RECALIBRATING 

THE U.S.-REPUBLIC OF KOREA 

ALLIANCE

Edited by

Donald W. Boose, Jr.

Balbina Y. Hwang

Patrick Morgan

Andrew Scobell

May 2003
ii

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ISBN 1-58487-124-5
iii

CONTENTS

Foreword 

Balbina Y. Hwang and Patrick Morgan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Part I: Setting the Stage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

1. Introduction: The Alliance Challenged

Donald W. Boose, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Part II: The Alliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

2. America’s Alliances in Asia: The Coming “Identity Crisis” 

with the Republic of Korea? 

Victor D. Cha . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

3. Cost Sharing for USFK in Transition: Whither the ROK-U.S. Alliance? 

Jin-Young Chung . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

4. Assessing the Costs of the U.S.-Korean Alliance: An American View

Tong Whan Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57

5. The Continuing Role of the United Nations in the Future of Korean Security

Kyodok Hong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69

6. Alliance Activities: Meetings, Exercises, and the CFC’s Roles

Jeongwon Yoon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89

Part III: North Korea and KEDO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111

7. If North Korea Were Really “Reforming,” How Could We Tell —

And What Would We Be Able to See? 

Nicholas Eberstadt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .113

8. Perceptions of North Korea and Polarization of ROK Society 

Taewoo Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .141

9. The Future of the Korean Peninsula Energy Development Organization (KEDO) 

Haksoon Paik . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .163

Part IV: Economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .195

10. Korea-U.S. Trade Relations in the Era of Regionalism 

Miongsei Kang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .197

11. South Korea’s Inward Foreign Direct Investment: Policy and Environment 

Kyu-Ryoon Kim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .207

12. Promoting Economic Cooperation between North and South Korea

Joseph A. B. Winder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .221

About the Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .241
iv

FOREWORD

On October 18-20, 2001, the 16th Annual Conference of the Council on 

U.S.-Korean Security Studies was held in Washington, DC. Created in 1985 

by retired generals Richard Stilwell of the United States and Sun Yup Paik 

of the Republic of Korea, the Council’s aim was to initiate a conference that 

would bring together top scholars and practitioners on the most important 

issues facing the two countries and their important bilateral alliance. Since 

then, the Council has successfully hosted an annual conference, alternating 

every other year between meetings in Seoul and Washington. 

Although begun as an idea with a relatively small scale, in 2001 the 

Council hosted one of the largest meetings ever, bringing together over 

50 presenters and discussants and several hundred participants. Due 

to the terrorist attack on the World Trade Center the preceding month, 

the planned participation of high-level U.S. government officials was 

curtailed. However, those attending the conference heard from many of 

the leading experts on Korean, Northeast Asian, and U.S. foreign policy 

issues and problems. Major speakers included the Republic of Korea 

(ROK) Ambassador to the United States, the Deputy Director of the Korean 

Peninsula Energy Development Organization (KEDO), and the U.S. Deputy 

Assistant Secretary of Defense for Asia and Pacific Affairs.

The unexpected attacks just 1 month prior to the conference caught 

everyone by surprise, not the least the authors. Thus, the papers did not 

capture adequately an assessment of the actual and potential impact of the 

terrorist attack on U.S. foreign policy, its implications for the two Koreas, 

and its probable effects on China and Russia. There were suggestions that 

the attack would have major effects, but few details about what those would 

be, which was understandable with so little time having elapsed since the 

attack. On the other hand, papers such as Victor Cha’s stressed that in 

important ways much had not changed: U.S. commitments had not been 

shifted or weakened; the U.S. ability to militarily uphold its commitments 

had not been affected; and the solidarity of the ROK-U.S. alliance again had 

been demonstrated through South Korea’s strong support for the war on 

terrorism.

The terrorist attack may have contributed to some extent to a broad mood 

of uneasiness, even outright concern, at the conference. Some authors, such 

as Tae Woo Kim, noted the stagnation or stalemate now existing in NorthSouth and U.S.-Democratic Peoples’ Republic of Korea (DPRK) relations. 

There was consensus as articulated by Nicholas Eberstadt that North Korea 

had not made serious progress in either relationship: it had yet to install a 
v

significant reform program, making only modest economic improvements 

and none that reflect an easing of the structural problems in the economic 

and political systems. Most importantly, North Korea had not opened up 

to the outside world. 

Interestingly, unlike previous conferences, there was no concern about 

a collapse of the North with its myriad of unfortunate consequences. 

Instead, recent developments were taken mainly as evidence that the North 

lacks any serious commitment to reform, to engagement, and to opening 

up to the world, which is why the North is neglecting the opportunities 

offered by the Sunshine Policy and the Bush administration’s offer to 

resume negotiations, and why the North did not respond effectively to the 

opportunity raised by the 9/11 incidents to deepen engagement with the 

United States. However, this was not a unanimous view. Some participants 

suggested the Bush administration was still not serious about talking with 

Pyongyang, and that the North really has made a significant commitment 

to change but that we are expecting too much too soon in this regard. In 

response, the pessimists carried their criticism further, suggesting that the 

Sunshine Policy has actually had a corrosive effect in South Korean politics 

and that the United States has not demanded sufficient reciprocity from 

Pyongyang. In short, one element captured in the conference papers was 

not just that engagement was not working but that it was too costly.

Some papers such as Tong Whan Park’s and Jin Young Chung’s also 

expressed concern about the state of the alliance. To be certain, some 

analysts, particularly the government speakers who offered the official 

view from each country, emphasized that the alliance and the larger U.S.-

ROK relationship are quite sound. They cited the very high caliber of the 

alliance forces, the excellent level of cooperation and consultation within the 

alliance, the reciprocal support each government has offered for the other’s 

major efforts in the past year: on engagement, terrorism, and economic 

recovery. But others saw public support for the alliance as likely to wane 

in the United States if the alliance was not refocused and public support 

for the alliance continuing to drop in the ROK due to a string of complaints 

about the U.S. military presence. In addition, there is growing sentiment 

in some quarters that, with the United States as the only superpower and 

North Korea very much weakened, the alliance was now much less about 

defending Korea and much more about goals and purposes of each of the 

two governments that may be increasingly divergent. They cited the clear 

disagreements between the Bush administration and President Kim DaeJung over the Sunshine Policy. Others, such as Miong Sei Kang, argued that 

regional trade blocs, particularly the U.S. interest in developing one in the 
vi

Americas, could drive a wedge into U.S.-Korean economic relations in the 

coming years. Their overall point was that the alliance lacks deep roots, 

particularly as the generation passes on that personally experienced how 

and why the alliance came into existence and the shared sacrifices it has 

entailed.

The papers also expressed a somber mood about the environment 

in South Korea. Speakers disagreed in assessing the South’s economic 

situation. Most saw the state as still too deeply involved in running the 

economy, the economic reforms as too limited, and the future bleak in 

terms of economic growth, with the ROK facing increased competition 

from China’s low costs and Japan’s advanced technology. Many of the 

authors referred to President Kim as a lame duck with well over a year 

left in his term, and felt that the sharp domestic political divisions in South 

Korea had produced some paralysis on important matters.

Finally, there was considerable pessimism expressed about the future 

of the Agreed Framework and KEDO, which oversees its operation. At 

the time of the conference, it was unclear how North Korea was going to 

meet its requirements under the Nonproliferation Treaty and the Agreed 

Framework and be sufficiently transparent and cooperative about its 

nuclear programs. If it did not, then either the Agreed Framework or the 

standards it is supposed to uphold would collapse. Offsetting this potential 

outcome were KEDO’s continued efforts to move the project ahead, even 

with significant delays. At the time these papers are being published, the 

situation has become far more serious, with the entire Agreed Framework 

apparatus in disarray.

The participants were very grateful for the strong support the conference 

enjoyed from the Korean Association of International Studies, the ROK 

Ministry of National Defense, the Federation of Korean Industries, the 

Korea International Trade Association, the Korea Chamber of Commerce 

and Industry Hanwha Group, the Hae Sung Institute for Social Ethics and 

Korea Line Cooperation, Korean Airlines, and The Heritage Foundation.

BALBINA Y. HWANG PATRICK MORGAN
PART I: SETTING THE STAGE

1

CHAPTER 1

INTRODUCTION:

THE ALLIANCE CHALLENGED

Donald W. Boose, Jr.

The principal focus of the papers collected in this book is the 

Republic of Korea (ROK)-U.S. alliance and the challenges it faces 

from tensions within the alliance, the effects of the alliance partners’ 

interaction with North Korea, and the economic pressures that affect 

the alliance.

These papers were presented at the 16th Annual Conference 

of the Council on U.S.-Korea Security Studies in October 2001. 

Because of the elapsed time, the reader could be tempted to think 

that the events since these papers were presented have overtaken 

the arguments of the presenters. This is far from the truth. Each 

of these papers reflects the enduring historical forces, geopolitical 

realities, and national interests that affect Northeast Asia, the Korean 

peninsula, and the ROK-U.S. alliance. The descriptions of the alliance 

mechanisms, the Armistice machinery, the Agreed Framework, 

and the economic imperatives that affect the alliance thus have 

continuing value. The policy recommendations are still germane 

and worthy of the consideration of those to whom the future of the 

alliance is entrusted.

At the time of the conference, the prevailing tone was cautiously 

optimistic, although the challenges were severe. Soon after President 

George W. Bush entered office, he had announced that U.S. policy 

toward North Korea would be reviewed, a process that brought 

most of the on-going dialogue between the United States and the 

Democratic People’s Republic of Korea (DPRK) to a halt. During his 

March 7, 2001, summit meeting with ROK President Kim Dae-jung, 

President Bush supported President Kim’s engagement policy and 

the 1994 Agreed Framework, but expressed skepticism of the North 

Korean leader and stressed the need for “complete verification” 

in any future agreements with the North.1 Many in South Korea 

believed that President Bush had demonstrated lukewarm support 

for President Kim and, in spite of U.S. statements to the contrary, 

concluded that there was a cooling in the ROK-U.S. relationship. On 
2

the other hand, a January 2001 agreement that allowed the ROK to 

build missiles with ranges and payloads up to those permitted by 

the Missile Technology Control Regime (MTCR), the conclusion of 

an investigation into the killing of South Korean civilians near the 

village of No Gun Ri during the Korean War, and the revision of 

the U.S.-ROK Status of Forces Agreement, increasing ROK ability to 

prosecute American soldiers under Korean law,2 all helped to defuse 

public criticism of the United States.

While U.S.-DPRK dialogue was generally moribund, there were 

some contacts between the United States and the North throughout 

2001, and South-North dialogue proceeded fitfully. In the wake of the 

cataclysmic terrorist attacks against the United States on September 

11, 2001, sympathy for the United States temporarily overshadowed 

anti-U.S. feelings. South Korea offered support and North Korea 

condemned the attacks. Thus, by the time of the October conference, 

there seemed to be some grounds for optimism, although some of 

the conference participants raised concerns about North Korean 

actions and intentions and noted the underlying tensions between 

the alliance partners and within South Korea itself.

Post-Conference Events: Continuity and Change.

In the months immediately following the conference, hopes 

were raised further with indications that the South-North dialogue 

was reviving and that contact between the United States and the 

DPRK was about to resume. However, during his State of the Union 

address on January 29, 2002, President George W. Bush reflected 

the skepticism of his administration toward the north by including 

North Korea with Iraq and Iran in what he called an “Axis of Evil.” 

In spite of further statements by President Bush and other members 

of his administration that the United States remained prepared to 

negotiate with North Korea, the immediate effect of his speech was 

to raise North Korean hackles and bring the incipient moves toward 

dialogue to an abrupt end. The speech also aggravated those in 

South Korea who saw the United States as an obstacle to Korean 

reconciliation.3 While prospects for U.S.-DPRK dialogue were set 

back, the operation of the Korean Peninsula Energy Development 

Organization (KEDO) (the multinational organization established 

to carry out the provisions of the 1994 U.S.-DPRK nuclear Agreed 

Framework) continued throughout the year, as did much of 
3

the South-North dialogue, including ministerial and economic 

meetings. The course was not smooth, with several of the meetings 

being abruptly cancelled by the North Koreans and with periodic 

naval clashes in the West (Yellow) Sea. Nonetheless, the cautious 

optimism of most of the conference participants seemed justified 

until the Autumn of 2002, when a series of events shook the SouthNorth dialogue, the U.S.-ROK relationship, and KEDO.

During the first week of October, James A. Kelly, the U.S. 

Assistant Secretary of State for East Asian and Pacific Affairs made 

his long-anticipated visit to North Korea. Two weeks later, U.S. 

officials said that during the visit, Kelly’s North Korean interlocutors 

acknowledged the existence of a clandestine uranium enrichment 

program and, according to Kelly, declared the 1994 Agreed 

Framework “nullified.”4

On October 25, the Korean Central News Agency reported 

comments by a DPRK Foreign Ministry spokesman, who accused 

the United States of hostile intent against North Korea, exemplified 

by the “Axis of Evil” speech, nuclear threats, and failure to make 

good on its obligations under the Agreed Framework. Under the 

circumstances, he said, the DPRK could not ”sit idle” and was 

“entitled to possess not only nuclear weapon[s] but any type of 

weapon more powerful . . . so as to defend its sovereignty and right 

to exist” in the face of the U.S. threat. Nonetheless, the spokesman 

said, the DPRK was prepared to seek a negotiated settlement if the 

United States recognized DPRK sovereignty, assured the DPRK of 

nonaggression, and did not “hinder the economic development of 

the DPRK.”5 The United States announced that it was willing to talk 

to North Korea, but only if the DPRK renounced its nuclear weapons 

program first.6

Thus, the situation reached an impasse and, although SouthNorth ministerial talks took place in October and economic talks and 

other dialogue and contacts continued in November, the revelation 

began a dangerous series of moves and countermoves, amid strong 

rhetoric on both sides.

On November 6, the DPRK announced that it might end its 

freeze on missile tests.7 Eight days later, the KEDO Executive Board 

issued a statement of condemnation of North Korea’s “pursuit of 

a nuclear weapons program, which is a clear and serious violation 

of its obligations under the Agreed Framework” and announced 

that heavy fuel oil shipments would be suspended, beginning 
4

with the December shipment.8 On November 29, the International 

Atomic Energy Agency (IAEA) Board of Governors adopted a 

resolution deploring the DPRK’s public claim that it is entitled to 

possess nuclear weapons, declaring that claim to be “contrary to 

its obligations under the Nuclear Non-Proliferation Treaty” and 

insisting that “North Korea urgently and constructively cooperate 

with the IAEA in opening immediately all relevant facilities to IAEA 

inspections and safeguards and [urging] North Korea to give up 

any nuclear weapons program, expeditiously and in a verifiable 

manner.”9 North Korea rejected the request for inspections.10

On December 11, President Bush released a “National Strategy to 

Combat Weapons of Mass Destruction,” reiterating the U.S. policy 

reserving the right to respond with overwhelming force, including 

conventional and nuclear capabilities, to the use of weapons of mass 

destruction (WMD) against the United States, its overseas forces, or 

its allies. While this document did not name North Korea, it is clear 

that the DPRK was among those referred to as “the world’s most 

dangerous regimes.”11

On the same day that the President released the WMD strategy, 

Spanish and U.S. forces intercepted a North Korean cargo ship 

transporting missiles to Yemen. The Yemeni government insisted 

that the missiles had been purchased legally and the ship was 

released, but North Korean rhetoric escalated even further, with 

accusations that the United States was engaged in piracy.12

On December 12, North Korea announced that it intended to 

restart the Yongbyon and Taechon reactors, the issue that had 

precipitated the crisis of the summer of 1994 and led to the negotiation 

of the Agreed Framework. The putative rationale for restarting the 

plant was that North Korea had a critical energy shortage due to 

the suspension of oil shipments by KEDO and lack of progress on 

the light water reactors being built in North Korea pursuant to the 

framework agreement. It seems more likely, however, that the move 

was intended to put pressure on the United States to resume talks.13

As these events were taking place, the ROK-U.S. alliance came 

under increasing strain in the face of anti-American demonstrations 

prompted by the acquittal of two soldiers who had accidentally 

crushed to death two Korean school girls under the treads of their 

armored vehicle on June 13, 2002. The acquittals served as a focus 

for long-simmering unhappiness with American actions and the 

aggravations caused by the presence of large numbers of U.S. 
5

soldiers in South Korea. The anti-American turmoil and outrage 

was reflected in statements by both presidential candidates in the 

campaigning then underway and led to calls by President Kim Daejung for further renegotiation of the Status of Forces Agreement.14

This message was delivered to U.S. Secretary of Defense Donald 

Rumsfeld by ROK Minister of National Defense Lee Jun at the 

annual Security Consultative Meeting in December 2002, although 

the joint communiqué diplomatically referred only to Minister Lee’s 

“keen interest in improving the implementation of the Status of 

Forces Agreement,” while, “Secretary Rumsfeld listened carefully to 

Minister Lee’s explanation.”15

In the December 19, 2002, ROK presidential elections, ruling 

Millennium Democratic Party candidate Roh Moo-hyun defeated 

conservative opposition leader Lee Hoi-chang. President-elect Roh, 

a 56-year old human rights and labor lawyer, had previously been 

critical of U.S. policies, calling for continued engagement with North 

Korea and revision of the Status of Forces Agreement. However, the 

initial contacts between Roh and U.S. President Bush were cordial, 

and the new president-elect quickly indicated his strong support 

for the alliance. The new year began with the ROK President-elect 

identifying “peaceful settlement of the ongoing North Korean 

Nuclear Crisis” as his top priority and U.S.-ROK-Japan consultations 

on the appropriate response to the North Korean actions.16

The nuclear situation continued to escalate as North Korea broke 

the seals on the previously sealed spent plutonium fuel rods at the 

Yonbyong reactor, disabled the monitoring cameras, brought in 

fresh fuel rods, and ejected the International Atomic Energy Agency 

on-site inspectors.17

Clearly, the situation in Northeast Asia has changed in many 

ways since these papers were presented. Yet, there is continuity in the 

fundamental dynamics of the alliance, in the issues and challenges 

facing the alliance, and in the various forums and mechanisms 

through which the alliance works. Even with the unexpected “wild 

card” of the North Korean nuclear revelations, our commentators, 

writing a year before that event, were generally accurate in their 

identification of the crucial issues, potential points of crisis, and 

likely broad course of events. It is worthwhile reading their analyses 

in the light of the actual circumstances since the conference.
6

Challenges and Proposals: The View from October 2001.

In his chapter, Professor Victor Cha argues for the value and 

relevancy of the U.S.-ROK alliance in the post-Cold War world, even 

after the eventual reunification of Korea, with the assumption clearly 

held by most of the conferees that reunification, when it comes, will 

be under the ROK. Not only does the alliance have enduring value 

for the security of both nations, he insists, but it is also grounded 

in shared values, a fact that is often unrecognized by Americans. 

Professor Cha warns that the alliance could dissolve, to the detriment 

of both nations, and recommends actions by both parties to rethink 

the alliance’s rationale, emphasizing the mutually-shared ideals of 

freedom, justice, and democracy.

Dr. Jin-Young Chung examines the alliance from the perspective 

of the cost sharing that symbolizes the balance of the relationship 

and reflects other, deeper, issues. Dr. Chung suggests that debates 

on cost sharing provide a forum not just for the discussion of alliance 

support, but for more far-reaching dialogue on the future purpose 

and nature of the alliance. He proposes strengthening the alliance 

by developing through this dialogue a new vision of purpose to 

assure its continuation after reunification, as well as the replacement 

of the current system of constitutional processes with automatic 

guarantees of wartime assistance, and other actions to assure a more 

equal partnership.

Professor Tong Whan Park examines the U.S.-ROK alliance in 

terms of its relative costs to the United States compared to the costs 

of having no alliance, the costs of the U.S.-Japan alliance, and the 

costs of the alliance to the ROK. He concludes that the alliance is 

advantageous for the ROK, and even more advantageous for the 

United States in terms of political, economic, and military security.

Professor Kyudok Hong traces the history of United Nations 

involvement with Korean security, with an emphasis on the U.S.-

led United Nations Command (UNC). In its quest for a U.S.-CPRK 

agreement that would lead to the removal of U.S. forces from Korea, 

North Korea has attempted to abrogate the Armistice Agreement and 

has called for the disestablishment of the UNC. But Professor Hong 

argues that both the Armistice Agreement and the UNC are valuable 

mechanisms that contribute to the security of the United States and 

the ROK, as well as to the effective working of the alliance.

Professor Jeongwoon Yoon describes the various agreements, 
7

forums, and structures through which the ROK-U.S. alliance 

operates. After explaining the content and value of the many forums, 

he provides policy recommendations to improve these mechanisms. 

He suggests increased emphasis on mid to long-term issues, a 

clearer division of labor between the bilateral Security Consultative 

and Military Committees, the establishment of standing offices 

for on-going discussion, and the active participation of the ROKU.S. Combined Forces Command (CFC) leadership in the security 

deliberations of the committees. He then describes the various 

combined and multinational exercises carried out by the two nations, 

providing policy recommendations for increasing the value of these 

exercises. He proposes short notice exercises at varying times of the 

year and greater emphasis on interoperability. He also recommends 

exercises based on scenarios in which the United States is engaged in 

military operations elsewhere in the world when a crisis breaks out 

in Korea in order to test the U.S. ability to respond to simultaneous, 

widely-separated contingencies. Finally, he argues that, so long as 

North Korea refuses to engage in substantive confidence-building 

and arms control efforts, the practice of curtailing exercises in order 

to avoid jeopardizing dialogue should be discontinued. Professor 

Yoon then explains the structure and roles of the ROK-U.S. Combined 

Forces Command, which is the integrated headquarters for the 

defense of Korea and the conduct of bilateral military operations. He 

recommends that CFC focus on its deterrence role and be prepared 

to adapt to changes in the international security environment. He 

also argues that CFC needs more effective options for countering 

the rising tide of anti-U.S. criticism and North Korean propaganda 

designed to divide the allies.

Professor Nicholas Eberstadt introduces a note of caution. He 

examines the evidence in the months prior to the conference that 

North Korea was beginning a process of reform. His close reading 

of North Korean political, economic, and military statements and 

actions lead him to conclude, however, that, far from reforming, the 

Pyongyang leadership had remained steadfast in its policies and was 

using the South Korean “Sunshine” policy of engagement to attempt 

to drive a wedge between the United States and the ROK.

Professor Taewoo Kim examines the divergent views within 

the South Korean populace and leadership concerning North 

Korea and U.S. Forces in Korea. He uses the term “liberal” to 

describe those who work from the basis of Korean ethnic identity, 
8

favoring active engagement with the North, downplaying the North 

Korean threat, seeking reconciliation, and viewing the presence of 

U.S. forces in Korea as intrusive, unwelcome, obnoxious, and an 

obstacle to reunification. He applies the term “conservative” to 

those who see the North not only as a counterpart in negotiation 

toward reunification, but also as a dangerous, threatening, and 

untrustworthy neighbor. The conservatives, while not uncritical 

of U.S. actions contrary to Korean interests, value the alliance as 

both necessary for security and a reflection of shared values that 

transcend ethnic identity. Professor Kim expresses concern that this 

“South-South ideological conflict” was having a corrosive effect, 

threatening the social fabric and national cohesion of the South and 

undermining the alliance, thereby jeopardizing ROK security. He 

argued that this dire outcome could only be averted by dialogue 

and mutual understanding--reconciliation within South Korea as 

a prerequisite to effective interaction with the North to achieve the 

reunification and peace that are the goals of both “conservative” and 

“liberal” Koreans in the South.

Professor Haksoon Paik provides a very thorough discussion 

of the 1994 Agreed Framework and the Korean Peninsula Energy 

Development Organization (KEDO), which he sees as a successful 

mechanism for engaging North Korea. Professor Paik argues that 

KEDO provides a useful precedent for international engagement 

with North Korea, a conclusion that remains valid even if the nuclear 

confrontation that began in October 2002 results in the end of KEDO 

as currently constituted.

Professor Miongsei Kang examines the trade situation 

confronting the ROK, noting that the pattern of trade has shifted, 

with less dependence on the American market for Korean exports. 

Nonetheless, the United States remains the second largest trading 

partner, after China and Hong Kong, as well as an essential element 

of Korea’s security. While the relative proportions of Korea’s trade 

have changed, the country has also come under increasing pressures 

through “regionalism,” as Professor Kang calls the growth of 

regional economic trading arrangements, such as the European 

Union and the North American Free Trade Agreement. Malaysian 

Prime Minister Mahathir Mohamad has proposed an Asian trade 

bloc from which the United States would be excluded, but Professor 

Kang argues that Korea is best served by open trade arrangements. 

He notes that the Asia Pacific Economic Cooperation (APEC) forum 
9

provides a mechanism for addressing trade and other economic 

issues without the constraints inherent in participation in regional 

preferential trade arrangements.

Professor Kyu-Ryoon Kim delineates South Korea’s foreign 

direct investment (FDI) policies in the context of what he calls the 

“Asiatic mode of economic development,” based on an exportoriented development strategy. The ROK has many economic 

advantages of geography, high quality labor and management, a 

strong industrial and research base and infrastructure, and a rapidly 

growing information technology sector. The ROK Government has 

built on this foundation with policies that encourage and facilitate 

foreign direct investment. Nonetheless, Professor Kim suggests that 

South Korean firms may not be making the most of the opportunities 

available to them for FDI. Furthermore, while South Korea has 

weathered the Asian financial crisis of the late 1990s, that crisis 

raised questions about rapid economic growth and the government’s 

role in economic development. The attitudes and actions of North 

Korea and the state of South-North relations also affect investment 

and growth. Professor Kim calls for a rethinking of ROK policies 

and consideration of whether moderate and sustainable economic 

growth and multilateral cooperation may not be the best pattern for 

the future.

Economic cooperation is essential to the process of South-North 

reconciliation and was a key element of former President Kim 

Dae-jung’s “Sunshine” policy of engagement, which decoupled 

economic cooperation from political issues. Yet, as Professor 

Joseph A.B. Winder explains, there have been many obstacles to the 

development of South-North economic links. Nearly all of them can 

be attributed to the North Korean leadership, whose attitudes and 

actions have been incompatible with the norms of modern commerce 

and industry. The two Koreas have negotiated a framework for 

economic cooperation, however, and, even during the tensions that 

resulted from the October 2002 revelations concerning the North 

Korean nuclear program, economic talks continued.

Enduring Realities, Persistent Challenges.

Collectively, these papers set forth the structure of the alliance, 

provide useful background information, and place the alliance in 

its political, social, and economic context. They provide a basis for 
10

understanding and dealing with current and future challenges to 

peace and security in Northeast Asia.

ENDNOTES - CHAPTER 1

1. Transcript: Presidents Bush, Kim Dae Jung March 7 Press Briefing, http://

usembassy.state.gov/seoul/wwwh42yr.html, accessed December 11, 2002.

2. The Status of Forces Agreement (SOFA) is an international agreement 

between the United States and the ROK that sets forth the rights and responsibilities 

of U.S. military and supporting civilian personnel in Korea. The texts of the 1966 

agreement and 1991 revision are at http://www.korea.army.mil/sofa/sofa1966_

ui1991.pdf, while the text of the 2001 revision is at http://www.korea.army.mil/sofa/

2001sofa_english%20text.pdf, both accessed January 7, 2003.

3. See, for example, Donald G. Gross, “Riding the Roller Coaster,” Comparative 

Connections, Vol. 4, No. 2, April 2002, http://www.csis.org/pacfor/cc/0201Qus_

skorea.html, accessed December 11, 2002.

4. For Kelly’s account, see James A. Kelly, “U.S.-East Asia Policy: Three 

Aspects,” remarks at the Woodrow Wilson Center, Washington, DC, December 

11, 2002, http://www.state.gov/p/eap/rls/rm/2002/15875pf.htm, accessed December 15, 

2002.

5. “Conclusion of Non-Aggression Treaty Between DPRK and U.S. Called 

for by Pyongyang,” Korean Central News Agency of DPRK, October 25, 2002, in 

Northeast Asia Peace and Security Network (NAPSN)Daily Report, October 25, 

2002, http://nautilus.org/napsnet/dr/0210/OCT25.html#item1, accessed December 10, 

2002.

6. “US Ambassador Says Talks With N. Korea Hinge on Dismantling Nuclear 

Program,” Agence France-Presse, December 2, 2002, in NAPSN Daily Report, 

December 2, 2002, http://nautilus.org/napsnet/dr/0212/DEC02.html#item2, accessed 

December 15, 2002. See also Kelly, “U.S.-East Asia Policy.”

7. Doug Struck, “N. Korea Hints at Missile Test Threat Aimed at Jump Starting 

Talks With Japan,” Washington Post, November 6, 2002, in NAPSN Daily Report, 

November 8, 2002. http://nautilus.org/napsnet/dr/0211/NOV08.html#item3, accessed 

December 15, 2002.

8. Korean Peninsula Energy Development Organization, KEDO News for 12/

12/2002,” KEDO Executive Board Meeting Concludes-November 14, 2002,” http:

//www.kedo.org/news_details.asp?News=10, accessed December 10, 2002.

9. IAEA Media Advisory, “IAEA Board of Governors Adopts Resolution on 

Safeguards in the DPRK,” http://www.iaea.org/worldatom/Press/P_release/2002/med-
11

advise_033.shtml, accessed December 11, 2002.

10. Sang-Hun Choe, “North Korea Rejects Call For Inspections,” Associated 

Press, Seoul, December 4, 2002; and “N. Korea Rejects U.N. Nuclear Watchdog’s 

Call,” Reuters, Seoul, December 4, 2002, in NAPSN Daily Report, December 4, 

2002, http://nautilus.org/napsnet/dr/0212/DEC04.html#item1, accessed December 15, 

2002.

11. National Strategy to Combat Weapons of Mass Destruction, December 2002, 

available at http://usinfo.state.gov/topical/pol/arms/02121121.htm, accessed December 

14, 2002.

12. Thomas E. Ricks and Peter Slevin, “Spain and U.S. Seize N. Korean 

Missiles,” Washington Post, December 11, 2002; “Suspected North Korean Missiles 

Found on Ship,” Agence France-Presse, December 11, 2002; and Steve Holland 

and Mohammed Sudam, “U.S. Frees Ship With Scud Missiles For Yemen,” Reuters, 

Washington/Sanaa, December 11, 2002, in NAPSN Daily Report, December 11, 

2002, http://nautilus.org/napsnet/dr/0212/DEC11.html#sect1, accessed December 15, 

2002; “North Korea Ratchets Up Tension, Accuses Washington Of Piracy,” Agence 

France-Presse, December 13, 2002, in NAPSN News Daily Report, December 13, 

2002, http://nautilus.org/napsnet/dr/index.html#sect1, accessed December 15, 2002.

13. Doug Struck, “North Korea Says it Will Resume Work at Reactors,” 

Washington Post Foreign Service, December 13, 2002, http://www.washingtonpost.com/

wp-dyn/articles/A47924-2002Dec12.html, accessed December 15, 2002.

14. Doug Struck, “Resentment Toward U.S. Troops Is Boiling Over in South 

Korea, Acquittal of Soldiers Stokes Protests, Campaign Rhetoric,” Washington Post 

Foreign Service, December 9, 2002, http://www.washingtonpost.com/wp-dyn/articles/

A28621-2002Dec8.html, accessed December 13, 2002; “South Korean President 

Calls For New Pact on US Troops,” Agence France-Presse, December 3, 2002, in 

NAPSN News Daily Report, December 3, 2002, http://www.nautilus.org/napsnet/dr/

0212/dec03.html, accessed December 11, 2002.

15. “Korea-U.S. Security Consultative Meeting Joint Communiqué,” 

United States Department of Defense News Release, December 5, 2002, http:

//www.defenselink.mil/news/Dec2002/b12052002_bt619-02.html, accessed December 

11, 2002.

16. ROK Government Press Release, New Gov’t Unveils 10 Goals, January 7, 

2003, http://www.korea.net/, accessed January 7, 2003; Oh Young-Hwan, “Halfcentury alliance shows signs of strain,” JoongAng Ilbo, January 6, 2003, http:

//english.joins.com/article.asp?aid=20030106101958&sid=F00, accessed January 7, 

2003; and Glenn Kessler, “U.S. and Asian Allies Discuss North Korea,” Washington 

Post, January 7, 2003, p. A08.
12

17. Paul Shin, “North Korea Begins Moving Fuel Rods Into Nuclear Reactor,” 

Associated Press, Seoul, December 26, 2002; Louis Charbonneau, “N. Korea 

Moving Fresh Fuel To Nuclear Plant,” Reuters, Vienna, December 25, 2002 in 

NAPSN News Daily Report, December 26, 2002, http://nautilus.org/napsnet/dr/

0212/DEC26.html#item1, accessed December 27, 2002; Peter S. Goodman, “U.N. 

Inspectors to Leave North Korea,” Washington Post, December 29, 2002, p. A25; 

and “N. Korea Threatens to Abandon Treaty,” Washington Post, January 1, 2003, 

p. A13.
13

PART II: THE ALLIANCE

15

CHAPTER 2

AMERICA’S ALLIANCES IN ASIA: 

THE COMING “IDENTITY CRISIS” 

WITH THE REPUBLIC OF KOREA?

Victor D. Cha

The bilateral security relationship with the Republic of Korea 

(ROK) has been one of the most successful U.S. post-war alliances 

in terms of levels of interoperability and attainment of security 

objectives. However, as with other alliances forged in the Cold War, 

there are increasing questions about its resiliency in the post-Cold 

War era. Some have argued that the absence of a principal enemy 

for the alliance (i.e., the end of the Soviet threat or the future end of 

the North Korean threat), would by definition mean an end to the 

alliance itself. Others have debated such an outcome, arguing that 

adjustments in the rationale as well as the components of the alliance 

can guarantee its resiliency.1

While the question is right, I argue that the answers are more 

complicated and multi-faceted. First, it is by no means certain 

that the end of North Korea will equate with termination of the 

alliance; there are both empirical and theoretical justifications for the 

continuance of the alliance after the threat is gone. Second, in the 

present and future, an alteration in the rationale and adjustments in 

components of the alliance on the ground are critical and requisite 

to future resiliency. However, focusing solely on these issues instills 

a false sense of confidence in the alliance’s longevity and obscures 

a deeper conceptual obstacle to alliance resiliency, its normative 

underpinnings. This factor is given short shrift in other analyses, 

yet I believe it is critical because the true test of alliances in the postCold War era is not merely their continuation in peacetime but the 

domestic support for fulfilling of these commitments in wartime. 

The likelihood of the latter is greater when the allies have a strong 

normative link. Otherwise, confidence in the alliance’s longevity 

today and in the future could be shattered when the effort to activate 
16

alliance commitments comes up empty.

The Past and Present Success of the Alliance.

Formed in 1953, the alliance with the ROK was America’s 

quintessential Cold War relationship in Asia. There was no preceding 

history of interaction (aside from sporadic and minor commercial 

exchanges in the 1800s) on which to draw, no common values as a 

frame of reference. In fact, the United States knew virtually nothing 

about Korea when it received the Japanese surrender in the southern 

half in 1945, and knew only marginally more when it committed to 

defend the South in 1950 as a bulwark against communism and a 

front line of defense for Japan. Korea’s value to the United States 

was never intrinsic and always strategic (i.e., keeping it out of the 

adversary’s camp). In spite of this, the alliance later blossomed into 

one of America’s most successful and vibrant bilateral relationships 

in East Asia. 

Across a range of criteria that determine the functional success of 

a military alliance, the U.S.-ROK alliance has done well.2 The alliance 

enabled the stationing of what is now some 37,000 U.S. troops 

directly at the point of conflict on the peninsula, which provided the 

South with an unequivocal symbol of the U.S. defense commitment 

and deterred the North with its tripwire presence. The two militaries 

represent the classic example of an alliance operating under a joint, 

unitary command (the Combined Forces Command or CFC) with 

a common doctrine, as well as with a clear division of combat roles 

practiced through frequent and extensive joint training. While there 

have been some negative civil-military externalities associated with 

the stationing of U.S. forces, overall host country support for the 

alliance has been and continues to be strong. Arguably the United 

States and ROK have evolved into ideal military allies, far more 

workable and efficient together than the U.S.-Australia alliance or 

U.S.-Saudi Arabia partnership and paralleled only by NATO and 

the U.S.-Japan alliances.3

The U.S.-ROK Alliance’s Place in the Region.

Throughout the Cold War, the U.S.-ROK alliance, while focused 

on peninsular security, also constituted an integral part of a larger 
17

security triangle in Northeast Asia with the U.S.-Japan alliance. 

Despite the historical antagonisms between the ROK and Japan, the 

United States sought to strengthen the cohesion of this triangle and 

effectively treated the two alliances as strategically complementary. 

U.S. ground forces in South Korea were as much an extended 

frontline of defense for Tokyo as for Seoul. The U.S. Seventh Fleet 

and Marine units in Japan provided rear-guard support for the 

ROK. This relationship was spelled out in 1969 with the Nixon-Sato 

Korea clause (and Prime Minister Eisaku Sato’s National Press Club 

speech) in which Japan acknowledged that ROK security was crucial 

to Japan and, therefore, would allow the United States unlimited 

access to bases in Okinawa (post-reversion) to defend the South.4

In exercises as well as actual maneuvers during the Cold War, 

the two essentially comprised one integrated unit in U.S. defense 

planning. U.S.-ROK military exercises regularly employed bases 

in Japan for logistic support; U.S. tactical air wing deployments 

rotated frequently between Japan and Korea; and air and naval 

surveillance of the North was operated out of bases in Japan. In 

addition, Seoul and Tokyo conducted periodic exchanges of defense 

officials, developed bilateral fora for discussion of security policies, 

and engaged in some sharing of intelligence and technology.5 

While the triangle was driven during the Cold War by the 

task of deterring Chinese and Soviet communist expansion on the 

peninsula and in the region generally, the post-Cold War linkage 

of the two alliances has as its primary focus a North Korean 

contingency. Stemming from a potential collapse or aggression by 

the North are coordinating roles for the Japanese Maritime and Air 

Self-Defense Forces (MSDF and ASDF) in and around the peninsula 

with regard to wartime logistics and activities like minesweeping, 

anti-submarine warfare, maritime patrol, search and rescue, refugee 

processing, and noncombatant evacuation. The catalyzing force for 

greater integration of the U.S.-ROK alliance with Japan was the Nye 

initiative6 and the new U.S.-Japan defense guidelines, which not 

only better delineated the respective roles of Washington and Tokyo 

in a military contingency, but also highlighted the need for greater 

communication and coordination between the CFC in Korea and the 

SDF in Japan. Since its inception, the U.S.-ROK alliance, and indeed 

the U.S.-ROK-Japan triangle, had to contend with its place vis-à-vis 
18

Washington’s relationship with China. When the latter was bad, 

there was no question of the former’s place in the region. However, 

improvements in Washington-Beijing relations always raised a 

degree of ambiguity and insecurity among the Asian allies about 

U.S. intentions. During the Cold War, these ranged from concerns 

that the United States was downgrading ties with Korea and Japan 

(partly motivated by trade tensions) and elevating those with China, 

to fears that the U.S. reconciliation with China was motivated not by 

the success of the Cold War alliances but by their perceived failure.7

In the post-Cold War era, trepidation arose again in Seoul and Tokyo 

regarding the Clinton administration’s “strategic partnership” with 

China.

Two distinctions require highlighting with regard to this 

problem. First, such concerns about China have often been couched 

in terms of a potential fracturing or erosion of the convergent 

interests that have traditionally undergirded the U.S.-ROK and 

U.S.-Japan alliances. However, rather than being symptomatic of an 

alliance breakdown, these concerns are simply symptomatic of an 

alliance. Fears of abandonment are an inherent part of any alliance 

relationship and particularly salient in asymmetrical relationships 

such as those with Korea and Japan.8 If anything, abandonment 

fears are a sign of a healthy and vibrant alliance--indifference would 

be more symptomatic of an erosion. Second, the notion of a grand 

U.S.-China condominium that undermined Korean and Japanese 

security interests overlooks the fundamental difference between 

a “partnership” and an alliance. The U.S. alliances with the ROK 

and Japan are not only among the most successful but also carry the 

most indisputable symbol of commitment--troop deployments. This 

is easily taken for granted, as it has been an established and integral 

component of the alliances since their inception; nevertheless, it 

is an unmistakable sign of who is the primary ally and who is the 

“partner.” Finally, convergent rather than competing views between 

these two sets of relationships on core issues like nonproliferation 

and maintaining the peaceful status quo on the peninsula are more 

prevalent in the post-Cold War era, reducing the sort of zero-sum 

tradeoffs perceived during the Cold War. 
19

The Future Rationale and Components.

With regard to the future resiliency of the U.S.-Korea alliance, the 

key question is whether the alliance can survive the end of the North 

Korean threat. The stated policy of both Washington and Seoul is 

that the alliance and U.S. military presence will continue in the postunification era.9

 However, political pronouncements about this and 

the groundwork to achieve it are two separate matters. Resiliency 

will require adjustments in both the rationale and components of the 

alliance. Foremost is a reorientation of the alliance’s overall purpose 

toward the promotion of broader regional stability.10 The primary 

rationale would no longer be deterring the North Korean threat, but 

would entail three different but related objectives. One purpose of 

the alliance would be to prevent dangerous power vacuums from 

forming on the peninsula. As the experience of the late 19th and 

early 20th centuries showed, whenever Korea has been unified, such 

vacuums have been an invitation for major power competition and 

war. Second, the U.S.-Korea alliance would remain an important 

political symbol of U.S. forward engagement as a Pacific power, 

which, in turn, would be key to ameliorating security dilemmas 

between China and Japan. As has already become clear in the 

post-Cold War period, Tokyo supports the U.S. presence as a check 

against China’s rise in the region; and Beijing implicitly supports 

the continuing U.S. presence as it views Japan’s future intentions 

with suspicion. Moreover, this amelioration effect would be weaker 

without the U.S.-Korea alliance. In other words, cutting the U.S. 

presence in a post-unified Korea but keeping a token presence 

in Japan is not likely to achieve the same effect, as Japan would 

remain uncertain of the U.S. commitment (given events in Korea), 

and China would have heightened suspicions due to Japanese selfhelp security behavior. A third purpose of the alliance would be 

to reassure a reunified Korea of its security, thereby preempting 

rash turns to self-help behavior that might be destabilizing in the 

region (e.g., nuclearization, ballistic missile development). The flip 

side of this same coin would be for a continued U.S.-Korea alliance 

to play a “binding” role on a reunified Korea that, replete with 

resurgent nationalism, might otherwise engage in arms buildups 

and provocative behavior toward Japan.

In addition to revised alliance rationales, adjustments in specific 
20

alliance components on the ground are necessary. These include 

changes in the composition of U.S. forces in Korea as well as alterations 

in cost-sharing arrangements, the CFC structure, and base locations 

to be more amenable to host country complaints.11 A reconstitution 

of U.S. forces would largely follow from the reorientation of the 

alliance’s rationale to regional security. For example, given the 

alliance’s current mandate (deterring and defending against a 

northern attack), the overwhelming majority of the 98 U.S. military 

installations are Army. A regional security mandate would mean 

substantial upgrading of air and naval presence and mobile rapid 

reaction capabilities at the expense of traditional ground forces. For 

example, the future U.S. force presence might no longer consist of 

two full brigades, prepositioned Army and Marine equipment (in 

Korea and Guam), and an infantry division ready to be flown in 

from Hawaii; instead, it might be 10-15,000 troops largely air and 

navy-based, a small contingent of ground forces south of the 38th 

Parallel and substantially less prepositioning.

Regarding the CFC, operational control has been a delicate 

sovereignty issue for the two governments. Operational control 

traditionally belonged to the United States until December 1995, 

when peacetime control (as well as the position of Senior Member 

of the United Nations (U.N.) command component of the Military 

Armistice Commission) was transferred to South Korea. A postNorth Korea, diminished-threat environment would bolster a 

united Korea’s desires for wartime operational control; however, 

this faces two obstacles: (1) the lack of adequate Korean intelligence 

capabilities (which Seoul wants the United States to provide); 

and (2) U.S. reluctance to concede wartime operational control in 

any theater. Most likely, an alternative arrangement would need 

consideration, similar to a NATO-type combined control system 

in wartime or a U.S.-Japan system of independent control but with 

specified guidelines about roles and expectations for cooperation. 

Cost-sharing calculations are likely to be readjusted in a revised 

alliance system. Until the early 1970s, the United States covered 

all costs for maintenance of the security presence in Korea. In the 

early 1980s, the ROK committed to share maintenance costs for 

joint facilities (up to $45 million/year in 1989), and by the early 

1990s, increased its contribution to one-third of total base costs (up 

to $300 million/year by 1995). By 1998, the ROK share had risen to 
21

$399 million, but in 1999, in the wake of the financial crisis, the two 

countries negotiated a new multi-year Special Measures Agreement. 

Under this agreement, the ROK contributed some $333 million in 

1999, and the contribution rose to $391 in 2000.12 

The United States currently occupies 78.6 million pyong [1 pyong

= 3.954 yards, ed.] for 36,272 troops. This amounts to .23 percent 

of total South Korean land (30 billion pyong) and 40 percent of 

metropolitan Seoul (183 million pyong).13 The percentage, location, 

and terms of land for the U.S. base presence are likely to undergo 

change in a revised alliance. The precedent for this was set in June 

1990, when the two governments agreed to the staged relocation 

of Yongsan out of central Seoul to Osan and Pyongtaek, including 

headquarters for U.N. Forces, U.S. Forces Korea (USFK), CFC, and all 

supporting troops). After completion of an initial phase (relocation 

of the Yongsan golf course) in March 1991, the plan was postponed 

indefinitely with the North Korean nuclear crisis, and since then 

disputes have arisen over the costs of relocation (originally to be 

borne by the ROK government), estimated in 1990 at over 2 trillion 

won. Adjustments in the terms of land usage are also likely. Relative 

to Japan or the Philippines, the ROK provides more exclusive land 

use rights to the United States without compensation to the private 

sector or does not hold the United States accountable for damages 

(56 percent of the total land usage is granted for exclusive use by the 

United States). 

Additional Factors for Alliance Longevity. 

The preceding issues are important and highlight facets of the 

relationship that will eventually require attention as the alliance 

remakes itself.14 The discussion, however, has not advanced 

substantially beyond this point. Analysts and well-wishers pay lip 

service to the above recommendations, couching the entire exercise 

in urgent phrases like “now is the time to reestablish ROK-U.S. 

relations for the 21st century,” or calls for a “restructuring” of the 

alliance “beyond the North Korean threat.”15 I raise two additional 

avenues of inquiry to push the discussion further. First, contrary to 

conventional wisdom, the resiliency of the alliance is overdetermined. 

Despite all the efforts at re-thinking rationales and revising 

components of the alliance to avert future erosion, objectively 
22

speaking, the conditions on and around the Korean peninsula are 

ideal for continuation of the alliance in the short to medium term. 

Second, because alliance well-wishers focus their attention only on 

its rationales and components, and because this will, in fact, appear 

successful, given the already favorable conditions for alliance 

resiliency, what is being missed is an understanding of the alliance’s 

normative base. This base is critical because it is linked to the true 

test of the alliance’s resiliency, domestic support for activation of the 

alliance commitment.

The Defense and Insurance Rationale.

In spite of all the trepidation about post-threat disintegration, 

a number of factors favor U.S.-ROK alliance longevity. History 

has shown that alliances are more likely to thrive when they face 

a persistent threat, are defensive in nature, have limited “exit” 

opportunities, have host-nation domestic support, and/or develop 

institutional linkages.16 First, ceteris paribus, defensive alliances 

last longer than offensive ones. Offensive partnerships tend to 

be short in duration. They are motivated by joint acquisition of 

a maximum gain after which the partnership speedily dissolves. 

Defensive alliances are also motivated by a specific goal, but it 

is loss-prevention rather than gains-acquisition. The former is 

inherently a stronger rationale for alliance resiliency because the 

benefits of continuing the relationship (i.e., insurance) outweigh 

the costs.17 The U.S.-ROK alliance will clearly enjoy both of these 

conditions for the forseeable future. A defensive alliance (with the 

one exception of the rollback policy during part of the Korean War), 

envisioning an “insurance policy” as its rationale is easy to imagine. 

Moreover, any hard thinking about the modalities and requirements 

of “insurance” has been postponed as North Korea’s combination of 

intransigent behavior and periodic unexpected pliancy provides an 

unquestionable rationale for the alliance now.18

Preventive Defense Rationale.

The more “institutionalized” an alliance, the greater the likelihood 

of its survival. The prime example is NATO, which has evolved 

into far more than an instrument of Western deterrence. It has 
23

spawned such a variety of subsidiary organizations and transatlantic 

networks of former officials, intellectuals, journalists, and analysts 

that its livelihood is ensured by the very symbols and institutions of 

cooperation it has created.19 While similar institutions are lacking in 

the U.S.-ROK case, the alliance has provided the only U.S. security 

presence on the Asian mainland, and has become an embodiment of 

U.S. influence and commitment as a Pacific power. It will still be in 

the U.S. interest to discourage the rise of a hegemon in the region, 

a goal that also suits Korea. Operationally, the alliance is integral 

to the operations of the U.S.-Japan alliance for any contingency in 

Northeast Asia. From the ROK perspective, the security relationship 

buttresses the trade relationship and has provided other hard-toquantify but significant benefits in terms of regional political stability 

and secure markets.20 In short, these factors provide a “preventive 

defense” rationale for alliance longevity — the benefits substantially 

outweigh the costs, and the costs of maintaining these arrangements 

are substantially less than having to re-create them in the future.21

The Impact of Multilateralism.

Multilateral security designs are more likely to complement 

than supplant the bilateral alliance. Multilateralism’s growth in the 

region has been rapid, but while the ROK has been actively involved 

in a number of initiatives,22 this does not suffice as its foreign policy 

template. This was made starkly clear at the time of the Asian 

financial crisis when the primary facilitator of the ROK’s economic 

bailout was not the multilateral bodies, but the United States, based 

on the security rationale. Multilateralism also tends to accord less 

with Korea’s strategic culture which, throughout modern and premodern history, has tended to view security as best achieved either 

through unilateralism and self-imposed isolation (e.g., the premodern “hermit kingdom”), or through intense bilateralism vis-àvis China and then, later, the United States.23 Multilateralism’s role, 

much to the desire of both Washington and Seoul, will be alongside 

the alliance, complementing it when necessary. Perhaps more 

relevant for the alliance than multilateralism in the future are ad hoc

policy coalitions or “minilaterals.” More limited in membership 

than broader multilateral groups and pragmatically designed to deal 

with concrete problems, minilaterals offer a more opportune venue 
24

in which the bilateral alliance can operate.24

The Effect of Unification on Alliance Resiliency.

A common cause for alliance breakups after the threat is gone 

are fears of abandonment at the government level and host-nation 

opposition to the alliance among the general public. The common 

assumption is that the U.S.-ROK alliance will suffer from these 

debilitating dynamics after North Korea is gone, leading to a great 

deal of mistrust and uncertainty between Seoul and Washington. 

Regarding host-nation civil-military relations, most assume that 

Korean domestic opposition to the alliance will be fierce. 

However, a closer look at the prevailing conditions leads to a 

different conclusion. Abandonment fears lead to alliance abrogation 

only when alternative security or “exit” options exist (e.g., either 

the abandonment-fearing ally seeks out new allies or internally 

builds up). If such options are not available, abandonment fears can 

counter-intuitively lead to a cohering of the alliance.25 Undoubtedly, 

Korean unification will be accompanied by concerns in Seoul about 

U.S. retrenchment; however, the likely response to this will be 

reaffirming rather than junking the relationship. This is because the 

alternatives are not attractive. Historical animosity toward Japan 

and uncertainty regarding Chinese intentions rule out these parties 

as security providers. The self-help option is expensive and not 

feasible given relative power disparities in the region; moreover, 

Seoul has always considered the United States to be the only honest 

broker in the region. Unification is thus likely to bring continued 

rather than waning enthusiasm for the relationship with the United 

States. 

Related arguments are relevant at the level of domestic politics. 

By any reasonable calculation, unification will be an extremely 

costly and difficult process for the Korean people.26 Economic and 

social integration will be accompanied by a great deal of dislocation 

in both the north and south. And as the German case showed, no 

amount of policy foresight or economic pliancy can ensure a smooth 

transition. The prospect of having to foot new security costs in 

addition to unification-related ones will not be an attractive prospect. 

In an ideal world, renewed nationalist pride would prompt Korea 

to venture outside the protective umbrella of the United States. In 
25

a pragmatic one, however, the alliance offers Koreans an anchor of 

stability in what is certain to be a time of great change.27

Thus, well-wishers will see their aspirations for a resilient U.S.-

Korea alliance validated. This will partially stem from the revisions 

in regional security rationales in combination with adjustments in 

cost-sharing, base location, command structures, and composition 

of forces. In addition, as the preceding conceptual section shows, 

certain objective conditions already weigh in favor of the alliance’s 

residual continuity in the short-medium term. While this is a positive 

outcome, its very success discourages any additional thinking about 

a critically neglected variable for alliance resiliency, the normative 

underpinnings. 

The Normative Foundations of Alliance Resiliency.

The durability of an alliance is not defined merely by the 

prolonging of its material structures. The ultimate measure of 

resiliency is domestic willingness to fulfill alliance obligations in 

time of need. This was a foregone conclusion during the Cold War 

when the line between adversaries and allies was clear and battles in 

the periphery were equated with those in the core. This is far from 

the case in the post-Cold War era.

The American public has traditionally exhibited ambivalence 

for international commitments. The Chicago Council of Foreign 

Relations found, for example, that only 61 percent of the general 

public support an activist U.S. role in world affairs in the postCold War era, a level of interest only marginally better than in 

the immediate aftermath of the Vietnam war.28 “Public disinterest 

in international affairs is pervasive, abetted by the drastically 

shrinking media coverage of foreign events. Majorities of 55 to 66 

percent of the public say that what happens in Western Europe, 

Asia, Mexico, and Canada has little or no impact on their lives.”29

While 80 percent of the public considers protecting American jobs a 

“very important” goal of the United States, only 44 percent believes 

the same for “defending allies’ security.” Moreover, the polls 

consistently found that Europe is perceived as a more important 

theater than Asia.30 Thus, it is not U.S. physical engagement in Asia 

but “psychological” engagement that constitutes the critical test of 

alliance resiliency--Congress and the American people’s willingness 
26

to use the U.S. forces deployed in the region. As John Mueller has 

argued, the United States is generally accepting of engagement and 

the deployment of forces abroad in peacetime even if the costs are 

substantial. However, what the public is not tolerant of is the loss 

of American lives. Once U.S. soldiers start dying, the American 

cost-calculation becomes extremely stringent, demanding clear and 

unrefutable benefits for such sacrifices.31 This nicely sums up the 

alliance resiliency dilemma in Asia: for a variety of reasons related 

to markets, U.S. leadership, and convenience, support for the United 

States to remain in Asia will persist up to the point where conflict 

breaks out.

A key determinant of alliance resiliency is the degree to which 

shared identities underpin interaction. By identity, we mean the 

degree to which alliances are grounded in commonly held norms, 

values, beliefs, and conceptions of how security is best achieved.32

[W]hen an alliance either reflects or creates a sense of common 

identity . . . [t]hen the entire notion of an individual “national 

interest” becomes less applicable. If elites and/or publics begin 

to view their own society as inextricably part of a larger political 

community, then members will find it difficult to conceive of 

themselves as separate and will see their interests as identical 

even if the external environment changes dramatically.33

Alliance identity can exist a priori based on similarities in regime 

type, religion, or ethnicity (e.g., the Anglo-American alliance). 

Common identities can also be constructed over time between unlike 

regimes through a wide range of economic and social interactions, 

development of elite networks, and high levels of communication.34

In the latter case, alliances become institutions of socialization where 

constituencies in both countries develop common standards and 

expectations of conduct. Most important, the type of commitment 

that emerges from shared alliance identities is fundamentally 

different from those that lack this component. The decision to help 

the ally in the latter case is based on a cold calculation of the overlap 

in interests. In the former case, the decision may have as much to 

do with promoting certain commonly shared values (even if there is 

comparatively less overlap in interests). At the extreme end, shared 

identities may lead to an emotive attachment and loyalty to an ally 

irrespective of the issue at-hand.35 
27

The Task for U.S.-ROK Alliance Resiliency: 

Constructing a Shared Identity.

The importance of identity factors for post-Cold War alliance 

resiliency does not bode well for the U.S.-ROK alliance. The alliance 

had no a priori-shared identity, and instead was formed around 

two utilitarian goals: deterring a second North Korean invasion 

and safeguarding Japan.36 Korea does not register in the average 

American mindset. When asked to quantify feelings of affinity 

for countries on a scale of 0 to 100 (above 50 being a “warm”), 

Americans rated South Korea, a longtime ally of the United States, 

below “neutral” (48) and only two points above China. By contrast, 

Britain and Canada were rated 69 and 73 respectively.37 In the most 

telling sign of the absence of American “psychological” engagement 

in Korea, a clear majority of the general public were against the use 

of U.S. troops to repel a North Korean attack. This was in spite of the 

nuclear crisis in 1994 and a prolonged period of exposure to Korea 

stories in the media.38

These discrepancies should alarm alliance-watchers of a potential 

disaster down the road. A reconstituted U.S.-Korea regionallyoriented alliance, while appearing outwardly resilient, would 

probably garner even less American support than at present. The 

inability of Americans to “identify” with Korea and Koreans could 

ultimately make the alliance a hollow shell. 

