South Korea will take economic integration with North Korea even if full denuclearisation is off the table

It’s 2021. A train full of South Korean cars and North Korea-made textiles arrives in Europe. It takes Spanish wine, French handbags and German machinery on its way back to the Korean peninsula. A dream? Perhaps. But a dream that millions of Koreans share. Including the man at the helm in Seoul, President Moon Jae-in. 

Economic cooperation will be a key item in the agenda of next week’s inter-Korean summit. In recent weeks, Moon and other members of his cabinet have been talking up the possibility of a single inter-Korean economic community. In more concrete terms, Moon has discussed an East Asian Railroad Community binding together the whole of Northeast Asia.

From Seoul’s perspective, this is the bedrock of a lasting sustainable peace on the Korean peninsula – linking North Korea to one of the most economically dynamic regions in the world. This would fundamentally transform North Korea’s relations with the outside world. It would significantly increase the incentives for Pyongyang to seek cooperation and avoid a return to provocations.

To explain why the South Korean government sees this as the best chance to transform inter-Korean relations in the immediate future, it is necessary to first understand the prospects of denuclearisation from a South Korean perspective. In short, few policymakers and analysts in the country believe that full denuclearisation will ever happen.

That boat has sailed. Partial dismantlement of Pyongyang’s nuclear and missile programmes might be possible. But South Korea, and the international community at large, have to work with North Korea as it is. This includes economic cooperation.

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Inter-Korean economic links have to move as quickly as possible, hence South Korean delegations are already scoping North Korean infrastructure and other needs. The risk is that by the time South Korean firms arrive, their Chinese and Russian competitors will have already taken over.

From Seoul’s perspective, a nightmare scenario would be an open North Korean economy dominated by firms from China. This would increase Beijing’s political influence over Pyongyang, reducing Seoul’s leverage over developments on the Korean peninsula. It could also discourage proper inter-Korean reconciliation. To avoid this, South Korea’s major business groups, the chaebol, have to get there first.

Self-interest also drives South Korea’s plan to upgrade North Korea’s infrastructure and strengthen inter-Korean economic relations. South Korea has effectively been an island since the partition of Korea into two in 1945. Being able to use trains to transport goods all the way from the port city of Busan through the Eurasian land mass and to Madrid would reduce costs for South Korean exporters.

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North Korea’s opening up would ease tensions and could boost South Korean economic growth. North Korean workers could also help Seoul to tackle labour shortages in areas such as construction or domestic care.

A key question is whether North Korea shares this enthusiasm for an inter-Korean economic community. According to Seoul, the answer is yes. Few South Koreans believe that Kim Jong-un is bent on bringing democracy to his communist country. But many think that he is a Deng Xiaoping seeking economic reform. And this is all they need at this point.

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Moon and his government see in Kim a young leader who will rule for decades and wants the respect of ordinary North Koreans. This can be achieved through a vibrant economy. The Kim family wants to follow the Chinese and Vietnamese model of trading away political reform in exchange for economic prosperity.

The main impediment to the integration of the North Korean economy in regional networks is the sanctions regime on Pyongyang. There is growing frustration in South Korea that the fate of inter-Korean relations ultimately lies in Washington. This brings home the proverbial “shrimp among whales” syndrome. In other words, the fate of Korean peninsula affairs being in the hands of major powers.

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While the Moon government has been careful to make clear that it will continue implementation of the sanctions regime, others have spoken out. In a recent op-ed, former minister of unification Lee Jong-seok scolded the United States for standing in the way of inter-Korean cooperation. A growing number of South Koreans share this view.

Moon and pro-engagement South Koreans, however, think they still have time on their side. A large majority of the country’s population supports their government’s North Korea policy. There is a realisation that sanctions have failed. Otherwise, North Korea would not hold several nuclear warheads.

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And nobody wants a return to the tensions that characterised the “maximum pressure” campaign of 2017. Sanctions should eventually start to be lifted. If this does not happen, waivers and aid can be used to initiate proper inter-Korean economic engagement. Not to mention the unwillingness of China, Russia and others to continue implementing sanctions now that Kim and US President Donald Trump have met and are planning a second meeting.

Ultimately, South Koreans have made a decision: Koreans both sides of the 38th parallel should determine the fate of their peninsula. This might seem counter-intuitive, but this has not always been the case. As many South Koreans see reconciliation and economic cooperation within reach, the Moon government is seeking to drive their dreams.

Ramon Pacheco Pardo is KF-VUB Korea chair at the Institute for European Studies of Vrije Universiteit Brussels and senior lecturer in international relations at King’s College London