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Last Updated: 24-Jun-98
Earlier, in another forum (United States Institute of Peace, Korea Working Group), I had the opportunity to share some views about the forthcoming Korean elections, then just 30 days away, focusing primarily upon the parlous state of the South Korean economy and assessing the impact of the few data and developments available at the time. I'd like to discuss a few of the topics from that analysis.
At the outset, I'd also like to emphasize that my perspective is not that of a specialist who follows events in North Korea on a regular basis. Most of the members of this group are indeed well-informed specialists with up-to-date information concerning the latest developments in the Democratic People's Republic of Korea (DRPK). That type of information is important, since it forms the basis for the next steps in a complex, often confounding process, but the reality of the policymaking process is that such factual information is often overlooked, or cannot be weighed adequately, by those who wind up making the decisions. In the case of North Korea, matters are made much more complex by fragmentary, anecdotal, and often contradictory intelligence information. No one, it seems--not we, the Japanese, or the South Koreans--has timely and verifiable information that could form the basis for new or different policies toward the North. It's hard, if not risky, to rely on such murky data for purposes of fundamental policy changes or new initiatives.
The Korean peninsula is an area in which I have been actively interested for the 30 years since my first visit, and I've had the opportunity to examine it as an academician, a policymaker, and a businessman. As it happens, I've known many Korean public figures in the public and private sectors, have watched with more than a passing interest the last three Korean presidents, and have a reasonable understanding of the next one as well.
We are, after all, still in a state of uncertainty, with a month to go until the inauguration of Kim Dae Jung. For those who have followed Kim's thinking and extensive writings on North Korea over many years, there is a recognition that, for the first time in decades, Korea has a president who has given reunification, and all that it entails, a great deal of thought, and who has created a detailed policy record that we can read and analyze.
While not necessarily a blueprint for his future policy, this extensive record of policy analysis and strategies is in itself a novelty; we had no clue even in the Park Chung-hee regime, except to assume, correctly, that an army general would follow a tough and unremitting line against the North. In the Chun Doo-hwan regime, little changed; when Roh Tae-woo came to office in 1987, by mid-1988 (thanks to a very few clever advisers), he had crafted a policy, the so-called Nordpolitik, designed to isolate the North through a string of diplomatic initiatives and economic incentives with the North's traditional allies, and eventually succeeded in luring Pyongyang into an elementary dialogue. But even that was on-the-job evolution of policy, not a preplanned and long-thought-out strategy.
The Korean political system, such as it is, has never made allowances for the construction of bipartisan alliances, at least not beyond the exigencies of the moment. Rarely, if ever, do politicians act in the national interest, but rather in pursuit of narrow, private agendas relentlessly directed to personal, party, and corporate gain. The requisite government permission for a chaebol to enter an industry, for example, has traditionally been purchased, and the implementation of legislation and presidential and ministerial decrees--"where the rubber meets the road"--is at the whim of an arbitrary and often feckless bureaucracy that by divine right expects to be lubricated and enriched. Legislators have been "adopted" and "supported" by industrial groups in return for the promotion of corporate interests. Though no one ever asks, it's difficult to explain how so many government bureaucrats live in homes that cost more than a million dollars, and manage to send their children abroad for university studies. In fact, it's not explained, and no one ever does anything about it. Revenge, a central characteristic of Korean politics, is yet another factor; holding power entitles the holder to settle accounts, a time-honored and consistent feature of the past--and perhaps the future.
Judging by the facts of mid-November, just prior to the first meeting of this group, (at USIP), I suggested several points as being key considerations for policymakers and for others either interested in or exposed to Korea:.
The colossal number of bankruptcies (15,000 through October) and dishonored bills (defaults by borrowers) would have a short-term effect on both the election and international confidence in Korea.
The exchange rate of the won, a sensitive issue, was approaching 1,000 to the dollar, a tide stemmed only by massive government intervention; a "breakthrough" to more than the 1,000 level would be considered a calamity for the ruling party. Worse, foreign exchange reserves were rumored to be significantly lower than the government would admit. Short-term interest rates, then at nearly 16 percent and rising, were wrecking the economy. Seven of the 30 top chaebol were in mounting trouble. Serious corruption scandals had not played out completely, including the scandal surrounding Kim Hyun-chul, son of the president, who was accused of collecting a slush fund of some $18 million.
