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Slim trade impact seen in U.S. move on North 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 many 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.

“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,” said Marcus Noland, a senior fellow at the Peterson Institute for International Economics in Washington.

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 more difficult to compete with countries that have favourable trade status with Washington, like China.

The Bush administration also notes that the steps unveiled on Thursday will not restore North Korea’s access to the international banking system.


The Asian nation of around 23 million, one of the world’s poorest countries, has been looking for outside help exploiting its mineral wealth, which includes zinc, iron ore and gold.

But U.S. firms that might help make needed investments will likely be reluctant to do business in a poor country with a bad human rights record, little transparency and woeful 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.

Some companies received news of the sanctions steps cautiously.

“We don’t do any business in North Korea today. At this early stage I think it would be premature to speculate on how today’s news might change that,” said PepsiCo Inc spokesman Dick Detwiler.

Caterpillar Inc, the world’s biggest maker of heavy machinery, sees “the moves to open trade with North Korea as a step in the right direction, as history shows that economic engagement drives positive social and economic changes that are far more effective and beneficial than isolation,” a spokesman said.

In agriculture, the United States could begin sending more regular shipments of food aid to the famine-prone nation, but analysts do not expect North Korea to begin buying U.S. wheat, rice or meat on the open market.

Noland expects 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.

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

“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,” he said.

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

Additional reporting by Susan Cornwell in Japan, Paul Eckert and David Lawder in Washington, Martinne Geller and Nick Zieminski in New York, and Lisa Shumaker in Chicago; editing by Patricia Zengerle