The pressing task is therefore not only to deal with pragmatic, 

material alliance management issues, but also to lay the ideational 

foundation for the alliance in the post-Cold War era. As noted 

above, shared identities can be constructed even where they do not 

exist a priori. Several steps appear necessary. First, U.S. officials 

must make deliberate efforts to frame the relationship in normative 

terms that resonate with the average American (i.e., not just with 

specialists). Statements like this one by former Deputy Assistant 

Secretary of Defense Kurt Campbell are a step in the right direction:

. . . the security alliance between the U.S. and the Republic of 

Korea is more than treaty commitment — it is a close, mutually 

beneficial partnership built on a shared stake in democracy and 

free markets. Our alliance is an essential element of the strategy 

for achieving our long-standing security goal: a non-nuclear, 

democratic, and peacefully reunified Korean peninsula.39
28

Former Ambassador Bosworth’s statements offer similar attempts 

at reconstructing the alliance in ideational terms: 

The third element of our relationship is philosophical — our 

shared commitment to democratic values and democratic 

practice. As Korean democracy has developed strongly in recent 

years, democracy has become in a real sense the cement of the 

overall relationship.40

Moreover, such statements before wider foreign policy audiences 

help construct an image of Korea as the successful embodiment of 

market democratic ideals in a region where skepticism about such 

ideals still remains. The November 1998 Clinton-Kim summit, while 

framing the relationship in its traditional anti-North Korean context, 

also put forth images of an alliance grounded in shared values of 

liberal democracy and free markets.41 Similarly, President Bush in 

March 2001 spoke of the alliance’s strength in deterring North Korea, 

but also in terms of its deepening and “comprehensive” partnership 

that ranges out to extraregional issues beyond the peninsula.42

While the former is important now, constructing the latter image is 

critical for the long-term. In a similar vein, the establishment of the 

Democracy Forum by the two presidents to promote and strengthen 

democracy in East Asia also creates important symbols of Korea that 

resonate with values rather than just security threats. 

Second, there was no better opportunity for remaking the alliance 

in normative terms than under the South Korean administration of 

Kim Dae-jung. Kim was undoubtedly the most well-known Korean 

chief executive in American elite and public circles in the post-war 

era. His life history resonates with American ideals of freedom, 

justice, and democracy. His suffering as a martyr for these causes 

has been anointed by many American leaders. Critics of Kim found 

these assessments troubling; however, Kim’s past gave him the 

credibility, in American eyes, to promote the bilateral relationship as 

a reaffirmation of mutually-shared values in a way that no previous 

Korean leader could have.43 The opportunity was lost, however, and 

the Bush administration must work with the new administration of 

Roh Moo-Hyun. While early 2003 is a tense time on the Korean 

peninsula, circumstances may actually prove conducive to 

constructing a new shared identity for the alliance.

Third, the ROK could resuscitate certain images invoked during 
29

Ronald Reagan’s reaffirmation of the alliance in the 1980s. After a 

period of difficult relations during the Carter administration, when 

Washington criticized ROK human rights violations and called 

for troop withdrawals, the ROK encountered a renewal of alliance 

ties under Reagan. What is of use today from this period is not the 

Cold War rhetoric but the images of Korea as a reliable and loyal 

U.S. ally. More so than any other Asian power, the ROK directly 

supported U.S. policies — a front line state throughout the Cold War 

and a willing partner in Vietnam when the United States needed 

allied support. The conceptual objective would be to cultivate an 

American appreciation of the alliance per se, rather than as derivative 

of Japanese security.

Finally, through activities outside the purview of the U.S.-

ROK alliance, Koreans can also demonstrate shared principles. 

For example, the ROK has been an active participant in U.N. 

peacekeeping operations (PKO) and other multilateral activities, 

especially after being admitted to the U.N. in 1991. These sorts of 

activities resonate with the American public. Polls find that only 

19 percent of the public disapprove of U.S. participation in U.N. 

peacekeeping, while over 50 percent actively support it.44

Conclusion.

The future resiliency of the U.S.-ROK alliance is far from 

determined. This paper does not argue that efforts to rethink the 

alliance’s rationale in the post-threat era are a valueless exercise. 

Nor does it argue that alliance identity is the solution to every 

problem. Diagnoses of the alliance tend to ignore redesigning its 

rationale. This is unhealthy because what appears to be a resilient 

and renovated alliance for the 21st century may in fact prove to be 

hollow when Americans see no reason to fight for or in the name of 

Korea. The chances of avoiding such an outcome are greater with 

proactive efforts to remake the U.S.-Korea alliance on the basis of 

shared norms and values.

CHAPTER 2 - ENDNOTES

1. For earlier works that have raised these issues, see David Steinberg, 

“Reconstructing the Bridge: Rethinking Korean-American Relations,” Pacific
30

Bridge, Vol. 6, Spring/Summer 1997, p. 9. Also see Victor Cha, “Realism, 

Liberalism and the Durability of the U.S.-South Korean Alliance,” Asian Survey, 

Vol. 37, No. 7, July 1997. Other scholars who have noted this problem include

Nancy Bernkopf Tucker, “The Origins and Evolution of the Korean-American

Alliance: An American Perspective,” Asia/Pacific Reseach Center Discussion 

Paper, Stanford University, June 1998; and Yoichi Funabashi, “S. Korea-U.S. 

Alliance an Anchor Stabilizing Asia,” Asahi Evening News, January 30, 1998.

2. These indicators are borrowed from Dr. William Perry, “Comprehensive 

Commenting Remarks,” Alliance Tomorrow Workshop Proceedings, GFRS, 

December 6, 1998. Alliances serve the purpose not just of providing for one’s 

security, but doing so in an efficient and relatively less costly manner than would 

otherwise be the case, i.e., self-help. In this vein, an alliance’s success is measured 

by the extent to which it serves as a facilitator of power accretion and projection; 

operates as a unified command; enables common tactics and doctrine through 

joint training; promotes a division of security roles; facilitates cooperation in 

production and development of military equipment, and elicits political support 

among domestic constituencies. 

3. The US-ROK alliance surpasses that with Japan in its possessing a unitary 

command, as well as NATO in terms of a clear division of labor and cooperation 

in the production of some military equipment.

4. “Joint Communiqué between President Nixon and Prime Minister Sato of 

Japan on the international situation and other matters of mutual interest, including 

the reversion of Okinawa to Japanese control, November 1970” and “Address by 

Prime Minister Sato to the National Press Club, November 21,” U.S. Congress, 

Senate, Committee on Foreign Relations, U.S. Security Agreements and Commitments 

Abroad, Part 5: Japan and Okinawa, 91st Congress, 2d Sess., Washington, DC: U.S. 

Government Printing Office, 1970, pp. 1425-1433.

5. For elaboration on these points, see Victor Cha, Alignment Despite 

Antagonism: The United States-Korea-Japan Security Triangle, Stanford: Stanford 

University Press, 1999, chapters 2, 3.

6. The “Nye Initiative” was a policy formulated in 1995 at the diretion of 

then U.S. Assistant Secretary of Defense Joseph Nye. It called for actions to 

improve the U.S.-Japan alliance by identifying post-Cold War common interests, 

developing a new rationale for the alliance, and by increasing dialogue between 

U.S. and Japanese counterparts.

7. See, for example, statements by ROK president Park Chung Hee’s advisors 

cited in Don Oberdorfer, The Two Koreas, NY: Addison-Wesley, 1997, p. 13.

8. For the seminal article on abandonment and entrapment, see Glenn 

Snyder, “The Security Dilemma in Alliance Politics,” World Politics, Vol. 36, No. 
31

4, July 1984. For applications to the U.S.-Korea and U.S.-Japan alliances, see Cha, 

Alignment Despite Antagonism, Chapter 2; and Michael Green, Arming Japan, NY: 

Columbia University Press, 1996.

9. For statements to this effect, see the U.S Department of Defense, The United 

States Security Strategy for the East Asia-Pacific Region, 1998, pp. 61-3; Ambassador 

Bosworth’s comments in Korea Herald, December 31, 1998; and Kim Dae-jung’s 

statements in Yonhap Newswire, December 30, 1997.

10. See in particular, Jonathan Pollack and Young Koo Cha, et al., A New 

Alliance for the Next Century, Santa Monica, CA: RAND, 1994; and Ahn Byungjoon, “Korea-US Alliance Toward Unification,” Korea Focus, Vol. 4, No. 2, MarchApril 1996, pp. 5-19.

11. Space limitations allow us to deal only superficially with each of these 

issues. For elaboration on these and other issues, see Kim Chun-pom, “Inevitable 

Changes in ROK-US Security Relations,” WIN, August 7, 1998 [in Korean]; 

Ministry of National Defense, White Paper, 1997-8, Seoul: MND, 1998; and Kwon 

Tae-yong and Chong Chun-il, Korea National Defense Institute Report [in Korean].

12. General Thomas A. Schwartz March 5 Testimony to the Senate Armed 

Services Committee, 107th Congress, http://www.senate.gov/~armed_services/

statemnt/2002/schwartz.pdf.

13. There are 98 bases, of which 82 are Army, 14 Air Force, and 2 Navy.

14. For other works in this vein, see C. Fred Bergsten and Il Sakong, eds., 

Korea-United States Cooperation in the New World Order, Washington DC: IIE, 1996; 

Ahn, “Korea-US Alliance Toward Unification”; Alan Romberg, “The Future of US 

Alliances with Japan and Korea,” Critical Issues, No. 5, 1990, Council on Foreign 

Relations; Pollock and Cha, “New Alliance”; and Kim Kyung Won, “What Makes 

and Sustains Alliances,” paper presented at the 38th annual IISS conference, 

Dresden, Germany, September 1-4, 1996. A third alternative is alliance abrogation 

with the end of the Cold War and future termination of the North Korean threat, 

for example, see Doug Bandow and Ted Galen Carpenter, eds., The U..S.--South 

Korean Alliance: Time for a Change, Piscataway, NJ: Transaction, 1992. This paper 

does not directly address alliance termination, but implicitly assumes this as a 

wholly plausible outcome should efforts at reconstituting the alliance fail.

15 “Survey of Experts: Where is North Korea Headed Four Years After Kim IlSong’s Death?” Sin Tong-A, July 1998, pp. 356-69; and Koji Murata, “The US-Japan 

Alliance and the US-South Korea Alliance,” Comparative Strategy, Vol. 14, Issue 2, 

1995, p. 192.

16. An in-depth discussion of these points is beyond the scope of this paper. 

On threats and alliance resiliency, the representative work is by Stephen Walt, 
32

Origins of Alliances, Ithaca: Cornell, 1986. On defensive and offensive alliances, 

see Randall Schweller, “Bandwagoning for Profit: Bringing the Revisionist State 

Back In,” International Security, Vol. 19, No. 1, Summer 1994; Thomas Christensen 

and Jack Snyder, “Chain Gangs and Passed Bucks: Predicting Alliance Patterns 

in Multipolarity,” International Organization, Vol. 44, No. 2, Spring 1990; and 

Schweller, “The Concept of Alliances.” On “exit” opportunities, see Snyder, “The 

Security Dilemma in Alliance Politics”; and Cha, Alignment Despite Antagonism. 

The seminal work on alliances is George Liska, Nations in Alliance, Baltimore: 

Johns Hopkins, 1962.

17. By contrast, in offensive alliances the costs of continuing the relationship 

after the prize has been reaped become unwanted and valueless. 

18. The initial foray into trimming the U.S. presence after the Soviet collapse, 

reflected in the 1990 Department of Defense East Asia Strategy Initiative (EASI) 

report, was indefinitely postponed in response to DPRK behavior on nuclear 

weapons development and ballistic missile testing, which have led to reinforcing 

and strengthening the alliance since 1994.

19. See Robert McCalla, “NATO’s Persistence After the Cold War,” International 

Organization, Vol. 50, No. 3, Summer 1996, pp. 445-476.

20. In this vein, see Joseph Nye, “The Case for Deep Engagement,” Foreign 

Affairs, Vol. 74, No. 4, 1995, pp. 90-102.

21. See William Perry, “Defense in an Age of Hope,” Foreign Affairs, Vol. 75, 

No. 6, November/December 1996, pp. 64-79.

22. Among other acts, Seoul proposed the six-power Northeast Asia 

Consultative Mechanism in 1988; was behind proposal for Northeast Asia Security 

Dialogue; and has played active roles in Asia Pacific Economic Cooperation 

(APEC) and the Association of Southeast Asian Nations Regional Forum (ARF).

23. See Cha, “Strategic Culture and the Military Modernization of South 

Korea” Armed Forces and Society, Fall 2001.

24. In this vein the KEDO has been a relatively successful example of 

minilateralism at work. See The United States Security Strategy for the East Asia 

Pacific Region, pp. 43-44.

25. Cha, Alignment Despite Antagonism, chapters 2, 7.

26. For a range of estimates, see Marcus Noland, Sherman Robinson, and LiGang Liu, “The Costs and Benefits of Korean Unification,” Asian Survey, Vol. 38, 

No. 8, August 1998, 801-814.
33

27. This type of thinking was evident from the Kim Young-sam administration 

when references to a post-unification U.S.-ROK alliance were first made. For 

statements by the current administration calling outright for U.S. forces in Korea 

after unification, see “Kim Dae-jung calls for Post-Reunification US Presence,” 

Seoul Yonhap, December 30, 1997.

28. John E. Rielly, ed., American Public Opinion and US Foreign Policy 1999, 

Chicago Council on Foreign Relations, 1983, p. 12. By contrast, over 96 percent of 

elites advocated U.S. engagement in world affairs. 

29. Samuel Huntington, “The Lonely Superpower,” Foreign Affairs, Vol. 78, 

No. 2, March/April 1999, p. 40.

30. Reilly, American Public Opinion 1999, p. 31. The numbers in 1999 were 42 

percent versus 28 percent; among leaders, 51 percent vs. 37 percent.

31. On these points, see John Mueller, “The Common Sense,” National 

Interest, Spring 1997, p. 82; Tom Langston, “Imagining Peace: America’s Coming 

Disengagement from Asia,” paper presented at the annual meeting of the 

American Political Science Association, September 1998, Boston, MA; and Harvey 

Sapolsky and Jeremy Shapiro, “Casualties, Technology, and America’s Future 

Wars,” Parameters, Summer 1996, p. 123.

32. On the last of these, see Cha, “Realism, Liberalism.”

33. See Stephen Walt, “Why Alliances Endure or Collapse,” Survival, Vol. 39, 

No. 1, Spring 1997, p. 168. Walt, however, is skeptical on the causal role of identity 

in alliance commitments. 

34. See Karl Deutsch, et al., Political Community and the North Atlantic Area, 

Princeton: Princeton University Press, 1957, p. 5.

35. Historical precedents for identity determining behavior in international 

relations were classical empires and colonialism where common identification 

of remote territories with the core often led to imperial wars over objectively 

insignificant things. See G. John Ikenberry and Charles Kupchan, “Socialization 

and Hegemonic Power,” International Organization, Vol. 44, No. 2, Summer 1990; 

and Kupchan, Vulnerability of Empire, Ithaca: Cornell, 1994, p. 258.

36. Tucker, “Origins and Evolution,” p.4. 

37. American Public Opinion, 1995, pp. 21-24. North Korea was scored at 34 

degrees, Iraq at 24, and Japan at 53 degrees. On the general lack of attention to 

Korea in policy circles, see Robert Manning, “The United States and the Endgame 

in Korea,” Asian Survey, Vol. 37, July 1997, p. 608.
34

38. Reilly, American Public Opinion, 1995, p. 14.

39. Statement by Dr. Kurt Campbell, Hearing on U.S. Policy Toward the Korean 

Peninsula, Subcommittee on East Asian and Pacific Affairs, Senate Committee on 

Foreign Relations, September 10, 1998.

40. “The Korean-American Relatonship Continuity and change,” Address 

Before the Korean-American Society and the American Chamber of Commerce, 

January 23, 1998, Seoul, napsnet@nautilus.org. Also see public statements by 

Peter Tarnoff and Edward Royce in Bergsten and Sakong, Korea-United States 

Cooperation; and “Perspectives on U.S.-Korea Relations,” U.S.-Korea Tomorrow, 

Vol. 1, No. 1, August 1998.

41. “Kim Dae-jung, Clinton in Agreement on Democracy, Free Market,” Korea 

Herald, November 23, 1998.

42. Joint Statement by U.S. President George W. Bush and ROK President Kim 

Dae-jung, March 7, 2001.

43. State Department interview; “Survey of Experts--Where is North Korea 

Headed Four Years After Kim Il-Song’s Death?” Sin Tong-A, July 1998, pp. 356-

369; Wolgan Choson, February 1998, pp. 344-353.

44. American Public Opinion, 1995, p. 8.
35

CHAPTER 3

COST SHARING FOR USFK IN TRANSITION:

WHITHER THE ROK-U.S. ALLIANCE?

Jin-Young Chung

Introduction.

United States Forces Korea (USFK) is a key component of the 

bilateral security alliance between the Republic of Korea (ROK) 

and the United States of America. For almost half a century, 

USFK and the Mutual Defense Treaty have been very successful 

in achieving key common interests, that is, deterring North Korea 

and maintaining peace and stability on the Korean peninsula and 

in the Northeast Asian region. South Korea has benefited from 

this security arrangement in various respects beyond its primary 

objective of deterring invasion. ROK achievements in economic 

development and democratization hardly would have been possible 

without peace and stability in its security environment. The United 

States has also benefited from the forward deployment of USFK in 

protecting and strengthening U.S. interests in Northeast Asia. 

However, the alliance and USFK have not been exempt from 

turbulence. Sometimes bilateral relations have fallen into trouble 

due to South Korea’s domestic politics, the two allies’ different 

views on North Korea, or one party’s illegal lobbying or influence 

peddling. The United States unilaterally decided to withdraw 

U.S. ground forces or reduce their size significantly in spite of 

South Korea’s strong opposition in 1971, 1977, and 1989. The very 

success of the ROK-U.S. alliance has also sown the seeds of its 

transformation. As South Korea has grown strong in economic and 

defense capabilities, the initial imbalance between the two allies in 

the allocation of defense burdens and decisionmaking power had 

to be modified. Moreover, the breakdown of the Soviet bloc and the 

weakening of North Korea have fundamentally transformed the 

external environment. The very fact that conflicts have occurred over 

sharing the costs of stationing U.S. forces in South Korea reflects this 

changing nature of the alliance. 
36

This essay is about cost-sharing debates between the ROK and 

the United States, and their implications for the bilateral alliance. Our 

arguments are three-fold. First, ROK-U.S. cost-sharing debates have 

occurred in an inappropriate way so they tended to divide the two 

allies. When the issue of cost sharing for USFK gained importance in 

the security dialogues between the ROK and the United States in the 

late 1980s, Americans were seriously considering the reduction of 

USFK, while South Koreans began to doubt the American commitment 

to the defense of their country. In other words, South Korea was 

asked to increase its share of the burden for maintaining USFK just 

when the United States was preparing for the reduction of its military 

commitment. Accordingly, South Koreans tended to believe that the 

United States was taking advantage of the troop withdrawal card for 

the purpose of gaining more concessions from its ally. 

Second, it is natural that there have been significant differences 

over how to measure the two allies’ respective shares of USFK costs. 

The issues of which costs to include and how to measure them 

for calculating host nation support have been especially divisive. 

Moreover, cost-sharing debates between the ROK and the United States 

have gained importance in another, very unexpected way: They came 

to provide each of the two allies with rare but fertile opportunities to 

express discontents and demands vis-à-vis the partner on the current 

state and future development of the alliance. As a very complicated 

process, cost-sharing debates exhibited many subtle and difficult issues 

involved in alliance politics.

Third, the question of fairness in cost-sharing debates can hardly 

be resolved through the adoption of sophisticated indicators or 

measurement techniques. Rather, it is primarily related to how to define 

the nature and mission of the alliance itself in the changing internal and 

external environment. Now it is time for the Republic of Korea and the 

United States to evaluate the state of their bilateral alliance and find a 

new vision for the future. 

The rest of this essay is composed of four sections. The following 

three sections are devoted to support of the three arguments mentioned 

above. The last section is a conclusion.

 

ROK-U.S. Cost Sharing: Background and Trend.

The U.S. forces came to the Korean peninsula in 1945, together with 

Soviet forces, to disarm the Japanese army and liberate the Japanese 
37

colony. Before the establishment of the South Korean government, the 

United States governed the southern half of the peninsula through 

a military government. U.S. forces left the country in keeping with 

the U.S. policy decision to exclude the Korean peninsula from its 

defense line in East Asia. 

The outbreak of the Korean War in 1950 brought U.S. forces 

back to the peninsula as the core part of the United Nations forces 

to rescue South Korea. After the cease fire agreement, the ROK and 

the United States concluded the Mutual Defense Treaty and agreed 

to station substantial U.S. forces in South Korea. This was the origin 

of the current USFK (see Figure 1). During the early decades of 

ROK-U.S. relations, the United States was the dominant partner 

and provided substantial economic and military assistance. It was 

believed that strengthening South Korea’s economic and defense 

capabilities would make it a bulwark against Communist influence 

on the peninsula and in Northeast Asia. 

Source: Lee Sang-Hoon, The Security Environment of the Korean Peninsula in the 21st 

Century and the Role of the USFK (in Korean), Sungnam: The Sejong Institute, 2001, 

p. 28.

Figure 1. The Number of U.S. Troops in South Korea.
38

However, even during that period, South Korea was not a free 

rider. South Korea provided free land for USFK bases and supported 

manpower through the Korean Augmentation to the U.S. Army 

(KATUSA) program and its operation costs. South Korea also sent 

combat troops to the Vietnam War. In the 1970s, U.S. demands 

for South Korean contributions to USFK intensified.1 In 1974, for 

instance, the United States asked South Korea to provide logistics 

support, especially the costs for storage and maintenance of war 

reserve stocks for allies (WRSA) and financial support for carrying 

out combined defense improvement projects (CDIP). After 1976, 

South Korea carried the burden of providing the operations cost of 

the Joint United States Military Assistance Group-Korea (JUSMAGK). In 1983, South Korea also began to share the operational cost of 

the ROK-U.S. Combined Forces Command (CFC). 

This trend of increasing cost sharing reflected, in part, South 

Korea’s economic success.2 However, it was also during this period 

that the United States unilaterally decided to reduce or pull out of the 

USFK. President Richard M. Nixon declared his “Guam Doctrine” 

and decided to reduce USFK by 20, 000 by June of 1971. President 

Jimmy Carter announced his 3-stage plan in 1977 to withdraw USFK 

ground combat forces by 1982. In this context, the United States 

pressed South Korea to take more of the burdens of USFK, and 

South Korea had little choice but to agree.3 From the South Korean 

perspective, according to Professor Ryoo Jae-Gab, “it was utmost 

important to keep U.S. forces in South Korea by all means.”4 South 

Korea was willing to share the costs of the USFK in order to keep 

U.S. forces. 

U.S. demands for cost sharing greatly intensified in the late 1980s 

and early 1990s.5 Two factors were especially responsible. First, 

the burgeoning budget deficit was a serious concern in Congress. 

Second, the collapse of the Soviet empire led the American people 

to expect a “peace dividend” in the form of defense budget 

cuts. Accordingly, those cuts became an important target for the 

reduction of the budget deficit. The question was: how to cut the 

defense budget? One easy solution was reduction of overseas 

defense expenditures6 because the United States could blame allies 

for not cooperating in sharing the defense burden and the post-Cold 

War international environment made it possible to reduce overseas 

military commitments. The United States could achieve its objective 
39

in two ways: reduce the absolute size of overseas forces or increase 

the allies’ contributions to the costs of stationing U.S. forces.

South Korea and USFK were directly influenced by this. From 

1986 on, South Korea was asked to directly contribute in cash to 

share the costs of the USFK. After a tense bilateral negotiation, 

South Korea began to pay direct support for USFK from 1989. In 

early 1991, the ROK and United States concluded a multi-year costsharing agreement in the form of the Status of Forces Agreement 

(SOFA) Special Measures Agreement (SMA) for the 1991-95 period. 

According to this agreement, South Korea was to increase its 

contributions to a third of USFK’s won-based costs (WBC), which 

meant U.S.$300 million in 1995 (see Figure 2).

While South Korea was pressed to increase its contributions for 

USFK, the United States decided in 1989, once again unilaterally, to 

Source: Ministry of National Defense, White Paper 1999 and 2000; Korea Times, September 9, 2001. The preliminary data for the year 2002 is based on the ROKU.S. agreement at the 2001 Security Consultative Meeting. Korea Times, November 

25, 2001.

Figure 2. South Korea’s Direct Payment for

USFK Stationing Costs (Unit: U.S. $ million).

cut U.S. Forces. According to a new 3-stage reduction plan, USFK 
40

was to be reduced by 7,000 for the first 3 years until 1992. The second 

and third stage reductions were to be made after a review of the 

previous achievements. However, the second stage reduction plan 

was never implemented due to the North Korean nuclear issue. In 

1995 the United States decided to maintain the current level of its 

forces in the region. According to the Defense Department’s East 

Asian Strategic Report, the United States has vital interests there 

and will maintain the forces to defend them.7 

Also in 1995 the ROK and the United States completed another 

round of negotiations for a multi-year cost-sharing scheme. This 

time, calculating South Korea’s contributions on the basis of the 

WBC was dropped. Instead, South Korea was to increase its total 

contributions by 10 percent per year for 3 years from the 1995 base, 

or U.S.$300 million. In South Korea, this was welcomed, as it was 

expected to reduce the rate of increase in the contributions.8 When 

the East Asian financial crisis hit South Korea in 1997-98, the United 

States allowed South Korea to pay a part of its contributions in 

Korean Won instead of U.S. dollars, which meant some alleviation 

of the Korean burden. 

Since 1999 the ROK and the United States have negotiated South 

Korea’s contributions for USFK each year. For 2000 and 2001, South 

Korea agreed to increase its direct contributions to U.S.$391 million 

and U.S.$444 million, respectively. Although the allies have found 

a compromise solution so far, many factors have complicated the 

negotiations. 

U.S. demands for increased contributions have been made during 

a declining U.S. commitment to Korean security. The United States 

made unilateral decisions to reduce or withdraw its forces while 

demanding more for maintenance of USFK. This was a very shortsighted policy for two important reasons. First, it aroused a very 

negative feeling on the Korean side about cost sharing, making the 

negotiations controversial and divisive. Second, U.S. policy put the 

future of the alliance in a negative light, preventing the allies from 

developing a new vision for the alliance. These are the main subjects 

of the following two sections.

 
41

Debates over Cost Sharing: A Korean Perspective.

If USFK produces a collective good, both South Korea and the 

United States have to pay the costs for its production. Few people in 

South Korea flatly deny the need for making a contribution to USFK. 

However, there is much disagreement between South Korea and the 

United States on how to measure the benefits and costs of USFK and 

their allocation. Recent cost-sharing negotiations came to be an arena 

in which each party could raise its demands and discontents with 

great implications for the future of the alliance.9 In the following, we 

pick four broad issues that have been considered most important 

from the South Korean perspective. 

South Korea’s Fair Share.

Many in South Korea think their country’s contributions are too 

heavy.10 One of the main reasons is related to the measurement of 

South Korea’s contributions, which we deal with in the next item. 

Two other reasons are often mentioned. First, South Korea’s relative 

burden is heavier than those of the other U.S. allies. According to 

research by Dr. Nam Chang-hee, when he was working for the 

Korea Institute for Defense Analysis, South Korea’s contributions 

as a percentage of its gross domestic product (GDP) and defense 

expenditure far exceed those of Germany and Japan.11

Table 1 provides a comparison of contributions by Germany, 

Japan, and South Korea. The data in Table 1 are based on the 

U.S. Department of Defense report on the allied contributions. 

In absolute terms, Japan is an outstanding contributor, the only 

country that satisfied the U.S. congressional requirement that the 

host country assume 75 percent or more of the costs of stationing 

U.S. forces. We can explain this by two factors peculiar to Japan: 

it has been constitutionally prohibited from maintaining its own 

armed forces; and, compared to the size of the economy, Japan’s 

defense expenditure has been very limited.12

In relative terms, however, South Korea’s contributions have 

been heavier. South Korea spent far more resources for defense than 

the other two countries. South Korea’s total support for USFK as a 

percentage of its GDP and its direct support compared to its defense 

budget have been heavier. This is why many Koreans believe that 
42

Host Country Support

 ($ million)

Direct Indirect Total

Number 

of U.S. 

Troops

Defense

Budget

($billion)

 Defense / Total Cost / Total Cost / D.Cost / 

 GDP GDP Personnel Defense 

 (%) (%) ($1,000) (%)

Germany 33.6 1344.1 1377.7 68,196 32.89 1.55 0.06 20.2 0.10

Japan 3957.2 1223.9 5181.1 40,244 2.18 1.03 0.13 128.7 9.38 

Korea 324.7 397.2 721.8 36,130 11.52 2.84 0.18 20.0 2.82

Source: Department of Defense, Report on Allied Contributions to the Common 

Defense, March 2001 and March 2000.

Table 1. Comparative Cost Sharing, 1999.

their portion of the cost sharing is not fair.

Second, South Korea’s support has increased very rapidly.13

According to Nam Chang-Hee, while it increased by 32.3 percent 

per year from 1994 to 1997, Japanese support increased only by 

5.4 percent and German support decreased by 57.3 percent for the 

same period.14 As we can see in Figure 2, South Korea’s support 

increased continuously except in 1999, when the financial crisis hit. 

Moreover, this occurred when the United States planned to reduce 

the size of USFK, which made South Koreans feel that their share of

the costs was much heavier.

Measurement of South Korea’s Contributions.

South Korea’s continuous complaints about the United States 

in the cost-sharing negotiations are related to the latter’s refusal 

to include some of its contributions.15 Two important items are the 

support of Korean forces to augment U.S. forces (KATUSA) and 

the provision of land for USFK bases and facilities. Although the 

KATUSA program supports USFK, the United States refuses to 

include this cost as a contribution. On the provision of land, the 

United States accepted only a very limited amount as a contribution. 

As a result, the U.S. estimate of South Korea’s contributions has been 

far lower than the Korean estimate.16

Table 2 compares those estimates for 1997. South Korea includes 

all the items the United States includes and then adds others not in-
43

Korean Version American Version

Direct 

Support

Cash

 

 364.5 Direct

Support

Rent 2.7 2.7

Operation & 

Maintenance

 9.8 Labor 186.5 191.3

Logistics

 

 20.5 Utilities 0 0

Facilities 3.4 Facilities 118.3 118.3

Subtotal 398.1 Miscellaneous 42.9 60.6

Indirect

Support

Facility Use such as 

ranges, etc. 26.5

Subtotal 350.4 372.9

Tax exemption

 

 153.8 Indirect

Support

Rent 277.6 277.6

Manpower support

 

59.9 Taxes 108.3 108.3

Subtotal

 

240.2 Miscellaneous * *

Rental 

Support

Exclusively used 

land and areas 

surrounding USFK 

facilities

1,557.0 Subtotal 385.8 385.8

Grand Total 2,195.4 Grand Total 736.2 758.7

Source: Ministry of National Defense, White Paper 2000, Appendix 14; Department 

of Defense, Responsibility Sharing Report, March 1999, p. D-9.

Table 2. Differences in Measurement of Korean 

Contributions, 1997 (Unit: $U.S. million).

cluded in the U.S. estimate. As a result, there is a big difference, 

about $1.4 billion, which means that South Korea’s contributions are 

greatly underestimated by the United States.17

Limitations on South Korean Sovereignty and Autonomy.

Recently, South Koreans have become much more sensitive 

about the unequal nature of the ROK-U.S. alliance. This sentiment 

was aroused by increased USFK-related criminal activities such as 
44

servicemen’s crimes and environmental accidents and the South 

Korean government’s inability to deal with these issues effectively 

due to the restrictions of the SOFA. It was in this context that 

South Korea tried to link the speedy revision of the SOFA with its 

contributions to USFK.18

Another issue that has attracted much concern and raised 

nationalist sentiment in South Korea is the restriction, through 

a ROK-U.S. memorandum of understanding, of South Korea’s 

freedom to develop medium-range missiles.19 South Koreans felt 

frustrated over this especially because it contrasted with North 

Korea’s ability to develop and export missiles. The public had great 

difficulty understanding why the United States established such a 

restriction. As long as USFK is perceived as a hindrance to South 

Korea’s national sovereignty and autonomy, the government has 

great difficulty in persuading its people to support it.

South Korea’s dependence on the United States for arms and 

U.S. restrictions on Korean development and transfer of military 

technology also have been the subjects of deep resentment. South 

Korea has purchased most of its arms from the United States. Many 

Koreans believe this has been the result of American lobbying and 

pressure and reflects the asymmetric relationship between the 

allies. Moreover, the United States has been very stringent on the 

transfer of military technology to South Korea and on granting the 

South Korean requests for the export of defense products to third 

countries.20 

Last, but certainly not least, South Koreans came to be concerned 

about rising cost sharing without a commensurate increase in South 

Korea’s responsibility and power. South Korea provided U.S.$500 

million worth of support for the Gulf War and actively participated 

in United Nations (U.N.) peacekeeping operations. South Korea also 

took up 75 percent of the costs for the provision of two light water 

reactors to North Korea in order to facilitate the implementation 

of the U.S.-North Korea Agreed Framework. South Koreans want 

responsibility and power-sharing in parallel with cost sharing visà-vis the United States. In fact, there has been a meaningful change: 

a transfer of the peacetime operational control of ROK forces 

committed to the Combined Forces Command to South Korea in 

December 1991. Nevertheless, many South Koreans feel that they 

pay the costs of the U.S.-led activities without participating in the 
45

decisionmaking process. Therefore, there are some who argue that 

the government has to link these issues to the level of support for 

USFK.21

The Nature of USFK.

Who benefits from USFK? The allocation of costs should be 

related to the allocation of benefits. We inevitably confront this 

question in the negotiations over cost sharing. In the ROK-U.S. 

negotiations, this question is primarily related to the nature and 

status of USFK. There has been a broad consensus between the 

allies that the primary objective of USFK is deterrence against North 

Korea. However, growing voices in South Korean society advocate 

other views.22 Some argue that, as USFK basically supports U.S. 

interests in Northeast Asia as well as the Korean peninsula, there 

is little need for South Korea to support its costs. Another view is 

that South Korea no longer needs USFK because North Korea is so 

weak that South Korea alone can handle it and because USFK is a 

hindrance to reconciliation and reunification of the two Koreas. 

Although these advocates are still a minority in South Korean 

society, the government cannot dismiss them in its negotiations on 

cost sharing.

ROK-U.S. Alliance in Transition: A New Vision?

Enduring conflicts over cost sharing have been mostly related 

to fundamental questions about the alliance, about its mission and 

vision for the future. After almost a half-century, the alliance has 

had several important challenges. Without serious efforts to redefine 

the long-term vision of the alliance, the two countries risk rising 

differences between them and a gradual loosening of the alliance. 

Let us discuss several sources of transformation the ROK-U.S. 

alliance has met and several hurdles the two allies have to resolve.

Sources of Transformation.

The external and internal environment of the alliance has 

undergone tremendous changes in the last half century, especially 

the past decade. Let us mention briefly a few important factors 
46

that require that South Korea and the United States rethink their 

alliance. 

First, the collapse of the Cold War structure has had a great 

impact on the foreign and security policies of each country and on 

the alliance. South Korea has achieved diplomatic normalization with 

North Korea’s two key former allies, Russia and China. The United 

States does not have to worry about Soviet expansion in Northeast 

Asia. These changes, togetits with the weakening of North Korea, 

have reduced the relevance of the old mission of the alliance. 

Second, the role of the United States as a single superpower in 

the post-Cold War world has been greatly expanded. The United 

States nowadays is involved in virtually every corner of the world as 

a world policeman or balancer. This has important implications for 

the alliance because the two countries must decide on the U.S. role 

in the changed world.

Third, South Korea’s economic success and democratization have 

also changed the bilateral relationship. In the early years, South 

Korea was a recipient of U.S. economic and military aid. However, 

the relationship has been changing towards a partnership as South 

Korean economic capabilities have increased. This is reflected in the 

security arrangement between them, with the United States playing 

“a supporting rather than a leading role in deterrence against 

the North.”23 South Korean democratization has added another 

dimension to the alliance. South Korea’s domestic politics has had 

important repercussions on the negotiation agenda and relative 

power within the alliance. 

Fourth, the weakening of North Korea and improvements in 

inter-Korean relations have the potential to fundamentally transform 

the nature of the alliance and the status of USFK. A quasi-collapse 

of North Korea and/or establishment of peace on the peninsula will 

make many in South Korea and the United States doubt the need 

for USFK, let alone the alliance. If this is a possible scenario, the two 

countries have to start serious discussions for the future of their 

alliance.24

Fifth, China’s rise and the U.S.-China relationship will also have 

a great impact on South Korea’s foreign policy and the alliance. Due 

to geography and deepening economic relations with China, South 

Korea has to be very sensitive to the rise of China. Someday, South 

Korea may face a serious dilemma in choosing between the United 
47

States and China, if the U.S.-Chinese relationship deteriorates. This 

is another reason for redefining the alliance. 

Some Problems Ahead.

When the two allies try to redefine the future of their alliance, 

they may face several important challenges. Without resolving them 

the alliance cannot have a clear future. Let us discuss three of them 

briefly. 

The United States and Two Koreas.

It is quite natural that South Korea and the United States have 

different interests in North Korea and different lenses through which 

they see and understand North Korea. Developing a shared interest 

and a common perspective on North Korea is a big challenge. If 

the two countries are suspicious of each other’s intentions and 

movement vis-à-vis North Korea, they may face serious troubles 

in their alliance.25 It is imperative for the two countries, possibly 

with Japan, to develop a close coordination of their North Korean 

policies.

The Relationship between the ROK-U.S. and U.S.-Japan 

Alliances.

Some in South Korea believe that the ROK-U.S. alliance is 

secondary to the U.S.-Japan alliance in the U.S. East Asian strategy.26

They believe that U.S. restrictions on South Korean missiles and 

defense industries are related to U.S. relations with Japan having 

primacy. When we consider the uneasy relationship between the 

ROK and Japan, the merger of the two alliances into a multilateral 

alliance is not practical, at least for the time being. However, any 

redefinition of the ROK-U.S. alliance must deal with its relationship 

with the U.S.-Japan alliance. 

Out-of-the Korean Peninsula Issues.

As the role of the United States has risen globally, the question 

arises as to whether the ROK-U.S. alliance will be used for out-of-
48

Korea purposes. As we can see with NATO, the expansion of U.S. 

responsibilities is accompanied by a corresponding increase in the 

role of NATO. Currently, the United States takes advantage of South 

Korean bases for its global missions. The United States also prods 

South Korea to take part in global activities such as U.N. peacekeeping 

operations and the Gulf War. Therefore, the redefinition of the ROKU.S. alliance will certainly involve the question of how to use the 

alliance for activities outside Korea. 

Towards a New Vision?

Faced with deepening conflicts over cost sharing for USFK and 

the increasing need to transform their relationship, South Korea and 

the United States have to find a new vision for the alliance.27 From 

a South Korean perspective, the alliance has greatly contributed 

to peace and stability and can do so in the future. Therefore, it is 

wise and rational for the two countries to maintain and develop the 

alliance with some modifications.28

First, they have to identify a new vision based on their shared 

interests and common purposes beyond deterrence. Table 3 provides 

a rough summary of the costs and benefits for each country from a 

Korean perspective. Many scholars in South Korea believe that 

the two countries share an interest in Northeast Asian peace and 

stability, so this should be included as a primary goal.

ROK US

Benefits - Deter North Korea

- Trip-wire for American Involvement

- Northeast Asian Stability 

- Economic Benefits

- Protect Alliance with Korea 

and Japan 

- Forward Deployment in 

Northeast Asia and Enhanced 

U.S. Influence over the Region

- Contain Russia/China

Costs - Loss of Political and Strategic Autonomy

- Instigate Northern Triangle comprising North Korea, 

China, and Russia

- Economic Burden 

- Risk of Automatic 

Involvement in Korean Crisis 

Table 3. Benefits and Costs of USFK to the ROK and United 

States from a Korean Perspective.
49

Second, USFK has to stay in South Korea even after peace or 

unification. As we see in Table 4, the public attitude to USFK has 

been quite favorable in South Korea. Although there has been a 

significant decrease recently in the number of people who favor 

USFK, the proportion is still significant, and very few South Koreans 

want a complete withdrawal. The problem is that the United States 

has often unilaterally decided to reduce or withdraw USFK.

September 

1992

June 1995 September 

1997

July 2000

Stay

- Even after unification

- As long as South-North 

confrontation continues 

(42.5)

 4.9

 37.6 

41.5

 

 

(58.5)

 5.9

 54.6

 

27.1

Pull out gradually/in stages

 

44.9 45.6 30.3 63.2

Pull out shortly/complete 

withdrawal

 

4.8 5.9

 

2.4

 

9.0

Don’t know

 

- 6.9

 

6.9

 

-

Source: Data for September 1992 and 1997, public opinion survey by the Joongang 

Ilbo; data for June 1995, national attitude survey by the Sejong Institute; data for 

July 2000, public opinion survey by the Korea Daily, July 18, 2000.

Table 4. Public Attitude towards USFK in South Korea.

Third, the Mutual Defense Treaty has to be revised to guarantee 

automatic involvement of the ally in case the partner is invaded. 

Articles 2 and 3 of the current Treaty reads: “The parties will consult 

together whenever, in the opinion of either of them, the political 

independence or security of either of the Parties is threatened by 

external armed attack,” and each of the Parties, “would act to meet 

the common danger in accordance with its constitutional processes.” 

This has been understood in South Korea as not guaranteeing 

automatic involvement of the United States.29 This limitation has 

made South Koreans worry about their security and insist on the 

presence of USFK. Now the bilateral relationship needs to go beyond 

the immediate defense of South Korea. South Korea and the United 
50

States have to share a common destiny for the future, which can be 

realized by the guarantee of each party’s automatic involvement if 

the other is invaded.

Fourth, the asymmetric bilateral relationship has to be changed 

into a partnership between equals. South Korea has been complaining 

about inequalities in rights and duties within the alliance and various 

restrictions on its sovereignty and autonomy. Cost sharing should be 

accompanied by responsibility and power sharing. With one party 

having a great many complaints against the other, the alliance cannot 

have a safe foundation for the future. 

Conclusion.

Cost sharing for USFK can be considered a minor issue in the 

alliance. However, it has provided the two allies with a channel to 

discuss and evaluate the current state of their alliance and its future. 

Researchers can also take advantage of this small window to look 

into many big problems the alliance has faced. 

From the South Korean perspective, the ROK-U.S. cost-sharing 

debates have occurred in an inappropriate way. The United States 

wanted South Korea to pay more for the weakening USFK. The 

withdrawal or reduction of USFK can be considered by South 

Koreans as lack of commitment on the part of the United States. 

The U.S. request for increased cost sharing was based on the purely 

American logic and necessity and cannot be justified from the 

Korean perspective. 

South Korea could raise many of its discontents via the costsharing debates. The ROK has had a real interest in making the 

alliance a partnership of equals. South Korea wanted responsibility 

and power sharing in tandem with cost sharing. However, this cannot 

be resolved merely through more sophisticated measurement. It is 

inevitably and fundamentally related to redefinition of the alliance 

for the future. Many factors have required modification of the 

alliance. However, the allies have so far failed to deal with this issue. 

In this essay, we identified four modifications which seem necessary 

and important: a new vision, the continuation of USFK after peace, 

guarantee of automatic involvement in case of war, and equal 

partnership. It is now time for South Korea and the United States to 

seriously think about the future of their alliance. 
51

ENDNOTES - CHAPTER 3

1. Republic of Korea Ministry of National Defense, Defense Cost Sharing (in 

Korean), Seoul: MND, 1988.

2. Charles Wolf, Jr., and Jong-Sup Han, Korean and U.S. Economic and 

Technological Capabilities to Support Defense Burdens, RAND Note N-3327-NA/

USDP, Santa Monica, CA: RAND, 1992.

3. The American decision to withdraw its forces was perceived as a catastrophe 

by most South Koreans and the Park Chung Hee government. In face of this 

crisis, President Park decided to pursue a “self-reliant defense” policy with the 

development of defense industries. 

4. Ryoo Jae-Gab, “Korean Perspective on the United States Forces Korea” (in 

Korean), in Kang Seong-Hak, et al., The United States Forces Korea and the Security 

Cooperation between the Republic of Korea and the United States, Sungnam: The Sejong 

Institute, 1996, pp. 84-85.

5. Park Sun-Seoup, et al., A Study on the Support Policy for the USFK (in Korean), 

Seoul: Korea Institute for Defense Analysis, 1998.

6. In the context of NATO, Simon W. Duke identified why “overseas defense 

expenditure has tended to make a particularly attractive target for cuts in the U.S.”: 

First, “it is politically easier to blame the failure of internal economic programs on 

an external or foreign drain, such as the cost of the U.S. contribution to NATO.” 

Second, “the purported inequalities of the burdensharing debate are simple to 

present and rapidly engender a strong, but at times xenophobic, response. It 

is, in other words, a good vote catcher.” Third, “the changes in Eastern Europe 

and the Soviet Union have undermined some of the consensus for maintaining 

high military expenditure, particularly of ungrateful allies who may no longer 

be subject to the same threats.” Simon W. Duke, the Burdensharing Debate: A 

Reassessment, London: Macmillan, 1993, p. 10.

7. Department of Defense, Office of International Security Affairs, United States 

Security Strategy for the East Asia-Pacific Region, Washington, DC: U.S. Government 

Printing Office, 1995.

8. Chosun Ilbo, November 4, 1995; Dong-a Ilbo, November 4, 1995.

9. It was also the case with NATO. See Duke, “The Burdensharing Debate”; 

and Keith Hartley and Todd Sandler, “NATO Burden-Sharing: Past and Future,” 

in Journal of Peace Research, Vol. 36, Issue 6, 1999.

10. However, there may be many Americans who feel in the opposite way: that 

South Koreans free ride on the U.S.-provided security in spite of their economic 

capacity for their own security. If one may admit that cost sharing is primarily 

related with economic capacity, one can argue that South Korea has to increase its 
52

own share of the defense burden.

11. Nam Chang-Hee, “A Study on South Korea’s Appropriate Defense Cost 

Sharing” (in Korean), Journal of Strategic Studies, No. 11, 1999.

12. Then why is German direct support too low? According to the Department 

of Defense:

There is no tradition in Europe of providing the kind of direct 

cash and in-kind support provided by Japan and Korea, since the 

emphasis in NATO for many years has been on strengthening 

participation in the military roles and missions of the Alliance. 

Furthermore, our NATO allies make a variety of other 

responsibility sharing contributions, ranging from participation 

in peacekeeping operations to provision of substantial foreign 

assistance to enhance global stability.

Department of Defense, Report of the Allied Contributions to the Common Defense, 

March 1997. 

13. According to the latest agreement, South Korea’s cash provision will 

increase 10.4 percent in 2002 and by 8.8 percent plus the GDP deflator for 2003 and 

2004 respectively. Korea Times, November 25, 2001. 

14. Nam Chang-Hee.

15. Park Sun-Seop, et al., 1998; Peter Hayes and Stephen Noerper, “The ROKU.S. Alliance: Who Benefits?: An Impartial View,” in Tae Han Kwak and Thomas 

L. Wilborn, eds., The U.S.-ROK Alliance in Transition, Seoul: Kyungnam University 

Press, 1996, p. 54.

16. Korea Herald, February 1, 1999.

17. This underestimation was caused by the change that was made in 1996 

by the United States with regard to the methodology of calculating the indirect 

support. Before that change, the United States estimated that South Korea’s 

indirect support was valued at U.S.$1,429 million for 1995, but, as a result of the 

methodology change, it was reduced to U.S.$385.8 million for 1997.

18. Dong-a Ilbo, July 11, 1996; Korea Times, April 16, 1999.

19. Korea Times, April 16, 1999.

20. Koo, Sang-Hoe, Korea’s Defense Industry: Prospect and Policy Responses (in 

Korean), Sungnam: The Sejong Institute, 1998.

21. Hankyoreh Daily, September 28, 1995.
53

22. One may argue that USFK has performed many roles in the changing 

international environment. Very briefly, we can differentiate three different roles at 

three different levels. At the global level, USFK was a bulwark against Communist 

expansion. In Northeast Asia, it has worked as a balancer for regional stability. At 

the Korean peninsula level, USFK was primarily a deterrence force against North 

Korea. Which role has been most important? Perhaps the changing environment 

has the answer. As the global bipolar structure has dissolved, USFK’s global role 

has diminished. As South Korea has gained economic and defense capabilities to 

cope with the threats from North Korea, the importance of USFK as a deterrent 

against North Korea has also been reduced. Therefore, many Korean specialists 

perceive the primary role of USFK as changing towards a regional balancer or 

stabilizer. Kim, Tae-Hyun, “The USFK and the Future of ROK-U.S. Military 

Cooperation” (in Korean), in Baek, et al., ROK-U.S. Military Cooperation: Present 

and Future, Sungnam: The Sejong Institute, 1998. See also Lee Chun-Kun, “New 

East Asian Strategy of the United States and the USFK” (in Korean), in Kang, 

Seong-Nak, The United States Forces Korea; and Han, Sung-Joo, “The Korean’s New 

Century,” Survival, Vol. 42, No. 4, Winter 2000, pp. 85-96.

23. Scott Snyder, “New Challenges for U.S.-ROK Relations,” Korea and World 

Affairs, Vol. 24, No. 1, Spring 2000, p. 31.

24. Narushige Michishita, “Alliance After Peace in Korea,” Survival, Vol. 41, 

No. 3, Autumn, 1999, pp. 68-83. 

25. The Agreed Framework between the United States and North Korea has 

often been perceived in South Korea as an example of America abandoning its 

ally for its own interests. For instance, “If Washington regards South Korea’s 

burden-taking of the LWR [light water reactor, ed.] project as given for free, it 

will be misreading public sentiment. On the other hand, Pyongyang is likely to 

continue to shift the burden on Seoul through talks with Washington as it tries to 

isolate Seoul completely.” Yong-Sup Han, “The Future of the United States Forces 

Korea” (in Korean), in Kang Seong-Hak, et al., The United States Forces Korea, 1996, 

p. 132.

26. Lee Chun-Kun, “New East Asian Strategy,” 1996.

27. Ko Sang-Tu, “Change of Alliance Model in the Post-Cold War: 

Comparative Study of Germany and Korea,” Korean Political Science Review, Vol. 

35, No. 2, 2001.

28. Han Sung-Joo, “The Korea’s New Century,” 2000-01.

29. Ryoo Jae-Gab, “Korean Perspective,” p. 83; Baek Jong-Chun, “The 

Direction of Development of the ROK-U.S. Combined Forces Command Structure” 

(in Korean), in Baek, et al., “ROK-U.S. Military Cooperation.”

55

CHAPTER 4

ASSESSING THE COSTS OF THE U.S.-KOREAN ALLIANCE:

AN AMERICAN VIEW

Tong Whan Park

Goals, Needs, and Costs of the Alliance.

There are many ways of evaluating the costs of a foreign policy 

action. Especially for a long-term commitment like a formal alliance, 

not only the costs but also the methods of its evaluation may become 

the source of controversy. The U.S.-Korean alliance is no exception, 

and it will be subjected to an even more careful scrutiny than before, 

now that the international environment of Northeast Asia is entering 

a new phase of uncertainty. Uncertainty is caused not only by such 

idiosyncratic developments as the election of George W. Bush as 

U.S. president and Kim Dae-jung’s overzealous engagement policy 

toward Pyongyang, but also more structural transitions including 

China’s rise in the global hierarchy. In such a fluid setting, is 

America paying too much, or too little, to maintain its alliance with 

South Korea? What should be the scales with which to measure the 

appropriateness of the costs? If the United States is not content with 

the current level of commitment — whether too high or too low 

— how can it bring about changes?

When discussing the costs of the U.S.-Korean alliance, there 

is a natural tendency to jump into bean counting in terms of the 

dollars, personnel, and equipment required to maintain U.S. Forces 

in Korea (USFK). But the most logical starting point in evaluating 

the costs is to examine the goals of the alliance. Before concluding 

whether one has “paid too much for the whistle,” one should ask 

whether the purchase meets one’s desire. What, then, are the goals 

of the alliance? More precisely, what does Washington want from 

it? As stated in the 1953 Mutual Defense Treaty and manifested 

in the numerous cases of combined defense against the common 

threat, the alliance is primarily intended to protect the integrity of 

South Korea.1 It provides deterrence to maintain the armistice on the 

peninsula and, should deterrence fail, the war-fighting capacity to 
56

defeat North Korean aggression. Defeating Pyongyang’s aggression 

does not necessarily mean winning the war to the extent of achieving 

unification through military means. Instead, Washington maintains 

its security relationship with Seoul for the purpose of preserving 

peace and stability on the Korean peninsula.

When World War II ended, the United States could only divide 

the Korean peninsula when confronted with stiff resistance from the 

former Soviet Union. During the Cold War era, the United States 

was in no position to alter the division in Korea for fear of escalation 

into a global nuclear war. U.S. General Douglas MacArthur had 

to be retired in the middle of the Korean War when he advocated 

bombing Manchuria after the Chinese troops intervened in the 

winter of 1950. Washington allegedly kept a close watch on Park 

Chung-hee — lest he retaliate — when Pyongyang’s commandos 

came within striking distance of the Blue House in 1968; and even 

at the time of the Aungsan (Rangoon) massacre in 1983 and other 

terrorist acts perpetrated by the North, the United States was 

apparently concerned with the possibility of a northern expedition 

by the angered South.

Although the global Cold War ended more than a decade ago, a 

local version still goes on in Korea. Whereas it is mostly Pyongyang’s 

calculated risk-taking that has delayed rapprochement in Korea, 

Washington has not taken advantage of the openings provided 

by Pyongyang — the windows of opportunity to call its bluff and 

end the Korean War at long last. Even the plan to launch a surgical 

strike on Yongbyon’s nuclear facilities in the summer of 1994 did 

not materialize as soon as Pyongyang made a diplomatic overture 

of accommodating Washington’s proposal to build two light-water 

reactors.

Hence the bottom line is that the alliance and USFK are there to 

maintain the military status quo on the Korean peninsula. Going one 

step further, a Realpolitik supposition can be made that Pyongyang 

may not object to this “peacekeeping” role for USFK.2 If so, the 

costs of the alliance — the portion dealing with USFK in particular 

— should be evaluated from the standpoint of “dual deterrence.” 

After all, a stone that can kill two birds should be considered more 

cost-effective.

The notion of dual deterrence raises the question of who needs 

USFK more or most? During the Cold War era, and especially when 

the South Korean economy was taking off under the protective 
57

umbrella of America’s hegemonic stability, Seoul was undoubtedly 

the largest beneficiary of the alliance. At least that was the attitude 

held by many South Koreans who had neither the time nor temerity 

to calculate the benefits accruing to Washington from the invaluable 

foothold on the Asian continent. Even today, the majority of those 

in the establishment hold an extremely positive view about USFK 

although they may differ from their predecessors about who gains 

more from the alliance. The current generation of South Koreans 

appears to believe that Seoul and Washington benefit equally from 

USFK. When the Pyongyang regime is thrown in as the third player 

who may profit from America’s military presence in the peninsula, 

then a potentially important query emerges about how long North 

Korea can be left to enjoy the status of a free rider. For some time to 

come, it would be preposterous to ask Pyongyang to share the burden 

of supporting USFK. And North Korea’s leaders will continue to 

make an issue of the foreign troop presence for two reasons. One 

is to engage the United States in bilateral dialogue while bypassing 

South Korea. After all, which issue could be more central than USFK 

in Pyongyang’s direct approach to Washington? The other is to hide 

from the ordinary residents in the North that the government may 

want to utilize the American troops as the guarantor of peace, and 

thus protector of the regime. As inter-Korean relations improve, 

however, the day will come when Pyongyang may have to help 

defray the cost of protection — not with money but with its policy.

Absolute Versus Relative Costs of Maintaining USFK.

Goals and needs of the alliance partners set the parameters within 

which the costs can be assessed. Especially at the level of subjective 

appraisal, numbers may not mean much. Should one partner need 

the alliance to guard its vital interest, the objective calculus of costs 

could become irrelevant. Once the general parameters are set and 

the pattern is established in managing the alliance, however, it is 

critical to undertake a periodic review of the costs. By so doing, the 

partners can fine-tune the alliance so that a radical and disruptive 

correction may be prevented.

The U.S.-Korean alliance has gone through such adjustments 

via close bilateral consultations and the main mechanism for that 

process has been the annual Security Consultative Meetings (SCM) 

held since 1968. Since the establishment of the Combined Forces 
58

Command (CFC) in 1978, the two allies have paid special attention 

to the issue of cost sharing for the maintenance of USFK. Over time, 

South Korea has increased its cash and non-cash contributions. 

Based on what is called the Special Measures Agreement (SMA), 

in particular, Seoul has increased its commitment in the areas of 

labor, logistics, ROK Funded Construction (ROKFC), and Combined 

Defense Improvement Projects (CDIP). In sum, it can be said that 

the burdensharing has been managed in a manner quite satisfactory 

to the American side, as expressed in the following assessment.

The Congressional goal for all cost sharing [SMA is one subset] 

was for the ROK to pay 62.5% of U.S. non-personnel stationing 

costs in Korea in 1999. The ROK actually paid $692 million out 

of $1.84 billion non-personnel stationing costs, or 38%. However, 

Korea still provided a substantial contribution compared to other 

nations when factoring in differences in gross domestic product. 

. . . The SMA is an important milestone in the alliance and serves 

the interest of both the ROK and the U.S. It demonstrates the 

commitment of a strong combined posture in which the ROK 

cost sharing contributions directly finance a significant portion of 

USFK’s non-personnel stationing costs.3

The United States appears satisfied with the current formula 

of burdensharing and South Korea seems willing to accommodate 

the wishes of its alliance partner. But is everything fine in the area 

of cost sharing? While the setup meets the goals and needs of the 

allies in actual costs disbursed, one should keep it mind that it is not 

etched in stone. Today’s division of labor is the result of a long series 

of negotiations and it is subject to change as the future unfolds. 

Inasmuch as the alliance and cost sharing are influenced by shifts in 

the domestic, peninsular, and international environment, it would be 

an exercise in futility to analyze all the determinants. Nevertheless, 

a modest beginning is needed in order to devise a framework with 

which to prepare for future developments.

The framework proposed here is designed to push the calculus 

of cost sharing a small step forward. It suggests that the allies look 

beyond the absolute figures as done in a typical budgetary decisionmaking process. Specifically, it recommends that they expand 

their horizon in two directions. One is to widen the concept of 

costs beyond the U.S. dollars and Korean won. In addition to the 

economic costs of the alliance and USFK, it is important to examine 
59

the military, political, and socio-cultural costs. The other is to try to 

evaluate the costs in the relative sense—e.g., relative to the absence 

of the alliance, other comparable arrangements, and the alliance 

partner, South Korea. When these two dimensions are combined, an 

illustrative chart can be constructed as shown in Table 1.

