WILL ECONOMIC SANCTIONS WORK AGAINST NORTH KOREA?
Kimberly Ann Elliott* June 22, 1994
INTRODUCTION
The debate over US policy toward North Korea boils
down to one deceptively simple question: what does Kim Il-sung
want? No one can be sure of the answer and different
interpretations can have quite different policy implications. If
the Great Leader views a nuclear weapons option as important to
the survival of his regime, economic sanctions are unlikely to
force him to give it up. But if he views the threat of developing
nuclear weapons as a bargaining chip, some combination of carrots
and sticks may induce him to trade it away. In fact, if the
bsrgaining chip theory is correct, the threat of economic
sanctions has been useful at various stages in signalling to the
regime that it is getting too close to the edge of the cliff. For
purposes of this analysis, I assume that the North Korean regime
is susceptible to external pressure that is short of military
compulsion. Given that assumption, I analyze the prospects for
the effective use of economic sanctions in the current dispute
with North Korea over its compliance with inspection obligations
under the International Atomic Energy Agency (IAEA). Based on
available data, I will identify potential vulnerabilities in
North Korea's economic structure, as well as key trading partners
that would have to cooperate for a sanctions effort to have a
reasonable chance of success. I then present a framework
developed in Hufbauer, Schott, and Elliott (1) for evaluating the
circumstances under which economic sanctions are most likely to
achieve foreign policy goals. I conclude with an evaluation of
the specific options facing the international community in
deciding whether to impose sanctions, including what products or
services might be the target of effective sanctions against North
Korea, and whether sanctions would be more or less likely to
achieve the desired outcome as a function of how they might be
applied (for example, gradually or all at once).
THE NORTH KOREAN ECONOMY North Korea presents unusually difficult
challenges for countries contemplating the use of economic
sanctions. The Kim Il-sung regime has chosen to follow an
economic development strategy that emphasizes self-reliance, and,
with the recent opening of Albania, it is the most closed economy
in the world. This choice derives in part from ideology and the
political need to control information about the outside world.
It is also a consequence of the US decision during the Korean war
to try and isolate the North, reflected today in an embargo on
virtually all trade and financial relations between the United
States and North Korea, and multilateral controls on exports of
dual-use and military-related technology. North Korea's external
trade is also limited for commercial reasons relating to its
inability to service its external debt. Whatever the reasons for
North Korea's economic isolation, its effects are becoming
increasingly serious, compounding the problems caused by an
inefficient command and control economy and high military
spending (perhaps as much as 25 percent of gross national
product). The Bank of South Korea estimates that the economy
contracted by an average of 5.5 percent annually in the period
1990-92. Sources also report that capacity utilization in
manufacturing is probably no higher than 50 percent to 60
percent, and may be as low as 30 percent because of petroleum
shortages and general inefficiency in the energy sector. (2)
Even the government in Pyongyang has begun to admit that the
economy is in serious trouble, calling the situation "grave" in a
radio broadcast monitored in Tokyo in late 1993.(3) Kim Il-sung's
philosophy of "juche" creates several dilemmas for the
international community. Because North Korea's trade and
financial relations with the rest of the world are already
limited, the scope and volume of potential leverage is less than
in many other cases. This limits the range of sanctions options
available. Juche also means that North Korea imports only
products that it must have to keep the economy functioning and
that it cannot produce domestically; it must then export to earn
hard currency to pay for the imports or to provide products for
barter. This deepens the dilemma for the international community
since sanctions would almost inevitably affect key sectors,
including the military, and might then reverberate quickly
throughout the economy. Substantial economic disruption could
increase the risk of either a military response by North Korea or
economic collapse, both of which the international community
wants to avoid. Table 1 shows the distribution of North Korea's
trade by partner country. Partial data for 1992 suggest that
trade with Russia declined sharply again and that Russia is now
North Korea's third largest trading partner, behind China and
Japan. (4) Other data indicate that inter-Korean trade has grown
so rapidly since it was first legally permitted in 1988 that
South Korea may now be the North's fourth largest trading
partner. South Korean government approvals for trade with the
North through the first seven months of 1992 reportedly totalled
$387 million, with perhaps $350 million being imports from the
North. This would make South Korea another important source of
foreign exchange for North Korea.
