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

• On May 26, the Ministry of Unification announced its plan to revise the Inter-Korean Exchange and Cooperation Act to simplify administrative procedures and to allow wider cross-border exchanges with North Korea.
• On May 27, the U.S. State Department said South Korea’s attempts to increase engagement with North should be pursued in parallel with North Korea’s denuclearization.
• On May 12, South Korea’s Minister of Unification said the ministry is planning to prioritize the inter-Korean tourism project, after the COVID-19 crisis is resolved, that would allow its citizens to visit North Korea.
• During the May 10 speech, President Moon reiterated his vision to bolster inter-Korean cooperation.

Implications: Seoul is exercising its option to pursue a bottom-up approach to inter-Korean engagement while government-to-government efforts are stalled. The proposed revision of the Inter-Korean Exchange and Cooperation Act aims to designate municipalities and civilian groups as agents for cooperative projects with the North and ease regulations for more individual-level interactions. The government hopes that these revisions would promote exchanges between the two Koreas and facilitate state-led projects like inter-Korean tourism and reconnecting railways in the long run.

Context: President Moon invested significant political capital in inter-Korean détente since he took office in 2017. However, many of his efforts have been hampered by broader geopolitical challenges, domestic opposition, and an uncooperative North Korea. With the ruling Democratic Party now fully in control of the National Assembly, the Moon administration is likely to leverage the momentum to push ahead with its desired North Korean policy.

Korea View was edited by Yong Kwon with the help of Gordon Henning, Soojin Hwang, and Ingyeong Park.

Picture from flickr user TeachAgPSU

By Robert R. King

In a tough statement, Kim Yo-jong, the sister of Kim Jong-un, issued a particularly vicious attack on North Korean defectors, particularly those who send leaflets across the border from the South. She referred to the refugees in the South as “human scum, hardly worth their value as human beings” and “human scum, little short of wild animals who betrayed their own homeland, are engrossed in such unbecoming acts to imitate men. They are sure to be called mongrel dogs as they bark in where they should not.” [The quoted text is from the official English translation of the statement; the Republic of Korea is always referred to as “south Korea” without a capital “S”.]

The statement also includes a threat: “Now that the mongrel dogs are doing others harm, it is time to bring their owners to account. I would like to ask the south Korean authorities if they are ready to take care of the consequences of evil conduct done by the ruggish-like mongrel dogs who took no scrupple to slander us while faulting the ‘nuclear issue’ in the meanest way at the most untimely time.”

The repetition of vicious phrases such as “human scum” and “mongrel dogs” seems to go beyond the usual vituperation and venom that is reserved by the North for defectors who have illegally fled the paradise that is North Korea in order to live in the South.

Why has one of the most senior North Korean officials, the sister of the Supreme Leader, issued such a blistering denunciation of refugees from the North now in the South?

Are Leaflets Really Having an Impact in North Korea?

The statement begins with reference to sending “hundreds of thousands of anti-DPRK leaflets into the areas of our side from the frontline area.” Sending leaflets across the DMZ via balloons or other means of physically delivering the papers has been done for decades. In recent years this has been a publicized effort of some human rights and defector organizations in the South for publicity and fund-raising. The effort is visible and photo-worthy. It irritates officials in the North, and the media blasts from the North are used by human rights groups in the South as evidence of their effectiveness. (See, for example, the North Korean threats against the South in 2016 when tens of thousands of leaflets were sent across the border by balloon.)

Leaflets sent by balloon, however, have limited impact. They usually land not far from the DMZ border and seldom if ever reach Pyongyang, and soldiers are ordered to pick up and destroy such propaganda materials. Far more significant information is reaching North Korea via radio—government-sponsored and religious broadcasts from South Korea, U.S. radio from Voice of America and Radio Free Asia in Korean, and Korean-language broadcasts from Chinese border areas intended for the Korean population in Northeast China, but with a significant listenership in North Korea. In Cold War Europe in the 1950s, the United States conducted major sophisticated balloon drops of leaflets directed toward Czechoslovakia, Hungary, Poland, and other countries in Central Europe, but such efforts were abandoned in 1956 in large part because they were less effective than radio in reaching these areas.

Uncertainty in the North and Defector Influence in the South

Another factor that may have motivated Kim Yo-jong to release her broadside against North Korean defectors in South Korea is because there is growing uncertainty in the North. Kim Jong-un was missing from the public eye for three weeks before he made a public appearance for the grand opening of a fertilizer factory, then he was out of sight again for a notable period of time. The Supreme Leader smokes too much, is overweight, and he had health problems—not a healthy prognosis for someone in his 30s. The recent promotion of the Supreme Leader’s sister Kim Yo-jong to alternate membership in the Politburo and her recent prominence in making important public statements, such as this recent blast against defector leaflets, may be a further indication of uncertainty about the future.

Another factor that may be raising concerns in the North is what appears to be the growing influence of defectors in South Korea. In elections six weeks ago, two prominent defectors were elected to the National Assembly. Although both are members of the minority party in the Assembly, it shows the growing credibility, acceptability, and influence of defectors in the South. Defectors traditionally have taken the toughest position against the North in South Korea’s political discourse. In the past defectors have been on the margins of South Korean society, but now two prominent defectors sit in the National Assembly.

Pressing South Korea for Progress on Rapprochement

Another explanation for the “nastygram” from Kim Yo-jong is that Pyongyang is getting impatient with the slow progress by President Moon Jae-in for improving relations between the North and South. Moon just marked the third full year of his five-year term in office, and under the South Korean constitution, a president can serve only a single term. Time is running out to redefine the relationship with the North under Moon Jae-in. Furthermore, Moon’s Democratic Party just won some 60 percent of the seats in the National Assembly. If he wants to make progress with the North, he now has the votes in the Assembly to get it done. Mme. Kim’s blast may be intended to encourage President Moon to move more quickly.

The threats in the tough message from Pyongyang target initiatives that President Moon supports in the search for better relations with the North. Kim Yo-Jong referenced the upcoming 20^th anniversary of the June 15, 2000 summit between leaders of the North and South, and their declaration marking the beginning of Kim Dae-jung’s “Sunshine” Policy which led to improved relations, divided family visits, and economic cooperation.

Kim Yo-jong’s warning to the South Korean president followed another blast of vicious invective: “The south Korean authorities must be aware of the articles of the Panmunjom Declaration and the agreement in the military field in which both sides agreed to ban all hostile acts including leaflet-scattering in areas along the Military Demarcation Line. . . . It is hard to understand how such sordid and wicked act of hostility is tolerated in the south at a time as now.”

Mme. Kim then spelled out the threats: “south Korean authorities will be forced to pay a dear price if they let this situation go on while making sort of excuses.” If Seoul does not take steps Pyongyang is demanding “they had better get themselves ready for possibility of the complete withdrawal of the already desolate Kaesong Industrial Park following the stop to tour of Mt. Kumgang, or shutdown of the north-south joint liaison office whose existence only adds to trouble, or the scrapping of the north-south agreement in military field which is hardly of any value.”

Considering the modest impact of the leaflet balloons and the vicious voice in which they are attacked, it seems quite clear that the North is simply trying to move Seoul into making important concessions now. Political uncertainty, the possible strain on the North Korean economy from United Nations sanctions, and the worldwide Covid-19 economic downturn are likely the most important factors behind the vehemence of the statement, which indicates its urgency.