Although by no means exhaustive, the contents of Table 1 

definitely support a broadly positive assessment about cost sharing. 

Compared to the

absence of alliance

Relative to a 

comparable 

alliance (with 

Japan)

Relative to the 

alliance partner

(South Korea)

Military costs Low.

Massive rapid deployment 

is difficult in case of major 

contingency.

North Korea must have 

taken over the South.

Extremely low. 

Japan is the hub 

of America’s 

extended 

deterrence in 

Northeast Asia.

Extremely low. 

Korean armed 

forces are the main 

instrument of 

combined defense.

Economic costs Cumulated costs may be 

high, but are still acceptable 

compared to the costs of 

massive rapid deployment.

Loss of the South cannot 

be measured in monetary 

terms.

Far less than 

the costs of 

maintaining 

USFJ

Incalculably low 

measured against 

gross domestic 

product

Political costs Unthinkable.

Political value of South 

Korea as an ally is priceless.

Less than the 

WashingtonTokyo alliance.

South Korean 

government has 

been far more 

dependent 

on the United 

States for 

legitimacy and 

support.

Low beyond 

comparison.

South Korea has 

owed its survival to 

the alliance.

Socio-cultural costs Somewhat low.

In case of the North 

Korean takeover, the 

unified Korea may have 

followed Vietnam’s path of 

eventually accommodating 

the United States. 

Less.

Lower level 

of antiAmericanism in 

South Korea.

Low.

Costs of absorbing 

the American way of 

life by the Koreans 

have been higher 

than the opposite.

Table 1. Relative Costs.
60

The alliance and USFK are a good deal for South Korea, but an 

even better bargain for the United States. Nobody can foretell how 

long the current arrangement will last. As the internal and external 

conditions of the alliance change, a framework like the one shown 

here should hopefully serve as a guideline in future negotiations 

between the two countries. Evidently, most of the observations 

included in Table 1 must have been dealt with in previous bilateral 

talks. Nevertheless, what the template offers is a systematic way in 

which they can be factored in so that a better informed and more 

balanced compromise may be reached in defense cost sharing 

between the United States and South Korea.

USFK and the Inter-Korean Détente.

One variable that would affect the U.S.-Korean alliance most, 

and hence the stationing of American troops on the peninsula, is the 

inter-Korean détente. Put bluntly, what is to be done with USFK 

if the two Koreas one morning decide to go ahead with de facto 

unification? Even though such a scenario seems not even remotely 

plausible in the near to medium term, it should be given serious 

consideration. The mere appearance of the two Koreas moving in 

that direction would have tremendous implications not only to the 

defense burdensharing but also the presence of USFK itself.

Elsewhere, I have argued — and still hold — that, given the 

geostrategic and geoeconomic importance of the Korean peninsula, 

frictions could emerge between the inter-Korean process of 

rapprochement and the regional order each of the four surrounding 

powers wishes to see established.4 Of particular concern to the 

surrounding powers could be the prospect of the Korean people 

attempting to determine their own fate, which may not necessarily 

serve the vested interests of the big powers. Among the four major 

powers, the United States is in a position to wield the strongest 

influence over the Korean peninsula. It remains the blood ally 

of South Korea while it has become a “savior” for post-Cold War 

North Korea. Who could have imagined in 1945, when World War 

II ended, and 1953, when the Korean War halted, that Washington 

one day would play Godfather to both Seoul and Pyongyang? 

This sea change was, of course, the product of a global systemic 

transformation from which a small power like Korea could not 

escape. Likewise, one can suppose that another tectonic shift in the 
61

Northeast Asian international system may force the United States to 

reconsider its two-Korea policy.

Combine such a regional outlook with President George W. 

Bush’s determination to launch a missile defense (MD) program and 

it becomes clear that the United States will not be eager to change the 

status quo on the Korean peninsula. It does not hurt Washington’s 

MD plans for Pyongyang to remain a rogue state. Even without 

Pyongyang’s long-range missiles, the Bush administration must 

have gone ahead with the MD program. But why not make the best 

use of the North Korean missiles as a contributing factor? 

Faced with America’s hard line policy, both Pyongyang and 

Seoul are struggling to find a correct prescription for their respective 

U.S. policies. The task seems somewhat easier for South Korea’s 

decisionmakers, as they know that the United States will not be able 

to give up its only military foothold in continental East Asia. Being 

a nonresidential power, the United States needs its forces in Korea as 

a clear manifestation that it is a player in the Asian theater. And the 

costs of maintaining USFK are small compared to the alternatives 

of not having them or relocating them somewhere in the United 

States.

North Korea’s answer to Bush’s hard line approach has largely 

been rejection and brinkmanship. The case in point is Pyongyang’s 

irritation with the “conditions” implied in Washington’s decision 

to reopen talks with Pyongyang in June 2001. The United States 

insisted on its willingness to talk with North Korea without any 

preconditions, but this did not mean that Washington would 

commit itself to the kind of generous engagement policy pursued 

by Seoul. Specifically, the United States wants to discuss the full 

safeguard inspection of Pyongyang’s nuclear weapons facilities, the 

verification of its long-range missile capabilities, and conventional 

arms control. Did Pyongyang want to roll back its ultimate goal 

of improving relations with the United States? Most probably not. 

Instead, Pyongyang seemed to be jockeying for position to play ball 

with the Bush administration. Having for long taken advantage 

of Clinton’s goodwill, North Korea might find it uneasy to revert 

back to a confrontational mode. And Kim Jong-il must have learned 

that it could be dangerous to collide with the United States head 

on. Especially in the aftermath of the September 11 terrorist attacks 

on the United States, it is expected that Pyongyang would tread 

somewhat cautiously so as not to arouse Washington’s ire.
62

It is critical to note that the issue of USFK is in the dead center 

of the triangular relationship among the United States and the two 

Koreas. On one hand, USFK serves as a facilitator of the interKorean rapprochement. While USFK protects the South from the 

danger of North Korea’s military takeover and the North from an 

absorptive unification into South Korea, the two Koreas would enjoy 

more decision latitude in undertaking bilateral interactions. As the 

Koreans improve their relations and hence begin to shed the legacies 

of the Cold War, it is possible that they may demand a change in the 

makeup of USFK. As long as they require USFK for dual deterrence, 

the Koreans will favor the presence of American troops. At the same 

time, however, they will want to see some changes in the size and 

mode of deployment. Hypothetically, one may see a proportional 

downsizing in USFK commensurate with the improvement in interKorean relations.

Up to a certain point, the United States will most likely go along 

with the wishes of the Koreans: a measured drawdown while not 

losing a foothold on the continent will not be detrimental to the 

U.S. interest. If and when the Koreans find their modus vivendi for 

peaceful coexistence without the need for a peacekeeper in between, 

what should the United States do? Although this question poses 

challenges exceeding the issue of military cost sharing, the ultimate 

solution may be found in the model of the Washington-Tokyo 

alliance. The nature of the U.S.-Korean alliance and the mission of 

USFK will have to be modified to serve the changes in the strategic 

requirement of the two partners.

The September 11 Terrorism and the U.S.-Korean Alliance.

The September 11 terrorist attacks on America and the ensuing 

retaliatory strikes led by the United States against the Taliban regime 

in Afghanistan will in many ways affect the U.S.-Korean alliance 

and its cost sharing. My discussion so far has largely been based on 

the major trends in the United States and the two Koreas without 

considering this horrendous act of war against the sole superpower 

in the 21st century. The September 20, 2002, Quadrennial Defense 

Review, mostly completed before the attacks but subsequently 

altered, shows that the United States finds it necessary to change 

its priorities in defense and military preparedness. Originally, the 

Pentagon planners had proposed cutting the size of the military’s 
63

1.4-million-member active duty force and moving resources away 

from ground forces and into air power. But in its final form, the 

review avoided calling for specific cuts, shifts in force structure, or 

purchase of weapon systems. Instead, it asked for a greater role 

for the National Guard and Reserves in protecting U.S. interests 

at home, beefing up intelligence and surveillance efforts to fight 

terrorism, and moving carrier battle groups, ground forces, surface 

ships, and airplanes out of Europe and into the Persian Gulf and 

Asia to protect evolving U.S. interests abroad.5

This marks a departure from the fundamental reassessment of 

U.S. military capability that Defense Secretary Donald H. Rumsfeld 

had promised when he came into office. While the original plan 

could have led to a downsizing of USFK, the new policy put a stop, 

at least temporarily, to any discussion of military withdrawal from 

Korea. In addition, there will be heightened alert against North 

Korea that is known to have committed terrorism and supplied 

arms to the Middle East. When combined with Washington’s official 

abandonment of the strategy of winning two wars, the value of the 

U.S.-Korean alliance cannot but appreciate in the future. As a result, 

U.S. forces in Korea are not likely to face a drawdown, but to be 

reinforced, in necessary.

What will be the implications of this new development to the 

Korean situation? The most immediate impact will be felt by North 

Korea, whose leadership will have to think twice before continuing 

its hitherto “successful” diplomacy of extortion—at least vis-à-vis 

the United States. South Korea, too, will have to show prudence 

in its aid to the North so as not to irritate the United States. It 

will need to pay more attention to the question of reciprocity in 

which Pyongyang’s “good behavior” is expected in return for the 

assistance from the West. In particular, it will be imperative for the 

Roh Moo-hyun administration to emphasize policy coordination 

with Washington. Will the United States be able to go its way in 

relation to the two Koreas? As long as the United States leads a 

global war against terrorism — the campaign could indeed take a 

long time — this global campaign may complicate its dealings with 

both Seoul and Pyongyang.

Given such an outlook, the costs of common defense will almost 

certainly rise and the alliance partners will need to increase their 

respective shares of contribution. Breaking from the tradition, 

however, they will conduct cost sharing negotiations in a more 
64

amicable environment. Instead of a zero-sum approach, both 

Washington and Seoul are likely to see the alliance as a positivesum game in the post 9/11 world. For its part, Pyongyang may be 

expected to refrain itself from demanding a wholesale withdrawal 

of USFK. Until it becomes more self-reliant, North Korea will 

need the dual deterrence provided by America’s strong military 

presence in the peninsula. Moreover, Pyongyang will want to 

avoid America’s punitive sanctions by dissociating itself from 

terrorism. Paradoxically, the global crisis caused by the terrorist 

attacks on America may strengthen the U.S.-Korean alliance and, 

at least temporarily, help tame Pyongyang’s rogue behavior. In the 

short-term future, the crisis is expected to bring more security to the 

Korean peninsula.

ENDNOTES - CHAPTER 4

1. With the September 11 acts of terror against the United States, South Korea 

is in a position to fulfill the other half of the mutual defense pact. Seoul would 

assist Washington in combating global terrorism with military and non-military 

support. In fact, we may see competition among America’s allies all over the 

world to return the favor they received in the past. The Hankook Ilbo, Los Angeles 

edition, September 24, 2001.

2. Since the June 2000 inter-Korean summitry, Kim Dae-jung repeatedly 

mentioned in speeches that Kim Jong-il understood the protective role of the 

American troops against potential threats from the three residential great powers. 

Kim Dae-jung’s understanding is quite consistent with many informal signals 

from Pyongyang in the last two decades. On his month-long visit to Russia in 

August 2001, however, Kim Jong-il was able to place the issue of U.S. forces 

in the joint declaration with Putin. Though the declaration did not demand 

withdrawal of American troops, it put Seoul in a difficult position. With Kim 

Jong-il apparently back to square one on this, Kim Dae-jung faced an uphill battle 

in domestic politics. Did Kim Jong-il “abandon” Kim Dae-jung? Or did Kim Daejung misinterpret Kim Jong-il’s signals last year? I believe the truth is neither. 

Being a realist, Kim Jong-il most probably sees the utility of the American troops 

as a foreign legion, which serves two purposes. One is to deter South Korea from 

attacking the North, while the other is to check the territorial and other ambitions 

of China, Russia, and even Japan. Because he is schooled in Realpolitik, he should 

also understand that the U.S. troops are an issue over which he has definite 

leverage against Washington. The United States has been pushing Kim Jong-il 

to the corner with the issues of nuclear weapons development and long-range 

missiles. With the issue of foreign troops, however, Kim can be on the offensive. 

Kim would thus vacillate between the two positions of recognizing the utility of 

the U.S. troops and denouncing their presence.
65

3. U.S. Forces Korea: Resource Management Fact Book (2000 Korean War 

Commemoration Edition), prepared by Assistant Chief of Staff, Resource 

Management, Headquarters U.S. Forces Korea, p. 39. In addition to SMA, the costsharing category included such direct costs as rents, Korean military augmentee 

labor, and relocation construction, as well as the indirect costs of revenues and 

taxes plus foregone rent.

4. For more discussion of why inter-Korean rapprochement may conflict 

with the policies of the major powers, see Tong Whan Park, “The Challenges of 

Balancing the Inter-Korean Détente with the Big Power Politics.” James M. Lister, 

ed., The Political Economy of Korean Reconciliation and Reform, Washington, DC, The 

Korean Economic Institute of America, 2001, pp. 9-18. 

5. Los Angeles Times (Orange County Edition), October 2, 2001.

67

CHAPTER 5

THE CONTINUING ROLE OF THE UNITED NATIONS 

IN THE FUTURE OF KOREAN SECURITY

 

Kyudok Hong

Introduction.

With the inauguration of President George W. Bush on January 

20, 2001, a new chapter opened in the ongoing effort of the United 

States to coordinate policy toward North Korea with the Kim Daejung government. With the end of Cold War, the balance of power 

on the Korean peninsula has unraveled, and the North has taken 

increasingly risky and desperate steps to shore up prospects for 

its survival, undermining the stability that the Cold War balance 

of power on the peninsula maintained. The post-Cold War period 

has also seen the emergence of a "U.S.-ROK-DPRK" triangle as U.S. 

and ROK policy priorities toward North Korea diverge and separate 

U.S.-DPRK and inter-Korean dialogue channels develop. Adapting 

to changing realities on the peninsula and coordinating management 

of emerging differences in priorities between South Korea and the 

United States on North Korea have become major challenges for 

Seoul and Washington. This issue takes on an added importance 

as the new administration in Washington attempts to imprint its 

own ideological and theoretical preferences more assertively on the 

current situation on the Korean peninsula. How this process unfolds 

will have important implications for the future of the ROK-U.S. 

alliance and for U.S. strategy and policy in Northeast Asia.

This chapter will focus on the role of the United Nations (U.N.) 

in shaping peace and security on the Korean peninsula. One of 

the crucial future challenges for the ROK-U.S. alliance is whether 

and how to replace the current Armistice Agreement, sponsored 

by the U.N., with a new peace system. As we are well aware, the 

Armistice Agreement of 1953 set the terms of the truce and imposed 

the structure of peace on the two Koreas. While the Armistice 

Agreement was never intended to be permanent, it has survived and 

succeeded in preventing another war. Yet, it is Pyongyang's position 

that the United Nations Command (UNC) has to be dismantled and 
68

U.S. Forces Korea (USFK) should be withdrawn before there can 

be a new peace treaty between the United States and North Korea. 

As President Kim Dae-jung illustrated in his speech at the Korea 

Society in New York on September 8, 2000, more people in Korea 

now openly discuss the possibility of establishing a peace system to 

replace the 50-year-old Armistice Agreement,1 though South Korea 

has never seriously addressed the fundamental question of whether 

a new peace system will guarantee long-lasting peace and security. 

In this chapter, I demonstrate the potential danger of discarding 

the UNC and replacing the Armistice Agreement with a peace 

treaty. Also, while some advocate that USFK be transformed into a 

U.N. Peacekeeping Force (PKO) in the future since the inter-Korean 

relationship has dramatically improved, I argue that we must be 

very careful about this because U.N. peacekeeping operations have 

not been all that successful in recent years. Moreover, while the 

ROK government is enthusiastically involved in U.N. activities 

in general and PKOs in particular, U.S.-U.N. relations have been 

conflict-ridden.

The United Nations and the Korean War.

When the North Korean forces invaded South Korea on June 25, 

1950, the U.N. Security Council convened immediately and adopted 

Resolution 82:2

Noting with grave concern the armed attack upon the Republic 

of Korea by forces from North Korea, Determines that this action 

constitutes a breach of the peace, . . . Calls for the immediate 

cessation of hostilities [and] calls upon the authorities of North 

Korea to withdraw forthwith their armed forces to the 38th 

parallel.

Two days later, the Council passed another resolution with 

regard to the U.N. collective action. Resolution 83 states that:3

Having noted the appeal from the Republic of Korea to the United 

Nations for immediate and effective steps to secure peace and 

security, Recommends that the Members of the United Nations 

furnish such assistance to the Republic of Korea as may be 

necessary to repel the armed attack and to restore international 

peace and security in the area.
69

To make the military operation effective, on July 7, the Security 

Council adopted another important Resolution 84:4

. . . Recommends that all members providing military forces and 

assistance pursuant to the aforesaid Security Council Resolutions 

make such forces and other assistance available to a unified 

command under the United States . . . Requests the United States 

to designate the commander of such forces [and] Authorizes the 

unified command at its discretion to use the United Nations flag in 

the course of operations against North Korean forces concurrently 

with the flags of various nations participating. 

These resolutions vividly reflected the strong American will 

to use the U.N. Security Council for an application of the U.N. 

collective security system against an aggressor. North Korea was the 

first military target in U.N. history. These resolutions showed to the 

world that North Korea was an aggressor. North Korea still has to 

live with the stigma. South Korea was saved from the surprise attack 

with the help of the U.N., and the U.N. provided quick assistance on 

the basis of the broad support of the international community. 

Although the nature of the U.N. collective action was not clearly 

identified in those resolutions, the Security Council seemed to have 

followed the spirit of the U.N. Charter. The fact that more than 50 

of the 60 member states expressed moral support and criticized the 

North Korean invasion indicates the level of broad international 

support in those days. 

However, it should be noted that the quick consensus in the 

Security Council was possible only under extremely unusual 

circumstances. First, the adoption of the resolutions was made 

without the concurrence of the Soviet Union, which certainly would 

have blocked the resolutions by its veto but had been absent from 

the Council since mid-January 1950 in protest over the Chinese 

representation issue.5

Second, the consensus necessary to pass the resolutions was 

consolidated by the strong initiation of U.S. military assistance to 

South Korea. The rapid deployment of U.S. forces under President 

Harry S. Truman's order was made possible by the availability 

of the U.S. forces stationed in Japan. This swift and unilateral 

measure by the United States, immediately after the outbreak of 

the war, demonstrated U.S. resolve and willingness to take major 

responsibility in the Korean operation and thus induced other 
70

members to cooperate in expediting U.N. actions in an orderly 

manner.

Third, the consensus in the Security Council for the Korean 

War was helped by the presence of the U.N. Commission on Korea 

(UNCOK).6 The UNCOK, established and stationed in Korea in 

November 1947, was able to provide objective reports on the war 

situation as requested by the Council. Therefore, U.N. measures, 

including the determination of the North Korean "armed attack" 

against South Korea, was made easier and less controversial among 

the members.

In the course of the war, the U.N. resolutions consistently 

provided a broad framework for political and moral support, as 

well as a legal basis for U.N. actions. However, U.N. actions also 

posed several questions, in terms of the ideal provisions of collective 

security, envisioned in Chapter VII of the Charter.

First, the consensus behind the U.N. collective action was 

seriously impaired by the strong opposition of the Soviet Union 

and its communist allies. The Soviet Union considered the military 

action against North Korea as a hostile move against its important 

ally. Moscow claimed that the Security Council Resolutions were 

null and void, first because they were passed without the Soviet 

presence, thus violating the provision of Article 27 (3); and second, 

because China was not represented by the "legitimate" government, 

i.e. the People's Republic of China (PRC). However, the Soviet 

objections were not accepted, since it had been the practice in the 

Council that an abstention did not constitute a veto, and since other 

members generally agreed with the U.S. view that the voluntary 

absence of a permanent member in the Council is clearly analogous 

to abstention.7 The Soviet Union and Poland also argued that the 

Korean situation was a civil war in which intervention by the 

U.N. was illegal.8 The consensus reached in mobilizing Security 

Council power was constitutionally valid, but it was not a genuine 

consensus based upon cooperation among the great powers. When 

U.S. political and military leadership was vehemently challenged by 

another permanent member, the legitimacy of the U.N. itself was 

significantly weakened. 

Next, the nature and conduct of the U.N. collective action 

changed as a result of the adoption of the "Uniting for Peace" 

resolution. With the return of the Soviet Union to the Council on 

August 1, East and West engaged in antagonistic confrontations and 
71

made efforts to block each other's proposals and actions in support 

of the two Koreas. To avoid the Soviet veto in the Council, the 

United States found an ingenious avenue for continuing U.N. action 

within the Charter by adopting the "Uniting for Peace" Resolution 

in the General Assembly in November 3, 1950.9 From Washington’s 

viewpoint, the General Assembly was a safe place where no veto 

power of the permanent member could frustrate the American-led 

majority.

Consequently, from late November on, the General Assembly 

played a leading role in place of the Security Council. There 

were no differences in the legal effects of the decisions of the two 

organizations regarding the U.N. action in Korea. Nevertheless, 

the ascendance of the Assembly regarding collective security was a 

drastic departure from the spirit of the Charter. 

When the U.N. forces began a steady advance northward after 

breaking out of their defense perimeter around Pusan, and asked 

whether their units should advance across the 38th parallel, the 

General Assembly overwhelmingly endorsed the decision to cross the 

38th parallel on October 7, 1950. The General Assembly recalled that 

the essential objective of its previous resolutions in 1947-49 were the 

establishment of a unified independent and democratic government 

of Korea and requested the Secretary General to establish the United 

Nations Commission for Unification and Rehabilitation of Korea 

(UNCURK).10

The U.N. operation expanded further northward, but after it 

advanced deep into the North and neared the China border, the 

prospects of a unified Korea were dashed by the massive Chinese 

intervention in late October. The United States wanted the U.N. 

to condemn Communist China as an aggressor and take stringent 

measures, such as a naval blockade and economic sanctions. 

However, U.S. allies like France and Great Britain were uneasy 

about tough measures against China. They worried that adoption 

of the U.S. proposal might unnecessarily provoke China and hinder 

their efforts for peaceful settlements through negotiations. 

Moreover, the war had increasingly involved new issues 

like Chinese representation in the U.N., the security of Taiwan, 

and representation in the armistice negotiations. Therefore, the 

initial coalition became increasingly strained. However, when 

the Chinese made a massive surprise attack on November 25 in 

support of retreating North Koreans, the General Assembly adopted 
72

Resolution 498, on February 1, 1951, which condemned China as an 

aggressor.11

By mid-May, the United States managed to win enough support 

from its major allies to impose economic sanctions via General 

Assembly Resolution 500. The resolution recommended that every 

state embargo shipments to areas under control of China and 

North Korea, including arms and ammunition and implements of 

war, atomic energy materials, petroleum, transportation materials 

of strategic value, and items useful in the production of arms, 

ammunition, and implements of war.12 These sanctions were the first 

in the history of the organization. 

There is no denying that the United States achieved international 

legitimacy under the Charter for punishing China as an aggressor. 

However, the consensus achieved on economic measures was 

incomplete. The Soviet bloc refused to vote; and Afghanistan, 

Burma, Egypt, India, Indonesia, Pakistan, Sweden, and Syria 

abstained. To be sure, issues between the United States and its allies 

were usually smoothed away in favor of the U.S. position. However, 

there was a persistent call for peaceful settlement by its major allies 

and anxiety over the possible expansion of the local war into a world 

war, especially after China intervened. 

The U.N. was not able to play a critical role during the final days 

of the Korean War. The U.N. collective action had to be conducted 

by a voluntary, ad hoc association of national forces due to the lack 

of genuine U.N. forces. The United States was allowed to dominate 

the process, since no other major power would sacrifice to protect 

peace and security on the Korean peninsula. 

The resolution that established the U.N. command was not clear 

about the command structure. The United States took the position 

that, within the limit of the Charter and the resolutions of the 

Security Council and the General Assembly, it had the responsibility 

for military operations. Actually, the United States directed the 

overall functioning of the UNC; the chain of command in effect ran 

from the President of the United States through the Secretary of 

Defense, the Joint Chiefs of Staff, the Chief of Staff of the Army, to 

General Douglas MacArthur, the first Commander-in-Chief of the 

UNC (CINCUNC).

Formal channels of communication were maintained from the 

UNC headquarters in Tokyo to the Secretary Council in the form 

of bi-weekly reports. However, General MacArthur did not have 
73

to directly report to the Security Council or the Secretary-General. 

Usually, his reports were sent to Washington first and then submitted 

after revision and editing to the Security Council. It seems that the 

United States was reluctant to work with and within the framework 

of the Security Council, fearing U.N. interference with its freedom of 

action. In short, the military operations of the U.N. were multilateral 

in name but in reality integrated by the United States and then 

endorsed by the U.N. The authority of the U.N., and especially the 

Security Council, was limited by the extent to which Washington 

wanted to direct the war. 

To the extent that the United States viewed the aggression by 

North Korea and China as a threat to international order, the interests 

of the U.N. as a collective security body coincided with those of 

the United States. Therefore, the U.N. could serve as an effective 

instrument of U.S. policy of containment. The U.N. provided the 

legitimacy for the U.S. military action but also an opportunity to 

garner broader international support. The mobilization of the U.N. 

also satisfied theAmerican people's desire that the United States be 

just one of the major contributors. President Truman believed that it 

was essential to have the moral sanction of the U.N. and made great 

efforts to give the impression that the American action in Korea was 

in response to the call from the U.N.

Future of the Armistice Agreement and the United Nations 

Command.

The Armistice Agreement was signed on July 27, 1953, by 

the Commander-in-Chief of the United Nations Command, the 

Supreme Commander of the North Korea People's Army (KPA) 

and the Commander of Chinese People's Volunteers (CPV). It was 

an irony that the UNC had to sign an armistice agreement with 

the aggressors, North Korea and China, while excluding South 

Korea, the victim of their aggression. Throughout the Cold War, the 

Demilitarized Zone (DMZ) between North and South Korea was a 

symbol of the fault line between East and West, and the Armistice 

Agreement confirmed the existence of the two de facto states while 

structuring the relationship between them. With the end of the Cold 

War, however, calls to replace the Armistice Agreement with a peace 

treaty to deal with the vastly changed circumstances have become 

steadily louder in Korea.
74

The Armistice Agreement has served its original purpose of 

stopping armed clashes. Therefore, it would not be wise to scrap 

the agreement unless the level of threats and insecurity drastically 

declines on the peninsula. If the Armistice Agreement is discarded, 

dangerous consequences will follow. Although the agreement has 

not been a perfect instrument for peace, its absence may lead to 

higher levels of tension. 

According to Robert E. Bedeski, the 1953 Armistice Agreement 

has had at least three major functions: enforcement, verification, 

and communication.13 Enforcement has been the most important 

function. Maintaining the nonmilitary character of the DMZ has 

been carried out through patrols and surveillance by both sides. 

Occasional incidents remind the world of continued tensions and 

the need for vigilance. Violations such as unauthorized penetration 

are reported and investigated, with the UNC Component of the 

Military Armistice Commission (UNCMAC) largely responsible for 

supervision.

Verification is a function that has not been fulfilled due to North 

Korea's refusal to cooperate. The contracting parties are supposed to 

monitor each other's activities through air and ground surveillance. 

The Neutral Nations Supervisory Commission (NNSC) was designed 

to physically inspect suspected violations of the agreement to halt 

the introduction into Korea of additional arms and personnel, but 

has been inactive since the early years of the Armistice Agreement. 

Communication has been a most important function. Both the 

MAC and NNSC have been channels of communication for the 

former combatants. Antagonism between the adversaries on the 

MAC has neutralized its effectiveness, but for a long period the two 

structures have been lines of communication between communist 

and U.N. forces. 

As long as the mutual hostility and distrust of the Cold War 

persisted, the Armistice Agreement could play only a limited role. 

Although there were many efforts to build a peace settlement, none 

were successful. In 1954 representatives of 19 nations gathered 

in Geneva to craft a peace settlement formally, but unfortunately 

they failed and the talks were adjourned without setting a further 

schedule. 

Prospects for a settlement suffered a further setback in the 

1950s with the hobbling of the NNSC. Comprised of military 

representatives from Switzerland and Sweden on the UNC side 
75

and Poland and Czechoslovakia on the KPA/CPV side, the NNSC 

had been established as a part of the Armistice Agreement to 

supervise, observe, inspect, and investigate suspected violations 

of the Agreement outside the DMZ, especially the unauthorized 

introduction into the peninsula of reinforcements. The North Korean 

refusal, in violation of the Armistice Agreement, to allow access to 

designated ports of entry in the North left the UNC no choice but to 

respond in kind, leaving the NNSC with a largely symbolic role until 

it came under even more determined assault by the North Korean 

regime in the 1990s.14

Under the circumstance, we must be very careful when we try to 

redesign the peace arrangements on the Korean peninsula. Although 

Pyongyang has been calling for an inter-Korean peace accord to 

replace the Armistice Agreement, North Korea has not taken any 

concrete peace or confidence-building measure toward South 

Korea. Instead, North Korea has tried hard to isolate South Korea 

by proposing a DPRK-U.S. peace treaty since March 25, 1974. It was 

apparently encouraged by the Paris Peace Accords, which ended the 

U.S. involvement in Vietnam. The United States rejected the offer 

and refused to contact the North directly until the early 1990s, when 

the nuclear issue came up. However, Pyongyang has continued to 

seek a deal directly with Washington, arguing that North Korea and 

the United States are the only legitimate parties.15

On January 10, 1984, North Korea, while continuing to deny the 

legitimacy of the ROK, proposed tripartite talks between Pyongyang, 

Washington, and Seoul with the goal of crafting a political settlement 

based on the two pillars of a DPRK-U.S. peace treaty and a NorthSouth nonaggression pact. However, this proposal did not draw 

serious attention from the alliance. 

The end of the Cold War, the demise of the Soviet Union, and 

the warming of relations between Beijing and Seoul compelled 

Pyongyang to engage Seoul directly in 1991. The two Koreas 

finally signed the “Agreement on Reconciliation, Nonaggression, 

and Exchanges and Cooperation” (commonly known as the Basic 

Agreement) and the accompanying "Joint Declaration of the 

Denuclearization of the Korean Peninsula," both of which entered 

into force on February 19, 1992. Pledging once again to exert joint 

efforts to achieve peaceful unification, the two Koreas reaffirmed the 

1972 Joint Communiqué's principles of unification and agreed not 

to slander, vilify, undertake armed aggression against, or attempt 
76

to overthrow each other. Hotlines between the armed forces were 

promised, as was the opening of direct air and sea routes, roads, and 

rail links. The two sides further pledged a variety of cultural and 

scientific exchanges, and an integrated and balanced development 

of the national economy. Most importantly, the two sides agreed 

to transform the Armistice into a solid peace and to abide by the 

Armistice Agreement until peace had been realized.16

But North Korea’s peace offensive did not last long. The North 

quickly backed away from implementing these new agreements. 

Instead, leveraging the potential threat posed by its nuclear 

program, Pyongyang launched a successful campaign to establish a 

direct negotiating link with Washington, marginalizing South Korea 

in the process and straining the U.S.-ROK alliance. At the height of 

the nuclear crisis, Pyongyang also attacked the Armistice Agreement 

in an effort to extract a bilateral DPRK-U.S. peace agreement. The 

assault got an unexpected boost by two seemingly unrelated events: 

a well-intentioned but misguided decision by the U.S. and ROK 

governments to have CINCUNC appoint a South Korean general 

officer as the UNCMAC Senior Member; and the dissolution of 

Czechoslovakia into the Czech Republic and Slovakia following the 

fall of the Berlin Wall.17

The appointment of a ROK officer was part of a larger policy shift 

designed to move the United States from a leading to a supporting 

role in its defense relationship with the ROK and to force the North 

to deal directly with a member of the ROK military. The North 

simply refused, boycotting all further attempts to convene MAC 

meetings for the next 7 years, although the KPA continued to engage 

their UNCMAC counterparts at the Secretary and language officer 

levels. In 1993, with the Military Armistice Commission stalemated, 

the North set out to emasculate the Neutral Nations Supervisory 

Commission as well by forcing the recall of the Czech delegation on 

grounds that the Czech Republic had no legal standing as a "neutral 

nation" in the context of the Armistice Agreement. 

One year later, in April 1994, as the confrontation over 

Pyongyang's suspected nuclear weapons program was reaching 

crisis proportions, North Korea announced its withdrawal from 

the MAC, opened the "Panmunjom Mission of the Korean People's 

Army," and called on the United States to join in creating a new 

peace mechanism to replace the obsolete MAC. Later, no doubt 

encouraged by the outcome of its nuclear diplomacy with the United 
77

States, North Korea convinced China to withdraw its "Chinese 

People's Volunteers" representatives from the Commission.

The MAC suffered another setback in December 1994, when 

a U.S. Army helicopter strayed into North Korean airspace and 

was shot down. In an effort to secure the release of the surviving 

crewmember, the United States acceded to Pyongyang's demand 

for a meeting of North Korean and U.S. general officers in the Joint 

Security Area and dispatched a senior diplomat to Pyongyang for 

subsequent negotiations. 

In the end, the United States agreed to maintain a “proper 

form” of military contact with the North. On what was a “proper” 

form, however, they diverged. To the United States and ROK, the 

proper form meant the MAC. North Korea expected bilateral U.S.-

DPRK military contact outside the MAC framework, excluding 

South Korea. With the MAC seemingly on the critical list, the 

North in early 1995 forced the Polish members of the NNSC to 

withdraw from North Korean territory and broke off contact with 

the Swiss and Swedish NNSC representatives. In a further violation 

of the Armistice Agreement, Pyongyang banned entry into the 

northern side of the Joint Security Area by NNSC and UNCMAC 

personnel and called for general officer talks with the United States. 

CINCUNC, increasingly concerned about the lack of a functioning 

crisis management mechanism, sidestepped the politically sensitive 

issue of the UNCMAC Senior Member by counter-proposing a 

dialogue in which General Officers from the UNC and the DPRK 

would participate within the framework of the MAC.18

The North refused and in early 1996 capped its assault on the 

Armistice Agreement by resurrecting the twin elements of its 

1984 tripartite proposal. Declaring that "an agreement on nonaggression has already been concluded between the North and the 

South of Korea and a North-South joint military body has also been 

established," Pyongyang proposed the establishment of a new peace 

system in which the United States and the North would first sign a 

tentative agreement to maintain the Armistice, and then organize and 

operate a DPRK-U.S. joint military body in Panmunjom in place of 

the MAC. This bilateral arrangement would maintain the Armistice 

pending a permanent peace agreement between Pyongyang and 

Washington.19

It is not difficult to understand why North Korea is determined 

to eliminate the UNC. The U.N. resolution during the early stage 
78

of the Korean War was a stigma, as it explicitly defined North 

Korea as an aggressor. Discarding the UNC is as good as removing 

a criminal record, though not the original sin. Ignoring the fact 

that then-CINCUNC General Mark W. Clark signed the Armistice 

Agreement on behalf of all the UNC participating nations and 

that no individual nation, including the United States, signed the 

Agreement, Pyongyang further claims that, since the United States 

and the DPRK signed the Armistice Agreement, they are the only 

parties with standing to participate in a political settlement and sees 

no role for the UNC. 

Meanwhile, President Kim Dae-jung indicated his intention to 

jump-start the reconciliation process by concluding a peace treaty 

with the North, including the option to issue a peace declaration 

when Kim Jong-il comes to Seoul for the next Summit round. But the 

real question is whether and how to replace the current Armistice 

Agreement with a new peace system. It is not clear under what 

conditions the disestablishment of the UNC could take place and 

whether there will be negative consequences

In my opinion, there is no reason to discard the UNC, since it does 

no harm to the alliance and has symbolic value. Seventeen nations 

fought under the United Nations flag, while five others provided 

medical support, and the UNC is one of the two parties referenced in 

the Armistice Agreement. Furthermore, the Agreement was signed 

by CINCUNC. Therefore, the UNC banner still legitimizes stationing 

U.S. and other UNC forces in Korea and joint defense efforts against 

potential aggressors. 

Discarding the UNC would provide the North with a kind of Papal 

indulgence for its wrongdoings. The Security Council authorized a 

unified command under the United States, and it is the United States 

that created the UNC and directed its operations. If war breaks out 

again, the United States is expected to do a similar job under the 

U.N. flag. Unlike before, the UNC is not likely to exercise control 

over U.S. and ROK forces, but it will certainly be a useful instrument 

for the alliance to assemble more flags behind its efforts to defend 

Korea. We had better hold onto the UNC banner unless Pyongyang 

clearly changes its military posture, readiness, and strategy. 

Furthermore, any proposed settlement must be a real peace based 

on genuine confidence-building measures that provide transparency, 

inspection and verification mechanisms. The Bush administration is 

ready to resume talks with the North. U.N. participation in a peace 
79

agreement should focus on stopping proliferation of Pyongyang's 

weapons of mass destruction (WMD) and on conventional arms 

control. The current MAC and NNSC should be reorganized, given 

genuine enforcement powers, allowed to use the latest verification 

technology for inspections on both sides, and mandated to set a 

schedule for conventional arms control. 

The Possibility of U.N. Peacekeeping in Korea.

This year the ROK celebrates the 10th anniversary of its admission 

to the U.N. Despite its brief membership, Seoul has actively 

participated in U.N. PKO activities. South Korea dispatched a 250-

person engineering unit to Somalia in July 1993 to join the UNOSOM 

II mission and also sent a unit of 198 military engineers to Angola 

in the UNAVEM III mission. In September 1994, the ROK sent a 42-

member medical unit to Western Sahara in the MINURUSO mission. 

In addition, South Korea sent its first infantry battalion to East Timor 

in February 2000 to participate in the UNTAET mission.20 In spite of 

this enthusiasm, there exists almost no serious discussion in Korea 

about whether the U.N. peacekeepers can play a role if a war breaks 

out again on the peninsula. 

As mentioned above, some are floating the idea of transforming 

the USFK into U.N. peacekeepers. However, this is not gaining any 

momentum in South Korea, and here is why. First, North Korea 

has indicated that it may accept U.S. forces if they change into U.N. 

peacekeepers. However, according to the basic principles of U.N. 

PKO, host nation approval is needed to send PKO troops; U.N. 

peacekeepers have to leave if the host nation requests this. Therefore, 

it is naive to believe that U.N. peacekeeping is the ideal alternative to 

the Armistice system. 

Second, recent U.N. PKOs were poor performances, especially 

in Africa. The key problem is a lack of clear mandates, making 

peacekeeping today akin to shooting at a moving target. Third, 

U.N. PKOs are not actually trained for regular warfare. They are 

not allowed to arm themselves to win wars. The use of weapons 

has to be limited to the minimum necessary to protect their own 

lives. There is almost no chance U.N. peacekeepers could manage a 

massive attack from the North with the potential danger of weapons 

of mass destruction. Fourth, the U.N. PKOs face serious financial 

difficulties, and, therefore, it is highly unlikely to expect the U.N. 
80

to accept a major role as a belligerent, further worsening U.N. 

finances. Finally, U.N. peacekeeping may open the door to Japanese 

involvement in Korean conflicts, about which most Koreans have 

strong reservations. After the tragic terrorist attacks in Washington, 

DC, and New York on September 11, 2001, Japan moved quickly to 

participate in America's military efforts to eliminate terrorist groups 

and the Taliban regime in Afghanistan. Japan will not want to sit 

idle in a conflict on the Korean peninsula. According to its own 

principles for sending peacekeeping forces, Japan will only join U.N. 

PKOs under consent from either the host country or parties to armed 

conflict.21 However, it will be very difficult for Korea to turn down a 

Japanese offer to assist the ROK-U.S. alliance in military operations 

on the Korean peninsula while welcoming contributions from other 

countries. 

The ROK strongly wishes to increase its voice in the 

decisionmaking process of U.N. PKOs. Korea tried to secure this 

by advocating that troop-contributing countries (TCGs) play a role 

in the Security Council's decisionmaking and be consulted more 

closely. It also urged the U.N. to devise a system that caters to 

the interests of countries making major contributions to the U.N. 

peacekeeping budget. As an important contributor of troops and 

financial resources, Korea is determined to actively participate in 

related discussions, including in the Security Council and the Special 

Committee on Peacekeeping Operations. Yet, this does not mean the 

ROK will be better off without USFK. 

We cannot disregard the fact that the United States has not been an 

ardent supporter of U.N. PKO missions. The Bush administration is 

no exception. During the presidential campaign, the two candidates 

demonstrated that they had no more interest in peacekeeping than 

Congress. In their first debate, then Governor Bush twice declared, 

with little attempt to hide his disdain for such efforts, that he would 

allow no American troops to be used for nation building. In the second 

debate, both he and Vice President Gore agreed that they would not 

have used American troops to stop the genocide in Rwanda. On 

many occasions, Bush and his advisors repeatedly stressed that U.S. 

alliances need to be strengthened to meet the challenges of the 21st 

century. However, they did not touch upon multilateral institutions 

such as the U.N., and they gave the impression that the U.N. would 

not play much of a role in U.S. foreign policy. 

Policymakers in the White House and on Capitol Hill will surely 
81

prefer unilateral U.S. actions to multilateral ones. It is not surprising 

that the U.S. Congress shows little sense of urgency in restoring the 

U.S. relationship with the U.N.. Condoleezza Rice, now serving as 

the National Security Advisor, once said that "foreign policy in a 

Republican administration will most certainly be internationalist."22

However, she strongly emphasized that the policy will have to 

proceed from the national interest, not the interests of an illusory 

international community.23

Robert Zoellick also argues that one of the Clinton administration’s 

flaws was to erode its credibility by offering words not backed by 

proper actions.24 For an effective U.N., the major members must 

recognize that their actions, rather than words, determine the 

outcomes.25 As he correctly points out, many people in the Bush 

administration believe that the U.S. share will have to be reduced. 

When the U.N. finally agreed to cut U.S. dues, U.S. lawmakers, 

including Senator Jesse Helms, welcomed the decision to reduce 

American dues for the first time in more than a quarter-century. 26

Many experts argue that it is unrealistic to expect much 

progress in U.S. policy toward the U.N. or multilateralism under 

the Republican presidency. That does not necessarily mean that 

Clinton as a Democratic president was a true believer in the U.N. 

and multilateralism. Unfortunately, his commitment to "assertive 

multilateralism" and honeymoon with the U.N. did not last long. 

The Clinton administration quickly pulled out its forces from 

peacekeeping in Somalia when U.S. Rangers were killed, and he 

did not help prevent the slaughter in Rwanda in 1996. Clinton 

looked upon the U.N. as an additional tool of American foreign 

policy. He used it when it fit and ignored it when it did not. As the 

sole superpower, the United States has little interest in agreements 

that limit its freedom of action. This kind of exceptionalism is easily 

found in the Bush administration's foreign policy behavior.27 The 

administration will very likely follow Clinton in preserving peace 

through cooperation with key allied nations. 

However, we should keep in mind what President Clinton said 

in his address to the U.N.: "we will act if we have to alone, but my 

fellow Americans should not forget that our values and our interests 

are also served by working with the U.N."28 In this context, the 

Bush administration indicated it would make the overdue payment 

of U.S.$582 million in both regular and peacekeeping arrears to 

the U.N. as soon as possible.29 However, several conservative 
82

Republican House members, including Speaker J. Dennis Hastert 

(R-IL), International Relations Committee Chairman Henry J. Hyde 

(R-IL), and Majority Whip Tom Delay (R-TX), threatened to hold up 

the money unless Americans were exempted from the International 

Criminal Court (ICC), a permanent tribunal being established in 

the Hague to prosecute war crimes, genocide, and crimes against 

humanity.30

House leaders also wanted the administration to support 

the stipulation that final U.S. payments were dependent on the 

reinstatement of the United States on the U.N. Human Rights 

Commission. The ejection had infuriated lawmakers, who froze the 

final payment--brushing aside objections from the White house.31

To make matters worse, the Bush administration also decided to 

withdraw the U.S. delegation from the U.N. conference on racism in 

South Africa on September 3, 2001, to protest attempts by Arab and 

Muslim nations to single out Israel as a racist state.32

The greatest international challenge facing the United States 

is to devise a strategy to maintain its global leadership and make 

the world a safer and better place for mankind. At the dawn of the 

century, the U.N. also wishes to help the world to confront new 

challenges and shape a new destiny. Success requires us to be creative 

and committed. It also requires every state to recognize the U.S. 

role in transforming the U.N. as politically effective and financially 

efficient as possible. The U.N. needs strong support from the Bush 

administration, and, at the same time, the Bush administration must 

show strong enthusiasm for innovative measures to enhance the 

U.N.’s capacity. An efficient U.N., with strong backing from the 

United States, will play a meaningful role on security for South 

Korea.

Conclusion.

A brief post-Cold War euphoria has already evaporated, and 

the U.N. is now in a precarious state. Members were quick to assign 

new tasks to the U.N. but not to upgrade its capabilities. As far as 

peacekeeping is concerned, the U.N. performed poorly in many 

recent missions, so it is very doubtful that it can play a crucial role 

as a peacekeeper in Korea. Peace on the peninsula has been made 

possible by the ROK-U.S. alliance, firmly rooted and prepared to 

deter any threats from the North. Yet, North Korea is demanding 
83

that the UNC be discarded and the Armistice Agreement be replaced 

by a new peace treaty. 

This chapter has argued that the Command should not be 

dismantled until North Korea fundamentally changes its military 

strategy, forward-based offensive force structure, and its policy of 

developing WMD. This chapter also points out that extreme caution 

is required in redesigning the peace system. So far, there is no 

compelling reason to discard the UNC. The UNC symbolizes that 

North Korea was the aggressor, and it would be a serious mistake 

to relieve Pyongyang of this stigma. Furthermore, the UNC will be 

the ideal institution to build international support in case the North 

invades the South again. 

As we have seen, the U.N. was an important and effective tool 

for the United States in the old days. Half-a-century later, many 

have lost faith in the U.N. for various reasons. We have heard 

enough about the U.N.'s ineffectiveness, waste, mismanagement, 

and corruption. We must ask ourselves what we can expect the U.N. 

to do. If member states wish to ratchet up the U.N.'s role, they must 

also upgrade its capabilities. 

More efficient and healthy U.N. PKOs will never be a liability for 

the Bush administration. In fact, the U.S. military has become quietly 

engaged with the U.N., in the belief that "gray area" conflicts--beyond 

the scope of traditional peacekeeping but short of all-out warfare--

must be addressed, and that, outside the NATO and East Asian 

contexts, a collective response through the U.N. will often prove 

the most viable and sustainable option. For the U.N. to become an 

effective collective instrument in gray-area peace operations, major 

doctrinal innovations are necessary, pre-deployment planning and 

more standardized training must be instituted, and its capacity to 

field command forces must be enhanced. This will never be done 

without the Bush administration's strong support. 

In reality, the United States remains the U.N.'s biggest debtor. It 

was the United States that invented the U.N. half-a-century ago. Of 

course, it has sometimes been a disappointment, or even resentment, 

in being little use to its founding father. [Although we might note 

that the 1990 Gulf War, like the Korean War, was conducted under 

the aegis of U.N. resolutions, and the United States sought and 

received U.N. Security Council support for pressure against Iraq in 

2002. Ed.] Yet it is high time for the United States to help shape a 

more efficient U.N. 
84

To summarize, the ROK was born with the help of the U.N. 

U.S. leadership within and outside the U.N. has been the key to 

the survival and security of South Korea. It is natural for Koreans 

to believe that cooperation between the United States and the U.N. 

will be the winning combination to deter aggression and protect 

democracy and human rights in the whole world.

ENDNOTES - CHAPTER 5

1. Address by President Kim Dae-jung at the Korea Society on September 8, 

2000, http://www.korea.net/kois/government/president/2000/unitednations/index/html, 

p. 2. 

2. Security Council Resolution 82 (S/1501), June 25, 1950, adopted by 9 votes, 

1 abstention (Yugoslavia), 1 absent (Soviet Union), Yearbook of the United Nations, 

1950, New York: Colombia University Press, 1951, p. 222.

3. Security Council Resolution 83 (S/1508/Rev.1, S/1511), June 27, 1952, 

adopted by 7 votes, 1 opposition (Yugoslavia), 1 absent (Soviet Union), 2 abstention 

(Egypt, India), Ibid., p. 223.

4. Security Council Resolution 84 (S/1588), July 7, 1992, adopted by 7 votes, 3 

abstentions (Yugoslavia, Egypt, India), 1 absent (Soviet Union), Ibid., p. 230.

5. For the details of the process leading to adoption of this resolution, see 

Trygve H. Lie, In the Cause of Peace: Seven Years with the United Nations, New York: 

The Macmillan Company, 1954, pp. 341-344. 

6. Further details of the UNCOK activities are well-covered in Leon Gordenker, 

The United Nations and the Peaceful Unification of Korea: The Politics of Field Operations, 

1947-1950, The Hague, Martinus Nijhoff, 1959.

7. Lawrence D. Weiler and Anne P. Simons, The United States and the United 

Nations: The Search for International Peace and Security, New York: Manhattan 

Publishing Co., 1967, pp. 238-239.

8. D. W. Bowett, United Nations Forces: A Legal Study, New York: Fredrick A. 

Praeger, Inc., 1964, p. 35.

9. General Assembly Resolution 377 A(V), November 3, 1950.

10. Ibid.

11. General Assembly Resolution 498(V), February 1, 1951.
85

12. General Assembly Resolution 500(V), May 18, 1951, adopted by 47 to 0, 8 

absentions, Yearbook of the United Nations, 1950, New York: Colombia University 

Press, 1951, p. 228.

13. Robert E. Bedeski, "Verification of Compliance by Resident Inspectors: A 

Study Using the Experience of the Neutral Nations Supervisory Commission," 

Paper presented to the 1995 ROK-Canada Arms Control Workshop, “NorthPacific Arms Control: Confidence-Building at a Regional Level,” hosted by the 

Arms Control Research Center, Korea Institute for Defense Analyses, and The 

Department of Foreign Affairs and International Trade, Canada, in Seoul, Korea, 

June 7-9, 1995, p. 3.

14. For further details of the background, see William M. Drennan, "From 

Armistice to Peace: Some Observation," Paper presented at the International 

Conference, hosted by Sejong Institute and Asia Foundation at the Shilla Hotel, 

Cheju Island, Korea, September 2000, p. 2.

15. Ibid., p. 3.

16. Ibid.

17. For the detailed analysis on North Korea's assault on the Armistice, see 

Ibid., p. 4.

18. Ibid., p. 5.

19. Ibid.

20. For a detailed description, see Jae-Young Park, "Korea and PKO: Korean 

Experiences and its Policy," Paper presented at the KACUNS International 

Conference, 2001, "UN, PKO and East Asian Security: Currents, Trends and 

Prospects," ISANS, Seoul, Korea, September 13-14, 2001, pp. 1-3.

21. For the five principles, see Shigeru Kozai, "Japan and PKO: Japanese 

Experiences and Its Polity," Paper presented to the KACUNS International 

Conference 2001, IFANS, Seoul, Korea, September 13-14, 2001, pp. 3-4.

22. Condoleezza Rice, "Promoting the National Interest," Foreign Affairs, Vol. 

79, No. 1, January/February 2000, pp. 45-62.

23. Ibid., p. 47.

24. Robert B. Zoellick, "A Republican Foreign Policy," Foreign Affairs, Vol. 79, 

No. 1, January/February 2000, p. 65.

25 Ibid.
86

26. Barbara Crosette, "After Long Fight, UN Agrees to Cut Dues paid by US," 

New York Times, December 23, 2000, p. 1.

27. For a detailed analysis among the members of the Bush foreign policy 

team, see Johanna Mcgeary "Odd Man Out," Time, September 10, 2001, pp. 25-32.

28. Robert J. Myers, US Foreign Policy in the Twenty-First Century, Baton Rouge, 

Louisiana State University Press, 1999, p. 101.

29. “UN Regular Budget Out of Cash, Forced to Cross-Borrow from 

Peacekeeping to Finance Expenditures,” http://www.unausa.org/dc/info/

dc082301.htm, p. 1

30. Steven Mufson and Alan Sipress, "UN Funds In Crossfire Over Court: 

Exemptions Sought For US Troops," http://www.globalpolicy.org/finance/unitedstates/

2001/0816cc.htm,p. 2.

31. "US Strikes Back by Freezing UN Payments," Independent South Africa, May 

11, 2001, p. 1.

32. Bill Nicholas, "U.S. raise U.N. Tensions by Leaving Racism Summit," USA 

Today, September 4, 2001, p. 13A.
87

CHAPTER 6

ALLIANCE ACTIVITIES:

MEETINGS, EXERCISES AND CFC’S ROLES

Jeongwon Yoon

INTRODUCTION

The ROK-U.S. Alliance successfully deterred North Korea from 

initiating a war after the signing of the Mutual Defense Treaty in 

October 1953. This Alliance played a pivotal role in maintaining 

peace and security on the Korean Peninsula and contributed to 

regional stability in Northeast Asia. 

The ROK-U.S. Alliance now rests on legal frameworks such 

as the Mutual Defense Treaty (October 1953), Status of Forces 

Agreement (SOFA: July 1996), Wartime Host Nation Support 

(WHNS: November 1991), Terms of Reference I (July 1978) and II 

(October 1994), Strategic Directive No.1 (July 1978) & No.2 (October 

1994), and over 300 bilateral military agreements between the two 

allies. 

The ROK-U.S. Alliance has altered its structure and activities 

along with security environment changes at the global, East Asian, 

or Korean level. The allies have retained their credible Alliance 

system and strong combined defense capability.

This chapter focuses on ROK-U.S. Alliance activities in terms 

of mutual meetings, combined exercises, and the roles of the 

Combined Forces Command (CFC). It analyzes the ROK-U.S. 

Security Consultative Meeting (SCM), the Military Committee 

Meeting (MCM), and other security/military meetings, which have 

contributed to the Alliance. 

In relation to combined exercises, this chapter reviews the 

Ulchi Focus Lens (UFL) Exercise, the Team Spirit (TS) Exercise, 

the Reception, Staging, Onward Movement and Integration (RSOI) 

Exercise, the Foal Eagle (FE) Exercise, etc. The chapter also discusses 

the roles of the CFC, centering on its establishment, structure, 

mission, and function. The CFC is the centerpiece of the combined 

defense system. However, the CFC needs to cope with some 

challenges in the short, middle, and long term. 
88

ROK-U.S. SECURITY/MILITARY MEETINGS

The ROK and the United States have held a lot of meetings 

at various levels to understand mutual security/military issues, 

promote security/military cooperation, and resolve policy rifts. 

These meetings have successfully consolidated the ROK-U.S. 

Alliance system. However, some ideas can be suggested on how to 

make these meetings better.

Security Consultative Meeting.

At their summit talks in April 1968 in Honolulu, the U.S. and ROK 

Presidents decided to hold an annual meeting of defense ministers. 

They felt it necessary to enhance bilateral security cooperation 

through a high-level military meeting. The ROK and the United 

States have continued to hold this meeting, with the title changed to 

“ROK-U.S. Security Consultative Meeting” (SCM) in 1971; they have 

held 32 SCMs, alternating between the United States and ROK. 

The main function of the SCM is consultation on and adjustment 

of major security/military policies, and to convey strategic guidelines 

to the ROK-U.S. Military Committee (MC). The SCM’s highlight is a 

plenary meeting of defense ministers, supported by five workinglevel committees as shown in Figure 1. These five committees 

hold meetings prior to the SCM where agendas are developed and 

subjects for negotiation are examined.

Figure 1. SCM and Its Five Committees.

Security

Consultative

Meeting

Policy 

Review

Subcommittee

(PRS)

Security 

Cooperation 

Committee

(SCC)

Logistics 

Cooperation 

Committee

(LCC)

Defense 

Technology and 

Industrial CooperaCommittee

(DTICC)

Joint 

Communique 

Committee

(JCC)
89

The PRS discusses policy issues sensitive to the security interests of 

both countries, advises ministerial talks through policy consultation 

at the highest working-level, and deals with issues not related to 

other committees. The SCC coordinates issues involving security 

assistance. The LCC promotes defense industrial cooperation and the 

exchange of technological data in military science. The JCC, in which 

foreign affairs officials take part, prepares joint communiqués. 

In the past, the significance of the SCM lay mainly in its declarative 

role. However, in the late 1980s, the SCM evolved into a substantial 

policy consultative meeting in that the two allies discussed key 

security or military issues, drew up policy alternatives, and jointly 

designed long-term directions for the Alliance’s progress. 

The major issues of recent SCMs are shown in Table 1. According 

to this table, the ROK and the United States have a common interest 

in supporting Inter-Korean dialogues, the Inter-Korean Basic 

Accord (1992), and the Inter-Korean Denuclearization Declaration 

(1992). They also welcome four party talks or U.S.-North Korea 

bilateral talks and negotiations. The two allies highly appreciate 

their combined defense system for Korean security and East Asian 

stability, and agree on the necessity to maintain their Alliance even 

after Korean reunification.

The ROK and the United States are seriously concerned about 

the threat from North Korea’s weapons of mass destruction (WMD) 

to the security of the ROK, the United States, and the region, and 

mount common efforts to counter these threats. The two allies 

support the maintenance of the U.S.-North Korea Geneva nuclear 

accord. Moreover, they clearly oppose North Korea’s efforts to 

nullify the Armistice Agreement (1953). They have resolved to keep 

this agreement in place until a permanent peace system is established 

between the two Koreas. 

The ROK and the United States have been interested in revisions 

of the SOFA and the resolution of South Korea’s missile issues. They 

concluded a revision of the SOFA in January 2001. After a series of 

bilateral missile talks, the United States finally allowed the ROK to 

develop ballistic missiles with a 300km range and 500kg payload 

and the ROK ultimately entered the missile technology control 

regime (MTCR) in March 2001. 

Currently, the SCM is an effective mechanism for tackling policy 

discrepancies on pending issues. It is desirable for the SCM to discuss 

frankly bilateral policy rifts and make efforts to get rid of them in a 
90

30 January 15, 1999

Seoul, Korea

- Importance of Korean security for Asia-Pacific Prosperity and 

U.S. security.