Table 1. North Korea's Foreign Trade by Source (million
dollars)
Exports(a)
Imports (a)
1989 1990 1991 1992 1993 1989 1990
1991 1992 1993
USSR/
FSU(b) 891 1047 563 n.a. n.a. 1641 1668
858 n.a. n.a.
China 167 142 85 154 297 399 403
524 541 600
Japan 268 271 284 n.a. n.a. 216 194
223 n.a. n.a.
A.Sub-
total 1326 1460 932 n.a. n.a. 2256 2265
1605 n.a. n.a.
B.All 1686 1857 1240 916 1020 2905 2930 2280
1500 1620
sources
A/B 78.6 78.6 75.2 n.a. n.a. 77.7 77.4
0.4 n.a. n.a.
a. The data for 1992 and 1993 are from a different source and
thus may not be completely consistent with earlier years.
b. The collapse of the Soviet Union further complicates the
problems in compiling consistent, reliable data on the North
Korean economy. Among other things, the exchange rate of the
ruble has depreciated significantly and some sources suggest that
the drop-off in trade with Russia when valued in dollars was even
greater than indicated in the table. An article by JETRO
researcher Dr. Murooka Tetsuo presents data showing two-way trade
between North Korea and Russia of only $1,142 million in 1990 and
$365 million in 1991 ("The Future of North Korea Trade in
Agricultural Products," Vantage Point, vol. XVI, no. 3 (March):
1-20).
Sources: For 1989-91, JETRO and South Korean Ministry of Foreign
Affairs, as reported in Economist Intelligence Unit, op. cit., p.
88; for 1992-93,the Central Bank of the Republic of Korea, as
reported in The Journal of Commerce, June 20, 1994, 1A, 7A.
Oil, China, and Iran. Petroleum products supply only around 15
percent or so of energy consumption, but shortages would affect
three key sectors in particular: the military, transportation,
and food production (petroleum is used in fertilizer production
and to run food processing machinery). Transportation
bottlenecks also affect other sectors, including the ability to
get food from the countryside to urban areas. Reuters reported
in the Fall of 1993 that urban workers were going into the
countryside to barter "toothpaste, soap" and other items for
food, with Hamhung reportedly not having received rice rations
for two or three months because of transportation difficulties.
(5)
Until the collapse of the Soviet Union, that country was a major
source of concessional oil supplies for North Korea; since then,
Russia has put trade on a hard currency or barter basis and oil
exports to North Korea reportedly have slowed to a trickle.
China has surpassed the former Soviet Union (FSU) as North
Korea's largest trading partner and emerged in 1991 and 1992 as a
major supplier of oil, by one estimate accounting for 40 percent
of total North Korean oil imports in 1992, possibly rising to 75
percent in 1993. (6) Although no data is available, Iran
reportedly concluded a deal to barter oil for SCUD missiles and
related technology that may have been worth several hundred
million dollars. (7) North Korea also apparently has some
capacity to produce oil from coal, but it is not clear how much
room there is for expansion, over what period of time, and at
what cost in terms of diverting coal from other uses.
Food. In recent years North Korea's grain output reportedly has
been declining and has not been sufficient to meet basic needs,
even without the difficulties in transporting food from rural to
urban areas described above. Although the data, as usual, is
sketchy and of unknown reliability, some sources put grain output
in recent years at less than 5 million tons per year versus
estimated demand of 6.6 million tons. (8) In 1991, North Korea
reportedly concluded a barter deal with Thailand for 1 million
tons of rice over two to three years in exchange for coal,
cement, and marine products. Also in 1991, China reportedly
agreed to provide some $150 million in food aid over five years,
while South Korea may also be providing covert financing for food
(for example, paying for a shipment of rice from Vietnam), as
well as providing small amounts of rice directly. (9)
Coking coal. North Korea has large deposits of anthracite coal,
which supply about 70 percent of its total energy consumption.