Denouncing U.S. Secretary of State Pompeo and Defending China

Another interesting and probably related media missive was a statement released by the International Department of the Central Committee of the Workers Party of Korea. The statement said that Secretary of State Pompeo “reeled off rubbish” that the U.S. would work with its partners in the West to ensure that “liberal democracy” rules in this century. It continued to note that Pompeo “said nonsense about China over the issues of Hong Kong, Taiwan, human rights and trade disputes,” and “he slandered the leadership of the Communist Party of China over socialism.” The statement then included another malicious comment about the Secretary of State: “Pompeo, who has been deeply engrossed in espionage and plot-breeding against other countries, has become too ignorant to discern where the sun rises and where it sets.”

The last phrase is probably the key to the blast at Pompeo. North Korea clearly has cast its lot with China and wants to make sure that Beijing will have no doubt that Pyongyang sees its future with its socialist neighbor China as relations deteriorate between the U.S. and China.

Increasingly dependent on China as its economy worsens, thanks to UN sanctions and now the Covid-19 economic downturn, North Korea appears to be increasingly concerned about its future. The blast at South Korea and the tightening embrace of China appear to show a North Korea increasingly fearful about the future in a very difficult time.

South Korea’s Immediate Response Risks Emboldening the North

In less than 24 hours after Mme. Kim Yo-jong issued her demeaning and intemperate screed against the flier balloons, the South Korean government responded that it would take immediate action to prohibit the sending of fliers via balloon because they caused “tension” with the North. Mayors of some of the towns along the border reportedly called for strong government action to halt the balloon launch. The spokesperson of the Ministry of Unification said “most leaflets have been found in our territory, causing environmental pollution and increasing burden on local people to get rid of them.”

Defectors and human rights activists were equally adamant that they would not stop their launch activities. One rights group said it had no plans to stop sending fliers across the border, and in fact had ordered another one million leaflets. Advocates were quick to denounce the restrictions as a violation of the right of freedom of speech, and others denounced buckling under Pyongyang’s demands.

The real risk of for the Moon Jae-in government is that by responding so quickly and so publicly to the demeaning dressing down from Mme. Kim Yo-jong gives the administration the appearance of being overly eager to accede to Pyongyang’s demands. It looks particularly obsequious to respond so quickly and so totally to such an arrogant ultimatum from the North.

Such a response only weakens Seoul’s ability to negotiate with the North.  The quick and total capitulation by the South will only encourage Pyongyang to take a tougher position in any negotiations that may come up in the future.  There was not even a hint that the South might drive a bargain with the North to get something in return for ending the sending of fliers.

I am personally skeptical of the value of balloons. Getting information into the North is better done with radio broadcasts and thumb drives than with fliers. How Seoul is responding, however, will have a major impact on future negotiations with the North.  Unfortunately, the pattern does not bode well. The South Korean government’s immediate capitulation on balloons will only encourage the North to make unreasonable demands. The real danger is that Moon Jae-in administration will be so eager to show success in improving relations with the North in the final two years of its tenure in office that there will be an incentive to cave to demands from the North.

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 sources from Wikimedia commons

By Troy Stangarone

Official tourism statistics for the month of February won’t be available for at least a month, but there are already indications that South Korea’s tourism industry will be hit harder by the coronavirus (COVID-19) than by prior infectious diseases such as SARS, swine flu (H1N1), and Middle East Repertory Syndrome (MERS).

During the SARS outbreak from November, 2002 to July, 2003, the global travel industry saw a six month decline. In the case of South Korea, there was a nine month decline before tourist numbers saw a rise from the same month in the previous year. Estimates suggest that SARS cost the South Korean economy 0.1 percent of GDP in terms of the temporary shock and had a long-term cost of 0.08 percent of GDP.

During the outbreak of H1N1 in from May 2009 to August 2010, 750,000 South Koreans were confirmed to have contracted H1N1 and 252 died. Despite the diseases spread, there was no noticeable overall drop in tourism and visitors to South Korea increased 13.4 percent in 2009 and another 12.5 percent in 2010.

The shorter MERS outbreak from May to July of 2015 resulted in an estimated 2.1 million fewer tourists in South Korea and an economic loss of $2.6 billion across the transportation, accommodation, and food and beverage industries.

In contrast to COVID-19, these prior viral outbreaks did not result in nearly as many travel restrictions or warnings related to South Korea. This time, however, 99 countries and territories have placed some type of restriction or warning in regards to travel to South Korea in response to the coronavirus, only eight countries and Hong Kong issued warnings during the MERS outbreak. As a result, Korean Air has cut service to just 20 percent of capacity.

With the increase in travel warnings, there are growing losses for the airline and tourism industries. Looking at the impact of COVID-19, the International Air Transport Association found that in a limited virus spread scenario South Korea would see airline passengers decline 14 percent for the year. This would amount to airline losses of $2.8 billion for South Korea in 2020, which would be higher than the total losses from MERS across transport, retail, and accommodation.

According to the Korean Tourism Organization, the average tourist spent $991 in South Korea in 2018. This suggests that an annual decline in tourism of 14 percent in South Korea could result in an additional loss of $2.4 billion for total yearly losses of $5.2 billion.

However, there are two reasons to think that overall losses to the travel and tourism industry will be greater. Globally passenger numbers are dropping quickly and have begun to look more similar to the global financial crisis than epidemics like SARS, despite SARS having a higher fatality rate than COVID-19.

In addition, Chinese tourists accounted for just under 35 percent of tourists in South Korea in 2019, the highest percentage for any OECD country. Chinese tourists also spend more than double the average tourist in South Korea.

As a result, China’s informal ban on group tours in South Korea in response to the decision to deploy the Terminal High Altitude Area Defense (THAAD) system may be a more apt analogy. During the first six months of THAAD, the decline in Chinese tourists resulted in losses of approximately $5.9 billion. If Chinese tourists declined by just 14 percent this year the losses would be roughly $1.8 billion, but if the number of Chinese tourists declined by 30 percent those losses would climb to $3.8 billion.

Coupled with the drop in travel to Japan from the ongoing boycott from Japan’s export restrictions on South Korea and the recent dispute over Japan’s decision to place restrictions on travelers from South Korea, the Korean tourism industry faces the prospect of significant declines from the two largest sources of tourists in South Korea. As a result, South Korea’s six budget airlines have asked the government for a package of tax and loan measure to help them whether the additional costs from the coronavirus. The South Korean government has also put forward a $9.8 billion stimulus package, but with less than a third of that dedicated to help for small and medium enterprises hurt but the virus, a more robust stimulus may be needed later to help hotels and restaurants weather the crisis.

Troy Stangarone is the Senior Director and Fellow at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from byeangel’s photostream on flickr Creative Commons. Graphic by Juni Kim, Senior Manager for Operations and Technology, Korea Economic Institute of America.

By Troy Stangarone

Thirty years after Hungary allowed the first East Germans to cross into Austria beginning a process that would see the breakdown of the barriers that prevented free movement between East and West Germany, and within the communist bloc, North Koreans are still unable to travel abroad freely or visit their relatives in South Korea.

East and West were divided for decades by the Berlin Wall and boarder fencing to prevent a drain of citizens heading from East to West, but on August 19, 1989 600 East Germans in Hungary were allowed to leave and cross the border into Austria. In less than a month, 60,000 East Germans had taken advantage of the new opening.

While the Iron Curtain separated East from West, it was always more porous than the DMZ has been. While security services might tap calls or read mail, East and West Germans were able to call and mail each other.

East Germans were allowed to travel to West Germany, but permission was difficult to secure and conditional. However, even with restrictions in place around one million East Germans are estimated to have traveled to West German between 1964 and 1981. Division existed, but the near hermetic seal that exists today between North and South Korea never existed between East and West Germany.

Visa and currency restrictions also limited travel within the Eastern Bloc, but it was still possible even if East Germans were largely limited to travel to Czechoslovakia.

