we have received in the United States from North Korea is just a start, and we have no limitation on the number of North Korean refugees that we will accept. Obviously it is a delicate issue to work with the countries in the region to facilitate the movement of these refugees in large part because of China’s policies in contravention of its international obligation. So I think the first place to start is to work with the Chinese so that they will acknowledge and abide by their international obligations, and that is an area where the United Nations can certainly play an important role. Mr. FALEOMAVAEGA. I am also curious what the South Korean Government should do with reference to refugees. Should they not also play a very substantial part in working cooperatively with our Government in receiving more than six refugees? Mr. LEFKOWITZ. Well the South Korean Government does work closely with us in terms of facilitating the refugee flow and helping us absorb the refugees who we are trying to absorb now, and in a number of instances—particularly in the last year—we worked very cooperatively with the Government of South Korea in this area. Mr. FALEOMAVAEGA. You had indicated earlier also about the importance of the media, like Radio Free Asia. This is something that I am seriously wanting to make sure that if we put some form of amendments or even legislation that will enhance our ability to reach out if this is like what we have done to Radio Free Europe for all these years and that really made a tremendous difference to the people living in the former Soviet Union. How extensive do you think we should proceed in this in enhancing our ability to provide the media like Radio Free Asia and other media outlets to educate and to inform the North Korean people? Mr. LEFKOWITZ. I think we should be very aggressive about this. We have obviously requested budgetary authority from Congress to proceed this coming year to significantly ramp up our broadcasting efforts. It is an area where other countries I think can also be encouraged to participate. We are not the only country that can broadcast into North Korea and help the North Korean people gain access to information about the outside world, but I think fundamentally one of the major differences between the living conditions of the people in North Korea now and the living conditions of those behind the Iron Curtain 20 years ago is that the people of North Korea by and large do not have any access to information from the outside world, and we need to help to change that. Mr. FALEOMAVAEGA. One of the issues currently pending in our negotiations for free trade agreement with South Korea is the Kaesong project. As you may have heard some of

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my colleagues are totally against any notion of any products produced under the Kaesong project to be exported to the United States. Your take on that? Mr. LEFKOWITZ. I will leave it to my colleague, the trade representative, to articulate a formal policy statement. I certainly am sympathetic to some of the concerns that have been raised about the Kaesong project, and as I have said I am withholding my approval for that project until I have a chance to take a look and see that it is creating more benefits than negatives. Mr. FALEOMAVAEGA. I want to continue keeping our channels of communication open with you, Mr. Lefkowitz, and I sincerely wish you all the best and success in your efforts in bringing about this issue of human rights to the North Korean people, and with all the suggestions that you have pointed out in our hearing this afternoon, please I want to assure you my door is always open, and I want to continue working closely with you and your office. Hopefully, that we will bring about a better solution to these various issues. I thank you again, and hopefully we will have another round and hearing on this issue. Mr. LEFKOWITZ. I look forward to it. Thank you, Mr. Chairman. Mr. FALEOMAVAEGA. Thank you. The hearing is adjourned. [Whereupon, at 3:55 p.m., the subcommittee was adjourned.]

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I NDEX # 9/11, 132

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A abduction, 36, 42, 44, 104, 105, 124, 125, 144, 150, 159, 160, 162, 163 absorption, 212, 217, 218 abusive, 91 access, 9, 32, 42, 43, 52, 61, 62, 64, 66, 87, 88, 89, 90, 92, 93, 94, 97, 99, 100, 101, 103, 106, 116, 118, 130, 137, 153, 156, 176, 232, 234, 243, 249 accessibility, 5 accidents, 175 accountability, 178, 243 accounting, xi, 12, 42, 44, 104, 105, 132, 135, 159 accuracy, 135 achievement, 142, 219 activity level, 129 acute, 237, 241 ad hoc, 87 adjustment, 13, 163 administration, viii, 9, 55, 56, 64, 79, 81, 124, 186, 188, 190, 191, 192, 193, 195, 196, 200, 201, 202, 213, 214, 215, 216, 218, 220, 224, 230, 231, 232, 233, 237, 238, 239, 244, 249 administrative, 16, 80 administrators, 216 AEA, 76, 77 Afghanistan, 129, 147, 148 Africa, 51, 100, 118, 162, 179, 180, 181, 183, 225, 226, 236 afternoon, 227, 233, 235, 236, 250 age, 14, 105, 111 agent, 77 agents, 35, 62, 131, 159, 160, 162 aggression, 40, 66

aging, 2, 155, 226 agricultural, 12, 13, 21, 69, 72, 90, 115, 154, 178 agricultural sector, 12 agriculture, 4, 11, 13, 42, 48 aid, viii, x, xi, 2, 3, 4, 5, 6, 12, 19, 22, 24, 26, 27, 28, 29, 31, 33, 34, 35, 36, 42, 43, 45, 46, 48, 55, 57, 61, 62, 63, 64, 67, 69, 70, 72, 73, 77, 81, 82, 83, 93, 94, 97, 99, 101, 105, 109, 122, 126, 129, 130, 131, 141, 144, 146, 149, 151, 153, 154, 155, 156, 159, 170, 171, 190, 192, 201, 211, 215, 216, 222, 231, 237, 238, 241, 242, 244 aiding, 148 AIDS, 236 air, 137, 148, 206, 225 Airlines, 132, 134, 135 airports, 204 Al Qaeda, 125 Albino, 47 Algeria, 115 aliens, 116 allies, 38, 39, 42, 77, 124, 125, 185, 187, 194, 195, 197, 198, 199, 203, 206, 221, 226, 238 alternative, 9, 31, 39, 170, 173, 195, 196, 199, 200, 202, 212 alternative energy, 212 alternatives, 189, 195, 197, 199, 203 alters, 101 altruism, 89 aluminum, 35 ambassadors, 109, 223 amendments, 249 analysts, xi, 17, 33, 52, 57, 58, 60, 80, 102, 103, 104, 108, 161, 162, 167, 170, 173, 178 anger, 161 Angola, 65 annual review, 70 anti-American, 203, 220, 224, 226, 227 anti-Americanism, 203, 226, 227 anti-terrorism, 62, 124, 129, 130

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Index

ants, 214, 242 apparel, 16, 29, 34, 35 appendix, 82 application, ix, 3, 40, 56, 61, 82, 88, 124 appropriations, 64, 69, 81, 155 aquaculture, 12, 21 Arabia, 115, 138 Argentina, 79, 80 argument, 97, 108, 177, 206 Armed Forces, 53, 61, 74 Armenia, 65 Army, 10, 48, 124, 132, 134, 135, 171, 224, 230 arrest, 15, 169, 170 ASEAN, 205 Asia, vi, vii, viii, 18, 27, 31, 32, 36, 40, 41, 43, 46, 48, 49, 50, 51, 52, 54, 55, 56, 58, 60, 67, 78, 80, 81, 95, 97, 98, 99, 100, 101, 102, 109, 114, 115, 118, 145, 149, 162, 171, 172, 173, 178, 179, 180, 181, 182, 183, 186, 187, 188, 189, 190, 192, 214, 217, 220, 226, 229, 234, 238, 241, 244, 249 Asian, ix, 6, 13, 29, 40, 43, 44, 45, 48, 49, 50, 51, 53, 78, 80, 86, 97, 98, 102, 106, 115, 117, 119, 163, 168, 169, 178, 205, 217, 226 Asian countries, ix, 13, 86 assessment, 110, 137, 139, 201, 235 assets, 27, 28, 41, 59, 61, 66, 67, 72, 80, 168, 173, 192 assignment, 110 Association of Southeast Asian Nations, 205 assumptions, 38, 39, 215 asylum, 33, 88, 91, 93, 94, 95, 96, 98, 100, 103, 104, 105, 106, 109, 111, 116, 117, 233, 234 athletes, 92 Atlas, 19, 20, 21, 22, 29, 30, 34, 35, 37, 48, 49, 53 atmosphere, 86, 227 Atomic Energy Act, 56, 77, 79, 82 attacks, viii, 38, 55, 132, 138, 139, 147, 225 attitudes, 3, 6, 38, 116, 206 Attorney General, 181 aura, 9 Australia, 23, 24, 27, 47, 60, 170 Austria, 173 authenticity, 217 authority, 56, 62, 63, 65, 66, 71, 81, 82, 83, 100, 110, 155, 244, 249 automobiles, 32 autonomy, 13 availability, 5, 64, 99, 100, 178, 204 aversion, 217 aviation, 66 awareness, 89, 99, 104, 169, 177 axis of evil, 41, 57, 78, 134, 192, 219, 220 Azerbaijan, 65

B background information, xi, 117, 159 bad behavior, 177 Bahrain, 115 ballistic missile, xi, 16, 26, 41, 56, 58, 59, 77, 134, 139, 140, 141, 160, 168, 169, 194, 199, 239, 242 ballistic missiles, 16, 26, 41, 56, 58, 59, 77, 139, 140, 141, 169, 194, 199 Bangladesh, 7 bank account, 173, 174, 205 Bank of Korea, 7, 8, 11 banking, 33, 66, 173 banks, 23, 24, 34, 36, 102, 173, 174, 180, 205 bargaining, 41, 42, 45, 211, 215, 221 barley, 6 barrier, 244 barriers, 238, 247 beer, 13 behavior, vii, 38, 41, 93, 102, 131, 160, 168, 169, 177, 187, 203, 206, 211, 213, 218 behind-the-scene, 109 Beijing, 15, 17, 32, 33, 91, 93, 104, 105, 108, 109, 164, 191, 195, 200, 210, 212, 214, 239, 242 Belarus, 65 Belgium, 33 benchmarks, 52 benefits, 45, 61, 64, 89, 100, 123, 126, 217, 220, 250 Bhutan, 35 Bible, 206 bilateral relations, 35, 36, 103 bilateral trade, 20, 34, 44 Bilateral trade, 35 biodiversity, 64 biological weapons, 59, 86 bipartisan, 190, 191, 236, 240 BIS, 23, 50 black market, vii, 187, 238, 241 blame, 11 blaming, 190, 191, 206, 215 blood, 218, 245 Board of Governors, 57 boats, 26 boilers, 35 bomb, 62, 123, 126, 142, 148, 149, 194, 196, 197, 198, 202, 211, 215, 222, 245 bonds, 23 borrowing, 22, 170 Botswana, 35 branching, 142 Brazil, 20, 21 breakdown, 206 Bretton Woods, 69, 71, 83