But it has almost no deposits of coking-grade coal, which is
essential in steelmaking, and must import it. As with oil,
China reportedly has replaced Russia as North Korea's primary
source for coking coal, accounting for nearly 90 percent of
imports in 1993.(10) Output of steel reportedly dropped by half
in 1992. Shortages of coking coal could further squeeze steel
supplies and have serious follow-on effects for the rest of
economy, including in areas such as transportation that would
also be hit by an oil embargo. Construction, which accounts for a
significant portion of economic activity in North Korea, would
also be hard-hit.
Technology. North Korea turned to Western technology in the
early 1970s when it attempted to build a light industry, export
sector with machinery imports from the West. Its timing was
poor, however, and it was hammered by the 1973-74 oil crisis and
global economic recession. It eventually defaulted on the loans
used to make the purchases and has been largely shut off from
Western credit and technology since. (11)
Hard currency. North Korea exports mainly minerals and metals,
such as iron and steel, and cement; agricultural products,
including fish and other marine products; and a small amount of
precious metals, such as gold and silver. Exports have not been
sufficient to pay for needed imports, however, and North Korea
runs persistent trade deficits. Russia, responding to its own
problems and to North Korea's rising debts, put most trade on a
hard currency basis in 1991.
China has repeatedly threatened to put trade on a hard currency
basis, but apparently has allowed trade to continue, in part
through barter.
South Korea may now be the North's fourth largest trading partner
and will be an important source of foreign exchange as long as it
allows the North to run large surpluses. It is also an important
potential source of trade and investment if the nuclear and other
bilateral issues are resolved. The largest single source of hard
currency apparently is the pro-North Korean community in Japan,
which sends anywhere from $600 million to $2 billion per year in
cash to Pyongyang. Much of the cash reportedly is carried in
suitcases and plastic bags on the twice-a-month ferry from
Niigata by Japanese North Koreans going to visit family members
in North Korea. (12)
A FRAMEWORK FOR ANALYZING ECONOMIC SANCTIONS In Hufbauer, Schott,
and Elliott, we examined 115 cases of economic sanctions
beginning with World War I. Most of the episodes studied
occurred after the Second World War, and most were unilaterally
imposed by the United States (77 of the 115) with only minor or
no cooperation from its allies. The United Nations was
constrained for much of the post-war period by Cold War politics
and, prior to the 1990 embargo of Iraq (in response to its
invasion of Kuwait), had imposed mandatory sanctions only twice:
comprehensive sanctions against Rhodesia from 1966 to 1979, and
an arms embargo of South Africa from 1977 to 1994. Since 1990,
the United Nations has imposed comprehensive sanctions against
Iraq, Serbia, and Haiti, and arms embargoes against a number of
countries suffering from civil unrest, including Somalia, Sudan,
Liberia, and Rwanda, and the UNITA rebels in Angola. The goals
of economic sanctions have ranged from the relatively modest,
such as the United States seeking to settle expropriation
disputes with developing countries, to the highly ambitious, such
as ending apartheid in South Africa.
My colleagues and I made judgments about the outcome in each
case--the extent to which stated foreign policy goals were
achieved--and the contribution made to that outcome by sanctions.
We then developed a set of six political and five economic
variables that might be expected to affect the effectiveness of
sanctions. These eleven variables are summarized in table 2. By
comparing outcomes across cases with the values for the economic
and politcal variables, we were able to draw conclusions about
some of the factors that appear to influence the effectiveness of
economic sanctions in achieving foreign policy goals.
Table 2. Summary of Variables Analyzed
Variables having a Variables having a
Variables with no
positive relationship negative relationship
clear relationship
with success with success
with effectiveness
Percentage of the Difficulty of the
Type of sanction imposed
target's total trade objective sought
conducted with the
sanctioner
Warmth of prior Extent of inter'l
The ratio of the sanctioner's
relations between cooperation sought
GNP to that of the target
the sanctioner (correlated with
(most sanctioners in the
and target difficulty of goal)
sample are much larger than
their targets)
Cost to the target Cost the sanc-
Use by the sanctioner of
as a percentage of tioner imposes on
accompanying policies
its GNP itself
(covert, quasi-military,
or regular military)
Offsetting assis-
tance received by
the target from a
third party
Economic health and
political stability
of the target
As noted above, the data set is dominated by unilateral US
sanction cases, which suggests several caveats in interpreting
the observed negative correlation between the probability of a
sanctions success and the extent of international cooperation.