In contrast, North Korea and South Koreans face even stricter barriers to communication. Outside of economic engagement projects, humanitarian assistance, or government contacts, interactions are largely limited to controlled and infrequent family reunions. Since the first family reunion in 1985, some 20,000 South Koreans over 20 sets of reunions have been able to meet with loved ones who were separated by the Korean War.

Despite these reunions, there are some 56,000 South Koreans still waiting for their opportunity to meet with their relatives in the North. Tragically more than 75,000 have died since the late 1980s without the opportunity to meet with their relatives in the North.

North Koreans traveling to other countries such as China or Russia are largely limited to travel as overseas laborers to benefit the regime rather than to travel for personal reasons.

For those trying to escape North Korea, the number who have made it to South Korea has fallen since Kim Jong-un came to power in 2012. In the last year of Kim Jong-il’s rule 2,706 North Koreans made their way to South Korea. By 2018 that number had dropped to 1,137. Though, there are no hard statistics on how many North Koreans have tried to leave but been unsuccessful, increased security on both sides of the boarder is believed to have played a role in the decrease as China has recently begun to crack down on those trying to flee North Korea.

Beyond the human consequences of divided families, the continued slow movement towards travel between the two Koreas is a disappointment as on two separate occasions last year Kim Jong-un expressed his desire that Koreans be able to travel in both countries. Though, there is hope that video reunions could relieve some of the burden in the future.

This division is unique in the world, as even those living in Taiwan or mainland China are able to travel freely despite China’s division.

With thirty years now passed since the first East Germans made their way into Austria, the continued lack of interaction between North and South Korea shows how little progress has been made in addressing the human consequences of the Korean War.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are the authors alone.

Photo from Needpix.com.

By Kyle Ferrier and Linnea Logie

While South Koreans celebrated their team’s upset victory over Germany in the World Cup earlier this week, no country was happier about the win than Mexico. The South Korean “Reds” late game heroics against Germany advanced Mexico to the next round of the tournament despite Mexico’s simultaneous 3-0 loss to Sweden, causing pro-Korea euphoria to sweep across the country. Videos of people celebrating outside of the South Korean embassy in Mexico City, hoisting Koreans on their shoulders to a chorus of cheers, and pictures of stores offering heavy discounts to Koreans flooded the internet. Although it may seem like an unusual pairing at first glance, Koreans and Mexicans actually have a long history of working together. Below are some key areas of cooperation beyond sports.

That’s the Korean consul general to Mexico, Byoung-Jin Han, celebrating with grateful Mexican fans outside the Korea embassy here. One fan said he took a shot of tequila with them earlier. pic.twitter.com/NGWEmRADUW

— James Wagner (@ByJamesWagner) June 27, 2018

Official Relations

Diplomatic history

Mexico and South Korea formally established diplomatic relations in January 1962 driven by South Korean leader Park Chung-hee’s efforts to open new markets for exports. South Korea opened an embassy and appointed an ambassador shortly thereafter, while Mexico waited until 1978 and 1987 to open an embassy in and post a resident ambassador to Seoul, respectively. The Korean Embassy in Mexico City has played a key role in spreading Korean culture, particularly from when the first bilateral cultural agreement was signed in 1966 through the late 1990s when the two countries first started a dialogue on educational and cultural projects, which continues today and has produced numerous programs such as festivals and museum exchanges. In international relations, both countries are middle powers and belong to the informal middle power partnership known as MITKA (an acronym for the members of Mexico, Indonesia, Turkey, Korea, and Australia).

North Korea

Mexico and North Korea first established diplomatic relations in 1980. Mexico City is one of only 48 cities in the world to host a North Korean embassy, but Mexico does not have an embassy in Pyongyang. In protest of North Korea’s sixth nuclear test in September 2017, Mexico expelled the North Korean ambassador Kim Hyong Gil. In 2017, reported North Korean exports to Mexico were valued at $6,102,754.

FTA negotiations

South Korea and Mexico officially launched negotiations for a free trade agreement in 2007, but talks stalled because of Mexican concerns that a deal could have widened its trade deficit with Seoul. However, amid growing protectionism, both countries have announced a renewed interest in accelerating negotiations. A Mexican government official has even recently stated, “We have selected strategic partners worldwide, and in Asia, our major strategic [economic] partner is Korea.”

¡Te amamos Corea! Nuestros vuelos de México a Corea tienen 20% de descuento. #VolamosConTodo #GraciasCorea https://t.co/vCVAlmJ3Hl pic.twitter.com/i8WJWJV8wE

— Aeroméxico (@Aeromexico) June 27, 2018

People to People Links

Tourism

Mexico is a popular destination for South Korean honeymooners. It also may be gaining popularity among retirees as an affordable travel spot. Last year, 75, 415 South Koreans visited Mexico, up from 63,661 in 2016. From January through April 2018 this year, 30,230 South Koreans travelled to Mexico, which is a third more visits than during the same period in 2017. While fewer Mexicans travel to South Korea, it is becoming a more popular destination. From January through May this year, 9,509 Mexicans have visited South Korea, a nearly 50 percent increase from the same period last year.

Hallyu

The Korean culture wave is swelling in Mexico. Korean culture has increasingly entered homes throughout Latin America in recent years by way of K-pop and Korean dramas, giving rise to fan clubs for South Korean actors and music groups. Mexico City was one of only two cities in 2014 to host Music Bank¸ a Korean music show featuring live performances of multiple K-pop groups outside of South Korea. South Korean music groups are increasingly releasing songs in Spanish, including the girl group Crayon Pop which collaborated with the Mexican boy band BD9 for the song “Get Dumb.” When Mexicans wanted to show their appreciation to South Koreans after their World Cup victory they played K-pop on local radio stations and bought songs from groups like BTS, whose song “Fake Love” climbed 31 spots on the Mexican iTunes Charts on the day of the game.

Trade and Investment

Mexico is South Korea’s largest Latin American trading partner, while South Korea is Mexico’s third largest export destination in Asia, after China and Japan. South Korea exported nearly $11 billion in goods to Mexico last year, a 12.5 percent increase from 2016, and Mexico exported about $4.4 billion to South Korea, a 20 percent increase from 2016. South Korean has invested $5.6 billion in Mexico, while Mexican investment in South Korea is around $60 million. Over 1,800 Korean companies operate there. South Korea’s main exports are liquid-crystal display devices, optical devices and instruments, electronic parts, auto parts, vehicles, and electrical machines, appliances and equipment. Mexico’s main exports to Korea include crude oils, lead minerals and concentrates, zinc ores, silver ores, copper ores, and electronic devices.

Btw Koreans love Mexico’s music. Fun fact: “Sabor a mi” (performed here) is my go to karaoke song. pic.twitter.com/3BD4d0CuIX

— Gene Park 🇲🇽🇰🇷 (@GenePark) June 27, 2018

Kyle Ferrier is the Director of Academic Affairs and Research at the Korea Economic Institute of America. Linnea Logie is currently an Intern at the Korea Economic Institute of America and is also an incoming graduate student with the Security Studies Program at Georgetown University. The views expressed here are the authors’ alone.  

Image by KEI’s Jenna Gibson.

By Mark Tokola, Phil Eskeland, Troy Stangarone, Jenna Gibson, Kyle Ferrier, Sang Kim, and Juni Kim

As we look ahead to what might occur in 2018 we should also consider how key events from 2017 will continue to shape the year ahead. In 2017, there was significant change on the Korean Peninsula. South Korea underwent political change as the Constitutional Court approved the impeachment of conservative President Park Geun-hye, opening the door to early presidential elections in May and the election of progressive Moon Jae-in. North Korea made significant advancements in its nuclear and missile programs, with both North and South Korea beginning to adjust to the changes brought by U.S. President Donald Trump.