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Index bribery, 15, 92 bribes, 14 Broadcasting Board of Governors(BBG), 99, 118, 238, 239, 241 brothers, 219, 245 Brussels, 50, 99 buffer, 32, 94, 205 buildings, 94 Bureau of Economic Analysis, 52 bureaucracy, 9, 247 Burma, 65, 95, 110, 114, 115, 119, 169, 179 buses, 86, 90, 105, 239, 240, 242 Bush administration, vii, ix, x, 1, 2, 3, 28, 40, 43, 45, 57, 86, 96, 97, 101, 102, 103, 104, 109, 119, 121, 122, 123, 125, 126, 127, 128, 131, 134, 142, 143, 151, 153, 154, 160, 161, 162, 164, 169, 176, 177, 188, 190, 195, 198, 200, 220, 232, 233, 234, 245

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C cables, 18, 227 Cambodia, 94, 95, 114, 171 Canada, 28, 118 cannabis, 180 capacity, 12, 99, 164, 171, 174, 178, 214, 221, 236 capital flows, 22 capital inflow, 170 capital markets, 23 capitalism, 13 Capitalism, 49 Capitol Hill, 77 cargo, 22, 59, 138, 148, 177, 182 Caribbean, 236 cash flow, 187 cast, 57, 181 casting, 244 Catholic, 101 Catholic Church, 101 caviar, 34 cement, 49 censorship, 238, 241 Central Intelligence Agency, 112, 139, 140 central planning, 10 centralized, viii, 2, 6, 8, 13, 237, 240 cereals, 30 certification, 82, 131, 171, 180 certifications, 157 channels, 7, 26, 30, 176, 186, 250 chemical industry, 18 chemical weapons, 125 chemicals, 29, 31 children, 5, 6, 92, 111, 115, 126, 132, 134, 160, 164, 176, 197, 203

253

cholera, 225 CIA, 4, 7, 112, 140, 207, 213 cigarettes, xi, 167, 169, 173, 174, 175, 178, 179, 182 circulation, 137, 172, 173 CITES, 175, 183 citizens, x, xi, 3, 8, 16, 21, 27, 35, 39, 40, 42, 43, 44, 63, 90, 91, 102, 103, 104, 105, 107, 121, 124, 125, 126, 134, 159, 160, 168, 232, 233, 234, 237, 240, 242 citizenship, 95, 100, 103, 117 civil society, 101 Civil War, 205 civilian, 25, 39, 130, 237 clams, 35 classes, 8, 9 clients, 173 Clinton administration, 186, 213, 214, 215, 216, 218, 219 Clinton Administration, ix, 96, 121, 122, 123, 124 closure, 4, 52 coal, 4, 12, 15, 21, 25, 34, 37 coal mine, 25 coercion, 196, 202, 228 cohesion, 203, 220 Cold War, 30, 31, 35, 36, 145, 237 collaboration, 140, 141, 142 collateral, 102, 193 colonial rule, 163 colonialism, 11 colonization, 226 Columbia University, 47, 230 combustion, 148 command economy, 10 Commerce Department, 62 commercial bank, 72, 73 communication, 16, 18, 137, 186, 200, 240, 250 communism, 69 Communism, 69, 70, 71 communist countries, 63, 64 Communist Party, 4 communities, 169, 219, 227 community, ix, 56, 71, 86, 90, 95, 101, 106, 107, 108, 129, 153, 168, 173, 178, 188, 190, 196, 202, 213, 237, 238, 239, 240, 241, 242, 245, 246 compensation, 44, 163 competition, 227 compliance, 40, 58, 116, 244 components, 16, 21, 22, 42, 122, 125, 137, 139, 140 composition, 88 compounds, 94, 117 concentration, 90, 92, 233, 234, 237, 240 conciliation, 103 concrete, 125, 142, 187

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Index

confidence, 119, 186, 188, 197, 201, 214, 220, 224 conflict, 60, 87, 107, 169, 177 confrontation, 37, 106 Confucianism, 9 congress, 118 Congress, vi, vii, ix, x, xi, 1, 2, 3, 17, 40, 42, 45, 46, 52, 53, 54, 64, 66, 68, 70, 79, 81, 83, 84, 85, 86, 97, 98, 100, 101, 104, 105, 110, 114, 115, 118, 121, 122, 129, 130, 131, 132, 138, 145, 146, 155, 156, 157, 159, 164, 168, 169, 176, 177, 180, 183, 185, 189, 199, 219, 229, 233, 234, 235, 236, 239, 241, 244, 245, 248, 249 Congressional Budget Office, 155, 157 consensus, 57, 128, 240, 242, 244 conservation, 64 Consolidated Appropriations Act, 28 Constitution, 100 constraints, 178 construction, viii, 11, 12, 16, 18, 24, 31, 33, 52, 55, 96, 128, 139, 142, 154, 198, 199 consulting, 7, 124, 246 consumer electronics, 32 consumer goods, 204 consumers, 13 consumption, 171 contamination, 206 contingency, 194, 198 contracts, 63, 67, 72, 73, 155 control, viii, xi, 2, 12, 13, 14, 41, 45, 67, 77, 105, 106, 143, 145, 167, 180, 200, 203, 217, 224, 227, 228, 237, 240, 244 controlled substance, 180 controlled substances, 180 Convention on International Trade in Endangered Species, 175 conversion, 115 copper, 18 corn, 13, 31 corporations, 31 corruption, 92, 205 cosmetics, 16 costs, 16, 31, 43, 60, 155, 189, 215 cotton, 28 counsel, 230 counterfeit, xi, 27, 40, 42, 167, 169, 171, 172, 173, 174, 175, 177, 178, 179, 181, 191 counterfeiting, viii, xi, 22, 27, 36, 38, 52, 55, 56, 58, 67, 102, 131, 167, 168, 169, 172, 177, 178, 179, 181, 188, 190, 191, 192, 205, 214 counterterrorism, 125, 129, 133, 145 coverage, 19, 175 covering, 146 cracking, 94, 170

credit, 23, 26, 36, 63, 64, 67, 73, 83, 210 credit rating, 23 credit unions, 26, 36 crime, xi, 92, 167, 168, 169, 173, 174, 175, 176, 177, 178, 183 crimes, 27, 92, 107 criminal activity, xi, 167, 168, 169, 172, 178 criminal behavior, 168, 169, 177 criminal gangs, 179 criminality, 174 criminals, 91, 95, 170, 178 criticism, 3, 90, 103, 104, 108, 125, 146, 161, 216 crop production, 12 crops, 12, 176 cross-border, 61, 228 CRS, 1, 4, 5, 25, 42, 46, 48, 49, 50, 51, 52, 53, 54, 55, 68, 78, 79, 80, 82, 85, 113, 114, 115, 117, 118, 119, 121, 144, 146, 151, 157, 159, 164, 165, 167, 178, 179, 180, 183, 184 crude oil, 33 cruise missiles, 198 Cuba, 44, 63, 65, 81, 82, 83, 115, 129, 132, 145, 184, 221 Cultural Revolution, 89, 204 culture, 160, 188 currency, xi, 12, 13, 16, 17, 26, 27, 38, 40, 42, 52, 102, 131, 167, 169, 171, 172, 173, 174, 176, 177, 178, 179, 188, 191, 192, 217

D Daewoo, 31 danger, 89, 108, 109, 125, 196, 197, 202, 203, 245 data gathering, 19, 45 database, 15, 23, 24, 47, 50 death, 27, 89, 92, 98, 161 death penalty, 92 death sentence, 27 deaths, 90, 161, 175 debt, 37, 64, 71, 72, 228 decision making, 10 decisions, 10, 13, 80, 192, 248 deep-sea, 11, 174 defense, 10, 32, 36, 48, 63, 65, 69, 70, 72, 77, 142, 163, 189, 194, 198, 216, 226, 228 Defense Authorization Act, 155 deficit, viii, 2, 19, 30, 42, 170 definition, 92, 106, 110, 183, 204 deforestation, 115 delivery, 27, 38, 59, 67, 153, 155, 174, 177 demand, 123, 124, 125, 236, 243 democracy, 38, 97, 99, 118, 220, 221, 227, 238, 241, 244, 246, 248

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Index denial, 62, 63, 64, 90, 161 Department of Agriculture, 152 Department of Commerce, 20, 29, 30, 61, 62 Department of Defense, 64, 69, 82, 83, 155 Department of Homeland Security, 100, 111 Department of State, 46, 51, 53, 54, 65, 78, 129, 130, 134, 144, 146, 147, 148, 178, 179, 181, 182, 183, 184 deported, 92, 93, 104 deposits, 23, 173 deprivation, 9, 117 desertion, 164 desire, xi, 60, 89, 102, 153, 167 destruction, vii, 28, 38, 62, 67, 168, 187, 225 detection, 88, 94 detention, 92, 169, 170 deterrence, 194, 197 detonation, 56 devaluation, 13 developing countries, 28 developing nations, 26 development assistance, 24, 25, 29, 154 Development Assistance, 23, 24 development banks, 24, 180 dictatorship, 83, 192, 217, 249 diesel, 13 direct investment, 24, 30 direct measure, 177 disabled, 145 disaster, 64, 115, 175, 213, 219 disaster assistance, 64 disclosure, 40, 127 discretionary, 171 discrimination, 26 dislocation, 217 dismantlement, 36, 58, 125, 127, 143, 154, 155, 159, 194, 198, 199 dissatisfaction, 5, 39 distortions, 39 distraction, 219 distribution, 90, 97, 153, 168, 172, 182, 238, 241 division, 30, 82 DNA, 134, 165 DNA testing, 134 domestic economy, 19 domestic labor, 61 domestic policy, 230 donations, xi, 66, 151, 153, 245 donor, x, 24, 90, 100, 151, 153, 156 donors, 24, 25, 47, 153, 243 doors, 101, 142, 238, 241 drought, 6, 12 drug abuse, 171

drug addict, 171 drug addiction, 171 drug dealing, 192 drug trafficking, xi, 27, 36, 167, 168, 169, 170, 173, 174, 184, 188 drugs, xi, 19, 22, 27, 38, 40, 42, 167, 169, 170, 171, 172, 177, 180, 184, 205 dual-use items, 63 duration, 63, 83, 138 duties, 98, 177, 184 duty free, 17, 28 duty-free treatment, 28