First, in a great number of cases, international cooperation
played no role in the outcome because the United States did not
seek it. Second, cooperation was more extensive in cases
involving more difficult goals, though the data suggests that it
was a necessary but not sufficient condition for success in such
cases. Finally, the results suggest that international
cooperation has become more important over time as US economic
and political hegemony has declined and the global economy has
become more interdependent.
Overall, we found that economic sanctions had contributed to at
least partially successful outcomes in 34 percent of the 115
cases studied. The success rate for cases involving what were
defined as "major" goals--such as impairing the military
potential of an adversary or forcing the surrender of territory--
was lower, just 23 percent. We concluded that sanctions are most
likely to be effective when: (1) the goal is relatively modest,
thus lessening the importance of multilateral cooperation, which
often is difficult to obtain, and reducing the chances a rival
power will bother to step in with offsetting assistance; (2) the
target is economically weak and politically unstable even before
sanctions are imposed; (3) the sanctioner and its target are
friendly toward one another and conduct substantial trade (the
sanctioner accounted for 28 percent of the average target's trade
in all success cases but only 19 percent in failures; in cases
involving "major" goals, the ratios were 36 percent and 16
percent, respectively); (4) the sanctions are imposed quickly
and decisively to maximize impact (the average cost to the target
as a percentage of GNP in all success cases was 2.4 percent and 1
percent in failures, in cases involving "major" goals, the
figures were 4.5 percent and 0.5 percent, respectively); (5) the
sanctioner avoids high costs to itself.
In sum, economic sanctions succeed when the economic and
political costs of the sanctions to the target outweigh the costs
it expects to incur from complying. Multilateral sanctions under
the auspices of the United Nations typically involve ambitious
objectives, which runs counter to the first finding that
sanctions are a limited instrument that work best to achieve
relatively modest, clearly defined goals. However, international
cooperation is also likely to be more extensive under a UN
mandate than otherwise, which may allow more ambitious objectives
to be achieved. Thus, UN sanctions are likely to involve both
higher costs of compliance, because the objective will be
ambitious, and higher costs of defiance, because the sanctions
are likely to be more comprehensive in scope.
A key problem in evaluating the prospects for success in a given
case is that, while the costs of defiance--the likely economic
impact of the sanctions--can be measured with some confidence,
the costs of compliance cannot be measured in any precise way. A
second problem is that the same cost, measured as a percentage of
GNP, may be valued differently by different types of regimes.
For example, an authoritarian government may be less responsive
to the pain inflicted by economic sanctions than a democratic
government whose survival depends on the support of a majority of
its citizens. The normal problems associated with predicting the
response of a targeted government are compounded when the regime
is as secretive as that of Kim Il-sung.
THE FRAMEWORK APPLIED TO NORTH KOREA This section takes each of
the five major conclusions outlined above in turn and applies
them to the North Korean case. (1) Goals, cooperation, and
offsetting assistance. Inducing North Korea to abandon its
suspected nuclear weapons program is a high profile, ambitious
objective. A secondary, but important, goal is preserving the
integrity of the international nonproliferation regime. Thus,
international cooperation is important. From the US perspective,
cooperation is essential because the United States already has
banned virtually all trade and financial relations with North
Korea since 1950 and, thus, has very little negative economic
leverage available to it. (13)
Fears of unintended consequences, however, complicate the
decision to impose economic sanctions for North Korea's immediate
neighbors. South Korea and Japan do not want to provoke Kim Il-
sung into a rash military response, and no one, but especially
South Korea, wants to risk an economic collapse that could make
eventual reunification even more costly for the South, in
relative terms, than German reunification was for the Federal
Republic of Germany. In addition to these concerns, China may
also be reluctant to acquiesce in UN sanctions to enforce anti-
proliferation objectives, an ongoing sore spot in its own
bilateral relations with the United States. In addition to
Chinese approval or abstention, multilateral UN sanctions would
