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[Senate Hearing 108-471]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 108-471

      THE NORTH KOREAN NUCLEAR CALCULUS: BEYOND THE SIX-POWER TALKS

=======================================================================

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              MARCH 2, 2004

                               __________

       Printed for the use of the Committee on Foreign Relations

 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate

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                     COMMITTEE ON FOREIGN RELATIONS

                  RICHARD G. LUGAR, Indiana, Chairman
CHUCK HAGEL, Nebraska                JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island         PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia               CHRISTOPHER J. DODD, Connecticut
SAM BROWNBACK, Kansas                JOHN F. KERRY, Massachusetts
MICHAEL B. ENZI, Wyoming             RUSSELL D. FEINGOLD, Wisconsin
GEORGE V. VOINOVICH, Ohio            BARBARA BOXER, California
LAMAR ALEXANDER, Tennessee           BILL NELSON, Florida
NORM COLEMAN, Minnesota              JOHN D. ROCKEFELLER IV, West 
JOHN E. SUNUNU, New Hampshire            Virginia
                                     JON S. CORZINE, New Jersey

                 Kenneth A. Myers, Jr., Staff Director
              Antony J. Blinken, Democratic Staff Director

                                  (ii)

  
?

                            C O N T E N T S

                              ----------                              
                                                                   Page

Cha, Dr. Victor, Associate Professor of Government, School of 
  Foreign Service, Georgetown University, Washington, DC.........    20
    Prepared statement...........................................    22
Feingold, Hon. Russell D., U.S. Senator from Wisconsin, statement 
  submitted for the record.......................................    41
Kelly, Hon. James A., Assistant Secretary of State for East Asian 
  and Pacific Affairs, U.S. Department of State, Washington, DC..     3
  Responses to additional questions for the record from Senator 
      Feingold                                                       41
Lugar, Hon. Richard G., U.S. Senator from Indiana, opening 
  statement......................................................     1
Malinowski, Mr. Tom, Advocacy Director, Human Rights Watch, 
  Washington, DC.................................................    26
    Prepared statement...........................................    28
Taylor, Mr. Terence, President and Executive Officer, U.S. 
  Office, International Institute for Strategic Studies, 
  Washington, DC.................................................    14
    Prepared statement...........................................    17

                                 (iii)

  

 
      THE NORTH KOREA NUCLEAR CALCULUS: BEYOND THE SIX-POWER TALKS

                              ----------                              

                         TUESDAY, MARCH 2, 2004

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met at 4:10 p.m., in room SH-216, Hart Senate 
Office Building, Hon. Richard G. Lugar, chairman of the 
committee, presiding.
    Present: Senators Lugar, Hagel, and Feingold.

        opening statement of senator richard g. lugar, chairman

    The Chairman. This hearing of the Senate Foreign Relations 
Committee is called to order.
    Today the Foreign Relations Committee again turns its 
attention toward North Korea. We are pleased to welcome 
Assistant Secretary of State James Kelly. We look forward to 
his timely update on the six-party talks in Beijing, from which 
he has most recently returned.
    The North Korean regime's drive to build nuclear weapons 
and other weapons of mass destruction poses a grave threat to 
American national security. All of us remain concerned about 
the potential for miscalculation that could lead to a deadly 
incident or broader conflict. We are also concerned about the 
transfer of North Korean weapons, materials, and technology to 
other nations or terrorist groups.
    The administration and our allies understand the importance 
of the six-party talks for regional stability and global 
security. The United States has consulted closely with other 
countries in the region in an effort to make these talks 
productive. The goal of United States policy must be to stop 
and to ultimately dismantle the North Korean nuclear weapons 
program. To achieve this objective, we cannot rule out any 
options.
    Even as we attempt to achieve our objectives through the 
six-party talks, the United States must continue to refine its 
analysis and its options related to North Korea. Previously I 
outlined four factors that I believe we should keep in mind as 
this analysis occurs. First, the central interest of the North 
Korean regime is its own survival. Second, given their lack of 
friends and their dysfunctional economy, the North Korean 
leaders increasingly perceive that their backs are to the wall. 
Third, recent events, including the ousters of Saddam Hussein 
and the Taliban and even the voluntary opening of Libya's 
nuclear program, have pressurized the geopolitical environment 
for North Korean leaders, who may believe they face the threat 
of United States military action. Fourth, although there is 
still ambiguity surrounding the precise configuration of North 
Korea's nuclear program, the North Korean regime sees the 
program as the primary means through which it can protect and 
perpetuate itself. It will not give up its nuclear ambitions 
easily and these realities combine to create a dangerous 
situation that requires focused attention by the United States 
and our allies.
    Any satisfactory agreement with North Koreans on 
permanently ending their nuclear program must ensure absolute 
verification. There is no method that achieves a higher degree 
of verifiability than United States sponsorship and 
implementation of the dismantlement operations. The Pentagon 
has built a record of success in such operations through 
programs such as the Nunn-Lugar Cooperative Threat Reduction 
program in the former Soviet Union. And Congress recently 
authorized the administration to use $50 million in Nunn-Lugar 
funds outside the former Soviet Union for nonproliferation 
operations such as those that might present themselves in North 
Korea. As talks continue, we must begin to think about how a 
negotiated settlement to the North Korea nuclear question could 
be effectively implemented.
    In addition to our examination of security issues, this 
hearing will also consider North Korean economic and human 
rights issues. The regime keeps its grip on power by repressing 
political dissent with a vast gulag system of cruel prisons and 
labor camps. This committee has devoted considerable time and 
energy to oversight of policies related to the conditions 
within North Korea, and we will continue to do so today.
    After Secretary Kelly has testified, we will hear from a 
second panel of expert witnesses. Terence Taylor is President 
and Executive Director of the United States Office of the 
International Institute for Strategic Studies. Mr. Taylor will 
provide his perspective on nuclear issues, including an 
appropriate verification model related to North Korea's nuclear 
program. Dr. Victor Cha is Associate Professor of Government of 
the School of Foreign Service of Georgetown University. He will 
share his perspective on North Korea's economic situation. Mr. 
Tom Malinowski is Advocacy Director of Human Rights Watch. He 
will testify regarding human rights conditions in North Korea.
    We welcome all of our witnesses. We look forward to their 
insights and their analysis. And I would express to all of them 
my appreciation for their patience. We are only an hour late in 
beginning the hearing, but better late than never, and we are 
at least at a point in the Senate's schedule where the last 
rollcall vote has been cast for the day. Therefore, we will not 
be interrupted again.
    Secretary Kelly, we have appreciated so much your coming to 
the committee frequently throughout the talks and negotiations 
with North Korea. Certainly your appearance today is timely. We 
know you may be weary after long travels, as well as your work 
there in Beijing last week, but we deeply appreciate your 
coming. We look forward to your testimony. Take the time that 
you wish. Your entire statement will be made a part of the 
record.
    Secretary Kelly.

