This is the second in a two-part series looking at the North Korea Sanctions Enforcement Act of 2014 (H.R. 1771). The first piece is available here.
To date, U.S. sanctions on North Korea have had both a strategic and defensive purpose. The strategic aim is to sharpen the choices Pyongyang faces by raising the costs of pursuing its nuclear and missile programs and providing incentives to return to the Six Party Talks. The defensive motivation of sanctions is to limit North Korea's capabilities and proliferation activities by curtailing its trade-and in both directions-in proscribed systems and dual-use technologies. This defensive motivation has undergirded the support the U.S. has secured for a succession of steadily-tightening UN Security Council resolutions. Those resolutions have secured support in large part because they have maintained a sharp line between limitations on WMD-related trade-which is thoroughly proscribed-and commercial trade, which is not.
Proponents of sanctions typically come at the task with a variety of aims, and the North Korea Sanctions Enforcement Act of 2014 is no exception. The bill constitutes a shift in both the aims of U.S. sanctions policy and the means of implementing it. The effort to target foreign entities that are either supplying or purchasing from North Korea's WMD complex is completely justified, and fully in line with the spirit of existing UN Security Council resolutions as well. The U.S. should also engage on the human rights issue, and should name, shame and designate those who are responsible for the country's gross human rights violations. A valuable aspect of the Commission of Inquiry process-which HR 1771 supports-will be to identify the units and individuals responsible for the most gross violations, such as the maintenance of the country's sprawling system of political prison camps.
Yet the bill also raises long-standing questions about whether sanctions are likely to work and whether they may even have perverse consequences. With respect to means, the legislation marks what Josh Stanton has called a financial constriction strategy against the regime. A key barrier to U.S. sanctions policy is to exercise leverage in the absence of any significant trade and investment. A core component of the HR 1771 strategy-borrowed from earlier experience with Banco Delta Asia-is to not only target North Korean entities, but to use U.S. market power to induce desired behavior by foreign commercial entities as well. The pursuit of secondary sanctions offers market players a choice: do they want to do business with the giant U.S. market or throw their lot with North Korea? The strategy appears to sidestep the need to rely on foreign governments for enforcement, including China, by encouraging foreign entities to choose the commercially prudent course.
One concern, however, is whether the legislation has intentionally or unintentionally blurred the line between WMD-related and commercial trade. The justification for doing so is arguably legitimate. In such a highly centralized regime, it is difficult if not impossible to draw the line between illicit and commercial activities. Nonetheless, to date the international community has sought to draw such a line, and for several reasons. The outside world has a strong interest in encouraging reform and opening of the North Korean economy, to shift its strategic orientation away from the byungjin line of trying to pursue economic development and nuclear weapons simultaneously. If this legislation were to have the effect of encouraging deeper economic integration, it would be through an initial phase of even greater isolation, autarchy and external controls.
The extent of that isolation will depend on how North Korea and China respond to the threat of secondary sanctions. One of the perverse effects of the post-2003 sanctions efforts is that North Korea has become increasingly dependent on China; my estimates with Marc Noland suggest that China may account for as much as 70 percent of the DPRK's total trade. This growing dependence has had the odd consequence of reducing the influence of sanctions as trade has shifted toward the weakest links in the sanctions chain. China probably provides fewer direct supports than is commonly thought, but it remains strongly committed to a strategy of deep economic engagement with the country. It is possible that firms and particularly banks conducting business with North Korea will reconsider, and that is a good thing. But we should not have exaggerated expectations; there are plenty of firms and financial institutions that will continue to ply this trade, and we are unlikely to get much sympathy from Beijing in tracking them down. To the contrary, the Chinese government has already signaled its concern about the use of secondary sanctions and has shown little inclination to use the economic leverage over North Korea that it quite obviously has. Will this legislation make cooperation with China on North Korea easier or harder?
Post-BDA, and since the ascent of Kim Jong-un in particular, North Korea has also sought to diversify its trade, investment and financial links. The KPA and its associates have developed relationships with financial entities that are not concerned with access to the U.S. market, both in China and outside it; Russia will be particularly interesting to watch in this regard but there is also the open field of the Middle East. Throughout, the legislation recognizes that the administration will need to conduct a vigorous diplomacy to close the loopholes created by the fact that some firms and financial institutions will not be deterred by secondary sanctions. The legislation gives the government some interesting tools to do so; for example, it allows the U.S. to impose sanctions on jurisdictions-down to the level of individual ports-that are not exercising due diligence. But while this legislation might raise the costs of proliferation activities if implemented, it is unlikely to staunch them completely and could simply forge new networks beyond the law's reach.
Another question is whether the sanctions will have the broader strategic effect of moving the North Koreans toward serious negotiation of its nuclear program. I am extremely dubious. Proponents of such sanctions point to BDA as a success in gradually bringing North Korea back to the table after its nuclear test in October 2006. But this assessment confuses a tactical move with the failure of the broader get-tough policy of the first Bush administration, which probably contributed to North Korea's determination to go nuclear in 2006 in the first place. The incremental progress made during 2007-8 rested on the lifting of the BDA sanctions and extending offers of assistance as well.
The point is a general one. The paradoxical feature of sanctions is that they rarely have the direct effect of forcing the target country to capitulate. The HR 1771 sanctions will have effect only when coupled with strong statements of a willingness to engage if North Korea showed signs of interest in doing so. The legislation provides plenty of sticks; the administration will have to continue to articulate the prospective carrots in a way that is credible. Strong sanctions legislation makes that difficult to do if the legislation places a series of binding constraints on the president's discretion. Why negotiate with the U.S. if there is no return from doing so?
Given the magnitude of the humanitarian challenges posed by North Korea, there has been concern with the possibility that the legislation could affect the ability of NGOs to operate in the country; the National Committee on North Korea provides a reasoned analysis of the issue here. The worries about the ability of NGOs to pay local salaries and import needed goods are legitimate, but the legislation does not disallow such activities and I see no reason to oppose the legislation on those grounds.
Current U.S. policy is straightforward. The U.S. stands ready to return to the Six Party Talks if North Korea sends a credible signal of its willingness to resume serious negotiations. We have set a high but reasonable bar for beginning negotiations with Pyongyang, namely that it makes no sense to talk about the country's nuclear program in the absence of a verifiable freeze. The proposed legislation sets the bar to negotiations even higher, although we have little evidence that North Korea has responded positively to threats in the past; to the contrary. The sanctions rightly target WMD-related trade, but blur the line with commercial trade that we ultimately want to encourage as part of a strategy of reform and opening.
In the end, however, the North Korean and Chinese governments have invited these sanctions because of their unwillingness to engage on the issue seriously. North Korea is unwilling to re-commit to the principles outlined in the joint statement of September 2005, and has repeatedly stated its intention to continue its nuclear and missile programs. China has stated its interest in a denuclearized peninsula and a restart of the Six Party Talks, but has proven either unwilling or unable to bring North Korea to the bargaining table. China's emphasis on "stability" on the peninsula has had the effect of extending support for the status quo. Although I am skeptical that this legislation will have its intended effects, strategic patience is not working either and we seem to have few instruments for getting Pyongyang's attention. If coupled with a restatement of our willingness to engage seriously on the nuclear issue, targeted secondary sanctions could provide a useful signal that we cannot continue to pursue strategic patience forever if North Korea continues to deepen its nuclear and missile capabilities.