E earnings, xi, 26, 77, 167, 178 East Asia, 6, 43, 49, 78, 97, 98 Eastern Europe, 101, 217, 226 eating, 4, 206 economic activity, vii, 1 economic assistance, 3, 4, 5, 6, 33, 35, 39, 41, 42, 60, 159, 160, 169, 176, 190 economic cooperation, 31, 38, 61, 154, 218, 219 economic crisis, 5 economic development, 93, 200 economic growth, 6, 38 economic hardships, 37 economic incentives, 44, 96, 176 economic integration, 17, 103 economic leverage, 30 economic liberalization, 39 economic migrants, 33, 92 economic performance, viii, 1, 5 economic problem, 91 economic reform, viii, 1, 8, 12, 14, 17, 39, 90, 204, 206 economic reforms, viii, 1, 8, 12, 14, 90, 204 economic resources, 80 economic systems, 31 economics, 9, 41 Egypt, 15, 33 election, 103, 127, 131, 203 electricity, 9, 13, 18, 39, 57, 126, 199 elephant, 175 embargo, 41, 61, 65, 179 emergency relief, 90 emigration, 69, 240, 244 emotional, 161, 211 employees, 172, 238, 241 employment, 88, 94 encouragement, 105, 132, 238, 241

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energy, x, 2, 3, 12, 18, 20, 25, 28, 35, 37, 42, 43, 60, 94, 115, 126, 151, 154, 155, 159, 177, 203, 212, 214, 217 Energy Policy Act, 130 Energy Policy Act of 2005, 130 engagement, 16, 40, 42, 60, 61, 62, 177, 192, 200 enterprise, 170, 228 entertainment, 26 entrepreneurs, 178 environment, 101, 164 Equatorial Guinea, 115 espionage, 44, 136, 137 ethical standards, 188 ethnic groups, 94, 111 Europe, 21, 39, 45, 118, 136, 160, 172, 179, 180, 181, 183, 217, 230, 249 European Community, 23, 24, 25 European Parliament, 118, 239, 242 European Union, viii, 44, 55, 99, 109, 154 Europeans, 114, 217 evil, 41, 57, 78, 134, 192, 219, 220 evolutionary process, 227 exchange rate, 8, 13 excuse, 213 execution, ix, 85, 92, 131 Executive Branch, 2, 101 Executive Order, 27, 67, 72, 77, 79, 84 exercise, 41, 58, 65, 83, 110, 196 expanded trade, 35 expenditures, 10, 189 expert, 27, 97, 139, 142, 228 expertise, 217, 227 exploitation, 89, 93, 176, 233, 234 explosions, 142 export controls, 61, 62, 129 exporter, 27, 77, 149 Export-Import Bank, 25, 45, 56, 62, 63, 64, 69, 70, 71, 72, 73, 82, 83 exports, xi, 4, 12, 19, 20, 21, 22, 26, 28, 29, 31, 33, 34, 35, 37, 41, 44, 60, 61, 65, 67, 70, 71, 72, 73, 167, 169, 177 exposure, 243, 246 external relations, 50 extortion, 89 extraction, 17

F failure, 33, 61, 70, 108, 191, 198, 213, 216 faith, 98, 222 false identifications, 138 family, 13, 14, 27, 30, 59, 88, 89, 111, 132, 134, 164, 239, 242

family members, 27, 132, 134 famine, ix, 6, 66, 85, 87, 90, 95, 115, 152, 153, 195, 199, 237, 240 FAO, 48 Far East, 47, 49, 50, 138, 147 farmers, 9, 10, 13, 171 farming, 9, 12 farms, 3, 12 fatigue, 153, 163 FBIS, 48 FDI, 14, 24, 50 fear, 41, 87, 110, 188, 190, 217, 220, 222 fears, 13, 104, 160, 163 February, 2, 5, 10, 28, 32, 40, 42, 44, 50, 52, 53, 57, 77, 78, 80, 84, 95, 97, 104, 116, 117, 119, 123, 124, 127, 128, 135, 138, 141, 142, 143, 144, 147, 148, 149, 154, 157, 163, 165, 173, 179, 181, 182, 185, 233, 234, 239, 242, 245, 247 federal law, 173, 181 Federal Register, 130, 146, 181 Federal Republic of Yugoslavia, 65 Federal Reserve, 172, 173 fee, 66 feeding, 2, 6, 192, 230 feelings, 128, 214 fees, 17, 80 fertilizer, 45, 205, 211 fertilizers, 12, 48, 115 fibers, 37 filament, 34 finance, xi, 19, 26, 29, 140, 167, 173, 187 financial aid, 126, 130 Financial Crimes Enforcement Network, 79, 84 financial institution, viii, 29, 36, 40, 44, 55, 58, 62, 63, 67, 71, 73, 79, 130, 168, 173, 182 financial institutions, 36, 44, 62, 67, 79, 173, 182 financial markets, 23 financial resources, 58 financial support, 63, 131 financial system, 28, 30, 189 financing, 24, 40, 61, 63, 71, 72, 73 Finland, 118 fire, 147, 175, 194, 197 firms, 11, 15, 16, 21, 31, 34 fish, 21, 34 fishing, 12 flexibility, 83, 102, 159, 186 flight, 62, 132, 134, 135, 140, 246 flood, 115 flooding, viii, 1, 6, 8, 12, 66, 90 flow, 42, 66, 86, 98, 214, 227, 245, 247, 249 food, ix, x, 2, 3, 4, 5, 6, 8, 9, 12, 13, 18, 19, 21, 26, 28, 29, 30, 31, 33, 34, 35, 40, 41, 45, 49, 60, 62,

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Index 63, 64, 71, 83, 85, 86, 88, 89, 90, 92, 93, 94, 97, 109, 115, 151, 152, 153, 156, 170, 176, 177, 192, 203, 205, 214, 215, 216, 217, 218, 222, 223, 232, 234, 237, 240, 243, 244, 245 food aid, x, 2, 5, 21, 29, 30, 33, 34, 35, 40, 45, 60, 63, 64, 94, 109, 151, 153, 156, 192, 203, 216, 222, 223, 237, 241, 245 Food aid, x, 151 food intake, 5 food production, 5 food products, 18 foodstuffs, 80 footwear, 16 forced labor, 89, 92, 176, 233, 234 forecasting, 46, 47 foreign aid, viii, 2, 12, 19, 22, 24, 34, 45, 55, 62, 63, 64, 67, 69, 72, 73, 81, 83, 129, 190, 192 foreign assistance, viii, 2, 5, 64, 146, 238, 240, 241 foreign direct investment, 10, 14, 24 Foreign Direct Investment, 15 foreign exchange, xi, 12, 13, 19, 22, 45, 167, 172, 176, 177, 178 foreign intelligence, 138 foreign investment, viii, 2, 13, 14, 15, 22, 32, 34, 39, 40 foreign person, 63 foreign policy, xi, 36, 65, 69, 81, 83, 131, 163, 168, 169, 177, 186, 188, 216, 219, 220, 237, 240 Foreign Relations Committee, 110, 133, 157 foreigners, 92, 103, 116, 218 forensic, 165, 198 forestry, 31 Fox, 183 France, 23, 24, 47, 78, 79, 144, 147, 148, 149, 175 fraud, xi, 15, 167, 169, 175, 179 free trade, 14, 15, 24, 28, 80, 174, 205, 249 free trade agreement, 80, 249 freedom, ix, 38, 85, 87, 94, 97, 99, 118, 176, 226, 232, 234, 236, 237, 238, 241, 243, 248 freedom fighter, 226 freedoms, 86, 91, 107, 118 freezing, x, 6, 80, 96, 127, 151, 194, 198 freight, 26 friction, 21, 33, 160, 227 frustration, 98 FTA, 17, 46, 50, 80, 184 fuel, viii, x, 2, 3, 5, 24, 26, 28, 36, 37, 40, 44, 45, 55, 60, 122, 151, 154, 155, 194, 195, 196, 198, 200, 201, 202, 213 fuel cycle, 198 fulfillment, 109, 128, 135 fund transfers, 36

funding, 24, 31, 62, 64, 69, 71, 82, 83, 98, 99, 138, 164, 177, 199 funds, viii, xi, 2, 17, 23, 24, 25, 28, 36, 37, 40, 41, 44, 59, 69, 80, 86, 98, 101, 130, 133, 149, 155, 167, 169, 173, 175, 178, 238, 239, 241, 245

G Gabon, 33 games, 216 gangs, 89, 174, 230 gas, 141 GDP, 4, 6, 7, 8, 11, 12, 61 Generalized System of Preferences, 51, 63, 70 generation, 206, 226 Geneva, 230, 239, 242 genocide, 107, 225 genre, 171 Germany, 20, 21, 23, 24, 25, 31, 37, 47, 217, 230 gifts, 26, 188 girls, 176, 224 glass, 31, 204 global economy, vii, 187 Global Insight, 4, 7, 8, 19, 46, 47 global markets, 32 global terrorism, 38, 129 globalization, 12, 17 GNP, 227 goals, 34, 38, 39, 42, 100, 102, 143, 169, 177, 215 gold, 18 goods and services, viii, 55, 61, 67, 72, 81, 84, 130 governance, 38 government, viii, ix, x, xi, 7, 9, 10, 11, 12, 13, 14, 16, 17, 23, 24, 25, 26, 27, 31, 36, 39, 42, 52, 55, 56, 57, 61, 63, 64, 66, 71, 85, 86, 87, 90, 92, 93, 95, 96, 99, 100, 101, 102, 104, 105, 106, 107, 108, 109, 110, 115, 118, 121, 122, 123, 126, 130, 131, 132, 134, 135, 137, 138, 140, 141, 153, 155, 160, 163, 164, 167, 168, 170, 171, 172, 173, 175, 176, 177, 186, 195, 198, 199, 201, 202, 226, 227, 239, 240, 241, 242, 243, 244, 247, 248 grain, 4, 12, 196, 202, 210, 211 grains, 8, 21 grants, 99, 103, 117 grapefruit, 196, 202 grass, 99 Greece, 182 greed, 3, 135, 194, 198 grief, 220 gross domestic product, 4, 7, 61 gross national product, 7 groups, ix, x, 16, 27, 36, 38, 47, 52, 85, 91, 92, 94, 101, 102, 104, 106, 110, 114, 116, 122, 125, 129,

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131, 132, 133, 134, 135, 138, 140, 143, 145, 160, 161, 163, 174, 184, 193, 238, 239, 241, 242 growth, vii, 4, 6, 7, 8, 38, 41, 79, 115, 187 growth rate, 7 GSP, 62, 63 guerrilla, 148 guest worker, 96 guidance, 132, 138 guidelines, 130 guilt, 225 guns, 4, 10, 138

