NORTHEAST ASIA PEACE AND SECURITY NETWORK ***** SPECIAL REPORT ***** July 6, 2000 The following is the prepared text of a speech given by Stephen Bosworth, US Ambassador to the ROK, in Seoul on June 28, to the Korea Press Foundation. Bosworth discussed the implications of the recent ROK-DPRK summit on US policy toward the DPRK. He argued that the ROK must get its own financial practices up to international standards to attract the investment necessary to help the DPRK rebuild its infrastructure. ---------------------------------------- After the Summit: American Policy towards Korea By Ambassador Stephen W. Bosworth U.S. Ambassador to the Republic of Korea Korea Press Foundation June 28, 2000 It is a pleasure to be here today in the company of so many fine journalists. The Korean press - and many here with us today - has made historic contributions to the growth of the nation, particularly in the building of democratic institutions. I honor their contribution and their struggle for the nation. We meet as commemorations to mark the fiftieth anniversary of the beginning of the Korean War begin. And we also meet just two weeks after the South- North summit. The summit was an historic step that will hopefully begin to end the tragic legacy of that war. How appropriate that as we commemorate the pain and sacrifice of the war, we also celebrate the beginning of a process that could lead to lasting reconciliation and permanent peace. The painful inheritance of the war necessarily weighs heaviest on Korea and Koreans. While the United States has vital interests in Korea, the Korean people have everything at stake. This is why the United States has long supported direct dialogue between the South and the North as the only realistic path to stability and lasting peace. That is why, though we are realistic about the difficulties ahead, we are so encouraged by the summit between President Kim Dae-Jung and Chairman Kim Jong Il. Years of hostility can only be overcome by realistic diplomacy. For nearly five decades, a strong deterrent, centered on the US-ROK military alliance, has been the centerpiece of our two countries' approach to North Korea. Deterrence has worked. There has been no significant military conflict on the Peninsula since the Armistice ended the fighting in 1953. Yet, the ROK and the US have also recognized that true peace is more than just the absence of military conflict. With powerful armies faced off along the DMZ and intense suspicion and mistrust dividing the two sides, it has been all too apparent that the Korean Peninsula is a very dangerous place where miscalculations or misapprehension could have terrible consequences. Both the ROK and the US have recognized, therefore, that deterrence by itself is no longer an adequate strategy. Lasting peace and true stability will only come through the reduction of mistrust and underlying tensions - through engagement with the North. The US has long believed that to be truly effective engagement must be led by South Korea. President Kim Dae- Jung's determined and consistent pursuit of a balanced engagement policy over more than two years has been crucial. The summit offers reason for cautious optimism that further steps can be taken towards reconciliation and peaceful coexistence. In the period leading up to the summit, the United States took a number of diplomatic and economic initiatives in support of President Kim's Engagement Policy. As you know, Dr. William Perry, the former U.S. Secretary of Defense, undertook a comprehensive review of U.S. policy, seeking ways to build on the Agreed Framework of 1994. Dr. Perry's review was done in close coordination with the government of South Korea, and his report was in many ways centered on ROK engagement policy. As a result of the Perry Report, the U.S. has eased Trading with the Enemy Act sanctions, which had been in place against North Korea since the Korean War. We are prepared for further discussions with the North which could lead to the easing of additional sanctions. We will shortly resume discussions with North Korea to address regional and global concerns about their missile programs and missile proliferation; we will also hold further discussions on issues involving the implementation of the Agreed Framework. The United States has also been a major contributor of food aid to North Korea, providing some 500,000 metric tons over the past year and having donated another 50,000 metric tons of food assistance earlier this month. I expect we will respond generously to the upcoming World Food Program appeal as we have in the past. We are also, of course, heavily involved in the implementation of commitments to North Korea under the Agreed Framework, including delivery of heavy fuel oil and the construction of twin light water nuclear reactors. In other words, as was spelled out in the Perry Report, we seek to move on a step by step basis toward a more normal relationship with North Koreas we address our concerns, including the North's missiles and development of weapons of mass destruction, through negotiations. The efforts of the United States, of course, are closely coordinated with those of Korea and Japan. China has also been constructively involved, and Russia has taken a positive interest. Many other nations, including European and Asian states, have engaged North Korea diplomatically and economically, including establishing diplomatic ties. In the final analysis, however, only Koreans can solve Korea's problems. Only South Korea has both the resources and the supreme national interest to help North Korea overcome the economic and humanitarian tragedy with which it is now faced. Ultimately, the key to resolving the problems of the Korean Peninsula is reconciliation between South and North. It is this fact which makes the recent summit so significant and promising. South-North reconciliation can provide the essential foundation for addressing the full range of interlocking problems facing the Peninsula. Economic cooperation cannot be sustained without an improved security environment. And it is hard to see how the security environment can be improved if the North continues its economic decline. South-North reconciliation can provide the basis for real improvement in the DPRK's relations with the outside world, including with the United States. On the other hand, South-North relations cannot be improved if the North is isolated in a state of near-war with the rest of the world. South-North engagement, national reconciliation, reduction of tensions on the Korean Peninsula, normalization of the North's diplomatic and commercial relations with the rest of the world, and addressing concerns about missiles and weapons of mass destruction are all interrelated, and progress in one area is highly contingent on progress in the others. All