In a conventional Western democracy, this combination of factors would be a formula for disaster; as the drama played out, it was in fact a disaster. In Korea, where there has never been meaningful transparency at any level of government and politics, the ruling party of Kim Young Sam was hoping to hold things together until the December 18 election, believing that it could squeak by and salvage a victory by Lee Hoi-chang, its candidate.
Besides, analysts on Wall Street and elsewhere insisted, Korea was "not the same" as Indonesia and Thailand; its strength and resilience would see it through any period of rough sailing in Asia. Even the International Monetary Fund (IMF), as late as September, issued praise for the Korean economy, citing its robust character. The issue of the IMF in the context of Korean developments is a topic for another study group, I'm sure, but that session could well begin in the woodshed and then proceed to the equivalent of an automobile "chop shop."
Korean foreign exchange reserves, announced by the Ministry of Finance and the Bank of Korea as $30 billion on November 2, were later found to be less than $15 billion on that day. Just a rounding error, of course. Bloomberg news reported on the low figure of $15 billion and was threatened with legal action by the Minister of Finance, Kang Kyung-shik, just before Kang was put over the side and replaced by a levelheaded professional, Lim Chang-yuel. By early this month, the more nearly correct composite debt figure was being estimated at "more than $100 billion," and realistically could reach $150 billion when it's all sorted out.
This was and is and extraordinary situation. The real trouble, lest we forget, is that nobody could determine with accuracy the scope of Korean indebtedness, not even the Koreans themselves. They didn't know what they owed the rest of the world! By year-end, private short-term debt had to be rolled over, with the United States reportedly owed $9 billion, the Japanese $24 billion, and the Europeans $34 billion, or $67 billion. As we meet in late January, short-term debt alone is estimated to be about $95 billion. The investment banks have been at Korea's side with dispatch, naturally urging that private debt be converted to sovereign debt, but the Koreans were resisting such a step.
When hearing all these soothing forecasts, I was reminded of a lesson learned long ago, in the 1968 presidential campaign here in the United States: that is, listen very carefully to the political analysis and advice of chairmen and presidents of the Fortune 500 companies, and weigh the advice of the bankers and the Wall Street anointed; then do exactly the opposite, and you'll be sure to get it right. This rule never fails. What was thought at first to be a manageable crisis in Korea was to turn into an actual meltdown, one with profound long-term consequences for the entire peninsula and for the United States and Japan as well.
The 1997 Korean presidential campaign was remarkable primarily for being solely a personality contest among three contenders, with no issues other than the past misdeeds and general future unsuitability of all three. At a time of growing economic discontent and fundamental political instability, and with the permanent crisis in and military threat by North Korea added to the mix, an ordinary democracy would have expected to hear elaborate policy prescriptions, thorough debates on realistic alternative scenarios for the future. The Korean people got none of that.
Yet some thought it possible to forecast a winner, even in those confusing circumstances. I shared that view not because of any special insight, but because it seemed that the tremors of forthcoming economic and financial ferment, not to mention the public's disgust with unimaginably widespread corruption, would propel the Korean voters to choose fundamental change. The only candidate offering reform and a clean break with the past, that is to say, a break with institutionalized corruption at every level of Korean society, was Kim Dae Jung. Any other outcome of the election, one could conclude, would lead to continuation of the status quo and ultimately to virtual chaos.
In the five years of the Kim Young Sam government, beginning with the surprise implementation of the real-name system (now officially abandoned, probably forever); the purge of the military and the prosecution of former presidents, their associates, and certain targeted members of the private sector (such as Chung Ju-yung of Hyundai Group and Park Tae-joon of POSCO); tax investigations against citizens found to have charged excessively on their credit cards while abroad; harassment of foreign businesses operating in Korea, under the rubric of "austerity campaigns"; and ruthless handling of political opponents, Kim Young-sam and company behaved in a way not seen since the early days of the Chun regime. Pledged to stimulate small and medium-sized businesses by improving their access to credit from the government-controlled banks, Kim Young Sam ignored the pledge and permitted the continuation of the cozy and corrupt relationship of the banking sector with the chaebol.
