The Peninsula

The Report on the 5th Plenary Meeting of the 7th Central Committee Part 2: The Economic Message

By Stephan Haggard

I argued yesterday that the report of the party plenum was an attempted exercise in leverage; to hold out the threat of ongoing missile and nuclear developments—and as far as the eye can see—to extract concessions.  But the report also suggests that the regime’s frustration stems from the fact that sanctions are having material effect.

To be sure, the situation could be a lot worse. The leakiness of the sanctions regime has been a leitmotif of the best writing on the subject; particularly noteworthy are the UN’s Panel of Experts reports and high-quality open-source work by organizations like C4ADS (for example, here on luxury goods). Whether Chinese trade data can be fully trusted or not, it shows a pattern we would expect given the nature of the UNSC resolutions: that Chinese imports from North Korea have fallen a lot farther and faster than Chinese exports to North Korea. Even more than in the past, China constitutes a crucial lifeline.

But that does not mean that the sanctions are ineffectual. American analysts and news sources have been focused on the strategic elements of the plenum report rather than its long economic passages, but they are revealing. The “key tasks” it outlines are actually not on the military front. Rather, they lie in the turn toward “self-reliance” first signaled in the wake of the Hanoi breakdown at the April 2019 plenum. In the language of the report, “the key front in the offensive for frontal breakthrough today is the economic front.” The report openly acknowledges that whatever hopes the regime might have had for sanctions relief—contained in their bid at the Hanoi summit—it now believes sanctions are likely to persist for some time. If North Korea wants to show resolve, signaling a plan for dealing with the external constraints is an important place to start.

The report is replete with such messaging, even when it has the effect of underlining North Korean vulnerabilities. References to the Cabinet system have historically been tied to marginal shifts in the direction of reform. In this plenum report, the “reforms” are not liberalizing but focused on how to survive in a context of shortage. The report contains surprisingly self-critical passages with respect to economic management, noting for example “the evil practices and stagnation found in metal, chemical, power, coal, machine and building materials industrial fields, railway transport and light industrial field.” If we exempt agriculture from this litany—and mention of agricultural output in the plenum report was wildly rosy–there isn’t much of the state sector that is actually left.

Without the underlying sectoral reports, there was very little in the plenum report about what these evil practices are; rather we get the standard resort to exhortation and increasing effort. However, there are intriguing hints. When things appear to be going wrong economically, it could well be because market-oriented activity—while keeping the economy going–is also squeezing out state activity to the perceived detriment of the latter. Thus we see the announced need for “party-wide, nationwide and society-wide struggle against anti-socialist and non-socialist deeds and strengthening the work of the working people’s organizations and tightening the moral discipline throughout society.”

It will take some time for the intrepid group of personnel trackers to figure out the implications of the tail end of the report on “organizational matters.” But as would be expected given the critique of economic management, the report makes mention not only of “election” and “appointments,” but of “recalls” and “dismissals.” Whether this rises to the status of a purge is yet to be seen, but it can’t yet be ruled out.

If we take the report seriously, the regime is placing the bet it always does: external imperatives override domestic economic ones. The report in fact admits that “it is true that we urgently need external environment favorable for the economic construction.” But it is also clear that it will sacrifice—or rather, extract sacrifice—on the home front rather than capitulate.

The unspoken issue is whether such capitulation will be necessary given Chinese and Russian impatience with the stalled state of diplomatic play. Surprisingly little attention has been given to the draft UNSC resolution introduced by China in mid-December and secured by CBS news. The ideas undergirding the resolution are not new; their origins can be traced back to the unusual joint statement made by the vice foreign ministers of Russia, China and North Korea in October 2018 arguing for an adjustment in sanctions. But the new resolution is one of the first times we have seen a full blow proposal on the table from China and Russia. In addition to proposing a return to the Six Party Talks, the resolution argues not only for sanctions relief, but a lot of sanctions relief. In effect, the resolution would fundamentally dilute a number of the measures to which Xi Jinping acquiesced over the course of 2016-17; a more detailed analysis will follow in a forthcoming post.

Of course, the U.S. holds a veto at the Security Council and the purpose of the resolution is not to directly sway the Trump administration, which quickly underlined that it remained committed to sanctions. But the message of the Chinese and Russian effort is not simply to get U.S. buy-in; it is to signal that patience with wide-ranging sanctions could erode even further than it already has if the current stand-off continues. After dutifully lining up behind the U.S. efforts for his entire presidency, perhaps the most interesting development over the course of December was the endorsement of these proposals by Moon Jae-in.

In sum, the report on the 5^th Plenary Meeting of the 7^th Central Committee is the belated Christmas gift. It promises open confrontation on the nuclear and missile front, backed by a commitment to tough out whatever additional sanctions the U.S. tries to impose. But as critics have long argued, sanctions regimes are hard to sustain. The U.S. could end up going into this fight with fewer instruments at its disposal than it thinks, unless the administration wants to ratchet up pressure on China over the issue. Given looming risks in the Middle East, not to mention continued uncertainty on the trade front with Beijing, the option of staying the course and hoping something will break does not look promising.

Stephan Haggard is the Lawrence and Sallye Krause Professor of Korea-Pacific Studies, Director of the Korea-Pacific Program and distinguished professor of political science at the University of California – San Diego.  The views expressed here are the author’s alone.

Photo from Clay-Gilliland’s photostream on flickr Creative Commons.