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H Haiti, 65 Hamas, 138 hands, 132, 133, 194, 197, 204, 206, 211, 221, 222, 243 hard currency, 9, 12, 16, 17, 22, 26, 31, 88, 187, 192, 217 hardships, 195, 199 harm, 61, 188 harmony, 61 harvesting, 12 hate, 226 Hawaii, 195, 199 health, 64, 227, 237 health care, 237 health problems, 227 hearing, xi, 98, 99, 100, 101, 102, 105, 118, 128, 159, 162, 172, 182, 189, 190, 192, 193, 213, 218, 226, 228, 229, 230, 233, 234, 235, 236, 245, 250 heavy oil, 40, 126, 155, 203 hegemony, 41 height, ix, 6, 85, 145, 160, 169 heme, 220 heroin, 27, 169, 170, 171 Heroin, 51 Hezbollah, x, 122, 135, 136, 137, 138, 139, 142, 147, 148, 187 high-level, viii, 55, 93, 102, 186, 212, 213, 217, 221 high-tech, 147 highways, 31 hips, 42 hiring, 204 Homeland Security, 100, 111, 179, 180, 181, 182, 183 homeless, 90 Honda, 248 Hong Kong, vii, 6, 20, 34, 144, 187 hospitals, 5 host, 104, 194, 197 hostility, 39

house, v, vi, xi, 26, 51, 77, 78, 84, 86, 98, 99, 100, 101, 102, 104, 105, 118, 128, 129, 130, 131, 133, 141, 145, 156, 157, 159, 162, 182, 185, 229, 244 household, 9, 13 households, 5, 7, 13 housing, 9 human, ix, xi, 2, 5, 28, 38, 43, 46, 56, 62, 64, 66, 72, 78, 85, 86, 89, 90, 91, 92, 96, 97, 99, 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 114, 115, 116, 118, 119, 156, 160, 161, 162, 164, 167, 169, 176, 192, 213, 214, 216, 223, 225, 230, 231, 232, 233, 234, 235, 236, 237, 238, 239, 240, 241, 242, 245, 246, 247, 250 human dignity, 38 human rights, ix, 2, 38, 43, 46, 56, 64, 72, 73, 85, 86, 89, 90, 91, 96, 97, 99, 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 115, 116, 118, 119, 156, 160, 164, 192, 213, 214, 223, 225, 230, 231, 232, 233, 234, 235, 236, 237, 238, 239, 240, 241, 242, 245, 246, 247, 250 humane, 91, 96, 235 humanitarian, vii, viii, ix, xi, 1, 3, 4, 5, 19, 24, 28, 29, 33, 35, 36, 42, 45, 63, 70, 71, 72, 80, 82, 85, 86, 87, 89, 90, 94, 97, 99, 102, 105, 106, 109, 111, 116, 117, 153, 154, 156, 168, 169, 171, 215, 216, 237, 238, 240, 241, 242 humanitarian aid, xi, 3, 4, 5, 24, 28, 29, 33, 35, 42, 97, 99, 105, 153, 159, 171, 215, 216, 237, 238, 242 humanity, 107 Hungary, 33 husband, 164 hydroelectric power, 12 hypothermia, 175 Hyundai, 14, 16, 24, 31

I ice, 60, 127 identification, 126 identity, 138 ideology, 10, 30, 90, 248 illegal drugs, 19, 22, 38, 40, 42, 169, 177 Illicit Activities Initiative, 177 Illinois, 131, 232, 233, 235 IMF, 19, 45, 50, 54, 130 immigrants, 89, 233, 234 immigration, 98, 103, 106 Immigration and Nationality Act (INA), 75, 76, 77, 100, 110, 119 imperialism, 12, 15, 66, 224 implementation, 44, 57, 59, 80, 87, 98, 100, 104, 107, 127, 128, 213, 231, 235

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Index imports, 2, 5, 12, 15, 19, 20, 21, 22, 24, 27, 29, 33, 34, 35, 37, 41, 60, 63, 65, 66, 67, 70, 72, 73, 94, 110, 175, 178, 184, 191 imprisonment, 8, 89, 92 in situ, 41 inauguration, 200 incentive, 4, 5, 45, 95, 127, 211 incentives, 12, 13, 40, 43, 44, 109, 185 incidents, 172 inclusion, ix, 41, 104, 121, 122, 124, 125, 146, 162 income, xi, 7, 9, 25, 32, 47, 167, 168, 178, 190 incomes, 9 independence, 10, 220 India, 20, 43, 57, 147, 189 Indian, 20 indication, 96 indicators, 247 indoctrination, 237, 240 Indonesia, 7, 164, 204 industrial, vii, 1, 3, 5, 10, 11, 12, 15, 17, 19, 30, 31, 36, 61, 81, 93, 228 industrial production, 3, 19 industrial sectors, 11 industrialization, 6 industry, 4, 10, 11, 18, 171, 175 inflation, 7, 13 information sharing, 103 Information System, 20 information technology, 12 infrastructure, 15, 142 inherited, 77 initiation, 141, 186 injury, 98, 196, 201 inmates, 90, 233, 234 innovation, 153 insight, 210 inspection, 22, 59, 194, 198 inspections, 6, 26, 33, 59 inspectors, viii, 40, 55, 57, 194, 195, 198, 200, 222 instability, vii, ix, 1, 5, 86, 94, 205 Institute of Peace, 115, 156 institutions, 5, 9, 67, 79, 101, 130, 134, 173 instructors, 139 instruments, 87, 116 insurance, xi, 17, 64, 80, 167, 169, 175, 179, 183, 187 insurance companies, 183 insurance fraud, xi, 167, 169, 175, 179 integration, 17, 30, 31, 95, 103, 190 integrity, 79, 165 intelligence, 14, 71, 103, 129, 136, 137, 138, 140, 141, 142, 181, 193, 201, 206, 223, 228 intelligence gathering, 14

259

intentions, 41, 84, 93, 205, 244 interaction, 39, 44, 48, 219 interest groups, ix, 85 interference, 37, 107 intermediaries, 89 International Atomic Energy Agency (IAEA), viii, 40, 55, 57, 59, 69, 78, 123, 140, 141 International Covenant on Civil and Political Rights, 108 International Covenant on Economic, Social and Cultural Rights, 108 international financial institutions, viii, 29, 40, 55, 62, 63, 67, 71, 73, 168 international investment, viii, 2, 41 international law, 38, 87, 93, 114 international markets, 170 International Monetary Fund, 19, 29, 37, 40, 44, 45, 50, 54, 63, 71, 83, 130, 168 international standards, 89, 177, 238, 241 international terrorism, viii, 28, 52, 55, 56, 60, 61, 62, 64, 65, 79, 81, 125, 129, 131, 134, 135 international trade, viii, 2, 10, 31, 39, 169 International Trade, 19, 80 International Trade Commission, 80 internet, 136, 144, 145, 147, 148, 149, 150 Internet, 47, 49, 53, 179, 180, 181, 182, 184 interpretation, 146 intervention, 107, 203 interview, 111, 139 interviews, 99 Investigations, 77 investigative, 171, 179 investment, viii, 2, 4, 10, 11, 13, 14, 15, 17, 18, 24, 30, 32, 39, 40, 41, 43, 45, 61, 154, 212, 230, 248 investors, 9, 17, 22, 23, 62, 171 Iran, vii, 26, 56, 65, 67, 73, 74, 77, 81, 82, 104, 115, 129, 132, 136, 137, 139, 140, 141, 142, 145, 148, 149, 187, 194, 197, 212, 213, 225 Iraq, 26, 41, 57, 65, 131, 138, 144, 146, 147, 148, 188, 189, 201, 214, 219, 249 Iraq War, 201, 219 iron, 12, 15, 18, 34, 35, 37, 203 Iron Curtain, 249 IS, 172 Islam, 148 Islamic, 147 isolation, 5, 9, 19, 40, 159, 163, 245 Israel, 28, 128, 136, 137, 139, 142, 145, 147, 148, 149, 187 ivory, 175

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J

L

Jamaica, 37 January, viii, 4, 6, 15, 16, 17, 46, 47, 48, 49, 50, 51, 52, 53, 55, 57, 62, 67, 75, 78, 84, 85, 114, 115, 116, 119, 123, 127, 129, 130, 131, 145, 147, 148, 149, 150, 154, 164, 180, 181, 182, 183, 185 Japan, vii, viii, xi, 1, 3, 5, 7, 9, 14, 19, 20, 21, 25, 26, 27, 28, 31, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 51, 52, 54, 55, 56, 57, 60, 63, 68, 79, 80, 104, 123, 124, 125, 126, 127, 132, 134, 135, 143, 144, 150, 154, 159, 160, 161, 162, 163, 164, 168, 170, 171, 177, 186, 187, 188, 189, 194, 195, 196, 198, 199, 200, 202, 203, 210, 211, 225, 228, 233, 234, 239, 241, 242, 245 Japanese, viii, x, xi, 2, 3, 11, 21, 26, 27, 32, 34, 35, 36, 40, 43, 44, 48, 51, 52, 63, 94, 99, 104, 105, 121, 124, 125, 126, 127, 129, 131, 132, 134, 135, 136, 137, 143, 144, 145, 150, 159, 160, 161, 162, 163, 164, 174, 175, 178, 195, 199, 204, 213, 218, 233, 234, 239, 241, 242, 246 Jerusalem, 137, 147 jewelry, 16, 34 Jilin Province, 18 jobs, 9, 16, 31, 89, 176 Joint Chiefs, 194, 198 journalists, 52 Juche, 9, 225 judge, 236 judgment, 212, 214, 227 Jung, 31, 49, 200 jurisdiction, 27, 61, 66, 67, 79, 88, 107 jury, 248 justice, 91 justification, 58, 107, 125, 204

labor, ix, 11, 16, 31, 42, 43, 85, 89, 92, 155, 176, 204, 224, 233, 234, 243 land, 8, 15, 115, 178, 206 land use, 15 language, 17, 46, 78, 102, 104, 107, 118, 130, 132, 134, 156, 160, 192, 211, 222 language skills, 107 Laos, 94, 95, 114 large-scale, 12, 169, 171, 174, 178 Latin America, 21, 115 laundering, viii, 27, 55, 56, 58, 67, 73, 79, 173, 182 law, viii, x, 38, 45, 55, 56, 61, 63, 64, 66, 71, 81, 82, 87, 93, 98, 103, 105, 114, 116, 117, 121, 122, 128, 129, 155, 168, 169, 173, 176, 177, 180, 181, 182, 189, 229, 230 law enforcement, 56, 71, 169, 176, 177, 182 laws, 60, 63, 64, 65, 66, 80, 81, 87, 90, 91, 177, 232, 234 lead, 3, 12, 15, 30, 44, 87, 94, 105, 160, 163, 191, 203, 205, 206, 218, 239, 242, 243 leadership, 12, 36, 91, 109, 131, 137, 140, 142, 164, 177, 218, 219, 238, 239, 240, 241, 243, 245, 248 Lebanon, x, 122, 135, 136, 137, 139, 145, 147, 148 legal aspects, 106 legislation, x, xi, 2, 66, 97, 98, 102, 110, 116, 122, 131, 159, 189, 230, 231, 233, 235, 246, 249 legislative, 17, 46, 91, 244 Levant, 147, 148 liability insurance, 60 liberal, 45 liberalization, 6, 39, 218 liberation, 226 Liberia, 65 liberty, 38 Libya, 65, 129, 131, 132, 134, 146, 201 licenses, 62, 63, 65, 70, 72, 73, 81 licensing, 62, 63, 71, 81 lien, 80 life expectancy, 237, 240 lifestyle, viii, 1, 5, 107 likelihood, 131, 178 limitation, 249 limitations, 215 linkage, 101, 127, 153 links, 10, 36, 116, 144, 145, 149, 170, 173, 180 liquor, 13, 34 listening, 216, 228, 246 livestock, 21 living conditions, 249 living standards, 7 loans, 23, 45, 64, 71, 225