- Strong ROK - U.S. combined defense system for supoprting the 

Sunshine Policy toward UK.

- Demand for of NK’s suspected underground nuclear facilities and 

tunnels.

- Concerns about UK’s missiles and chemical and biological 

weapons.

- Concern about the test firing of Taepodong-1 missle.

- Continuance of the ROK-U.S. alliance even after the reduction of 

impending threats to Korean stability.

- Mutual Efforts to conclude revision of the SOFA.

31 November 23, 1999

Washington, D.C.

- Support for Inter-Korean dialigues.

- Welcoming U.S. - NK relation progress.

- Support for four-party talks and the Armistice agreement (1953).

- Support for smooth progress of the light water reactor (LWR) 

project for NK.

- Welcoming NK’s Moratorium on further missile test firing.

No. Date & Time Major Issues

28 November 1, 1996

Washington, D.C.

- Support for four-party talks, Inter-Korean Denuclearization 

Declaration (1992) and the Basic Accord (1992), and the Armistice 

Agreement (1953)

- Support for the U.S. - NK Geneva nuclear accord (1994), and 

concern about UK’S nuclear threats.

- Criticism of NK’s submarine infiltration on East Coast.

- Maintenance of ROK - U.S. combined defense system, continuous 

modernization of the ROK military.

- Dialogue on mid- and long-term security cooperation between the 

two allies.

29 December 9, 1997

Washington, DC

- USFK’s contribution to war deterrence in Korea and stability in 

East Asia.

- Support for Inter-Korean dialogues to resolve Inter-Korean issues.

- Support for four-party talks.

- Maintenance of the Armistice Agreement until the realization of a 

permanent peace system in Korea.

- Concerns about NK’s missiles and chemical and bioligical weapons.

- Necessity of anti-personnel mines for defense of Korea.

- Security threats stemming from NK’s economic crisis

Table 1. Major Issues
91

Table 1. Major Issues (concluded).

cooperative way. It is important to acknowledge that the ROK and 

the United States respectively face new domestic as well as external 

security situations in the post-Cold War era.

Military Committee Meeting.

The 10th SCM in 1977 decided to establish the ROK-U.S. 

Combined Forces Command (CFC) with the Military Committee 

(MC) as an operational supervisory organ of the CFC. The MC 

as well as the CFC were officially set up in 1978. As a result, the 

Military Committee Meeting (MCM) has been held annually since 

1978 (except in 1980). The SCM provides the National Authorities 

(NA) with strategic guidelines for the Military Committee.1 The 

MC receives these guidelines from the NA and delivers strategic 

directives and operational instructions to the Commander of the 

CFC (CDRCFC).2 Ordinary Korean people do not recognize well 

the presence and function of the MC, which leads them to believe 

erroneously that the CFC is under the direct control of the U.S. JCS.

- Continuance of the ROK - U.S. Alliance even after the reduction 

of impending threats to Korean stability.

- Mutual efforts to conclude the revision of the SOFA.

- Necessity to resolve SK’s missile issues according to MTCR 

criteria.

32 September 21, 2000

Seoul, Korea

- Support for Inter-Korean summit meeting and defense ministerial 

meeting.

- Demand for NK’s full compliance with Inter-Korean Denuclearization Declaration (1992), the U.S. - NK Geneva nuclear accord 

(1994), and the Non-Proliferation Treaty (NPT) - related nuclear 

safeguards.

- Threats of NK’s WMD to the security of the ROK, the United 

States, and the region.

- Welcoming the first U.S. - NK foreign ministers meeting.

- Continuance of the Armistice Agreemant (1953).

- Strong ROK - U.S. combined defense system for supporting the 

Sunshine Policy toward NK.

- Continuance of the ROK-U.S. Alliance even after the reduction of 

the impending threats to Korean stability.
92

The MC is co-hosted by the Chairmen of the ROK Joint Chiefs of 

Staff (ROK CJCS) and the U.S. CJCS. The MCM consists of a plenary 

meeting and standing meetings. The ROK CJCS and U.S. CJCS, two 

delegates named respectively by each Chairman, and the CDRCFC 

take part in the plenary meetings. The MCM’s plenary meeting is 

usually held just before the SCM meeting, but it can be also held as 

needed. The MCM reports its results to the SCM. The ROK CJCS 

and the Senior U.S. Military Officer in Korea,3 as the representative 

of the U.S. CJCS, hold the MCM’s standing meetings. During 

those meetings, they coordinate current military issues of concern 

to the CFC. The meetings are held whenever at least one of the 

representatives calls for a meeting. 

A lot of major military issues are dealt with at the MCMs, as shown 

in Table 2. In recent times, the MCM has focused on devising common 

perceptions of North Korea’s military threats, countering North 

Korea’s biological/chemical weapons and missile threats, deterring 

North Korea’s infiltration or armed provocations, maintaining the 

ROK-U.S. Alliance, developing the ROK-U.S. combined defense 

system and exercises, and resolving military issues. The MCM 

plays a major role in coordinating military policies and delivering 

operational directives and guidelines to the CFC. However, many 

Koreans suspect that the MCM genuinely guarantees the ROK JCS 

can affect wartime operational control of the CFC on an equal basis 

as long as the commander of the CFC is American.

Trilateral Defense Consultation.

The ROK, the United States, and Japan annually hold a trilateral 

defense consultation meeting of high-ranking defense officials to 

maintain trilateral cooperation on their security/military policies 

toward North Korea and to exchange military information 

concerning their neighbors. The North Korean nuclear program 

crisis led to this trilateral coordination. The consultation has been 

held since August 1994, as shown in Table 3.

This involves both a trilateral plenary meeting among the three 

countries and bilateral meetings between the ROK and the United 

States, the ROK and Japan, or the United States and Japan. The 

9th session in Tokyo decided to divide the trilateral discussions 

into three different levels: Tri-A (Assistant-Secretary level), Tri-B 

(Bureau Director-level), and SSG (Sub-Study Group: special experts 
93

level). The trilateral defense consultation focuses on coping with 

regional instability as well as North Korea’s military threats. This 

consultation is of importance in that it can improve the ROK-Japan 

No. Date & Place Major Issues

18 October 30, 1996

Washington, DC

- ROK-U.S. Alliance’s contrubution to regional 

stability.

- Necessity to respond to NK’s unpredictable and 

unstable regime change.

- Enhancement of ROK-U.S. combined defense system, combined war preparedness, combined exercises, 

interoperability, the RSOI, etc.

- Countermeasures against NK’s chemical weapon 

threats.

- Logistics sufficiency of the CFC.

- War sustainability of the ROK armed forces.

- Anti-submarine and anti-artillery combined exercises.

19 December 9, 1997

Washington, DC

- Combined responses to NK’s large-scale infiltration 

or local armed provocations.

- Strengthening ROK-U.S. cooperation in crisis 

management and military operations.

- Early deployment of U.S. augmentation forces.

- Enhancing combined exercises and operational 

capabilities.

20 January 14, 1999

Seoul, Korea

- Threats of NK’s asymmetrical military capabilities.

- U.S. military support in case of security crisis in 

Korea.

- Development of Operation Plan (OPLAN) 5027 to 

cope with biological or chemical warfare.

- Primary support for the ROK in case of 2MTW 

(Major Theater War) situations.

- Development of combined exercises.

- Coordination on the improvement of Combined

Psychological Warfare Command.

Table 2. Major Issues of Recent Plenary MCMs.
94

Table 3. A Brief History of Trilateral Defense Consultation.

military talks despite Korea’s lingering historical animosity against 

Japanese colonial ruling over Korea.

Trilateral Coordination and Oversight Group Meeting.

The Trilateral Coordination and Oversight Group (TCOG) 

meeting has been held several times a year since 1999 among highranking foreign affairs officials from the ROK, the United States, 

and Japan. Usually, Assistant Secretary-level officials participate. 

They devise cooperative policies toward North Korea, decide on 

negotiation strategies and tactics, and report their conclusions to 

their governments. 

This meeting tends to deal with broader issues than the 

trilateral defense consultation meeting. The Director of the Policy 

Planning Bureau, as a representative of the ROK Defense Ministry, 

No. Month/Year Place (Host Country) Major Issues

1st August 1994 Hawaii (U.S.) - NK’s military threats, U.S.-Sino relations.

2nd June 1995 Washington, DC 

(U.S.)

- NK’s situation, NK’s nuclear issues.

3rd June 1996 Hawaii (ROK) - NK’s situation.

- Regional multilateral security.

4th March 1997 Seoul (Japan) - NK’s threats and instability.

5th April 1998 Seoul (U.S.) - NK’s situation.

- Policies toward neighboring countries.

6th October 1998 Seoul (Japan) - NK’s situation.

- Responses to NK’s nuclear / missile issues.

7th February 1999 Seoul (U.S.) - Responses to NK’s nuclear / missile issues.

- NK’s suspected underground nuclear tunnels and facilities.

8th October 1999 Tokyo (Japan) - Coordination for policies toward UK.

- Lessons from the Kosovo Incident.

9th May 2000 Cheju Island (ROK) - NK’s situation, Relations with China.

- U.S. Quadrennial Defense Review / National Missile 

Defense / Theater Missile Defense (QDR/NMD/TMD).

10th November 2000 Hawaii (U.S.) - Coordination of policies toward NK.

- Conference on military responses in crises.
95

sometimes joins in. The TCOG also enhances the ROK-U.S. Alliance 

by coordinating foreign policies. Nonetheless, the TCOG more 

frequently has to solve policy differences between the ROK and the 

United States, while the ROK pursues a more active engagement 

policy toward North Korea than the United States expects.

Big-4 Meeting.

The meeting of ROK Defense and Foreign Ministers, the U.S. 

Ambassador, and the Senior U.S. Military Officer in Korea is 

called the “Big-4,” or “2 + 2,” meeting. It mainly discusses pending 

military/security issues. It is an irregular, informal, and closed 

meeting held once or twice a year since February 1990. It has dealt 

with major issues such as the relocation of USFK military bases, 

North Korea’s nuclear threats, ROK-U.S. defense burdensharing, the 

holding of General officer-level meetings with North Korea, the fourparty talks, etc. It was being held on a monthly basis with a view to 

tightening bilateral security cooperation after the inauguration of the 

Bush administration. However, it has not met recently because the 

ROK and the United States confronted different policy perspectives, 

which could not be coordinated easily, on North Korea’s nuclear 

threats and anti-Americanism among some Koreans.

Policy Recommendations.

Although these diverse meetings have made a great contribution 

to the ROK-U.S. Alliance, there are several ways to improve the 

MCM and SCM. First, it is important to put more emphasis on midand long-term security/military issues which will face the two allies 

amid the far-reaching changes of the security environment in the 

21st century. 

Second, it is desirable to clearly divide the level of issues taken 

up in the MCM from those in the SCM. The MCM should focus on 

operational-level issues while the SCM deals with policy issues. At 

present, there seems to be some fusion between the two bodies. 

Third, it may be necessary to establish combined standing 

offices for discussion in the MCM and SCM, which help prepare the 

meetings, put the agreements into practice, and assess the results. 

Fourth, it is desirable that the CFC actively join the process of 

issue formation for the discussions in the MCM and SCM because 
96

the CFC is responsible for combined wartime defense and well 

recognizes the problems involved. Moreover, it is best to hold these 

meetings at times in combination with combined CFC exercises for 

wartime.

In a changing security environment, the alliance meetings will 

be desirable when they draw out future-oriented readjustment and 

restructuring rather than adhering to status quo without flexibility.

ROK-U.S. COMBINED EXERCISES

The ROK-U.S. combined defense system has maintained highlevel military preparedness, through various combined exercises, in 

order to deter a war and rapidly cope with any security crisis on the 

Korean peninsula. On a regular basis, the ROK and the United States 

have carried out the Ulchi Focus Lens (UFL) exercise; the Reception, 

Staging, Onward Movement and Integration (RSOI) exercise; the 

Foal Eagle (FE) exercise; the Team Spirit (TS) exercise; and others. 

These exercises enabled the two allies to accumulate many lessons 

on how to fight against armed provocations which North Korea 

might initiate. 

Ulchi Focus Lens Exercise.

The ROK began to conduct the annual Ulchi Exercise as a fullscale war exercise in 1969, after the failed attack by North Korean 

infiltrators on the Blue House (president’s residence) in January 1968. 

The USFK also started, in 1968, its annual Ulchi Focus Lens (UFL) 

Exercise to upgrade its operational readiness. After a U.S. proposal 

in 1973 to combine them, UFL has been conducted annually in late 

summer since 1976. UFL has developed through adopting the War 

Game model since 1988 and using the Computer-Based Simulation 

(CBS) model since 1992. Since 1994 UFL has been undertaken, in 

parallel with the crisis management exercise of the ROK government 

which is called the Chungmu Plan. 

Nowadays, UFL is an annual ROK-U.S. Command Post Exercise 

(CPX). It focuses on reviewing the ROK government’s war guidance 

and support plan, improving proficiency in military operation 

procedures, reviewing the deployment of U.S. reinforcement forces 

in the Time Phased Force Deployment Data (TPFDD),4 and training 

corps-level and above staffs of the ROK-U.S. CFC on the operation 
97

plan. UFL consists of two parts. In the first part, government offices, 

major ROK and U.S. commands, and even business companies 

designated for mobilization, join to conduct an integration exercise 

between the government and military sectors. The second part is 

conducted with a focus on a military exercise. 

The ROK JCS has conducted the Amrok River Exercise since 

1996. This is the joint CPX of the ROK Armed Forces, carried out 

before UFL. This exercise provides an opportunity to master the 

war execution procedures and enhance operational command 

capabilities. The experiences in Amrok River are helpful for adapting 

the ROK Armed Forces in preparation for UFL. 

Meanwhile, USFK conducts Summer-X, which makes the Eighth 

U.S. Army and lower level unit officers familiar with the procedures 

of theater operations on the peninsula. It is also a preparatory 

exercise for UFL. A small number of Korean officers began to join 

Summer-X after 1998. 

UFL has increased the deterrent power of the ROK-U.S. CFC 

by providing an opportunity to master governmental or military 

watchover procedures in wartime and enhancing combined military 

capabilities. UFL has strengthened wartime military capabilities such 

as ROK mobilization, U.S. reinforcement, information warfare and 

command, control, communications, computers, and information 

(C4I) systems, countermeasures against WMD threats, flexible 

deterrent options based on deep, close, and rear battles, and so on. 

UFL’s intensity was weakened to some degree after the first 

Inter-Korean summit meeting in June 2000. The ROK government 

did not want to damage Inter-Korean relationships that the summit 

meeting brought about. North Korea criticized South Korea for 

conducting UFL, arguing that it was contrary to the spirit of the 

summit. Nonetheless, UFL is necessary because no significant 

military confidence-building or arms control steps with North Korea 

have emerged. 

In the short term, UFL aims at ensuring immediate and sufficient 

interoperability between the allies. However, in the long term, UFL 

should be able to improve the scope of wartime operational control 

of the ROK if the USFK plans to reconfigure itself by withdrawing 

from Korea to a noticeable degree.
98

Team Spirit Exercise.

Team Spirit (TS) was a large-scale field maneuver exercise aimed 

at improving the Combined/Joint operation capabilities of USFK 

and U.S. reinforcement forces. The ROK and the United States 

agreed to conduct TS annually at the SCM of 1975, with the first TS 

held in 1976. The ROK-U.S. CFC has been in charge of TS since 1979. 

TS grew to nearly 200,000 ROK and U.S. participants commensurate 

with increased perceptions of an increased North Korean threat. 

U.S. participation included augmentation forces of all the services 

tactically deployed to the ROK from other Pacific bases and the 

continental United States.

However, TS was defensive in that it purported to deter North 

Korean war provocations by strengthening the Alliance. TS was 

mainly devised to estimate how the United States forces would 

fight a war initiated by North Korea. North Korean delegates were 

invited but none were ever sent. Instead, North Korea criticized TS 

as an offensive nuclear war exercise and argued for its permanent 

cancellation. In the early 1990s North Korea continued this 

demand for an end to TS in return for stopping its nuclear weapon 

programs. 

In 1992, the ROK and the United States suspended TS on the 

condition that North Korea accept Inter-Korean and international 

inspections of its suspected nuclear facilities and sites. As North 

Korea was not fully cooperative, TS was resumed in 1993. However, 

it was suspended in 1994 to entice North Korea to abandon its 

nuclear weapon options. In October 1994, the United States and 

North Korea signed the Geneva nuclear accord, freezing the North’s 

nuclear program. TS has not been undertaken since then. The 

defense ministries of the ROK and the United States have made an 

annual decision since 1996 on whether to resume it. 

The suspension of TS contributed to resolving the North Korean 

nuclear dispute and easing military tension on the peninsula. 

However, the ROK and the United States lost an opportunity 

to show their Alliance tightness and conduct a large-scale field 

maneuver exercise in which U.S. forces actually participate. It is 

unexpected that TS will resume unless North Korea abrogates the 

Geneva nuclear accord.5
99

Reception, Staging, Onward Movement and Integration (RSOI) 

Exercise.

Along with the strategic concept of Power Projection, U.S. forces 

put an emphasis on the rapid deployment of sufficient forces for war. 

In 1993, the Department of Defense pointed out that the ROK-U.S. 

CFC lacked preparedness for deploying U.S. reinforcements. The 

Operations Plan (OPLAN) did not fully reflect the steps necessary. 

As TS was likely to be suspended because of the North Korean 

nuclear dispute, the ROK and the United States agreed to conduct 

an annual RSOI exercise. 

The first RSOI was done just as a seminar in 1994. Thereafter, it 

was conducted as a computer-simulated CPX under the control of 

the CFC, aimed at exercising the reception, staging, movement to the 

forward area, and integration of additional U.S. forces. Of course, 

the RSOI includes a seminar where ROK and U.S. military leaders 

discuss the implications for the OPLAN. 

During the RSOI exercise, the participants review the content 

and the procedure of the OPLAN TPFDD, examine the cooperation 

procedures and requirements related to the WHNS, and test the 

C4I and logistics support of the ROK Armed Forces for rear area 

operations. The exercise probes force protection, tracking, and 

movement during deployment of the incoming U.S. forces, and 

enhances deterrence by displaying plans to actually deploy U.S. 

reinforcements. 

The RSOI partly replaces the suspended TS, which was an actual 

field maneuver of USFK and U.S. augmentation forces. However, 

its achievements are limited in that there is no real deployment of 

forces. 

Foal Eagle Exercise.

The ROK Armed Forces conducted a battalion-level special 

forces exercise from 1961 on, and in 1975 the ROK and the United 

States expanded this into a combined special forces exercise called 

Foal Eagle (FE). FE has included a large-scale field maneuver since 

1995 to compensate for suspension of TS. In 1997, FE included a 

corps-level Field Training Exercise (FTX), but since 1998, it has been 

a brigade-level combined FTX. 

FE is composed of two parts. The first focuses on the procedures 
100

OPLAN of the Combined Special Forces Command, the combined/

joint rear area operations, and the RSOI of the Time Phased Force 

Deployment Listed units. The second part includes a ROK corpslevel FTX, a ROK-U.S. combined brigade-level FTX with the 

Multiple Integrated Laser Engagement System (MILES), a combined 

landing operation with Marines, and the FTXs of the Combined 

Ground, Naval, or Air Forces Commands. Most of the ROK Armed 

Forces take part in FE, even including the reserve forces and local 

government offices. Eighth Army and USFK Special Forces also 

are involved, along with a significant portion of the United States 

augmentation forces. 

FE examines special forces operations; rear area defenses; forceon-force field maneuvering; anti-air, -surface, and -submarine 

operations by naval forces; close air-support; defensive and offensive 

counter-air operations by air forces; and amphibious landings. FE 

also reviews noncombatant evacuations, mass casualty exercises, 

chemical decontamination exercises, and so on. In a sense, FE is 

a comprehensive FTX that demonstrates the military resolve that 

deters war on the peninsula. 

Since 1996, the ROK JCS has carried out Hokuk (“Guarding the 

Nation”) training, a large-scale joint field exercise among all the 

services to make up for FE’s limits in training for defense of the 

ROK. Each service also annually conducts a variety of maneuvering 

exercises to improve operational readiness and combat capabilities. 

Other Combined Exercises.

The ROK Navy participates in the Rim of the Pacific (RIMPAC) 

Exercise, which is conducted biennially (every even year) under 

the United States Third Fleet. RIMPAC has been a multinational, 

combined sea mobility exercise of the United States, Australia, 

Canada, Chile, United Kingdom, and Japan since 1971. The ROK 

Navy joined six times after 1990. The United States and Australia, 

every odd year, carry out Tandem Thrust training, which focuses on 

securing the safety of sea lines of communication (SLOCs) around 

the western rim of the Pacific, plus enhanced cooperative operations 

in contingencies. The ROK Navy has joined this exercise since 

1999. Moreover, the ROK, the United States, Australia, Japan, and 

Singapore took part in the Pacific Reach Exercise, first conducted 

with an eye to exercising submarine and other rescue activities in 
101

the western Pacific.

In close consultation with USFK, the ROK Army annually 

conducts combined assault training; nuclear, biological, and 

chemical (NBC); and counter-fire operations training. The ROK Air 

Force also undertakes combined air defensive training and offensive 

flight group training in various forms. ROK Special Forces take part 

in a variety of combined exercises for developing guerilla warfare 

tactics, anti-terrorism operations, seashore infiltration, maritime 

special operations, airborne infiltration and escape tactics, explosive 

ordnance disposal operation, and so on. 

Policy Recommendations.

These combined exercises clearly strengthen the ROK-U.S. 

Alliance and improve deterrence. The ROK and the United States 

draw significant lessons and reflect them in combined operation 

plans. These exercises will be the cornerstone of military victory in 

any war with North Korea. However, it is important continuously to 

improve these exercises. Here are some recommendations with this 

in mind.

First, considering the short warning time in a North Korean 

attack, it may be wise to conduct some of these combined exercises 

on short notice. Moreover, it may be desirable sometimes to change 

the seasons of major combined exercises, since North Korea could 

attack at any time during the year. 

Second, it is important to link ROK-U.S. combined exercises with 

those of the ROK Armed Forces. It is also desirable to upgrade the 

interoperability of ROK-U.S. command, control, communications, 

computers, and intelligence (C4I) and weapon systems. Efficient 

communication between Korean and U.S. officers in a crisis is 

indispensable. 

Third, the existing exercises may not cover a full range of training 

needed. It is important to add missing combined exercises in the 

future, especially to prepare for North Korea’s WMD threats. Fourth, 

the ROK and the United States may need to conduct multilateral 

exercises at times on possible multinational force mobilization in 

such cases as the Persian Gulf War or Kosovo. It is uncertain that all 

U.S. augmentation forces will arrive in the ROK if the United States 

is engaged in another major theater war. If so, multinational forces 

and multinational military exercises can be valuable.
102

Fifth, it is important not to limit the ROK-U.S. combined exercises 

as long as North Korea does not carry out substantial military 

confidence-building and arms control steps. In the absence of the 

ROK’s thorough military preparedness, it would be impossible 

to restrain North Korean aspirations for a communized Korean 

peninsula through armed provocations. 

ROK-U.S. COMBINED FORCES COMMAND’S ROLES

The Establishment of the CFC.

A combined operational planning staff, developed in 1968 

as an adjunct to the UNC/USFK/Eighth United States Army 

Headquarters, evolved in 1971 into an integrated field army 

headquarters. This was lodged in the ROK-U.S. CFC in 1978, when 

the ROK and the United States sought a military mechanism to make 

up for the proposed withdrawal of the U.S. ground combat forces 

(which was later cancelled). The 11th SCM of July 27, 1978 agreed 

on “Terms of Reference for the Military Committee and ROK-U.S. 

CFC,” which included the mission and the function of the CFC as 

well as the MC. They provided a legal basis for the establishment of 

the CFC.

The UNC had kept the responsibility for defending the ROK 

and operational control over the ROK Armed Forces. However, 

when the UNC handed over operational control, the CFC was put 

in charge of defending the ROK. Thereafter, the commander of the 

UNC supervised the maintenance of the Armistice Agreement, 

with “directive authority” to assure allied compliance with the 

Armistice Agreement, and continued to provide a framework for a 

multinational response to North Korean aggression. 

In July 28, 1978, the first MCM delivered Strategic Directive 

No.1 to the CFC and ordered CDRCFC to be in charge of defending 

the ROK. This directive included the command chains of the CFC 

during the armistice period as well as war, and clarified details of 

operational control within the CFC. The CFC was finally set up in 

November 1978. The ROK could have influence on the operational 

control of the CFC through the NCMA and the MC. 

On October 6, 1994, the 16th MCM delivered Strategic Directive 

No. 2, which limited the CDRCFC to wartime operational control 

of ROK and U.S. military forces and provided the ROK CJCS with 
103

armistice period operational control over the ROK units. Accordingly, 

on October 7, 1994, the 26th SCM agreed to revise the command 

system of the CFC and provide CDRCFC with Combined Delegated 

Authority (CODA), which gives him the necessary authority to 

plan and prepare for combined military operations in wartime. On 

December 1, 1994, the CFC handed over its peacetime operational 

control to the ROK JCS. However, some nationalistic Koreans argue 

for early handover of even wartime operational control to the ROK. 

Some of them call for the reduction or withdrawal of the USFK from 

their radical perspective. They are small in number, but active in 

shouting.

The Structure of the CFC.

Nowadays, the CFC receives operational guidelines and 

directives from the MC, which relies on strategic guidelines and 

directives from the SCM or the NA. The CFC consists of the 

CFC Headquarters, Combined Ground Component Command, 

Combined Naval Component Command, Combined Air Component 

Command, Combined Marine Forces Command, and Combined 

Unconventional Warfare Task Force.

The CFC Headquarters is composed of ROK and U.S. officers 

on an equal basis. The CFC is under a four-star U.S. commander, 

with a four-star ROK Army deputy commander. Throughout the 

command, if the chief of a staff section is Korean, the deputy is 

American, and vice versa. This integrated structure exists within the 

component commands as well as the headquarters. To accomplish 

its mission, the CFC has wartime operational control over more than 

600,000 active-duty military personnel of all services. In wartime, 

augmentation would include ROK reservists and additional U.S. 

forces.

The CFC may be desirable in terms of war preparedness and 

efficacy of the two allies. However, the CFC seems to emphasize 

the roles and capabilities of the USFK in contingency. Therefore, 

some Korean critics are concerned about symbolic or substantial 

infringement on their national sovereignty. North Korea refuses to 

have inter-Korean military talks while it prefers to have U.S.-North 

Korean peace talks, assuming a U.S. hegemonic role in the Korean 

peace.
104

Figure 2. The Structure of the CFC.

ROK President

NCMA

ROK, US

Defense Ministers

SCM

US President

NCMA

US CJCS

US JCS

Pacific Command

USFK Command

USFK

Army

Navy

Air

Force

Marines

Special 

Forces

US

TPFDD

(wartime)

Combined

Ground Component

Command

Combined 

Naval Component 

Command

Combined 

Air Component

Command

Combined Marine 

Forces Command

Combined

Unconventional Warfare 

Task Force

ROK Armed Forces

Army

(+ Special Forces)

Navy

(+ Special Forces)

Air Force

Army, 

Navy, 

Air Force, 

HQ

ROK

CJCS

ROK JCS

CFC UNC

MC (MCM)

wartime operational control administrative control

peacetime operational control 
105

Policy Recommendations.

The CFC has accomplished its goal to deter war on the Korean 

peninsula. However, we can make some suggestions for the further 

development of the CFC. First, the CFC must continue its flexible 

adaptation to security environment changes. The ROK and the 

United States have used the CFC mechanism to contain communist 

forces in Northeast Asia. Now the Union of Soviet Socialist Republics 

has collapsed, and China has adopted a capitalist economic system. 

The CFC, rather than expanding its role, may have to limit its 

strategic role to deterring war in Korea. 

Second, the CFC should prepare for changes in the status of 

USFK, which may be motivated by conceptual changes in U.S. 

security or military strategy. In the late 1970s and 1980s, the United 

States pursued withdrawals of U.S. forces in accordance with 

changes in its security or military strategies. The end of the Cold 

War will necessarily influence U.S. security strategies and military 

organizations, which can change the stationing of the USFK.

Third, the CFC should prepare for challenges from progress in 

Inter-Korean reconciliation and cooperation. The more successfully 

the two Koreas develop exchanges and cooperation, the more the 

CFC’s strategic value may be lessened.

Fourth, the CFC needs effective options for countering criticisms 

of U.S. forces in South Korea. Although the anti-USFK mood is not 

lethal yet, it has risen recently because of issues such as crime by 

U.S. soldiers, environmental pollution near U.S. bases, restraints 

on individual property rights from USFK training fields, the 

maintenance of main commanding posts in central Seoul, etc. In 

addition, U.S. domestic support for the USFK may fade, given 

the ROK’s capacity to mount its own defense and anti-American 

protests in Seoul.

Fifth, the CFC should continuously devise responses to North 

Korea’s political propaganda against USFK and the CFC. North 

Korea demands the abolishment of the CFC as well as the withdrawal 

of the USFK, while refusing to promote sincere peace and stability 

in Korea.

CONCLUSION

The ROK-U.S. Alliance has been successful in preventing 
106

aggression since the cease-fire that ended the Korean War. This 

Alliance has relied on meetings such as the SCM, the MCM, the 

Trilateral Defense Consultation, the TCOG, and the Big-4 meetings. 

It has conducted a variety of combined exercises such as UFL, TS, 

RSOI, FE, etc., for upgrading deterrence and fighting power. The 

CFC has developed its structure, accomplished its mission, and 

fulfilled its function. 

The ROK and the United States basically agree on keeping their 

Alliance and maintaining U.S. forces in Korea, even after unification. 

They expect USFK to play a stabilizing role in Northeast Asia in 

the 21st century. However, the ROK-U.S. Alliance will face various 

challenges and its future will be affected by how it copes with them. 

These challenges arise from domestic politics in the two Koreas, 

inter-Korean relations, the Northeast Asian security environment, 

U.S.-South Korea or U.S.-North Korea relations, and even U.S. 

domestic politics and security strategies.

ENDNOTES - CHAPTER 6

1. The term “National Command and Military Authorities” (NCMA) refers to 

the President, Secretary or Minister of Defense, and the Chairman of the Joint Chiefs 

of Staff of either of the two countries. In 2002 the U.S. Secretary of Defense decreed 

that the term “National Command Authorities” (NCA) should no longer be used to 

refer collectively to the U.S. President and Secretary of Defense. As of this writing, 

the term “National Authorities” (NA) is being used in place of “NCMA” for U.S. 

authorities.

2. From the establishment of the Combined Forces Command in 1978 until 2002, 

its commander was known as “Commander in Chief, ROK/U.S. Combined Forces 

Command (CINCCFC). In 2002, however, the U.S. Secretary of Defense forbade 

the use of the term “Commander-in-Chief” for any person other than the President 

of the United States. As of the time of this writing, the term being used for the 

officer previously called CINCCFC is “Commander, Combined Forces Command” 

(CDRCFC).

3. The Senior U.S. Military Officer in Korea is the highest level military 

representative of the U.S. Government stationed in Korea. He is also the 

Commander of the ROK/U.S. CFC, the Commander of the multinational United 

Nations Command (CDRUNC) and the Commander of U.S. Forces in Korea 

(COMUSKOREA), which is a purely U.S. command.

4. The TPFDD includes all the data on deployment of U.S. forces and material 

in support of the combined ROK-U.S. plan for the defense of Korea in the event of a 

North Korean attack.

5. This was written before the events of late 2002 which have called the continued 

viability of the nuclear accord into question.
PART III: NORTH KOREA AND KEDO

107

109

CHAPTER 7

IF NORTH KOREA WERE REALLY “REFORMING,”

HOW COULD WE TELL —

AND WHAT WOULD WE BE ABLE TO SEE? 

 Nicholas Eberstadt1

Structural Problems in the Study of the Democratic People’s 

Republic of Korea.

In any assessment of the strategic situation in Northeast Asia, 

an accurate evaluation of the outlook for North Korea is utterly 

indispensable, for the Democratic People’s Republic of Korea (DPRK) 

lies at the very heart of the “Korea problem” as that problem is 

presently constituted. Yet while North Korean policies and practices 

have accounted for most of the volatility within the Northeast Asian 

region since the end of the Cold War, and may continue to do so over 

the immediate future, North Korean external behavior unfortunately 

is not easily understood or anticipated by foreign analysts. The 

reasons for this are readily explicable. As a socialist dictatorship that 

simultaneously embraces hereditary succession, the basic precepts 

of North Korean governance are intuitively alien to viewers of a 

liberal, Western sensibility. Further, for nearly decades Pyongyang 

has striven assiduously — and with extraordinary success — to 

suppress any and all information that might permit an independent 

assessment of the regime’s performance. No less important, North 

Korea is a state that cleaves unremittingly to a policy of strategic 

deception (in bygone Soviet terminology, maskirovka). 

Indeed, misleading potential adversaries about its intentions 

and capabilities seems to lie at the very heart of North Korea’s 

statecraft. As we now know, the preparations for North Korea’s 

surprise attack against South Korea in June 1950 carefully were kept 

secret, and Pyongyang even used diplomacy to help keep its target 

off-guard, offering Seoul a new peace and unification initiative just 

a week before it launched its assault.2 The outbreak of the Korean 

War, however, is only the most famous of the DPRK’s exercises in 

strategic deception. Strategic deception was a mainstay of North 

Korean external policy during the Cold War and has been an integral 
110

part of its foreign policy since the end of the Cold War. For example, 

in early 1992, as the “Joint Declaration on The Denuclearization of the 

Korean Peninsula”3 that Pyongyang had just signed with Seoul was 

supposed to be going into force, the DPRK submitted falsified data 

to the United Nations (U.N.) International Atomic Energy Agency 

(IAEA) about the status of its nuclear development program;4 it was 

the discovery and exposure of these falsifications that triggered the 

international community’s North Korean nuclear crisis of 1993-94. 

North Korea’s reputation for “unpredictability,” then, is in no small 

measure testimony to the success of official government policy.

North Korea: Gathering Signs Of Change.

For all the difficulties in divining the significance of developments 

in North Korea, signs of change on the North Korean stage have been 

gathering since Kim Jong Il’s accession to the DPRK’s “highest post 

of the state” in September 1998.5 The aforementioned Pyongyang 

parleys of June 2000, for example, marked a dramatic departure from 

North Korea’s previous posture toward inter-Korean summitry.6

Other noteworthy, and intriguing, divergences from past practices 

or policies have been gradually accumulating. A partial inventory 

of these would include:

• In North-South relations, Pyongyang’s November 1998 

6-year, $942 million deal with the Hyundai business group 

for tourism in the Kumgang Mountain area, under whose 

terms over 400,000 outsiders have already visited the scenic 

North Korean site;7 the commerce-oriented November 2000 

Republic of Korea (ROK)-DPRK agreements on investment 

protection, prevention of double taxation, resolution of 

commercial disputes, and clearing settlement;8 and the nowunfolding project (reportedly approved directly by Kim Jong 

Il) for a multi-billion dollar, 66-square-kilometer, Hyundaibuilt industrial park and residential development in the 

vicinity of Kaesong, just above the DMZ.9

• In relations with the United States, the unprecedented 

and cordial high-level meetings between Kim Jong Il and 

Secretary of State Madeleine Albright in Pyongyang, and 

in Washington between President William Clinton and 
111

Kim’s emissary National Defense Commission (NDC) 

Vice Chairman Jo Myong Rok, in 2000 — and no less 

unprecedented, the repeated reports that Kim Jong Il had 

informed South Korean and American leaders that he was 

reconciled to a continuing U.S. troop presence in the Korean 

peninsula, even after reunification.10

• In international diplomacy, the establishment, between 

early 2000 and summer 2001, of diplomatic relations with 11 

Organization for Economic Cooperation and Development 

(OECD) countries and the European Union (EU) (and with 

most of its erstwhile Korean war military opponents as 

well!)11 — punctuated by DPRK declarations that “there is no 

reason to hesitate about improving relations with capitalist 

countries”12 and that “North Korea seeks friendly relations 

with all countries.”13

• In international security policy, the DPRK’s bid and 

accession, in the year 2000 to membership in the Association 

of Southeast Asian Nations (ASEAN) Regional Forum (ARF) 

— the first such multilateral security dialogue that Pyongyang 

had ever entered; and North Korea’s presentation at the 2001 

ARF of an official paper titled “annual report on security 

prospects”: a small but highly symbolic step toward making 

the regime’s security calculations more transparent.

• Finally, there are the evident stirrings in the country’s 

economic policy. In January 2001 came the striking 

pronouncement in Nodong Sinmun, the DPRK’s party paper, 

that 

Things are not what they used to be in the 1960s. . . With the start 

of the new age of the 2000s, an all-around re-examination should 

be given to outworn patterns and practices. . . . We should bring 

about technical modernization by b oldly doing away with what 

needs to be abolished, instead of being shackled by ready-made 

ideas or hanging on to the old and outdated conceptions.14

Following this call for “a new way of thinking,” the DPRK 

revealed that Chairman Kim Jong Il had paid an “unofficial” 6-day 

trip to China.15 During their stay in Shanghai, Kim Jong Il and his 
112

delegation apparently devoted much of their time to inspecting 

profit-oriented, Chinese-, Japanese-, and American-owned factories 

and reportedly twice toured the Shanghai stock exchange.16 Shortly 

thereafter, the DPRK formally requested the U.N. Industrial 

Development Organization (UNIDO) to teach some North Korean 

college students about market systems and management,17 while 

North Korean officials publicly voiced the hope that the DPRK 

might join the World Bank and the International Monetary Fund.18

As for signs on the ground of “a new way of thinking”: in spring 

2001 North Korea reportedly erected its first commercial billboard19

and scheduled its first fashion show to exhibit South Korean high 

couture;20 perhaps more importantly, rumors were circulating 

that the DPRK was poised to enact a China-style contract-farming 

arrangement on a nationwide scale21 and to develop a domestic 

internet infrastructure.22

Indispensible Facets of a Meaningful DPRK “Reform.”

Not so long ago, any and all of the markers listed above 

might have seemed unthinkable for North Korea. Clearly, North 

Korea is changing. But to appreciate the strategic significance of 

these changes, we must ask: how profound are the changes now 

underway, what accounts for them, and what do they augur for the 

DPRK’s habitually adversarial relations with its neighbors and the 

rest of the outside world?

The answers to all these questions, of course, turn on the 

intentions of the North Korean leadership. Unfortunately, that 

critical quantity remains obscure — for at least as yet, ruling circles 

in Pyongyang are no more inclined now than ever in the past to 

disclose their true thinking about the tactical and strategic issues 

they face. Consequently, deductions abroad about the regime’s 

outlook, motivations, and estimations are unavoidably based upon 

inferences drawn from critically incomplete and often inconsistent 

evidence. 

Be that as it may, despite Pyongyang’s preternatural secrecy, 

we can be reasonably confident that we already know what sorts of 

changes in regime outlook would be necessary for a fundamental 

recasting of the country’s international policy to be regarded as 

feasible or desirable. That knowledge provides us with the rudiments 

of a decryption key with which to uncode the diverse signs of change 
113

in North Korea today, so that we might distinguish the strategically 

meaningful from the epiphenomenal. 

As a necessary precondition for a more peaceable modus vivendi

with the international community, we may submit the DPRK would 

have to embrace bold new answers to three old problems bearing 

centrally upon the identity and character of the state:

1. The problem of “ideological and cultural infiltration.” North Korean 

authorities coined the term “ideological and cultural infiltration” to 

describe their perception of the impact on their country of exchanges 

of people, ideas, and goods with the outside, “imperialist”-

dominated, world. In the aftermath of the Soviet collapse, North 

Korean ideologists argued that the downfall of socialism in Eastern 

Europe and the Union of Soviet Socialist Republics (USSR) was 

due in large measure to “cultural and ideological infiltration,” and 

DPRK leadership vowed to protect their system from this menace.23

If North Korean authorities decided, however, that “ideological 

and cultural infiltration” was a manageable difficulty rather than 

a regime-threatening menace, then experimentation with more 

pragmatic economic policies — including some sort of economic 

opening toward the outside world — would be a viable rather than 

a subversive proposition. An opening to the world economy, for 

its part, would raise the possibility that the DPRK could finance the 

operations of its system from the sale of conventional goods and 

services — rather than depend upon international military extortion 

for financial survival.

2. The problem of weapons of mass destruction (WMD) and regime 

survival. North Korea’s prolonged, fathomless investment in its 

WMD programs and its accomplished recourse to nuclear diplomacy 

over the past decade, strongly suggest that the DPRK leadership 

regards mass destruction weaponry not only as an invaluable asset, 

but perhaps also as an indispensable tool for guaranteeing regime 

survival. (Official declarations in the past have hinted as much.24) 

An independent state will never willingly trade away an instrument 

it regards as vital to its survival — but if the DPRK leadership 

regarded its WMD as valuable but not vital, it would presumably be 

possible to negotiate an end to those programs in exchange for some 

particular package of benefits.
114

3. The problem of South Korea’s legitimacy. From its earliest days, 

North Korea has insisted that the DPRK was the sole legitimate 

government on the Korean peninsula. Pyongyang, further, has 

exacted terrible sacrifices from its people in its long and dogged 

quest for unification of the peninsula on its own terms and its terms 

alone. The quest for unconditional unification with the South, one 

might argue, is deeply and inextricably fused into the constituting 

rationale of the DPRK system that we know today. If, however, the 

DPRK leadership convinced itself that the North Korean system 

could survive indefinitely next to the ROK, and that purposes of 

state were served by recognizing the legitimacy of the ROK, then 

a revolution in inter-Korean relations would be possible: a genuine 

Seoul-Pyongyang peace agreement (and presumably, a correlative 

official declaration of some kind of “one nation, two states” policy 

by which to justify the pact for the DPRK), a detente worthy of the 

name, and a massive demobilization of military forces on the Korean 

peninsula could all then be theoretically within grasp.

It will be evident upon reflection, incidentally, that arriving at 

new answers to every one of these problems is contingent upon, and 

reinforced by, arriving at new answers to each of the others. 

Assessing Change In North Korea.

From a strategic perspective, signs of change in North Korea may 

thus be deemed important and meaningful insofar as they portend 

internal regime movement on three scores: economic opening, WMD 

proliferation, and North-South struggle. Consequently, we must 

ask: what would meaningful movement on these issues look like to 

us, given the limited apertures that outsiders have for peering into 

North Korea? And does available evidence suggest such movement 

is currently taking place?

Economic Opening.

We must bear in mind the simple fact that even serious adjustments 

in official economic policies and practices may not necessarily be 

driven by “new thinking.” Such adjustments can also be forced 

upon a regime by sheer exigency — and official claims of “turning 

the corner” and “completing the Forced March” notwithstanding, 
115

the DPRK remains in a dire economic straits. According to the latest 

assessment by the U.N. Food and Agriculture Organization (FAO) 

and the World Food Programme, for example, cereal production 

for the DPRK for 2000/2001 is expected to be fully a third below 

the level of 1995/9625 — when Pyongyang first launched its 

international appeal for emergency food aid. The country’s export 

capabilities are likewise in a state of virtual collapse: according to the 

ROK Unification Ministry, North Korea’s export earnings in the first 

half of the year 2001 amounted to barely $350 million26 — a sum that 

would work out to well under $20 per capita. 

Under such circumstances, tactical and opportunistic 

improvisations may well be imperative for the survival of 

what Pyongyang terms “our own style of socialism.” From an 

analytic standpoint, attributing the DPRK’s observed economic 

improvisations to a postulated change in outlook on the part of North 

Korean leadership is to violate the very logic underlying “Ockham’s 

razor” (e.g., “what can be done with fewer [assumptions] is done in 

vain with more”). 

It is perfectly true that North Korean party journals have recently 

averred that DPRK policy “by no means” insists upon a strategy of 

“economic construction with the door closed.”27 But as those same 

articles patiently emphasize, North Korea’s “door” is officially 

open to “the accomplishments of modern science and technology”28

— nothing else. In particular, North Korean policy still categorically 

opposes what it brands as “ideological and cultural infiltration,” 

including “international, regional, and global cooperation and 

exchanges.” “Lessons of history,” according a July 2001 Nodong 

Sinmun, “show that once the door is open to the imperialists’ 

ideological and cultural infiltration, the revolution can be destroyed 

at one stroke”; accordingly, “it is mandatory to completely block 

the route through which their ideology and culture infiltrate.”29 So 

deep is North Korea’s doctrinal antagonism to these tendencies, 

indeed, that the DPRK Constitution specifically enjoins the state to 

combat “cultural infiltration” (Article 41). And since international 

economic integration is a prime vector for just such “cultural 

infiltration,” North Korean doctrine remains implacably hostile to 

“globalization,” a tendency Pyongyang continues to describe as “a 

nefarious crime against humanity.”30

At this writing, North Korean economic praxis has faithfully 

followed published doctrine regarding “ideological and cultural 
116

infiltration.” The 1998 Mt. Kumgang tourism deal — the largest 

commercial venture Pyongyang has ever undertaken with a foreign 

partner — entails almost no exposure to the outside world since the 

tourists in question are ferried to and cordoned within a remote 

military area, and cash payments for the visits are wired directly 

to North Korean bank accounts. More recently, North Korea’s 

posture on “ideological and cultural infiltration” has been revealed 

by its behavior on the light water nuclear reactor project underway 

in the country under the auspices of the Korean Peninsula Energy 

Development Organization (KEDO), the multilateral institution 

created under the 1994 “Agreed Framework.” In 1997, that project 

had hired 200 North Korean workers to assist in construction 

activities, alongside 700 South Korean engineers. Even this tiny 

amount of contact with outsiders proved to be unacceptable to the 

regime: in 2000, under the pretext of a “labor dispute,” the DPRK 

withdrew half of its local workers from the construction site, and in 

2001 had KEDO replace them with Uzbek nationals.31 KEDO is now 

poised to replace the North Korean workforce in its entirety.32

Evocative as Kim Jong Il’s tour of Shanghai has been to many 

students of North Korean affairs, there are reasons to doubt that 

the visit portends a North Korean effort to replicate a China-style 

economic opening. First, the visit served clearly identifiable North 

Korean interests entirely separate from any possible urge to emulate 

China. 

For one thing, as a longstanding recipient of Chinese foreign aid, 

it would certainly be in Pyongyang’s interest to make a symbolic 

gesture sure to please its sponsors. For another, Pyongyang is fervently 

committed to defense modernization, and the tour of diverse hightech plants and facilities by Kim Jong Il’s predominantly military 

delegation33 self-evidently served preexisting martial objectives. 

Foreign visits by high-level North Korean delegations typically serve 

military purposes. Recall that NDC Vice Chairman Cho Myong Rok 

began his October 2000 visit to the United States with a visit to Lucent 

Technologies34 and other “IT” concerns — information technologies 

are the basis of today’s emerging “revolution in military affairs” 

(RMA) — and that Kim Jong Il inspected a tank factory and a former 

Soviet inter-continental ballistic missile (ICBM) development facility 

on his July/August 2001 visit to Russia. North Korea’s interest in 

a country’s military or dual/use technology does not necessarily 

imply a corresponding interest in its economic system. 
117

Second, Kim Jong Il’s reported Shanghai-tour comments 

concerning China’s achievements were actually quite circumspect 

and noncommittal.35 In the Chinese press, Kim was quoted as 

“stress[ing] that the big changes that had taken place . . . since . . . China 

began the reform and opening up drive, proved that the policies of 

reform and opening up adopted by the [Chinese Communist Party] 

are correct”36 — for China. North Korea’s policies, by contrast, 

were held to be correct for the DPRK, and the North Korean press 

pointedly emphasized that China’s leadership had congratulated 

“the Korean people” for “remarkable progress and achievements 

in various domains including socialist construction . . . successfully 

surmounting manifold difficulties under the leadership of . . . Kim 

Jong Il.”37 

Third, the particulars of China’s post-1978 economic policy would 

seem poorly suited for the contemporary DPRK. The mismatch 

involves both initial conditions and policy priorities:38

• Post-Maoist China was a predominantly rural, 

agricultural society, whereas North Korea is already 

urbanized and (mis)industrialized;

• China’s economy in the late 1970s enjoyed a measure of 

macroeconomic stability obviously absent from North 

Korea’s today;

• Though the renminbi in the late 1970s was a nonconvertible 

currency, its role as medium of economic exchange was 

vastly greater than that permitted the DPRK won today;

• China’s reallocation of resources included massive (if 

temporary) demobilizations of military manpower and 

cutbacks in the defense industries, while North Korea 

continues to enshrine “military-first politics”;

• Not least importantly, China relied heavily upon ethnic 

Chinese from the diaspora for the capital, technology, 

and entrepreneurship that stimulated Chinese linkages 

with the world economy; any call today for a similar 

reliance by the DPRK on outside Koreans would be 

labeled counter-revolutionary in Pyongyang. 
118

Given these nontrivial discrepancies and contradistinctions, an 

attempt to implement China-style economic policies could easily 

have economic and political repercussions that North Korean 

leadership would regard as highly adverse. Choson Sinbo, the paper 

of the pro-DPRK Korean community in Japan (Chochongnyon or 

Chosen Soren), was therefore most likely correct when it asserted, 

in the aftermath of Kim’s Shanghai tour, that “[H]is inspection was 

aimed at seeking ‘reference,’ not at following a Chinese-style reform 

and opening.”39

If North Korea were to experiment deliberately with a new 

economic direction, one might expect the chosen path to comport less 

with the recent “China model” than with “military as modernizer” 

template familiar from the political economies of prewar Japan 

and Park Chung Hee’s South Korea.40 Both of those “models,” it 

may be recalled, relied upon an “economic opening,” and indeed 

depended upon growing integration with outside economics for 

their success.41 

If Pyongyang were to embark upon a genuine move toward an 

economic opening, what initial signs would outsiders be able to 

see? Some of these might include: 1) meaningful departure from 

old “economic” themes, and new dialogue about economic issues, in 

DPRK propaganda and guidance organs; 2) doctrinal reorientation 

regarding the treatment of profit-generating transactions in 

official DPRK pronouncements — and especially profits involving 

transactions with foreign concerns; 3) an attempt on the part of 

the DPRK to settle its longstanding international “debt default” 

problems;42 4) a parallel effort to remonetize the domestic North 

Korean economy; 5) a move toward greater economic transparency, 

i.e. the publication of economic and social statistics describing 

the North Korean domestic situation; and 6) serious attempts to 

promulgate a legal framework for potential foreign investors that 

might assist in attracting profit-seeking overseas entrepreneurs 

to North Korean soil. As yet, for better or worse, none of those 

“indicator lights” appear to be flashing. 

 

WMD Development.

Hopes that the DPRK’s commitment to its decades-old drive for 
119

WMD might be wavering — and that the Pyongyang leadership 

might ultimately be convinced to forswear the project altogether 

— are buoyed by the following facts:

• On the nuclear front, the “Agreed Framework” has resulted 

in a shutdown of North Korea’s only identified reactor/

reprocessing facility, and the United States has not confirmed 

any suspicious nuclear activities in the DPRK since the 

signing of the document in 1994. [This was written befor 

the events of late 2002 indicated that North Korea has been 

pursuing an enriched uranium weapons program. Ed.]

• On the missile front, in September 1999 the DPRK acquiesced 

in the previously mentioned rocket-launch moratorium in 

talks with the United States; in July 2000 Kim Jong Il privately 

advised visiting Russian President Vladimir Putin that North 

Korea would scrap its missile program if other countries 

would launch DPRK satellites into space;43 in October 2000, 

Kim Jong Il personally assured visiting U.S. Secretary of 

State Albright that there would be no more North Korean 

“satellite” launches;44 in late 2000, Clinton administration 

officials engaged in extensive missile talks with North Korean 

counterparts, and the U.S. point person in the discussions 

concluded “an agreement was within reach;”45 in May 2001, 

Kim Jong Il told a visiting EU delegation headed by Swedish 

Prime Minister Goran Persson that North Korea’s missilelaunch moratorium would be extended to the year 2003;46

and in August 2001, in a visit to Moscow, Kim Jong Il issued 

a joint declaration with President Putin in which North 

Korea reaffirmed its pledge to refrain from missile tests until 

2003.47

Weighing against these promising signs, however, are a host of 

indications that the DPRK continues to place an extraordinarily high 

value on its present capabilities and future potential as a producer 

of weapons of mass destruction. While it may not be possible for 

outsiders to determine categorically whether North Korea’s posture 

in its international diplomacy concerning DPRK WMD programs 

reflects deep strategic design or instead mere tactical bargaining, 

Pyongyang has been stubbornly unwilling to date to provide 
120

the international community with credible assurances that it has 

abandoned the path toward proliferation.

On the nuclear issue, to begin, North Korea has, for nearly 7 years 

and under a succession of objections and excuses, adamantly refused 

to permit the unrestricted inspections of its Yongbyon facilities 

by the IAEA specifically envisioned in the “Agreed Framework”48

document. (Those inspections are supposed to determine how much 

bomb-quality plutonium North Korea generated before the “Agreed 

Framework” — and by extension, whether the DPRK may already 

possess nuclear weaponry.) Further, Pyongyang has, in the course 

of its wide-ranging negotiations with the United States, repeatedly 

threatened to restart its frozen Yongbyon nuclear program,49 the 

most recent of these warnings having been issued in June 2001.50

[The North Korean leadership has made similar threats in late 2002 

and 2003, after KEDO ended the supply of heavy fuel oil. Ed.] 

Despite America’s certification that Washington has not detected 

any illicit DPRK nuclear activities, North Korea has also deliberately 

encouraged, and skillfully profited from, the international 

perception that it could not be trusted to abide by its promised freeze 

of its nuclear program: in March 1999, it extracted what it called a 

“visit fee” of over 500,000 tons of cereals from the United States for 

permission for a U.S. team to inspect an enormous underground 

facility at Kumchang-ri whose construction suggested surreptitious 

nuclear development efforts were underway, and whose purpose 

Pyongyang would not forthrightly explain.51 

Finally, there is the unanswered question of why the DPRK has 

insisted, in the crafting of the “Agreed Framework” and ever since, 

in the replacement of its plutonium-generating Yongbyon plant with 

new, KEDO-supplied, plutonium-generating light-water nuclear 

reactors. Pyongyang officially acknowledges that it is suffering 

from pervasive electricity shortages,52 and the new reactors, which 

will not be completed for at least 7 more years,53 will not be able 

to provide power to the North Korean economy until the DPRK’s 

electrical grid is renovated and upgraded.54 Why a project incapable 

of meeting the country’s pressing and immediate economic needs, 

but prospectively capable of eventually supplying fissile material to 

the regime, should meet Pyongyang’s strategic objectives has yet to 

be explained by North Korean leadership.

On the missile issue, North Korea’s pledge of a launch 

moratorium until the year 2003 offers rather less than meets the eye. 
121

In the 5 years between May 1993 and August 1998, recall that the 

DPRK launched no rockets — yet thanks to clandestine development 

projects, Pyongyang successfully leapfrogged from its single stage, 

liquid-fuel No Dong missile to the improved multi-stage, solid-fuel, 

ballistic Taepo Dong model.55 

Since September 1999 — in the period of the self-declared 

DPRK moratorium on test-launches — Pyongyang has carefully 

underscored that it is not bound to halt rocket and satellite research 

and development (since these are “sovereign rights”56); and indeed, 

in July 2001 American intelligence reportedly detected tests of new 

North Korean rocket engines.57 North Korea has also consistently 

reaffirmed as its sovereign prerogative the right to sell abroad any 

missiles that it might be able to manufacture, and through 2001 was 

reportedly exporting missile components and technology to Iran 

and other interested buyers.58 

As for the claims by outgoing Clinton administration officials 

that “a deal was within reach” on North Korean missiles at the 

end of their tenure, the incoming Bush administration (which is 

now privy to the confidential details of those past PyongyangWashington deliberations) has publicly demurred: in the words of 

one Bush administration National Security Council (NSC) official, 

“We’ve looked at the [record] . . . There was nothing close to an 

agreement. There was no verification element in anything the 

previous administration had discussed.”59

Finally, there is the curious detail of North Korea’s relentless 

denunciation of America’s proposed national missile defense (NMD) 

plan.60 It is true that Washington’s prospective program for NMD 

has been sharply criticized by both Moscow and Beijing — but both 

Russia and China are countries with acknowledged nuclear and 

ballistic inventories, whose credibility would be directly affected by 

the success of the envisioned American program. Wherefore then 

Pyongyang’s bitter opposition to American missile defense?

To this date, there is little evidence that North Korea has, at 

any point in its more than 5 decades of existence, ever voluntarily 

abjured any new instrument of military force that might possibly lie 

within its grasp. (Today, indeed, such a renunciation would seem 

fundamentally inconsistent with the state’s established policies of 

Kangsong Taeguk and “military-first politics.”) Moreover, North 

Korea’s commitment to developing WMD was implicitly reaffirmed 

in June 2001 in a full front-page Nodong Sinmun editorial, which 
122

exhorted that “We should hold fast to the military-first politics 

and build up our military strength in every possible way.”61 [emphasis 

added.]

If North Korea were to head on a different road regarding 

proliferation, the first clear sign of a change in attitude would be 

a new stance toward outside verification of North Korean WMD 

activities. For the time being, however, Pyongyang maintains 

that U.S. calls for verification conceal “a dark ulterior motive to 

thoroughly investigate our national defense and military bases . . . 

[a plot to] completely dig out our interior organs [sic] . . .”62 and that 

“the issue [of verification] can never be on the agenda for DPRK-U.S. 

talks”63.

North-South Relations.

The DPRK’s diplomatic behavior toward Seoul since early 

2000 — the Pyongyang Summit and North-South Declaration; the 

subsequent high-level deliberations between the two sides; Kim 

Jong Il’s promise to visit the South “at the appropriate time”; the 

North’s willingness to accept food aid and economic subsidies 

from the South Korean government — all may seem to suggest that 

Pyongyang implicitly has come to recognize the ROK’s right to exist 

as a state. Unfortunately, other evidence suggests the matter is not 

so straightforward.

