This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

What Happened

• At the start of the month, two men escaped from North Korea after allegedly killing sixteen crew members aboard their fishing boat.
• Just days after their arrival in South Korea, they were repatriated to the North because of the crimes they committed. This was the first time a North Korean had been deported since the end of the Korean War.
• In response, a group of eighteen human rights organizations denounced the decision and accused President Moon of abandoning human rights issues to win favor with Kim Jong-Un.

Implications: Aside from the human rights groups, there has been limited public outcry against the deportation – potentially reflecting a growing domestic view that North Korea is a distinct and separate country from South Korea. The Committee for Human Rights in North Korea argued that the expulsion is a violation of South Korea’s constitution, which views all Koreans on the peninsula as citizens of South Korea (with rights to due process in South Korea). Nevertheless, the government has stood by its decision, saying that the men’s crimes prevented them from being categorized as refugees. And a professor at Chung-Ang University acknowledged that other foreigners would be sent back to their country if they committed a crime, so the same should be done for North Korea. These positions suggest that North Korea is increasingly viewed as a sovereign country by South Koreans.

Context: The limited criticism in South Korea to the deportation of the North Korean men cannot be attributed to political apathy. South Koreans have congregated time and time again to protest perceived injustices. In the past weeks, South Koreans have turned out to support both sides of the Hong Kong protests. However, no major demonstrations were held over the extradition.

Korea View was edited by Yong Kwon with the help of Soojin Hwang, Hyoshin Kim, and Rachel Kirsch.

Photo from NVictor’s photostream on flickr Creative Commons.

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

What Happened

• Since 2015, 12 North Korean defectors in South Korea were caught trying to return to North Korea.
• During the same time period, 64 defectors applied for refugee status in Europe and the United States despite receiving settlement in South Korea, according to new government data.
• According to the 2018 Settlement Survey of North Korean Refugees in South Korea, 72.5% of North Korean refugee respondents were satisfied with life in South Korea.

Implications: With cases of North Korean defectors attempting to leave South Korea, Seoul will likely focus more heavily on social integration when formulating its resettlement policies going forward. Following the incident in August when a defector and her son starved to death, the inquiry initially focused on whether public services are materially failing this community. But survey data revealed that defector dissatisfaction was not predominantly driven by economic conditions. Most defectors cited difficulties separation from family back in North Korea (27.4%) and discrimination and prejudice (18.3%) as principal challenges to integration. Only 14.9% of respondents cited economic difficulties.

Context: The number of North Korean defectors to South Korea has fallen since Kim Jong-un came to power seven years ago due to tighter border controls. As of June 2019, 33,022 North Korean defectors live in South Korea. Although still a relatively small community, research by Steven Denney (University of Toronto) and Chris Green (Leiden University) show that there is variation within this community’s attitudes towards South Korea. Denney and Green attribute this to people older than 55 having a different resettlement experience than their younger cohorts. Specifically, they hypothesize that the need for younger age defectors to compete with native-born South Koreans for jobs, build social networks, and substantively integrate into South Korean society negatively influence their resettlement experience and feelings of ethnic solidarity.

Korea View was edited by Yong Kwon with the help of Soojin Hwang, Hyoshin Kim, and Rachel Kirsch.

Picture from Ceosad on Wikimedia Commons

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

What Happened

• As of October 3, South Korea has reported thirteen cases of African Swine Fever (ASF).
• In response the government has quarantined infected farm areas, implemented movement bans of vehicles and equipment, placed travel restrictions on visitors, and even culled over 100,000 pigs, equivalent to 1% of the total pig population in South Korea.
• While the source of the disease remains unconfirmed, it is widely believed to have spread from North Korea through the water or from wild boars in the DMZ. All reported cases in South Korea, so far, have been in areas bordering North Korea.

Implications: The outbreak of ASF exemplifies how North Korea’s refusal to engage in dialogue amplifies trans-national risks to South Korea. ASF is a particularly difficult disease to contain because the virus can travel via animals, water, vehicles, equipment, and even clothing. Moreover, the virus has an incubation period of 19 days, making it challenging to detect carriers. When initial reports of outbreaks in North Korea came out four months ago, South Korean authorities contacted their counterparts in Pyongyang to discuss ways to prevent the disease from spreading further. Despite the urgency of the challenge, Seoul’s request for cooperation with Pyongyang went unanswered. Confirmation that ASF was transmitted to Korea through North Korea would raise the urgency of future cooperation between the two Koreas.

Context: ASF has caused serious problems in a number of countries in Asia, but its consequences may be felt even more acutely in South Korea because of consumer preference for pork. The popularity of home meal replacements further contributed to the increased demand for pork. Currently, South Korea only imports about one-third of its pork. As a result, further contagion could have a severe impact on domestic pork prices. Only three weeks after the first case of ASF was announced, pork prices are already up 7%.

Korea View was edited by Yong Kwon with the help of Soojin Hwang, Hyoshin Kim, and Rachel Kirsch.