also require approval or acquiescence from Russia, which has a UN
Security Council veto, and which has expressed displeasure at not
being consulted by the United States on this issue. Even if
comprehensive UN sanctions are eventually imposed, however, Iran
and Libya could provide significant offsetting assistance through
continued oil shipments. (2) Economic health and political
stability. North Korea's economy appears to be under severe
stress, but that has not yet translated into clear signs of
political instability. Visitors to Pyongyang in the Spring of
1993 reported visible signs of an energy crisis--little traffic
on the streets and numerous blackouts. There were also reports
of food riots in the summer of 1992 and again in the spring of
1993. (14) Upon returning from Pyongyang in June 1994, former
President Jimmy Carter reported that the streets of the capital
were "bustling and neon-lit", but diplomats questioned that
description. (15) (3) Diplomatic and trade relations prior to
sanctions. The volume of potential economic leverage is limited
because of North Korea's self-imposed isolation, which has been
involuntarily deepened as a result of the regime's inability to
generate the hard currency needed to pay for imports, and the
unwillingness of China and Russia to continue providing goods on
concessional terms. Still, if China, Japan, and Russia
cooperate, the sanctions would cover probably 70 percent of North
Korea's reported trade flows, well above the average in past
successful cases (36 percent in difficult cases). (4) Potential
economic costs of sanctions for the target. If North Korea's
foreign trade accounts for 10 to 15 percent of GNP, comprehensive
UN sanctions could easily impose an economic cost on North Korea
at least equal to the average for past successful cases with
ambitious objectives (4.5 percent of GNP), even allowing for
extensive evasion and smuggling.16 (5) Economic costs to the
sanctioner. The obverse of North Korea's relative autarky is
that its trade is not large enough to be of much economic
importance to its partners. But the potential costs if sanctions
provoke a military response from North Korea or an economic and
political collapse could be quite high. Concerns about these
potential costs have have been a major factor dictating the
cautious strategy followed to date.
SANCTIONS ALTERNATIVES WITH RESPECT TO NORTH KOREA The Hufbauer,
Schott, and Elliott analysis revealed a strong correlation
between the estimated economic costs to the target of sanctions
and the probability of success. We concluded that a gradual,
"turning the screws" strategy is less likely to be successful
than quick, comprehensive-- decisive--imposition of economic
sanctions because, "Time affords the target the opportunity to
adjust: to find alternative suppliers, to build new alliances,
and to mobilize domestic opinion in support of its policies."
And, to reiterate, raising the costs of defiance may be
particularly important when the price the target must pay for
complying with sanctioners' demands is perceived to be high.
In contrast, the sanctions strategy outlined in early June by the
Clinton administration begins with modest, primarily symbolic
sanctions, which would be ratcheted up if necessary.
This cautious gradualism has been dictated by the concerns of
North Korea's neighbors, who would be primarily responsible for
enforcing the sanctions and who do not want to provoke either a
military backlash or a destabilizing and costly economic
collapse. North Korea has threatened to treat the imposition of
sanctions as an act of war and explicitly threatened Japan with
"deserving punishment" if it cooperated with US proposals to cut
off the flow of funds from the Korean community in Japan. (17)
Given concerns in the region about possible North Korean
responses, the recent opening for continued negotiation spawned
by former President Carter's trip to Pyongyang was a welcome
excuse for suspending moves toward sanctions.
If the renewed talks do not produce the desired results, however,
economic sanctions will quickly return to the agenda. The first
phase of the proposed Clinton sanctions would involve boycotting
North Korean arms exports, which would cost the regime an
estimated $50 million to $100 million a year. Other sanctions in
the initial phase would include suspending the remainder of a $15
million UN Development Program project, as well as plans for the
much larger Tumen River project. Cultural, scientific, and
educational exchanges would also be cut off. (18) The second
phase of sanctions in the Clinton administration plan would ban
all financial transactions, including North Korea's single
largest source of foreign exchange, the remittances from Koreans
in Japan. A ban on financial transactions would inhibit the
regime's ability to import oil, food, and other products even
without imposing sanctions directly on exports to North Korea.