True, Korea joined the Organization for European Cooperation and Development (OECD), extolled the virtues of the World Trade Organization (WTO), and announced a grand policy of "Segyehwa," or "globalization," leading many to believe that Korea would at long last establish a level playing field in international trade. No such luck; globalization turned out to be "globaloney," and Korea continued to respond only to unrelenting and systematic pressure to open its markets and to play by the accepted rules. No one appeared to have the courage to tell Kim the truth: Korea was slipping badly.
Meanwhile, inflated by the pride that being the world's eleventh-11th largest economy can bring, the Kim Young Sam administration easily lapsed into self-deception. In fact, both the president and his cabinet were clueless about the tsunami headed Korea's way. On November 26, Kim addressed the nation prior to his departure for the APEC meeting in Vancouver and said: "Our basic conditions such as financing and consumer prices are healthy, and we are competitive in industry and exports." If there's hidden truth in that sentence, it's located in the punctuation.
Within two weeks of the election, Kim Dae Jung had become the de facto president of Korea; Kim Young Sam had ceased to govern, and basically threw in the towel. His most important policy decision now is whether to move out of Chong Wa Dae on the evening of February 24 or the next morning, Inauguration Day.
Seized by the economic and financial crisis, Kim Dae Jung's time and attention have been devoted to triage in fields where he has little experience, with the attendant result that there's been little time to devote to either foreign policy or to North Korea.
But what does all this domestic politics have to do with our policy options toward North Korea? I would suggest that nothing in the atmosphere augurs well for increased sympathy toward the North Korean regime, and that in the present atmosphere Congress will develop less tolerance for things Korean, not more. That said, we are promptly directed back to the South Korean political situation and the willingness of Seoul to fulfill its commitments under the Agreed Framework. If the fFramework is the dike that is containing the North Korean nuclear program and preventing a breakout, both it and the four-party talks form the centerpiece of present U.S. strategy to keep the North Koreans engaged in the process of talking and negotiating.
We probably can't take the time to reargue the wisdom of the fFramework; it's there, in place, and is basic U.S. policy. But there are signs the Congress may want to take a closer look, citing the changing circumstances in South Korea. As early as last October, there were rumors that the Kim Young Sam government was thinking of changing the deal by trying to "persuade" the United States to pay "its fair share" of the nuclear reactor project in the North. The Japanese began to make similar noises. When the Strobe Talbott mission aborted its stop in Korea, one of the pleasures he missed was an opening salvo designed to engage Washington in discussions concerning burden sharing.
This theme has been revisited in the postelection agenda, although it may not have been formally communicated to us. In late December, inspired stories appeared in the Korean press, suggesting the increasing hardship imposed on Korea; the Korea Times of December 25:
Seoul officials are also in increasing need of guidelines from Kim [Dae Jung] in their negotiations with the United States and Japan on how to share the cost of light- water reactors (LWR) to be built in North Korea....The falling value of the Won...is casting doubts on whether South Korea will carry out its pledge to play a central role in the project estimated to exceed $5 billion. Under such circumstance,, attention will be drawn to how Kim will respond to U.S. refusal to pay for the reactor .and Tokyo's position its share will not exceed $1 billion.
With the Congress out of town for an extended recess, the administration has been able to act without incurring a political penalty. This is going to change rapidly as Congress reconvenes, and there is every indication that a new axis may be forming, a coalition of left and right that is skeptical, even angry, about the bailouts in Asia. It has little to do with members of Congress being right or having the facts, and everything to do with the state of emotions and the prevailing political volatility.
At the moment, the Agreed Framework and its present and projected costs to the United States is not on the political radar screen, but we can expect that it will be "painted" very soon, as various committees begin extended hearings on several aspects of U.S. involvement with international institutions and their financing mechanisms in Korea. In turn, congressional reluctance to fund projects it considers adventurous or risky will increase. For example, now that the United States has expended some $100 million on Korean Peninsula Energy Development Organization (KEDO) activities in connection with the LWR project in North Korea, it is inevitable that questions will be asked as to why the U.S. contribution is so much greater than Korea's or Japan's, and when the next funding cycle for the heavy crude pledged to Pyongyang begins, there is likely to be a significant increase in objections.
At this juncture, a reduction of support for the LWR project could cause significant ripples in administration policy, provide Korea and Japan with reasons to signal reductions in their respective commitment, and give the North Koreans a reason to become even more obdurate.
