How the Halt of inter-Korean Trade Hit N.Korea

      May 24, 2013 09:28

      Friday marks the third anniversary of South Korea's suspension of all inter-Korean exchanges and trade. Three years ago, the Lee Myung-bak administration imposed sanctions against the North after it sank the Navy corvette Cheonan in March that year.

      All inter-Korean trade was halted except for the joint-Korean Kaesong Industrial Complex, and all new investment in the North banned.

      A government source here said the Park Geun-hye administration had thought about partially easing the sanctions, but in the event decided to maintain them when the North kept up its provocations, including a third nuclear test and closing the border to the Kaesong industrial park.

      Until the sanctions, the North earned more than US$300 million in cash per year from inter-Korean trade, chiefly exports of agricultural and fisheries products to the South and toll manufacturing agreements with South Korean firms.

      Seoul estimates that the North has suffered a loss of more than $1 billion over the past three years.

      As inter-Korean trade ground to a halt, the North increased trade with China. Their bilateral trade volume rose a whopping 62 percent in 2011 from $3.47 billion to $5.63 billion. Exports led the growth as a way to keep buying fuel and daily necessities from China.

      But this brought its own hazards, because the North sold mainly strategic goods like anthracite and iron ore to China, rather than the farm and fisheries products it used to export to the South. Those goods are essential for the North to produce its own energy and maintain basic industries, and former leader Kim Jong-il had banned their export altogether in the late 2000s.

      A researcher with a government-funded think tank said, "This shows that growing trade between the North and China came at the price of painful restructuring of the North's export industry."

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