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The Political Economy of Trustpolitik: What is Ahead for North-South Trade and Investment?

Korea's Economy
About Korea's Economy

Korea’s Economy is KEI’s annual journal publication dedicated to the key issues of the day for the Korean economy. Articles in Korea’s Economy are designed to give the casual, but informed reader insight into issues related to Korea’s markets and financial institutions, economic reform, economic relations with the wider world, and North Korea. It is published jointly each year with the Korea Institute for International Economic Policy.

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The Political Economy of Trustpolitik: What is Ahead for North-South Trade and Investment?

Park Geun-hye’s Trustpolitik envisioned incremental, step-by-step exchanges, including economic ones, that would build trust. The strategy was disrupted by North Korean provocations during the first half of 2013 and had to be recalibrated. However, trade and investment have been limited not only by direct political constraints, but by the inherent risks South Korean firms face in operating in North Korea. The future of Trustpolitik therefore depends on two strategic questions for the South: the nature of North-South economic engagement it seeks; and the question of reciprocity, or what it expects in return. Given that large-scale investment projects are unlikely, two strategies are possible: an expansion of the “zone model,” exemplified by Kaesong, or a strategy of placing greater emphasis on purely commercial transactions with the North.

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