Picture from flickr accout of K-State Research and Extension 

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

What Happened

• President Moon Jae-in met with the head of the International Olympic Committee to seek his support for a joint Korean bid for hosting the 2032 Summer Olympics.
• During the meeting, Moon also advocated for North and South Korea to compete as one team in the 2020 Tokyo Olympic Games.
• The two Koreas most recently played as a unified team in the 2019 World Handball Championship.

Implications: While President Moon sees joint participation in international sporting events as a vehicle to advance inter-Korean engagement, tepid domestic support for these efforts correspond with findings that South Koreans may be losing their co-ethnic affinity to North Koreans. A survey in 2018 found that public endorsement for North and South Korea’s co-hosting the Olympics fell from 66% to 47% if respondents were told that Seoul would help fund the construction of facilities in North Korea. This upholds findings that suggest South Koreans, particularly younger cohorts, are beginning to identify the two Koreas as distinct and separate countries. If true, this presents an obstacle for the Moon administration even if there is a diplomatic breakthrough as there might be domestic pushback to allocating national resources for the economic development of North Korea.

Context: South Korea already faced domestic backlash for fielding a late-minute unified hockey team to compete at the Pyeongchang Olympics in 2018. A survey found that 80% of respondents generally supported North Korea’s participation in the games, but 49.4% of people polled by a Realmeter survey showed a preference for North and South Korea marching under their respective national flags. These results suggest that animosity toward North Korea is not the source of South Korean tepidness towards joint participation in sporting events – rather, it may be an acknowledgement of a separate and distinct national identity.

Korea View was edited by Yong Kwon with the help of Soojin Hwang, Hyoshin Kim, and Rachel Kirsch.

Picture via James Hill published in The New York Times

By Mark Tokola

On Thursday, July 25, North Korea launched two, (reportedly) short-range, missiles into the sea west of Japanese waters. News reports say that they traveled to distances of 430 and 690 kilometers, and flew low, no higher than 50 kilometers in altitude. Some analysts believe that the projectiles were part of North Korea’s newly-developed KN-23 arsenal, a short-range ballistic missile that resembles Russian-designed Iskander system. The weapon was also tested in May ahead of President Trump and Kim Jong-un’s meeting at the Demilitarized Zone on June 30.

Although these missiles do not have the same range as the ICBMs that North Korea tested in 2017, the KN-23 is sophisticated. The KN-23 reportedly can change direction and its low trajectory can help evade missile defense systems.  It apparently is designed to strike with accuracy. They may not threaten the U.S. homeland, but they certainly threaten South Korea and Japan.

What is North Korea signaling with this test, if anything?* In retrospect, North Korean missile testing in 2017 seemed to have adhered more to a weapons development and engineering timetable than to any diplomatic maneuvering or special anniversaries. They tested when they were ready to test. North Korea’s stepped-up testing schedule enabled Kim Jong-un to announce in his 2018 New Year’s speech that the program had been completed.

However, diplomacy has come to the fore in 2018 and 2019 and it seems more probable that North Korea’s May 9 and July 25 missile tests were intended to message something to someone. It also may not be coincidental that these missile test came just days after photographs were released of Kim Jong-un standing next to a new North Korean submarine under construction. It is just not clear what the message is, or to whom it is directed.

American commentators tend to assume that the North Korean missile tests were a message to the United States, perhaps to urge a resumption of negotiations or to increase North Korean leverage for the talks to come. Conversely, it could be argued that the missile tests are intended to message the opposite, that North Korea does not mind if its behavior leads to a delayed resumption of talks. They may want to show that sanctions are not having that much effect and time is on their side.

There are several possible interpretations of the message. Might it be directed towards South Korea rather than towards the United States? “The U.S. dismisses short-range missiles as unimportant but they can hit you. You should deal with us.” Or the message may be meant for Japan. “Our missiles tests are aimed in your direction for a reason. Ease up on your hardline policies towards us, or else.” Or maybe China? “You want stability in Northeast Asia? Then get the U.S. to make a serious offer to ease sanctions.” Kim Jong-un’s missile test messaging might even be directed towards his hardline domestic constituency. “You can stop worrying about diplomacy leading to North Korean weakness.  Support me.  We’re developing new and deadly North Korean weapons.” Or it could be some combination of the above.

There is no way to be sure what North Korea is signaling. Pyongyang may be frustrated that we are not interpreting their signals correctly and are not responding to them as they would wish. What the United States can do is to interpret the possible signals in ways that advance U.S. and South Korean interests.  If we want talks to resume, we should not interpret the missile tests in ways that would derail them. Whatever the intended message is, U.S. and South Korea policymakers should see the short-range missile tests and think: “Note to self: North Korean nuclear weapons and long-range missiles are not the only threats North Korea poses.”

What does North Korea mean by the tests?  When movie mogul Samuel Goldwyn was asked about messages conveyed in movies, he reportedly said: “If you want to send a message, use Western Union.”  It would be helpful if North Korea would be more explicit about its wants and what it is offering.

*The day after this was posted, Kim Jong-un made a public statement that the missile test was meant as a warning to South Korea to stop joint military exercises with the U.S. and to stop modernizing its military forces.