This measure was deferred to the second phase because of Japanese
reluctance to be out front on sanctions because of a possible
backlash among the Korean community there or even the possibility
of terrorist acts fomented by North Korea. Japanese officials
have said Japan would "carry out its responsibility" even without
a UN resolution, if China continues to oppose the imposition of
sanctions, but Japan clearly would prefer the political and
diplomatic cover of a UN mandate. (19)
The Clinton plan did not explicitly mention moving to a full
trade embargo in a potential stage three, apparently to placate
China. While China might ultimately acquiesce in the phase one
and two sanctions, by abstaining on a Security Council vote, a
trade embargo would directly involve China in enforcement. One
way for China to finesse this problem would be to refuse to
continue barter trade if phase two sanctions are imposed and to
insist on hard currency, which North Korea would be hard-pressed
to produce if the ban on financial transactions is effective.
Virtually all of the proposed sanctions pose significant
enforcement challenges. The major markets for North Korea's arms
exports, primarily missiles, are Iran and Syria. Iran, in
particular, would have little incentive to cooperate in the
sanctions effort. Iran might also be willing to ignore broader
trade sanctions and take China's place as North Korea's major
supplier of oil. While the administration has called for a cargo
flight ban to enforce the arms boycott, it apparently believes
that naval interdiction would be too provocative a step, which
means Iran potentially could poke large holes in any sanctions
package. Even with naval interdiction, and assuming China
formally acquiesced in a trade embargo, controlling trade across
the Chinese border could be difficult given the sometimes tenous
control of Beijing over its farflung regions. Finally, money is a
fungible commodity and efforts to halt the cash flow from Japan
to North Korea will require extensive global cooperation, as well
as limits on the movement of people from Japan to North Korea.
A final question is whether to include food in any sanctions
package, which would have an immediate impact, exacerbating
shortages already plaguing the economy. Food, however, along
with medicines and other medical supplies, is typically exempted
from sanctions outside of wartime for humanitarian reasons.
Moreover, the moral dilemmas raised by including food in an
embargo are amplified when the targeted regime is an
authoritarian one in which the people have no voice.
SUMMARY AND CONCLUSIONS Despite its relative autarky, what North
Korea does import affects key linkages in its economy and
economic sanctions, reasonably enforced, could have significant
economic impact. Modest sanctions, such as those proposed in
phase one of the Clinton plan, might be effective in sending a
signal of seriousness to North Korea if talks bog down again in
July, but only if the threat to increase the pressure as
necessary is believed in Pyongyang. In this, China is the key.
Russia also has a veto in the UN Security Council and would need
to be consulted on appropriate steps if it becomes necessary to
move to economic sanctions, but China is the vital link if
sanctions are to be imposed.
If China were to veto a sanctions resolution in the Security
Council, it could strengthen North Korea's resolve to stand fast,
while weakening Japan and South Korea's resolve to cooperate with
the United States in a sanctions effort without a UN mandate. If
China were to abstain on, or even better approve, a sanctions
resolution vote incorporating phases one and two as outlined
above, it would bolster any sanctions effort. China could
further enhance the impact of phase two financial sanctions by
requiring hard currency for sales of oil, without being directly
involved in imposing trade sanctions.
It could be argued that the combination of an ideological
straitjacket, relatively large military expenditures, and
economic mismanagement have resulted in self-imposed sanctions
against the North Korean economy. Because of the economy's
inability to produce goods that the rest of the world is
interested in buying, it is increasingly unable to buy on world
markets other goods that it needs and cannot produce itself.
Combined with international political changes that have reduced
the willingness of its major allies to continue subsidizing it,
North Korea is increasingly suffering from a self-induced
economic squeeze. Under these circumstances, and given the
likely problems in enforcing economic sanctions, carrots would
appear to offer greater leverage in this case than sticks--unless
the regime views the carrots on offer as "poisoned carrots" that
threaten the Kims' hold on power. (20)
Which brings us back to the original question: what does Kim Il-
sung want? If he views improvement in North Korea's economic
situation as critical to maintenance of the regime, a combination
of carrots and sticks likely will be effective in resolving the
current crisis. If, however, Kim views the opening to the
outside world that would accompany improved economic relations as
a threat to his control, and if he believes nuclear weapons are
essential in protecting North Korea's security, neither carrots
or sticks will be effective. In that situation, sanctions would
likely be necessary to protect the integrity of the international
proliferation regime, but policymakers would need to be prepared
to deal with the potential consequences, including a possible
military response in the short run and likely collapse of the
regime in the longer run.