Although the North Korean government unarguably toned down 

its anti-Seoul invective in the wake of the Pyongyang summit, the 

DPRK’s longstanding official estimate of the legitimacy of the South 

Korean state remained unaltered. This fact was underscored by the 

pronouncements of the “National Democratic Front of South Korea” 

(NDFSK) — the only entity representing the South to be accorded 

a mission in Pyongyang at this time. (The NDFSK is purportedly 

a South Korea-based organization, but is actually a creation of the 

DPRK, operating in and broadcasting for North Korea.) 

Two months after the Pyongyang summit, a statement by the 

NDFSK explained the group’s purpose: “to put an end to the U.S. 

colonial rule over South Korea and establish a regime based on 

national independence and . . . democracy . . .”64 That formulation 

unmistakably characterized the ROK as an American colony, 

possessed of neither national independence nor a democratic 

system. The assessment has since been reinforced and clarified by 
123

NDFSK calls for South Korea’s “emancipation” from “the 50-oddyear U.S. colonial rule”65 and admonitions that South Koreans “will 

forever undergo disgrace as colonial slaves of foreign forces” if they 

do not “rise in anti-U.S. resistance” and “abolish pro-U.S. submissive 

diplomacy.” 66

The NDFSK is ostensibly unconnected to the North Korean 

government. But official statements by the DPRK media convey 

the very same message. A February 2001 statement, for example, 

referred to South Korea’s legislature as the “national assembly” — 

sneer quotes and lower case letters in the original.67 And in August 

2001, Minju Choson, the DPRK’s party journal, made Pyongyang’s 

view of the ROK crystal clear. The essay decried the present ROK 

government as the descendant of “the Korean government-general 

of the Japanese imperialists,” which “the U.S. imperialist . . . renamed 

the ‘U.S. military government’”; it further intoned that the United 

States “enforced a ‘military rule’ in South Korea” and “illegally . . . 

set up a pro-American ‘separate government’ there”:68 that is to say, 

the state currently governed by the Kim Dae Jung administration.69

Is it possible that these recent media pronouncements misstate 

official DPRK policy? While this contingency cannot be dismissed, 

the chances of such a media error are exceedingly unlikely. More 

than possibly any other Communist state, the DPRK has made a fetish 

of subjecting its media outlets to party discipline; Kim Jong Il’s own 

extensive background in propaganda and “guidance” underscores 

the attention that is devoted by Pyongyang to every word it prints 

or broadcasts. That recent reading of the South Korean system, 

furthermore, is consistent with both North Korea’s basic ideological 

documents and the present declarations of the DPRK’s top officials. 

The current preamble of the Workers’ Party of Korea (WPK) charter, 

for example, states that “The present task of the WPK is to ensure . . . 

the accomplishment of the revolutionary goals of national liberation 

and the people’s democracy in the entire area of the country”:70 that 

is to say, in South Korea.71 

North Korean “Reform” and the U.S.-ROK Military Alliance.

The corollary of the DPRK’s estimate of the legitimacy of the 

South Korean state is Pyongyang’s posture toward the ROK’s 

military alliance with the United States. According to President Kim 

Dae Jung, at the Pyongyang summit “North Korea has consented 
124

to the South’s view that U.S. troops should continue to stay on the 

Korean peninsula.”72 President Kim has recounted his June 2000 

conversation with Kim Jong Il over the future of American forces 

in the peninsula on a number of occasions; his account seems to 

be corroborated by China’s Beijing Review, which has intimated 

that North Korean officials told Chinese sources that Pyongyang 

might reconcile itself to a long-term U.S. troop presence under 

certain specific conditions.73 Yet these fascinating emanations are 

to date wholly at odds with the stated position of the North Korean 

government, and indeed with Kim Jong Il’s own published postPyongyang summit comments, all of which maintain that the United 

States is responsible for the division of Korea, that the U.S. alliance 

with South Korea is totally unacceptable, and that U.S. troops should 

withdraw from the ROK and the Korean peninsula.

In the months since the Pyongyang summit, Kim Jong Il has 

given two interviews in which he discussed American forces on the 

Korean peninsula: one to a Korean-American reporter (June 2000), 

the other to Moscow’s Itar-Tass news agency (July 2001). In the 

former, he is quoted as saying:

President Kim Dae Jung’s image had not been so good among our 

people. For instance, he has advocated continued U.S. military 

presence in our country even after the unification has been 

realized . . . We have urged U.S. forces to leave Korea. However, 

I don’t expect them to leave soon. The Americans, more than 

anybody else . . . are responsible for the partitioning of Korea 

into two halves. They are accordingly obligated to facilitate its 

reunification.74

In the Itar-Tass interview, Kim’s view is more succinct: “The 

whole world knows that the United States has forcibly occupied half 

of our country’s land and is constantly threatening us.”75 Neither of 

these pronouncements sounds like an invitation to American forces 

for an indefinite stay on the Korean peninsula.

The DPRK’s post-Pyongyang summit declamations about U.S. 

forces in Korea are entirely consonant with Kim’s words, and 

elaborate upon his expressed viewpoint. Especially interesting is 

the sounding of Nodong Sinmun on June 16, 2000 — the day after the 

Pyongyang summit concluded. In that presentation, it is emphasized 

that, 
125

Korea’s division is what outside forces imposed upon the country. 

If they had not occupied Korea, there would have been no division 

of the county. . . . The major outside power responsible for the 

division of the country is the United States. . . . U.S. imperialists 

[are] the mastermind of national division and the key obstructer 

of national unification. . . . Withdrawal of U.S. troops — that 

should be the first step for the United States to take to help Korea’s 

reunification . . . 76

In the following months, the drumbeat of criticism against the U.S. 

military alliance with South Korea continued to reverberate. By one 

count, between the June 15, 2000, Pyongyang summit and August 1, 

2001, North Korea’s state news agency, KCNA, vented 61 criticisms 

of the American troop presence in the South.77 Though many of these 

forays did not specifically call for a U.S. pullout, a large number of 

KCNA items — and many more from other North Korean outlets 

— explicitly did. Thus, in various pronouncements, U.S. troop 

pullout was held to be a “stumbling block to reunification” (Radio 

Pyongyang, March 200178); a “prerequisite for disarmament” (Nodong 

Sinmun, April 200179); “a precondition for arms reduction” (Nodong 

Sinmun, May 200180); and even “the master key to reconciliation, 

cooperation, and lasting peace on the Korean peninsula” (KCNA, 

April 200181). In March 2001, Pyongyang Central Broadcasting Station

insisted “the United States . . . give up its domination and invasive 

policy over the South”;82 in July 2001, Nodong Sinmun demanded 

“the unconditional withdrawal of the U.S. imperialist aggression 

troops from South Korea.”83 

Any lingering doubts about the DPRK’s official position on 

U.S. troops in South Korea should have been satisfied by the joint 

declaration with the Russian government on the occasion of Kim 

Jong Il’s Moscow August 2001 meeting with Vladimir Putin. In that 

document, the DPRK avowed “The pullout of the U.S. forces from 

South Korea is a pressing issue which brooks no delay.”84

Pyongyang has indicated, incidentally, that it would not be 

satisfied simply with a U.S. military withdrawal from South Korea: 

since it holds that “the U.S. insistence on its military presence in 

the region is designed to establish military domination over the 

Asia-Pacific” and “is aimed to use Japan as a shock brigade in 

Asian aggression” (Minju Choson, February 200185), a U.S. military 

pullout from Japan is also a requirement for peace and stability in 

the region. 
126

In the North Korean lexicon, an “independent” South Korea is 

defined as a South Korea no longer stationing American forces, or 

bound to the United States by a military alliance. It is therefore highly 

significant that the first point in the June 15, 2000, “North-South 

Declaration” signed by Kim Dae Jung and Kim Jong Il in Pyongyang 

should read “The North and the South agreed to solve the question of 

the country’s reunification independently by the concerted efforts of 

the Korean nation responsible for it.”86 After the Pyongyang summit, 

it became known that President Kim had not consulted the United 

States about this particular linguistic innovation in his “Sunshine 

Policy.”87 President Kim Dae Jung further revealed that he “had 

agreed to include the North Korean phrase [in the declaration] in 

return for Kim Jong Il’s agreement to a new government framework 

[for eventual reunification’],”88 and gamely explained that his own 

interpretation of the phrase “independent” was that “the two Koreas 

will work together maintaining friendly relations with surrounding 

nations.”89

In context of the joint declaration, however, what mattered was 

not President Kim’s personal definition of the word “independent.” 

Following the summit, North Korea repeatedly insisted that the 

spirit of the joint declaration be “recognized” and the objectives 

“implemented.” The meaning of the joint summit declaration, 

Pyongyang stressed, was that “reunification will be realized only 

when the two Koreas gather together to resolve matters without any 

other foreign powers involved in the process.”90 Pyongyang further 

averred that “our paramount, longstanding desire is to reunify the 

country at an early date,” but “as long as U.S. interference continues, 

we cannot resolve the issue of reunification on our own.”91 

North Korean officials have further explained that the key 

obstacle to the progress of the North-South declaration is the United 

States, which is “refusing the North-South Joint Declaration and 

hindering its implementation.”92 For although (as North Korean 

media phrases it) the “North-South relationship . . . has entered the 

track of harmony . . . with the historic . . . announcement of June 15 

North-South Joint Declaration . . . [the United States] block[s] our 

nation’s independent reunification.”93 By Pyongyang’s particular 

construction, of course, any American effort to preserve or uphold 

the U.S.-ROK military alliance would amount to hindering the 

implementation of the joint declaration.

If North Korea were to evidence a new attitude toward the 
127

legitimacy of the ROK, the indications of this change would be direct 

and unmistakable: its highest figures and its official media would 

simply disclose that they were prepared to accept the existence of the 

South Korean state, that they recognized the ROK’s right to conduct 

its own foreign policy, and they respected (while respectfully 

disagreeing with) Seoul’s decision to maintain a military alliance 

with the United States. No such disclosures, of course, have been 

offered to date. To the contrary: as the evidence adduced already 

should underline, Pyongyang has steadily attempted to use the 

South’s “Sunshine Policy” to drive a wedge between the United 

States and the ROK. 

By Pyongyang’s reckoning, its policies since the June 2000 summit 

have been successful indeed: as one North Korean broadcast in July 

2001 enthused, “Today is a rare day when everything is proceeding 

in accordance with our wishes . . .”94

ENDNOTES - CHAPTER 7

1. This essay abridges a longer study by the author from the just-released report, 

Strategic Asia 2001-2002: Power and Purpose, Richard J. Ellings and Aaron Friedberg, 

eds, Seattle, WA: National Bureau of Asian Research, 2002. 

2. John Merrill, Korea: The Peninsular Origins Of The War, Newark, DE: University 

of Delaware Press, 1989, p. 176.

3. Text of the Declaration available electronically at the ROK Unification Ministry’s 

website http://www.unikorea.go.kr/cgi-eg/eb.cgi?41D41/D4129.htm; accessed August 9, 

2001.

4. Don Oberdorfer, The Two Koreas: A Contemporary History, Reading, MA: Addison 

Wesley, 1997, pp. 268-271.

5. As with so many things North Korean, there is ambiguity today about what 

exactly the top slot in the government happens to be. According to the 1998 revision 

of the DPRK Constitution, Kim Il Sung, who died in 1994) is the “eternal President 

of the Republic.” (The full text of the Socialist Constitution of the DPRK is available 

electronically at People’s Korea website, http://www.korea-np.co.jp/pk/061st_issue/

98091708.htm; accessed July 30, 2001.) The Constitution itself does not indicate the top 

position of state for living office-holders, but in nominating Kim Jong Il for National 

Defense Commission, NDC) Chairman, Kim Yong Nam, head of the Presidium of 

the DPRK Supreme People’s Assembly, SPA, declared that “the NDC chairmanship 

is the highest post of state.” Korea Central News Agency (hereafter KCNA), “Kim 

Jong Il’s election as NDC chairman proposed,” available at the KCNA website, http:

//www.kcna.co.jp/item/1998/9809/news09/05thm.#2; accessed July 30, 2001.
128

6. It is true that North Korea had previously invited South Korean leaders to 

Pyongyang. But the earlier invitation to President Roh Tae Woo would have cast him 

as a celebrant — and supplicant — at Kim Il Sung’s colossal national birthday party 

— terms of reference no ROK President could have accepted. Again, in 1994, Kim Il 

Sung invited Roh’s successor, President Kim Young Sam, to a meeting in Pyongyang 

in 1994 — but Marshal Kim died just after extending the invitation, and before any 

arrangements for that summit had been negotiated. 

7. By late May 2001, a total of 396,000 tourists — almost all of them South Korean 

— had visited Kumgangsan through Hyundai Asan Corp. “Hyundai Finds No 

Breakthrough In Mt. Kumgang Project,” Korea Times, May 28, 2001. 

8. ROK Ministry of Unification, “Economic Agreements between South and North 

Korea,” Korean Unification Bulletin, No. 31, May 2001, pp. 2-3.

9. Cf. “Kaesong to be designated as special economic zone to host Hyundai’s 

industrial complex,” Vol. 8, No. 10, 2000, news report on Hyundai Asan Corporation 

website, available electronically at http://www.hyundai-asan.com/english/news1/list.asp; 

accessed July 27, 2001; Soon-jick Hong, “Developing The Kaesong Industrial Area: 

Economic Effects And Future Tasks,” VIP Millennium Report, Seoul: Hyundai Research 

Institute, Vol. 6, 2001, pp. 15-19.

10. See, for instance, “Kim Says He Struck Unexpected Accord With Kim Jong-il 

on Unification Issue,” Korea Times, June 17, 2000; Shino Yuasa, “North Korean leader 

okays US forces on peninsula: report,” Agence France Presse, August 9, 2000; “North 

Korean Leader Okays US Forces On Peninsula,” Financial Times, August 10, 2000; Doug 

Struck, “South Korean Says North Wants US Troops To Stay,” Washington Post, August 

30, 2000, p. A1; Jane Perlez, “South Says North Agrees US Troops Should Stay,” New 

York Times, September 11, 2000, p. A3; Lee Young-jong, “North ‘Understands’ Troops,” 

English JoongAng Ilbo (internet, February 21, 2001.

11. Between January 2000 and August 2001, the DPRK normalized diplomatic 

relations with Australia, Italy, the United Kingdom, the Netherlands, Belgium, 

Luxembourg, Canada, New Zealand, Germany, Spain, Greece, and the European 

Union. Eight of those countries (Australia, Belgium, Canada, Greece, Luxembourg, 

Netherlands, New Zealand, and the United Kingdom) had shed blood in the Korean 

War, under the aegis of the UNC. Over this same period, North Korea also forged 

diplomatic ties with two other former UNC enemies: the Philippines and Turkey. As 

of August 2001, only two of the 17 countries that had fought against North Korea in the 

Korean War had not yet established diplomatic relations with the DPRK: South Korea 

and the United States.

12. KCNA, January 12, 2001; reprinted in U.S. Foreign Broadcast Information Service, 

hereafter, FBIS) as “DPRK’s KCNA: Respect for independence called for,” FBIS-EAS2001-0112, January 12, 2001.

13. Central Broadcasting Station, Pyongyang, May 3, 2001; translated as “North 

Korean radio reviews developments in relations with EU,” BBC Monitoring Asia Pacific-
129

Political Supplied by BBC World Monitoring, May 4, 2001.

14. Nodong Sinmun, “21st Century Is Century of Great Change and Creation,” 

January 4, 2001; translated on People’s Korea website at http://www.korea-np.co.jp/pk/

154th_issue/2001012503.htm; accessed March 15, 2001.

15. KNCA, “Kim Jong Il pay unofficial visit to China,” January 20, 20001; available 

electronically at http://www.kcna.co.jp/item/20001/200101/news01/21.htm; accessed 

March 15, 2001.

16. Xinhua, January 20, 2001; translated as “Kim Chong-il Visits China, 15-20 

January; Holds Talks With Jiang Zemin, Others,” FBIS-CHI-2001-0120, January 20, 

2001; Joongang Ilbo, January 19, 2001, reprinted as “Kim Chong-il Confers With PRC 

President Jiang Zemin, Visits Stock Market Twice,” FBIS-EAS-2001-0118, January 19, 

2001.

17. The Korea Herald, March 2, 2001, reprinted as “DPRK Asks UN To Teach 

Students Market Systems,” FBIS-EAS-2001-0301, March 2, 2001. According to the 

ROK Ministry of Unification, nearly 400 North Korean officials have received overseas 

training since 1998. Ko Soo-kuk, “Nearly 400 N.K. Officials Out to Study Capitalism 

Abroad,” English JoongAng Ilbo, June 4, 2001.

18. The Korea Herald, March 12, 2001, reprinted as “DPRK Officials Said Hoping for 

P’yongyang To Join World Bank,” FBIS-EAS-2001-0311, March 12, 2001.

19. Yonhap News Agency, June 4, 2001, reprinted as “South Korean agency reports 

North approves first billboard ads,” BBC Monitoring Asia Pacific-Political Supplied by 

BBC World Monitoring, June 4, 2001.

20 “South Korean Designer to Hold Fashion Show in Pyongyang,” May 30, 2001, 

on a Choson Ilbo website http://nk.chosun.com/english/news/news.html?ACT=detail&res_

id=4298; accessed July 30, 2001.

21. Digital Chosunilbo, “North Korea to Introduce Farmers’ Contract,” March 

4, 2001 available electronically at http://www.chosun.com/w21data/html/news/200103/

200103040310.html; accessed March 5, 2001. 

22. Korea Times, “North Korea Online This Year,” February 13, 2001, available 

electronically at http://www.hk.co.kr/times/200102/t200102131738554011114.htm; 

accessed February 14, 2001. 

23. For example, 

The former East European socialist countries opened their door to the 

imperialists’ ideological and cultural infiltration . . . As a result, . . . 

they were ruined after all. . . . The fact that these countries collapsed 

without firing even a single shot clearly exhibits how dangerous the 

imperialists’ ideological and cultural infiltration is. 
130

Nodong Sinmun, February 6, 2001, translated as “DPRK Daily Urges ‘Imperialists’ 

Ideological, Cultural Infiltration’ Be Blocked,” FBIS-EAS-2001-0220, February 26, 

2001.

24. For example, in December 1998 a spokesmen for the General Staff of the North 

Korean People’s Army (KPA) pointedly asserted that “It must be clearly known that 

there is no limit to the strike of our people’s army and that on this planet there is 

no room for escaping the strike”; more recently, the DPRK media intoned that “The 

nation’s flourishing and the country’s prosperity entirely depend upon the barrel of 

the gun . . . When the barrel of the gun rusts, the country and the nation collapses. . . . 

[O]ur people will become slaves and the party and the revolution will all perish when 

the barrel of the gun became rusty. . .” “DPRK’s Military Warns of ‘Annihilating Blow’ 

to U.S.,” KCNA, December 2, 1998, available electronically on the People’s Korea website 

at http://www.korea-np.co.jp/pk/072nd_issue/98120206.htm; accessed July 1, 2001; Korean 

Central Broadcasting Station, Pyongyang, July 24, 2001, translated as “DPRK Stresses 

Leader’s ‘Invincible’ Military-First Politics,” FBIS-EAS-2001-0725, July 24, 2001. 

25. Food and Agriculture Organization and World Food Programme, “FAO/WFP 

Crop And Food Supply Assessment Mission To The Democratic People’s Republic Of 

Korea,” 27 July, 2001, available at the WFP website at http://www.wfp.org/newsroom/

in_depth/north_koreaII.html#; accessed August 3, 2001. 

26. “N.K. Overseas Trade Estimated as 1.51 billion for First Half,” English JoongAng 

Ilbo, online, July 27, 2001, available at http://www.english.joins.com/nk/article.asp?aid=20

010727184740&sid=E00; accessed August 2, 2001. That report placed North Korea’s 

“international” exports for the first half of 2001 at $290 million. The South Korean 

government does not count North-South commerce as “international” trade — but 

North Korea only exported $63 million in goods to the ROK during that same period, 

according to the Unification Ministry. “Inter-Korean Trade Decreased by 2.7% for First 

Half,” English JoongAng Ibo, online, available at http://www.english.joins.com/nk/article.a

sp?20010725174747&sid=E00; accessed July 27, 2001. Taken together, the Unification 

Ministry’s estimates imply global commodity export revenues of $353 million. 

Assuming a North Korean population in the range of 20-25 million would imply per 

capita export revenues of $14-$18 for the first half of the year 2001. 

27. Nodong Sinmun, February 28, 2001, translated as “DPRK Daily: Self-Reliance 

Does Not Mean Keeping ‘Door Closed Up’ To S&T,” FBIS-EAS-2001-0316; March 21, 

2001.

28. Ibid.

29. Nodong Sinmun, July 20, 2001, translated as “DPRK Daily Urges Prevention of 

‘Imperialists’ Ideological, Cultural Infiltration,” FBIS-EAS-2001-0727, August 2, 2001.

30. Nodong Sinmun, June 21, 2001, translated as “DPRK Full Front-Page Article 

Discusses ‘National Pride’,” FBIS-EAS-2001-0629, July 3, 2001.
131

31. Choson Ilbo, February 16, 2001, translated as “Nuclear group refuses North 

Korean wage demand, to use Uzbek workers,” BBC Summary of World Broadcasts, FE/

D4075/S1, February 19, 2001.

32. Yonhap News Service, May 24, 2001, reprinted as “ROK’s Yonhap: Seoul, Tokyo 

Already Fund $510 Mln Into KEDO Project,” FBIS-EAS-2001-0524; May 29, 2001.

33. Cf. Choson Ilbo, January 21, 2001, translated as “Further on 9 Figures Who 

Accompanied DPRK Leader on Visit to PRC,” FBIS-EAS-2001-0121, January 24, 2001.

34. Glen Chapman, “North Korean Envoy Arrives in US,” Agence France Presse, 

October 9, 2000.

35. Kim Jong Il has only once been quoted as evidencing personal interest in 

another country’s economic system. During Secretary of State Albright’s October 

2000 visit to Pyongyang, Kim reported told her that he was looking to Sweden as a 

model for national development. Yonhap News Agency, October 25, 2000, reprinted as 

“North Korea said adopting Swedish economy as development model,” BBC Summary 

of World Broadcasts, FE/W0664/S1, November 1, 2000. Sweden, of course, is an exportoriented, high-tax capitalist economy with solid commercial codes and firm property 

laws, and with a convertible currency. Kim’s curious comment may or may not have 

been intended to test his guests. That comment should be kept in mind, however, in 

judging the credibility of other confidential revelations that he has personally offered 

to outsiders. 

36. Xinhua, January 20, 2001, reprinted as “North Korean leader pays ‘unofficial’ 

visit,” BBC Summary of World Broadcasts, FE/D4050/G, January 22, 2001.

37. KCNA, “Kim Jong Il pays unofficial visit to China,” available electronically at 

http://www.kncna.co.jp/item/2001/200101/news01/21.htm#1; accessed August 4, 2001.

38. For background on the Chinese experience, see Gordon Bennett, ed., China’s 

Finance And Trade: A Policy Reader, Armonk, NY: M. E. Sharpe, 1978; Yun Wing Sung, 

The China-Hong Kong Connection: The Key To China’s Open-Door Policy, New York: 

Cambridge University Press, 1991; Susan L. Shirk, How China Opened Its Door: The 

Political Success of the PRC’s Foreign Trade and Investment Reform, Washington, DC: The 

Brookings Institution, 1994; Nicholas R. Lardy, China’s Unfinished Economic Revolution, 

Washington, DC: The Brookings Institution, 1998; and You-tien Hsing, Making 

Capitalism Work In China: The Taiwan Connection, New York: Oxford University Press, 

1998.

39. The Choson Sinbo article ran on February 9, 2001, and is summarized in Yonhap

News Service, February 11, 2001, translated as “DPRK Said Not Planning To Adopt 

Chinese-Style Economy,” FBIS-EAS-2001-0211, February 13, 2001.

40. By no coincidence, in 1998 Kim Jong Il adopted for his formal accession the 

slogan Kangsong Taeguk — “a rich and powerful nation” — one strikingly similar to the 

prewar Japanese Fukoku Kyohei.
132

41. For background, see G. C. Allen, et al., Industrialization of Japan and Manchukuo, 

1930-1940, New York: Macmillan, 1940; Michael A. Barnhart, Japan Prepares For Total 

War: The Search For Economic Security, Ithaca, NY: Cornell University Press, 1987; and 

Jung-en Woo, Race To The Swift: State And Finance In Korean Industrialization, New York: 

Columbia University Press, 1991.

42. For the past quarter-century, the DPRK has been in effective default on roughly 

$1 billion in European, Japanese, and Australian loans contracted in the early 1970s. 

For more detail, see Nicholas Eberstadt, Korea Approaches Reunification, Armonk, NY: 

M. E. Sharpe, 1995, Chapter 1.

43. Michael R. Gordon, “North Korea Reported Open To Halting Missile Program,” 

New York Times, July 20, 2000, p. A6; Edwin Chen, “Clinton, Putin Discuss N. Korea,” 

Los Angeles Times, July 22, 2000, p. A14.

44. Indira A.R. Lakshmanan, “N. Korea Pledges To End Rockets Trust An Issue 

Despite Overture,” Boston Globe, October 25, 2000, p. A1.

45. Michael R. Gordon, “How Politics Sank Accord on Missiles With North Korea,” 

New York Times, March 6, 2001, p. A1.

46 Don Kirk, “North Korea Pledges to Extend Its Missile-Test Ban,” International 

Herald Tribune, May 4, 2001, p. 1.

47. Bernard, Besserglik, “N. Korean leader Kim pledges ‘peaceful’ use of missile 

programme,” Agence France Presse, August 4, 2001.

48. Cf. Shin Yong-bae, “Japanese demand inspections of North Korean reactors,” 

The Korea Herald, September 9, 2000; “IAEA says North Korea not allowing nuclear 

access,” Agence France Presse, September 11, 2000; Sang-hun Choe, “North Korea again 

rejects inspection of its nuclear program,” Associated Press, June 21, 2001; Kim Heesung, “Pyongyang Refuses IAEA Inspection,” English Joongang Ilbo, July 18, 2001.

49. Cf. Korea Herald, July 3, 2000, reprinted as “DPRK Threatens To Restart 

Nuclear Program,” FBIS-EAS-2000-0702, July 3, 2000; KCNA, July 12, 2000, reprinted 

as “DPRK’s KCNA: KCNA on compensation for loss of electricity,” FBIS-EAS-2000-

0712, July 13, 2000.

50. KCNA, June 6, 2001, reprinted as “DPRK’s KCNA: US Urged To Compensate 

for DPRK’s ‘Loss of Electricity’ Due to Delay in LWR Project,” FBIS-EAS-2001-0606, 

June 7, 2001.

51. For Pyongyang’s official statement on the Kumchang-ri affair, see “4th 

DPRK-U.S. underground facility negotiations,” KCNA, March 18, 1999, available on 

the KCNA website at http://www.kcna.co.jp/item/1999/9903/news03/18thm.#2; accessed 

August 5, 2001.
133

52. Charles Lee, “Koreas conduct survey of North’s energy shortage,” Associated 

Press, February 3, 2001. 

53. “US provides $20 million for heavy oil for N. Korea,” Kyodo News Service, July 

6, 2001.

54. “NPEC Releases Trip Report and Recommendation on 1994 Agreed 

Framework,” Nonproliferation Policy Education Center, March 14, 2001, available 

electronically at http://www.wizard.net/~npec/announce..htm#trip; accessed August 10, 

2001.

55. For information on the specifications and capabilities of North Korean rockets, 

see the Federation of American Scientists website, http://www.fas.org/nuke/guide/dprk/

missile/index.hml; accessed August 5, 2001.

56. In the July 2001 ASEAN Regional Forum, ARF, North Korea’s “Annual 

Report on Security Prospects” stated that the “test of missile belongs thoroughly to 

the sovereignty of each country, that is why nobody has right to interfere with it”, p. 

37. (I am indebted to Ms. Joy Yamamoto of the U.S. State Department for making this 

DPRK document available to me.) Almost simultaneously, in an interview with ItarTass, Kim Jong Il declared that “Pursuing a peaceful missile program is our legitimate, 

independent, right.” Pyongyang Central Broadcasting Station, July 27, 2001, translated as 

“DPRK Radio Carries Kim Chong-il’s Interview With Tass-Itar,” FBIS-EAS-2001-0727, 

July 30, 2001. 

57. Bill Gertz, “N.Korea tests its missile engine,” Washington Times, July 3, 2001, p. 

A1. 

58. Bill Gertz, “North Korea Sends Missile Components, Technology to Iran,” 

Washington Times, April 18, 2001, p. A1.

59. Torkel L. Patterson, Special Assistant to the President and Senior Adviser 

for Asian Affairs, National Security Council, address to the Institute for CoreanAmerican Studies, June 21, 2001, available electronically at http://www.icasinc.org/

s2001/s2001tlp.html; accessed August 5, 2001. 

60. See, for instance, Pyongyang Central Broadcasting Station, July 14, 2001, translated 

as “US Plan To Build Test Facility for MD System Criticized,” FBIS-EAS-2001-0714, 

July 16, 2001.

61. Nodong Sinmun, June 1, 2001, translated as “DPRK Daily Full Front-Page 

Article Discusses ‘National Pride’,” FBIS-EAS-2001-0629, July 3, 2001. 

62. Pyongyang Central Broadcasting Station, July 8, 2001, translated as “North Korea 

demands compensation from USA for delay to reactor project,” BBC Monitoring Asia 

Pacific — Political Supplied by BC Worldwide Monitoring, July 8, 2001.

63. Yonhap News Service, August 1, 2001, reprinted as “ROK’s Yonhap: N.K. Says 
134

U.S. Demands for Verification Ruse to Disarm It,” FBIS-EAS-2001-0801, August 2, 

2001.

64. KCNA, August 25, 2000, reprinted as “DPRK’s KCNA: More vigorous 

movement for national reconciliation and unity called for,” FBIS-EAS-2000-0825, 

August 28, 2000.

65. KCNA, May 5, 2001, reprinted as “DPRK’s KCNA: Anti-U.S. resistance called 

for,” FBIS-EAS-2001-0505, May 7, 2001.

66. Pyongyang Central Broadcasting Station, June 8, 2001, translated as “North 

Korean radio broadcasts ‘letter of appeal’ by pro-North radio station in Seoul,” BBC 

Monitoring Asia Pacific — Political Supplied by BC Worldwide Monitoring, June 8, 2001.

67. “Revocation of proposed revision of ‘Labour Law’ demanded,” KCNA, 

February 25, 2001; available electronically at http://www.knca.co.jp/item/2001/200102/

news02/25.htm#5; accessed August 6, 2001. 

68. “Minju Joson on scientific exposition of root cause of Koreas division,” KCNA, 

August 1, 2001; available electronically at http://www.kcna.co.jp/item/2001/200108/

01.htm#5; accessed August 6, 2001.

69. It may seem paradoxical for Pyongyang to accept aid and financial transfers 

from the ROK if it does indeed regard Seoul as an illicit political entity: to the DPRK’s 

leadership, however, such transactions pose no contradiction. In Pyongyang’s wellrehearsed formulation, “those with strength should devote strength, those with 

knowledge give knowledge, and those with money give money” to the “struggle for 

national reunification.” KCNA, August 15, 1996, reprinted as “Pan-national meeting 

for peace and reunification help in Pyongyang,” BBC Summary of World Broadcasts, 

FE/D2692/D, August 16, 1996.

70. Sixth revision of the charter of the WPK, October 13, 1980; cited in The North and 

South Korean Political Systems, cf. fn. 3 above, p. 907.

71. Kim Jong Il reportedly indicated to both Kim Dae Jung in June 2000 and to a 

visiting group of South Korean newspaper editors in August 2000 that the preamble 

of the KWP charter would be changed in the fall of 2000. “North Korea to alter goal 

of making South communist: report,” Agence France Presse, June 20, 2000; Choson Ilbo, 

August 13, 2000, translated as “Excerpts of DPRK Leader’s Dialogue With ROK Media 

Heads,” FBIS-EAS-2000-0813, September 13, 2000. As of yet, however, no emendations 

of the preamble have been promulgated.

72. Kim Dae Jung, “North And South Korea Find Common Ground,” International 

Herald Tribune, November 28, 2000, p. 9.

73. See “North Korea could accept long-term US military presence: Chinese 

report,” Agence France Presse, July 26, 2000.
135

74. “Interview with General Secretary Kim Jong Il,” June 30, 2001; available 

electronically at http://www.korea-np.co.jp/pk/144th_issue/2000072502.htm; accessed 

August 10, 2001. 

75. “General Secretary Kim Jong Il Answers Questions Raised by Itar-Tass,” 

August 1, 20001, available electronically at http://www.www.korea-np.co.jp/pk/166th_

issue/2001080101.htm; accessed August 10, 2001. 

76. Nodong Sinmun, June 16, 2000, translated as “DPRK: Journal Urges US to 

Change Korea Policy,” FBIS-EAS-2000-0630, July 3, 2000.

77. I am indebted to Mr. Jungmin Lee of Harvard University for this research 

finding.

78. Yonhap News Service, March 17, 2001, reprinted as “ROK’s Yonhap: North 

Korea Renews Its Call for U.S. Troop Withdrawal,” FBIS-EAS-2001-0317, March 20, 

2001.

79. “Nkorea demands US troop pullout as ‘prerequisite’ for disarmament,” Agence 

France Presse, April 29, 2001.

80. Pyongyang Central Broadcasting Station, May 28, 2001, translated as “DPRK’s 

Nodong Sinmun Demands Withdrawal of US Forces Stationed in South,” FBIS-EAS2001-0528, May 30, 2001.

81. “U.S. military presence in South Korea, source of war,” KCNA, April 22, 2001, 

available electronically at http://www.kcna.co.jp/item/2001/200104/news04/22.htm#8; 

accessed August 6, 2001. 

82. Yonhap News Service, March 26, 2001, reprinted as “ROK’s Yonhap: N.K. 

Demands Withdrawal of U.S. Troops, Nuclear Weapons,” FBIS-EAS-2001-0326, March 

27, 2001.

83. KCNA, July 18, 2001, reprinted as “DPRK’s KCNA: U.S. forces’ pullback from S. 

Korea urgently demanded by times and nation,” FBIS-EAS-2001-0718, July 19, 2001.

84. “DPRK-Russia Moscow Declaration,” KCNA, August 5, 2001, available 

electronically at http://www.kcna.co.jp/contents/20010805.htm#1; accessed August 6, 

2001.

85. “Utterances of U.S. ambassador to Japan blasted,” KCNA, February 23, 2001; 

available electronically at http://www.kcna.co.jp/item/2001/200102/news02/23.htm#5; 

accessed August 6, 2001. 

86. “North-South Joint Declaration,” available on People’s Korea website at http:

//www.korea-np.co.jp/pk/142th_issue/2000061501.htm; accessed August 6, 2001.

87. “Sunshine Policy at Stake,” The Korea Herald, March 15, 2001.
136

88. Yonhap News Service, June 15, 2000, reprinted as “Korea: South President gives 

details behind summit declaration,” BBC Monitoring Asia Pacific-Political Supplied by 

BBC World Monitoring, June 15, 2000.

89. Yonhap News Service, June 16, 2000, reprinted as “ROK President Provides 

Further Details Of Summit At Cabinet,” FBIS-2000-0616, June 16, 2000.

90. Kim Hee-sung, “Foreign Forces must be Driven out, Pyongyang News 

Reports,” JoongAng Ilbo, June 7, 2001.

91. Minju Choson, June 5, 2001, translated as “DPRK: ‘Federation’ Said Only Way to 

Independent, Peaceful Reunification,” FBIS-EAS-2001-0620, June 25, 2001.

92. Xinhua, August 2, 2001, reprinted as “Xinhua Cites DPRK Condemning US for 

Refusal of North-South Joint Declaration,” FBIS-CHI-2001-0802, August 3, 2001.

93. Pyongyang Central Broadcasting Station, July 30, 2001, translated as “DPRK Radio 

Decries US as ‘Vicious Enemy’ to Reunification,” FBIS-EAS-2001-0730, July 31, 2001. 

94. Pyongyang Central Broadcasting Station, July 24, 2001; translated as “DPRK 

Stresses Leader’s ‘Invincible’ Military-First Politics,” FBIS-EAS-2001-0725, July 30, 

2001.
137

CHAPTER 8

PERCEPTIONS OF NORTH KOREA

AND POLARIZATION OF ROK SOCIETY

Taewoo Kim

The Sunshine Policy has made many changes in both Koreas. 

Republic of Korea (ROK) President Dae-jung Kim and North Korean 

leader Jong-il Kim (Kim Jong-Il), Chairman of the omnipotent 

National Defense Commission (NDC), stepped into the international 

spotlight when they met in Pyongyang for a summit in June 2000. 

Since the summit, Seoul has tried hard to keep the momentum going 

and seemed successful with a variety of follow-up events, such as 

ministerial meetings, reunions of separated families, and groundbreaking for reconstruction of the inter-Korean railway. The summit 

and a Jong-il Kim diplomatic blitz, including the meeting with U.S. 

Secretary of State Madeleine Albright and resumption of diplomatic 

ties with European countries, transformed his image from morally 

bankrupt and mentally unstable to pragmatic, a man with whom 

Korean peace and stability could be discussed. The excitement 

reached a peak when the Norwegian Nobel Committee made 

ROK President Kim the millennium's first Peace Prize laureate for 

his peace initiative. South Koreans, overwhelmed by the euphoria 

surrounding the summit meeting and rosy articles in the newspapers, 

developed high expectations of North Korean changes.

The Sunshine Policy started with two assumptions: the two 

Koreas should not continue their Cold War confrontation infinitely, 

and the North Korean regime is reasonable enough to accept 

changes in the quality of life for its people and appreciate the 

North’s common ethnicity with the South. Most South Koreans 

agree on the first assumption. In this sense, a historically significant 

initiative was provided by President Kim. The second assumption 

was controversial for some South Koreans, but they kept silent in 

hopes they were wrong. If North Korea had accepted indisputably 

real changes and stumbling blocks had not emerged, the momentum 

might have continued. Fortunately or unfortunately, Pyongyang's 
138

response to Seoul's lavish assistance stopped short of the expectations 

of ordinary South Koreans, prompting debates over whether the 

North was really changing. To make things worse, an economic 

downturn cast clouds over the future of the Sunshine Policy, since 

the inter-Korean detente was being propelled largely by a flow of 

money to the North. For the architects of the Sunshine Policy, the 

inauguration of President George W. Bush may have been another 

turnaround. The accidental U.S.-DPRK rapprochement at the last 

moment of Clinton’s term, symbolized by the October 9-12 visit 

to Washington of Vice Marshal Myong-rok Cho, Vice Chairman of 

the NDC, on October 9-12 dissipated quickly as Bush rejected any 

illusion-chasing and demanded verified changes by the North.

The 3 years of the Sunshine Policy has left much confusion in 

South Korea on how to perceive North Korea and what to expect from 

it. It has brought about acute ideological confrontation among South 

Koreans and polarized the society into conservatives and liberals. 

This division was further sharpened by the sudden emergence of 

government-subsidized nongovernment organizations (NGOs), socalled civic organizations, that ruthlessly promote liberal arguments. 

The civic organizations became invincible and overwhelming so 

quickly that they intervened with impunity in almost all important 

national policies. Conservative policies, officials, politicians, 

scholars, newspapers, etc., were under fire, and those who opposed 

the Sunshine Policy were vilified as anti-unification or anti-reform 

forces. Conservatives began to fight back with conservative activist 

organizations, which are rather unfamiliar to South Koreans. An 

example is the Free Citizens' Alliance of Korea (Jayoosiminyondae) 

established by conservative intellectuals in 2001. Now the two 

camps contend on almost all North Korea-related issues.

Today some South Koreans say that what we see now is a serious 

polarization of society which we witnessed in the past only after the 

national liberation in 1945. It is not North Korea, but South Korea 

that is undergoing drastic changes. It is ironic that Seoul endeavored 

for years to change North Korea but has precipitated confusion 

within itself and brought its own society to a crossroad of change. 

It is premature to say whether South-South ideological conflict is 

an overdue pain on the way to a true pluralist democracy or the 

nation is simply mired in nonproductive bickering. Nevertheless, 

there are reasons to fear a lousy war of attrition marring the nation’s 

policy making and undermining national strength. The purpose of 
139

this chapter is to help American colleagues better understand the 

contentions and controversies prompted by different perceptions 

of North Korea within South Korea. To this end, this chapter 

concentrates on policy issues that drive the heated debates in hopes 

that Americans can judge how good or bad the polarization is and 

what impact it could have on ROK-U.S. relations and their North 

Korea policies.

Sunshine Policy.

Before delving into major policy issues, we examine two schools 

of thought in South Korea that differ on North Korean matters. 

“Liberals” are generally those who look to one face of North 

Korea, ethnic homogeneity. They are usually supporters of carrots, 

engagement, a soft landing, etc. They play down the North Korean 

military threat and believe that a humanitarian response to North 

Korea will lead to inter-Korean reconciliation and eventual peaceful 

unification. In contrast, “conservatives” perceive North Korea as 

both a counterpart for coexistence and unification and the main 

enemy that still poses a threat. While not opposing North-bound 

economic cooperation per se, they tend to want reciprocity in return 

in the form of North Korean reforms and changes. They want to 

continue an unswerving defense posture while the Sunshine Policy 

is implemented, as they are not convinced that the North will opt for 

real reconciliation and coexistence. 

Nothing draws a clearer line between conservatives and liberals 

than their reactions to aid to North Korea. Liberals support the 

Sunshine Policy with perceptions that North Korea has changed 

and will change. On conservative criticism that the fundamentals of 

the North Korean system remain unchanged, liberals recommend 

more patience and a proactive attitude. They point to the disparity 

in personal income between the two Koreas and maintain that ROK 

assistance and technological guidance will reduce unification costs 

in the future.1

Conservatives perceive North Korea as unchangeable. They 

think the Sunshine Policy was successful only in coaxing the North 

to the table, no more than that. It has resulted in the sagging of 

South Korean national wealth while making the North militarily 

more robust, as Pyongyang refuses to discuss even the most modest 

military tension reduction or confidence-building measures. The 
140

National Assembly passage on September 4 of a no-confidence 

bill against Unification Minister Dong-won Lim, architect as well 

as preacher of the Sunshine Policy, demonstrates the increasing 

vehemence of conservative counterattacks. Conservatives demand 

that the government retard North-bound assistance and rethink the 

Sunshine Policy. 

Uncertainty about the South Korean economy is what 

conservatives refer to most. By the end of 2000, South Korea had 

clearly made a remarkable comeback from the financial disaster 

of the late 1990s. However, by 2001, the grim side was becoming 

increasingly impressive. Hit by rare synchronous slumps of the 

U.S., European, and Japanese economies, both exports and domestic 

consumption plunged, slowing economic growth to a worrisome 

level. Businesses cut back capital spending, eroding the nation’s 

growth potential. On top of these difficulties was the insolvency crisis 

of the Hyundai Group, the nation’s second largest conglomerate that 

spearheaded inter-Korean economic cooperation. The financially 

troubled Hyundai Asan, the group’s North Korea business arm, has 

spent over $600 million for the Mt. Kumgang tourism project and 

has so far incurred some $327 million in losses. The rescue measure 

that added the Korea National Tourist Corporation, a governmentowned corporation, as another investor is controversial since it 

means pouring taxpayers’ money into the unprofitable project 

more directly. Conservatives ask whether this is the proper time to 

continue one-way inter-Korean economic cooperation. 

The frustrations of the companies that invested in North Korea 

and came back bare-handed adds to the disenchantment with North 

Korea. The companies, beguiled by the North’s potential as a base 

for export manufacturing, low wages, and geographical proximity, 

experienced dismay at the North’s bizarre business attitude. They 

were embarrassed by the unofficial costs that surpassed common 

sense and by fear that the South’s investments could be confiscated 

or nationalized at any time. Failure of the northern venture surely 

contributed to the collapse of Daewoo and the breakup of Hyundai. 

The popularity of Mt. Kumgang tourism declined quickly due to 

high fees and tight surveillance imposed by the North. In 2001, South 

Korean tourists visiting the mountain declined 33 percent from the 

previous year. Ordinary South Koreans are increasingly enraged by 

the North’s ingratitude and arrogance. 

Conservatives, disillusioned after watching the Sunshine Policy 
141

for years, have other reasons to doubt that major North Korean 

changes are possible. A major structural barrier to reform is political, 

since no one can disavow what the real father Il-sung Kim (Kim Il 

Sung) did. The industrial structure is not conducive to reforms, 

either.2

So far there have been two kinds of approaches to reform within 

the old socialist block: the unsuccessful big bang in Eastern Europe 

and the successful gradual approach in China and Vietnam, where 

more than 70 percent of their labor forces were in agriculture and 

where many of these people were later transferred into the nascent 

non-state-owned light manufacturing sector. North Korea resembles 

the East European countries, with a much smaller agricultural sector 

and almost no privately-owned industries. It would be a vexing 

enterprise to follow in China’s footsteps or to imitate the East 

European model. 

A more structural barrier comes from the nature of the North 

Korean society, which can be best described by the three Cs: class, 

control, and cult.3 For conservatives the question is: will Jong-il Kim 

give up the cult of himself, and will the privileged elite surrender 

its lifetime prerogatives? Hwang Jang-yop, former international 

secretary of the Korean Labour Party, predicts firmly that Jong-il 

Kim will never change his policy.4

The reunion of separated families, which liberals claim as an 

outstanding success story, is not without demur. While South 

Korea approaches this as a humanitarian issue, it has always been a 

political business for the North. Conservatives maintain that several 

reunions of only 100 families when over one million first-generation 

separated families are alive will simply add to their agonies.5 North 

Korea continues to reject the South’s proposal for free exchange of 

visits and mail and confirmation of the whereabouts of separated 

kin. 

Really, success of the Sunshine Policy is a function of whether 

Jong-il Kim will truly open up his country and pursue reforms. The 

outcome cannot be ascertained yet. What is painfully true is that the 

verbal fighting between proponents and opponents of the policy 

in the South is increasing. Those who are pessimistic about the 

possibility of North Korean reforms ask if North Korea really wants 

to reform, while the optimists continue to ask: how can we expect 

them to change without believing in them? A conservative scholar 

deplores this, arguing that if the government sticks to the Sunshine 
142

Policy under the name of policy consistency, our overall North 

Korea policy will be caught in a labyrinth, since our live-first-andreceive-later policy has only strengthened the totalitarian regime in 

Pyongyang.6

The North Korean Threat and the USFK.

A few years ago, South Koreans hailed rather vaguely the sudden 

blossoming of inter-Korean detente but soon began to agonize over 

its conflicts with the ROK-U.S. alliance and question the presence of 

U.S. troops. This provided liberal activists with momentum to call 

for withdrawal of the U.S. Forces Korea (USFK). A newly emerging 

question regarding ROK-U.S. relations is: is it possible for South 

Korea to become a real friend with North Korea and still keep a 

robust ROK-U.S. alliance? This is why some analysts predicted 

early in the Sunshine Policy that it could cause friction. 7 The liberalconservative polarization is very real in this area and the disputes 

revolve around two major issues: perception of the North Korean 

threat and the role of USFK.

Liberal activists, led by civic organizations, maintain, particularly 

after the June summit, that North Korea has neither the capability 

nor intention of engaging in military provocation and that USFK is 

not necessary.8 The numerical superiority of the North Korean forces 

is pointless, as it is more than offset by the qualitative edge of South 

Korean forces. They cite the defense budgets, $3 billion vs. $15 billion 

in favor of the South. Some scholars with a liberal view point out 

that South Korean military forces have already achieved reasonable 

sufficiency in deterrence and defense against the North, since 

North Korean combat power is less than 40 percent of the South’s 

in comparing defense expenditure and investment. 9 On the role of 

USFK, liberal activists argue that U.S. forces were responsible for 

the division of the peninsula and continue to adversely affect interKorean reconciliation. They sometimes cite the unfair privileges of 

USFK and the inequality of the Status of Forces Agreement (SOFA) 

as reasons for calling for a withdrawal.10

They demand heavy punishment of U.S. officers who released 

toxic substances into the Han River or demonstrate to stop shooting 

by U.S. air forces at the Maehyang-ri firing range. The SOFA is 

sometimes called a document demonstrating the arrogance of 

a superpower in its inequality, prejudice and discrimination. 
143

Liberals find Washington’s get-tough North Korea policy now 

a stumbling block to inter-Korean reconciliation. In this context, 

liberal commentators argue that Seoul should secure the return visit 

of Jong-Il Kim and an inter-Korean Peace Declaration as quickly as 

possible before the United States acquires reasons to block it.11

The fact that North Korea has slowed the initial burst of postsummit inter-Korean dialogue is what liberals now often refer to. 

For example, on March 13, 2001, just few hours before its scheduled 

opening, North Korea called off the fifth inter-Korean cabinetlevel meeting. Soon after, North Korea did the same for the Red 

Cross talks. Some analysts believe that these decisions reflected 

North Korean displeasure with the tough U.S. stance against the 

Communist nation revealed in the ROK-U.S. summit. The fifth 

meeting finally was held on September 16, 2001, 9 months after the 

fourth meeting.

To conservatives, the North Korean military threat has never 

ended, based on the North’s capabilities and intentions. The former 

is obvious despite contrary arguments. In addition to its numerical 

superiority, its forces, 70 percent of which are forward-deployed 

within 100 km of the Demilitarized Zone (DMZ), are in good shape 

for attacks: with 2,000 self-propelled and towed artillery units that 

could maintain a barrage of 500,000 rounds an hour, 100,000 men in 

Special Operation Forces, etc. Threat of weapons of mass destruction 

(WMDs) cannot be calculated in figures. North Korea’s nuclear 

bomb-in-the-basement, i.e., parts of bombs ready to be assembled or 

sensitive material immediately useable for bomb production which 

Pyongyang may have produced before 1992, still remains shrouded 

in secrecy as the Agreed Framework stopped short of illuminating 

the North’s past nuclear activities.

The North’s formidable missile forces include Frog, Scud, 

Rodong, and Daepodong missiles, while South Korea had long been 

prohibited by the ROK-U.S. Missile Note prohibiting South Korean 

missiles of 180 km or longer ranges.12 Though on January 17, 2001, 

the government disclosed new missile guidelines after 5-year-long 

negotiations, those guidelines still limit the maximum range of South 

Korean missiles to 300 km or the missile technology control regime 

(MTCR) ceiling. South Korea has no meaningful attack missiles 

— most are surface-to-air, not capable of defending against North 

Korea attack missiles. The biochemical threat is even more dreadful. 

North Korea is believed to possess 2,500 tons of chemical weapons 
144

while vigorously developing biological weapons. It ironically true 

that a poverty-stricken North Korea, with its WMD and peculiar 

force structure, is capable of inflicting more damage to ROK-U.S. 

combined forces than before.13

Conservatives ask questions regarding the North’s intentions. 

How should South Korea interpret military exercises in the summer 

of 2000, right after the Pyongyang summit? What about the recent 

deployment of long-range 240 mm multiple rocket launcher systems, 

emplacement of anti-tank barriers, beefing-up of coastal defenses, 

procurement of fighter aircraft, improvement of camouflage and 

concealment, etc.?14 On the North Korean WMD, despite liberal 

arguments that they are purely defensive and should not be a 

stumbling block to the Sunshine Policy, conservatives ask: who 

can guarantee non-use? What if the North uses them for blackmail 

diplomacy or low-intensity provocations? 

Conservatives believe that South Korea needs USFK and a strong 

alliance, not only because of the threat from the North but also 

because of their positive roles: U.S. participation in the 1950 Korean 

War saved the nation from communism and USFK contributed 

stability to South Korean society during the 1960s and 1970s, when 

North Korea sent guerrilla forces. On top of this, the future role of 

USFK will be determined by all-important international variables, 

including the strategic stances of major countries. If Russia beefs up 

its nuclear weapons deployment and refurbishes its Pacific Fleet to 

regain its voice as a military superpower, if China continues military 

modernization and pursues regional hegemony, and if Japan 

enlarges its military might and roles with ambition to be a politicalmilitary superpower, the U.S. military presence in Asia will become 

all the more necessary as a peace enforcer. There are other scenarios, 

too. A significant reduction in the U.S. military presence, including 

removal of the nuclear umbrella, can create a security vacuum 

which prompts competition to fill it. This would call on Russia 

and China to play more roles, cornering South Korea and Japan 

in a difficult position. Anyway, it is illogical to assert that USFK is 

an anti-unification element when the future role of U.S. forces is to 

be adjusted according to the international order emerging in this 

region. To conservatives, anti-USFK arguments citing the SOFA 

are illogical because issues like the SOFA, the Nokeun-ri (Nogunri) 

incident, the dumping of toxic substances in the Han River, etc., are 

not fundamental questions but side issues subject to improvement 
145

through mutual consultation. Regarding the Bush administration’s 

skepticism about the North, conservatives accept it as opportune 

whistle-blowing.

To conservatives, gradual collapse of the South’s security system 

would be the most worrisome outcome of a unilateral appeasement 

policy. Seoul’s lukewarm response to the North’s submarine 

infiltration in June 1998, its launch of a Daepodong missile in August 

1998, and many other small-scale provocations have resulted in 

confusion among ROK soldiers on the concept of the main enemy, 

and may result eventually in total disarray of our defense posture. 

There are many more incidents that enrage conservatives. On 

September 19, 2001, some 20 North Korean soldiers crossed the 

DMZ about 40 meters inside the southern part. On the next day 12 

soldiers advanced 30 meters into the southern part. They retreated 

after South Korean guards fired warning shots. Military authorities 

delayed announcement of the incursions for 1 week. Earlier, in June, 

2001, four North Korean cargo ships violated the South’s Northern 

Limit Line (NLL) and the South’s territorial waters through the 

Cheju Strait. This time, too, the government response was generous. 

The South Korean Navy tried to persuade, not order, them to move 

back. The great general Jong-il Kim developed this sea route.Later, 

the government expressed its intent to permit passage of North 

Korean vessels through the strait if the North asked in advance 

while the Defense Ministry, citing Navy difficulties in covering 

all the 218-mile-long NLL in the East Sea, announced that it was 

considering reducing the length of the East Sea NLL to allow for 

more effective surveillance of the security-sensitive area.15 Liberal 

scholars insist that the incident was a simple passage, not a violation, 

since North Korea has never accepted the legality of the NLL.16 Of 

course, conservatives interpret the incident as a preplanned North 

Korean attempt to establish a new status quo by disregarding lines 

they respected for 50 years. Such alarmist perspectives are refuted by 

liberal scholars: they claim that anti-unification political forces and 

media are demanding hard-line policies that can pour cold water on 

the Korean peace process.

Unification Constitution.

The June 152000, joint statement signed by leaders of the two 

Koreas gave new impetus to debate on a unification constitution. 
146

In Clause 1, the leaders agreed to pursue independently peaceful 

unification‚ and in Clause 2, they agreed on the similarity between 

the North’s low stage federation plan and the South’s confederation 

plan. The document provided liberal scholars and NGOs seeking a 

unification constitution with momentum. To them, the document 

is tantamount to a binding agreement, since the two leaders 

representing each nation signed it, and it should be followed by 

an effort to institutionalize what was agreed on. This kind of logic 

inevitably leads to debate on a possible unification constitution.17

How nice it would be if the merits of both constitutions are 

combined and people of both sides can benefit. Liberals always 

point to joint management of the cultural sites spread all over the 

peninsula as an area where the two Koreas can work on a single 

legal system.18 Nevertheless, the constitution should eventually 

deal with political systems and a zero-sum confrontation on this is 

unavoidable. A third type of political system, if any, will not only 

intermingle the two systems, which the two Koreas cannot tolerate, 

but would be dangerous if it means a collapse of the security 

system before the trustworthiness of North Korea is ensured. This 

is why conservatives consider it a bad idea to think about political 

integration without a peace settlement.19

Other conservatives maintain that peace must precede 

unification, since the joint statement reflects two different dreams, 

as each Korea wants to integrate the other into its own political 

system.20 Others point to dangers inherent in Clause 2, since it can 

provide justification for the North to insist on withdrawal of USFK 

and abolition of the National Security Law.21

Missile Defense.

Now the U.S. ballistic missile defense (BMD) program is quickly 

becoming a hot issue as the government stance is being attacked 

on two fronts. So far the government has maintained a “strategic 

ambiguity” on the issue. This is understandable, given the narrow 

leeway South Korea has. Ovious support of it may embarrass China 

and Russia, which Seoul expects to help open the North while clear 

opposition would upset an ally on which the nation depends heavily. 

But such ambiguity is problematic to both sides. 

To the civic activists, BMD is the result of a conspiracy between 

conservative hard-line politicians in Washington and the huge 
147

U.S. military-industrial complex. The North Korean threat is just 

invented, they claim. The program is not only dangerous, as it 

prompts a nuclear arms race in a new technological area, but also 

immoral, as the United States is pursuing a hegemonic nuclear order 

to which China and Russia are already hypersensitive. The program 

will endanger the Sunshine Policy, since it will enrage China and 

Russia as well as North Korea, so South Korea should oppose it in an 

unambiguous manner.22

The ambiguity is problematic to conservatives, too. Though they 

accept the hegemonic elements inherent in the BMD program, they 

also see the positive side. The BMD program is a complement to South 

Korean security, which the nation needs in the process of unification. 

They ask two questions. Does South Korean opposition to the BMD 

program guarantee North Korean changes? What can South Korea 

gain by opposing a top priority objective of its superpower ally? 

Problems of Polarization.

Verbal battles over differences in perception of North Korea 

are proliferating too widely into almost all major policy issues. 

On education, the government wants to teach students that they 

have to embrace North Korea before thinking of it as an enemy.23

This is strongly supported by liberal NGOs. The Korean Teachers 

Union (Jeongyojo) pursues enlargement of teachers' “right in 

school management,” while liberal activists seek new laws for 

“democratization of universities” which, if enacted, will sharply 

reduce the rights of boards of directors. To some conservatives, 

school principals and university presidents being neutralized is 

an anarchic attempt to disregard the existing order and control 

educational institutions in a people’s court manner. 