Mark Tokola is the Vice President of the Korea Economic Institute of America. The views expressed here are his own.

Picture from Korea Central News Agency

By Robert R. King

On June 20, 2019, the U.S. Department of State released the 2019 Trafficking in Persons Report. There is a certain irony that at a time when the President of the United States is trading love letters with Kim Jong-un and barely even mentioning human rights issues in their summit conversations, the State Department is issuing frank, tough, and accurate criticisms of North Korea’s abysmal record of human rights abuses.

The United Nations and the U.S. Government define “trafficking in persons” as recruitment, transportation and/or exploitation of persons by coercion, abduction, or deception for the purposes of sexual exploitation or forced labor and slavery. The State Department trafficking report examines all countries and categorizes them into three “tiers” according to how they are meeting standards to eliminate trafficking. Tier 1 countries are fully meeting minimum standards.  Tier 2 countries do not meet minimum standards, but they are making significant efforts to meet those standards. Tier 3 countries do not meet minimum anti-trafficking standards and are not making significant efforts to do so.

The annual Trafficking in Persons Report issued by the U.S. Department of State is required by Congressional mandate in the Trafficking Victims Protection Act of 2001, which has been re-authorized by Congress on several occasions since its original adoption. The legislation created the Office to Monitor and Combat Trafficking in Persons at the Department of State and established the position of Ambassador-at-Large to Monitor and Combat Trafficking in Persons. After a vacancy of 21 months, John Cotton Richmond was confirmed to that post and sworn in on October 1, 2018. He is a co-founder and director of the Human Trafficking Institute, and previously he was a federal prosecutor in the Department of Justice’s Human Trafficking Prosecution Unit.

The Report is only the most recent example of Congressional legislation that requires the U.S. Government to publicly acknowledge human rights conditions in North Korea.

North Korea’s Record on Trafficking

It comes as no surprise that North Korea is a Tier 3 country—one of only 22 countries in the entire world which are making no significant effort to prevent trafficking of its own citizens.  Unfortunately, in the case of North Korea, some government policies actually encourage trafficking, and in other cases the government is complicit. The report determined that Pyongyang “did not demonstrate any efforts to address human trafficking,” and it “continued state-sponsored human trafficking through forced labor in mass mobilizations of adults and children, in prison camps as part of an established system of political repression, in labor training centers, and through its exportation of forced labor to foreign companies. It used proceeds from state-sponsored forced labor to fund government functions . . . [and] it did not protect potential trafficking victims when they were forcibly repatriated from China or other countries.”

It is worth noting that South Korea, in contrast, is a Tier 1 country which meets standards for the elimination of trafficking. The State Department report noted that Seoul “continued to demonstrate serious and sustained efforts . . . including funding and operating facilities to assist trafficking victims, training government officials to address sex trafficking, and cooperating with foreign law enforcement in the investigation of trafficking cases.”

North Korean Defectors are Frequent Victims of Sex Trafficking

One of the worst instances of trafficking involves North Koreans who seek to escape their homeland to find the freedoms that are not available in the repressive North or to join family members who live elsewhere. Because North Korean officials seek to prevent any unsanctioned departures, escaping is particularly difficult. Furthermore, if individuals are apprehended while trying to leave or are returned to North Korea by the Chinese or another government, they are brutally punished. Some 70 percent of North Korean defectors who have successfully fled to China as the first step in their effort to leave the North are women, and they are particularly vulnerable to sex trafficking.

There are many stories of defectors who sought and paid for help from “brokers” to flee to China. In far too many cases, their supposed benefactors have turned out to be traffickers. Instead of moving on to find freedom and family reunion, in China they have been sold into loveless marriages, forced into brothels, or pressed into the cybersex industry.

Just a few days ago, CNN reported on some of these victims forced into the cybersex industry in northeast China, one had spent five years and another eight years in cybersex slavery: “For five years, Lee—whose name has been changed for her safety—says she had been imprisoned with a handful of other girls in a tiny apartment in northeast China, after the broker she trusted to plan her escape from North Korea sold her to a cybersex operator. Her captor allowed her to leave the apartment once every six months. Attempts to escape had failed.”

A British human right group, the Korea Future Initiative, just issued an excellent report based on extensive interviews and rehabilitation work with North Korean women who were trafficked while attempting to escape the North.  The report gives this description of the problem: “North Korean women and girls are passed through the hands of traffickers, brokers and criminal organizations before being pulled into China’s sex trade, where they are exploited and used by men until their bodies are depleted.”

Vulnerable North Korean young women are caught up in the growing demand for sexual services in China. South China Morning Post reported that China’s booming economy has “fueled a prostitution boom.” The Korea Future Initiative report says North Korean women are in great demand because of the low price charged for their bodies, which can be as little as $4 for prostitution services and $146 to purchase a wife.” One survivor of exploitation said, “I was deceived by a broker and sold into marriage for ¥5,000 Chinese Yuan ($720 United States Dollars). I spent six years as a slave.”