This is just one way in which the intersection of U.S. politics and the lingering Asian economic crisis can bring about unexpected and, from the administration's point of view, unwanted changes in policy.
If one accepts that the context of handling the North Korean problem is affected by events and circumstances not ordinarily in the policy mix, what does all this "extraneous" information have to do with pragmatic policy choices? In my view, it has a major impact, and we're wise to pay attention to these factors as we consider policy options.
This policy requires patience, optimism, and occasional willingness to tolerate aberrant behavior for the sake of a larger goal, usually a lot of money and a somewhat flexible yardstick for measuring success. Presumptively, the policy also contains a hammer, to be used when it's necessary to apply punishment when it's called for. The trouble with the policy then, and now, is that only rarely does the hammer get used, and the behavior to be modified never is. We could argue all day about the utility of detente policy with respect to the Soviets, but the efficient way to assess it is to look at the massive Soviet arms buildup as the policy was deployed, and the rapid expansion of Soviet troops into, say, Afghanistan in 1979.
With respect to North Korea, we have less complex, but no less risky, conditions. Our main objectives are to keep North Korea contained at the 38th Parallel by deterrence, inhibit the North's nuclear weapons program, and eventually eliminate it entirely, secure Pyongyang's compliance with the Missile Technology Control Regime, i.e., to stop exporting missiles, coax, encourage, cajole, and persuade the North to enter a meaningful dialogue with the South, enlist the assistance of others, notably China and Japan, to assist in the process, alleviate starvation and famine as a potential ignition point for an attack on the South, keep the four-party talks as the centerpiece of their policy (and ours), convince North Korea that changes in its behavior will yield important benefits.
These objective are pursued "through diplomacy and broadening engagement...we can avoid confrontation and move toward a situation in which North Korea will accommodate to the outside world." (Mark Minton at this Task Force, November 1997). It is unassailable that engagement, avoiding confrontation and "accommodation to the outside world" are desirable goals; whether they amount to a policy is something else again. As we know, we're not in complete charge of this process, but rather have expectations of others in the region: China, Japan, perhaps Russia (but likely of little value).
With respect to the Chinese, there appear to be two views within the administration: one (the Department of Defense) one holds that the Chinese are "generally helpful," (DoD), and the other declares that they have been "very, very helpful."(DoS). It's very difficult for outsiders to assess the accuracy of either claim, but there is another view, namely, that the Chinese really have no interest in helping out on North Korea, and even find good value for the assistance they provide by keeping Pyongyang as a very constructive threat in the region, the "crazy, drunk old uncle in the attic who has a hatchet." China benefits from the assumption that we consider it a helper, but China's intentions are to strengthen its influence in the region as ours diminishes (and that applies to all of Asia, not just the northeast corner).
Moreover, as one of the parties in the four-party talks, China has been given a ticket to the main event, even though there are signs that North Korea does not have deep trust in Beijing, and would much rather deal exclusively with us.
Japan is not a party to the talks but has abiding interests in the region. The principal strategic interest of Japan in this context is that Korea remain divided, as it has no desire for a unified, developing peninsula with 65 million energetic Koreans. As any Japanese will tell you after your second meeting with him, Korea cannot be trusted, is unreliable, and, in the words of some, "is a dagger pointed at the heart of Japan." In short, Japan fears Korea, but has little respect or regard for it.
Perhaps more important, in the circumstances of the moment, Japan considers that it has the advantage over Korea, principally because it holds so much Korean debt and because Korea is so dependent upon Japanese suppliers and Japanese technology.
If we look around the region, we'll find no other "players" in the North Korean problem. No one else is interested, no one else has any money to spare, no one really cares. This means that North Korea is essentially a matter for Japan and the United States, and, of course, the Republic of Korea itself.
Essentially, the new president's thinking is far ahead of ours in every respect, and even a casual perusal of his many speeches, essays, and books on unification makes clear that he has maintained a consistent approach for many years.
In brief, he recites "three principles and three stages." The principles are peaceful coexistence, peaceful exchange, and peaceful unification. The three stages are (1) a confederation of states, (2) then a federation "like the U.S.A.," and (3) complete unification. In this larger context, he has examined and taken positions on issues such as a peace agreement, arms control, arms reduction, military confidence-building measures, verification, international guarantees (including the question of U.S. forces in Korea), and multilateral security arrangements in the region.
