World News

Slim trade impact seen in U.S. move on N.Korea sanctions

WASHINGTON (Reuters) - The Bush administration’s steps to relax certain sanctions on North Korea will have a symbolic, not commercial, impact on trade in the short run, U.S. officials and trade experts said on Thursday.

North Korea, which tested a nuclear device two years ago, handed over a long-delayed account of its nuclear activities, prompting Washington to lift some sanctions, affecting restrictions on imports, U.S. involvement in shipments to North Korea and prohibitions related to financial transfers by Pyongyang. But others will remain.

“Currently there is little tangible reward to the North,” said Victor Cha, director of Asian Studies at Georgetown University and a former Bush administration official, who noted that the “majority of sanctions” would remain in place.

“The immediate effects are virtually nil, at least on the economic side,” said Marcus Noland, a senior fellow at the Peterson Institute for International Economics in Washington.

“They’re not going to join the World Bank tomorrow morning; they’re not going to suddenly have North Korean television sets turning up at Kmart,” he said.

Part of the problem is that North Korea is not a member of the World Trade Organization and, even without sanctions, the United States would still impose high tariffs on imports, observers said.

Those tariffs “tend to be particularly high on products that North Korea could conceivably be competitive to export -- namely textiles and apparel,” Noland said, making it difficult to compete with countries that do have favorable trade status with Washington, like China.


North Korea has been looking for outside help exploiting its vast mineral wealth, but U.S. firms will likely be reluctant to do business in a poor country with a bad human rights record, little transparency and insufficient infrastructure.

“Even with sanctions off, there’s going to be little trade at least initially. They’re not going to be competitive, and I seriously doubt we’re going to accord them (trade) preferences,” said Jake Colvin, who directs USA Engage, a pro-trade business coalition.

One of the few North Korean products already being shipped to the United States is a rice-fermented liquor sold in a limited number of Korean restaurants and grocery stores, according to the Treasury Department.

Noland expects that North Korea could, over time, develop exports in niche markets like ginseng, sea urchins or seaweed, but not in large quantities to the United States. To develop other industries, it needs major foreign investment, he said.

Businesses are also aware of the fragility of the new political and commercial opening. President George W. Bush cautioned that the United States would watch closely for North Korean missteps that might prompt a resumed clampdown.

Bush’s national security adviser, Stephen Hadley, said Washington could reimpose sanctions and apply new ones if Pyongyang fails to live up to U.S. expectations.

“To the extent applicable and to the extent we can do it legally, we would reimpose past sanctions,” he said. “We would also have the option to get additional sanctions but it again would not just be the United States, it would be all the countries of the six-party talks.”

The six-party talks involve China, Japan, Russia, North and South Korea and the United States.

Additional reporting by Susan Cornwell in Japan and Paul Eckert and David Lawder in Washington; editing by Patricia Zengerle