Kaesong holds value-added role for Koreas
By Andray Abrahamian
SEOUL - The South Korea-United States free-trade agreement ( FTA) awaiting
approval by the US Congress and Korea's National Assembly is languishing in
legislative purgatory nearly three years after the initial signing. The
political impact it will have on bilateral US-South Korean relations when
eventually ratified in some form has been thoroughly debated, but a subtle
impact on US-North Korean relations has slipped under the radar. Namely, the
status of the Kaesong Industrial Complex.
In a relationship defined by largely ineffective sticks, the US might finally
have a useful economic carrot to brandish in negotiations with the North,
potentially helping to provide a way out of the largely confrontational posture
that both nations have adopted since president George W Bush's "axis of evil"
speech: free trade through Kaesong.
The Kaesong Industrial Complex was set up in 2002 during the
heady peak of president Kim Dae-jung's "Sunshine" policy, as a way to provide
the North with hard currency earnings and the South with a proximate source of
cheap labor. No less important, it was a means to increase positive ties
between the two Koreas. In the protracted wrangling between the South and the
United States over their FTA, signed in 2007, the inclusion of goods produced
in Kaesong proved a sticking point, with South Korean interests fighting to
fully include Kaesong-made products and US interests taking the opposite
stance.
Some American economic interests complained that the FTA did not sufficiently
account for potential unification and that "the proposed 'industrial park'" in
Kaesong "would become, in the event of Korean unification, a major source of
disruptive and unfairly traded exports to the United States". This, however, is
a misreading of both the FTA and peninsular relations.
At present, goods from Kaesong are excluded but could be used as enticement for
North Korean reform. The requirements for Kaesong-produced goods to be included
in the FTA are deliberately vague: they are dependent on US interpretations of
North Korean behavior. Specifically, the text cites progress in the
denuclearization of the peninsula, relations between the two Koreas and working
conditions in the industrial complex. Furthermore, the imagined threat of
unification is hardly imminent.
Kaesong's growing output was worth almost US$30 million per month at the end of
2009. The number of companies operating there, at 120, is well short of earlier
plans that the park would accommodate up to 2,000. Nonetheless, the capacity
for expansion does exist.
This potential gives the US a powerful long-term tool for improving its
political relationship with North Korea. The vagueness of the language in the
agreement provides flexibility as the degree of inclusion of North Korean-made
goods could be increased or decreased without violating the FTA or subsequent
agreements with North Korea.
United States policymakers could quietly allow free trade through Kaesong, in
combination with relaxed sanctions, or even while maintaining them, if a tough
public stance was politically necessary for an administration that
simultaneously wanted to increase contact with the North.
With a South Korea-European Union free-trade agreement imminent and China's
economic role on the peninsula greater than ever, the US FTA also allows a
window of opportunity to North Korea. Pyongyang's nuclear tests of 2006 and
2009 and its missile tests simultaneously expressed North Korean independence
from China and eventually caused a breakdown in the six-party talks on the
North's nuclear program. In a turn that would have been unthinkable a few years
ago, this has helped encourage the US to consider bilateral negotiations.
North Korea seems genuinely interested in changing the balance of its relations
with China and the United States. Post Cold-War, without Moscow's support, the
North's policymakers have felt that their dependence on China is too great.
This sentiment is perhaps compounded by China's Northeast Project, a scholarly
revision of the history of the ancient Korean kingdom of Goguryeo. This Chinese
government-sponsored project includes the kingdom as a part of China's history,
rather than Korea's, which is the scholarly norm.
It is difficult to speculate on a regime that has made no public comment on the
project, but in South Korea it has caused deep unease. Many suspect a renewed
Sinocentrism, with a co-option of history designed to discipline minorities or
lay ground for future influence or even territorial claims. One can reasonably
assume that North Korea, with such deep dependence on China, also harbors
suspicions about the Northeast Project.
Furthermore, the North has since the early 1980s called for direct talks with
Washington. In the early 1990s, when Beijing and Moscow recognized Seoul,
Washington refused to reciprocally recognize Pyongyang, souring relations. Even
so, Pyongyang has quite consistently sought direct talks with the United States
to work toward some form of non-aggression treaty, full recognition from
Washington and a normalization of their relationship.
Some scholars argue this could be quite favorable for the US, which "might find
it beneficial to have a friendly and unified Korea on its side, as rivalries
between Washington and Tokyo, or Washington and Beijing, grow in the [21st]
century".
Even without unification, more US policymakers may be realizing the wisdom of
having a strong ally in the South and a more normal relationship with the
North. As then-US ambassador to South Korea Alexander Vershbow stated in 2007,
"If North Korea fulfills its commitment to completely abandon all of its
nuclear weapons and existing nuclear programs in accordance with the September
2005 joint statement, the United States is prepared to normalize relations with
[North Korea] and help it to revive its dysfunctional economy."
Such statements have been absent since the breakdown of the six-party talks,
though one could expect some US concessions in bilateral talks, which took
place in late 2009 and could potentially revive the multilateral forum. If any
progress is made in either bilateral or multilateral negotiations, a ratified
US-South Korea FTA could give the US and North Korea a focal point to work
towards.
Though US-North Korea relations continue to be tenuous, the FTA is potentially
important for increasing US influence as North Korea seeks to diversify its
economic relations. Quietly increasing trade through the intermediate route of
South Korean companies could allow the leaders of both countries the room to be
slightly more confrontational in public as their domestic polities demand.
The FTA signed by the US and South Korea, if ratified, can be conceived of as
something of a status-quo action. Economically, it will help to maintain the
strong position of the US in the face of a growing Chinese economy and the
imminent European FTA. (The EU, incidentally, refused to include Kaesong-made
goods in its FTA, but has agreed to set up a committee to discuss the issue in
the future.)
Politically, the US FTA serves to maintain the current balance between
Chinese-American-South Korean relations and attempts to mitigate increased
Chinese influence in South Korea. It signals a strong commitment to maintaining
the close alliance between the US and the South.
If the US-South Korea FTA is largely about the status quo, however, where it
does appear to offer potential for political change is in the balance of great
power relations with North Korea. In this dynamic, the FTA helps offer a
tangible inducement for improvement in the tortured relations between the North
and the United States.
The sticks have been ineffective. Perhaps it's time for more carrots.
Andray Abrahamian is a doctoral candidate at the University of Ulsan,
South Korea.
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