After a year of growing tensions on the Korean Peninsula from North Korea’s nuclear and missile advances and concerns over war between the United States and North Korea, one of the key questions for 2018 will be whether the crisis will fester or will there be an opportunity to reduce tensions? There will also be significant focus on the impact of sanctions on the North Korean economy and whether they can change Kim Jong-un’s calculus.

However, 2018 will not only be about North Korea. In February, South Korea will welcome the world to PyeongChang for the 2018 Winter Olympics. While the Games will be a celebration in South Korea, there is also hope that they will help to reduce tensions on the Korean Peninsula.

With that in mind, here are 10 issues related to North Korea, South Korean politics, and U.S.-Korea relations to follow that will have an impact on the Korean peninsula in the year to come:

Could War Break Out on the Korean Peninsula?

With the leaders of North Korea and the United States fighting over nuclear buttons, it is hard to imagine a more precarious situation on the Korean Peninsula going into 2018. But war can, and most likely will, be avoided as long as cooler heads in Washington and Pyongyang prevail.

Security and international relations experts have long debated whether Kim Jong-un is a rational actor and if a nuclear North Korea obeys the same rules of deterrence that kept full-scale conflict at bay during the Cold War. Many firmly believe that North Korea can indeed be deterred, and that preventative military action is unnecessary and dangerous.

The key will be to keep communication and coordination between Seoul and Washington tight. Allowing North Korea or China (or even unrelated issues like the Korea-U.S. Free Trade Agreement renegotiations) to drive a wedge between the two allies could provide enough confusion and uncertainty to allow a miscalculation to get out of hand.

The Impact of Sanctions on North Korea

One of the key issues for 2018 will be the impact of sanctions on the North Korean economy. Much of the international strategy for dealing with North Korea’s nuclear weapons and missile programs so far has been built around the strategy of using increasing economic pressure to bring North Korea to the negotiation table.

In 2016, North Korea’s economy was estimated to have grown nearly 4 percent despite increasing United Nations sanctions. Estimates for 2017 won’t be out until later this year, but the UN Security Council has passed four new resolutions imposing greater sanctions on Pyongyang and one would expect economic growth to slow. North Korea is now banned from exporting coal, which was its largest export item, as well as other goods such iron and lead ore, textiles, fish and agriculture products, wood, and machinery. The sanctions have also placed greater constraints on North Korean financial transactions and require all of North Korea’s overseas laborers to be sent home in one year. The vast majority of North Korean exports have been banned and limits have been placed on oil exports to North Korea.

As a result of the sanctions, North Korean exports to China are down $573 million compared to 2016 through November of last year. Most of the decline has come towards the end of 2017 when many of the sanctions began to come into effect. Will sanctions continue to lead to a decline in North Korea’s official trade? Will North Korea be able to increasingly evade sanctions as it appears to with reports of Russian and Chinese ships transferring oil to North Korea in violation of UN sanctions? Will the sanctions begin to have a significant impact on the North Korean economy, perhaps in the form of a currency crisis, that will begin to place pressure on the regime to enter into talks on its weapons programs? The new year should give us some insight into these questions.

The Advancement of North Korea’s Nuclear and Missile Programs

North Korea displayed disturbing advancements in missile and nuclear technology in 2017, including three successful intercontinental ballistic missile (ICBM) tests and a nuclear test in September showing North Korea’s highest yield yet. Each successive ICBM test conducted by Pyongyang demonstrated greater altitude and reach, with the most recent test in November estimated to be capable of hitting anywhere within the United States.

Despite a new series of UN sanctions passed in 2017 aimed at curbing North Korea’s weapons progress, 2018 will likely see North Korea continue to test the international community and demonstrate further advances in their weapons technology. Although North Korea established its ICBM advances in the past year, North Korea has yet to display missile re-entry capability, which would be a critical part of the country’s ability to launch a potential attack. North Korea may also seek to conduct more satellite tests and submarine-launched ballistic missile (SLBM) tests to emphasize the regime’s expanded weapons capabilities, as well as expand its stockpile of missiles and warheads.

The 2018 Winter Olympics

The 2018 Pyeongchang Winter Olympics will be the second time that South Korea has hosted the Olympic Games after it held the 1988 Summer Olympics in Seoul. This will also be the first of three consecutive Olympic Games held in East Asia with the 2020 games to be held in Tokyo and the 2022 games to be held in Beijing. In regards to local hopes for Olympic glory, South Korean athletes have traditionally had a dominant presence in speed skating, and a predictive analysis by Gracenote currently estimates another strong performance in the sport with a projection for South Korea to finish sixth in the overall Gold Medal count.

Despite local enthusiasm for the Games, lagging ticket sales have been attributed to international concerns over North Korea’s provocative behavior. In a New Year’s address, North Korean leader Kim Jong-un voiced openness to North Korea’s participation in the Winter Games. In response, South Korean officials have proposed talks to discuss North Korea’s involvement next week, which if obtained would be a significant development for South Korea and its hope to reassure a worried international audience. North Korea’s participation would also be a huge political win for South Korean President Moon Jae-in, who campaigned on improving inter-Korean relations through dialogue and convinced the United States to postpone annual exercises until after the Olympics.

Special Measures Agreement/Burden Sharing

President Donald Trump recently reiterated his campaign rhetoric and long-held belief that the U.S. “defends nations that are very wealthy, and we do it for almost nothing.” In this same speech in Missouri, President Trump relayed his conversations on defense burden sharing with a “couple of countries” during his recent trip to Asia that he believes are “getting away with murder and they got to start helping us out.”

Ever since 1991, the Republic of Korea (ROK) has provided some financial support to offset the cost of stationing U.S. troops on the peninsula. In 2016, General Vincent Brooks testified before the U.S. Senate that South Korea pays approximately 50 percent of the total non-personnel costs of the U.S. troop presence on the peninsula. Under the current SMA, Korea’s annual payment (in won) increases by the rate of inflation. In preparation for the President’s November trip to Asia, the White House highlighted Camp Humphreys as a “great example of burden sharing.” In the same testimony cited above, General Brooks confirmed that South Korea has paid about 91 percent of the cost of this base relocation.

In 2018, South Korea and the United States will negotiate a renewal of the Special Measures Agreement (SMA), which is set to expire later this year, to lay out the terms of the burden sharing arrangement for the next several years. As in most negotiations, both sides start off with their most extreme position. Over time, the two sides come together to reach an agreement.  SMA negotiations will be tough with the Trump administration. However, experienced personnel in the Defense Department will continue to recognize Korea’s immense contribution to the alliance (i.e., devotes 2.7 percent of its GDP to its own defense; has military draft; has, in the past, contributed its own troops to support the U.S. in other conflicts; and purchases a significant share of its imported military equipment from the U.S.) and will not let the SMA talks undermine the U.S.-ROK alliance.

U.S.-Korea Trade Policy

President Donald Trump continued his campaign rhetoric to criticize past U.S. trade policy, including the Korea-U.S. Free Trade Agreement (KORUS FTA), as a source of job loss and economic desolation in the United States.  He was on the cusp of withdrawing from KORUS and had the paperwork prepared to sign, but was persuaded at the last moment by other senior White House aides to not take this action and instead work towards negotiating changes to the underlying agreement.

However, the impetus for renegotiating KORUS – a rising bilateral merchandise trade deficit between the U.S. and South Korea since 2011 – has dissipated over the past 18 months as the U.S. experienced a significant decrease in the bilateral trade imbalance in its favor.  While Trump Administration officials have finally recognized this fact, the goalposts have been moved to find “permanent solutions, not temporary forbearance,” to keep the U.S.-ROK trade imbalance low and possibly turn it into a surplus based on the philosophy of “free, fair, and reciprocal” trade. Nonetheless, the Trump Administration may run into its own self-imposed roadblock by not seeking major alterations to KORUS that would require changes to U.S. law, thus avoiding the need to trigger Trade Promotion Authority (TPA) and approval by Congress.

