North Korea’s economic crisis

MANAGEMENT OVERVIEW

North Korea is in trouble. The COVID-19 pandemic, self-isolation and isolation, crop disruptions, sanctions and others have put the economy in a sad state, as Kim Jong Un himself acknowledges. The government’s planning mechanism appears to be broken, currency shares are falling, government revenues are falling, foreign trade has plummeted and growth is slowing. To solve the crisis in the administration, the gaps so far do not seem to change things. In fact, they could exacerbate the situation, especially if Pyongyang continues its plans to redirect scarce resources to expand its nuclear and missile programs.

Evans J.R. Revere

Foreign Senior Researcher – Foreign Policy, Center for East Asian Political Studies
Despite its difficulties, Pyongyang is not counted out. For decades, the North Korean regime has shown remarkable determination, diplomatic dexterity and irrational survivability. The People’s Republic of Korea has the support of China, which is ready to live with Pyongyang’s nuclear status and promised to keep the regime “in a lifeline.” North Korea is down, but hardly out.

Last chance for nuclear disarmament?

Amid this economic crisis, Kim Jong Un is playing that expanding its nuclear and missile arsenals will prompt the U.S. to participate in “arms control negotiations” where North Korea is tacitly accepted as a nuclear power and Pyongyang for the sanctions it needs.

However, the economic crisis in North Korea is a major vulnerability for Pyongyang. It provides an opportunity to put overwhelming pressure on the regime on a broad front and convince Kim Jong Un that his pursuit of nuclear weapons can end his regime. Previous attempts to do so were half-women, and they failed to change Kim’s calculation. The current crisis may be the last chance to try.

Now the possibility of nuclear disarmament in North Korea is almost gone. But that goal could be achievable if the United States, its allies and partners recognize that Kim Jong Un and his regime are on shaky ground, and now is the time to convince Kim that he believes the earthquake is a sign that the days of the regime can be handled.

Reasonable observers disagree on the value and fairness of ISDS. However, regardless of the position in this debate, the mechanism has become politically toxic, on which even many capital exporting countries now agree. Reform has become an important political agenda. The EU is proposing a revised format for ISDS after investment protection provisions helped torpedo the prospects for the Transatlantic Trade and Investment Partnership (TTIP) and triggered a political crisis at the end of the ratification of the Comprehensive Economic and Trade Agreement between Canada and the EU (CETA). At the same time, EU efforts to reform the multilateral energy treaty have intensified after foreign investors used the agreement to target climate policy, including the regulation of the German coal-fired power plant and the Dutch decision to decommission coal-fired energy. In North America, the increase in ISDS requirements for the old North American Free Trade Agreement (NAFTA) was also widely condemned, and the relevant mechanism has now been removed from U.S.-Canada investment relations in the U.S.-Mexico-Canada (USMCA) agreement. [2]

But with the exception of ECT and NAFTA, leading policymakers and elected officials will focus primarily on how to limit or replace ISDS in future agreements. [3] This is misunderstood. Forward-looking reform proposals may help resolve some public backlash against new contracts. Even if all recently negotiated contracts improve or the government decides to stop negotiations with ISDS rules altogether, the current stock of investment contracts will continue to provide access to ISDS on the same terms as in the past.

In fact, most new ISDS cases come from agreements signed at least 15-20 years ago, rather than from agreements ratified in recent years. Unless policymakers return to existing investment agreements, the current network of agreements will continue to expose host countries on outdated terms. [4] And the home country’s launch of outdated agreements is complicit in easing investor demands, which are sometimes distorted by internal and foreign policy action plans, such as the energy transition.