K Kenya, 175 kidnapping, x, 40, 104, 121, 124, 125, 126, 127, 129, 134, 135, 143, 233, 234 Kim Jong-Il, 68 King, 182 Korean government, viii, ix, 10, 16, 17, 24, 25, 27, 55, 56, 57, 61, 85, 95, 99, 102, 105, 106, 108, 109, 115, 122, 130, 137, 138, 153, 155, 170, 171, 176, 199, 240, 241, 242 Korean War, 7, 10, 25, 36, 44, 95, 128, 131, 132, 198, 225 Kuwait, 115

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Index location, 136, 183, 200, 220 London, vii, 44, 46, 48, 49, 50, 52, 136, 140, 147, 148, 187 long-term, 44, 87, 212, 218, 238, 241 loopholes, 247 Los Angeles, 103, 140, 148, 149 love, 226 loyalty, xi, 92, 167, 178

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M Macau, viii, 27, 55, 56, 58, 67, 102, 173, 174, 177, 187, 189, 205 machinery, 2, 4, 16, 17, 20, 21, 31, 34, 35, 37, 39, 115 magnet, 105 mainstream, 160 maintenance, 40, 59, 61, 80 major cities, 15 Malaysia, 6, 115 males, 14, 88 malnutrition, 115, 242 management, 16, 179, 183 man-made, 34 manufacturer, 49, 171 manufacturing, 10, 11, 12, 16, 19, 22, 31, 140, 248 marginalization, 163 market, vii, viii, 1, 7, 8, 9, 10, 13, 14, 21, 29, 31, 33, 35, 39, 45, 70, 175, 178, 187, 238, 241, 248 market disruption, 70 market economy, 7, 10, 14, 39 market prices, 7 market share, 175 market value, viii, 1 markets, 6, 7, 8, 9, 13, 14, 21, 31, 32, 33, 37, 38, 41, 42, 43, 45, 153, 169, 171, 172, 212 marriage, 176 marriages, 88, 89, 233, 234 Marxist, viii, 55, 56, 64, 69, 83, 188 mask, 184 measures, x, 2, 7, 13, 27, 33, 43, 64, 67, 79, 84, 95, 96, 105, 114, 121, 122, 123, 154, 168, 177, 210, 224 meat, 34 media, 27, 90, 99, 136, 160, 161, 162, 168, 172, 174, 175, 232, 234, 247, 249 medicine, 18, 31, 62, 71, 83 megawatt, 40, 215 melons, 26 membership, 29, 45, 62, 87, 110, 130 memory, 134 men, 88, 92, 176, 204, 219, 233, 234 merchandise, 19, 22, 29, 31, 33

261

metals, 16, 21 methamphetamine, 27, 169, 170, 171, 178, 180 Methamphetamine, 171, 180 metric, x, 2, 36, 90, 151, 152, 170, 171 Mexico, 28 MIA, 50 microbial, 48 middle class, 9 Middle East, vii, 26, 51, 136, 143, 147, 148, 169, 170, 187 migrants, 33, 91, 92 migration, 91 military, vii, xi, 1, 4, 5, 6, 9, 10, 11, 13, 19, 22, 26, 27, 30, 32, 34, 36, 37, 38, 39, 40, 41, 42, 43, 48, 54, 59, 61, 63, 71, 72, 77, 90, 94, 104, 110, 124, 129, 136, 137, 138, 139, 142, 143, 146, 148, 149, 154, 160, 163, 164, 167, 169, 171, 189, 192, 195, 198, 199, 201, 202, 203, 204, 205, 211, 213, 214, 218, 219, 220, 221, 227, 228, 230, 237, 238, 240, 241, 243, 244, 246 military aid, 72, 146 military spending, 6 mineral resources, 18 minerals, 4, 12, 15, 18, 20, 21 mines, 21 minimum wage, 17 mining, 11, 12, 15, 18, 19 minorities, 111 minority, 101 minority groups, 101 mirror, 19, 20, 161 missile launches, vii, 187 missiles, 26, 34, 38, 42, 43, 58, 67, 73, 77, 86, 104, 137, 139, 140, 141, 148, 149, 154, 161, 187, 188, 189, 194, 195, 196, 198, 199, 201, 245 missions, 95, 98, 117, 139 Mississippi, 4 misunderstanding, 201 mold, 16 molybdenum, 12, 15, 18 money, viii, 9, 24, 26, 27, 28, 36, 55, 56, 58, 67, 73, 79, 169, 173, 203, 222, 230, 248 money laundering, 27, 56, 58, 67, 79, 173 Mongolia, 65, 68, 94, 96, 114, 116, 117, 163, 176 Montenegro, 65 mood, 220 Moon, 103, 137, 147, 182 morale, 204 morality, 78 moratorium, 58, 59, 66 morning, 188, 236 mortgage, 80 Moscow, 36, 37, 221

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mothers, 6 motion, 190 motivation, 243 mouse, 193 movement, xi, 10, 88, 89, 92, 105, 118, 163, 167, 168, 211, 212, 232, 234, 238, 243, 244, 249 multilateral, ix, 23, 24, 25, 44, 57, 121, 159, 163, 180, 184, 195, 200, 245 mushrooms, 35 Muslim, 143 Myanmar, 169

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N Namibia, 35 narcotic, 180 narcotics, 9, 27, 58, 67, 102, 169, 173, 177, 178, 190, 192, 205 narratives, 183 nation, 28, 32, 42, 44, 101, 145, 177, 186, 188, 189, 222, 236 national, viii, 4, 7, 9, 10, 12, 28, 38, 42, 55, 56, 61, 62, 63, 65, 66, 67, 70, 71, 73, 80, 82, 83, 84, 87, 90, 91, 137, 143, 169, 186, 191, 212, 216, 226, 237, 244 National Defense Authorization Act, 157 National Emergencies Act, 56, 66, 72, 77, 83 national emergency, 65, 66, 67, 83, 84 national income, 7, 9 national interests, 38, 42, 70, 186 national security, viii, 28, 38, 55, 56, 61, 62, 63, 70, 71, 82, 143, 169, 191, 212, 237 National Security Strategy, 53 National Strategy, 48 nationalism, 217, 224 nationality, 87, 110, 179 NATO, 226 natural, 87, 100, 115, 141 natural disasters, 87, 115 natural gas, 141 Navy, 226 NEA, 76, 77 neck, 204 nefarious, 192 negative consequences, 143, 204 neglect, 86 negotiating, 5, 42, 46, 127, 143, 160, 173, 186, 196, 201, 202, 203, 206, 216, 247 negotiation, 61, 94, 109, 143, 215, 245 Netherlands, 23 network, vii, 15, 36, 94, 95, 102, 179, 187, 222, 237, 240

New York, vii, 28, 44, 47, 50, 52, 53, 78, 79, 81, 84, 117, 118, 127, 144, 145, 148, 149, 150, 157, 181, 182, 183, 187, 188, 189, 221 New York Times, 52, 53, 78, 79, 81, 84, 117, 118, 144, 145, 148, 149, 150, 157, 181, 183, 189 newspapers, 29, 247 NGO, 94, 99, 110, 153, 231 NGOs, 87, 89, 93, 94, 96, 99, 101, 102, 106, 117, 153, 240, 242 nongovernmental, 118 non-human, xi, 64, 73, 105, 156, 159 non-nuclear, 43, 57, 79, 82, 155 non-profit, 118 nonproliferation, xi, 40, 43, 62, 63, 64, 168, 223 normal, 14, 28, 44, 177, 184, 191 normalization, xii, 3, 5, 7, 39, 40, 42, 44, 45, 60, 63, 97, 104, 109, 123, 124, 126, 128, 160, 163, 168, 177, 186, 195, 199, 239, 242, 246, 247 norms, 237, 240 Northeast, 43, 48, 49, 50, 53, 78, 93, 97, 102, 109, 117, 204 Northeast Asia, 43, 48, 49, 50, 53, 78, 97, 102, 109 Norway, 23, 24, 25 NPR, 48 NPT, 155, 198 nuclear arms race, vii, 43, 187, 194, 197 Nuclear Energy Agency, 142 nuclear material, 130, 168, 196, 202 Nuclear Nonproliferation Treaty, viii, 55, 57 nuclear power, 4, 31 nuclear power plant, 31 nuclear program, vii, ix, x, 1, 2, 3, 10, 21, 24, 25, 26, 30, 40, 41, 42, 44, 60, 86, 121, 122, 123, 125, 127, 128, 139, 140, 142, 151, 153, 154, 162, 168, 173, 187, 191, 194, 195, 196, 197, 200, 201, 202, 205, 212, 213, 223 nuclear reactor, 6, 10, 24, 52, 122, 128, 142, 154, 213 nuclear talks, 28, 144 nuclear technology, 52, 129, 130, 141, 189 nuclear weapons, viii, ix, xi, xii, 2, 4, 5, 10, 33, 36, 38, 39, 40, 42, 43, 55, 56, 57, 58, 59, 60, 63, 85, 86, 94, 96, 98, 101, 104, 108, 109, 127, 139, 141, 143, 154, 156, 159, 160, 163, 168, 177, 186, 190, 191, 192, 193, 194, 195, 198, 199, 201, 204, 206, 214, 216, 217, 218, 222, 223, 239, 242 nutrition, 115