With formal negotiations set to begin on January 5^th, the same day as the release of next set of U.S. trade statistics for the month of November, some of the areas under possible amendments and modifications to KORUS are changes to Investor Settlement Dispute (ISD) process; elimination of more non-tariff barriers to U.S.-made vehicles; and reforms in areas of digital trade, privacy, and financial services.  Commerce Secretary Wilbur Ross also said that he hopes the KORUS renegotiation talks will go “quickly and smoothly” and that both sides will find “ways that work for all parties.”  If this solicitous spirit imbues the negotiation teams, an agreement can be found relatively soon.  However, if talks drag out because of unrealistic demands, this could have negative ramifications for other areas of the U.S.-ROK relationship.

Lastly, there are two other trade decisions in 2018 that could negatively affect South Korea with respect to U.S. government investigations into alleged “unfair” trade practices – (1) the Commerce Department study on the national security implications of imported steel is due on January 15^th, with a presidential determination within 90 days to possibly issue higher tariffs as a tool to protect the U.S. steel industry (Korea represents the third largest source of imported steel for the U.S.) and (2) the President has until February 2^nd to make a decision on possibly increasing tariffs on imported large residential washing machines made by Korean-owned companies LG and Samsung to protect Whirlpool (based in Ohio) from an alleged import “surge” (even though LG and Samsung will soon be manufacturing washing machines in the U.S., employing over 1,500 workers). Decisions to increase tariffs could prove to be additional irritants in the U.S.-ROK relationship, and could mar the KORUS talks.

Will China’s Economic Pressure on South Korea Over THAAD End?

In the summer of 2016, China began taking steps to apply economic pressure on South Korea over Seoul’s decision to deploy the U.S. Terminal High Altitude Area Defense (THAAD) system. By 2017, China was informally sanctioning South Korea’s tourism, entertainment, and auto industries, as well as Lotte directly for providing the land on which was deployed.  Altogether, the economic losses to South Korea from China’s boycott have approached $10 billion.

At the end of October, South Korea and China announced that they had agreed to normalize economic ties. While Beijing had insisted that the dispute would not truly be over until South Korea made the appropriate decision on THAAD, it looked at the time as though the two sides had agreed to disagree as China partially lifted its ban on group tours to South Korea. It was not meant to be. A little more than a month later it appears that China has re-imposed the tourism ban, and while South Korean automotive sales have improved in China it looks as though the retaliation over THAAD is set to continue into 2018. Rather than lifting its economic pressure on South Korea, look for China to moderate it over 2018 but to not completely lift its economic pressure.

Moon Jae-in’s Promised Economic Reforms 

The South Korean economy is projected to grow over 3 percent in 2018, led by recovering global trade expectations. However, the key issue to watch this year in the Korean economy is how effective the administration’s reform agenda will be in spurring domestic demand. Moon’s social and economic reform platform arguably won him the presidency and his implementation of it so far has sustained his high approval ratings. The popularity of Moon’s strategy stems from its rejection of past policies, reversing conventional economic thought by arguing job creation leads to growth.

Perhaps the most consequential advancement of the agenda thus far came was the budget passed by the National Assembly in December. The budget increased social welfare spending and created around 9,500 new public-sector jobs, both are major steps towards achieving Moon’s lofty goals.

While this new path could help to address Korea’s widening social problems and boost the domestic economy as a portion of overall GDP, it is still largely unproven. Whereas 2017 laid the groundwork for Moon’s ideas to be enacted, 2018 will be prove crucial in determining their success and sustainability. All of this could however be moot if burgeoning household debt is not reigned in.

South Korean Local Elections

South Korean domestic politics will face another bumpy road in 2018. The June 13^th local election will be the Moon Jae-in Administration’s first major political event and a litmus test for Moon’s first year. It could also change the political landscape for next four years.

With Moon’s continuous high approval rate, the Democratic Party of Korea has a strong advantage over its opponents. According to the Korea Times’ New Year public opinion poll, an overwhelming majority in Seoul, Busan and Gyeonggi providence said they will support Moon and the ruling party in upcoming local election.

However, opposition parties are hoping to flip the political tide in their favor. Ahn Cheol-soo, the leader of the People’s Party and the Bareun Party leader Yoo Seun-min have been pushing for their parties’ merger to attract the votes of centrists and moderate conservatives. Whether the synergy from the merge will be strong enough to make them the main opposition party ahead of Korea’s Liberty Party is debatable.

The major race to watch out for the June election will be the Seoul mayor’s race. The incumbent, Park Won-soon, will be the first Seoul Mayor in history to run for the third term. According to DongA Ilbo survey, Park has overwhelming support over other potential candidates.

With five months left until the election, there is a plenty of time for unexpected changes.

Hallyu’s Ongoing Rollercoaster Will Continue

The last year was one of extremes for Korean pop culture overseas. Starting in 2016 and continuing throughout 2017, the market for Korean cultural content in China began to dry up amid formal and informal boycotts over THAAD. After years of Hallyu fever in China, concerts by Korean artists and endorsement contracts for Korean celebrities have become few and far between.

Meanwhile, though, boy band BTS may have achieved what was once deemed impossible – breaking into the mainstream American market. After appearances on the American Music Awards and The Ellen Show, BTS topped off the year with a performance at Dick Clark’s New Year’s Rockin’ Eve, and broke their own record for the longest run by a k-pop group song on Billboard’s Hot 100 chart.

In 2018, expect more of the same for both these phenomena. Even if China lifts some restrictions this year, Korean entertainment companies will likely be reluctant to rush back into the Chinese market. In fact, some groups with a stronghold in China such as EXO, who releases all their music in both Korean and Mandarin, have shifted toward more Japanese releases.

Meanwhile, it remains to be seen where BTS’s success in the United States will take them, and whether their popularity will open doors for more mainstream interest in other k-pop acts.

And finally one bonus issue:

Will There Be Constitutional Reform?

President Moon Jae-in has promised to reform the South Korean Constitution and intends to hold a referendum on proposed changes in conjunction with local elections in June.  The 1948 Constitution has been amended nine times, with the biggest change in 1987, when presidency was changed to a single five-year term.  A two-thirds majority in the National Assembly will be required to pass the constitutional reform bill that would then be put to the referendum.

Although there is consensus that the current Constitution grants too much power to the President, there is no agreement on how to curb the President’s powers.  Suggestions include: introducing a four-year, two-term Presidency; increasing the powers of the Prime Minister, perhaps by making the Prime Minister responsible for domestic policy while leaving foreign and security policy to the President; giving greater autonomy to regional and local governments, perhaps in the areas of education and local finance; creating a system for ballot initiatives and a recall system for National Assembly Members to strengthen “direct democracy”; and changing the system of National Assembly elections to increase the influence of smaller parties.  President Moon, formerly a human rights lawyer, has also said that he is interested in strengthening human rights provisions of the Constitution.

The first half of 2018 will see a strong push for agreement on Constitutional revisions in time for a June referendum.  If the parties cannot agree on a proposal, Constitutional reform will become an issue for the 2020 National Assembly elections.

Mark Tokola is the Vice President of the Korea Economic Institute of America, Phil Eskeland is the Executive Director of Operations and Policy, Troy Stangarone is the Senior Director for Congressional Affairs and Trade, Jenna Gibson is the Director of Communications, Kyle Ferrier is the Director of Academic Affairs and Research, Sang Kim is the Director of Public Affairs and Intern Coordinator, and Juni Kim is the Program Manager and Executive Assistant. The views expressed here are the authors’ alone.

