By Stephan Haggard and Liuya Zhang
In the last post on the proposed China-Russia Security Council resolution, we showed that exempting just two product categories—seafood and textiles—would restore as much as 50% of North Korea’s exports. But that does not capture the full extent of China’s ability to keep the regime afloat, even if we set aside the inevitable leakage in the sanctions regime (on that issue, see the August 2019 interim Panel of Experts report).
Harder to estimate is the relief that would come from lifting the ban on labor exports and the repatriation of North Korean workers that was supposed to happen at the end of 2019 (but didn’t; see here and here). U.S. estimates—and they do not strike us as hyperbolic—are that the total foreign exchange earnings from 100,000 workers abroad could total as much as $500,000,000 a year. These, and other, invisible receipts are much harder to track than trade in goods.
In addition, we have the particular interest that China—and South Korea—have in boosting tourism to the country. Since Xi Jinping’s visit to Pyongyang in June 2019, Chinese tourism to North Korea has increased exponentially. It is hard to think that the uptick is coincidental. Global Times reported that in the wake of Xi’s visit, trains and airlines heading toward Pyongyang were crowded with Chinese tourists and that the large surge of Chinese tourists has even strained capacity at the country’s hotels and resorts; as is well-known, tourism is a pet project of Kim Jong-un’s. The South China Morning Post has estimated that total Chinese tourists were expected to increase from 200,000 to 350,000 in 2019 and would contribute $175 million to the regime’s coffers this year. South Korea has also seen tourism as a potential icebreaker. In his New Year’s conference press, President Moon signaled that South Korea is seeking to allow individual tours to North Korea and believes that they can be structured in a way which does not violate sanctions.
The resolution offers little insight into the crucial question of what China would like to see in terms of material steps by North Korea on the nuclear front. It does, however, contain a surprising procedural proposal: almost in passing, it mentions that the Six Party Talks or some similar multilateral process be revived. Yet if we treat the proposal as a menu—with rolling back of seafood, textile and labor exports as an opening bid—it offers a measurable metric of what China would be willing to concede to make progress.
Given that the proposal is largely moot given U.S. opposition, what might we glean about Chinese motives? A close read of some of the Chinese press coverage offers some clues. The first is simply an effort to reduce risks of North Korean going rogue. As Kim Jong-un’s self-imposed year-end deadline for the resumption of talks approached, Beijing no doubt had concerns about a resumption of provocations. Press accounts suggest that China has a long list of things to worry about: Kim Jong-un’s visit to Mount Paektu; ongoing short-range missile tests; the convening of the 5th Plenum; North Korea’s UN representative Kim Sung’s remarks on “denuclearization is no longer on the table”; and the widely-cited remarks on delivering a “Christmas gift” to the United States. All of these developments suggested the potential escalation of tensions on the Korean Peninsula and even a return to the crisis atmosphere of late 2017.
Second, however, were a complex of strategic motives. Beijing clearly wanted to seize the high ground—including with its North Korean client—by drawing a sharp contrast between its role in maintaining the peace and stability of the Korean Peninsula and the adverse effects of the ongoing U.S. “maximum pressure” campaign. While openly blaming the U.S. for its inaction on implementing the DPRK-U.S. Singapore Joint Statement or assuaging North Korea’s legitimate security concerns, Beijing could position itself as the honest broker to the conflict.
Finally, there is some evidence that the Chinese leadership views Trump’s approach to North Korea with a significant dose of skepticism. Beijing is perfectly aware of the uncertain political environment in Washington arising from the impeachment process and the onset of the presidential election cycle. The leadership appears to believe that it will be hard for the U.S. to take the initiative in such circumstances because it would be seen as a sign of weakness, including by Democrats; there was previously at least some hope that the U.S. might respond positively.
At a deeper level, though, Beijing appears convinced that the Trump administration’s North Korea policy reflects only a tactical adjustment rather than a strategic policy change. “Maximum pressure” continues to dominate the “…and engagement,” as the policy was initially articulated by Secretary of State Rex Tillerson. For China, the Trump administration might well have taken the initiative on bilateral talks with North Korea to create a personal talking point for the president in the short-run, while continuing the effort to suffocate the North Korea regime using the sanctions tool in the medium or long-term. Under this interpretation, China was clearly aware that the U.S. was unlikely to support the proposal, but it could nonetheless play a useful signaling function not only to the U.S. and North Korea, but to the Moon administration as well.
In this regard, the draft resolution does implicitly argue for a possible course of action that seems relatively costless to us. Given the risks of tinkering with extant UNSC resolutions, the easiest route to partial sanctions relief could run through Seoul. A starting point would be to grant the Moon administration more room to pursue its rail and road surveys. Such surveys may expend resources, but they are marginal and by no means constitute a commitment to proceed; in any case, such a survey would take 18 months if not more to complete. Any further progress would depend on North Korean actions on the nuclear front. Outlining in more concrete detail what a settlement could entail in terms of infrastructure investment seems to carry little risk. Moreover, it would do at least something to ameliorate the strains in the alliance arising from the differences between the Trump and Moon administrations about how to move forward.
Stephan Haggard is a Non-Resident Fellow at the Korea Economic Institute and the Lawrence and Sallye Krause Professor of Korea-Pacific Studies, Director of the Korea-Pacific Program and distinguished professor of political science at the School of Global Policy and Strategy University of California San Diego. Liuya Zhang is a master student at the School of Global Policy and Strategy, University of California, San Diego. She received her Bachelor Degree of Arts from Fudan University and Master’s degree of International Studies from Seoul National University. The views expressed here are the authors’ alone.