The report estimates that overall this “complex and interconnected network of criminality accrues an estimated $105,000,000 United States Dollars annually from the sale of female North Korean bodies.”

Chinese Policy Contributes to Sex Trafficking of North Korean Refugees

The 2019 State Department trafficking report highlighted how Chinese policies and treatment of North Korean would-be defectors actually contribute to the trafficking problem of North Korean victims. The Chinese government refuses to recognize North Korean women as refugees and refuses to grant them legal protections.  This makes the refugees more vulnerable to being trafficked.

China simply returns all North Korean refugees to the North Korean government, where they are subjected to harsh imprisonment, forced labor, and all too frequently death. The fear of being returned to North Korea makes these defectors especially vulnerable.  Unscrupulous brokers simply threaten to turn the victims over to Chinese or North Korean authorities, and being sexually trafficked in China appears to be the lesser evil.

China has voluntarily accepted the obligation to act to prevent and protect trafficking under the Convention on the Elimination of All Forms of Discrimination against Women and also the UN Protocol to Prevent, Suppress and Punish Trafficking in Persons, Especially Women and Children. American authorities have called upon the Chinese to safeguard and protect victims of trafficking. Those requests, however, have largely been ignored. The Chinese have been more involved with international efforts to discourage trafficking in Southeast Asia than it has been in dealing with the serious trafficking problems on its northeast border with North Korea.

Forced Labor in North Korea

Forced labor is the other major area of concern with regard to North Korea’s abysmal trafficking record. The 2019 Trafficking in Persons Report identified North Korea as a country that uses forced labor as part of an established system of political repression and a pillar of its economic system.

The recently released Global Slavery Index states that as many as 2.6 million people—1 out of every 10 North Koreans—are victims of forced labor or modern slavery. The report declares that the North Korean government had the “weakest response to slavery” of all countries covered in the survey, and that the Pyongyang government is directly involved in forced labor both inside and outside the country.

The most pervasive practice of forced labor in North Korea is the use of mass mobilizations—forcing large numbers of people to spend long hours on high-profile politically important projects for no payment, working long hours with little sleep, and receiving only limited amounts of poor quality food to sustain them in their efforts.

Reuters reported on one mobilization in January this year. Thousands of North Korean students traveled to remote Mount Paektu in northwestern North Korea to “voluntarily” work on a project dear to Kim Jong-un—to build apartments, hotels, a ski resort and commercial, cultural, and medical facilities in the alpine town of Samjiyon. This site is on the sacred volcanic mountain on the Chinese-North Korean border.

The work on Samjiyon is given heroic attention in the government-controlled media. Young people are urged to dedicate their “boiling blood of youth” to Kim’s dream of a great show-place on the slopes of Mount Paektu. Families are shown on television packing warm winter clothes, tools, boots and such for the inspiring youth who work on the project.

The reality of the mass mobilizations, however, is much grimmer. One young man became a member of one of these work brigades with much fanfare and festivity when he left the orphanage where he spent his youth to become a member of the brigade. The reality was a textbook example of forced labor in violation of international trafficking norms.  He worked long hours with limited amounts of poor quality food, he saw another young man fell to his death because of unsafe working conditions, and fellow laborers injured themselves to escape from the rigorous labor.

Human rights groups estimate that such work brigades include some 400,000 people. The UN Commission of Inquiry on North Korea human rights in 2014 estimated that such brigades number 20,000 to 100,000 in each municipality depending on size.  Access to party membership, admission to higher education, and other important benefits in the North are dependent on enthusiastic participation in such un-paid mobilizations. The value of such unpaid labor is estimated to total nearly one billion dollars annually.

In addition to this mass mobilization, forced labor is an integral part of the North Korean prison system. An estimated 80,000 to 120,000 political prisoners are held in segregated prison camps, and in these camps, all prisoners, including children, are subject to forced labor. The UN Commission of Inquiry in 2014 provided details of conditions in these political prison camps where individuals are forced to work long hours in physically demanding jobs while they are given insufficient food, forced to live in unhygienic conditions, and subjected to beatings, torture, and rape. Forced labor is also part of the correction regime for individuals in North Korea for routine crimes. Like the political prisons, regular criminal prisons involve forced labor and extremely poor living and working conditions.

Some North Korean workers are also sent abroad under rigid government control to work on contracts with other governments and companies. Many of these workers face forced labor conditions. Salaries are deposited into accounts controlled by the North Korean government and workers receive only a fraction of the payment for their labor. Working conditions are grim, and workers could also face punishment for failure to meet output quotas or for violating behavior expectations.

A report of the Congressional-Executive Commission on China concluded that in the case of China, “The government of the Democratic People’s Republic of Korea (DPRK) reportedly continued to generate revenue by sending DPRK nationals to work in China under conditions that may constitute forced labor.”  Security personnel accompanied the workers going to China and actively monitored them continually. On average the government withheld 70 percent of the workers’ earnings.