Image created by Jenna Gibson. Photos from William Proby and Korea Net on flickr Creative Commons, and from Wikimedia Commons.

By Troy Stangarone

In 2017, much of the world’s attention turned to the Korean Peninsula. South Korean politics underwent major changes as President Park Geun-hye became the first South Korean president to be removed from office and a snap election was held in May that saw the election of Moon Jae-in. North Korea also dominated the news as Kim Jong-un followed through on his promises to test an intercontinental ballistic missile (ICBM) and has raised concerns over the prospect of military action on the Korean Peninsula as North Korea has advanced its programs more quickly than many expected.

The changes in South Korean politics and North Korea’s progress on weapons development on their own could mark 2017 as a major turning point on the peninsula. However, we also saw the United States threaten to withdraw from the KORUS FTA and China perhaps put more pressure on South Korea over THAAD than North Korea over its nuclear weapons program. As we take our annual look back at the events that helped to shape the Korean peninsula during the past year, it is also an opportunity to review the events we highlighted on The Peninsula in our annual 10 Issues to Watch For on The Korean Peninsula in 2017 blog.

Looking back, we largely touched on what would be the key issues on the Korean peninsula in 2017. Though, in the case of burden sharing we may have been a year too early and there are reasons to believe late in 2017 that our prediction on relations between South Korea and Japan while right for 2017 may be challenged in 2018. Areas where we could have done better include more of a focus on North Korea’s desire to try and complete much of its weapons testing in 2017, how nations in East Asia would react to the U.S. withdrawal from the Trans-Pacific Partnership, and the impact that the impeachment of Park Geun-hye would have on the leadership of South Korean chaebol. With that said, here’s a brief look back at the 10 issues we highlighted and what happened:

1. Political Dynamics and the Presidential Election in South Korea

The impeachment of Park Geun-hye and the subsequent election of Moon Jae-in as president were two major events in South Korean politics in 2017. While the snap election won by Moon resulted in a victory for the leading contender rather than an upstart candidate hoping to take advantage of shifts in the South Korean political scene, it did see the rise of populism in South Korea as we have seen in much of world over the last couple of years. The difference being that populism in South Korea is being driven by the left rather than the right. While Moon’s election could have resulted in shifts in policy towards North Korea and Japan, he has largely represented continuity through his endorsement of President Trump’s policy of maximum pressure and his efforts to separate historical issues from policy more broadly with Japan. Though, he has moved to give the government a greater role in job creation in South Korea.

2. The Trump Administration’s Foreign and Security Policy in East Asia

Despite campaign rhetoric that accompanied President Trump’s run to the White House, U.S. foreign and security policy towards East Asia has remained largely the same. Much of the strong rhetoric about the need for allies to contribute more to their defense has remained, but the broader U.S. policy in the early part of the Trump Administration seems to have largely remained in place. The most significant difference to date may have come in the rhetoric designed to describe the Administration’s policy. The Trump Administration has decided to move away from using the Obama Administration’s Asia Rebalance to a new Indo-Pacific strategy, but it is unclear how different the policy will be in reality. Though, we could see greater differences in 2018 as negotiations on burden sharing with South Korea will need to be completed and North Korea’s

3. Trump Administration Asia Economic Policy

If U.S. foreign and security policy in East Asia has largely remained consistent, the same cannot be said of U.S. economic policy. Trade policy was the one area where it was clear President Trump intended to make changes. On the first day of the new Administration, President Trump followed through on his promise to withdraw from the Trans-Pacific Partnership (TPP) and shift from the use of multilateral trade agreements to bilateral trade agreements to advance U.S. interests. The Trump Administration has also pushed to renegotiate the U.S.-Korea (KORUS) FTA, which President Trump has consistently referred to as a “horrible” trade agreement and only North Korea’s nuclear test in September may have convinced the Trump Administration to renegotiate rather than withdraw from the agreement. It has also taken steps to use more U.S. trade remedies to push a harder line with China on its trade practices.

4. North Korean Behavior in Response to a New Political Environment

Despite announcing in his New Year’s Day address that North Korea was close to conducting an ICBM test, North Korea did seem to display some hesitancy in its testing in 2017 as it adjusted to the new Trump Administration in Washington, DC and there have been indications that Pyongyang is confused by Washington’s new policies. At the same time, North Korea did not conduct as many missile tests around the U.S.-South Korean military exercise in the spring and delayed conducting its first ICBM test until July. However, by the middle of the year North Korea seems to have determined that the new Administration would not be a break on its behavior and proceeded to conduct missile tests at roughly the same rate as in 2016.

5. Will North Korea be a Trump Administration Priority?

It was clear before the Trump Administration came into office that dealing with North Korea would be a foreign policy priority, but less so where it would rank in terms of priorities, especially given candidate Trump’s focus on China. However, addressing North Korea’s nuclear program has become the Trump Administration’s top foreign policy priority because of both the maturity of North Korea’s weapons programs and the growing threat they represent to the U.S. homeland and the region. As a result, President Trump has lessened economic priorities that he campaigned on, such as addressing trade with China, and offered Beijing a better deal on trade if it helped the United States deal with North Korea.

6. Are Sanctions Working?

This was one of the key questions for 2017 and will remain a top issue in 2018. Are sanctions working on North Korea? Sanctions have taken a toll as exports to China have fallen by $410 million through October compared to the same period in 2016 and some countries have begun completely cutting off trade, but they have created no discernable change in North Korea’s testing or willingness to return to talks. However, concerns we had at this time last year that there may be a turn away from sanctions have not yet come to pass. While some of the presidential candidates in South Korea had expressed a desire to reverse course on sanctions with North Korea, Pyongyang’s continued missile test and hydrogen bomb test have closed any avenue for engagement and a lessening of sanctions, easing those concerns. Though, there has been an increasing consideration of the use of military force in the United States to solve the North Korean nuclear issue.

7. Special Measures Agreement/Burden Sharing 

Because of the focus on this issue by candidate-Trump we had an expectation that it could come to the fore in 2017. Asides from the occasional rhetorical flash, it didn’t. However, in 2018 the United States and South Korea will need to conclude a new Special Measures Agreement to determine the level of burden sharing in the alliance. This may just be an issue deferred.

8. Will RCEP Be Finalized in 2017?

One of the expectations for 2017 was that if President Trump followed through on his pledge to withdraw from the TPP, it would help spur the Regional Comprehensive Economic Partnership (RCEP) to conclusion and help to provide China with a platform for supplanting the United States’ leadership in East Asia on economic issues. While China has sought to supplant the United States on trade, RCEP remains unconcluded and rather than withering the TPP is very much alive. The remaining members under Japanese and Australian leadership have sought to conclude the agreement and leave open the door to a U.S. return in the future. The regional response to the United States on trade has not played out how one would have expected.

9. Will the Korean Wave Continue?

The Korean Wave, or Hallyu, continued to grow in 2017 despite Chinese retaliation over THAAD. China is a key market for Hallyu content and products. As a result of THAAD, China prohibited the streaming of new K-dramas and banned group tours to South Korea where Chinese tourists purchase large amounts of Hallyu related products such as K-beauty. Both of these actions cut into profits from Hallyu, but there was also significant growth of K-beauty product exports to China as Chinese customers sought to make up for the loss of purchases from their trips to Seoul. While China’s measures have clearly cut into Hallyu, it has seen increasing success outside of China. One of the biggest new hits on U.S. TV, The Good Doctor, is the export of a South Korean drama and the growing enthusiasm for Hallyu can be seen at KCONs around the world as well as in the American TV debut of boy band BTS, who will be ringing in the new year in Times Square along with the world’s biggest artists. While China’s THAAD retaliation clearly represented a challenge to Hallyu, it continues to thrive.