Notes 1. Hufbauer, Gary Clyde, Jeffrey J. Schott, and Kimberly
Ann Elliott, Economic Sanctions Reconsidered, 2nd ed., rvd.,
Washington, Institute for International Economics, 1990.
2. Oxford Analytica Daily Brief, January 25, 1993; Park Young-
ho, "Will North Korea Survive the Current Crisis? A Political
Economy Perspective," The Korean Journal of National Unification,
vol. 2, 1993, p. 113-115; Journal of Commerce, June 20, 1994, 7A;
Australian National Korean Studies Centre, Korea to the Year
2000: Implications for Australia, East Asia Analytical Unit,
Department of Foreign Affairs and Trade, Commonwealth of
Australia, 1992, 50; Wall Street Journal, March 13, 1993.
3. Washington Post, December 9, 1993; Financial Times, December
10, 1993.
4. Oxford Analytica Daily Brief, January 25, 1993.
5. Journal of Commerce, November 16, 1993; Economist
Intelligence Unit, China, North Korea Country Profile, 1992-93,
p. 80; Peter Hayes, "Should the United States Supply Light Water
Reactors to Pyongyang?" Paper presented to a Carnegie Endowment
for International Peace Symposium, November 16, 1993, p. 22.
6. Wall Street Journal, April 2, 1993; Journal of Commerce, June
20, 1994, 7A; Washington Post, June 17, 1994, A20.
7. Economist Intelligence Unit, op. cit., p. 87.
8. Park, op. cit., 108; Oxford Analytica Daily Brief, January
25, 1993.
9. Far Eastern Economic Review, May 30, 1991, 38-39; Journal of
Commerce, June 20, 1994, 7A.
10. Hayes, op. cit., p. 22; Journal of Commerce, June 20, 1994,
7A.
11. Economist Intelligence Unit, op. cit., p. 86.
12. New York Times, November 1, 1993; Journal of Commerce, June
20, 1994, 7A.
13. When the United States imposed the original trade embargo of
North Korea at the beginning of the Korean War in 1950, it was
comprehensive. In April 1989, the United States modified the
embargo to allow "commercially-supplied goods intended to meet
basic human needs," subject to case-by-case approval.
Congressional Research Service, "Economic Sanctions Imposed by
the United States Against Specific Countries: 1979 through
1992," CRS Report for Congress 92-631 F, Foreign Affairs and
National Defense Division, August 10, 1992, Washington.
14. Oxford Analytica Daily Brief, January 25, 1993.
15. Washington Post, June 21, 1994, A1.
16. The methodology used in our analysis to estimate the costs to
the target of economic sanctions involved, first, estimating the
value of the trade or financial flow initially affected by the
sanction, and, then, multiplying that figure by a fraction based
on the availability of alternative sources or markets. The
multiplier used in cases involving partial sanctions was
typically .3 or .4; in cases of extreme dependence or tight
enforcement, multipliers of .75 to .9 were used. For example, a
multiplier of .9 was used for the boycott of Iraqi oil exports
because Iraq's limited outlets facilitated enforcement, but a
lower value of .5 was used for exports because Iraq's long land
borders allowed for some smuggling. In the North Korean case, a
multiplier of .5 applied to total trade flows (assuming
comprehensive sanctions) would give a cost of 5 to 7.5 percent of
GNP. Since many of the commodities North Korea imports tend to
affect key sectors of the economy, a higher multiplier might be
appropriate, which might raise the cost to as high as 10 percent
of GNP.
17. New York Times, June 10, 1994, A11.
18. Washington Post, June 16, 1994, A1; Wall Street Journal,
June 16, 1994, A12.
19. New York Times, November 1, 1993.
20. United States Institute of Peace, "North Korea's Nuclear
Program: Challenge and Opportunity for American Policy," Special
Working Group Report, Washington, 1994; Andrew Mack, "North
Korea's Nuclear Program: the Options are Shrinking," The
Research School of Pacific Studies, The Australian National
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