Although North Korea is a signatory of United Nations agreements to prevent trafficking and forced labor, the record is quite clear that it has not lived up to its obligations. The just-released 2019 Report on Trafficking in Persons, as well as other recent reports from respected non-government organizations, clearly document North Korea’s human rights violations against its own citizens involving sex trafficking and forced labor.

Robert R. King is a Non-Resident Fellow at the Korea Economic Institute of America. He is former U.S. Special Envoy for North Korea Human Rights.  The views expressed here are his own.  

Picture courtesy of the U.S. Department of State

By Mark Tokola

Reporting on the April 10, 2019 meeting of the Central Committee of the Worker’s Party of Korea, the North Korean state media headline was: “N. Korea must deal a ‘blow’ against hostile forces, Kim Jung-un tells the ruling party.” The Central Committee meeting was held in advance of the 14^th Supreme People’s Assembly (SPA) that was held on April 11. Particular attention was paid to the belligerent headline in the U.S. media because commentators were waiting to see how Kim would react to the failure to reach an agreement with President Trump at the February 27-28 Hanoi Summit.  In context, however, Kim’s remarks were not as alarming as they appeared to be in the headline.

Kim Jong-un’s presentation to the Central Committee was mostly noteworthy for its heavy emphasis on the North Korean economy and for its lack of any direct criticism of the United States.  There were some references to defending the DPRK, but mostly in terms of what North Koreans need to do to advance their own country rather than about the evil intentions of hostile outsiders.

What Kim said about a “telling blow” as reported in the North Korean media beyond the headline was, “[North Korea] should vigorously advance socialist construction…to deal a telling blow to hostile forces who with bloodshot eyes miscalculate that sanctions can bring the DPRK to its knees.”  In other words, the “telling blow” would be that North Korea would be able to confound its enemies by withstanding economic sanctions.

The North Korean media reported that Kim Jong-un in his report to the Central Committee had “made a scientific analysis of the changed international landscape and the peculiarities of the present situation becoming daily acute and clarified the main tenor of the recent DPRK-U.S. summit talks and the Party’s stance towards it.”  Kim’s prescription to deal with the ”peculiarities of the present situation,” is to “more vigorously advance socialist construction by dint of self-supporting national economy… Self-reliance and self-supporting national economy are the bedrock of the existence of our own style socialism.”

Kim’s appeals for more efforts to advance the North Korean economy came close to admitting that it has underperformed in the past, “[there is a need to] put the national economy on a new phase of growth by expanding and reinforcing the foundation of the economy.”  North Korea has “reserved strength…and tremendous potential” — words which imply that its strength is not being exercised and its potential is not being met.  One difference between Kim Jong-un and his predecessors is his willingness to admit that everything is not perfect in North Korea.

What can be drawn from Kim Jong-un’s comments to the Central Committee?  Two main points are: (1) sanctions must be having an effect on the North Korean economy or he wouldn’t be so vociferous about the need to mobilize the country to resist them; and (2) he is continuing to stake his legitimacy on a promise to improve the North Korean economy.  Kim called on “the entire party, the whole country, and all the people [to] courageously wage an all-out, death-defying campaign to bring about a great surge in socialist construction.  Building an economic power is the main political task.”  That doesn’t sound like a man who is satisfied with the way things are going.

Mark Tokola is the Vice President of the Korea Economic Institute of America. The views expressed here are his own.

Photo from user MarsmanRom on Wikimedia Commons.

By William B. Brown

North Korea’s won has slipped ever so slightly against the dollar in recent weeks. This is not surprising given the dollar’s worldwide strength but presents an interesting conundrum for the Chosun central bank. It no doubt knows that pegged currencies could break suddenly when a small divergence, a wiggle, catches the public’s attention. Any signs of the country running out of reserves could lead to people dumping the local money in a panic to exchange for safer assets. A self-sustaining downward spiral can occur, eviscerating the currency and causing all kinds of social instability.

North Korea Daily reports the dollar traded at 8,500 won in Pyongyang on 26 December, up from a steady 8,000 won through the middle of the year, a devaluation of 6 percent.

Against the globally weaker yuan, won has been more volatile, but without the trend decline.

An incipient currency crisis began in North Korea in 2009 and stopped only with the execution of the party finance chief and a very rare Worker’s Party apology.  Since then, financial authorities under Kim Jong-un have done an extraordinary job keeping the won stable. Despite the extremely tough sanctions against the economy, free circulation of competing assets – the U.S. dollar and the Chinese yuan – helped moderate the won’s volatility.

The gap between U.S. dollar/yuan exchange rate as measured by their value in the North Korean market (cross rate) and the actual exchange rate value in overseas markets did grow in 2018, indicating the potential for corrosive arbitrage behavior.

But the cross rate implied by the won for dollars and yuan is now exactly consistent with the overseas dollar/yuan rate. This suggests a remarkably free-flowing foreign exchange market in North Korea despite its socialist underpinnings.

Parsimonious printing of notes and limited credit expansion probably contributed to the won’s steadiness as well, although a tight monetary policy adds its own stresses to the state’s economy.

So, the question on every North Korean’s mind, and especially on Kim’s as he travels to Beijing, must be, how long this can last.