O oat, 237 obligation, 87, 100, 106, 122, 127, 142, 249

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Index obligations, x, 57, 80, 87, 93, 100, 104, 107, 110, 116, 121, 122, 123, 127, 128, 249 observations, 237, 244 obstruction, 244 OCHA, 115 OECD, 23, 24, 25, 50 OFAC, 77 offenders, 27, 92 Office of Foreign Assets Control, 67, 77, 84 Office of Management and Budget, 230 Official Development Assistance, 23, 24 oil, viii, x, 3, 5, 6, 13, 24, 28, 33, 34, 37, 40, 55, 60, 126, 141, 151, 154, 155, 191, 194, 195, 196, 198, 200, 202, 203, 210, 214, 215, 222, 223 older people, 226 Oman, 115 online, 80, 142 on-line, 23, 79 open markets, viii, 1, 13 operator, 15 opiates, 171 opinion polls, 226 opium, 27, 171, 178, 180 opposition, 5, 57, 62, 99, 100, 127, 130, 134, 140, 143, 149, 161, 180, 227 ores, 12, 15, 18, 19, 21, 34 organ, 136, 147 organic, 29, 48 organic chemicals, 29 Organisation for Economic Co-operation and Development, 24 organization, 109, 110, 118, 136 organizations, ix, x, 14, 24, 25, 27, 45, 69, 85, 87, 88, 89, 90, 96, 98, 101, 107, 119, 122, 131, 132, 139, 141, 153, 177 organized crime, 178 orientation, 8 outrage, 125, 162 Oval Office, 239, 242 oversight, 2, 110, 176, 177 overtime, 17 ownership, 6, 10, 84

P Pacific, vi, vii, 32, 36, 40, 46, 49, 50, 52, 54, 78, 81, 97, 100, 101, 102, 118, 145, 162, 179, 187, 189, 194, 195, 197, 199, 212, 213, 229, 234, 244 pain, 223 Pakistan, 26, 43, 57, 68, 74, 141, 189 Pakistani, 201 paper, ix, 37, 56, 78, 184 Paper, 47, 48, 50, 52, 53, 114, 164

263

parents, 111, 162 Paris, 139, 147, 148, 221 partnership, 140 passenger, 138 passive, 145 passports, 172 Patriot Act, 27, 181 PATRIOT Act, 51, 73, 79, 84, 173 Peace Corps, 70, 82 peace treaty, 29, 33, 43, 44, 109 penalties, 56, 64 penalty, 92 per capita, 7, 23, 32, 61 per capita income, 32 perception, 102, 162 performance, viii, 1, 5, 6, 13 periodic, 87 permit, 236 personal, 9, 44, 176, 188, 231 personality, 78, 237, 240 personnel costs, 155 Peru, 33 petroleum, 4, 6, 33, 36 pharmaceutical, 171, 179 pharmaceutical industry, 171 pharmaceuticals, xi, 167, 169, 171, 173, 177, 178, 179 Philippines, 134, 171, 174 philosophy, 42 phone, 15 photographs, 138, 230 physical abuse, 90, 232, 234 planned economies, 42 planning, 6, 10, 18, 131, 149, 247 plastic, 34 play, 97, 163, 188, 203, 213, 216, 244, 249 plea bargain, 173 plea bargaining, 173 plutonium, x, 40, 121, 122, 123, 127, 128, 142, 143, 151, 154, 186, 188, 190, 194, 196, 198, 199, 200, 201, 202 Poland, 24 police, 34, 226, 227 policy instruments, 38 policymakers, xi, 101, 168, 176 political parties, 161 political power, 10 political refugees, 92, 95 politicians, 160, 161 politics, xi, 10, 159 poor, viii, 1, 3, 5, 41, 42, 89, 171, 243 population, 2, 4, 6, 8, 13, 34, 38, 88, 90, 94, 99, 115, 153, 203, 217, 220, 226, 232, 234, 237, 240, 244

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264

Index

porous, 39 ports, 34, 41, 60, 174 Portugal, 183 posture, 245 potato, 12 potatoes, 12 poverty, 88, 89, 117 power, vii, viii, 1, 4, 7, 8, 9, 10, 11, 12, 16, 18, 22, 31, 38, 39, 54, 57, 131, 155, 163, 189, 203, 225, 232, 234, 243, 245 power plant, 12, 38, 155 powers, 101, 203, 204, 205, 206, 217, 218, 219, 245, 248 PPI, 47 PPP, 4, 7, 8, 47 pragmatic, 32, 36 preference, 176, 220 preferential treatment, 17, 46 pregnant, 92 pregnant women, 92 premiums, 80 president, 77, 103, 104, 162, 200 President Bush, x, 3, 27, 28, 40, 58, 66, 78, 79, 82, 84, 86, 97, 98, 104, 105, 121, 122, 125, 126, 127, 134, 154, 156, 162, 200, 230, 236, 238, 239, 241, 242, 247 President Clinton, 62, 66, 80, 84, 194, 195, 198, 199, 200, 203, 222 presidential veto, x, 122 pressure, ix, 5, 7, 37, 39, 42, 60, 85, 95, 98, 104, 108, 109, 125, 144, 160, 176, 178, 190, 192, 198, 201, 203, 211, 215, 238, 241, 245 prestige, 41 prevention, 64 prices, viii, 1, 3, 7, 13, 33, 36, 153 primary products, 21 priorities, ix, 42, 85, 110, 160, 235, 246 prisoners, 90, 131, 176, 233, 234 prisoners of war, 131 prisons, 91 private, 8, 9, 10, 12, 24, 41, 90, 117, 153, 168, 171, 238, 241, 248 private citizens, 238, 241 private sector, 248 privation, 4, 12, 38, 41 proactive, 108 probability, 37, 193, 196, 202 probation, 245 producers, 171, 174, 175 production, xi, 3, 6, 10, 12, 13, 16, 17, 19, 21, 27, 39, 90, 115, 142, 143, 167, 168, 169, 170, 171, 172, 174, 178, 180, 182, 194, 198, 199, 201

profit, xi, 118, 167, 168, 169, 172, 173, 174, 175, 176, 177, 178, 188, 191 profits, xi, 11, 13, 167, 176 program, viii, ix, xi, 1, 2, 3, 4, 5, 10, 25, 28, 41, 42, 43, 47, 55, 57, 58, 59, 85, 93, 94, 95, 96, 98, 106, 110, 119, 121, 123, 128, 136, 139, 140, 141, 142, 143, 148, 149, 153, 154, 156, 157, 159, 163, 168, 177, 192, 194, 195, 196, 197, 198, 199, 200, 201, 202, 203, 205, 211, 212, 213, 216, 236 programming, 99, 241 proliferation, viii, xii, 2, 28, 33, 38, 42, 43, 55, 56, 58, 61, 63, 66, 67, 70, 72, 74, 75, 76, 77, 82, 84, 126, 128, 131, 138, 143, 160, 168, 176, 182, 184, 186, 187, 188, 189, 190, 204, 206, 213 promote, 40, 43, 97, 107, 115, 154, 219, 239, 241 propaganda, 44, 230, 238, 241 property, 66, 67, 71, 175 prosperity, vii, 43, 79, 187, 238, 241, 246 prostitution, 89, 176, 205 protection, 86, 87, 88, 96, 97, 100, 102, 106, 107, 110, 117, 248 protocols, 134, 135 prototype, 140 PSI, 177, 179, 183, 212 psychotropic drug, 180 psychotropic drugs, 180 public, 9, 35, 45, 80, 94, 102, 103, 109, 125, 138, 140, 143, 160, 161, 162, 163, 169, 171, 177, 189, 228, 236 public awareness, 169, 177 public opinion, 143, 236 public service, 228 public view, 162 punishment, ix, 27, 85, 92 punitive, 43 purchasing power, 4, 7, 8 purchasing power parity, 4, 7 Pyongyang, vii, ix, x, xi, 2, 3, 4, 5, 6, 8, 9, 10, 12, 13, 14, 15, 16, 17, 19, 21, 22, 23, 24, 26, 28, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 47, 48, 49, 51, 60, 77, 85, 95, 96, 98, 101, 102, 103, 104, 105, 108, 109, 119, 123, 124, 125, 126, 127, 132, 134, 135, 139, 141, 143, 144, 145, 151, 152, 153, 154, 160, 161, 162, 163, 167, 169, 171, 172, 173, 174, 177, 178, 182, 185, 186, 187, 189, 194, 195, 198, 199, 200, 201, 204, 210, 213, 214, 215, 225, 246

Q Qatar, 115 questioning, 98, 165, 218

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R race, 80, 87, 110, 118 radio, 97, 99, 191, 231, 238, 241, 246 rail, 37 range, 7, 56, 62, 72, 73, 83, 88, 105, 110, 116, 137, 139, 140, 141, 147, 148, 160, 162, 163, 172, 174, 178, 189, 194, 195, 196, 199, 201 rape, 89 raw material, 12, 22, 36 raw materials, 12, 22, 36 reality, 192 reasoning, 190 rebel, 147 recall, 245 recognition, 13, 41, 109, 246 reconciliation, 162 record keeping, 67, 84 recovery, 3, 7, 11, 17, 47 reduction, 72, 129, 143, 223, 224 reef, 204 re-export, 130 Reform Act, 71, 129 reforms, vii, 1, 2, 5, 6, 8, 12, 13, 36, 40, 48 refuge, ix, 85, 86, 89, 236, 239, 241, 242 refugee admission, 98, 100, 110 refugee camps, 93 refugee flows, 105 refugee resettlement, 100, 238, 241 refugee status, ix, 85, 86, 93, 97, 100, 106, 110, 111, 114, 116, 117 refugees, vii, ix, 1, 5, 8, 32, 34, 37, 42, 85, 86, 87, 88, 89, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 103, 104, 105, 106, 107, 108, 109, 110, 113, 116, 117, 119, 160, 204, 214, 217, 227, 231, 233, 234, 235, 236, 238, 239, 241, 242, 243, 246, 247, 249 regional, ix, xi, 38, 80, 86, 98, 99, 101, 103, 109, 110, 159, 187, 197, 203 regular, 27, 44, 96, 109, 246 regulation, 67 regulations, 14, 62, 65, 66, 80, 81, 83, 174 rehabilitation, 31 reimbursement, 80 reinforcement, 194, 198 relationship, x, 33, 35, 36, 37, 44, 64, 78, 103, 122, 135, 136, 137, 138, 139, 140, 160, 162, 192, 211, 216, 218, 219, 226, 227, 247 relationships, viii, 2, 5, 31, 63, 178, 184, 204, 224, 247 relatives, xi, 26, 105, 159, 161 reliability, 19 religion, 87, 110, 118