In the legal world, the Constitution Law Advocates (Hunbyon), 

a society of conservative lawyers, and the Lawyers for Democratic 

Society (Minbyon), a group of liberal lawyers, vie over almost all 

critical legal issues related to North Korea policy, including the 

National Security Law. Liberals argue that the law should be 

abolished, since it has been heavily abused in the past by dictatorial 

governments in supppressing political opponents. A liberal 

columnist defines the law as “evidence of madness that negates the 

dignity of human beings and freedom of thought and conscience.”24 

But most conservatives believe it is one thing to do something to 
148

prevent abuse or misuse of the law but quite another to give up 

the legal apparatus that has protected the nation from communist 

espionage.25

Press reform is the hottest topic in the liberal-conservative 

debate, particularly after the owners of the three conservative 

newspapers, Chosun Ilbo, ChoongAng Ilbo, and Dong-a Ilbo, were 

arrested on August 16, 2001, on charges of tax evasion and 

embezzlement after a large scale investigation. To liberal NGOs like 

the People's Coalition for Media Reform (Unronkaehyukyondae) and 

reformist scholars like professor Dong-Chun Kim of Sungkonghoe 

University, the conservative newspapers deserve to be targets of 

reforms since they are ideologically prejudiced against liberal policy 

toward North Korea, and the corrupt owners cannot be an exception 

in punishing tax evasion or other wrongdoing. In a Korea Press 

Foundation seminar on June 22-24, 2001, liberal organizations and 

participants like the People's Coalition for Media Reform, National 

Union of Media Workers, Professor Dong-Chun Kim, Un-Hyung 

Chung from Korea Daily, etc. unanimously supported governmentinitiated reforms for the conservative newspapers. But conservative 

organizations like Free Citizens Alliance of Korea, and conservative 

politicians argue that the government is muzzling newspapers 

critical of its North Korea policy through an unprecedented tax 

probe, and that other liberal newspapers and television broadcasting 

companies are joining in the pressure on freedom of the press. This 

media infighting is a very unfamiliar phenomenon to South Koreans. 

(Hankyoreh and government-owned Korea Daily are representative 

newspapers feuding with conservative newspapers.)

The liberal-conservative dichotomy is vivid even on what lesson 

South Korea should take from the September 11, 2001, terrorist 

attack in New York. Liberals tend to bury North Korean terrorist acts 

like the bombing against the South Korean presidential entourage 

visiting in Rangoon and the bombing of Korean Airlines 858 during 

the 1980s, and want the United States to exclude North Korea from 

its list of rogue states. For them, the September 11 terrorist attack 

has nothing to do with the inter-Korean dialogue. Conservative 

commentators point out that North Korea remains on the list of 

terrorism-supporting countries, and that South Korea should seek a 

North Korean apology for what it did in the past, and its promise not 

to repeat this, before going further in inter-Korean dialogue.26 The 

two sides differ greatly over the war on terror. A liberal politician 
149

argues, for example, that the American war may be driven by hardline politicians in Washington colluding with the military-industrial 

complex.27

Ceremonial events in Pyongyang on the anniversary of Korean 

liberation from Japanese rule revealed striking evidence of differences 

in perception of North Korea and the side effects they can precipitate. 

On August 21, 2001, at Gimpo Airport, liberal students shouting 

anti-American slogans cheered the 337-strong Southern delegation 

of civic leaders and religious and labor activists coming back from 

Pyongyang after attending week-long inter-Korean Liberation Day 

events. Professor Jeong-gu Kang, a sociology professor at Dongkuk 

University and other senior members of the Unification Alliance 

were “heros.”28 Professor Kang signed a guest book when he visited 

the birthplace of Il-sung Kim and wrote a memo on achieving 

unification by inheriting the Mangyungdae spirit.29

Some of the delegation participated in the opening and closing 

ceremonies in front of the Monument of the Three Unification 

Charters, a symbol of the North Korean unification proposal, 

despite having submitted written promises not to attend ceremonies 

in front of it before they left for Pyongyang. With the liberal students 

were war veterans and conservative activists denouncing Professor 

Kang’s acts. Some skirmishes and a violent confrontation followed 

between the two groups. 

Conservatives’ questions concerned how and why the Unification 

Ministry permitted the delegation to go when North Korea was 

highly likely to politically exploit it. In the past, North Korea has 

repeatedly requested a political meeting of various social and political 

forces, but Seoul rejected these meetings because there was only one 

political force and one voice in North Korea, and therefore such a 

meeting was likely to be used to deepen chasms in South Korean 

society. But the Sunshine Policy brought about drastic changes. 

On the anniversary of the foundation of the Korean Labor Party in 

October 2000, South Korea dispatched observers. In May 2001, South 

Korean labor representatives participated in an inter-Korean event 

held in Pyongyang. In June and July 2001, a unification seminar and 

farmers’ event were held in Mt. Kumgang. Conservatives fear that 

the South may be walking into a trap. A conservative commentator 

claims that the Seoul government should be held responsible for 

letting the Pyongyang event be exploited by the North.30

Right after this, the Grand National Party demanded the 
150

resignation of Unification Minister Dong-won Lim, as did the United 

Liberal Democrats (ULD), a party that had been allied to the ruling 

MDP. To conservative politicians, what happened in Pyongyang 

were not disconcerting or inconsiderate acts but preplanned ones, 

suggesting that some civic leaders participating in the events had 

been communicating with the North. This time, differences over 

how to perceive North Korea not only provoked conflict but put an 

end to the MDP-ULD coalition.31

In every mature society, schools of thought freely revealed seek 

the common good through reasonable debate. In this sense, the 

ideological conflicts can be seen as moving the nation toward a true 

pluralist democracy. But there are reasons to hesitate about this 

conclusion. First, both sides tend to go so far in violent verbal attacks 

and mutual slandering that they are becoming a threat to the social 

fabric. Some liberal civic organizations continue to depict opponents 

as anti-unification, anti-reform forces, while some conservatives 

find reformists ideologically unacceptable. Second, some liberal 

civic activists tend to ignore the existing legal order. On August 30, 

2001, the Constitutional Court of Korea judged that the intervention 

into the 2000 parliamentary election by the civic organizations was 

illegal.32

Third, the tricky problem is how to separate impure elements 

who want to disrupt South Korean society from pure liberal activists. 

All are championing anti-Americanism and calling opponents antiunification or reactionary, purposefully heating up conservativeliberal debates. It is really tricky to differentiate them from the wellmeaning liberals and difficult to contend with them in their nicelooking terminological cloaks stressing democracy, anti-dictatorship, 

unification, reform, and citizenship. This impunes on the honor of 

those who really sacrificed themselves for democracy or citizens’ 

welfare. The side effects are enormous. Some university students 

now believe that the Korean War was a northward aggression, 

and that the terrorist attack on the Blue House in the 1960s and the 

explosion of a Korean Airliner in the 1980s are inventions of the 

Seoul government. This defames the lives of 37,000 U.S. soldiers 

lost during the Korean War and undermines the deterrence role of 

USFK. 

Fourth, differences in perceptions of North Korea has created 

splits not only within ROK society, but between South Korea and the 

United States. Signs of this were revealed in the ROK-U.S. summit 
151

in March 2001. At the summit, President Bush, to prevent the United 

States and its ally from being out-slickered by double-dealing North 

Korea, rebuffed the idea of helping North Korea without verifiable 

changes. Of course, differences of opinion between countries 

happen every day. But in the ROK-U.S. case, the differences tend to 

become too sensitive to the extent that they mar being reasonable in 

policymaking. For example, anti-American voices of South Korean 

activists might be taken as what most South Koreans think. When 

the government and the liberal activists seek an early resumption 

of U.S.-DPRK missile negotiations, the Bush administration may see 

Seoul as acting like a spokesman for an untrustworthy North Korea. 

Now conservatives ask whether the alliance is okay.

Concluding Remarks.

Ironically, South Korean society, not the North, is poised on the 

threshold of significant transformation after 3 years of the Sunshine 

Policy. Of course, more chances should be given to the Sunshine 

Policy. But it is equally important is to redress the scars left in 

its wake. For South Korea, both inter-Korean reconciliation and 

stability of South Korean society are national objectives. Success 

in one and a catastrophe in the other is not a real success. A most 

daunting challenge for South Korea, therefore, is how to nurture a 

political force that holds off the liberal-conservative confrontation 

and quells the chaos. Given the current political map and the vigour 

of the liberal NGOs, it is very unclear if and when such political force 

can emerge. However, this does not mean that nothing can be done.

For conservatives, it is necessary to accept the fact that South 

Korea may continue to play a role as a launching pad for North Korea 

to step out towards the world and find a bail-out for its economy. 

They have to listen harder, whether or not they agree with them, 

before dismissing liberal arguments as ideologically unacceptable. 

For liberals, it is important to listen more to conservative criticisms 

before urging people to believe in North Korea and join the march 

toward unification. Above all, the so-called civic organizations 

should cease their insolent behavior in intervening in every 

policy issue with impunity. They have to come back to being 

organizations for citizens and self-reliant financially. It is awkward, 

for example, that the Federation for Environmental Movement 

(Whankyungyonhap) intervenes in such nonenvironmental issues 
152

as unification, the roles of hospitals and pharmacies, economic 

reform, ownership of companies, or the general election. If it wants 

to continue to pursue an ideological objective, it may have to change 

into a political party and compete squarely with other political 

forces. If ill-motivated activists believe that whether they can prevail 

depends on the popular support they can muster and that they must 

unleash everything they have, ROK society may be hopeless. Endless 

bickering may be inevitable. 

For the Seoul government that made a daring choice with 

the Sunshine Policy, it is important to spend more time heeding 

conservative worries about whether or not the North is agreeable. It 

needs to listen to the numerous commentators, scholars, and opinion 

leaders skeptical of the North’s trustworthiness and anxious over 

the antagonism within South Korean society: the new Cold War in 

the South between the conservatives and liberals.33 It is mistaken to 

attempt to invent majority support through mobilizing activists.34

What is needed is consensus among differing political forces to not 

demand black-white distinctions.35 The Sunshine Policy pushed 

stability-in-tension into instability-in-tension while it strengthened 

the North’s military capability and staggered the South’s security 

awareness. 36

Lack of transparency in the policymaking process has polarized 

the nation's public opinion to a serious degree.37 We have to heal the 

liberal-conservative confrontation before dealing with the North.38

The South, rather than asking the United States to accept the North, 

must let the North know that military tension reduction is the key to 

its relations with the South and the United States.39

Politicians particularly need to listen to the Group for Grooming 

a Mature Society, some 115 prominent senior citizens which, in its 

joint statement on August 15, 2001, deplored the rampant distrust 

and hostilities and requested that political forces prepare fora for 

truly democratic dialogues. Anyway, the government must deal 

effectively with domestic opposition and American skepticism if it is 

to make the Sunshine Policy more sustainable and legitimate.

No less important is to maintain and develop better relations 

with allies. Radical voices should not be able to obstruct a balanced 

conservative-liberal debate and allow allies to understand them as 

representing the people. It should not let calls for withdrawal of 

USFK weaken a robust alliance still needed by South Korea. Beautiful 

rhetoric without dealing with frictions over how to perceive North 
153

Korea let bilateral relations be ambushed by various developments. 

If impure elements and communist sympathizers camouflaged as 

liberals further spread anti-Americanism, and if Washington fails 

to understand the will of the silent majority and sees the radicals as 

representing public opinion, this may bring about a scenario akin to 

what happened in the Philippines.

U.S. policymakers must understand the die-hard dream of 

South Koreans, whether conservative or liberal, for peace and 

unification. South Koreans hope that this will be the bottom line 

in Washington’s policy. It is also important to note that most South 

Koreans prefer peace when peace and unification come into conflict. 

Similarly, the majority of South Korean citizens recognize the role 

of USFK and appreciate the alliance. Some U.S. analysts warn that 

the United States may reduce or withdraw USFK if requested by the 

government or public opinion. Above all, American public opinion 

may not tolerate overt South Korean public attacks on or hostile 

rhetorics toward U.S. forces.40

It is vitally important to differentiate the silent majority’s views 

from demagogic anti-American arguments fomented by radicals. A 

simple repetition of the solidarity of the ROK-U.S. alliance may be 

pointless at a time when the alliance is already a contentious issue. 

If continuation of the ROK-U.S. alliance is no longer automatic, it 

should be protected differently. 

ENDNOTES - CHAPTER 8

1. For example, see Seung Park, “Proactive Attitude for North-bound Economic 

Cooperation,” Seoul Economic Daily, September 30, 2001.

2. Marcus Noland, “The Economics of National Reconciliation,” paper at 

the 15th annual conference of the Council on Korea-U.S. Security Studies, Seoul, 

October 26-27, 2000. See also Marcus Noland, Avoiding the Apocalypse: the Future of 

the Two Koreas, Washington DC: Institute for International Economics, 2000.

3. Helen-Louise Hunter, “North Korea 2000: The Clear Loser in the Race with 

South Korea,” paper at the 15th annual conference of the Council on Korea-U.S. 

Security Studies, Seoul, October 26-27, 2000.

4. Jang-Yop Whang, I Saw the Truth of History, Seoul: Hanul Academy 

Publishing Co., 1999, p. 304.

5. Dong-Bok Lee, Chosun Ilbo, March 22, 2001.
154

6. Joo-Hong Nam, “Inter-Korean Relations on the Crossroad,” Institute for 

Korean Unification and National Security Studies, Kyonggi University, Korean 

Unification and National Security Studies, No. 1, September 2001, pp. 52-79.

7. Jin-hyun Paik, “Polices, Direction and Assessment of the Kim Dae-jung 

Government: With Particular Reference to Its Policy Toward North Korea,” paper 

presented at the 13th annual conference of the Council on Korea-U.S. Security 

Studies, Seoul, November 4-7, 1998.

8. For example, see Jeong-Gu Kang, “ROK-U.S. Relations and Anti-American 

Sentiment,” paper presented at a policy forum hosted by Korea Reunification 

Society under the the Citizens’ Coalition for Economic Justice, Kyongsilryon, 

August 29, 2000.

9. Taik-young, Hamm “Military Capabilities of South Korea: Reasonable 

Sufficiency and Future U.S. Support,” paper presented at the 15th annual 

conference of the Council on Korea-U.S. Security Studies, Seoul, October 26-27, 

2000. 

10. Jeong-Gu Kang, “ROK-U.S. Relations and Anti-American Sentiment.” 

Soon after publication of this book, South Korea and the United States agreed 

on December 12, 2000, to revise the SOFA, expanding South Korean criminal 

jurisdiction for major crimes and including an environment-related clause. But it 

is still not comparable with the SOFAs in Japan or Germany.

11. Won-Sup Lee, Hankyoreh, January 30, 2001.

12. For detailed information, see Taewoo Kim, “South Korea’s Missile 

Dilemmas”; “ROK-US Missile Accord Should be Scrapped,” Korea Post, October 

1998, pp. 26-27; "Deadly NK missiles can hit Seoul in 45 seconds," Korea Post, May 

1999, pp. 26-27.

13. Bruce Wm. Bennett, “North Korea: A Changing Military Force — A Threat 

Now and in the Future,” paper presented at the 15th annual conference of the 

Council on Korea-U.S. Security Studies, Seoul, October 26-27, 2000.

14. This is what General Thomas Schwartz, commander of the U.S. forces in 

South Korea, stated at the 15th annual conference of the Council on Korea-U.S. 

Security Studies, Seoul, October 26-27, 2000. He testified the same again at the U.S. 

Senate’s Armed Service Committee in March 2001. Korea Herald, March 29, 2001.

15. The Commander of the UNC unilaterally set the East Sea NLL at 218 miles 

by extending the land demarcation line right after the Korean War in 1953. The 42.5 

mile-long West Sea NLL was drawn in accordance with the three-mile standard 

using the midpoints between the five islands and North Korean coastlines.
155

16. See Chul-Ki Lee, “An Assessment of the ROK Response to Passage of 

North Korean Vessels through the Cheju Strait;” and Jang-Hi, Lee, “Legal Status 

of the Five Islands in the West Sea,” papers presented at KIDA-NGO Forum held 

on September 14, 200l. 

17. For example, Professor Sang-Chul Park of Kyonggi University suggests a 

“Korea confederation that encompasses national pride of both sides” as a third 

concept for a unification constitution. See “Institutionalization of the June 15 Joint 

Communique and Unification Constitution,” paper presented at the Security and 

Unification Forum on September 20, 2001.

18. In a similar vein, others suggest inter-Korean agencies for sports and 

tourism. See Man-Kil Kang, Hankyoreh, December 3, 2000.

19. Man-Kwon Nam, “How to Understand and Approach the Unification 

Problem,” Korea Institute for Defense Analyses, Weekly Defense Review, 857, 

September 10, 2001. 

20. Sang-Woo Lee, Chosun Ilbo, March 21, 2001.

21. Han-Ho Song, ChoongAng Ilbo, October 8, 2001.

22. A summary of comments by liberal participants at the 17th Policy Forum 

hosted by the Institute for a Participatory Society on May 19, 2001.

23. Education Center for Unification, Guidelines for Unification Education, 2000, 

ch. 1-2.

24. Sae-Wha Hong, Hankyore, August 26, 2001.

25. See Jin-Woo Lee, Abolition of National Security Law: Losses and Benefits, Seoul: 

SeoMoonDang Publishing Co., 2001.

26. See Jong-won Kim, “North Korea Must Depart Terrorism,” Dong-a Ilbo, 

September 30, 2001.

27. Won-Woong Kim, remarks at 100 Minute Debate, a talk program at MBCTV on October 11, 2001.

28. The Unification Alliance was a major force in the delegation, with 38 

civic organizations, including the Pan-National Alliance for Reunification of the 

Fatherland Beomminnyeon) and the Confederation of Korean Students’ Union 

Hanchongnyeon) judged to be “entities benefiting the enemy” by the Supreme 

Court in 1997. They vehemently support unification by federation, withdrawal of 

USFK, abolition of the National Security Law, etc.
156

29. This was seen by prosecutors as endorsing North Korea’s unification 

proposal and a violation of the National Security Law. Other delegates wrote 

memos that read “Laborers, be united.” Some delegates are said to have shed 

tears at a wax replica of Il-sung Kim at Mt. Myohyang and sang a song called 

“respecting a Great Star Kim Jong-il.” There were similar acts when the delegation 

visited Jong-il Kim’s birthplace. On arrival in Seoul, Professor Kang and six others 

were arrested for violating the law. Six other senior members of the Pan-national 

Alliance for Reunification of the Fatherland had been arrested at least once before 

for violating the National Security Law.

30. See Dong-Bok Lee, Chosun Ilbo, August 20, 2001.

31. The parliamentary verdict on Minister Lim was made possible by the 

United Liberal Democrats, a 16-seat coalition partner for the ruling Millenium 

Democratic Party, when its lawmakers supported the campaign to remove Lim. 

This led immediately to the breakup of the ruling coalition. Ostensibly the bill 

sought to fix the blame for the delegates dispatched to Pyongyang. But Minister 

Lim was held responsible for providing economic aid to North Korea without 

parliamentary approval, monopolizing the decisionmaking process, excluding 

conservative officials including ULD experts, and weakening the anti-Communist 

investigations of the National Intelligence Service. See Hyunuk Kim, “ULD Must 

Regain Its Conservative Identity,” Newsletter of Monthly Journal of the Minjok 

Jungron, September 2001, pp. 12-13.

32. Right before the election, an alliance of various civic organizations led 

by the Korea Federation for Environmental Movement (Whankyungyonhap) and 

Peoples’ Solidarity for Participatory Democracy (Chamyeoyondae) listed names of 

candidates who they believed should not be elected, not only politicians regarded 

as corrupt, but new faces and scholars who had never been politicians. Later, the 

alliance concentrated on defeating fewer candidates, dispatching young activists 

to their districts and waging intense campaigns that turned voters against them. 

Some media covered these activities, and the government took no action against 

the illegal activities. Conservatives denounced this as collusion to eliminate 

ideological competitors. The verdict points out that the activists are like a separate 

political force and that they should produce their own candidates rather than 

influencing the election in the name of reforms. Many South Koreans predict that 

the impunity and prerogatives of the liberal activists will precipitate a political 

backlash.

33. Young-Kwan, Yoon, ChoongAng Ilbo, September 5, 2001.

34. Jae-Han Kim, Chosun Ilbo, September 10, 2001.

35. Dal-Joong Chang, ChoongAng Ilbo, September 10, 2001.
157

36. Yong-Suk Chung, remarks at a Policy Evaluation Committee, Advisory 

Council on Democratic and Peaceful Unification, held on March 14, 2000.

37. Jung-Hyun Shin, remarks at a Policy Evaluation Committee, Advisory 

Council on Democratic and Peaceful Unification, held on March 14, 2000.

38. Jung-Hyun Shin, remarks at a Policy Evaluation Committee, Advisory 

Council on Democratic and Peaceful Unification, held on March 14, 2000; JongWook Chung, Chosun Ilbo, May 11, 2000.

39. Dong-Sung Kim, ChoongAng Ilbo, October 10, 2001.

40. Richard H. Solomon and Willaim M. Drennan, “The United States and Asia 

in 2000,” Asian Survey, Vol. 41, No. 1, January-February 2001.

159

CHAPTER 9

THE FUTURE OF THE

KOREAN PENINSULA ENERGY DEVELOPMENT 

ORGANIZATION (KEDO)

Haksoon Paik

[Editor’s Note: Professor Paik’s chapter was written at the end 

of 2001 when the Agreed Framework appeared to be generally 

on track. In late 2002, the North Korean leadership admitted to 

pursuing a uranium-based nuclear program and claimed that it 

had the right to develop nuclear weapons. The Korean Peninsula 

Energy Development Organization (KEDO) participating nations 

saw this as a violation of the agreement and on November 14, 2002, 

suspended shipments of heavy fuel oil. On November 29, 2002, the 

International Atomic Energy Agency Board of Governors called 

upon the Democratic People’s Republic of Korea (DPRK) to accept a 

team to clarify its uranium enrichment program. On December 12, 

2002, the North Koreans announced that they intended to restart the 

plutonium-based reactors that had caused the concern that prompted 

the Agreed Framework negotiations in 1994. On January 10, 2003, 

North Korea withdrew from the Treaty on the Non-Proliferation of 

Nuclear Weapons (NPT), and in late February 2003, it reportedly 

reactivated the plutonium-based nuclear reactor in Yongbyon.

As this book goes to press, the future of the Agreed Framework 

and KEDO appears dim. Nonetheless, Professor Paik’s chapter is 

a valuable description of the KEDO mechanism and, in spite of the 

current difficulties, the organization may yet provide a model for 

future relations with North Korea if the issues of trust and confidence 

can be resolved.]

Introduction.

KEDO was formed in March 1995 in order to provide light-water 

reactors (LWRs) and heavy fuel oil (HFO) to the DPRK as specified 

in the 1994 U.S.-DPRK Agreed Framework.1 KEDO carries out its 

mission under the circumstances in which the Executive Board 

members exercise their power and resources strategically to obtain 
160

the best outcome for their interests. 

KEDO has not been able to meet the target date of 2003 in 

providing the LWRs to the DPRK. It had not been able to begin 

“excavation work” for the first units of the LWRs until September 

14, 2001,2 a clear indication of the delay of providing the LWRs to the 

DPRK. Only 9.03 percent of the entire LWR project was completed 

at the end of 2000, and only 12.3 percent completed at the end of June 

2001.3 

The excavation work, however, signifies that the LWR project 

“has entered the stage where the construction of the LWRs will 

never stop unless obstacles are formed grave enough to cause a 

serious change in inter-Korean relations or in the international 

politics of Korea.”4 Speaking in July 2001, U.S. Special Enjoy Charles 

L. Pritchard said the project was expected to “reach a major turning 

point next year when the ‘first concrete’ is poured.”5

This chapter will first review and assess what KEDO has achieved 

and failed to achieve, focusing on the three declared missions of 

KEDO, then identify the major issues and problems it faces, and 

finally discuss the prospects for KEDO and the LWR project.

Three Missions of KEDO: An Assessment.

KEDO has three missions: first, to contribute to the strengthening 

of the international nonproliferation regime while improving the 

prospects for lasting peace and stability on the Korean Peninsula 

and beyond; second, to assist in implementation of the Agreed 

Framework by financing and constructing two LWRs in the DPRK 

and by providing the DPRK with up to half-a-million tons per year 

of HFO until the first unit of the LWRs is completed; and, third, to 

serve as an example of how a cooperative and targeted international 

diplomatic effort can lead to the resolution of regional security or 

political crises.6 An assessment of these three declared missions is 

in order.

Strengthening the NPT Regime and Peace and Stability in Korea.

Has KEDO strengthened the nuclear nonproliferation treaty 

(NPT) regime and improved the prospects for lasting peace and 

stability on the Korean Peninsula and beyond? The result at the 

end of 2001 was satisfactory; even though the DPRK had not yet 
161

come into full compliance on the Safeguards Agreement with the 

International Atomic Energy Agency (IAEA). 

In 1995, the parties to the NPT “faced the critical decision 

of whether to extend the NPT indefinitely or for a fixed period 

or periods,” and “a majority of parties supported the indefinite 

extension” of the NPT.7 The Agreed Framework and the birth of 

KEDO decisively contributed to the indefinite extension of the NPT 

regime by making the DPRK cancel its withdrawal from the NPT 

and by freezing the DPRK’s construction of the Yongbyon and 

Taechon facilities, thereby appearing to freeze its nuclear weapons 

development program.8

KEDO also paved the way for a solution to the DPRK’s weapons 

of mass destruction (WMD) and its delivery system. The Japanese 

Ambassador to the United Nations (U.N.) claimed in September 

2000 that KEDO had played a central role “in making the Korean 

Peninsula a safer place in the context of nuclear nonproliferation” 

and “as such, its efforts have significant implications not only for 

regional security but also for global security.”9

Without KEDO, the positive achievements on the Korean 

Peninsula in the first year of the new millennium would not have 

been possible. KEDO played an instrumental role in “set[ting] the 

pace for an evolutionary rather than destructive process of dealing 

with North Korea” and in helping North Korea in “gain[ing] a 

degree of confidence in dealing with both the United States and 

South Korea, to the extent of venturing an inter-Korean summit 

meeting.”10 In other words, the DPRK came to regard “KEDO as a 

test of whether it could deal with the outside world, and have found 

that they can.”11

In the late 1990s, the Agreed Framework and KEDO ushered in a 

process of reconciliation and cooperation between North and South 

Korea and between North Korea and the United States. Improvement 

in inter-Korean relations culminated with the historic inter-Korean 

summit talks in June 2000, and the serious dialogues and negotiations 

conducted between the United States and North Korea produced the 

“Perry process” and exchange visits to each other’s capital by highranking North Korean and U.S. officials--Special Envoy Jo Myong 

Rok’s visit to Washington, DC, and Secretary of State Madeleine K. 

Albright’s visit to Pyongyang, both in October 2000.12
162

Implementing the Agreed Framework.

 The second stated mission of KEDO, to assist in implementation 

of the Agreed Framework by financing and constructing LWRs in 

North Korea and by providing North Korea with HFO, had been 

half achieved by the end of 2001. The construction of the LWRs was 

much delayed, and in early 2002 it became clear KEDO could not 

meet the target date of 2003 for completing the LWR project.

The supply of HFO to the DPRK also had many difficulties, due 

mainly to the opposition of the Republican majority in Congress, so 

KEDO often failed to deliver the HFO in a timely and predictable 

manner. (The KEDO Executive Board announced on November 

14, 2002, that, due to North Korea’s acknowledgement that it 

was pursuing a uranium-based nuclear weapons program, it was 

suspending HFO shipments beginning with December shipment. 

Ed.) It was noteworthy, however, that once President George W. 

Bush came to power, the U.S. House of Representatives did not 

strongly resist passage of the KEDO bill for 2002.13 

Three things loom large when we compare the KEDO bill for 2002 

with the previous ones. First, there was a dramatic increase in the 

budget for 2002 from a maximum of $35 million for 1999, 2000, and 

2001, to $95 million for 2002.14 This increase was partly explained by 

soaring prices in the international oil market, but a more convincing 

explanation would be the support of the Republican majority in the 

House of Representatives for the Bush administration. Second, the 

number of days allowed by the bill in which the President has to 

certify some specified conditions and report to Congress in order to 

have funds made available for KEDO was shortened from 30 days 

for 2000 and 2001 to 15 days for 2002. The smaller the number, the 

faster funds could be made available for KEDO. Third, the number 

of provisos attached to the KEDO bill was reduced noticeably from 

12 for 2000, to 8 for 2001, and finally to 3 for 2002. Also the strictness 

and complexity of the provisos were loosened and straightened 

out. In other words, past Congressional opposition to the Agreed 

Framework and the Clinton administration’s engagement policy 

toward North Korea was in part responsible for KEDO’s failure to 

implement the Agreed Framework on a full scale and in a timely 

manner during those years.15
163

Serving as an Example of Resolving Regional Crisis.

Whether the third mission of KEDO, serving as an example of 

resolving regional crisis, was fulfilled remains largely to be proven. 

From a theoretical point of view, KEDO symbolized a combination 

of idealism and realism, that is, cooperation and conflict and 

coordination among nation-states. KEDO is an international 

organization that purports to achieve the goal of freezing and 

ultimately dismantling the North Korean nuclear program by 

bringing in and coordinating multiple countries with conflicting 

interests.16 

KEDO, with such theoretical underpinnings, may serve as a 

precedent or model for solving future problems in the Korean 

Peninsula and Northeast Asia,17 such as the problems related to 

ballistic missiles and other WMD that have global implications. 

KEDO can also be a role model for regional crisis resolution in 

economic crises as well as security or political crises. For instance, 

KEDO could serve as a model for the so-called “Korean Peninsula 

Agricultural Development Organization” (KADO), a conceivable 

future organization for agricultural restructuring, investment, and 

recovery in North Korea, or for the “Korean Peninsula Industrial 

Development Organization” (KIDO), another comparable 

organization for North Korean industries.18

Stephen Bosworth, former Executive Director of KEDO, doubted 

that “KEDO would be replicated if a new nuclear proliferation threat 

were to emerge,” arguing that “the circumstances that brought KEDO 

into existence may be unique to Northeast Asia.” But he agreed that 

“the concept of bringing together a small number of countries most 

directly affected by a security threat is one that we may wish to use 

again.” According to him, the Trilateral Coordination and Oversight 

Group (TCOG) among the United States, Japan, and Korea “has 

no secretariat or common funding, but it does, in some respects, 

build on the KEDO model.”19 In fact, KEDO was “a product of 

this trilateral cooperation,” and it is the Washington-Seoul-Tokyo 

trilateral cooperation that continues to be “the driving force” of the 

KEDO process.20

What is the overall assessment of KEDO? KEDO was initially 

successful in strengthening the NPT regime and contributing to 

peace and stability on the Korean Peninsula. But the mission of 

implementing the Agreed Framework has not been fulfilled, in 
164

part due to the delay in providing the LWR project to North Korea 

[and because of North Korean actions violating at least the spirit of 

the agreement. Ed.]. The third mission, to serve as an example of 

regional crisis resolution could be applicable to other cases, but this 

remains to be seen. 

Major Issues and Problems for KEDO.

President Bush’s announcement of a new policy toward the 

DPRK on June 6, 2001, indicated that a broad agenda including 

three items should be discussed seriously with the DPRK: improved 

implementation of the Agreed Framework relating to North 

Korea’s nuclear activities; verifiable constraints on North Korea’s 

ballistic missile programs and a ban on its missile exports; and a 

less threatening conventional military posture.21 The first and third 

of these are new items that the Clinton administration did not put 

forward as something that should be achieved in relations with 

North Korea. 

The issue of “improved implementation of the Agreed 

Framework” has much to do with several salient problems: whether 

to revise the Agreed Framework; how to bring North Korea into full 

compliance with the Safeguards Agreement with the IAEA; whether 

to replace the LWRs with non-nuclear power plants; how to deal 

with North Korea’s demand for compensation for the electricity 

loss to be incurred from 2003 by the delay in the construction of the 

LWRs; how to build up trust between the United States and North 

Korea; how to upgrade North Korea’s power grid for the safety of 

the LWRs; how to meet international nuclear safety standards by 

North Korea; and, finally, how to improve North Korea’s business 

practices with regard to the LWR project. 

Whether to Revise the Agreed Framework. KEDO faces many 

problems — political, security, legal, financial, and technical. After 

several months’ review of U.S. policy toward the DPRK, the Bush 

administration put forward a new “comprehensive approach” 

towards North Korea on June 6, 2001, and emphasized the “improved 

implementation of the Agreed Framework relating to North Korea’s 

nuclear activities”22 as one of the three aims in negotiations. Should 

the Agreed Framework be revised to accommodate the demands of 

the Bush administration?

Some argued that the Agreed Framework is “not, however, a 
165

treaty or even an agreement in any binding sense,” and regarded it 

as simply “a set of guidelines to align the behavior of the two state 

parties.”23 Thus, they argued, nothing in the Agreed Framework 

can prevent the United States and DPRK from “reformulating and 

updating it to account for new circumstances affecting the vital 

interests of both parties.”24 They even saw it as “inevitable” that “the 

new U.S. Administration and the DPRK will need to come to terms 

on a new, modernized Agreement that serves the current needs 

of both parties.”25 As a way of updating the Agreed Framework 

by coming to new terms, they suggested “offering a package of 

infrastructure assistance to the DPRK in exchange for changes in 

HFO deliveries.”26

The problem, however, was that even Charles Pritchard, U.S. 

Special Envoy for Negotiations with the DPRK, had to admit that 

“abandoning or unilaterally gutting the Agreed Framework risks 

serious setbacks in U.S.-DPRK and DPRK-Republic of Korea (ROK) 

relations, and would be seen as a major breach of trust by the 

DPRK.”27 North Korea interpreted the U.S. claim for the revision 

of the Agreed Framework quite straightforwardly “as an attempt 

to evade its responsibility for the delay of the LWR project” and as 

“an indication of its intention to lead it to its breakdown, given the 

central point in the framework is the DPRK nuclear freeze versus the 

U.S. LWR supply.”28

North Korea’s Noncompliance of Nonproliferation Obligations. One of 

the most serious problems KEDO faces is that North Korea had not 

yet fully complied with the Safeguards Agreement of the IAEA. Both 

the IAEA and KEDO demanded that the DPRK accept the special 

inspections of the IAEA to verify the accuracy and completeness 

of the DPRK’s initial report on its nuclear material. North Korea’s 

cooperation was crucial to the successful implementation of the 

Agreed Framework and a prerequisite for completing the LWRs 

without any serious delay.29 

Since the entire verification process may take “three to four years,” 

the IAEA argued, verification should have begun immediately with 

the full cooperation of the DPRK if the LWR project was to proceed 

smoothly.30 The IAEA and the KEDO Executive Board member 

states worried about a potentially disturbing situation in the future 

where “the IAEA reports either a failure to account for all the nuclear 

material or further discrepancies between the initial report and the 

result of inspections are found.”31 
166

The Agreed Framework was targeted at securing the transparency 

of current and future activities related to the North Korean nuclear 

weapons development program. The transparency of the past 

nuclear-related activities was to be secured later when North Korea 

comes into “full compliance with its Safeguards Agreement with 

the IAEA(INFCIRC/403),32 including taking all steps that may be 

deemed necessary by the IAEA, following consultations with the 

Agency with regard to verifying the accuracy and completeness 

of the DPRK’s initial report on all nuclear material in the DPRK,” 

“when a significant portion of the LWR project is completed, but 

before delivery of key nuclear components.”33 That is, the Agreed 

Framework “envisages specific functions for the IAEA, notably to 

monitor a ‘freeze on the DPRK’s graphite-moderated reactors and 

related facilities,’ to continue with verification activities at facilities 

not covered by the freeze and to take measures required with a view 

to verifying, at a later date, the accuracy and completeness of the 

DPRK’s initial report on all nuclear material in the DPRK.”34

One thing to note is that the DPRK decision in the Agreed 

Framework to freeze its graphite-moderated reactors and related 

facilities is “a voluntary measure beyond what is required by the 

[NP]T and the IAEA-DPRK Safeguards Agreement,”35 but “IAEA 

monitoring activities with respect to such a voluntary measure are 

within the scope of verification activities under the IAEA-DPRK 

Safeguards Agreement.”36 Thus, the facilities and installations 

that were included in the declared nuclear facilities by North 

Korea but were not covered by the freeze were also to be subject to 

safeguards.37

North Korea acceded to the NPT in December 1985, but until 

January 1992 did not sign the Safeguards Agreement with the IAEA, 

INFCIRC/403, which should have been signed within 18 months 

after entering the NPT.38 The Safeguards Agreement entered into 

force on April 10, 1992. North Korea submitted an “initial report” 

on nuclear material on May 4, 1992, and ad hoc inspections began 

in the same month to verify the correctness of it and assess its 

completeness.

Through six rounds of ad hoc inspections from May 1992 to 

February 1993, the IAEA found discrepancies between North 

Korea’s initial declaration and the inspection outcomes. The IAEA 

demanded special inspections of two suspect sites in Yongbyon, but 

North Korea refused to allow them on the pretext that the two sites 
167

were military facilities. 

There have been 15 rounds of technical discussion between the 

IAEA and the DPRK up to the end of 2001 — two to three times 

a year — but the DPRK never came into full compliance with the 

Safeguards Agreement. As of the 45th General Conference of the 

IAEA in September 2001, the IAEA was “unable to verify fully 

the DPRK’s initial 1992 declaration of its nuclear programme, . . . 

unable to verify that there has been no diversion of nuclear material 

required to be safeguarded under the Agreement to nuclear weapons 

or nuclear explosive devices.”39

Why has the DPRK refused the IAEA’s demand for special 

inspections? It has to be pointed out that there is a fundamental 

difference of view between the IAEA and the DPRK “regarding 

the current status of the Safeguards Agreement”: North Korea 

regards “acceptance of measures required to enable the Agency to 

monitor the freeze as not being under the Safeguards Agreement 

but as falling solely within the context of the ‘Agreed Framework’,” 

and has further indicated that, “until such time as it comes into 

full compliance with its Safeguards Agreement, the Agency can 

carry out ad hoc and routine inspections only at the facilities not 

covered by the freeze.”40 Therefore, North Korea accepts the IAEA’s 

activities “solely within the context of the Agreed Framework,” not 

within the context of the Safeguards Agreement with the IAEA. 

However, the IAEA emphasizes that a bilateral agreement like the 

Agreed Framework “could not replace, supersede or detract from 

the Safeguards Agreement between the IAEA and the DPRK” under 

the NPT.41

The Agreed Framework itself, is responsible for North Korea’s 

noncompliance of nonproliferation obligations in many important 

ways. For example, there is no stipulation in the Agreed Framework 

for exactly “when the IAEA should begin its verification process.”42

Moreover, the Agreed Framework does not specify “exactly where 

the fuel rods have to be shipped out of the country” as well as “when 

the IAEA effort to discover North Korea’s nuclear history — or 

Pyongyang’s cooperation — must begin” and so on.43

It is noteworthy that, despite North Korea’s noncompliance with 

the Safeguards Agreement, concerned countries like the United 

States, South Korea, and Japan seemed to accept North Korea’s 

refusal as something that could not be helped. It appeared that 

“as long as the DPRK maintains the nuclear freeze and the IAEA 
168

confirms this, none seems to be willing to challenge the DPRK at 

this stage.”44 In other words, they appeared to be “ready to wait 

until full and unlimited inspections are possible.”45 Otherwise, they 

would have had to negotiate with North Korea. Merely mounting 

pressure to make it give in would not work in the absence of any 

practical means with which to force North Korea to abide by the 

Safeguards Agreement.

North Korea claimed that the special inspection demands were an 

excuse and a tactic to blame the delay of the LWR project on North 

Korea.46 Against IAEA Director General Dr. Mohamed ElBaradei’s 

attack in his “Statement to the Forty-fifth Regular Session of the IAEA 

General Conference 2001” on North Korea’s failure to implement 

the Safeguards Agreement with the IAEA faithfully, North Korea 

argued that “this can not be construed otherwise than reckless acts 

of the riffraff to shift the responsibility for the non-compliance with 

the agreed framework on to the DPRK, defying international justice 

and impartiality, pursuant to the U.S. policy.”47 North Korea claimed 

that IAEA’s demand for special inspections was “an act of putting a 

brake on implementation of the Agreed Framework”48 and even “a 

grave challenge to the sovereignty of the DPRK.”49

Whether to Replace the LWRs with Non-nuclear Alternatives. During 

the review of U.S. policy toward North Korea, an option of replacing 

the LWRs with thermal power plants was raised by the people 

who were against the provision of the reactors.50 Some members 

of Congress51 and nonproliferation experts in Washington, DC, 

argued for a non-nuclear or partially-nuclear alternative to the LWR 

project. They cited several reasons: the LWRs’ potential to produce 

weapons-grade plutonium, lack of a reliable power grid in North 

Korea, increased cost of supplying HFO due to the increase in oil 

prices, and North Korea’s demand for compensation of the loss of 

electricity to be incurred after 2003.

As to whether the LWRs are or are not “proliferation resistant,” 

there was a serious debate between Henry Sokolski, Executive 

Director of the Nonproliferation Policy Education Center, and Desaix 

Anderson, then Executive Director of KEDO.52 Sokolski argued that 

the two LWRs to be supplied to North Korea will produce material 

for twice as many bombs as the reactors North Korea had under 

construction because the LWRs are “much bigger — nearly ten 

times the power output of all the reactors it was planning to build.” 

And “not only is all the plutonium usable for bombs, but the two 
169

proposed reactors will, in fact, produce so-called ‘weapons-grade’ 

material during initial commercial operation.”53 

Desaix Anderson contends that this is “nonsense which ignores 

totally the context in which the LWR’s are being built and will 

operate.”54 He argues that “the term ‘proliferation resistant’ is meant 

to convey that production of weapons grade plutonium from an LWR 

is technologically and economically very difficult when compared to 

alternatives,” even though “it theoretically possible to do so.”55 It is 

known that there are about 400 LWRs around the world, but there 

has been no country that has extracted weapons grade plutonium by 

reprocessing the spent fuel.56

In contrast to the fact that North Korea’s graphite-moderated 

reactors were “designed for the specific purpose of creating 

weapons grade plutonium,” with electricity production being just 

a useful “byproduct,” LWRs are “designed to maximize electricity 

production at the most economical price,” production of small 

quantities of plutonium being an “undesirable but unavoidable 

byproduct.”57 Furthermore, since LWRs “can only be refueled when 

they are shut down,” removing spent fuel to a reprocessing facility 

and subsequent plutonium extraction are “easily detectable.”58 

Furthermore, key components of the LWRs were not to be 

delivered to North Korea until “a significant portion of the LWR 

project is completed, but prior to the delivery of key, nuclear related 

components,” and the LWRs “will be completed and operated 

under IAEA monitoring.”59 It is also noteworthy that “if requested 

by KEDO, the DPRK shall relinquish any ownership rights over the 

LWR spent fuel and agree to the transfer of the spent fuel out of its 

territory as soon as technically possible after the fuel is discharged, 

through appropriate commercial contracts.”60 In addition, digital 

cameras were to be installed and in operation for the surveillance of 

any diversion of spent fuel or plutonium around the clock.

There are several other reasons why it would not be easy to 

revise the Agreed Framework and replace the LWR project with 

other non-nuclear alternatives. First, it will not be easy to revise 

the legal, institutional, and financial arrangements of the Agreed 

Framework and supply agreement of the LWR project. Not only 

the Agreed Framework and the LWR supply agreement, but loan 

agreements, a Turnkey Contract (TKC) of the LWR project, and 

others would have to be revised. It also would take too much time 

mobilizing engineering and construction contractors and equipment 
170

suppliers as well as renegotiating the whole process of replacing the 

LWR project. 

Second, replacement of the LWRs with thermal power plants 

would not save much time. Too much time had already been spent 

on the LWR project, and it would not make sense to cancel a project 

estimated to “have a four year head start on any alternative and 

alternative facilities. . . .”61 It takes about 60 months or 5 years to 

build a thermal power plant, and it would have taken about that 

long to go from the Agreed Framework to the TKC.

Third, too much money had already been spent, and there was no 

point of giving up the financial resources invested. If ten 200MW(e) 

coal-fueled power plants were to be built, it would cost about $4.0 

billion, $600 million less than the $4.6 billion for the LWR project. 

But it would not be a big savings if we take into account the money 

that had been spent already on the LWR project. Moreover, it would 

“cost about one billion dollars for construction already done and for 

costs to shut down the project.”62

Fourth, North Korea cannot afford gas– or oil-fueled or coalfired power plants. These alternatives would “cost less perhaps to 

operate in the short run, but all would be much more expensive for 

the DPRK in the long run because of much higher fuel costs.”63 If 

North Korea could import gas or oil, this would be a relatively fast 

alternative. However, if North Korea has to connect pipelines to the 

gas field in Siberia, it will take many years and billions of dollars.64

Another option, “providing coal-fired power plants or providing 

a transmission line to carry 500 MW of power from South to North 

Korea would be an “impossible quick fix.”65 If North Korea cannot 

receive as much as 10-20 years’ fuel from outside for free or at a 

highly discounted price, the thermal power plants would not be a 

sustainable option.66

For these reasons, I agree with Desaix Anderson that there was 

“no quicker and cheaper alternative” to the LWRs.67 It is possible 

that North Korea will want thermal power plants to solve the 

urgent energy shortage problem as an independent transaction, but 

it is not likely to accept the offer of replacing the LWRs with other 

non-nuclear alternatives because North Koreans have argued that 

this would undermine the Agreed Framework itself. For different 

reasons, however, the United States opposed providing electricity 

to North Korea through independent deals, worrying that “any 

provision of additional electricity to North Korea that is not linked 
171

in some manner to the Agreed Framework risks undermining the 

implementation of the Agreed Framework, as it would remove 

Pyongyang’s incentives to cooperate with the IAEA.”68

North Korea’s Demand for Compensation for loss of Electricity. 

When the Bush administration demanded new concessions in its 

policy towards North Korea, North Korea immediately argued 

that what should be discussed seriously was the practical issues 

for implementation of the Agreed Framework and the October 

2000 U.S.-DPRK Joint Communiqué. North Korea also argued that 

“the most urgent problem to be solved” was “the compensation for 

electricity loss to be incurred by North Korea due to the delay of 

the LWR project,”69 because the “electricity problem [was] the most 

basic problem for revitalizing the North Korean economy, and [was] 

an important matter related to the survival of North Korea.”70 The 

DPRK realistically regarded the target date of 2003 as impossible to 

meet.71

By September 2001, North Korea had received half-a-million tons 

of HFO annually as an interim energy alternative as compensation 

for “the energy foregone due to the freeze of the graphitemoderated reactors, pending completion of the first LWR unit.”72

The facilities covered by the freeze included the Yongbyon 5 MW(e) 

Experimental Nuclear Power Plant, the Yongbyon Nuclear Fuel Rod 

Fabrication Plant, the Radiochemical Laboratory of the Institute of 

Radiochemistry of Yongbyon, the Yongbyon 50 MW(e) Nuclear 

Power Plant, and the Taechon 200 MW(e) Nuclear Power Plant, both 

under construction.73 The total amount of power that was frozen 

was 250 MW(e), if 5 MW(e) produced by the Experimental Nuclear 

Power Plant is subtracted.

North Korea has argued that if it had been able to develop its 

own independent nuclear power industry not bound by the Agreed 

Framework, it would not have suffered an energy shortage.74 The 

problem was an expected annual loss of 2,000 MW(e) from 2003 to 

2008 or 2009 due to the delay of the LWR project.75 North Korea 

repeatedly demanded compensation for this electricity loss.76 

North Korea laid out its proposal in talks held in New York 

in March 2000: “compensation for electricity loss should be made 

by electricity” and “other member countries of KEDO could 

contribute to this effort if the U.S. is in a real difficult position to 

make that compensation.”77 North Korea argued that, if there 

were no compensation, it would not be able to maintain the freeze 
172

of its nuclear weapons development program and to continue to 

implement the Agreed Framework.78 It threatened to reoperate the 

graphite-moderated reactors.79

The United States and KEDO counter-argued that North Korea 

was also responsible for delay in the LWR construction and that they 

could not compensate for the loss of electricity because the year 2003 

was simply a target date, not a legally-binding one, and there was no 

provision for compensation specified in the Agreed Framework.80

North Korea maintained that the United States promised the 

LWRs based on North Korea’s freeze of the graphite-moderated 

reactors under construction and on its abandonment of constructing 

future nuclear power plants.81 North Korea contended that “the 

central point of the framework is the DPRK pledge on nuclear freeze 

versus the U.S. pledge on the provision of LWRs.”82 Therefore, it 

was crystal clear, in the eyes of the North Koreans, that providing 

the LWRs was the core of the Agreed Framework83 and that North 

Korea could link its cooperation with the IAEA with progress in 

implementation of the Agreed Framework.

Building Up Trust between the United States and the DPRK. What 

was the underlying cause for North Korea’s consistent refusal to 

come into full compliance with its nonproliferation obligations? 

North Korea refused to do so because it did not trust the United 

States. It believed that building trust should be based on the faithful 

implementation of the Agreed Framework and the LWR project by 

the United States and KEDO.84 North Korea argued that “if the U.S. 

had remained sincere in implementing the Agreed Framework, it 

would have been implemented to such a level as to enable the DPRK 

and the IAEA to start negotiations on verifying the accuracy and 

perfectness of the initial report on nuclear substance.”85 The United 

States was not given the “benefit of doubt.”

Therefore, there would be no full compliance with the Safeguards 

Agreement with the IAEA until North Korea was certain that the 

LWR project was sure to be constructed and delivered. If North 

Korea should accept the IAEA’s special inspections before the 

completion of a significant portion of the LWR project and delivery 

of key nuclear components to North Korea, and if the United States 

should defect from the Agreed Framework and the LWR project, 

then North Korea would not be able to defend its interests. For North 

Korea, purposeful nuclear ambiguity served best in assuring that the 

United States and KEDO carried out the promises they made.
173

In this context, North Korea argued that the key issue in the 

Agreed Framework was to remove misunderstanding and distrust 

and build confidence. The freeze on the graphite-moderated reactors 

and their related facilities, in the eyes of the North Koreans, would 

“address the U.S. security concerns, while the U.S. LWR supply 

would help remove the DPRK mistrust of the U.S. and promote 

confidence building between the two nations.”86 The Agreed 

Framework was a compromise solution, with both sides taking 

defensive postures in the absence of trust. The very nature of the 

relationship between the United States and North Korea “resulted 

in the stipulation of the DPRK nuclear freeze and the U.S. LWR 

provision as simultaneous actions” in the Agreed Framework.87

North Korea’s disillusionment with the United States was gravely 

felt when it claimed that the U.S. President had broken the promise 

he made in his letter of assurance dated October 20, 1994. President 

Clinton’s letter to Chairman Kim Jong Il went: “In the event that this 

reactor project is not completed for the reasons beyond the control 

of the DPRK, I will use the full powers of my office to provide, to 

the extent necessary, such a project from the U.S., subject to the U.S. 

Congress.”88 One could argue that there was some truth in North 

Korea’s contention that “the U.S. administration should have taken 

other steps earlier in an effort to meet the date of completion in the 

year 2003 true to the assurance made by the President.”89

By mid-2001, North Korea had expressed suspicions about 

“whether the U.S. is truly committed to the supply of LWRs or 

seeking some kind of filthy political purposes.” It said it was 

suspicious about the “deliberate delay” of the LWR project, plus 

sensationalization of the missile issue and the underground suspect 

site at Kumchang-ni, which North Korea claimed had “nothing to 

do with the LWR project.”90

Upgrading North Korea’s Power Grid. As a technical matter, a 

nuclear reactor needs outside power ten times greater than the 

electricity it generates. Whether North Korea’s power grid can 

supply reliable offsite power to protect against accidents is a matter 

of great concern. In late 2000, the Korea Electric Power Corporation 

(KEPCO) asked North Korea to provide grid data and found the 

data seriously flawed.91

Henry Sokolski has argued that reliable offsite power cannot 

be supplied in North Korea “even if North Korea’s transmission 

system is upgraded, because the total generation capacity of 
174

North Korea’s grid is simply too small.”92 In contrast, Desaix 

Anderson argued that the DPRK “has developed long-term plans 

for upgrading its electricity sector, which include increasing its 

overall power generation capacity.” He was optimistic about the 

safety of the LWRs, “because the DPRK must meet off-site power 

system interface requirements, based on U.S. Nuclear Regulatory 

Commission standards, before KEDO will supply nuclear fuel and 

conduct commissioning tests.”93 Sokolski expressed serious doubt 

about Anderson’s assessment and prediction.94

In September 2000, David Von Hippel, Peter Hayes, and 

Timothy Savage pointed out that “the DPRK energy infrastructure 

is disintegrating in many ways,” and argued that “the national 

electrical grid is essentially non-existent, operating, at best, as a 

collection of unreliable regional grids using poorly-maintained 

equipment that is 50 years out of date to begin with.”95 Therefore, 

North Korea’s electricity grid had to be “substantially rebuilt, . . . if 

the nuclear reactors provided as part of the Agreed Framework are 

to operate as intended.”96 According to them, the most cost-effective 

investments would be “in refurbishing existing plants, not building 

new plants that the North Koreans will not be able to operate.”97

Some people argued for partial replacement of the LWRs. 

However, replacing one unit with thermal power plants would have 

meant that the other unit would “still require rehabilitation of the 

grid, a nuclear liability legal regime, a nuclear safety system, etc.,” 

and these requirements are “the same for one or two reactors.”98

Von Hippel, Hayes, and Savage argued that “replacing one of the 

reactors with a thermal power plant [was] an equally impractical 

solution,” and that “instead, the U.S. could consider offering a 

package of infrastructure assistance to the DPRK in exchange for 

changes in HFO deliveries.”99 They suggestd that the United States 

“explore with the DPRK alternative services — grid refurbishment, 

power plant and boiler rehabilitation, fuel supply infrastructure 

rebuilding, and alternative electricity sources and energy-efficiency 

improvements — that the United States could provide with a portion 

of the funds now earmarked for HFO purchases.”100

North Korea was solely responsible for upgrading its national 

power grid for the LWR project. Considering North Korea’s economic 

difficulties, the question was: who would finance upgrading North 

Korea’s power grid how soon and to what extent?

North Korea’s Duty to Meet Nuclear Safety Standards. Two issues 
175

were involved in North Korea’s obligation to meet nuclear safety 

standards: nuclear safety and liability, and the nuclear cooperative 

agreement with the United States. Whether North Korea could meet 

“international standards of nuclear and conventional safety” drew 

attention, particularly because General Electric (GE) withdrew from 

the LWR project due to lack of confidence in and uncertainty about 

North Korea’s nuclear liability and safety regimes.101 It was this 

safety issue that led to the debate on nuclear liability insurance for 

the LWR project between Desaix Anderson and Henry Sokolski.102

The other was the nuclear regulatory issue. North Korea had 

to conclude a bilateral agreement for peaceful nuclear cooperation 

with the United States prior to the delivery by U.S. firms of any key 

nuclear components to North Korea.103 The U.S. Atomic Energy 

Act “requires American firms to acquire a nuclear export license 

before shipping any nuclear components abroad,”104 and before 

giving an export license to any firm, the President must “certify 

that the recipient has not violated IAEA safeguards.” The DPRK’s 

noncompliance with the Safeguards Agreement with the IAEA, for 

instance, would “give the President or the U.S. Congress another 

opportunity to veto the Agreed Framework.”105 The North Korea 

Threat Reduction Act of 1999, which stipulated severe “restrictions 

on nuclear cooperation with North Korea,”106 may turn out to be a 

precursor for future tough U.S. regulations.

Improving Business Practices of North Korea. North Korea’s full 

cooperation for construction of the LWRs was needed if KEDO was 

to succeed. It should be pointed out that North Korea has often 

failed “to cooperate by adhering to self-imposed regulations and 

principles to the detriment to the project.”107 In addition, North 

Korea’s “attitude towards international agreements and commercial 

contracts, or more precisely, its arbitrary interpretation of and lax 

sense of obligations to these agreements” can cause problems in the 

future just as it has in the past. Furthermore, for North Koreans, 

“concluding, interpreting and implementing agreements are three 

entirely separate issues,” as shown by North Korea’s demand for 

wage increases for its unskilled workers beginning in mid-1999 and 

its withdrawal of half the workers from Kumho in April 2000.108

North Korea refused to provide additional workers to KEDO, and 

the wage issue threatened construction schedule delays and cost 

increases.109
176

The Future of KEDO: Prospects.

As discussed above, KEDO has many problems. The issues and 

problems in any combination could disrupt KEDO and the LWR 

project. As the Independent Task Force on Korea of the Council 

on Foreign Relations pointed out, the Agreed Framework “was 

structured to defer the most difficult aspects of the agreement until 

its later stages,” and “another standoff could well happen, as in 

1994.”110

No doubt, there are problems, as discussed, such as North 

Korea’s possible failure to fulfill its nonproliferation obligations111

and to be ready for the delivery of the LWRs due to its incapability 

to solve technical and financial problems112 in a national power grid 

system, nuclear liability and safety requirements, and so on. North 

Korea’s full cooperation in transportation and telecommunication113

with KEDO also would be required for full-scale construction work 

for the LWRs in Kumho, excavation work having started in 2001.114

North Korea had good reasons to render full support for KEDO, 

one being that KEDO was “in the vanguard of the outside world’s 

contact and cooperation with the DPRK.”115 KEDO served as a good 

working model for international cooperation with North Korea and 

as an intermediary between North Korea and the outside world.116

The LWR project helped expose North Korea and the outside world 

to each other, promoting “buffered engagement” and opening a 

window of opportunity for better relations.117

The LWR project was the first large-scale foreign investment 

and Western-style construction project in North Korea, and could 

provide a model for future construction projects. North Korean 

officials and workers were to obtain Western know-how on all 

phases of the project, which could then be applied to other parts 

of the economy, promoting its modernization and other changes.118

This could contribute to reform in North Korea. 

However, many problems have serious impact on KEDO. KEDO 

has been vulnerable to shifts in inter-Korean and international 

politics since KEDO “does not exist in a political vacuum.”119 A list 

of events, most of which were not expected in advance, testified to 

this: a North Korean submarine’s incursion in the East Sea in 1996, 

North Korea’s test launch of a ballistic missile over Japan in 1998, 

North Korea’s demand for more than 500 percent increase of wages 
177

for the unskilled North Korean workers at the LWR construction 

site in Kumho, North Korea, and its withdrawal of half of the North 

Korean-supplied work force from Kumho in 2000. [The North 

Korean admission that it had pursued a uranium-based weapons 

development program even while claiming to comply with the 

Agreed Framework, KEDO’s subsequent cancellation of HPO 

shipments, North Korea’s withdrawal from the NPT, and North 

Kora’s unfreezing and reactivation of the plutonium-based nuclear 

reactor in Yongbyon were the most significant “unanticipated” 

problems to date. Ed.]

