Sunday, June 04, 2006
Is N Korea following the footsteps of China?
I read an interesting article on the US-Korea free trade agreement. The possible future agreement is being viewed as "the biggest U.S. free-trade deal since the North American Free Tree Agreement and the most important development in U.S.-South Korean relations since the two countries signed their military alliance in 1953." There is no question as to the economic impact of the deal on the US-Korea bilateral trade. What really caught my attention was the issue of North Korea and the Kaesong industrial park. I googled Kaesong to find more information on the project. According to wikipedia, North Korean government designated part of Kaesong as an industrial zone which would allow foreign investment. It seems similar to that of the Chinese special economic zones that were established in China, which played a significant role in the Chinese economic development. In Kaesong industrial park, the wages are set at around 50$ a month, a great economic incentive for south Korean investors. 50$/month is artificially low wage, and a great bargain compared to the rising labor prices in South Korea. In addition, the workers are educated and there is no language barrier. North Koreans seem to finally understand the changing times of the global economy and seem ready to embrace certain elements of market economy. In my opinion, it seems like a win win situation for both South and North Korea, and signals the beginning of economic integration.
The US government does not seem to be pleased with the Kaesong Industrial Park, and the increase in trade between the two Koreas. Many lawmakers in the US congress believe the industrial park goes against the strict economic sanctions placed against north Korea.
Rather than criticizing the recent economic reforms like the Kaesong Industrial park, the US interest may be best served by encouraging economic integration. China is an example of how economic development can positively influence bilateral diplomatic relations. Other critics believe north Korean economic development will only help sustain the north Korean authoritarian regime. I believe economic integration will smoothen the political transition and with the ultimate goal of unification. The European Union comes to mind when thinking about how economic integration can lead to political integration. The EU originally was formed as the European Coal and Steel Community. The economic integration over the years led to political integration with the creation of the European parliament, and other supranational political bodies. If the US have it their way, North Korean regime may topple in the future, but it will most likely incur a heavy cost. Instead of letting the north Korea fall further deep into poverty, the most effective policy is to show a positive example and encourage change through moral suasion, an element of Confucianism.
What are your opinions on this issue?