STATEMENT OF HON. JAMES A. KELLY, ASSISTANT SECRETARY OF STATE 
               FOR EAST ASIAN AND PACIFIC AFFAIRS

    Mr. Kelly. Thank you, Mr. Chairman. I do not have a formal 
statement, but I do have some opening remarks that we have 
provided to the committee, and I will try to be brief.
    Thank you, Mr. Chairman, for this opportunity to review our 
efforts to deal with the threat that North Korea's nuclear 
programs pose to regional peace and security and to the global 
nonproliferation regime. Having just returned from the six-
party talks in Beijing, I am grateful to have the chance to 
discuss with you and your colleagues our work, together with 
like-minded countries at the talks, toward a nuclear-free 
Korean Peninsula.
    The multilateral process is off to a very good start. The 
false notion that North Korean nuclear weapons are the unique 
concern of the United States is all but gone. Our goal, 
complete, verifiable, irreversible dismantlement of North 
Korean nuclear programs, has been dubbed by the South Koreans 
CVID, and that acronym and the important goal it represents has 
been accepted by all at the six-party talks except the North 
Koreans. And with each of the countries having large and direct 
interest in the issue, the process is unusually well-focused.
    The first round of six-party talks, in August of last year, 
provided the opportunity to governments directly concerned with 
the Korean Peninsula and the nuclear issue in particular to 
state their positions authoritatively before all of the other 
parties. This created a solid baseline from which we are 
working together to bring about a diplomatic solution to the 
problem.
    We began the second round last Wednesday, February 25, with 
hope for concrete progress that would lay the basis to continue 
moving forward. I am pleased to report that the talks are 
working to our benefit and are moving a serious process 
forward. The parties agreed to regularize the six-party talks, 
to convene a third round of talks before June, and to establish 
a working group to continue our efforts in the interim.
    This is a good foundation on which we can build in future 
rounds. Key, substantive differences do remain that will need 
to be addressed in further rounds of discussions. However, we 
worked closely with our partners in the talks and were pleased 
with the high degree of cooperation among us. Most importantly, 
we kept the talks focused on our objective, the complete, 
verifiable, and irreversible dismantlement of North Korea's 
nuclear programs, by which we mean plutonium and uranium 
enrichment-based programs. It was clear by the conclusion of 
the talks that this is now very much on the table.
    The onus is on the DPRK to demonstrate its commitment to 
abandoning its nuclear programs by being forthcoming about the 
entirety of its efforts, including uranium enrichment. The 
other five parties are all in full agreement on this 
fundamental idea. North Korea heard what it needs to do in 
sessions with all the parties represented and it heard it from 
us in direct encounters on the margins of the formal sessions. 
By the way, after these encounters, I was quick to brief the 
other parties. Transparency is an important part of the six-
party talks and essential to its core premises.
    These accomplishments are evidence of a very different and 
promising atmosphere at this round. All parties came prepared 
to be blunt about their positions, but also ready and willing 
to take on board the concerns of the other parties. The North 
Koreans came to the table denying a uranium enrichment program 
and complaining about the inflexibility of the U.S. position, 
but they have gone along with the institutionalization of the 
process.
    The achievements from the talks are in no small part due to 
the extensive efforts of the Chinese. They have worked as 
intermediaries to bring about and host a second round, and we 
are grateful for the hard work they have been doing. More 
importantly, China has been active as a participant and makes 
clear that it will not accept nuclear weapons on the Korean 
Peninsula. The Republic of Korea has also made a valuable 
commitment. It would offer fuel relief to the North if there 
were a halt or a freeze of the nuclear programs. But South 
Korea has made clear that any such freeze is to be but a 
temporary measure toward the larger goal and will have to be 
complete and verifiable.
    We will continue working side by side with the Chinese, the 
Russians and our Japanese and South Korean allies to reach the 
result we seek. We have already begun to discuss next steps and 
will be actively consulting with China, the Republic of North 
Korea, Japan, and Russia in preparation for the next round in 
the intercessional working group.
    The process of transforming the situation on the Korean 
Peninsula in the interest of all these parties must begin with 