One is hesitant to guess what caused the recent dollar uptick, either market forces surrounding the strong dollar overseas or the continuing drain on the country’s foreign exchange exhibited by the huge drop in its exports due to sanctions.  Chinese merchandise trade data suggest a $200 million monthly outflow for most of 2018, unlikely offset by significant services or remittances inflows.

Recent commodity-by-country trade data released by China (with a six-month delay) reveal the conspicuous absence of exports of electrical and non-electrical machinery, and vehicles to North Korea. This may suggest that the country is running out of foreign exchange and can’t afford any investment related purchases.

Alternatively, the authorities may be trying to inoculate the market so that participants do not expect a firm peg. This ensures that future movements are not seen as policy failures or an impending crisis. If this is the case, we should see the dollar fall back to the 8,000 won level quickly as the central bank intervenes and spends dollars for won repurchases.

Another guess, expressed recently by some scholars, is that the won is actually more closely tied to yuan; therefore, the yuan’s decline against the dollar automatically made for the won decline.  As the above graphs show, however, the won’s value against the yuan has tended to be much more volatile than against the dollar.  Alternatively, some kind of basket approach may be in use but that removes the confidence-building features of a simple dollar peg, and confidence is what North Korean markets need more than anything.

What we do know is that anyone holding dollar assets in North Korea over the past few weeks has become relatively better off than those holding dollar liabilities such as apartment mortgages. One might think this could be cause for regime concern. We don’t know but is it enough for a quick trip to Beijing and a friendly chat with President Trump?

William Brown is an Adjunct Professor at the Georgetown University School of Foreign Service and a Non-Resident Fellow at the Korea Economic Institute of America. He is retired from the federal government. The views expressed here are the author’s alone.

The author is indebted to Daily North Korea which diligently reports North Korean prices and exchange rates in its newsletter.  https://www.dailynk.com/ 

Picture from user Price Roy on flickr

By Robert R. King

Final results on the 2018 U.S. Congressional elections are still being tallied, and as of November 15 two U.S. Senate races and eleven House races have still not been “called.”  The outcome of the congressional elections, however, is clear.  Republicans retained control of the U.S. Senate with a net gain of one or two seats.  On the other side of Capitol Hill, control of the House of Representatives has changed hands.  Democrats have picked up 32 seats giving them a majority of 227-199 in elections that have been decided.  Of the 11 races that have not been called, a majority appear to be leaning Democratic.

The changes brought by the election may result in changes in U.S. foreign policy.  This post attempts to see what might change in policy toward Northeast Asia over the next two years.

Senate Still in Republican Hands, but . . .

During the first two years of his presidential term, President Donald Trump has been able to get most of what he really cared about from both the Senate and the House.  In the Senate, most Republican lawmakers supported the President.  Two Republican critics who publicly voiced disagreement with Trump—Senators Bob Corker (Tennessee) and Jeff Flake (Arizona)—chose not to run for reelection.  The next Congress, however, is likely to have different dynamics.

In the Senate, Trump’s invincibility may be waning.  The President’s failure to achieve an electoral success in the House of Representatives and his serious weakness in suburban areas and with women and ethnic minorities, may well encourage some Republican senators to consider Trump a liability in their own upcoming reelection efforts.  After this election, some senators may well be willing to speak up and vote against the president on some issues.

There was no single national candidate for any office in this election.  Senate contests took place in about two-thirds of the states.  Senate votes are less reliable as a measure of national attitudes and feelings.  Votes for Representatives in Congress were held in every corner of the United States and that vote is a much better measure of national American attitudes and particular attitudes toward the President, since Trump made the election about himself.

The total number of votes cast in the mid-term election for representatives in Congress shows that some 5 million voters chose Democratic representatives over Republican representatives.  The popular vote in the 2016 Presidential Election gave 3 million votes more to Hillary Clinton than Donald Trump.  This suggests that support for Trump is declining, not growing.  Senators are less likely to be intimidated by or to support a president who may soon be a lame-duck.

Another element could influence Trump’s influence with the Senate.  One of the incoming Republican Senators, Mitt Romney (Utah), who was one of the harshest Republican critics of Trump during the Republican primary in 2016.  Romney is a “freshman” Senator and Senate decorum requires deference to elders and new upstarts are frowned upon in the Senate’s clubby ethos.  Romney, however, was the Republican Presidential candidate in the 2012 presidential election.  He knows the Republican members of the Senate and worked with them in the 2012 election and in other political contexts.

Trump nurtures grudges, and Romney’s criticism obviously still rankled him.  After the presidential election in 2016, Trump had at a much-publicized dinner with Romney to discuss the position of Secretary of State.  Shortly after the dinner, Trump appointed Rex Tillerson to the position in what was seen as a deliberate snub of Romney.  (Vanity Fair titled its story about the meal “Mitt Romney Eats Crow at Three Star Dinner with Trump.”)  Throughout Romney’s Senatorial campaign he studiously avoided commenting on Trump or his policies, and Trump stayed away from Utah during the campaign.  Nevertheless, just a few months before the mid-term election Romney spoke out and discussed differences with Trump during the campaign.  Romney may well be a high-profile Senator willing to challenge the President’s policies when he disagrees.

