Interview: Breakdown of Inter-Korean Talks an 'Issue of Substance'

South Korean conservative activists shout slogans with placards showing portrait of North Korean leader Kim Jong Un during an anti-Pyongyang rally in Seoul, June 12, 2013.

What appeared to be the first high-level discussions between South and North Korea in six years were called off as the North boycotted the talks, taking issue with the rank of South Korea’s chief delegate.  The high-level talks between the two Koreas were to have dealt with a wide range of issues, including the reopening of the Kaesong Industrial Complex.  Expert views vary as to the “real” motivation behind Pyongyang’s sudden withdrawal from the talks.  Some experts believe that North Korea might have wanted to gain an advantage over discussions on inter-Korean affairs ahead of the upcoming China-South Korea summit talks in Beijing. Changsop Pyon of RFA’s Korean Service interviewed Stephan Haggard of University of California at San Diego, a renowned scholar of North Korea’s economy, about North Korea’s recent moves and its widely reported economic reforms.

Q: To much disappointment, the high-level inter-Korean talks were canceled when North Korea failed to attend, demanding that Seoul upgrade the rank of its chief negotiator to that of a minister.  What is your take on Pyongyang’s motivation?

A: Well, the breakdown of talks is being treated as an issue of protocol, namely the chief North Korean representative was of lower rank than his South Korean counterpart.  But it was also an issue of substance.  Would the North Korean representative have the authority to really negotiate and was his mandate tied to the specific issue of the joint celebrations of the 1972 and 2000 declarations?  That issue is a divisive one in South Korea, and North Korea seems more intent on such divisions than in addressing the substantive issues of how to make Kaesong and Kumgang viable and to reduce military tensions on the peninsula.

Q: It is unusual that North Korea proposed a South-North dialogue immediately before the Obama-Xi talks in California.  What do you think of the timing of such a proposal?

A: There are three things to know about the timing of this.  The first was obviously to influence the summit between President Obama and Xi Jinping.  The North Koreans were positioned to allow Xi Jinping to say that something is happening in Korea.  So, I think this is partly paying back the Chinese. The second point to make is that money is a major motivation in the offer that the North Koreans have made.  If you really think about it, there is not much that the North Koreans can put on the table. They’re not offering much.  They’re basically allowing the talks to take place on three issues: Kaesong and Mt. Kumgang which are revenue-generating activities for North Korea, and the very small issue of family reunion.  We know that many of the families who are separated subsequently died, so this is the only thing the North Koreans are offering. If the agenda is just these three issues, then I think that President Park will not have achieved the objectives here.

Q: You just mentioned three factors that might have influenced Pyongyang to accept Seoul’s proposal.  Don’t you believe money is the main factor among other things, given North Korea’s dire economic situation?

A: I’m not sure.  We have some evidence that at least China is implementing some of the sanctions contained in UN Resolution 2087, particularly the foreign trade banking sanction.  There is some evidence, though anecdotal, that trade across the borders has slowed down, and some of the North Korean banks were having difficulties securing lines of credit from Chinese counterparts.  So, money is clearly part of their motivations.  This is clearly $90 million from Kaesong, and Mt. Kumgang promises anywhere between $15 million to 30 or 40 million, depending on how they figure. So, obviously money is a major part of that.  I just emphasize that at least as a bargaining position, North Korea isn’t offering very much. I mean the only thing they could offer is to regularize Kaesong and Mt. Kumgang operations that they themselves have been responsible for shutting down.

Q: As you know, North Korea announced some measures on agricultural reform in early spring.  Economic reforms require money, especially foreign investment from the outside world.  Do you see any sign that North Korea tried to seek South Korean economic aid through the high-level talks?

A: Well, money and reform are not the same thing.  I mean, in the past North Korea has basically sought aid from the international community, but has shown no interest in reforms.  So, I am not sure those two things are necessarily related.  It’s a separate question whether North Korea is starting experimenting with economic reforms.  Most people watching North Korea think that something is probably going on. You know something is going on.  It started last year, clearly on an experimental basis, and you had the beginning of small stories leaking out about things that the North Koreans are experimenting.  I think that’s the way they think about it.

Q: In April, North Korea declared that it would pursue the dual goal of economic build-up and nuclear development.  Do you think they can achieve the goal as they wish?

A: Well, the question is what the North Koreans mean by economic reform.  If you look at the Byongjin [the dual goal of economic build-up and nuclear development] policy, it is really talking about economic reconstruction, and most of the language in those announcements didn’t suggest anything like a market economy.  So, it’s not portrayed as an interest in economic reform.  It’s portrayed as the more standard development of a socialist system, increasing work efforts, etc.  So, if you read what’s on the page, it’s actually quite disappointing.  So, everything has to be seen as a question of what the North Koreans are actually doing rather than what they’re saying, because they’re not going to stand up and say, “We’re doing economic reforms.”

Q: Could you explain about the status of North Korea’s economic reform at this point?

A: There have been basically three clusters of stories that have emerged about areas where reform is undertaken.  The first is there have clearly been some experimental efforts to reform the agricultural sector.  And these have to do with the size of the work teams as well as the nature of the outputs.  Now there are some ambiguities whether those things are working.  The second is the reform of the wage setting.  Here, one observation that hasn’t been made in other stories is that probably firms already have been involved in differential payments for workers, because we know there are entities attached to these units that are involved in market-oriented activities.  Clearly, the managers of those entities are making money that’s beyond their normal salary.  And the third story which has just come out in the last couple of weeks has to do with the distribution system, following this report in the Japanese and Korean press about reform of this distribution system.  It appears that some reforms about the distribution system are going on. I am not pessimistic or optimistic, but it does seem like some experimental reforms are being undertaken.

Q: In that respect, how do you evaluate reformist Park Bong Ju’s recent appointment as premier?  Is it a positive sign for North Korea’s economic reform?

A: I do interpret that as some type of signal that the North Korean regime is likely to move in a different direction, and the question is how quickly.  And let me just underline one dilemma that the regime has now, which is that it has announced a policy of economic reconstruction and developing and maintaining its nuclear capabilities.  This makes it difficult for outside parties to engage with North Korea, because if that engagement is going to be supporting the development of North Korea’s nuclear capability, then it’s going to be difficult for outside parties to support increase in trade and investment, except for the Chinese.  So, I believe there is still a dilemma. As long as North Korea maintains its nuclear capabilities, it’s very difficult for outside parties to support those moves.


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