A security and peace mechanism for Northeast Asia: the economic dimension

Abstract

Northeast Asia is notable for the relative absence of regional institutions. The Six Party Talks could constitute an embryonic starting point for the development of such institutions. The path toward greater institutionalization is likely to begin in a modest fashion. Functional working groups on topics such as the environment, maritime transport, technical barriers to trade, road and rail links, and energy could provide the locus for integrating North Korea into the broader regional and global economies. Foreign ministries will inevitably take the lead in developing the Northeast Asia Peace and Security Mechanism (NEAPSM), but meaningful economic achievements will require the involvement of other ministries. North Korea has proved problematic in this regard thus far. Moreover, given the importance of private-sector involvement in achieving sustainable economic development in North Korea, modalities will have to be developed to integrate private-sector actors when possible. The governments of the region, and particularly China and South Korea, may continue support on a bilateral basis as a hedge against North Korea's collapse or as inducements in the context of the nuclear talks. But the development of more permanent multilateral structures is unlikely until the nuclear issue is resolved.

Keywords:

• North Korea
• Northeast Asia
• Six Party Talks
• nuclear weapons
• economic integration

Acknowledgments

Stephan Haggard is the Krause Distinguished Professor at the Graduate School of International Relations and Pacific Studies, University of California, San Diego. He is the author, with Marcus Noland, of Famine in North Korea: Markets, Aid, and Reform (2007)

Marcus Noland is a Senior Fellow at the Peterson Institute for International Economics, and the author of Avoiding the Apocalypse: The Future of the Two Koreas (2000) and Korea after Kim Jong-Il (2004)

Notes

¹A common format for examining regionalism in Northeast Asia is an edited volume in which overviews of the region are coupled with individual country chapters that underline the divergent approaches to multilateralism. See, for example, Kim (2004); Kim and Jones (2007); Calder and Fukuyama (2008); Aggarwal et al. (2008).

²The perils of duplicating multilateral institutions can be seen with respect to humanitarian assistance as well; from the standpoint of efficiency, the overall aid mission would be better served by channeling more Chinese and South Korean assistance through multilateral institutions such as the World Food Program.

³It is sometimes suggested that North Korea join the ADB before joining the World Bank, since bank membership is contingent on joining the International Monetary Fund, and ADB membership is not. However, even North Korea's potential membership at the ADB would depend on reaching a political accommodation with the United States and Japan, its two largest shareholders; this is true with respect to observer status at the WTO as well.

⁴Normally, members are granted observer status as a transitional status during accession negotiations. In some unusual circumstances typically involving post-conflict or new states (the Palestinian Authority, post-Khmer Rouge Cambodia, East Timor), direct lending activities began before full membership, and this idea has been floated with respect to North Korea. Whatever the specific arrangements, it is important that observer status not be exploited as a permanent mechanism to sidestep membership obligations.

⁵Japanese officials have signaled that normalization could include a multiyear package of grants, low-interest-rate loans, and trade credits of as much as $10 billion, consistent with the value of Japan's 1965 settlement with South Korea, appropriately adjusted for inflation and other factors. Japan will certainly argue that its $1 billion contribution to KEDO should be credited against this bill, and it has been speculated that Japan might even claim credit for the costs of re-capitalizing failed Chochongryun-affiliated financial institutions.

⁶Alternatively, the Working Group on the Northeast Asia Security and Peace Mechanism may be the locus for the negotiation of a new entity that would encompass both a new security agenda, such as confidence-building measures, as well as the economic issues highlighted here.