265

religious groups, 91 remittances, 2, 9, 22, 25, 26, 36, 170 rent, 80, 188 repair, 12, 28, 62 repatriation, 87, 93, 104, 162 repression, 102, 235, 238, 241 reprocessing, 72, 142, 190, 195, 198, 199, 200, 213 Republican, 141, 227, 236 Republicans, 216 reputation, 96, 163 resale, 153 rescission, 3, 70, 131 research, 114, 140, 141, 197, 201 research and development, 140 researchers, 217 reserves, 18, 22 resettlement, ix, 86, 94, 95, 96, 100, 101, 103, 105, 106, 110 residential, 53 resistance, 4, 10 resolution, 3, 33, 36, 41, 42, 43, 57, 60, 61, 66, 70, 80, 87, 94, 99, 103, 104, 105, 125, 162, 163, 164, 177, 192, 202, 214, 239, 242, 246 resources, vii, xi, 1, 5, 10, 12, 15, 18, 32, 39, 58, 80, 87, 88, 96, 118, 132, 153, 167, 169, 182, 187, 231, 238, 241 responsibilities, 231 restructuring, 224 retaliation, 39, 221, 222 retention, 132 reunification, 30, 42, 43, 44, 80, 88, 111, 211 revenue, 77, 169, 174, 176, 178, 205, 240 revolutionary, 6, 10 Revolutionary, x, 122, 135, 136, 137, 138, 148 rewards, 9 RFA, 99 rhetoric, 163, 188, 198 rhino horn, 175 rice, 11, 13, 60, 174, 211 rings, 176 risk, 5, 27, 34, 42, 67, 92, 93, 108, 146, 153, 200, 231, 237, 240 risk factors, 92 risks, 98 rivers, 39 Robert Gates, 140 rocky, 164 rods, 40, 122, 155, 195, 200 rolling, 33 Rome, 100 ROS, 187, 190, 213 rule of law, 168 runaway, xi, 167

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rural, 13, 117 rural areas, 117 Russia, vii, viii, 1, 2, 12, 20, 23, 24, 25, 35, 36, 37, 39, 41, 42, 43, 44, 45, 47, 51, 52, 53, 56, 57, 60, 80, 123, 154, 155, 156, 170, 175, 176, 181, 186, 199, 200, 204, 210 Russian, 6, 12, 36, 37, 53, 79, 80, 173, 205, 213 Rwanda, 65, 225

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S sacrifice, 60 Saddam Hussein, 187 safeguard, 57 safeguards, 59, 199 safety, 161 salaries, 23 sales, vii, 8, 22, 26, 38, 61, 62, 63, 69, 72, 73, 77, 149, 174, 187, 211 Samoa, 234 Samsung, 31 sanctions, vii, viii, ix, x, 1, 2, 3, 4, 5, 20, 21, 28, 33, 34, 37, 39, 40, 41, 42, 45, 55, 56, 57, 58, 60, 61, 62, 63, 64, 78, 83, 104, 105, 110, 114, 121, 122, 126, 128, 129, 145, 146, 154, 155, 161, 168, 171, 176, 182, 190, 198, 205, 211, 213 SAR, 15 satisfaction, 124, 128 Saudi Arabia, 115, 138 scams, 187 scarcity, 8, 10, 42 scheduling, 173 school, 94, 104, 117, 160, 162, 239, 242 scientists, 142, 171 seafood, 34, 35 search, ix, 25, 85, 88, 92, 93, 138 searches, 25 searching, 177 Second World, 230 Second World War, 230 secret, 123, 126, 140, 141, 144, 148, 149, 227 Secret Service, 172, 179 Secretary General, 239 Secretary of Commerce, 69, 130 Secretary of Defense, 78, 123, 140, 186, 194, 197 Secretary of State, viii, 3, 41, 55, 56, 60, 62, 64, 70, 71, 78, 81, 82, 96, 97, 100, 102, 123, 125, 126, 127, 129, 130, 143, 145, 146, 189 Secretary of the Treasury, 67, 69, 71, 73, 79, 130 secrets, 149 securities, 23 security, vii, viii, ix, 5, 14, 28, 36, 38, 39, 42, 43, 46, 55, 56, 57, 61, 62, 63, 65, 69, 70, 71, 82, 86, 90,

91, 94, 96, 98, 100, 101, 102, 105, 108, 109, 111, 115, 136, 137, 143, 147, 154, 160, 163, 168, 169, 172, 185, 186, 187, 190, 191, 199, 212, 223, 224, 237 Security Council, 37, 41, 53, 56, 57, 58, 59, 60, 61, 79, 80, 107, 119, 126, 154, 178, 187, 189 seeds, 31, 228 seizure, 159, 170 seizures, 27, 170 selecting, 188 semiconductor, 16 semiconductors, 32 Senate, 77, 78, 79, 84, 86, 110, 130, 131, 133, 157, 179, 180, 181, 182, 183 Senate Foreign Relations Committee, 110, 133, 157 sensitivity, 108, 219 sentences, 91 Serbia, 65 series, 13, 36, 98, 123, 154, 162, 205 services, viii, 4, 11, 12, 15, 22, 44, 55, 59, 61, 63, 65, 67, 69, 70, 71, 72, 80, 81, 84, 103, 106, 130, 188, 238, 241 servitude, 247 severity, 63, 89 sex, 56, 64, 118 Shahid, 74 shame, 108 Shanghai, 48, 49, 50, 200 shape, 215, 223 shares, 36, 77 sharing, 32, 103 shellfish, 21 shelter, 94 shipping, 22, 45, 227 shoot, 206 short period, 217, 245, 246 shortage, 3, 19, 49, 61, 89, 212, 237, 240 short-range, 56 short-term, 44, 143, 162, 203 shoulder, 235 sign, 184 signals, 127, 226 signs, 133, 164, 228, 246 sine, 246 Singapore, x, 6, 13, 20, 33, 68, 121, 122, 128, 143 singular, 163 sites, 31, 33, 139, 141 skills, 107, 142 slavery, 56, 64 slaves, 94, 243 small and medium sized enterprises, 16, 31 smelting, 18 smugglers, 173, 222

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Index smuggling, xi, 26, 27, 89, 141, 147, 167, 168, 170, 172, 173, 174, 175 social costs, 60 social group, 87, 110 social problems, 218 socialism, 7 socialist, 13, 14, 238, 241 software, 28, 62, 66, 81 soil, 115 soil erosion, 115 solutions, 87, 100, 116 Somalia, 65 Southeast Asia, 95, 98, 101, 106 Southern Hemisphere, 221 sovereignty, 107 Soviet Union, 6, 33, 36, 65, 89, 118, 188, 197, 216, 217, 221, 232, 234, 249 Spain, 26 species, 169, 175 spectrum, 145 speculation, 3, 62, 177 speech, 32, 57, 237, 240 speed, 196, 201 sponsor, viii, 46, 53, 55, 56, 64, 86, 104, 124, 125, 129, 130, 131, 133, 135, 146 sporadic, 14 Sri Lanka, x, 122, 135, 138, 147 stability, vii, 34, 43, 97, 187, 220, 223, 227 stabilize, 217 stages, 16, 122 stakeholder, 216 standard of living, 5, 38 standards, 38, 39, 56, 64, 89, 115, 176, 177, 188, 238, 241 starch, 29 starvation, viii, 1, 2, 5, 6, 8, 9, 12, 91, 216, 225, 230, 237, 240, 244 state control, 171 State Department, viii, ix, x, 2, 3, 27, 28, 41, 55, 56, 57, 62, 71, 79, 82, 85, 88, 89, 90, 91, 97, 98, 100, 101, 103, 108, 110, 114, 115, 116, 121, 124, 125, 127, 128, 132, 133, 135, 136, 138, 139, 140, 145, 146, 152, 155, 156, 157, 162, 169, 170, 171, 174, 175, 176, 179, 180, 183, 222, 233, 234, 239, 241, 247 State of the Union, 57, 78, 134 state-owned, 6, 15, 67, 172 states’ rights, 107 statistics, 7, 19, 47, 53, 217 Status of Refugees, 87, 113, 114 statutory, 63 steel, 18, 31, 34, 35, 37, 155 stimulus, 33

stock, 12, 24, 33 stockpile, 143 storage, 136, 196, 201 strain, 93 strategic, 29, 32, 36, 38, 102, 153, 160, 162, 185, 186, 189, 193, 205 strategies, 39, 105, 195, 199 strength, 10, 203, 220 stress, 10, 90, 204 stretching, 181 strikes, 41, 137 students, 224 substances, 131, 180 Sudan, 7, 65, 81, 115, 129, 132, 134, 145, 146, 225 suffering, 86, 97, 214, 236, 240, 242 sugar, 7, 237 suicide, 137, 162, 194, 197, 204 suicide bombers, 137 summer, 6, 8, 89, 91, 123, 156, 187, 226 Sun, v, 51, 167, 183, 203 sunlight, 246 supernatural, 9 supplemental, 155 suppliers, 20 supply, 16, 21, 22, 31, 36, 41, 59, 128, 138, 139, 140, 175, 194, 196, 198, 202, 213 Supreme People’s Assembly, 10 surgical, 214 surprise, 161, 206 surveillance, 136 survival, 64 surviving, 132, 134 survivors, 90, 230 Sweden, 23, 24, 25 switching, 215 Switzerland, 24, 44, 47, 173, 230 symbolic, 162, 244 sympathetic, 226, 250 Syria, 26, 56, 65, 67, 73, 74, 77, 81, 82, 115, 128, 129, 132, 134, 137, 142, 145, 147, 149, 225 systems, xi, 38, 59, 79, 151, 177, 217

T tactics, 137, 147, 176, 206, 211, 222 Taiwan, vii, 6, 33, 80, 170, 174, 187, 205, 220 Taiwan Strait, 205 Tajikistan, 65 Taliban, 138 tangible, 248 Tanzania, 79 targets, 7, 13, 39, 138, 199 tariffs, 28, 63