10. Relations Between South Korea and Japan

The relationship between South Korea and Japan has developed largely as we expected. The 2015 agreement regarding the Comfort Women remains unpopular in South Korea and President Moon has said the South Korea could not “emotionally” accept the agreement. However, in contrast to the Park Administration the Moon Administration has worked to separate historical issues from other issues in the relationship. Shortly after his election President Moon spoke with Prime Minister Abe about North Korea and the two have met in a summit meeting during APEC and the trilateral meeting with President Trump on the sidelines of the UN General Assembly. While the growing threat from North Korea, along with President Moon’s reluctance to date to call for the Comfort Women deal to be revised or scrapped, has likely helped to maintain ties, a South Korean commission recently concluded that the agreement did not adequately take into account the views of the Comfort Women and could challenge this balance in the new year.

Beyond the events that we expected, here is a look at some of the unexpected events that helped to shape 2017:

1. North Korea’s Nuclear Successes

After a series of Musudan missile failures in 2016, few would have expected the progress shown by North Korea in 2017. However, 2017 saw Pyongyang make significant progress as it introduced the Hwasong 14 and 15 models for its three successful ICBM tests. Also, more than a year after claiming the successful test of a hydrogen device, North Korea successfully conducted it first test of a hydrogen bomb. While North Korea’s successes to-date may not quite complete their tests as Kim Jong-un indicated, they have brought North Korea significantly closer to being able to strike the U.S. homeland than many would have thought possible in 2017.

2. How Sanctions on North Korea have Changed

Prior UN sanctions on North Korea were designed to prevent North Korea from acquiring the technology that it needed to advance its nuclear weapons and missile development, but that began to change in 2017. While UN sanctions in 2016 began to move in this direction with caps on the export of coal, sanctions in 2017 prohibited the export of most of North Korea’s minerals, textiles, fish, and basic items such as wood products. They also began to cut into North Korea’s earnings from the export of labor to foreign countries by requiring that all workers return to North Korea in the next year and prohibiting future work contracts. In essence, the sanctions on North Korea have moved from a stage of punishment and deterrence to one of coercion.

3. The Impact of Scandal on the Chaebol Leadership

The impeachment of Park Geun-hye has also had a significant impact on the leadership of South Korea’s chaebol who became embroiled in the scandal, but also left mixed signals. When the scandal first broke there was hopes that the history of the South Korean legal system going light on the heads of chaebol would have changed. Lee Jae-yong, the head of Samsung, was found guilty of giving bribes to Choi Soon-sil in the Park scandal and now faces 12 years in prison. However, there are now indications that may not be the case. Many of the key figures of the family behind Lotte were also convicted in the scandal, but given suspended prison sentences. The Lotte case indicates that the change many hoped for may not be the case and next year we will learn whether Lee Jae-yong’s sentence is also reduced and suspended or if he is faces jailtime.

4. China’s Retaliation Over THAAD

China never formally sanctioned South Korea over the deployment of THAAD, but it took steps related to Hallyu, tourism, Lotte, and other areas in an effort to pressure the South Korean government to reverse its decision over THAAD. While there seemed to be an agreement to return to normal, China has only partially reversed its economic pressure over THAAD and indicated that it will only completely do so once the missile defense system has been reversed. However, through October, the economic costs to South Korea from the deployment of THAAD are likely over $9 billion, while North Korea has only seen its exports to China decline by $410 million.

5. The Assassination of Kim Jong-nam

While not taking place directly on the Korean Peninsula, the assassination of Kim Jong-un’s older half brother Kim Jong-nam in Malaysia was one of the year’s most surprising events. Not only did North Korea take out a potential rival to Kim Jong-un on foreign soil, but it did so using VX nerve gas raising concerns about North Korea’s potential use of chemical and biological agents in addition to its nuclear weapons and missile programs.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are the author’s alone.

Photo from the Republic of Korea’s photostream on flickr Creative Commons.

By Robert King

On September 1st, the ban on travel to North Korea for holders of U.S. passports went into effect.  Secretary of State Rex Tillerson announced a month earlier that the ban would be imposed, but the initial statement indicated that there would be exemptions for humanitarian activities and journalists.  Those exemptions, however, are limited and narrow.

The regulations provide four specific groups who will be granted permission to travel to the DPRK: Professional journalists whose reporting will be made available publicly; American citizens who are employed by the International Red Cross or the American Red Cross who are traveling to the North on an official Red Cross mission; individuals whose travel is justified by a “compelling humanitarian interest;” and individuals whose travel is “otherwise in the national interest.”

Not only are the categories tightly limited, but the State Department has not made the application process easy.  The first step in receiving permission to use a U.S. passport to go to North Korea is to request permission with supporting documentation.  The regulations do not indicate how long it will require for a decision, but there is no evidence that such requests will get expedited treatment.  If the request is denied, there is no appeal.  If the request is approved, the individual will then have to apply separately for a special U.S. passport.   To get this special validated passport apparently requires a new passport application with the appropriate fees.  The U.S. passport with the DPRK travel exception will be valid only for a single trip, and any subsequent travel will require a new travel permit application and a new U.S. specially validated passport.

American citizens involved in humanitarian and educational programs in the DPRK left North Korea prior to the effective date of the new travel requirements.  Leaders of Non-Government Organizations (NGOs) have expressed concerns about the impact of the travel ban on their humanitarian and assistance programs.

With the imposition of the travel ban, it is worth considering the factors that led to this decision and its potential consequences.

The initial decision to impose the travel ban was largely the outgrowth of the tragic death of American college student Otto Warmbier after he was detained, tried, spent 17 months imprisoned in the North, and died shortly after being returned to the United States in a state of “unresponsive wakefulness.”   He died in mid-June, and the travel ban was announced six weeks later.  State Department official travel warnings for the DPRK, issued well before Otto Warmbier was detained, bluntly said “Do not travel to North Korea,” but there was no prohibition on travel.

Over the last decade or so, some twenty Americans have been detained by the DPRK, in most cases for reasons that are consistent with North Korean laws, but not with those of democratic societies like the United States.  These detained Americans required considerable effort by American diplomats to seek their release from the North, and in some cases their release required visits to the DPRK by former presidents Clinton and Carter and other senior American officials.

There was frustration in Washington over using U.S. diplomatic resources to seek the release of Americans in North Korea when there were questions about the benefit of the travel in the first place.  Also, there was concern that tourist dollars were being used to fund DPRK military programs and the leader’s lavish lifestyle.

A second element which likely encouraged the decision on the travel ban was the growing American frustration of dealing with the DPRK’s illicit nuclear and missile programs.  Over the past year the ramp-up of missile tests as well as continued nuclear weapon development has led to a growing sense of urgency.  At the same time, the options available to contain the North are limited.  American tourist revenue is a small source of funding for the military, but cutting off the revenue might be helpful.

Americans taking a North Korean tour to participate in the Pyongyang Marathon serves little benefit other than to give adventurous Americans bragging rights.  The DPRK receives significant revenue from such travel.

There are, however, significant but intangible benefits to the United States from the humanitarian efforts of private American citizens, and the travel ban will significantly reduce American NGO efforts.

American NGOs help undermine the DPRK’s oft repeated charge of “American hostility.”  The vicious brutal image North Koreans have of Americans is softened for those North Koreans who deal directly with Americans (though the Koreans are carefully vetted and monitored).   Furthermore, contact with Americans helps get external information to North Koreans otherwise unable to access information about the outside world.  In a country where all information is tightly controlled by the Pyongyang government, even such limited contact with Americans provides information that undermines government information controls.  Such information helps pry open a tightly closed society.

