The Arch of Korean Reunification. Pyongyang, DPRK - North Korea. May 03, 2017. - Editorial credit: Ablakat / Shutterstock.com

Planning for Korean Reunification

By Lee Jong-Wha

SEOUL – The long-simmering North Korean nuclear crisis has reached a near boiling point. Last month, the Hermit Kingdom launched two intercontinental ballistic missiles capable of hitting major US cities. The United Nations Security Council responded with a unanimous vote to impose new economic sanctions on the country – the most stringent yet – which would cut at least one third of its annual export revenue. Since then, North Korean leader Kim Jong-un and US President Donald Trump have been hurling escalating threats at each other.

At this point, it is impossible to say what will happen on the Korean Peninsula. For now, all the international community can really do is continue to leverage a combination of economic sanctions, military pressures, and diplomacy to try to get the Kim regime to the negotiating table. But, at the same time, we should consider and prepare for all eventualities, from a military conflict to the peaceful reunification of North and South Korea.

The most catastrophic scenario would undoubtedly be a military conflict. And yet the likelihood of that outcome has now actually increased, owing to the Trump administration’s recent announcement that it is reviewing its military options, including “preventive war.”

The truth is that a preemptive strike is far from a practical solution. It is not at all clear that such an approach would lead to North Korean denuclearization or topple the Kim regime. What it could do is escalate into an armed confrontation between the US and China, with nuclear war being the worst possible outcome.

South Koreans, well within the range of the North’s weapons, would suffer dearly from the Kim regime’s retaliation against a US strike. To put it into perspective, the Korean War of 1950-1953 killed more than two million Koreans, as well as 36,000 Americans and 600,000 Chinese soldiers – and it didn’t even involve nuclear weapons.

A safer and more practical approach would focus on tightening the economic and political screws on North Korea. To be sure, some argue that economic sanctions, however harsh, would be inadequate to compel North Korea’s leaders to give up their nuclear weapons. After all, both Iraq’s Saddam Hussein and Libya’s Colonel Muammar Qaddafi halted their programs to acquire weapons of mass destruction, only to be driven out of power and then executed.

Given the risk implied by a military solution, more robust economic and political pressure remains the international community’s best bet for defusing the North Korean nuclear threat, whether by compelling the Kim regime to abandon its program or by triggering that regime’s collapse. The UN Security Council sanctions are a step in the right direction, but they are not enough, as they do not ban supplies of oil to the North, apparently due to Chinese and Russian opposition.

In fact, though China agreed to the sanctions, it remains reluctant to aggravate its already tense relationship with its North Korean client. This must change. Stronger and more focused US-China cooperation is essential if sanctions are to have a chance of working. Avoiding such cooperation will only make a devastating outcome – be it a military conflict or an unruly collapse of the Kim regime – more likely.

China could still be persuaded to take a more active role in constraining the Kim regime. Indeed, its uncooperativeness could damage its relationships with the US, Europe, Japan, and South Korea – all of which are ultimately more valuable partners than the unruly, impoverished North Korea.

But for China to do more, it needs assurances that it will not immediately lose its strategic buffer on the Korean Peninsula. Hence the need for an agreement now on how to handle the potential collapse of the Kim regime and the reunification of the Korean Peninsula. Like the fall of the Berlin Wall, the Kim regime’s collapse could come about quite suddenly. So China needs to know now that a reunified Korea would not be its enemy, and that the US would withdraw its troops that are currently stationed in South Korea.

Of course, the implications of a collapsed regime in North Korea extend far beyond China’s strategic interests. Indeed, it would have a major economic and political impact throughout the region. That is all the more reason to put a comprehensive plan in place to ensure a peaceful transition.

I recently conducted a quantitative assessment of the economic impacts of unification on North and South Korea under several hypothetical scenarios, assuming North Korea’s sudden collapse. As it turns out, a peacefully managed unification process, characterized by comprehensive economic reform and opening-up, could enable North Korea to achieve sustained double-digit GDP growth, despite a sharp slowdown immediately following the collapse.

The key to success would be to allow North Korea to take advantage of its relatively abundant human and natural resources, including rich mineral reserves, to achieve export-led industrialization. As for South Korea, with sufficient preparation, effective policies, and more financial resources, it can manage a peaceful reunification and mitigate the adverse effects of the shock.

By contrast, in a scenario where South Korea is unprepared for reunification and the North quickly dissolves in a state of disorder, the risk premium on the Korean Peninsula would jump sharply, and reforms would be delayed. This would lead to persistently weakened investment and GDP growth across the Korean Peninsula, causing South Korea’s GDP to decline by more than 3% in the initial years of the crisis. Inflows of migrants from the North would compound the risks, potentially disrupting South Korean labor markets and causing social unrest.

For now, the international community, including China, should continue to push for North Korea to abandon its nuclear weapons and pursue economic reforms, using ever-stronger economic sanctions. Meanwhile, South Korea must continue its efforts to resume a dialogue with the North on humanitarian, health, and environmental issues. Civilian exchanges and information flows could nurture forces that would bring about fundamental change from the inside.

Even after 70 years of division, South Koreans must not give up hope for peaceful reunification with our northern brethren. On the contrary, we must plan for it.

About the Author:

Lee Jong-Wha, Professor of Economics and Director of the Asiatic Research Institute at Korea University, served as Chief Economist and Head of the Office of Regional Economic Integration at the Asian Development Bank and was a senior adviser for international economic affairs to former President Lee Myung-bak of South Korea. His most recent book, co-authored with Harvard’s Robert J. Barro, is Education Matters: Global Schooling Gains from the 19th to the 21st Century.