Besides financial problems over the long run, the two most salient 

problems [until October 2002] were North Korea’s ballistic missiles 

and North Korea’s attitude toward terrorism. As far as the missiles 

were concerned, North Korea continued a moratorium on test 

launches, and the missile problem was one of the top priorities in the 

U.S.-DPRK negotiation agenda. North Korea expressed willingness 

to come up with an “unprecedented” offer in the negotiations at the 

end of the Clinton administration.120

North Korea is still on the U.S. State Department’s list of states 

sponsoring terrorism, even though it has not engaged in any terrorist 

acts for the past several years and has agreed that “international 

terrorism poses an unacceptable threat to global security and peace, 

and that terrorism should be opposed in all its forms, including 

terrorist acts involving chemical, biological, or nuclear devices or 

materials.”121A Foreign Ministry spokesman stated on September 12, 

2001, one day after the unprecedented terrorist attack on the World 

Trade Center and Pentagon, that “as a UN member, the DPRK is 

opposed to all forms of terrorism and whatever support to it and this 

stance will remain unchanged,” and described the terrorist attack on 

America as a “very regretful and tragic incident.”122 A North Korean 

representative also delivered an anti-terrorism speech at the U.N. 

General Assembly on October 5.123

By late 2001, it appeared that North Korea would make serious 

efforts to get itself removed from the list as soon as possible, while 

the United States tried to draw North Korea out into the international 

community, thereby promoting inter-Korean reconciliation, getting 

rid of North Korea’s WMD and its delivery systems, and taking 

measures to prevent North Korea from sponsoring terrorism.

Lastly, in order for KEDO to succeed, strong and active support, 

both financial and political, of the governments involved in KEDO 
178

would be required.124 South Korea pledged to pay 70 percent of 

the actual cost and was mainly in charge of building the LWR 

project; the strong commitment of the United States, Japan, and 

the European Union to take care of the LWR project was equally 

important. The Executive Board member countries have disparate 

and distinctive political interests and decisionmaking processes, 

and coordination among them on the LWR Project was not always 

easy.125 The EU joined KEDO as a Board member in September 1997 

and enjoyed an equal role in decisionmaking and voting with the 

original members. As the Executive Board grew, the consensus and 

compromises needed among the members became more difficult to 

obtain, making the decisionmaking process remarkably complex 

and time-consuming.

What are the prospects? Compared to the early years when KEDO 

was “hobbled by inadequate and irregular funding,”126 KEDO’s 

prospects for success seemed bright in late 2001.127 The question 

remains, “how to build on and expand the KEDO successes.”128 

By the end of 2001, inter-Korean and international politics in 

and around the Korean Peninsula had made some progress toward 

reconciliation and cooperation between the two Koreas and a 

post-Cold War rapprochement in East Asia. Chairman Kim Jong 

Il of North Korea appeared to have completed his coordination of 

policies toward the United States and South Korea with Russia and 

China through his visit to Moscow and President Jiang’s visit to 

Pyongyang.

On the other hand, the United States had substantially completed 

its East Asia strategy and North Korea policy review. The 

Quadrennial Defense Review (QDR) was completed and submitted 

on September 30, 2001. President Bush visited China for the APEC 

summit meeting in Shanghai, China, in October 2001. At the APEC 

summit meeting, the United States checked, through China, on 

whether North Korea was ready for dialogue with the United States 

and South Korea. If things had gone smoothly, the United States 

seemed prepared to conduct negotiations with North Korea for a 

concrete discussion of issues of mutual concern.

Whether Chairman Kim will pay a return visit to Seoul remained 

uncertain at that time. The two Koreas held their fifth round of 

ministerial-level talks. North Korea’s resumption of inter-Korean 

dialogue at various levels seemed to indicate that North Korea 

was serious about continuing inter-Korean reconciliation and 
179

cooperation.

While it was concentrating on inter-Korean dialogue and 

cooperation, North Korea said it would wait for “serious discussions” 

on the issues with the United States. It seemed as though U.S.-DPRK 

negotiations would resume with serious and robust discussions 

to follow, due to the increased need to engage each other after 

September 11, 2001. An improved political environment would have 

helped KEDO and the LWR project. As long as the United States 

and North Korea do not trust each other, things could go wrong. 

And this will have a negative impact on KEDO and the LWR project. 

[When U.S. representative James Kelly finally visited Pyongyang in 

October 2002, however, he charged the DPRK with carrying out a 

secret uranium-based weapons development program. The North 

Korean leadership seemed to admit to this, and a period of heated 

rhetoric followed, with a KEDO decision in November 2002 to halt 

HFO shipments. The future of KEDO now seems far gloomier, but 

the organization may still prove to serve a useful purpose and, as 

a potential mechanism for dealing with intractable issues, is well 

worth study and analysis. Ed.]

ENDNOTES - CHAPTER 9

1. The Agreed Framework between the United States and the Democratic People's 

Republic of Korea (hereafter referred to as the “Agreed Framework”), Geneva, 

October 21, 1994; The Agreement on the Establishment of the Korean Peninsula Energy 

Development Organization, March 9, 1995. 

2. David R. Sands, “Construction set for N. Korea nuclear plant,” The 

Washington Times, August 30, 2001; Hankyoreh, September 17, 2001.

3. Nuclear Energy Yearbook 2001, Seoul: Korean Atomic Industrial Forum, 2001; 

Unpublished Papers, Seoul: LWR Project Planning Office, 2001.

4. Statement of Ambassador Chang Sun-sup of Korea, Chair of the Executive 

Board, KEDO. See Hankyoreh, September 17, 2001.

5. Testimony of Charles L. Pritchard, Special Envoy for Negotiations with 

the DPRK and U.S. Representative to KEDO, before the Subcommittee on 

East Asia and the Pacific, Committee on International Relations, U.S. House of 

Representatives, July 26, 2001.

6. KEDO Mission Statement, KEDO Annual Report 1995, p. 1; KEDO at Five: 
180

Annual Report 1999/2000, p. 1.

7. “The Treaty on the Nonproliferation of Nuclear Weapons: A Global 

Success.” Distributed by the Office of International Information Programs, U.S. 

Department of State.

8. Howard Diamond, “The Korea Deal: Advantage U.S.,” Op-Ed, Washington 

Post, April 17, 1997.

9. Yukio Satoh, Ambassador of Japan to the U.N., “KEDO and its implications 

for Northeast Asian Security,” Paper presented at KEDO Seminar, “Ensuring 

Peace and Stability on the Korean Peninsula,” Hotel Inter-Continental, New York 

City, September 26, 2000.

10. Han Sung Joo, “KEDO at Five: A Vehicle of Cooperation,” Keynote 

Speech Delivered at KEDO Seminar, “Ensuring Peace and Stability on the Korean 

Peninsula,” Hotel Inter-Continental, New York City, September 26, 2000.

11. Desaix Anderson, “Myths of KEDO,” Washington, DC: GeorgetownPacific Century Institute, March 25, 2001. Also see Stephen Bosworth, “KEDO 

Cooperation: Lessons Learned and Future Challenges,” Address Delivered to the 

12th Pacific Basin Nuclear Conference, KEDO Project for International Cooperation 

and Nonproliferation, COEX, Seoul, Korea, October 30, 2000.

12. Stephen Bosworth, “KEDO Cooperation: Lessons Learned and Future 

Challenges.” 

13. Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2002.

14. See Foreign Operations, Export Financing, and Related Appropriations Act, 

1999, 2000, 2001, and 2002.

15. For the opposition of the Republican-majority Congress, see North Korea 

Threat Reduction Act of 1999, various House Hearings on North Korea, North Korea 

Advisory Group’s Report on North Korea, in addition to the Foreign Operations, 

Export Financing, and Related Programs Appropriations Act from 1999 to 2001.

16. Author’s Interview with Mitchell B. Reiss, KEDO Secretariat, New York 

City, October 7, 1998. Also see Haksoon Paik, “The Korean Peninsula Energy 

Development Organization (KEDO): Interests, Conflicts, and Institutionalization,” 

in Jae-Kap Ryoo, Hae-Hoon Kang, and Sung-Joo Kim, eds., Bilateralism, 

Multilateralism and Geopolitics in International Relations: Theory and Practice, Seoul: 

KAIS, 1999, pp. 103-135.

17. Stephen W. Bosworth, "The Korean Peninsula Energy Development 
181

Organization (KEDO): A Status Report," Korea: Economic Update, Vol. 7, No. 2, 

April 1996. Also see Bong Geun Jun, “A Multilateral Approach to North Korea: 

KEDO’s Experiences and Lessons,” Paper prepared for the 2000 Annual Meeting 

of the American Political Science Association, Marriot Wardman Park, August 31-

September 3, 2000.

18. Author’s Interview with Jae-Do Moon, KEDO Secretariat, New York City, 

October 7, 1998; Author’s Interview with Philip W. Yun, U.S. Department of State, 

Washington, DC, October 1, 1998; Author’s Interview with Robert Hathaway, 

Ranking Democratic Staff, O’Neill House Office, U.S. Congress, Washington, 

DC, October 2, 1998; Joel Wit, “The Korean Peninsula Energy Development 

Organization: An American Perspective,” Unpublished Paper, p. 11. For the 

concept of KIDO, see Jae Kyu Park, “We can unbar the gate of North Korea only 

when we embrace it,” Joongang Ilbo, January 5, 1999.

19. Stephen Bosworth, “KEDO Cooperation: Lessons Learned and Future 

Challenges.” 

20. Yukio Satoh, “KEDO and its implications for Northeast Asian Security.” 

21. “Statement by the President,” White House Office of the Press Secretary, 

June 6, 2001.

22. Ibid.

23. David Von Hippel, Peter Hayes, and Timothy Savage, “Modernizing the 

U.S.-DPRK Agreed Framework: The Energy Imperative,” Special Report, Berkeley, 

CA: Nautilus Institute, February 16, 2001.

24. Ibid.

25. Ibid.

26. Ibid.

27. Ibid.

28. “Report on Delay in Construction of LWR project Issued,” Korean Central 

News Agency, May 16, 2001.

29. Testimony of Charles L. Pritchard before the U.S. House of Representatives, 

July 26, 2001.

30. IAEA Director General Dr. Mohamed ElBaradei, “Statement to the 54th 

session of the United Nations General Assembly,” New York City, November 6, 

2000.
182

31. Bong-Geun Jun, “Obstacles to the KEDO LWR project,” p. 78.

32. “Agreement of 30 January 1992 between the Government of the Democratic 

People's Republic of Korea and the International Atomic Energy Agency for the 

Application of Safeguards in Connection with the Treaty on the Nonproliferation 

of Nuclear Weapons,” IAEA Information Circular, INFCIRC/403, May 1992. Also 

see “Implementation of the Agreement Between the Agency and the Democratic 

People's Republic of Korea for the Application of Safeguards in Connection with 

the Treaty on the Nonproliferation of Nuclear Weapons (INFCIRC/403),” Report 

by the Director General to the General Conference, GC(39)/18, August 17, 1995 

(hereafter referred to as “Implementation of INFCIRC/403, GC (39)/18”), Item 23 

of the Provisional Agenda.

33. Agreed Framework, Clause IV, Article 3. Also see Agreement on Supply 

of a Light-Water Reactor Project to the Democratic People's Republic of Korea 

between the Korean Peninsula Energy Development Organization and the 

Government of the Democratic People's Republic of Korea (hereafter referred to 

as “Agreement on Supply of a LWR Project”), Annex 3, Article 7, December 15, 

1995, New York.

34. “Implementation of INFCIRC/403, GC(39)/18,” Item 23 of the Provisional 

Agenda.

35. Ibid, (e) of Annex I.

36. Ibid, (f) of Annex I. 

37. Ibid.

38. Each non-nuclear-weapon State Party to the NPT undertakes to accept 

safeguards, as set forth in an agreement to be negotiated and concluded with the 

IAEA in accordance with the Statute of the IAEA and IAEA’s safeguards system. 

For this stipulation, see Article 3 of the Treaty on the Nonproliferation of Nuclear 

Weapons (NPT), July 1, 1968.

39. Ibid.

40. “Implementation of INFCIRC/403, GC (39)/18.”

41. Ibid.

42. “Testing North Korea: The Next Stage in U.S. and ROK Policy,” Report 

of an Independent Task Force Sponsored by the Council on Foreign Relations, 

Morton I. Abramowitz and James T. Laney, Co-Chairs, Robert A. Manning, Project 

Director, 2001, p. 7.
183

43. Ibid.

44. Bong-Geun Jun, “Obstacles to the KEDO LWR project,” p. 77.

45. Ibid.

46. A Commentary, Korean Central News Agency, June 27, 2001.

47. “KCNA urges IAEA to be impartial,” Korean Central News Agency, 

September 29, 2001. Also see “Unreasonable Resolution of IAEA,” Korean Central 

News Agency, September 28, 2000.

48. “KCNA urges IAEA to be impartial,” Korean Central News Agency, 

September 29, 2001.

49. “Unreasonable Resolution of IAEA,” Korean Central News Agency, 

September 28, 2000.

50. Executive Director of the Nonproliferation Policy Education Center Henry 

Sokolski’s letter to Desaix Anderson, Executive Director of KEDO, December 19, 

2000, and January 29, 2001. For the debate between Victor Gilinsky and Henry 

Sokolski, on one hand, and Howard Diamond on the other, see Victor Gilinsky 

and Henry Sokolski, “Korea: How Long Do We Live With Blackmail?” Op-Ed, 

Washington Post, March 27, 1997; Howard Diamond, “The Korea Deal: Advantage 

U.S,” Op-Ed, Washington Post, April 17, 1997; Victor Gilinsky, “Assessing the 

Agreed Framework,” Policy Forum Online #6, Berkeley, CA: Nautilus Institute, 

July 10, 1997.

51. See the “Joint Letter to President Bush on North Korea Policy” by Henry 

J. Hyde, Christopher Cox, and Edward J. Markey, March 2, 2001. The letter states 

that “it may prove impossible to implement the Agreed Framework in precisely 

the manner envisioned in 1994,” pointing to the problems associated with the 

construction of “plutonium-producing light water nuclear reactors” in North 

Korea: safety, liability, licensing, the condition of North Korea’s electric power 

grid, and the suitability of alternative sources of electric power.”

52. Henry Sokolski’s Letters to Desaix Anderson, December 19, 2000, and 

January 29, 2001; Desaix Anderson’s Letter to Henry Sokolski, January 12, 2001

53. Henry Sokolski’s Letter to Desaix Anderson, December 22, 2000.

54. Desaix Anderson, “Myths of KEDO.” 

55. Ibid.

56. Unpublished Papers, LWR project Planning Office, Seoul, Korea, 2001.
184

57. Desaix Anderson, “Myths of KEDO.” 

58. Ibid.

59. Ibid.

60. “Agreement on Supply of a LWR Project,” Clause 8, Article 3.

61. Desaix Anderson, “Myths of KEDO.” 

62. Ibid.

63. Ibid.

64. Ibid. 

65. David Von Hippel, Peter Hayes, and Timothy Savage, “Modernizing the 

U.S.-DPRK Agreed Framework: The Energy Imperative.”

66. Bong-Geun Jun, “Conditions for the Success of the LWR project and its 

Prospects,” Current Issues & Policy (Chongsewa Chongch’aek), Songnam City, ROK: 

The Sejong Institute, November 2000. p 9.

67. Desaix Anderson, “Myths of KEDO.” 

68. “Testing North Korea: The Next Stage in U.S. and ROK Policy,” p. 6.

69. “Announcement of the DPRK’s Position by the Spokesman of the Foreign 

Ministry of the DPRRK with Regard to the U.S. Government’s Offer of the 

‘Resumption of Dialogue’,” Korean Central News Agency, June 18, 2001. North Korea 

claimed that it was waste of time and escape from negotiation if both countries 

only discussed unrealistic issues instead of dealing with the basic problems that 

awaited solution for the practical purposes. See Minju Chosun (Democratic Korea), 

June 23, 2001; Korean Central News Agency, June 23, 2001.

70. A Commentary, Korean Central News Agency, June 27, 2001; “A Detailed 

Report of the Delay of the Construction of the LWR Project in Accordance with the 

Agreed Framework between the DPRK and the U.S.” Also see “The U.S. cannot 

Escape from Its Responsibility for Compensation for the Lost Electricity,” Korean 

Central News Agency, June 5, 2001. Also see “Criticism against the Refusal of the 

Compensation for the Lost Electricity by KEDO’s Executive Director,” Korean 

Central News Agency, June 16, 2001.

71. “A Detailed Report of the Delay of the Construction of the LWR project in 

Accordance with the Agreed Framework between the DPRK and the U.S.” 

72. Agreed Framework, Clause 1, Article 2.
185

73. “Implementation of INFCIRC/403, GC(39)/18,” Item 23 of the Provisional 

Agenda, Annex II: Extracts from INFCIRC/457.

74. Korean Central News Agency, June 16, 2001; “Report on Delay in 

Construction of LWR project Issued.” Also see Korean Central News Agency, 

December 23, 1999.

75. According to the TKC signed between KEDO and KEPCO in December 

1999, the first LWR was to completed in January 2008 (in 95 months) and the 

second one in January 2009 (in 107 months). See Kyonghyang Sinmun, September 

6, 2001.

76. North Korea had repeatedly demanded compensation for the expected 

loss of electricity due to the delay of the LWR project since December 23, 1999. See 

Korean Central News Agency, December 23, 1999. Also see Rodong Sinmun, January 

28, 1999; Korean Central News Agency, February 3 and July 1, 2000; March 3, June 

18, 2001.

77. “Report on Delay in Construction of LWR project Issued.”

78. Ibid.; “A Commentary,” Korean Central News Agency, June 27, 2001.

79. “Report on Delay in Construction of LWR project Issued.” 

80. Richard Boucher, U.S. Department of State Press briefing, June 18, 2001; 

Munhwa Ilbo, June 18, 2001; Korean Central News Agency, June 16, 2001.

81. Korean Central News Agency, June 16, 2001.

82. “Report on Delay in Construction of LWR project Issued.”

83. “A Detailed Report of the Delay of the Construction of the LWR project in 

Accordance with the Agreed Framework between the DPRK and the U.S.,” and 

Report on Delay in Construction of LWR project Issued.”

84. Chairman Kim Jong Il is known to have said in more than one conversation 

with Madeleine Albright and Wendy Sherman in 2000: “You are the big country, 

we are the little country — why should we be the one to take the first step; to 

take the greatest risk?” Kim Jong Il demands the United States make the first 

cooperative move in order to usher in a process in which both sides reciprocate 

each other’s cooperative moves in good faith for the emergence of cooperation and 

trust building between the two countries. 

85. “KCNA urges IAEA to be impartial,” Korean Central News Agency, 

September 29, 2001.

86. “Report on Delay in Construction of LWR project Issued.”
186

87. Ibid.

88. President William J. Clinton’s Letter to Chairman Kim Jong Il, October 20, 

1994.

89. “Report on Delay in Construction of LWR Project Issued.”

90. Ibid.

91. Edward Lynch, chief counsel of KEDO confirmed that “the DPRK power 

grid is far too weak to accept two 1,000 MW(e) nuclear reactors under construction 

at Kumho.” The problem is that building a power grid is North Korea’s sole 

responsibility, not KEDO’s. See Mark Hibbs, “It’s up to DPRK to make sure grid 

works, KEPCO and KEDO say,” Nucleonics Week, Seoul, November 2, 2000.

92. Henry Sokolski’s Letter to Desaix Anderson, then Executive Director of 

KEDO, December 19, 2000, and January 29, 2001. Also see Victory Gilinsky and 

Henry Sokolski, “Korea: How long do we live with blackmail?” Washington Post, 

March 27, 1997; Howard Diamond, “The Korea Deal: Advantage U.S,” Washington 

Post, April 17, 1997; Victor Gilinsky, “Assessing the Agreed Framework,” 

NAPSNet, Policy Forum Online, Berkeley, CA: Nautilus Institute, July 10, 1997.

93. Desaix Anderson’s Letter to Henry Sokolski, January 12, 2001.

94. Henry Sokolski’s Letter to Desaix Anderson, January 29, 2001.

95. David Von Hippel, Peter Hayes, and Timothy Savage, “Modernizing 

the U.S.-DPRK Agreed Framework: The Energy Imperative.” Also see Bradley 

O. Babson, Senior Advisor to the World Bank, “KEDO and the Future of the 

North Korean Economy,” Paper presented at KEDO Seminar, “Ensuring Peace 

and Stability on the Korean Peninsula,” Hotel Inter-Continental, New York City, 

September 26, 2000.

96. David Von Hippel, Peter Hayes, and Timothy Savage, “Modernizing the 

U.S.-DPRK Agreed Framework: The Energy Imperative.”

97. Ibid.

98. Desaix Anderson, “Myths of KEDO.” 

99. David Von Hippel, Peter Hayes, and Timothy Savage, “Modernizing the 

U.S.-DPRK Agreed Framework: The Energy Imperative.” 

100. Ibid.

101. Bong-Geun Jun, “Obstacles to the KEDO LWR Project,” pp. 79-80. Also 
187

see Prepared Testimony of Mitchell B. Reiss, Dean of International Affairs, Director 

of the Wendy and Emery Reves Center for International Studies, College of 

William and Mary, Williamsburg, Virginia, before the Committee on International 

Relations, U.S. House of Representatives, March 16, 2000.

102. Henry Sokolski’s Letter to Desaix Anderson, December 19, 2000, and 

January 29, 2001, February 1, 2001; Desaix Anderson’s Letter to Henry Sokolski, 

January 12, 2001.

103. “Agreement on Supply of a LWR Project,” Annex 3, Article 4. Also see 

“Testing North Korea: The Next Stage in U.S. and ROK Policy,” p. 7.

104. Daniel A. Pinkston, “Implementing the Agreed Framework and Potential 

Obstacles,” A paper for the 12th Pacific Basin Nuclear Conference in Seoul, Korea, 

October 20-November 2, 2000.

105. Ibid. 

106. “North Korea Threat Reduction Act of 1999” (H.R. 1835); Gilman-Markey 

amendment of "American Embassy Security Act of 1999”; H. AMDT. 324.

107. Bong-Geun Jun, “Obstacles to the KEDO LWR Project,” p. 73.

108. Ibid.

109. Ibid., pp. 73-74.

110. “Testing North Korea: The Next Stage in U.S. and ROK Policy,” p. 6.

111. The Independent Task Force on Korea of the Council on Foreign Relations 

recommends that “no ambiguous determination by the IAEA of North Korea’s 

nuclear history should be acceptable if the margin of error — between what 

plutonium the North has declared, and the amount the IAEA judges it may 

actually have — is in the vicinity of the amount required for one or more nuclear 

weapons.” See Ibid., p.7. 

112. But KEDO does not embody an economic logic that is needed to make 

KEDO ultimately successful.” See Bradley O. Babson, “KEDO and the Future of 

the North Korean Economy.”

113. North Korea’s cooperation should be two-fold: to implement agreements 

already in place, and to show flexibility in order to handle unexpected 

transportation and telecommunication needs. See Bong-Geun Jun, “Obstacles to 

the KEDO LWR Project,” pp. 73-74.

114. It is noteworthy here that there were some areas where North Korea 

“took the extra measure of allowing the operation of fast passenger-cargo 
188

boats between the site and the South that would shorten the travel time from 

2 days to 5 hours, though this was not in the agreements. See Ibid., p. 75.

115. Yukio Satoh, “KEDO and its implications for Northeast Asian Security.” 

116. Desaix Anderson, “Remarks to Korea Economic Institute,” July 22, 1998, 

pp. 2-3.

117. Author’s Interview with Masaaki Ono, New York City, October 7, 1998; 

Author’s Interview with Joel Wit, Westin Chosun Hotel, Seoul, September 29, 

1998.

118. Joel Wit, “The Korean Peninsula Energy Development Organization: An 

American Perspective,” Unpublished Paper, pp. 8-9. In this context, Bradley O. 

Babson, Senior Advisor to the World Bank, suggests expanding KEDO’s mandate 

“to enable it to address the wider ranges of issues . . . affecting the energy sector 

as a whole,” that is, “interacting with a broader segment of the North Korean 

government system and require mobilization of financing and technical expertise 

beyond the resources now available to KEDO.” Here, KEDO is conceived as “the 

center of international support to rehabilitate and make economically efficient the 

whole of the energy sector” of North Korea. See Bradley O. Babson, “KEDO and 

the Future of the North Korean Economy.” 

119. Stephen Bosworth, “KEDO Cooperation: Lessons Learned and Future 

Challenges.” 

120. “Testing North Korea: The Next Stage in U.S. and ROK Policy,” p. 8.

121. “Joint U.S.-DPRK Statement on International Terrorism,” Statement by 

Richard Boucher, Spokesman, U.S. Department of State, October 6, 2000.

122. “DPRK stance toward terrorist attacks on U.S.,” Korean Central News 

Agency, September 12, 2001.

123. Yonhap News, October 6, 2001. But there is no way for North Korea to 

get off the list of states sponsoring terrorism as long as North Korea continues to 

harbor Japanese Red Army hijackers, because U.S. laws do not exempt any country 

from the duty of being cleared of hijacking and hijacking-related terrorism. And, 

if North Korea is not off the list of states sponsoring terrorism officially, the 

United States simply “cannot support its membership in international financial 

institutions.” See “Testing North Korea: The Next Stage in U.S. and ROK Policy,” 

p. 10.

124. Stephen Bosworth, “KEDO Cooperation: Lessons Learned and Future 

Challenges.” 

125. Haksoon Paik, “The Korean Peninsula Energy Development Organization 
189

(KEDO): Interests, Conflicts, and Institutionalization,” pp. 103-135.

126. Stephen Bosworth, “KEDO Cooperation: Lessons Learned and Future 

Challenges.”

127. Mitchell B. Reiss saw it as important to debunk the myth that KEDO does 

not need U.S. support nor deserve it. See Prepared Testimony of Mitchell B. Reiss 

before the Committee on International Relations, U.S. House of Representatives, 

March 16, 2000.

128. Bradley O. Babson, “KEDO and the Future of the North Korean 

Economy.” 
190
191

PART IV: ECONOMICS
192
193

CHAPTER 10

KOREA-U.S. TRADE RELATIONS 

IN THE ERA OF REGIONALISM

Miongsei Kang

With the goal of providing an account of the recent development 

of Korean-U.S. trade relations, this chapter utilizes regionalism, 

which increasingly characterizes world trade patterns. The United 

States is a core member of the North American Free Trade Agreement 

(NAFTA), one of the most influential trade blocs along with the 

European Union (EU). The emergence of regionalism will have a 

great impact on the trade flows of East Asia. In defensive responses 

to regionalist initiatives from Europe and the United States, East 

Asia is more likely to institutionalize an economic cooperation that 

has been largely informal and unbinding. As a trade-dependent 

country, Korea now confronts a regional challenge. The United 

States took the lead in its regionalist move in reaction to a “Fortress 

Europe,” away from its traditional commitment to a multilateral 

trading system. The goals in this chapter are to establish what has 

happened to Korea-U.S. trade flows and analyze what it means for 

the future. Section 1 provides an overview of the development of 

Korea-U.S. trade relations during the past three decades. Section 2 

introduces the rising tide of regionalism, which has affected the trade 

policy of Korea and the United States. Section 3 traces the impact of 

regionalism on trade relations with a discussion of the redirection 

of trade. Section 4 explains Korea’s strategic options in the face of a 

regionalist challenge within East Asia and from the United States. 

An Overview of Trade Direction and Korea-U.S. Trade.

Korea had long-run trade surpluses with the United States. The 

size of the trade surplus went up to about 9.6 million dollars in 1987. 

Then, the surplus decreased to 2.5 million dollars in 1990. After that, 

Korea’s trade with the United States ran deficits until 1997. A surplus 

came back after the financial crisis, thanks to the depreciation of the 

Korean currency, and the surplus since has been steadily increasing, 

reaching about 8.4 million dollars in 2000. 

Korea’s trade direction has changed much over the past 2 
194

decades. The United States was Korea’s largest single market until 

the middle of the 1980s. In the 1990s, Korea diversified its trade 

pattern, shifting from large economies such as the United States and 

Japan toward small- and medium-sized economies, particularly in 

Southeast Asia. At present, its largest market is East Asia, including 

China but not counting Japan. Korea’s export share in East Asia 

increased from about 13 percent in the 1980s to more than 34 percent 

in the 1990s, making it the single most important destination for 

Korean exports. The share of U.S. trade in Korean exports has been 

gradually decreasing since 1990, down to 20 percent in 1999, from 

40 percent in 1986. The share of exports to Japan has decreased 

by half, from more than 21 percent in 1978 to 11 percent in 1999. 

The biggest change is found in the trade flows between Korea and 

China. Korea had no formal relations and little trade with China 

until 1990. China, in combination with Hong Kong, has become the 

largest importer of Korean products over the past 5 years. China is 

expected to loom larger in the future, while the United States is still 

one of the largest export markets of Korea, and Japan is the third 

market. Thus a greater part of Korean export is concentrated in the 

Asia Pacific Economic Cooperation (APEC) area. The share of EU is 

stagnant, hovering around 10-15 percent. The United States, Japan, 

and East Asia comprised more than 65 percent of Korea’s exports 

in the 1990s. According to some econometric analyses, the effect of 

APEC is large and statistically significant. Korea’s bilateral trade 

flows with members of APEC are three times as much as those with 

non-APEC countries.1

The Rise of Regionalism.

During the past decade, regionalism has attracted extensive 

attention in policy circles, from politicians, and from economists. 

The advent of the European Monetary Union (EMU), NAFTA, and 

the possibility of an Asia-Pacific economic bloc have generated 

widespread debate concerning the causes and consequences of 

regionalism. The United States and the EU, the two centers of 

regionalism, have worked in harmony to expand the multilateral 

trading system since 1945. Both sides of the Atlantic have used the 

General Agreement on Tariffs and Trade (GATT) and the World 

Trade Organization (WTO) to defuse conflicts that have proven 

intractable in bilateral negotiations. 
195

However, the stability of bilateral relationships is threatened 

with the end of the Cold War and the rise of regionalism. The 

United States and the EU have no powerful incentive to look 

past commercial differences since the Union of Soviet Socialist 

Republics (USSR) collapsed. At the beginning of the 1990s, interest 

in regionalism or economic blocs was renewed. Policy circles and 

economists began to revive the discussion on regional integration 

around 1992, when the European Community decided to establish 

a single market. The catalyst of regionalism was fear of a “Fortress 

Europe” from the EU’s 1992 program (EC92). Throughout the 1990s, 

the EU has both deepened its regional integration through the singlemarket initiatives mandated by the Single European Act of 1985 

and continued the process of widening EU membership. Austria, 

Finland, and Sweden joined the Union in 1995, and new association 

arrangements have been negotiated with prospective members 

in Central and Eastern Europe. The EU has also inaugurated an 

economic and political dialogue with Asia through the Asia Europe 

Meeting (ASEM) Forum. 

The United States pushed NAFTA through a series of negotiations 

with Canada and Mexico and has sought to expand NAFTA to Chile 

and to the 24 participating countries in the Caribbean Basin Initiative 

in order to lay the foundation for a hemisphere-wide Free Trade Area 

of the Americas by 2005. The United States has also joined 17 other 

countries in the APEC forum in committing to the achievement of 

free trade and investment in the Asia-Pacific region by 2010 for most 

members and 2020 for developing countries. 

Patterns of world trade have changed over the past 2 decades. 

They are characterized by the move towards regionalism. East Asia, 

the EU, and NAFTA all exhibit an increasing tendency for intraregional export. Intra-regional export shares increased between 1978 

and 1997 from 52.4 percent to 60 percent among the EU countries, 

from 28.5 percent to 47.6 percent among the East Asian countries, 

and from 36.7 percent to 49.1 percent among the NAFTA countries. 

The largest increase is found in East Asia due to the rapid economic 

growth of East Asia during this period: the East Asian countries 

have grown richer and loom larger in the world economy.2

Korea-U.S. trade relations need to be analyzed in this new 

context. Korea belongs to an informal trading regime of East Asia, 

which is in the process of institutionalization. The United States 

has already been a key member of NAFTA along with Canada and 
196

Mexico. New developments in Korea-U.S. trade relations over the 

past decade need to be placed in the context of rising regionalism 

and the formation of regional trading arrangements in the 1980s.

Jeffery Frankel provides an analysis of the new developments of 

the world-trading regime. He discusses four factors as responsible 

for the move to regionalism; three are introduced here because they 

are highly relevant to understanding the changing Korea-U.S. trade 

patterns as well as the transformation of the world trading system. 

First, the move to regionalism was triggered by an ambitious EU 

plan to make a true common market. The EU’s initiative crystallized 

in the Maastricht Treaty in 1992, encouraging regionalist reactions 

by other areas. Second, a shift of American trade policy accelerated 

regionalist trade arrangements. Before the 1980s, the United 

States had long upheld the principle of multilateral arrangements. 

However, the American strategy changed in 1982. The United 

States responded to the European resistance toward multilateral 

liberalization with regional cards. Its first reaction was the U.S.-

Israel Free Trade Area.3

The United States shifted toward regional arrangements, away 

from the multilateral approach pursued during the post-war period. 

The United States formed the Canada-United States Free Trade 

Agreement (CUFTA) with Canada, and CUFTA was extended 

into NAFTA with Mexico’s entry in 1995. And the United States is 

willing to expand it by inviting in the members of the Southern Cone 

Common Market Customs Union (MERCOSUR)--Brazil, Argentina, 

Uruguay, and Paraguay. Finally, the regionalist move is spreading 

to the developing countries. Mexico’s bid for a free trade area with 

the United States in 1990 was a historic turning point, given that 

Mexico had feared American dominance through trade. Also the 

MERCOSUR was formed in 1991 by the four countries in South 

America east of the Andes. The motivation behind regionalism is a 

trade-led growth strategy. The developing countries are attempting 

to shift their trade strategy from an inward-looking or import 

substitution policy to an outward orientation, imitating the East 

Asian miracle.

Regionalism came to East Asia in a different form. Asian 

regionalism is open in that East Asian countries do not discriminate 

against others. Exclusive regionalism was attempted and failed. 

Malaysian Prime Minister Mahathir bin Mohamed proposed the 

creation of an East Asian Economic Group, whose name was 
197

eventually changed to the East Asian Economic Caucus (EAEC), 

centering on Japan in 1989. The EAEC consisted of China, Japan, and 

Northeast Asian newly industralized countries (NICs) in addition to 

the Association of Southeast Asian Nations (ASEAN) countries. The 

United States, Canada, Australia, and New Zealand were explicitly 

excluded. Mahathir’s plan was a reaction to emerging trade blocs 

in Europe and the Americas. His proposal had received attention 

from Japan and neighboring countries, particularly during Asia’s 

economic crisis of 1997. The United States pressed both Japan and 

Korea not to participate in the EAEC, and Mahathir’s proposal was 

rejected by both the United States and Japan from the beginning. 

Japan feared that the EAEC was in violation of open regionalism and 

would discriminate against the United States. Instead, the United 

States and Japan established the APEC forum as an alternative.4

Asian regionalism is often said to be open. Open regionalism implies 

a commitment to the multilateral trading system. Open regionalism 

is defined as a bloc where member countries choose to lower trade 

barriers to countries outside the bloc even if the degree of extra bloc 

liberalization may not be as thorough as it is with respect to fellow 

member countries.5

Changing Trade Patterns of Korea.

Korea’s export patterns demonstrate a considerable shift over 

time and region during the 1980-99 period. During the 1980s, the 

United States was the largest importer of Korean goods and Japan 

was second. However, the export direction of Korea in the 1990s 

differed completely. China emerged as the third largest importer 

of Korean products in less than 10 years. This is surprising, since 

China formally had no trade with Korea at all before 1990. Another 

noticeable change was the increasing importance of East Asia as an 

export market for Korea. Though the United States remains the 

largest importer on the basis of individual country, East Asia as a 

region has became the largest export market for Korean goods and 

services, not counting Japan. 

The distribution of countries exporting goods and services to 

Korea shows a similar change. On the one hand, Korea’s share in 

imports from Japan decreased from 28.6 percent to 22.3 percent, 

while during the same period, the share of the United States 

decreased only slightly from 22.8 percent to 21.8 percent. On the 
198

other hand, East Asia’s exports to Korea increased substantially in 

line with their increasing import of Korean products. Particularly, 

China’s export share grew during this period. China emerged as 

one of the major trading partners of Korea, as it pursued a policy 

of liberalization. The diversification of Korean exports and imports 

is distinctively strong. Dependence on the United States in exports 

was reduced. The big picture is straightforward: East Asia as a whole 

region becomes more important, while the trade share of the United 

States gets smaller. This has significant implications for the future 

of Korea-U.S. relations, not just for trade between the two countries. 

Regionalist strategies by the United States could lead Korea to be 

attracted to East Asian economic integration. In the long run, Korea 

could fear U.S. discrimination and protectionism and could consider 

seeking a regional free trade area as a self-help alternative. Any new 

protectionist or unilateralist measures taken by the United States 

would trigger a parallel response from East Asia, including Korea. 

An American slowdown would lead the Asians to overcome the 

humiliations over the shattering of the “economic miracle” and go 

their own way.

In the short run, however, Korea will continue to be dependent 

on the United States, as export markets will not decrease rapidly. 

The United States has purchased more Korean goods than any other 

country, particularly after the 1997 financial crisis. Trade with the 

United States in 1998 was in surplus, which increased to more than 

8 million dollars in 2000 after deficits from the early 1990s up to 

1997. Korea’s trade deficits with the United States peaked in 1996 

at more than 11 million dollars. The surplus with the United States 

as a percentage of the total trade surplus of Korea increased from 6 

percent in 1998 to 75 percent in 2000. Due to a long recession, Japan 

has bought fewer Korean goods than before the crisis. However, 

Japan’s large foreign reserves continue to look appealing to Korea. 

The idea of the Monetary Fund (MF) is attractive to countries like 

Korea that experienced great suffering from the liquidity crisis in 

1997. Korea and Japan have been discussing how to establish a free 

trade area. To deal with potential trade conflicts with East Asia, the 

United States should pay more attention to consolidating Asia-U.S. 

relations within APEC if it does not want the East Asian countries to 

establish an exclusive economic bloc as a counterweight to NAFTA. 

Trade between the United States and East Asia will become more 

important over time. During the 1990s, Korea was the eighth largest 
199

exporter to the United States, and Korea is the sixth largest importer 

of American goods and services. The American pattern of trade has 

changed during the 1978-99 period. With respect to imports, the 

biggest difference was made by China. U.S. imports from China 

increased from 1.1 percent in the 1980s to 6 percent in the 1990s. 

Thus, mutual dependence between the United States and East Asia 

becomes deeper. It would be advantageous for the United States to 

maintain close relations with East Asia. 

Korea’s Trade Strategy in the Era of Regionalism.

In the era of regionalism, only a few countries do not participate 

in economic blocs, so Korea is forced to make a choice. There remain 

two possible strategic options: to remain in APEC, or participate in 

the establishment of an East Asian bloc. The first strategy is better 

than the second for a country seeking trade-led growth. APEC is 

not a regional arrangement but a forum of open regionalism. Open 

regionalism, unlike regionalism, is in line with the basic principle 

of the World Trade Organization (WTO): no discrimination against 

nonmembers. In contrast, establishment of an East Asian economic 

bloc would divide the world into three blocs. No one gains when 

each bloc raises tariffs against members of other blocs. 

A bilateral trade pattern depends on geographical distance, 

the size of gross domestic product (GDP), per capital GDP, and 

cultural factors such as ethnicity and language. Many studies 

report that geographical adjacency — the pull of gravity — is the 

most important determinant of trade flows between two economies. 

Despite technological development, transportation costs still matter. 

Closeness facilitates bilateral trade flows.6 For instance, Canada is 

the largest trading partner of the United States. This gravity model 

would predict that the Korea-U.S. trade flows could not increase 

because the two countries are far apart. On the other hand, KoreaJapan or Korea-China trade should grow due to geographical 

proximity and shared culture among the three countries. In other 

words, the potential trade of Korea with China and Japan should 

be far larger than the actual trade now. According to one estimate, 

Korea today trades less with Japan and China than with the United 

States, despite the geographical and cultural proximity and large 

economic size of its neighbors.7 The study suggests that Korea has to 

establish a free trade area (FTA) to facilitate the bilateral trade flows 
200

with China and Japan. The FTA is expected to have the benefits 

of a trade creation effect. Korea’s trade with Japan or China falls 

short of the potential trade flow, by 15 percent and 33 percent less, 

respectively.8

In contrast, actual trade flows with the United States exceed 

potential trade volumes by 9 percent. The gap in East Asia between 

potential and actual trade could be reduced by an active trade policy 

that links Korea, China, and Japan through a free trade area on a 

bilateral or trilateral basis. A free trade arrangement produces both 

trade creation and trade diversion unless members do not erect trade 

barriers against nonmember countries. Trade diversion occurs with 

trade discrimination against a third country. Trade with the United 

States would be reduced while trade with Japan and China grew. 

Regional arrangements might lead to a shrinking of export markets, 

including the United States and elsewhere, even though an expansive 

East Asian market provides larger outlets for Korean products. 

Therefore, Korea needs to be actively involved in strengthening 

APEC, as well as in creating bilateral trade arrangements with Japan 

or China. A free trade agreement with Japan or China should not be 

pursued without taking into consideration its potential impact on 

Korea-U.S. trade relations. Korea has to pressure the United States to 

recognize that institutionalization of East Asian regionalism harms 

the trade interests of the United States as well as the principle of 

free trade. For now, it is more realistic for Korea to pursue bilateral 

agreements in particular with Japan and China. At the same time, 

Korea needs to emphasize the benefits of open regionalism, a 

distinctive character of the APEC area. APEC members are found 

to trade 3.3 times as much as similar non-APEC countries.9 To gain 

those benefits, Korea needs to commit its trade policy to addressing 

two goals of APEC: developing rules of deep integration and 

providing a forum to promote trade liberalization. Korea needs to 

be more open and must pursue a liberalization initiative program. In 

particular, it must be involved in the implementation of agreements 

of the APEC forum, simultaneously participating in the regional 

cooperation of East Asia. 

Conclusion.

Korea’s trade direction has been shifting over the past 2 decades. 

With rapid economic growth, the Korean economy tends to 
201

diversify its trade pattern towards small and medium economies. 

Global regionalism anchoring the EU and North America triggered 

economic regionalism in East Asia. The United States created a North 

American free trade area in 1993 with Canada and Mexico. These 

new developments and the financial crisis combined to encourage 

East Asian countries to attempt to create their own economic 

organization. A global shift towards bilateral arrangements 

from multilateral trade liberalization had an important impact on 

the Korea-U.S. trade pattern. In the new environment of strong 

bilateral trade flows and regional blocs, Korea, a trade-dependent 

country, aims to broaden trade patterns and to negotiate bilateral 

arrangements with countries in East Asia. Korea-China trade flows 

have grown rapidly over the past decade. Negotiation of a free trade 

area with Japan is already in process. 

The relative importance of the United States to Korea is shrinking 

as East Asia replaces the United States as Korea’s largest export 

market. However, the United States still remains a superpower. In 

the short run, therefore, it is in Korea’s interest to engage the United 

States in East Asia. The United States continues to play the role of 

a balancer in East Asia, particularly to prevent North-South Korean 

tensions from developing into a military confrontation. However, 

regional or bilateral measures taken by the United States since the 

early 1980s could threaten the present trade pattern by encouraging 

East Asia to establish an economic bloc. East Asian economic 

integration will gain momentum if the United States cannot afford 

the Asian exports because its economy weakens and protectionist 

interests prevail over free traders. To find export markets, Korea 

will inevitably strengthen its bilateral trade relations with East Asian 

economies. To avoid these potential conflicts, the United States 

should make a strong commitment to reestablishing the present 

asymmetric relations with East Asian countries within the WTO 

in a way that reflects the actual economic share of East Asia in the 

world economy. It is in Korea’s interests to keep the United States 

involved in East Asia through APEC. APEC is the proper place in 

which the United States and Asian countries can seek to recognize 

their mutual interests and realize free trade. Working efficiently, 

APEC can contribute to weakening regional competition between 

economic blocs and discrimination of East Asia and North America 

against each other. It is in the interest of the United States not to 

leave East Asia to establish an economic bloc and divide the world 
202

into three blocs. Competitive protectionism among three blocs 

would generate the worst outcome. 

ENDNOTES - CHAPTER 10

1. Jeffrey Frankel, Regional Trading Blues, Washington, DC: Institute for 

International Economics, 1997; Sonn and Yoon, 2001.

2. Jeffrey Frankel, “Foreign Exchange Policy, Monetary Policy and Capital 

Market Liberalization in Korea,” in Korean-U.S. Financial Issues, U.S.-Joint KoreaU.S. Academic Symposium, Vol. 3, Chwee Huay Ow-Taylor, ed., Washington, DC: 

Korea Economic Institute of America, 1993, pp. 91-107.

3. Jeffrey Frankel with Shang-Jin Wei, “Open Regionalism in a World of 

Continental Trade Blocs,” NBER Working Paper No. 5272, IMF Staff Papers, Vol. 

45, No. 3, September 1998, pp. 440-453.

4. Gary Saxonhouse, “What Does Japanese Trade Structure Tell Us about 

Japanese Trade Policy?” Journal of Economic Perspectives, Vol. 7, No. 3, 1993, pp. 

21-43; May T. Yeung, et al., Regional Trading Blocs in the Global Economy: The EU and 

ASEAN, Cheltenham, UK, and Northampton, MA: E. Elgar, 1999.

5. Peter Drysdale and David Vines, Eds., Europe, Asia and the ASEM Process 

— A Shared Global Agenda? Cambridge, UK: Cambridge University Press, 1998; 

Jeffrey Frankel and Shang-Jin Wei, “ASEAN in a Regional Perspective,” CIDER 

Working Paper No. C96-074, Berkeley, CA: University of California at Berkeley, in 

Macroeconomic Issues Facing ASEAN Countries, John Hicklin, David Robinson, and 

Anoop Singh, eds., Washington, DC: International Monetary Fund, 1997.

6. Frankel and Wei, “Open Regionalism.” 

7. Sonn and Yoon, 2001.

8. Ibid.

9. Frankel and Wei, “Open Regionalism.” 
203

CHAPTER 11

SOUTH KOREA’S INWARD FOREIGN DIRECT 

INVESTMENT:

POLICY AND ENVIRONMENT

Kyu-Ryoon Kim

Introduction.

East Asian countries showed remarkable economic growth and 

led the world in economic dynamism until the recent financial 

crisis. Asian economic dynamism first appeared in the city-states 

of Hong Kong and Singapore and then the partial nations, Taiwan 

and South Korea. These four tigers have been classified as Newly 

Industrializing Economies (NIEs) and a model for economic 

development of developing countries. Thailand, Malaysia, 

Indonesia, and the Philippines followed the developmental paths 

of neighboring NIEs and achieved high economic growth in the 

1990s. China recorded double-digit economic growth rates during 

the 1980s and 1990s. All these phenomena made economic analysts 

believe that the East Asian region would lead the world in economic 

dynamism in the 21st century.

The financial crisis of 1997 affected South Korea dearly, even 

though its economic success has not totally vanished. In fact, the 

financial crisis made South Korea rethink its development policies. 

Its first task was to overcome the financial crisis. In doing so, it had 

to reorganize economic resources to prepare for the next stage of 

economic development, realizing that the export-led growth model 

alone would be insufficient to provide long-lasting development 

in the interconnected world economy. More importantly, South 

Korea’s credibility and soundness were questioned by foreign 

businessmen and bankers.

Many writers and analysts detected the causes of the Asian 

financial crisis.1 While the immediate causes were financial sector 

weaknesses with easy global liquidity conditions and the contagion 

of financial disturbances across Asian countries, intrinsic causes 

were over-investment without adequate returns and inappropriate 

industrial policies. The South Korean government was supposedly 

providing a favorable business climate and proper developmental 
204

plans so that its businessmen could expand economic activities 

at home and abroad. In reality, the government was frequently 

involved in economic activities to pursue embedded interests of 

the richer part of the society. As a result, the economy had long 

rested on a vigorous trilateral relationship among bureaucrats, 

businessmen, and bankers. When the economy was booming, this 

trilateral relationship produced high economic growth rates. But 

many problems erupted when the economy was in crisis, and the 

same nexus was blamed as an intrinsic cause. The question has 

been whether South Korea could recover within its Asiatic mode of 

economic development--the export-oriented development strategy. 

Otherwise, it would be necessary to devise a new framework. 

This would entail such measures as macro-economic adjustments, 

correction of ill-structured networks, and restructuring of financial 

sectors.

This chapter attempts to delineate South Korea’s foreign direct 

investment (FDI) policies. In doing so, it is necessary to first 

investigate the past record and previous policies on foreign direct 

investment. Then I analyze South Korean efforts to promote inward 

foreign direct investment after the crisis.

South Korea’s Inward Foreign Direct Investment Policy.

South Korea has undergone three periods of change in its inward 

foreign direct investment policy. The first was between 1960 and 

1983, when Korea was building its industrial base and actively 

pursued an export-led growth development strategy. The second, 

between 1984 and 1997, was when South Korea had begun to realize 

the importance of FDI, though it tried to liberalize on this only 

minimally. The third period began in 1998, right after the financial 

crisis hit. (See Table 1.)

South Korea began its industrialization based on export-led 

growth in the early 1960s. This was accompanied by allowing DFI 

through enactment of the Foreign Capital Inducement Act in 1960. 

However, the prevalent policy during this period was to keep FDI 

to a minimum. The government preferred foreign borrowing to FDI 

because of its history of foreign domination under Japanese colonial 

rule.2 Thus the government emphasized control, rather than free 

entry, of foreign capital resources.

The government began to allow FDI in the middle of the 1960s, 
205

Period Main Contents

Early institutionalization

(1960-1983)

Enacted the Foreign Capital Inducement Act (1960)

Established two Free Export Zones (1970, 1974)

Passive liberalization

(1984-1997)

Adopted the negative list system (1984)

Abolished performance requirements (1989)

Allowed friendly cross-border M&A (1997)

Active promotion

(1998–present)

Allowed hostile cross-over M&A (1998)

Enacted the Foreign Investment Promotion Act (1998)

Ended most restrictions on foreign land ownership 

(1998)

Source: June-Dong Kim, Inward FDI, 1999, p. 11.

Table 1. Inward FDI Policy.

especially in the Free Export Zones at Masan and Iri, due to growing 

foreign debt and in order to develop light industry. However, 

performance requirements, such as export or technology transfer 

requirements, were imposed in order to raise foreign exchange 

earnings and acquire advanced technology. In the 1970s, South 

Korea realized that FDI was necessary to restructure its economy. 

The government began to allow FDI in heavy industry sectors. 

However, foreign ownership was limited to less than 50 percent, and 

the primary purpose of the FDI policy was to support exports.

The government recognized FDI as a key channel for acquiring 

advanced technology in the early 1980s. It replaced the positive 

list system of restricting FDI with a negative list system in 1984. 

This liberalization measure was followed by the abolition in 1989 

of performance requirements such as export, local content, and 

technology transfer provisions, which had been imposed on foreign 

investors.

 When Korea became a member of the Organization for Economic 

Cooperation and Development (OECD) in 1996, it brought its FDI 

policies in line with international norms and standards by turning 

the Foreign Capital Inducement Act into the Act on Foreign Direct 

Investment and Foreign Capital Inducement. Under the new Act, 

the concept of FDI was expanded to encompass long-term loans. 

Foreign investors were allowed to pursue friendly mergers and 
206

acquisitions beginning in early 1997. However, Korea’s basic 

attitude toward FDI was still passive. The government did not pay 

much attention to removing various impediments and to promoting 

FDI in general until after the financial crisis broke out.3

 The financial crisis made the government rethink the utility of FDI 

because its economy experienced refusals by foreign lenders to roll 

over debt. To overcome the financial crisis as quickly as possible, 

Korea actively promoted an influx of FDI. The government enacted 

the Foreign Investment Promotion Act (FIPA) in November 1998, 

and other FDI-related laws thereafter. In addition, the government 

issued the Enforcement Decree of the Foreign Investment Promotion 

Act, The Enforcement Regulation of the Foreign Investment 

Promotion Act, Regulations on Foreign Investment and Technology 

Inducement, Regulations on Tax Reductions or Exemptions for 

Foreign Investment, and the Special Tax Treatment Control Act. 

The purpose of FIPA is to contribute to sound development through 

attracting foreign investment by providing support and facilitation, 

formulating policies to design the most supportive and convenient 

FDI system in the eyes of foreign investors, and establishing a FDI 

system in which local governments take an important role.4 The 

more detailed promotional policies are dealt with later.

South Korea’s Inward FDI Records.

The total volume of FDI between 1962 and 1997 was only $25 

billion. Since then, the amount of FDI has been really remarkable 

— some $40 billion in 1998-2000. (See Table 2.)

Year 1995 1996 1997 1998 1999 2000

Amount 1,941 3,203 6,971 8,852 15,541 15,690

Cases 556 596 1,055 1,399 2,102 4,136

Source: Ministry of Commerce, Industry and Energy, Investment Statistics 

Database.

* Based on Notification.

Table 2. Inward FDI Records (Million of Dollars).*
207

Compared to other developing countries, South Korea ranked 

6th in this regard, as Table 3 indicates. This is remarkable, because 

South Korea received much FDI after the financial crisis. It should 

also be noted that China and Hong Kong occupy the first and second 

position and receive 35 percent of total FDI flows among developing 

economies.5

Economy Percentage

China

Hong Kong, China

Brazil

Argentina

Mexico

Korea, Republic of

Singapore

Bermuda

Chile

Cayman Islands

19.2

16.0

14.4

6.5

5.6

4.0

3.1

2.8

2.7

2.4

Top 10 total 76.7

Source: UNCTAD, World Investment Report 2001, p. 52.

* Average 1998-2000

Table 3: Largest Recipients’ Shares of FDI Flows 

among Developing Economies.*

According to Word Investment Report by the United Nations 

Conference on Trade and Development (UNCTAD), longer-term 

investment prospects for developing Asia remain bright. In this 

vein, FDIs to South Korea likely were sustained or increased this 

year too. However, the share of incoming FDI in the ROK Gross 

Domestic Product (GDP) in 1998 was only 6.1 percent, up from 

3.5 percent in 1997. This is quite low compared to the worldwide 

average of 13.7 percent; for developed countries, 20 percent; for 

developing countries, 17 percent; and for China, 27.6 percent.

As Table 4 shows, FDI to South Korea came primarily from the 

United States, the European Union, and Japan. The United States 

was predominant before and after the financial crisis, though its 

share decreased in 2000. However, much of the FDI from the 
208

Cayman Islands was reportedly from American enterprises, so the 

U.S. share may have remained higher than it appeared.

1996 1997 1998 1999 2000

Japan

(Share)

255

(8.0)

266

(3.8)

503

(5.7)

1,750

(11.3)

2,449

(15.6)

U. S.

(Share)

876

(27.3)

3,190

(45.7)

2,976

(33.9)

3,739

(24.1)

2,916

(18.6)

E. U.

(Share)

892

(27.9)

2,305

(33.0)

2,889

(32.6)

6,261

(40.3)

4,607

(29.4)

Others

(Share)

1,180

(36.8)

1,210

(17.4)

2,484

(28.1)

3,791

(24.3)

5,718

(36.4)

Source: Ministry of Commerce, Industry and Energy, Investment Statistics Database.

* Based on Notification.

Table 4. Inward FDI by Sources (Millions of Dollars).*

It should be noted that Japanese FDI flows to South Korea rose in 

1996-2000. The South East Asian countries were its primary investing 

location until the financial crisis,6 after which Japanese investors 

turned to safer locations. Also the Korean effort to promote FDI to 

cure its economic and financial problems made Japanese investors 

more interested.

South Korea’s FDI Promotion Policy After the Financial Crisis.

 The Kim Dae-Jung administration was born in the midst of the 

financial crisis. The foremost task for President Kim was to overcome 

the crisis. His administration adopted a series of measures to 

restructure the economy, including a comprehensive organizational 

structure for promoting investment as much as possible to increase 

its foreign reserves.

 

 The administration put forth the following directions.7

1. Foreign investment will be the central axis in improving 

the industrial structure.
209

2. Foreign investment will be directed to fundamentally 

address Korea's fragile industrial structure.

3. Foreign investment will be used to enhance the 

competitiveness of the weak areas and materials industry 

and strategically nurture them.

4. The investment climate will improve on a continuing basis 

so that the impact of foreign investment expands. 

5. Post-investment management will be consolidated by 

resolving the troubles of foreign investors. 

6. There will be continual work towards improving the labormanagement climate.

7. Government will promote solicitation of foreign investment 

through close teamwork between the government, 

provincial governments and corporations. 

8. The systematic support system for foreign investment 

solicitation activities will be strengthened.

9. Government will promote a positive attitude and mindset 

about foreign investment, ultimately inducing the nation 

to actively respond with foreign investment. 

 In addition, the government established the Korea Investment 

Service Center (KISC) in April 1998 as an arm of the Korea TradeInvestment Promotion Agency (KOTRA), a government-sponsored 

nonprofit organization. Since its inception in 1962, KOTRA has 

played a major role in Korea’s export-led development. Under 

the 1998 Foreign Investment Promotion Act, KISC has assumed a 

leading position in KOTRA’s promotion of FDI.

 The government also established the Office of the Investment 

Ombudsman (OIO) in 1999 to serve foreign investors. A quasigovernment institution, the Ombudsman office is an example of the 

initiative the government has taken to resolve the business-related 

grievances of foreign investors to ensure an investment-friendly 

environment.8

 The KISC set forth the direction of FDI related policies as follows.9

First, Korea is steadily liberalizing business sectors to FDI. After 

joining the OECD, South Korea streamlined previously restricted 

regulations on FDI and brought them to an internationally accepted 

level. Second, under the Foreign Investment Promotion Act, 

notifications and applications have been simplified, substantially 

eliminating red tape and delay in processing applications. Third, one 
210

barrier for foreign companies has been settled through improving 

the system for company public disclosures and for transparent 

accounting in keeping with international accounting standards. 