The Democratic-Controlled House will Not Be Friendly to Trump

In the House of Representatives, the swing of votes from the Republican to the Democratic column is the largest such Democratic “wave” in the House since the 1974 election which came just three months after Richard Nixon resigned the Presidency in the aftermath of the Watergate scandal.

House Democrats have not supported the Trump agenda on ideological grounds, but the petty bullying and taunting tactics Trump has used to criticize and mock Democrats have left him with a hostile House majority.  The Republicans who lost their seats in the recent elections largely represented politically more moderate constituents and whom the President has ignored or criticized.  Political moderate, women (particularly college educated women), and minorities turned from Trump.  In a post-election speech Trump blamed these Republican Members of Congress who lost for failing to embrace him, while the constituents saw them as too close to Trump.  The result is that the House of Representatives will be even more sharply divided on Trump and issues he champions.  With the need for both House and Senate to approve legislation, the divided Congress is likely to do less than the do-little congressional session just ending.

Foreign Policy Played a Minimal Role in the Mid-Term Election

Foreign policy issues, including Northeast Asia, received minimal attention in the U.S. election.  Foreign policy seldom is a key political issue in American elections, so this was not unusual.  The only campaign issue with tangential international implications was immigration, but this was an issue primarily intended to energize the Republican base.  Clearly the focus was not American relations with Mexico and Central America.  Fear was stoked with a military mobilization and overheated rhetoric, but we have seen little or no mention of sending U.S. military forces to the U.S.-Mexico border since the election took place.

Issues pressed by Democratic candidates were largely domestic American problems—health care, women’s rights, and the Donald Trump’s  divisiveness and lack of civility.  There has been considerable criticism of some of Trump’s foreign policy actions, but that was not an election issue.

Tariffs and trade was an international issue raised in the campaign, but the principal concern was not foreign policy, but American jobs.  Trump unilaterally imposed tariffs which he said was necessary to preserve American jobs.  The irony is that Republicans have traditionally led the opposition to tariffs and advocated for freer and more open trade.  But Democrats, who have been less supportive of free trade in the past, criticized the negative impact of tariffs on American jobs because of counter-tariffs and the impact on American farmers.  As the election rhetoric intensified, however, tariffs declined in importance.

Implications of the Electoral Change for U.S. Policy in Northeast Asia

Democratic control of the House of Representatives gives Congressional Democrats the ability to investigate, demand documentation, and question publicly or in closed session senior Administration officials on Administration policies.  Democratic leaders are already discussing their plans for “Congressional oversight” to investigate Trump administration policies.

But House Democrats will likely give higher priority to a number of controversial domestic issues—budget priorities, health care, environmental protection, climate change and energy policy, gun control, and women’s rights, including sexual harassment.  These issues more directly impact their constituents, and they will provoke disagreements with the White House.

Most of the key foreign policy and national security issues are not Northeast Asia.  The main issue for Democrats will be President Trump’s involvement in Russian efforts to influence American elections, and protecting the integrity of the Muller FBI investigation.  There could also be investigations into Trump’s business dealings with Russian oligarchs and possible Saudi business connections which may be influencing Administration policy.  The Middle East is always a major problem and a number of issues will be key—the murder of Saudi Arabian journalist Jamal Kashoggi by Saudi officials in Turkey, and the implications for U.S.-Saudi ties; the humanitarian crisis in Yemen and the ongoing internal Yemeni conflict; the thus-far ineffective White House effort to re-impose sanctions on Iran; the continuing conflict in Syria; and the complex issues involving U.S. relations with Israel.

Northeast Asia Issues will also engage House Democratic attention.  The most important of those will be the North Korean Security threat and denuclearization.  The House Committees on Foreign Affairs, Armed Services, and Intelligence are likely to hold both public and classified hearings on North Korean nuclear capabilities and the Administration unsuccessful efforts deal with the problem.  The much-publicized Singapore Summit has led to no discernable progress in denuclearization, and recent reports that North Korea is moving ahead secretly with nuclear and missile facilities while publicly dismantling with great fanfare a few older and well-known bases.

Democrats have openly questioned the value and achievements of Trump’s summitry with Kim Jong-un.  Democrats viewed the Trump-Kim Singapore Summit as largely a press event with little, if any, substance on denuclearization or improving regional stability and security.  Trump is clearly anxious for a follow-up summit—despite Kim Jong-un’s hard ball tactics in cancelling the preliminary meeting to lay the groundwork that was previously scheduled to take place in early November.  The House Foreign Affairs Committee will likely hold well-publicized hearings focusing attention on these concerns with North Korea policy.  The House Armed Services Committee is also likely to hold public and classified hearings on North Korean nuclear capabilities and policies for coping with them.  The fact that up to now Democrats were in the minority in both houses of Congress, however, gave their concerns and cautions little attention.  Now with control of the House agenda, their views will be given considerably more media attention.

