North Korea's foreign economic relations
1 IR/PS, University of California, San Diego, 9500 Gilman Drive, La Jolla, CA 92093-0519, USA
2 Peterson Institute for International Economics, 1750 Mass. Ave. NW, Washington, D.C., USA
Email: shaggard{at}ucsd.edu
Email: mnoland{at}petersoninstitute.org
Many debates about engagement with North Korea hinge on the precise nature of North Korea's foreign economic relations: whether trade and investment are on commercial or non-commercial terms; the extent of illicit activities, and the changing geographic patterns of North Korea's trade. This article provides an effort to reconstruct North Korea's foreign economic relations, subordinating our estimates to the discipline of the balance of payments accounting framework. Among the most salient findings for the debate about engagement and sanctions is that North Korea's trade and investment have continued to increase despite the onset of the nuclear crisis and a decline in illicit activities. This growth has occurred in part because of the growing weight of China and South Korea in trade, aid, and investment. We also find that economic relations between North and South Korea have a substantially greater non-commercial component than those occurring across the China–North Korea border.
Received for publication November 29, 2007. Accepted for publication April 7, 2008.