Fourth, the South Korean government has made continuous efforts 

to strengthen unemployment-related measures, expand the social 

safety net, and establish stable labor-management relationships 

in a bid to support foreign investment and regain corporate 

competitiveness in the world market. Fifth, the government 

has tried to change peoples’ negative attitudes towards foreign 

investment by publicizing positive aspects of the investment, such 

as greater employment opportunities, development of the local 

economy, more foreign exchange, and so on. All this is based on the 

notion that foreign investors can do business in South Korea just as 

South Koreans do.

South Korea’s FDI Environment.

 As we have seen above, South Korea’s efforts to attract FDI have 

been successful. Now we consider ways to improve this in the future. 

The Korea Investment Service Center has outlined South Korea’s 

advantages as a location for FDI: a strategic location between two 

giant markets, high profitability, an educated and skilled labor force, 

strong science and technology development, a developed physical 

infrastructure, a strong industrial base, and rapid growth in the IT 

industry.10

First, on the location between giant markets, South Korea is 

situated in a region with a huge customer base between Japan and 

China. In total, South Korea is surrounded by nearly two billion East 

Asian consumers, 500 million just in the Association of Southeast 

Asian Nations (ASEAN) countries. The Korean peninsula is poised 

to emerge as a mammoth transportation hub connecting East Asia 

and Europe as North and South Korea are jointly restoring the 

"Seoul-Uiju" railway that will boost the economic synergies between 

the Eurasian and Pacific economies.

 As for high profitability, approximately 2,900 foreign companies 

have chosen South Korea as a manufacturing location, and they 

perform far better than domestic companies in terms of profitability 

and financial soundness. According to a study by the Bank of 

Korea, the ordinary profit of international companies (ones at least 

50 percent foreign-owned) stood at 11.7 percent of aggregate sales 
211

revenue in 1999. South Korea has maintained the lowest corporate 

tax rates among the 29 members of the OECD. Foreign investors are 

free from double taxation if their home country is a signatory to a tax 

convention with South Korea, as 53 countries are now.

 On the educated and skilled labor force, South Koreans attach 

great importance to education, since it has been a vital element in the 

country's economic and technological advancement. The labor force 

is well educated, the product of a highly organized school system. 

More than 97 percent of the workers have education to the level of 

vocational training or university degrees. At 98 percent, literacy is 

nearly the highest in the world. 

 Labor productivity has grown by an average of 10 percent annually. 

The work force is renowned for its diligence and skill. South Korean 

employees worked 50 hours per week on average in 1999. A flexible 

working hour system, along with the regular working hour system, 

enables employers to offer work in 2-week or 1-month periods, 

reducing labor costs and raising competitiveness. 

 Fourth, South Korea's strengths in science and technology lie in 

its high level of investment in research and development (R&D), 

its patent registration, and its development of human resources. 

There are 2,863 R&D-related institutes in South Korea, including 

163 public research institutes; some 258 at universities, colleges, and 

junior colleges; plus 2,435 that are corporately owned. Investment in 

R&D as a proportion of the gross national product (GNP) increased 

from 0.81 percent in 1981 to 2.68 percent in 1999 and is expected to 

have hit 5 percent in 2001. South Korea now ranks fifth in the world 

in this regard after Sweden, Japan, Finland, and Switzerland.

 A package of tax and credit incentives has helped firms raise 

their research expenditures to 3-4 percent of gross revenue. Firms 

may take a tax deduction of up to 15 percent of total expenditures 

on human resource development. A deduction of up to 10 percent 

is allowed for investments in research facilities. There is also a 

90 percent annual depreciation allowance on research and test 

facilities.

 Fifth, is developed physical infrastructure. Maritime transportation 

is vital for South Korea since 99.7 percent of all exported goods 

travel this way. With three coasts, South Korea is well-positioned 

as a base for shipments to Northeast Asian markets, being close to 

major Chinese, Japanese, and Russian ports. International airlines 

operate 802 scheduled direct flights per week between Seoul and 
212

major cities in North America, South America, Europe, North Africa, 

the Middle East, and Asia. Electricity and telecommunications costs 

are the lowest in Asia. 

 As for the strong industrial base, the domestic semiconductor 

industry ranks third in the world in production. The dynamic random 

access memory (DRAM) sector has developed as the country's most 

competitive business, claiming 40 percent of the world market. 

The Korean shipbuilding industry became the world's largest in 

1999, accounting for 40 percent of the market. South Korea is the 

world's sixth largest electronics producer, with 6.6 percent of global 

production. The home appliances industry ranks second worldwide 

and the related parts sector, third, testimony to their status as major 

players in overseas markets.

 The petrochemical sector is one of the pillars of South Korea's 

industrial base, providing raw materials for such critical industries 

as electronics, automobiles, textiles, aerospace, and precision 

chemicals. South Korea is the third largest ethylene producer after 

the United States and Japan. Domestic production accounts for 15.1 

percent of the world total, ranking fifth globally. With top-of-theline technology, low investment costs, and geographical adjacency 

to China and other outstanding Asian markets, the outlook for the 

industry is extremely positive. 

With 16 million users by mid 2000, the Internet industry has 

grown rapidly. The country now ranks sixth in terms of Internet 

use. The rapid growth of the Internet market is due to the expansion 

of e-trade along with the development of such Internet-related 

businesses as contents, auctions, and game marketing. The degree 

to which Internet-related business has taken off in Korea may be 

gauged by the increase in the number of Internet domains from 

26,000 in 1998 to 207,000 in 1999. As Internet access skyrockets, 

companies are not only using the Internet as a marketing tool, but 

also have designated Internet business as a core segment for the 

future. South Korea is also the first country to have commercialized 

Code Division Multiple Access (CDMA) technology, a development 

that led to the creation of a global CDMA market, and it maintains 

the lowest telephone costs in Asia. 

Clearly South Korea offers numerous inducements to foreign 

direct investors. However, many of these existed before the financial

crisis or, more precisely, before the administration began to actively 

seek FDI. So what made investments increase so much after the 
213

crisis? Changed attitudes towards foreign investment, an upgraded 

FDI promotion policy, and a shift in the mentality of South Korean 

businessmen about the usefulness of foreign investment. However, 

certain businessmen still consider FDI as a matter of ownership, not 

as an opportunity to acquire high technology and advanced financial 

systems.

Indeed, small- and medium-sized enterprises11 are, in general, still 

reluctant to receive FDI. They have not had enough communication 

and contact with foreign businessmen, and most of the owners have 

considered FDI more as a way of investing abroad, especially those 

in the light-industry sector. Owners are also not accustomed to 

complying with transparent accounting systems because they have 

long been dependent on private borrowing.

The Office of the Investment Ombudsman (OIO) performed 

a survey on the environment for foreign firms in 1999, with 233 

responding. About 85 percent cited the market potential as a 

primary reason to invest, and about 59 percent said that profitability 

had improved in the previous year. On the other hand, taxation and 

labor relations were cited as problems. They were dissatisfied about 

noninstitutional difficulties, such as unreasonable practices by South 

Korean companies and the authorities.

What are the implications of the survey results? First, foreign 

firms were, in general, satisfied with the government’s efforts. 

Second, they were also satisfied with the business environment 

improvements made after the financial crisis. Third, unreasonable 

business practices, however defined, were still in place. These 

points imply that South Korean business may not be fully utilizing 

the opportunities provided by the government on attracting FDI.

Conclusion.

The South Korean government has made efforts to attract foreign 

investment as much as possible after the financial crisis. The policy 

changes include improvements, such as the adoption of one-stop 

service, and other liberalization measures. Owing to these attitudinal 

changes, South Korea ranked 6th in receiving foreign investment 

among developing countries. Can this trend continue? South Korea 

is at the center of the Northeast Asian region. However, it cannot 

fully exploit its geo-economic advantages because the Korean 

peninsula is divided, while the adamant attitude of North Korea 
214

inhibits South Korea’s efforts to become the center of economic 

cooperation in the region.

The financial crisis affected the economy dearly. It made South 

Koreans rethink hyper economic growth. It also raised questions 

about the role of politics in economic development. South Korea 

has long been accustomed to high economic growth and an exportled development strategy. Now may be the right time to consider a 

moderate level of economic growth as appropriate and to put more 

emphasis on sustainable development.

We also have to remember the premise that unstable political 

conditions affect economic development potential. Stephen Haggard 

has pointed out the adverse impact of bad politics: undue political 

influence, moral hazard, corruption and private fraud, policy biases, 

and economic mismanagement.12 President Kim Dae Jung was 

elected in the midst of the crisis and one of his major campaign 

promises was to overcome it. He received strong support from the 

people in the first half of his term and could pursue restructuring 

initiatives. Thus, many economic problems could be solved in a 

rather short time. However, South Korea’s political problems still 

affect its economy in an adverse manner, and more difficult tasks 

may lie ahead.

In the meantime, it may be necessary to rethink the impact of 

South-North relations on the South Korean economy. Take the 

example of Hyundai. It launched the Mt. Kumgang project in 1998, 

welcomed by President Kim and President Clinton. The South 

Korean president pointed out that the project bolstered South Korea’s 

economic credentials by providing an impression of stability to the 

world. However, Hyundai’s investment in North Korea became a 

major cause of its economic mismanagement.

It may be too early to evaluate the last 3 years’ performance in 

attracting foreign investment. The Asian experience shows that there 

can be many ways to achieve industrialization, modernization, and 

democratization. The Asiatic mode of development was certainly 

different from the Western one. However, its uniqueness may no 

longer be an advantage under globalization. It is necessary for us to 

recall the true meaning of democracy. A less democratic country is 

highly likely to fall into opaque business practices, corruption, and 

an inefficient financial sector. The Economist pointed to six myths 

about the factors behind East Asia’s economic growth: the virtue of 

high investment, small government, flexibility of economic system, 
215

good governance, the virtues of long-term relationships, and higher 

level of universal education.13 These same factors are now seen as 

causes of the financial crisis. It pointed out that the cozy relationship 

between firms and government was partly to blame for the tigers’ 

problems.

Finally, now is also the right time to consider strengthening 

multilateral cooperation in the Northeast Asian region. Asia has the 

Asia-Pacific Economic Cooperation (APEC) forum and the ASEAN. 

However, there is no multilateral cooperative body to handle 

Northeast Asian economic problems exclusively. To fully realize 

the economic potential of the region, it may be necessary to devise a 

new form of multilateral cooperation.

ENDNOTES - CHAPTER 11

1. Numerous articles on the causes of the crisis have appeared, though most 

of them deal just with economic causes. These articles and related documents are 

compiled at www.stern.nyu.edu/~nroubini/asia/AsiaHomePage.html.

2. June-Dong Kim, Inward Foreign Direct Investment, Seoul: KIEP, 1999, p. 9.

3. Ibid., p. 11.

4. See http://www.kisc.org/sevlet/ KiscCMNKiscMenu01A?OP=102&SITE_ID=KISC&

MENU_ID.

5. UNCTAD has cited three factors behind Hong Kong’s performance: 1) recovery 

from recent economic turmoil; 2) Trans National Corporations planning to invest in 

China “parking” funds in Hong Kong before China’s entry into the WTO; and a major 

cross-border mergers and acquisitions in telecommunications, which alone accounted 

for nearly one-third of the territory’s FDI inflow. UNCTAD, World Investment Report 

2001, New York: United Nations, 2001, p. xiv.

6. Japan was the largest investor in South Korea until the end of the 1980s. Then, in 

the 1990s, Japan turned its investing to China and ASEAN instead. After the financial 

crisis, this trend was reversed.

7. See http://www.kisc.org/sevlet/KiscCMNKiscMenu01A?OP=102&SITE_ID.

8. See http://www.i-ombudsman.or.kr.

9. See http://www.kisc.org/sevlet/ KiscCMNKiscMenu01A?OP=102&SITE_ID.

10. The full text can be found at http://www.kisc.org.

11. The Small and Medium Business Administration, a central government agency, 

defines small and medium enterprises as employing fewer than 300 persons or having 
216

capital below 8 billion won. Http://www1.smba.go.kr/human/english.

12. Stephen Haggard, The Political Economy of Asian Financial Crisis, Washington, 

DC: Institute for International Economics, 2000, p. 16.

13. “A Survey of East Asian Economies: Frozen Miracle,” The Economist, March 7, 

1998, pp. 17-18.
217

CHAPTER 12

PROMOTING ECONOMIC COOPERATION 

BETWEEN NORTH AND SOUTH KOREA

Joseph A. B. Winder

INTRODUCTION

Promoting economic cooperation between North and South 

Korea has long been a central element in the process of promoting 

peace and stability on the Korean Peninsula. President Park Chunghee included a reference to economic cooperation in his opening to 

the North in the early 1970s, and each subsequent government has 

added content to its policy on economic cooperation with the North. 

Economic cooperation was a major element in the communiquè 

issued at the conclusion of the historic summit visit of President Kim 

Dae-jung to North Korea in June 2000, and it has been a central focus 

of attention in the government-level exchanges that have taken place 

since the summit. 

In the initial stages, the government looked to the private sector 

as the principal instrument for implementing a policy of NorthSouth economic cooperation. There was interest in some elements of 

the private sector, and this approach ran less of a risk of generating 

strong political opposition. In fact, the government placed tight 

constraints on the activities of the private sector in dealing with the 

North and put in place strict regulations governing all South-North 

economic contact. 

Contacts grew slowly and were limited to trade and investment 

in a few manufacturing projects. Over time, the government relaxed 

the restrictions on private sector activity, and both trade and 

investment increased, albeit slowly. In 1988, the government began 

a gradual shift in its overall policy approach and began to encourage 

the private sector to become engaged in economic cooperation with 

the North. The results were positive but meager.

With the election of President Kim Dae-jung in December 1997, 

the government’s approach became one of active support and 

encouragement of private sector commercial activity in the North. 
218

Restrictions were eased, and the government devised mechanisms 

to assist South Korean firms doing business with the North. Public 

funds were made available in support of private sector projects, and 

the government made the expansion of business activity an agenda 

item for direct government-to-government negotiations with the 

North. The private sector responded with a spurt of activity after 

the North-South summit, but trade and investment still continued 

to grow at a modest pace. Much of the interest in the private sector 

in pursuing business opportunities in the North came from firms 

whose founders or key officers had been born in North Korea. The 

North Korean government courted these people, inviting a number 

of senior executives of South Korean companies, who were born in 

North Korea, to visit North Korea in April 2000. 

The government also moved to engage the public sector directly 

in the process of North-South economic cooperation. State firms 

began to invest in projects in the North, and the government became 

involved in financing and constructing two power plants in the 

North, while holding out the prospect of providing additional funds 

in support of other infrastructure projects. 

In spite of these efforts, private sector interest in undertaking 

business ventures in North Korea was limited. The business 

environment was difficult; the prospects for profitable ventures 

were uncertain, particularly in the short run; there were growing 

opportunities in other countries in the region; and business 

conditions at home were tough. Increasingly, the government was 

forced to take on the primary responsibility for energizing NorthSouth economic interaction. The government assumed the role of 

cheerleader, negotiator, and financier with the private sector clearly 

in a key but subordinate position. Both sides seemed comfortable 

with this new paradigm.

THE EVOLUTION OF GOVERNMENT POLICY

The government established much of the legal and administrative 

framework for controlling and regulating North-South economic 

cooperation during the administration of President Roh Tae-woo. In 

July 1988, a few months after he took office, President Roh issued a 

Special Presidential Declaration promoting North-South economic 

interchange, and the government followed up in October with the 

“inter-Korean trade measure,” which officially allowed inter-Korean 
219

trade. In 1989, the government established the Inter-Korean Exchange 

and Cooperation Promotion Committee as an oversight body for 

all North-South interaction. The Committee has responsibility for 

reviewing and passing on all proposals for North-South economic 

cooperation. On August 1, 1990, the National Assembly passed the 

Inter-Korean Exchange and Cooperation Act which expanded the 

basis for North-South economic cooperation. 

In July 1993 the government of President Kim Young-sam 

prepared a plan for inter-Korean economic exchanges and 

cooperation as part of the latest New Five-Year Economic Plan. The 

government followed up in November 1994 with a series of measures 

designed to energize North-South economic cooperation. 

Sunshine Policy.

The administration of President Kim Dae-jung made the 

promotion of North-South economic cooperation a central element 

of government policy. In a policy directive dated April 30, 1998, the 

government outlined its new approach, which has been named the 

Sunshine Policy. The central theme of this approach is the separation 

of business and government. The aim of the policy, as explained by 

government officials, is to encourage private enterprises to expand 

economic cooperation with North Korea solely on the basis of 

economic principles of a market economy, independent of the 

political situation in inter-Korean relations.

The Sunshine Policy includes measures to support and encourage 

trade and economic interchange between South and North Korea. 

The government took steps to ease the tight constraints on private 

sector activity with the North. It expanded the number of items which 

could be imported from North Korea without a permit, it eliminated 

the ban on the export of manufacturing facilities, and it lifted the 

ceiling on the size of investment by South Korean businesses in the 

North, subject only to a negative list of prohibited areas of business. 

In July 2001, the government announced its intention to widen 

the range of activities the Export-Import Bank can support. The 

Export-import Bank has recommended the modification of a law 

which currently classifies inter-Korean trade as “inside exchange,” 

rather than foreign trade. A change in the law is needed so that the 

Bank can provide export financing for trade with North Korea. The 

government has also expressed public support for North Korean 
220

membership in the Asian Development Bank.

The government did not totally abandon its control over 

the process of inter-Korea economic cooperation, however. The 

government continues to exercise oversight of North-South 

economic cooperation through the Inter-Korean Exchange and 

Promotion Cooperation Committee chaired by the Minister of 

Unification, and it has maintained the system of a two-step approval 

process for investments in North Korea. The government also issued 

a pronouncement warning against “excessive competition” between 

South Korean firms seeking to do business in the North. 

Berlin Declaration.

In addition to providing additional stimulus to North-South 

economic cooperation via the private sector, the government also 

recognized that it, too, must play a more active, direct role in moving 

the process forward. President Kim Dae-jung used the occasion of 

a speech in Berlin in March 2000 to articulate a policy of adding a 

government-to-government element to the process of inter-Korean 

economic cooperation. He said such a program of government-togovernment cooperation is necessary, since “private business can 

only do so much to expand social overhead structure, promote 

a favorable investment environment, and reform the overall 

agricultural setup.” In that speech, President Kim outlined several 

specific areas of cooperation between North and South:

• The expansion of social infrastructure, including 

highways, railroads, and electric and communication 

facilities.

• Government-to-government agreements regarding 

investment guarantees in prevention of double 

taxation.

• Support for comprehensive reforms in North Korea’s 

agriculture sector including the provision by the South 

of quality fertilizers, agricultural equipment, and 

irrigation systems.

President Kim’s speech in Berlin followed on the heels of an 
221

announcement earlier that month of plans to cultivate a “peace belt” 

in North Korean areas near the Demilitarized Zone (DMZ) with the 

construction of a large industrial complex. Unification Minister Park 

Jae-kyu said in a speech in April that the government would build as 

many factories as possible around the DMZ.

North-South Cooperation Fund.

The government also took steps to increase the resources of 

the North-South Cooperation Fund (sometimes referred to as the 

Inter-Korean Cooperation Fund) and to expand the purposes for 

which it could be used. The Fund had been created by the National 

Assembly in August 1990 as a vehicle for funding government-level 

humanitarian assistance to North Korea. The government allocated 

25 billion won to the Fund in 1991, and increased its resources by an 

additional 510 billion won from the period 1992–97. Thus far during 

the Kim Dae-jung administration, an additional one trillion won 

in government resources have been made available to the Fund. 

The government also expanded the Fund’s mandate to encompass 

financial support for public and private sector projects in North 

Korea. The Inter-Korean Exchange and Cooperation Promotion 

Committee, which oversees the activities of the Fund, has approved 

its use for small and medium firms’ business projects in the North 

and for a major tourism project at Mt. Kumgang. The government 

decided to reduce the interest rate for loans from the Fund to firms 

engaged in inter-Korean cooperation projects from 6 percent to 4 

percent beginning in 2002.

The Fund is also expected to be the source of support for 

infrastructure projects in North Korea. When the Korean Peninsula 

Energy Development Organization (KEDO) was established, the 

Fund was authorized to provide financial support for the Light 

Water Reactor (LWR) Project. As of August 2001, the government 

had provided 43.7 billion won in loans from the Fund to the Korea 

Electric Power Corporation (KEPCO) for the LWR project. In 

September 2000, the oversight committee approved the use of Fund 

resources for the construction of railroads and roads linking South 

and North Korea.
222

Government Entities.

In April 2001, the Ministry of Agriculture announced the 

establishment of a 21-member consultation group, which will 

provide agricultural expertise to North Korea and will explore the 

possibility of developing cooperative projects between South and 

North. The group will be comprised of professionals from both 

the government and private sectors. Specific areas of cooperation 

will include seed potatoes, irrigation systems, and improvement 

in the quality and production levels of crops in North Korea. The 

government has announced plans to set up a North-South Korea 

Information Technology (IT) Support Centre at the Korea IT 

Promotion Agency to assist the North-South IT Private Council in its 

work on joint projects with the North. 

Some South Korean public sector firms have also taken steps to 

establish a presence in North Korea.

• The Korea Tobacco and Ginseng Corporation provided $2.4 

million worth of cigarette making equipment to the North 

in October 2000 in exchange for imported North Korean 

cigarettes.

• In June 2001, Korea Resources Corporation signed an 

agreement to develop a Tantalum mine in the town of 

Abdong North Korea.

The Growth in Inter-Korean Trade.

As a result of the changes in South Korean government policy 

beginning in 1988, goods began to flow between South and North 

Korea. Due to political sensitivities, inter-Korean trade began as and 

remains primarily third-party. Early shipments went largely through 

Hong Kong, although with the dramatic growth in trade between 

South Korea and China, much inter-Korean trade is now directed 

through China. In recent years, more and more inter-Korean trade is 

being carried directly between the two countries.

Two-way trade began slowly. By 1992 it had only reached a level 

of $173 million. Following the government’s initiatives in 1993 and 

1994, inter-Korean trade began to grow, and by the end of 1997, it 

had reached a level of $308 million. Inter-Korean trade declined in 

1998 as a result of the sharp economic downturn in the South Korean 
223

Source: Korea Trade Investment Promotion Agency (KOTRA).

Table 1. South Korean Trade with North Korea.

economy in conjunction with the Asian financial crisis. Total trade 

in 1998 fell 28 percent to $221 million with imports falling by $100 

million. Inter-Korean trade rebounded in 1999, however, to $333 

million, and reached a record level of $425 million in 2000. During 

the first 11 months of 2001, inter-Korean trade registered a decline of 

9.3 percent, compared to the same period in 2000. Outdated facilities 

at Nampo, North Korea’s major port, have led to high transportation 

and storage costs, which have hampered the growth of inter-Korean 

trade. Table 1 shows the level of inter-Korean trade from 1989 

through the first eleven months of 2001.

Much of the growth in inter-Korean trade in recent years is 

attributable to increased exports from South to North Korea. Most of 

these increased exports are the result of noncommercial transactions, 

primarily humanitarian aid, construction materials for the KEDO 

LWR project, and shipments to South Korean ventures in the North, 

including the Mt. Kumgang tourism project. Table 2 shows the 

breakdown of South Korean exports to the North by commercial 

and noncommercial transactions.

Processing on Commission Trade.

One of the salient features of inter-Korean trade is the Process-
224

Source: KOTRA.

Table 2. South Korean Exports to North Korea.

-ing on Commission (POC) regime. Under this regime, which 

went into operation in 1992, South Korean firms ship primary or 

unfinished goods to North Korea on consignment where they are 

processed and then re-exported back to South Korea or elsewhere. 

This trade has grown steadily since 1992, and reached $129 million 

in 2000 (See Table 3.) This trade represents a substantial portion 

of commercial exports and imports between South Korea and the 

North. In 2000, for example, 39 percent of South Korean commercial 

exports to the North and 53 percent of commercial imports from the 

North took place within the POC framework. POC trade declined 

by 5 percent during the first 10 months of 2001 due in part to 

interruptions in shipping service between the ports of Inchon in the 

South and Nampo in the North.

The number of South Korean firms participating in this trade 

expanded steadily throughout this period, rising from four in 1992, 

to 151 in 2000. During the first half of 2001, 93 firms participated in 

POC trade. Most of these firms are small and medium enterprises. 

COOPERATION PROJECTS

In addition to inter-Korean trade, the other major element in 
225

Source: Ministry of Unification.

Note: 1st 10 months of 2001.

Table 3. South Korean Processing-on-Commission Trade

with North Korea.

North-South economic cooperation has been the establishment of 

specific cooperation projects in the North by individual South Korean 

enterprises. The South Korean government provided for this form 

of cooperation in the 1990 Inter-Korean Exchange and Cooperation 

Act. Firms seeking to engage in cooperation projects in the North are 

subject to a two-stage approval. In the first stage, a firm must apply 

for permission to pursue a cooperation partnership with the North. 

This status of “Cooperation Partnership” is, in effect, a license to try 

and make a deal. Firms may proceed to negotiate arrangements with 

the North, but before they can proceed to fruition, they must obtain a 

second approval to pursue a specific cooperation project. Approvals 

at this second stage are referred to as “Cooperation Projects.”

Daewoo was the first firm to avail itself of the opportunity 

provided by this new policy environment. In January 1992 Chairman 

Kim Woo-choong visited North Korea and reached agreement to 

invest in nine light industrial joint projects at the Nampo industrial 

estate. The venture was subsequently scaled back to three projects, 

producing shirts, blouses, bags, and jackets. The venture began 

operation in 1995, with Daewoo eventually investing over $5 million 

in it. 
226

A number of South Korean firms sought to emulate the Daewoo 

example. In 1995, six firms received cooperation partnership permits, 

and four more firms were granted cooperation partnership permits 

in 1996. The pace of activity picked up in 1997. Sixteen cooperation 

partnership permits were granted in 1997, and another twelve were 

granted in 1998. The pace slowed to three cooperation partnership 

permits in 1999, one in 2000, and three in the first half of 2001.

The vast majority of these project ideas have not yet born fruit. 

Of the 45 proposals approved by the South Korean government as 

cooperation partnerships, only 18 have actually progressed to the 

stage where they were granted approvals as cooperation projects. Four 

were cancelled, and the remainder are pending. Of the 18 approved 

cooperation projects, four are associated with the LWR project and 

three are associated with the Mt. Kumgang tourism project. These 

seven are moving forward. There are three projects in the RajinSonbong special economic zone which are not moving forward. The 

remaining eight are in various stages of implementation. 

In May 2000, the Federation of Korean Industries (FKI) issued a 

report stating that there are only 20 South Korean firms that have 

more than $100,000 in business dealings with North Korea. Table 4 

presents the status of the top several firms doing business with North 

Korea.

Korea Electric Power Corp. (KEPCO) $4 billion

Hyundai 100 million

International Corn Foundation 10 million

Samsung Electronics 7 million

Pyunghwa (Rev. Moon) 6.67 million

Daewoo 5 million

Source: Federation of Korean Industries.

Table 4. Firms with Major Business Dealings 

with North Korea—May 2000.

There are many other South Korean companies that have a 

business presence in North Korea, even though it may be relatively 

small. According to the Ministry of Unification, 152 South Korean 

companies are operating original equipment manufacturing facilities 

in the North.
227

IT Sector.

North Korea has made it clear that it attaches a high priority 

to cooperation in the information and communications technology 

sector. South Korean firms have responded with a variety of 

initiatives.

A group of IT firms led by Hanabiz.com have agreed to establish 

a joint inter-Korean information and technology company in 

Dandong, China. Samsung Electronics, Joongwon, and Unicotec are 

active in the joint development of computer software. Several South 

Korean firms produce software in North Korea on a commission 

basis, and import it into the South. Three dimensional contents and 

digital animation are areas of high growth potential for processing 

on commission activity. Ntrak and six other partners reached an 

agreement to set up software production operations in an interKorean IT complex being constructed in Pyongyang. IMRI and 

Hanaro Telecom both produce computer hardware in North Korea 

on a processing-on-commission basis. IMRI produces monitor 

printing circuit boards and Hanaro produces splitters. 

MAJOR PROJECTS

Much of the current interest in North-South economic 

cooperation is focused on a few major projects. The two largest ones 

involving the private sector were the brainchild of Chung Ju-yung, 

the founder of Hyundai. Chung was born and raised on a farm 

in Kangwon Province in North Korea and had a driving passion 

to reduce tensions and contribute to the process of reconciliation 

between North and South Korea. He visited North Korea many 

times and established a personal relationship with the North Korean 

leader, Kim Jong-il. Chung negotiated the original agreements with 

North Korea for each of these projects. One involves a tourist facility 

at Mt. Kumgang, and the other is a giant industrial park in Kaesong 

just north of the DMZ. Although the initiative for both of these 

projects originated in the private sector, the government has moved 

in to provide financial and other support for each.

Mt. Kumgang.

The centerpiece and crowning achievement of Chung’s efforts 
228

to reach out to North Korea was the establishment of a tourism 

project centered around the scenic Kumgang Mountain a few miles 

across the DMZ in North Korea. Mt. Kumgang is one of the three 

mountains that are cultural icons on the Korean peninsula. After 

many years of negotiation, Chung finally obtained permission from 

the North Korean authorities in 1998 to ferry tourists from South 

Korea to Mt. Kumgang, where they could walk on mountain trails 

and enjoy a local spa. Hyundai agreed to pay North Korea $942 

million in royalties in monthly payments of approximately $12 

million through the middle of 2005 to operate the tours, after which 

the contract is to be renegotiated. The agreement gives Hyundai 

exclusive rights to develop tourism at Mt. Kumgang for a 30-year 

period. In additions to royalties, Hyundai agreed to pay a $100 

entrance fee for each visitor. Hyundai spent $110 million to build 

tour facilities in North Korea, including the spa, theater and docks. 

The company also announced plans to spend an additional $250 

million on other attractions, including a hotel, golf course, a ski 

resort, beach facilities, a shopping mall, and a theme park. Hyundai 

also announced its intention to seek government approval to open a 

casino in Mt. Kumgang. 

The Mt. Kumgang project accomplished its initial objective of 

providing a way for South Koreans, many of whom were born in 

the North, to visit North Korea for the first time in over 50 years. A 

total of 420,000 tourists traveled to Mt. Kumgang from its launch in 

November 1998 through November 2001. The numbers grew steadily 

through 2000, but have dropped off sharply in 2001. [By November 

2002, over 500,000 tourists had visited since 1998. Ed.] The project 

has turned out to be a heavy financial drain on Hyundai, however. 

According to one report, Hyundai Asan, the unit that manages all the 

Hyundai projects in North Korea, has lost over $350 million from the 

Mt. Kumgang business since 1998. Hyundai has paid $378.9 million 

in fees to North Korea through August, 2001, but was behind on its 

payments for the year. [Hyundai Asan’s losses were expected to top 

$400 million by the end of 2002. Ed.] It had set the break-even point 

for the cruise service at 500,000 visitors per year, but the numbers 

have fallen far short of that.

Hyundai Asan’s financial difficulties led it to cut back on the 

cruise service. It withdrew the three luxury cruise ships from the 

project, leaving in service only a small, fast ship that makes 1-day 

trips to Mt. Kumgang. Hyundai has also attempted to renegotiate 
229

the terms of its agreement with North Korea without success. Due to 

the decline of people wishing to visit Mt. Kumgang, Hyundai Asan 

has reduced the frequency of sailings from ten per month to once a 

week.

In light of Hyundai Asan’s financial difficulties, the South Korean 

government decided to provide active support for the project. In June 

2001, the government-owned Korea National Tourism Organization 

(KNTO) signed an agreement with Hyundai Asan for joint operation 

of the Mt. Kumgang tour program. KNTO agreed to purchase 

Hyundai Asan’s hotels and service facilities at Mt. Kumgang for 

$22 million. The South Korean government approached the North 

about the opening of a 13.7 kilometer overland tourist route to Mt. 

Kumgang and the removal of land mines in the DMZ. Considerable 

progress has been made in both areas, althugh procedural obstacles 

remain.

Kaesong Industrial Park.

Hyundai’s second major project in North Korea is an industrial 

park in Kaesong. Hyundai founder Chung Ju-yung obtained the 

agreement of North Korean leader Kim Jong-il to the establishment 

of the industrial park during a visit to the North in June 2000. The 

scope of the project as envisaged by Chung is enormous. The total 

complex would house 850 industrial firms in a space of 66 million 

square meters. With a planned completion date of 2008, the complex 

would create 220,000 jobs and generate $20 billion in exports. The 

first of three phases called for the construction of a 33 million square 

meter complex to house about 200 plants and employ 40,000 workers. 

The majority of companies would be in light industries, e.g., fabric, 

clothing, bags, toys, electric devices, and shoes.

In July 2000, Hyundai Asan signed an agreement with the Pusan 

Footwear Association to build a 1.32 million-square meter complex 

designed to house 45 companies specializing in the manufacture of 

footwear. Progress on the project was halted for several months in 

2001 when North Korea put a hold on North-South dialogue and 

cooperation. That hold was lifted in September 2001 in conjunction 

with the resumption of ministerial level talks.

In the September 2001 FKI survey of private firms, respondents 

were asked what, in their opinion, it would take to ensure the 

success of the Kaesong project. Infrastructure expansion was listed 
230

by 60 percent of the respondents followed by freedom of passage 

(24.7 percent) and freedom to manage personnel (11.2 percent). 

The state-run Korea Land Corporation (KOLAND) has joined 

with Hyundai to develop the project. KOLAND President Kim 

Yong-chae visited North Korea in November 2000 to discuss the 

project, and KOLAND officials have undertaken a survey of the site 

for the industrial complex. The South Korean government made this 

project a subject of government-to-government negotiations. In the 

sixth round of ministerial-level talks, held in Seoul on September 

16–18, 2001, the two sides “agreed to actively carry out the Kaesong 

Industrial Complex project, have working-level contacts at an early 

date for that purpose, finalize concrete project plans, including the 

size of the complex, and start construction.”

Other Groups’ Projects.

Samsung has also shown active interest in inter-Korean economic 

cooperation. Yun Jong-yong, the Vice-Chairman of Samsung 

Electronics, was born in North Korea. In 1996, Samsung Electronics 

began assembling televison sets at the Taedong River Complex 

outside Pyongyang and shipping them south. In November 1998, 

Samsung unveiled a plan to invest $1 billion per year over a 10-year 

period in an industrial complex in North Korea designed to produce 

$3 billion worth of electronics products annually. Products include 

video cassette recorders, refrigerators, mobile phones, and computer 

chip parts. Phase one, originally planned to be completed in 2002, 

is to produce $500 million worth of appliances to be re-exported to 

the South. This venture remains in the planning stage, and Samsung 

has announced its intention to scrap it unless progress is made in 

developing the necessary infrastructure.

The Hanwha business group had planned to build a condominum 

in the Kumgang tour region, but shelved the project in light of the 

current uncertainties over the overall tourism project. Hanwha said 

that the group will only consider future investment projects in the 

North if Pyongyang signs a government-to-government treaty to 

guarantee the investments and commits itself to safeguard South 

Korean investments against risks that might come from outside the 

projects.

The LG group, the second largest group in the country, has 

shelved plans to set up a bicycle assembly plant in the Rajin 
231

Sonbong industrial complex. The group said it would only proceed 

with projects if there were on-land transportation and direct 

telecommunications links between North and South. 

Railroads.

The reconnection of the railroad links between South and North 

Korea and beyond to Europe has been one of the major South Korean 

objectives in the economic negotiations with the North. Both sides 

are now considering ways to establish railroad links along both the 

west and east coasts of the Korean peninsula.

Kyongui Line. The Kyongui line runs for 500 kilometers along the 

Korean west coast between Seoul and the Chinese border town of 

Shinuiju. Originally constructed in the early days of the Twentieth 

Century, the Seoul-Shinuiju and Seoul-Pusan links combined to 

form a transport route connecting Japan and Korea to Manchuria 

and mainland China. Rail service commenced in April 1906 but was 

suspended in September 1945. The railway was destroyed during the 

Korean War. The Kyungui line would link up with the Trans-China 

Railroad. It would reduce the shipping time from Inchon to Nampo 

from 13–14 days to 1–3 days, and substantially lower transportation 

costs between South Korea and Europe. In addition, it would be a 

visible symbol of the cooperation between North and South Korea, 

and a first step as a confidence building measure in easing tensions 

in the peninsula.

Upon his return from the North-South Summit in June 2000, 

President Kim Dae-jung expressed his determination to reconnect 

the Kyungui line; “why can’t we travel by train to Paris and 

London? If the severed Kyungui line is reconnected, we would go to 

Europe and a new Silk Road will be created.” The government also 

advocated a simultaneous connection of an expressway to serve as 

an access road to the proposed industrial complex in Kaesong. 

At the first ministerial level meeting between North and South 

Korea after the summit, the two sides agreed to reconnect the 

severed section of the Kyungui line. South Korea has already begun 

the work of reconnecting the railroad on its side of the DMZ. On 

September 30, 2001, South Korea opened a railway station on the 

Imjin River, 6.8 km north of Munsan, the previous northern end of 

the railway. Work on the northern side of the DMZ resumed in 2001 

after an interruption of several months. A major obstacle is the need 
232

for an agreement between the militaries of both sides to clear land 

mines. 

Kyongwon Railroad. The second railway project of interest would 

run along the east coast and reconnect the Kyongwon Railway 

between Seoul-Wonsan in North Korea and on to Vladivostok. 

Russia has expressed substantial interest in this project, and Russian 

President Vladimir Putin has discussed the project with both 

President Kim Dae-jung and North Korean leader Kim Jong-il. 

The Kyongwon line would link up with the Trans-Siberian 

Railroad and would reduce shipping time between Seoul and the 

Belarus Republic from 26 days to 16 days. The Korean government 

has completed the design of the severed section of the railroad that 

would link Seoul to Wonsan. According to press reports, North Korea 

has already begun reconstructing its train stations near the border 

regions of Russia. Russian officials have already begun visiting 

North Korea to determine the feasibility of linking the railroads. A 

Russian team in September 2001 made a thorough inspection of the 

630 km section that stretched from the Tumen River to Wonsan.

DIFFICULTIES FACING THE PRIVATE SECTOR

In spite of the atmosphere of cooperation and enthusiasm created 

by the inter-Korean summit and the various inter-governmental 

bodies that have been meeting since then, private sector firms, for 

the most part, remain hesitant to commit resources to inter-Korean 

business and commercial activity. Some of the hesitation reflects the 

continued uncertainty about the economic and business environment 

in North Korea. In addition, many of the companies that have taken 

steps to engage in business in North Korea have faced a number of 

difficulties which may well discourage others.

According to a press report, the Ministry of Commerce, Industry, 

and Energy submitted a report entitled “the Present Situation 

of Inter-Korean Business Deals by Domestic Companies” to the 

National Assembly Committee on Commerce, Industry, and Energy 

in September. According to the story, the report states that among 

ten business deals that have been approved by current government 

authorities from March 1998 to the present, almost all are either 

having great difficulties or their earnings cannot yet be estimated. 

North Korea’s ban on visits to the Rajin area in the fall of 1998 has 

prevented firms from implementing projects in the Rajin-Sonbong 
233

Special Economic Zone. The North unilaterally raised the price of 

an essential input in one project from $3.50 per ton to $100 per ton. 

According to the report, even Daewoo, the original investor in the 

North, has stopped its dressmaking business in the Nampo factory 

district because the North refused to allow technicians and managers 

to stay in North Korea. 

KOTRA, the government entity that promotes trade and 

investment, issued a report in May identifying several issues affecting 

the development and growth of inter-Korean cooperation in the IT 

sector. One major issue is the prospects for profitable ventures. 

According to the report, IMRI is the only company operating in 

North Korea in the IT field that is making a profit. The report notes 

that most participants in this sector are small and medium-sized 

firms that cannot afford substantial investment in North Korea 

without a reasonable expectation of profit. The other major issue 

is the need to improve infrastructure, including communication 

networks and electric power supply. 

Transportation difficulties have been one of the major problems 

confronting South Korean firms doing business with the north. In 

November 2000, North Korea unilaterally closed its port of Nampo 

to South Korean ships transporting goods between the Pyongyang 

harbor and Inchon. This interruption in sea transportation resulted 

in substantial losses for hundreds of South Korean firms engaged in 

cross-border trade. Although this problem was eventually resolved, 

the lingering uncertainty continues to discourage many possible 

participants in North-South economic cooperation. 

Many South Korean textile companies that have been engaged 

in processing operations in North Korea have begun to move their 

operations elsewhere, particularly Vietnam and Indonesia. Some 

executives of textile firms report that North Korean authorities now 

seem much less interested in the light industry sector, including 

textiles. In addition, Korean businessmen complain North Korean 

authorities are extremely inflexible. They note that Southeast Asian 

countries are prepared to lower their labor costs during the summer 

off-seasons, but North Koreans refuse to make these adjustments. 

The problem of wages is one that affects many firms and projects 

in North Korea. Companies report that North Koreans are also 

restricting visits to the north of South Korean technicians and others 

for the purpose of technical training and quality control. North 

Koreans also reportedly insist on faxing through a third country.
234

In September 2000, FKI undertook a survey of 500 largest Korean 

firms and 200 biggest foreign firms operating in South Korea. Of the 

448 respondents, only 60 said they had plans to undertake business 

activities in North Korea. Among the obstacles to pursuing interKorean business that respondents listed are the absence of investment 

guarantees, the prevention of double taxation agreements, the lack 

of infrastructure, and political uncertainties. 

In September 2001, FKI conducted another survey among South 

Korea’s 600 largest manufacturing firms. Of the 430 respondents, 

only 51 said they planned to do business in North Korea. In this 

survey, respondents listed as obstacles the absence of promising 

business, noneconomic uncertainties, restructuring and other 

internal difficulties, and immature market circumstances.

Problems are affecting not only private sector firms. According 

to a recent press report, the Korea Tobacco and Ginseng Corporation 

has reported a loss of 2.1 billion won since the launch of its joint 

business with North Korea. The loss is reportedly due to North 

Korea’s heavy transportation fees, worn out facilities, and high 

regional costs of the cigarette packs.

THE FRAMEWORK FOR INTER-KOREAN ECONOMIC 

COOPERATION

The Kim Dae-jung administration attempted to address the 

concerns of the private sector by negotiating changes in the business 

environment in North Korea. After the June 2000 summit meeting, 

the two sides held ministerial level negotiations to address issues 

of concern, particularly investment protection, avoidance of double 

taxation, account settlement, and business dispute arbitration. After 

a series of negotiations, agreements in each of the four areas were 

signed by the two sides at the ministerial-level talks in Pyongyang 

from December 12–16, and the ratification process is underway in 

both countries. There was the hope and the expectation that the 

agreements would be ratified and go into effect within a period 

of 6 months or so, but the North Korean decision not to hold the 

ministerial-level talks in March 2001 as scheduled resulted in a delay 

in the ratification process. Both sides reiterated their intention to 

put the agreements into effect at an early date at a ministerial-level 

meeting in September 2001. [The latest ministerial talks took place 

in May 2003, while talks on inter-Korean economic cooperation took 
235

place in November 2002. Ed.]

• Agreement on Investment Protection. Under the terms of this 

agreement, North Korea grants most favored nation status 

to South Korean investors in relation to their investment 

earnings and business activities in the north. The agreement 

bans the arbitrary expropriation or nationalization of South 

Korean investment by the North Korean government. The 

agreement also provides for the free remittance of earnings 

produced abroad. The South Korean side was unable to get 

the agreement of the North to provide for treatment of South 

Korean investors as being from a separate, sovereign nation.

• Agreement on Avoidance of Double Taxation. Under the 

terms of this agreement, a company that pays taxes in one 

country will be exempted from paying similar taxes in the 

other.

• Agreement on Accounts Settlement. This agreement 

enables both South and North Korean companies to 

conduct transactions through banks designated by the two 

governments. It thus avoids the need for companies to settle 

accounts through banks in third countries. The two sides 

agree that currency for settlement would be the U.S. dollar.

• Agreement on Business Dispute Arbitration. Under this 

agreement, the two sides agreed to create a joint business 

dispute arbitration committee that will adjudicate business 

disputes. 

CONCLUSION

Economic cooperation remains a central element of the process 

of reconciliation on the Korean Peninsula. Experience with 

various forms of economic cooperation over the past decade or so, 

however, demonstrates that there are many obstacles hindering the 

development of strong commercial links between North and South 

Korea. In spite of the obvious attractions of a common language 

and a relatively skilled labor force in the north, there are very few 

commercial deals that have been brought to fruition. The North 
236

Korean environment for business is simply not compatible with 

the norms of commercial activities practiced in modern industrial 

society.

The South Korean government has been successful over the years 

in stimulating a modest level of trade and investment between North 

and South Korea. It has adopted a variety of instruments to assist this 

policy. The government has increasingly been forced to rely on the 

initiative and resources from the public sector to move the process of 

inter-Korean economic cooperation forward. The two governments 

have negotiated a framework for economic cooperation that offers 

a prospect for providing a much more hospitable environment 

for South Korean firms to do business in the North. Whether this 

environment will be sufficiently attractive to stimulate trade and 

investment flows between South and North Korea above the current 

modest level remains to be seen.
237

ABOUT THE CONTRIBUTORS

DONALD W. BOOSE, JR., a retired Army colonel, is an adjunct 

professor at the U.S. Army War College. Much of his 30-year military 

career involved Korean political-military matters and included 

service as the Korean Politico-Military planner for the Joint Chiefs 

of Staff, 6 years with the U.N. Command Component of the Military 

Armistice Commission in Korea, and 3 years as the Assistant Chief 

of Staff for Strategic Plans and Policy (J-5) for U.S. Forces Japan. He 

is the coauthor of Great Battles of Antiquity, a major contributor to the 

Encyclopedia of the Korean War, and the author of many articles on the 

Korean War and Northeast Asia security issues. Professor Boose has 

a degree in Anthropology from Cornell University, a master’s degree 

in Asian Studies from the University of Hawaii, and is a graduate of 

the U.S. Army War College.

VICTOR D. CHA is an Associate Professor at the Georgetown 

University Department of Government, with a specialization in 

International Relations. Professor Cha holds a joint appointment 

with the School of Foreign Service core faculty and the Department 

of Government. He is a recipient of numerous academic awards, 

including the Fulbright Scholarship (twice) and MacArthur 

Foundation Fellowships. Professor Cha also spent 2 years as a 

John M. Olin National Security Fellow at Harvard University and 

as a postdoctoral fellow at Stanford University, the Center for 

International Security and Cooperation (CISAC). Dr. Cha is the 

award-winning author of Alignment Despite Antagonism: The U.S.-

Korea-Japan Security Triangle (Stanford Univ. Press, 1999 (winner 

of the 2000 Ohira book prize), and has published articles on 

international relations and East Asia in Survival, International Studies 

Quarterly, Orbis, Armed Forces and Society, Journal of Peace Research, 

Security Dialogue, Australian Journal of International Affairs, Asian 

Survey, Journal of East Asian Studies, Asian Perspective, and Japanese 

Journal of Political Science. He has acted as a consultant on East Asian 

security issues for different branches of the U.S. Government, and is 

a frequent contributor and guest analyst for various media, including 

CNN, National Public Radio, New York Times, Washington Post, Time, 

Newsweek, Asahi Shimbun, Japan Times, Choson Ilbo, and Joongang Ilbo. 

In 1999, he was the Edward Teller National Security Fellow at the 
238

Hoover Institution, Stanford University. His current book projects 

look at the future of American alliances and globalization, culture, 

and military modernization in Asia. Dr. Cha received his Ph.D. from 

Columbia University.

JIN-YOUNG CHUNG is Professor of International Relations at 

Kyung Hee University (KHU). Before he joined KHU, he worked for 

the Sejong Institute for 7 years. His academic interests are focused on 

the political economy of development and International Relations. 

Dr. Chung is the author of “Toward a New Synthesis?” “Debating 

East Asia's Currency and Financial Crisis and Its Developmental 

Future: Development Model, Structural Adjustment, and Regional 

Cooperation,” both written in Korean. He graduated from Seoul 

National University with a B.A. and M.A. in Political Science, and 

earned his doctoral degree at the University of Illinois at UrbanaChampaign.

NICHOLAS EBERSTADT currently serves as the Henry Wendt 

Chair in Political Economy at American Enterprise Institute, as 

well as serving as visiting fellow, Harvard University Center for 

Population and Development Studies since 1980. He has also 

consulted for the World Bank, State Department, Agency for 

International Development, and the U.S. Bureau of the Census. He 

co-edited two books, Korea’s Future and the Great Powers (2001) and 

Comparing the Soviet and American Economies (2000). He has also 

authored Prosperous Paupers and Other Population Problems (2000), 

The End of North Korea (1999), Korea Approaches Reunification (1995), 

and The Tyranny of Numbers: Mismeasurement and Misrule (1995). 

Mr. Eberstadt received a A.B. from Harvard University; an M. Sc. 

from the London School of Economics; an M.P.A from the Kennedy 

School of Government, Harvard University; and a Ph.D. in Political 

Economy and Government from Harvard University.

KYUDOK HONG is currently Professor of Political Science and 

International Relations at Sookmyung Women's University in Seoul. 

He is a Policy advisor to the National Security Council of Korea 

and is a member of the North Korea Monitoring Group. Dr. Hong 

also serves as standing director of public relations at the Korea 

Academic Council to the United Nations System (KACUNS). His 

research interests are in security studies, arms control, and U.S-
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Korea relations. He also wrote extensively on the role of the U.N. 

in Northeast Asia. His recent publications include “The Future of 

U.S-ROK Alliance and the Positions of Neighboring Countries,” 

“The Bush Administration's North Korean Policy,” and “Threat of 

North Korea's Chemical, Biological and Toxin Warfare: Implications 

and Recommendations.” Dr. Hong received his Ph.D. from the 

University of South Carolina. 

BALBINA Y. HWANG is the policy analyst for Northeast Asia at the 

Asian Studies Center of The Heritage Foundation. She is also currently 

completing her doctoral dissertation, entitled Globalization, Strategic 

Culture and Ideas: Explaining Continuity in Korean Foreign Economic 

Policy, in international relations at Georgetown University, where 

she is also a lecturer. Ms. Hwang was a Fulbright scholar to South 

Korea in 1998-99, where she conducted dissertation field research. 

She has received several writing awards from the International 

Studies Association and the National Capital Area Political 

Science Association. She has taught at Georgetown University 

and the University of Maryland, and has worked in the past for 

the U.S. Department of Commerce, Overseas Private Investment 

Corporation, and Delphos International. Ms. Hwang received an 

Masters in International Affairs from Columbia University, an MBA 

from the University of Virginia, and a BA from Smith College.

MIONGSEI KANG is currently a research fellow at the Sejong 

Institute, Korea where he has concentrated on analyzing the 

international political economy of the advanced developed countries 

as well as the political economy of Korea from the comparative 

perspective. He has published many monographs and editions, 

including Regional Competition and Party System in Korea, 1945-99

(2001), Dollar, Euro, Yen: Reorganization of International Currency 

Competition (2000), and Economic Crisis and Social Pact in Korea (2000). 

Dr. Kang received his Ph.D in political science from the University 

of California, Los Angeles.

KYU-RYOON KIM is a Senior Research Fellow at the Inter-Korean 

Affairs Division of the Korea Institute for National Unification 

(KINU). His major research interests are international political 

economy and South-North Korean economic relations. He is the 

author of The Formulae for the Development of South-North Korean 
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Economic Exchanges and Cooperation: Appraisals and Alternative 

Policies (Seoul: KINU, 1999), Exchanges and Cooperation between 

North and South Korea in Telecommunication (Seoul: KINU, 1998), 

and "Political and Security Environment in Asia: Uncertainties from 

Economic Crisis," in Kwang Il Back (ed.), Comprehensive Security and 

Multilateralism in Post-Cold War East Asia (Seoul: Korean Association 

of International Studies, 1998). Dr. Kim received his Ph.D. in Political 

Science from Northwestern University in 1989 and graduated from 

Sogang University in 1981.

TAEWOO KIM is a Senior Researcher Fellow at the Korea Institute 

for Defense Analyses and has worked as a specialist on nuclear 

affairs. He is author of some 300 articles, including "The US-DPRK 

Nuclear Rapprochement in the South Korean Dilemmas," Third 

World Quarterly; and "New Security Role and ROK-Japan Relations, 

Korea Journal of Defense Analyses (Summer 1999). Dr. Kim received 

his Ph.D. in Political Science from the State University of New York 

at Buffalo.

PATRICK MORGAN serves as Tierney Chair for Peace and Conflict, 

Department of Political Science, and was Acting Director of the 

Global Peace and Conflict Studies Center from 2000-2001. His many 

positions include those with the Political Science Department, 

University of California, Irvine 1991-present; Political Science 

Department, Washington State University, 1967-91; University of 

Washington, Visiting Professor, 1980-82; and College of Europe, 

Bruges, Belgium Visiting Professor and Professor, 1985-97. Dr. 

Morgan has concentrated his research primarily on national 

and international security matters—deterrence theory, strategic 

surprise attack, arms control, and related subjects. He has also had 

a long standing interest in theoretical approaches to the study of 

international politics. Currently Dr. Morgan is involved in projects 

on the theory and practice of deterrence in the post-Cold War era, 

security strategies for global security management, and security 

in Northeast Asia. Some of his publications include Reviewing the 

Cold War (1999), coedited with Keith Nelson; Security Studies Today 

(1999), with T. Terriff, S. Croft, and L. James; and “Assessing the 

Korean-American Alliance: How Do We Know when An Alliance 

is Healthy?” The Korean Journal of Defense Analysis (1990). Dr. 

Morgan received a Ph.D. and M.A. from Yale University, and a B.A. 
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from Harpur college (now State University of New York [SUNY] 

Binghamton).

HAKSOON PAIK is currently a research fellow at the Sejong Institute, 

Korea, and was a post-doctoral fellow at the Korea Institute, Harvard 

University, from 1996 to 1997. Dr. Paik is a specialist on North Korea 

and has written extensively on North Korea politics, inter-Korean 

relations, Korean unification, and North Korea-U.S. relations. He 

published numerous monographs and articles, including "North 

Korea's Opening and Reform and Prospects for De-socialization" 

(2001), "The Korean War as a State Formation War" (1999), "North 

Korean State Institutions in the Kim Jong-il Era" (2000), and "The 

Korean Peninsula Energy Development Organization (KEDO): 

Interests, Institutions, and Outcomes" (1999). Dr. Paik received his 

Ph.D. in Political Science from the University of Pennsylvania.

TONG WHAN PARK is Associate Professor of Political Science 

and Director of the Forum on Korean Affairs at Northwestern 

University, Evanston, IL. Before starting his academic career, he had 

served as a reporter for The Hankook Ilbo (Daily) in Seoul. Dr. Park's 

research interest centers on international relations and Northeast 

Asian politics. He has authored seven monographs and over 70 

articles that appeared in journals and edited volumes published on 

both sides of the Pacific. He is currently working on Korea's foreign 

policy into the 21st century. His most recent book analyzes the 

relationship among Washington, Seoul, and Pyongyang from the 

theoretical and empirical perspective (The U.S. and the Two Koreas: A 

New Triangle, Boulder, CO: Lynne Rienner, 1998). Dr. Park received 

his Ph.D. and MA in Political Science from the University of Hawaii, 

an MA in International Law from ChoongAng University in Seoul, 

and an LL.B. from Seoul National University. 

ANDREW SCOBELL is a Research Professor of National Security 

Affairs at the Strategic Studies Institute (SSI) at the U.S. Army War 

College in Carlisle, PA. Born and raised in Hong Kong, Dr. Scobell 

joined SSI in August 1999 and is its expert on Asia. He has taught at 

the University of Louisville, Kentucky, and Rutgers University, New 

Jersey. Since 1988 Dr. Scobell has published articles in such journals 

as Armed Forces and Society, Asian Survey, China Quarterly, Political 

Science Quarterly, and Problems of Post-Communism. Dr. Scobell holds 
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a B.A. in History from Whitman College, an M.A. in International 

Studies from the University of Washington, and a Ph.D. in Political 

Science from Columbia University. 

JOSEPH A. B. WINDER is the President of the Korea Economic 

Institute of America (KEI). Prior to joining KEI as Vice President in 

February 1996, Mr. Winder had a 30-year career in the United States 

Foreign Service. He retired with the rank of Minister-Counselor in 

September, 1995. During his career he had numerous assignments 

overseas and in Washington, including Director, Office of Economic 

Analysis, Department of State, 1993-95; Minister-Counselor for 

Economic Affairs, American Embassy, Tokyo, Japan, 1990-93; Deputy 

Chief of Mission, American Embassy, Bangkok, Thailand, 1986-89; 

Deputy Director, Policy Planning Staff, Department of State, 1985-

86; Director, Office of Indonesia, Malaysia, Brunei, and Singapore 

Affairs, Department of State, 1983-1985; Counselor for Economic 

Affairs, American Embassy, Jakarta, Indonesia, 1980-83; Director, 

Office of Multilateral Development Banks, Department of Treasury, 

1978-80; Director, Office of Monetary Affairs, Department of State, 

1977-78; and Director, Office of Development Finance, Department 

of State, 1975-77. Other experience included assignments as an 

economic officer in the American Embassies in Bonn, Germany, 

and Santiago, Chile. Mr. Winder was the recipient of the State 

Department’s Superior Honor Award in 1995, 1993, and 1989. He 

won the Treasury Secretary’s Award in 1980. Mr. Winder received a 

BA in Political Science and an MBA in Business Administration from 

the University of Michigan.

JEONGWON YOON is Associate Professor of Political Science at the 

Korea Military Academy. He is serving as Director of the Editing 

Board of the Korean Association of International Studies (2001) and 

Director of Research Council of the Korean Association of Defence 

Policy Studies. Dr. Yoon has published such security-related books 

as Theory and Practice of National Security (2001) and Studies on 

North Korea (2000). Dr. Yoon earned a MA from Seoul National 

University and a Ph.D. from the University of Georgia.