parties, perhaps especially the DPRK, would benefit from the greatly enhanced stability and security that moves towards reconciliation would bring; for North Korea, too, has a stake in stability and peace. That has been our consistent message. The heart of the Perry Process, as of South Korea's engagement policy, is the effort to make North Korea realize that peace, stability and general lessening of tensions are in North Korea's interests, too. We want to create incentives for North Korea to change its behavior and obtain help for itself through engagement with the international community. The problems of the Peninsula are obviously important to the international community. At the same time, the Peninsula is necessarily affected by changes beyond its perimeters. The world is no longer divided by a global ideological conflict. We are no longer paralyzed by fear that one side or the other will seize upon any change as an opportunity to damage its rivals. This is no longer a zero-sum world. It is, as President Kim stresses, a win-win world, and North Korea should be part of it. Flexibility and creative diplomacy play a constructive role. It was clearly evident at the summit that both leaders recognized this. It was also evident that personality and the visible personal relationship between the two leaders helped overcome years of paralysis. One of the most important aspects of the summit was that the two leaders met in an atmosphere free of ideological symbols, and in that conducive atmosphere they discovered and celebrated the common Korean heritage of both North and South Korea. Perhaps that is why, as the summit continued, there was hardly a dry eye in either the North or the South. Naturally, reconciliation cannot be based on personality alone. Nor can it be based on hope alone. Efforts to reconcile must be based on a continuing military deterrence. President Kim has made it clear that the Republic will not attempt to subvert or forcibly absorb the DPRK, but neither will it tolerate provocation from the North. It is still true that North Korea's conventional military forces remain a formidable threat. North Korea's willingness to invest scarce resources in missile programs and weapons of mass destruction adds to this concern. The United States believes that there exists an unprecedented opportunity to bring peace to the Peninsula. President Kim Dae-Jung has long made it clear that South Korea will pursue peace and stability in the Peninsula through dialogue and practical cooperation with the North. His consistency in executing this policy helped convince the North that he is offering a real opportunity and not a ploy. Now we must continue in this consistency. What of the North? The end of the Cold War resulted in greatly reduced diplomatic support and economic assistance for North Korea, with the result that North Korea has suffered a protracted economic crisis. By all standards of measurement, the North's economic condition is dramatically worse than it was a decade ago. The easing of American sanctions will remove certain commercial and financial roadblocks, but North Korea still will face serious economic difficulties. The United States and the Republic of Korea, with others, have joined to try to find ways to help North Korea solve its dilemmas, particularly its humanitarian crisis. However, North Korea must take major steps of its own to significantly change its economic condition. In the end, major changes in North Korean economic policy will be required to attract and make use of the infusion of outside resources needed for recovery. The summit between President Kim Dae-Jung and Chairman Kim Jong Il opens the door for serious infrastructure and business investment to reconstruct North Korea. How quickly that investment will flow depend in some measure at the North's willingness and ability to prepare the ground to accept it. The prospect of expanded economic cooperation with the North also has important implications for South Korean economic policy. South Korea's own needs for investment in national infrastructure and modern capital stock required to enhance international competitiveness already exceed the pool of available national savings. Some portion of the investment needed to reverse economic decline in the North may come from the international community, eventually including international financial institutions such as the World Bank and the Asian Development Bank. But it is likely that a significant portion of these funds will have to come from international private capital markets and that South Korea will become the international "marshalling yard" for capital headed north. This situation will place an even higher premium on your efforts to accelerate and complete financial restructuring and reform here. If South Korea is going to be able to attract the international capital needed for its own requirements, plus possibly expanding requirements in the North, it needs to redouble its efforts to come up to international standards of transparency, corporate governance, and strong capital markets. If the Southern economic house is not in order, and if it is not strong and transparent, South Korea will have a hard time attracting funds from abroad to use in North Korea, let alone from its own domestic resources. I am confident, that South Korea will seize the challenge and continue on the path of economic reform. Let me end with a note of speculation and then invite your questions. What do we expect of the future? Setbacks in the course of reconciliation are, of course, possible, perhaps inevitable. But we must not reject the prospect of positive change just because it is difficult or unprecedented. South Korea has created a great opportunity. North Korea appears ready to join in seizing it, perhaps not with the same exact end in mind, probably not with the same means in mind, but, we hope, with a shared recognition that only reconciliation can assure the peace and security necessary for all Korea. At this time of potentially great changes in the atmosphere on the Korean Peninsula, a classical Korean aphorism seems especially apt. "Ohn go ee ji shin" -- That we reflect on our past wisdoms, and make them into the new wisdoms we will need to resolve the issues of the Korean Peninsula. The United States will be steadfast in support for our ally and for engagement with North Korea. We share South Korea's goals of reconciliation, and eventually, of reunification, for we believe that a strong, united Korea serves the cause of stability in Northeast Asia. We recognize the desirability of change and embrace it as circumstances change. What will not change is our friendship based on common political values and common economic interests in the international economic system and democratic community of nations. Thank you.