Addressing North Korea's nuclear challenge, he has stated flatly: "North Korea should never be allowed to build a bomb," and demanded that Pyongyang must unequivocally abandon its nuclear ambitions. He proposes pullbacks and cessation of military exercises, and strongly encourages the West, and especially the United States, to open diplomatic relations with North Korea and begin economic exchanges.
At times, he has waxed enthusiastic about the chances for unification, occasionally venturing a date. But above all, he has what any observer must consider a well-considered strategy, and it is not based on naivete. I also had long thought of Kim as an idealist, but the more I began to read what he has written and the more I spoke with him, I became convinced that his model approach is not only one worth trying--while maintaining our guard or, as Kurt Campbell put in this forum, "the hope of our diplomacy is in our deterrence"--but one that he would implement if ever elected to the presidency.
So here we are: Kim Dae Jung is weeks from assuming that office, and our attention has been shifted to an arena--finance and the economy--in which he does not have a clear track record. In his trenchant January 4 article in the Washington Post, Morton Abramowitz says "it is ironic that an imaginative democratic leader such as...Kim Dae Jung, who wanted to focus on North-South problems, has to deal with the massive problem of no foreign exchange and a distraught and deeply shamed public."
He's right, of course, but once in office, I believe Kim will not let dust settle on strategy toward the North. In fact, I believe he will begin early with initiatives toward the North, albeit low-cost ones in political and economic terms, and will then move quickly to seize the momentum and initiative in all talks and contacts with Pyongyang. A man who has contemplated this complex problem for his entire adult life will not gladly suffer being led by others, especially "outsiders." He believes that this is a Korean problem first and foremost, and that Koreans will ultimately resolve it. He's absolutely right, of course: the essence of our policy is to get North and South talking seriously, and no mechanism such as the four-party talks will gain precedence over a North-South dialogue, if and when begun in earnest.
Either:
This suggests that the new president will want the United States to take a reduced role in setting the pace and the content of initiatives toward Pyongyang. For the short and medium term, the four-party structure will not be disturbed, but it is to be expected that Kim Dae Jung will seek to "break out" of it to get real bilateral talks moving. We should be neither surprised nor disappointed if we learn that Seoul has acted without informing us. There could be multiple reasons for moving independently and secretly, first among them the need for absolute security.
Not informing the United States of an initiative, if it comes to that, is a very good way to preserve security, as seen from someone in Kim Dae Jung's place. He, or some who advises him, may feel that informing the United States would enhance the prospects for leaks, which could occur in the normal course of business (after all, we have seen that in Washington not even a legal deposition by the President of the United States, supposedly a "sealed" document, can be protected for more than a few hours!).
Alternatively, there may be individuals in Washington who would oppose any such initiative, and leak maliciously, with a view to derailing it (this is not unthinkable). Moreover, President Kim Dae Jung would need to perform his exploratory moves carefully, safeguarding against domestic opposition, since we all know that, absent a clear bipartisan consensus on what constitutes Korean national interest, if not for purposes of political revenge alone, his Korean opponents may well try to sidetrack an opening to the North.
Because this issue is the most sensitive one in the Korean-American relationship, because of the huge national security stake we have on the peninsula, and because we may feel the Koreans owe us a great debt of gratitude for our historic sacrifices on their behalf, you may object to even mentioning these possibilities. After all, is not the relationship solid, and has it not been tested through many years and many difficulties? The answer to both questions is, of course, an emphatic yes.
But many things are different now, for reasons I've cited and probably some not mentioned. It is in our interest to encourage the maximum initiative on the part of the new Korean government, and that may mean relinquishing our leading role. While maintaining our deterrent posture and readiness, we should also envision and work toward a time when we would need fewer troops to maintain the tripwire function, and progressively toward a time when there may be no further need for U.S. troops. This outlook is consistent with our own long-range interests and is also consistent with trends in this country. It is not a plea for withdrawal or a submission to what some see as growing isolationism; it is not a retreat from leadership and strong alliances, nor a declaration that the United States will gradually pull back from its key role in Asia. On the contrary, I believe that relieving some of the resources dedicated to the defense of the 38th parallel so that they may be deployed productively elsewhere in the Asian theater--to cope with the main future security threat, China--makes sense.