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Index

tax incentive, 61 tax incentives, 61 taxes, 17, 80, 175 team leaders, 17 technical assistance, x, 151 technology, vii, xii, 9, 12, 18, 19, 21, 22, 52, 58, 63, 66, 67, 81, 129, 130, 134, 139, 141, 148, 149, 154, 168, 187, 189, 197, 201, 212, 213 technology transfer, 52, 63 Tehran, 137, 141, 142, 149, 150 telecommunication, 66 telecommunications, 66 telephone, 15 television, 13 Tennessee, 193 tension, 34, 39, 42, 59, 99, 103, 107, 203 tenure, 198 territory, 37, 59, 100, 106, 117, 131, 145, 174, 181, 204 terrorism, viii, ix, x, xi, 3, 28, 29, 38, 46, 52, 53, 55, 56, 60, 61, 62, 64, 65, 66, 79, 81, 86, 104, 105, 107, 121, 122, 123, 124, 125, 126, 127, 128, 129, 130, 131, 132, 133, 134, 135, 136, 138, 142, 143, 144, 145, 146, 159, 162, 168, 190, 233, 234 terrorist, x, 38, 44, 52, 63, 64, 65, 119, 122, 124, 125, 129, 130, 131, 132, 133, 134, 135, 138, 143, 145, 147, 154, 193, 203, 214, 221, 222 terrorist acts, 124, 132, 134, 135 terrorist groups, 38, 52, 125, 131, 132, 133, 134, 135, 138, 143, 193 terrorist organization, x, 119, 122, 132 terrorists, 119, 124, 131, 132, 133, 145, 221 testimony, xi, 26, 77, 78, 84, 100, 101, 105, 133, 159, 171, 187, 190, 193, 194, 197, 210, 213, 217, 227, 228, 230, 231, 235, 236, 237, 240, 249 textiles, 4, 16, 21, 22, 31, 110 Thai, 96, 174, 179 Thailand, 6, 20, 21, 24, 37, 60, 94, 96, 114, 117, 171 thawing, 195, 200 The Economist, 47, 48, 80 theory, 178, 216 thinking, 211 third party, 196, 202, 221, 222 threat, vii, viii, 5, 8, 19, 28, 38, 55, 56, 57, 60, 61, 66, 86, 91, 94, 107, 143, 148, 160, 185, 186, 187, 194, 195, 197, 199, 203, 204, 212, 222, 223 threat of force, 203 threatened, 87, 105, 163, 223 threatening, 38, 102, 231 threats, 58, 86, 163, 198, 203 tides, 203 Tier 3, viii, 55, 56, 64, 89, 176

time, 2, 3, 10, 33, 39, 40, 41, 58, 60, 61, 66, 67, 77, 83, 93, 94, 98, 101, 103, 114, 115, 116, 124, 127, 131, 134, 137, 139, 140, 141, 142, 154, 160, 169, 171, 178, 185, 186, 187, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 198, 199, 202, 205, 206, 213, 215, 217, 218, 221, 222, 223, 224, 225, 226, 227, 230, 233, 235, 239, 241, 245, 246 time pressure, 160 timing, 19, 153 TIP, 114 title, 79, 83, 181 tobacco, 173, 174, 175, 182 Tokyo, vii, 34, 35, 48, 51, 125, 144, 160, 161, 162, 164, 170, 187, 222 tolerance, 96, 106, 169 torture, 92, 103, 108, 223 total product, 12 totalitarian, 102, 232, 234 tourism, 14, 31, 170 tourist, 3, 14, 61 tracking, 177 trade, vii, viii, 1, 2, 4, 5, 6, 9, 10, 14, 15, 16, 17, 19, 20, 21, 22, 24, 26, 27, 28, 29, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 50, 53, 55, 56, 58, 60, 61, 62, 63, 64, 65, 69, 70, 79, 81, 84, 94, 109, 154, 169, 170, 171, 174, 178, 182, 184, 189, 191, 204, 205, 206, 211, 213, 223, 225, 250 Trade Act, 63, 69, 70, 81, 82, 83 trade agreement, 28, 44, 184 trade deficit, 2, 20, 22, 26, 39, 170, 191 trade liberalization, 6 trade policy, 81, 223 Trade Sanctions Reform and Export Enhancement Act, 82 trademarks, 179 trade-off, 4, 206, 213 trading, viii, 2, 5, 9, 13, 19, 20, 21, 27, 33, 35, 37, 45, 57, 60, 79, 82, 169, 172, 177, 212, 213 trading partners, 5, 20, 35, 45, 57, 60 Trading with the Enemy Act, vii, x, 1, 3, 28, 40, 46, 53, 121, 122, 124, 128, 143 tradition, 9 traffic, 27, 161, 174, 184 trafficking in persons, 73, 183, 239, 241 Trafficking in Persons, 114, 115, 176, 183 training, x, 59, 92, 95, 122, 131, 135, 136, 137, 139, 147, 197 transactions, 9, 13, 19, 24, 27, 33, 58, 62, 66, 67, 70, 72, 73, 79, 83, 84, 171, 172, 174 transfer, 58, 59, 67, 129, 130, 141, 196, 202 transformation, 205, 206, 217, 218, 238, 241 transition, 39, 45 transmission, 16, 18

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Index transnational, 79 transparency, 102, 156 transparent, 79, 93 transport, 35, 67, 147 transportation, 14, 72, 137 travel, 14, 30, 41, 62, 66, 80, 92, 94, 106, 246, 247 Treasury, 27, 51, 56, 58, 66, 67, 69, 71, 73, 77, 79, 81, 84, 130, 172, 173, 181, 189 Treasury Department, 56, 58, 67, 79, 84, 173, 189 treaties, 91, 108, 116 trend, 88, 178, 203, 204 trial, 237, 240 trucks, 35 trust, 36, 109, 119, 211 turbulence, 89 turbulent, 199 typhoon, 90

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U U.N. Security Council, 37, 56, 57, 58, 59, 60, 61, 80, 107, 126, 187 U.S. Citizenship and Immigration Services, 111 U.S. Department of the Treasury, 51, 181 U.S. Export-Import Bank, 45, 83 U.S. military, 4, 26, 27, 39, 40, 138, 143, 163, 164 U.S. Treasury, 27, 56, 173 UK, 23, 149 Ukraine, 216, 225 UN, 23, 33, 41, 47, 48, 53, 81, 117, 119, 154, 178, 242 UN General Assembly, 242 underemployment, 117 undergraduate, 230 unemployment, 93, 117 unfolded, 195, 200 UNHCR, 87, 88, 92, 93, 95, 96, 97, 99, 100, 106, 108, 109, 110, 114, 116, 117 UNICEF, 115 unification, 37, 206, 219, 248 uniform, 245 unions, 26, 36, 224 United Kingdom, 24, 79 United Nations, 6, 14, 15, 19, 22, 34, 36, 41, 44, 50, 53, 56, 58, 60, 79, 87, 90, 91, 96, 103, 106, 107, 108, 114, 115, 116, 117, 126, 131, 179, 187, 188, 189, 202, 211, 230, 239, 246, 247, 249 United Nations Development Program, 187 United Nations High Commissioner for Refugees, 53, 87, 106, 114 United Nations Office for the Coordination of Humanitarian Affairs, 90, 115

United States Agency for International Development, 153 Universal Declaration of Human Rights, 240 uranium, 123, 128, 141, 142, 143, 154, 156, 195, 200, 201, 205, 213 uranium enrichment, 123, 128, 154 USA Patriot Act, 181 USAID, 152, 156 USCIS, 111 USSR, 36 Uzbekistan, 7, 115

V values, viii, 1, 7, 32, 38, 47, 223, 235 vehicles, 27, 34, 35, 37, 205 Venezuela, 82, 115 venue, 14, 202 vessels, 26, 138, 174, 175 Vice President, 125 victims, 86, 89, 93, 125, 161, 162, 175, 239, 241 Victims of Trafficking and Violence Protection Act, 114 Vietnam, 44, 49, 54, 65, 68, 93, 94, 95, 114, 116, 163, 174, 205, 226 Vietnam War, 205 Vietnamese, 13, 49, 95, 116, 174, 217 village, 92, 225 Villagers, 53 violence, 206 violent, 222, 224 visa, 61 visas, 92, 119 voice, 97, 130, 161, 163, 243 voting, 103, 227 vulnerability, 101, 211

W wages, 13, 17, 23, 61 Wall Street Journal, 50, 51, 118, 145, 149, 157, 174, 182, 183 war, 10, 38, 41, 60, 83, 95, 104, 107, 116, 132, 136, 137, 139, 147, 181, 188, 189, 194, 198, 230 war crimes, 107 war on terror, 104, 132 warfare, 145 warlords, 204, 217 Washington Post, 51, 78, 80, 119, 143, 144, 147, 149, 150, 156, 189, 201, 202 watches, 13, 16

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Index wool, 28, 35 workers, 2, 12, 13, 16, 17, 22, 31, 51, 52, 94, 154, 247, 248 Workers Party, 228 working class, 10 working conditions, 17 working groups, 163, 239, 242 World Bank, 29, 45, 47, 62, 130, 168 World Food Program (WFP), 5, 6, 23, 34, 36, 46, 47, 90, 113, 115, 152, 153, 156, 237, 240, 244, 245 World War II, 11, 25, 28, 164 worms, 79 worry, 222

Y Yemen, 26, 33 yield, 60, 191, 192, 193, 202, 223, 247 yuan, 18, 174 Yugoslavia, 63

Z Zimbabwe, 7 zinc, 12, 15, 18

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water, viii, 11, 24, 31, 52, 55, 58, 154, 194, 198, 199, 201, 203, 215, 223 weakness, 177 wealth, 45 weapons, vii, viii, xi, 5, 27, 28, 36, 38, 39, 41, 42, 55, 56, 57, 58, 59, 61, 66, 67, 72, 73, 77, 84, 96, 101, 125, 127, 133, 138, 141, 142, 147, 149, 154, 159, 167, 168, 169, 177, 178, 187, 194, 198, 201, 204, 206, 212, 216, 217, 240 weapons of mass destruction, viii, xi, 27, 28, 38, 41, 42, 55, 56, 58, 59, 61, 66, 67, 68, 72, 73, 77, 84, 167, 168, 177, 204 well-being, 39 Western Europe, 118 Western-style, 14 wheat, 6, 29, 153 White House, x, 28, 52, 53, 54, 104, 121, 122, 127, 143, 145, 162, 180, 184, 215, 236, 239, 242, 247 wholesale, 14 wildlife, xi, 167 wind, 220 winter, 6, 12, 39 wisdom, 38, 61, 192, 193 withdrawal, 57 witnesses, 97, 105, 186, 187, 189, 190, 193, 213, 215, 219, 222, 223, 227 WMD, 51, 58, 75, 76, 77, 132, 133, 154, 155, 222 women, 14, 88, 92, 176, 219, 233, 234 wood, 34, 37

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