Economic issues are important for the relationship with South Korea, Japan, and China.  Democrats have been critical over Trump’s unilateral imposition of tariffs, abandoning previous trade and economic agreements because they did not have the Trump name on them.  The KORUS FTA changes by Trump were not particularly welcomed by Congress, which has always been jealous of its primacy under the U.S. Constitution on trade matters.

The House Democratic majority is likely to support backing away from the Trump trade policies.  Republicans in the Senate are as uncomfortable and skeptical of the Trump trade agenda as are House Democrats.  Traditionally Republicans have been leading advocates for freer and more open trade, and Trump trade policies reflect a departure from that traditional Republican position.  If the Democratic House stands up to Trump’s trade policies, it may give the Republican leadership in the Senate more backbone to push against policies that they ideologically oppose.

On the issue of North Korea Human Rights,  both political parties in both House and Senate have supported pressing for changes on North Korea’s deplorable human rights record.  Trump used human rights as a stick to encourage North Korea to engage with the United States (see his UN Speech in September 2017 and the lengthy discussion of North Korean human rights in his State of the Union Speech in January 2018).  Once the Singapore Summit was on the horizon, however, the Trump administration and the President in particular did not give further attention to human rights.

Congress, however, has a stronger commitment to the human rights issue.  The fact that the North Korea Human Rights Act was extended after the Singapore Summit indicates Congress’ strong interest in the human rights issue.  This legislation is one of the few bipartisan pieces of legislation to pass the Congress in the first two years of the Trump era.  That bipartisan interest will continue and will likely be given additional emphasis by Democratic House committees.

Expectations for a Change with Democratic Control of Congress

The American constitution gives the President considerable latitude in the conduct of American foreign policy.  The Congressional role is limited to allocating and controlling funding for the conduct of that policy.  The House shares that authority with the Senate, which still remains in Republican hands.  It is important not to raise expectations of any legislative limitation or roll back of policies affecting Northeast Asia.

It is also important to keep in mind that the House and the Senate are not particularly disciplined.  There is no Democratic phalanx of loyal Members of Congress that will follow their leaders in lockstep into battle.  As American humorist Will Rogers famously said: “I’m not a member of any organized political party.  I’m a Democrat.”  Howard Baker, the Republican leader of the U.S. Senate for several years, said that trying to be the Republican leader of the Senate is “like herding cats.”  Cooperation in congress requires cajoling and convincing, unlike the Commander-in-Chief, who can give orders and expect they will be followed.

Initiative in foreign policy is with the President.  He has the largest bull horn, the loudest voice in the American government.  Trump, the former reality-TV personality, has shown a willingness and skill in using the media to dominate the conversation.  Thus far, however, he has faced no competitors who have real authority or who get serious attention from the media.  The Congressional Republicans have quictly acquiesced in his policies.  Few voices of disagreement have spoken out from Republicans in either house of Congress.

The House, with its newly-energized Democratic majority, can and will conduct hearings and investigations of President Trump and his policies.  His and his Administration’s actions will be criticized, and the media will give the Democratic leaders greater attention because they hold a majority in the House and their action and views do have consequences.  This will irritate the President, and his counter-responses will make for more interesting news stories for journalists.

The disruptive, erratic actions from the Administration are likely to continue.  The President in his press conference the day after the election made a few conciliatory remarks about working with Democrats, if they accepted his terms.  But even before the end of the press conference he was back to campaign mode criticizing Democratic leaders by name.  The next two years are likely to be more tempestuous and volatile than the last two have been as President Trump begins to gear up for his own reelection bid in 2020.

Robert R. King is a Non-Resident Fellow at the Korea Economic Institute of America. He is former U.S. Special Envoy for North Korea Human Rights.  The views expressed here are his own.

Image of Mitch McConnell credited to Gage Skidmore. Image of Nancy Pelosi credited to Jason Pier.

By Jenna Gibson

In a new poll from the Asan Institute, South Korean public opinion of North Korea has greatly increased since the beginning of 2018, hitting 4.71 out of 10 in their June poll. According to Asan, this is the first time favorability of North Korea has exceeded 4.0 since they started conducting these polls in 2013. Kim Jong-un similarly saw a spike in favorability among the South Korean respondents, rising to 4.06 from just 0.88 in November 2017.

This result is particularly surprising in comparison to other countries in the region. The United States maintains its position as the most favored nation among Koreans, but North Korea had now surpassed both Japan and China in the eyes of the Korean public.

This increase comes on the back of the inter-Korean and U.S.-North Korea Summits, which recurved positive reviews from Koreans. According to the Asan poll, 71.8 percent of South Koreans evaluated the Trump-Kim meeting as achieving positive results, and 62.6 percent said they believed North Korea will follow through on its agreements to denuclearize.

While the South Korean public remains optimistic about the recent dentente on the Korean peninsula, they will likely be closely watching next steps and their opinion may shift again as the situation continues to unfold.

Image from Wikimedia Commons. Graphic by Jenna Gibson.