So there is no mistake: I do not share a view held by many that the withdrawal of U.S. troops from Japan is consistent with our long-range interests. A reduction of troops in Korea need not mean a corresponding reduction elsewhere, and if the Koreans can make progress on reunification to the extent that safe reductions can actually be made, it is not impossible that such reductions could contribute momentum to intra-Korean dialogue.
We should also expect that our Korean allies will to insist we maintain troops in Japan, even if pressures should build in Japan for force reduction. Keeping the "cork in the bottle" in Japan is as much a Korean interest as it is ours. I consider it to be an essential part of long-range U.S. policy toward Japan; the presence of U.S. troops there is an element of psychological reassurance, especially to those who may not be at ease with Japan's future interpretation of its security requirements.
It is not out of some misplaced sense of idealism or a sudden change of attitude on my part that prompts this scenario; I can't easily relinquish a preference for the hawk's position. But the notion of Seoul taking the lead is one whose time has come, and only because of the election of Kim Dae Jung. Were either of the other candidates elected, I would not have mentioned this approach. In my view, Kim Dae Jung is as uniquely qualified and positioned to attempt this course as Richard Nixon was in taking the China initiative. In Nixon's case, this strategy was embedded in the candidate's thinking long before the election, and was even discussed in an October 1967 article he published in Foreign Affairs ("Asia After Vietnam," October 1967). Oddly enough, back then no one took the time to analyze the article and the direct hints it contained; we were surprised by this at the time.
Or:
There's another possible outcome. It is equally likely that North Korea will simply spurn fresh overtures from Kim Dae Jung. As I understand it, it has refrained from attacking him so far, hinting only that he may be "more of the same." In any case, it's much too early to conclude anything solid from what the North says prior to Kim Dae Jung's inauguration, so we must wait and see.
In the event the North Koreans remain hostile, obstreperous, and insistent upon improving relations with the United States by either ignoring Seoul or attempting to do so at Seoul's expense, we must be prepared to tighten the screws. We have the leverage to do that, with the South's concurrence, by getting tough on food aid and on the financial side of the Agreed Framework. There would be an argument for suggesting, because of Seoul's impaired financial capability and Japan's apparent unwillingness to expand its commitment, for reverting to some variant of the proposal advanced by Gilinsky and Sokolsky in a recent Washington Post article, i.e., scrub the LWRs and substitute instead conventional power plants.
Were such a proposal to provoke an aggressive reaction from the North, including a threat to revive the graphite reactor project and to repudiate undertakings regarding the storage of fuel rods and the freezing of the nuclear (weapons) program, we could harden our stance and withdraw the KEDO mission, terminate site work, and develop other means to isolate North Korea with a view to hastening the downfall of the Kim Jong Il regime. Such a course of events would, of course, involve strengthening the U.S. defense commitment in the South. Not recommended would be anything along the lines of the self-defeating proposal of several years ago to carry out "surgical strikes" against the North Korean nuclear installations, a last-ditch, desperate stratagem certain to provoke a severe military response.
It is not impossible to pursue a dual-track strategy toward North Korea; whether the Clinton administration is prepared and/or equipped to do so is quite another matter. One thinks back to the Reagan administration's early decision to deploy intermediate-range cruise and Pershing missiles while simultaneously engaging the Soviets in negotiations. (Few may realize it, but there was actually a struggle in the administration by a leading cabinet member against the President's own policy; the struggle lasted until that particular secretary learned the lesson as to who really was in charge in the Reagan White House.)
In short, there's nothing sacred about the "process diplomacy" we've been implementing for the past two years. If it has served a purpose, its mission may be at an end, and it's time to try a new tack, one based upon the new circumstances and conditions on the peninsula.
Asked to write a paper from the "NSC point of view," I realize it's clear that this effort falls short, principally because it does not incorporate three or five options, allowing for the choice of the middle option, always the "reasonable" one, positioned squarely and safely between the poles of Armageddon and Surrender. I consider the two mentioned here to be the most useful as a point of departure for serious discussion.
Last Updated: 24-Jun-98
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