Another non-political benefit is the good that is done by these American NGOs.  North Korea is a poor country whose standard of living has more in common with sub-Saharan Africa than its Asian neighbors. (UN Per capita income figures for 2015 place DPRK at 179 of 195 countries, while South Korea is number 31.  North Korea is below Sierra Leone and Rwanda, but above Uganda in the UN ranking.)  There is no question that the poverty and living standards are the result of regime mismanagement, and its use of scarce resources for military expenditures rather than for the well-being of the people.  Clearly, the regime is responsible.

The North Korean people suffer because of their leaders, but they are not responsible for the totalitarian regime’s policies.  American NGOs provide help dealing with humanitarian issues such as multi-drug resistant tuberculosis—which benefits not only infected North Koreans, but also neighboring populations in China, South Korea and Russia, which could be infected if the disease is not controlled. These humanitarian and aid projects are funded through the generosity of many Americans who contribute to these efforts and other Americans who carry out them out.

It is difficult to see that these stringent restrictions on American NGOs engaged in humanitarian engagement in the North will have benefits that justify ending the benefits they provide.

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.

Photo from (stephan)’s photostream on flickr Creative Commons.

By Jenna Gibson

As several KEI analyses have shown, South Korea’s tourism industry  has been one of the main casualties of China’s economic retaliation over deployment of the THAAD missile defense system. New estimates from the Korea Tourism Organization show that China’s retaliation could cost Korea up to 5 million tourists this year, five times as many as when the MERS outbreak significantly dampened tourism in early 2015.

In June 2017, Korea saw a 36 percent drop in tourist entries, due in large part to a 66.4 percent decrease in Chinese visitors compared to June 2016. At that time, Chinese tourists made up 48.8 percent of all entries into Korea – a figure that’s now down to 25.7 percent.

But the numbers also reveal some good news that illuminate an important avenue for future growth in Korea’s tourism industry. While Chinese visitors continued to drop, the number of tourists from the Middle East have jumped significantly, recording a 71 percent increase from June 2016 to June 2017.

And, perhaps more importantly, tourists from the Middle East spend significantly more during their time in Korea than those from other areas, according to a study by the Korea Culture and Tourism Institute. Their recent survey of tourists in Korea showed that Middle Eastern visitors spent an average of $2,593 each during their trip, followed by Chinese tourists at $2,059 each. The average for all visitors to Korea is significantly lower, at $1,625.

In order to cash in on this growing market, the Korean government and the tourism industry are focusing on providing more services for Middle Eastern tourists, including a push to increase the number of halal certified restaurants around the country. Just this month, 117 more restaurants received their halal certification, bringing the total to 252. In addition, many popular tourist attractions have added prayer rooms for their Muslim visitors, including Nami Island, Lotte World, and Coex Mall, as well as Incheon International Airport and Busan’s Gimhae International Airport.

Part of the drive for more tourists from the Middle East choosing to visit Korea is the explosive popularity of Hallyu across the region. Take Iran, for example. There, fascination with Korean culture started back in the mid-2000s, when the historical drama ‘Dae Jang Geum’ was broadcast on state TV and garnered 86 percent ratings nationwide. In a 2017 report of the most popular shows on Netflix around the world, Iran was only one of two non-Asian countries to put a Korean drama (2012’s Love Rain) on the top of their queues.

In June, CJ E&M, Korea’s largest media company, said it will be opening a Turkish unit to increase its presence in Turkey, where locals can’t seem to get enough Korean cultural content. Considering that the filming sites of many popular Korean dramas have become popular tourist destinations, this increase in the popularity of Korean TV shows could lead to overseas fans travelling to Korea to see the spot where their favorite drama couple fell in love.

With the Korean tourism industry continuing to focus on enticing Middle Eastern visitors as well as tourists from all parts of the world, there is certainly an opening to offset some of the losses from the drop in Chinese tourism over the last year or so. But there is still a long way to go – even with the huge increase in visitors, Middle Eastern tourists still only make up around 1 percent of entries into Korea.

Jenna Gibson is the Director of Communications at the Korea Economic Institute of America. The views expressed here are the author’s alone. 

Image from yadem.hayseed’s photostream on flickr Creative Commons.

By Mark Tokola

According to news reports, the State Department will soon publish a new regulation to ban Americans from visiting North Korea for tourism.  State Department spokeswoman Heather Nauert said on July 21, “Once in effect, U.S. passports will be invalid for travel to, through and in North Korea, and individuals will be required to obtain a passport with a special validation in order to travel to or within North Korea.”  It appears the special validation exception is intended to allow the small number of U.S. humanitarian workers to continue their work in North Korea.  There will be a 30-day period after the ban is officially published in the Federal Register before it comes into effect to allow time for Americans in North Korea to depart.

The State Department has made clear that the justification for the ban is “mounting concerns over the serious risk of arrest and long-term detention,” following student Otto Warmbier’s year-long detention in North Korea and his death on June 19.  Three American citizens continue to be held in North Korea.  The State Department has long cautioned against Americans travelling to North Korea because of the U.S. government’s inability to provide protective services in a country in which it has no Embassy or Consulate. But that has not dissuaded several hundred Americans from visiting North Korea every year, usually by means of European travel agencies that offer group tours.

Those who have advocated for a travel ban on North Korea have given reasons other than personal safety.  One is to deprive the North Korean government of the money it makes from tourism.  North Korea charges a great deal for the privilege of visiting their country, and that money goes into government coffers.  Advocates of a travel ban say that tourism revenue directly or indirectly supports both North Korea’s weapons programs and its pervasive system of human rights abuses.  Another reason for a ban would be to prevent North Korea from seizing hostages to gain diplomatic leverage against the U.S.  In the past, North Korea has released American prisoners only in exchange for visits by high-level, current or former U.S. government officials.

Opponents of a travel ban have argued that people-to-people contacts can help change how North Koreans see America.  Even casual contacts with North Koreans, under this theory, will help counter North Korean propaganda that all Americans should be seen as hostile war-mongers.  Some also oppose all U.S. government travel bans on the general principle that American citizens should have the freedom to travel where they choose; travel restrictions are an abridgment of civil liberties.  As a legal matter, the Supreme Court settled this question in the 1965 Zemel v Rusk decision when it upheld the State Department’s power to restrict the use of U.S. passports to travel to Cuba. A final reason to oppose a ban is that it could prove difficult to enforce.  If an American joins a travel group from outside of the United States, to what lengths would the U.S. government go to punish that individual?  How would it even monitor the travels of such individuals?

Beginning in 1968, U.S. passports included a list of countries to which the passport holder could not travel: North Korea, the People’s Republic of China, North Vietnam, and Cuba.  Those restrictions were eventually dropped and there currently are no countries which a U.S. passport holder is prohibited from visiting.  You will ask, “What about Cuba?”  In fact, the current U.S. bar on tourists visiting Cuba is not a State Department ban on using a U.S. passport to visit Cuba; it was a U.S. Treasury Department ban on making any payment to the Cuban government, which had the effect of making travel to Cuba virtually impossible for tourist purposes.  The Obama Administration eased those financial restrictions, but the Trump Administration is restoring some of them.  For more on travel to Cuba, see the Treasury Department’s FAQs from June 16, 2017.

In addition to the State Department’s ban on tourism for the purpose of protecting American citizens from the dangers of travel to North Korea, watch for the U.S. Treasury to impose its own restrictions on American payments to visit North Korea as part of the U.S. sanctions regime, along the lines of the Cuban restrictions.  Although this would seem redundant, it might aid in enforcement of the travel ban once it comes into effect.

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

Photo by KEI.