a fundamental decision by the DPRK. The DPRK needs to make a 
strategic choice for transformed relations with the United 
States and the world, as other countries have done, including 
quite recently, to abandon all of its nuclear programs. We also 
made clear that there are other issues that, as the nuclear 
issue begins to unfold, can be discussed with the U.S. 
Missiles, conventional forces, and serious human rights 
concerns could be discussed and progress could lead to full 
normalization.
    There is also something else important that is beginning 
with the six-party talks. As the committee knows, the numerous 
and intensive security dialogs of Europe are not matched in 
East Asia where the only comparable institution is the annual 
and slow-growing ASEAN Regional Forum, the ARF. Northeast Asia 
has had no such event. But the chemistry of articulating 
interests in a direct but respectful way, on an equal footing, 
is developing at the six-party talks in a way that I anticipate 
will some day pass well beyond the DPRK nuclear issue.
    In his February 11 remarks to the National Defense 
University, President Bush called on other governments engaged 
in covert nuclear arms programs to follow the affirmative 
example of Libya. The Libyan case demonstrates, as President 
Bush has said, that leaders who abandon the pursuit of weapons 
of mass destruction and their delivery means will find an open 
path to better relations with the United States and other free 
nations. When leaders make the wise and responsible choice, 
they serve the interest of their own people and they add to the 
security of all nations.
    We discussed Libya's example with our North Korean 
counterparts and we hope they understand its significance. Once 
North Korea's nuclear issue is resolved, discussions would be 
possible on a wide range of issues that could lead to an 
improvement or normalization in relations.
    Thank you, Mr. Chairman, for this opportunity to meet with 
the committee today. We remain convinced that our multilateral 
diplomatic approach is correct and will bear fruit, though we 
know that more work is ahead. The President is committed to the 
six-party talks. We are offering North Korea a chance to choose 
a path toward international responsibility. We hope we and our 
partners in the six-party talks can bring North Korea to 
understand it is in its own interest to take the opportunity. 
And we will continue to work closely with this committee as we 
proceed.
    I will be happy to take any questions, sir.
    The Chairman. Thank you very much, Secretary Kelly. We will 
have an 8-minute limit for the first round of questioning, and 
we will have more questions if those are required.
    Secretary Kelly, you mentioned once again the uranium 
program, in addition to the plutonium program. There is 
ambiguity in terms of North Korean statements about this, as I 
recall--at least there were press accounts that North Koreans 
said this is a peaceful project in which we are going to go 
into power or something of this variety. It is not headed down 
the trail toward weaponization.
    How are we likely to see resolution, first of all, of what 
the program is, where it is, its extent? How are we to have a 
reasonable discussion in these negotiations? Perhaps you 
visited with other parties at the talks who have ideas, in 
addition to your own. This appears to be a factor. Even if we 
came to conclusions of destruction of the Yongbyon facility and 
the plutonium situation, sort of root and branch, out here now 
is still this issue that was raised in your encounter last fall 
with North Koreans. Can you amplify further where that is 
headed?
    Mr. Kelly. I would be pleased to, Mr. Chairman.
    First of all, in meetings last week and, as far as I know, 
elsewhere, the North Koreans have not tried to claim that a 
uranium enrichment project is part of a peaceful program. Now, 
they have insisted, and did so last week, on exempting some 
undefined peaceful nuclear program, except that all of the 
nuclear programs that North Korea has, of which we are aware, 
are all committed in one fashion or another, at least 
primarily, toward weapons usages.
    With respect to highly enriched uranium, Mr. Chairman, they 
would not give us any satisfaction and continued a denial, 
although not so prominently.
    The recent disclosures and publicity, however, of Mr. Khan 
of Pakistan, of the Libyan situation--there have been 
disclosures in the German courts of attempted shipments of 
aluminum tubes for use as centrifuges, precisely the kind that 
are most efficient for separating and enriching uranium. All of 
this evidence is starting to pile up publicly, and we did not 
find any of our other partners involved in the denials or even 
expressly stating that they do not know whether this is the 
case.
    So this remains a serious problem. We believe it is one 
that has to be included in the solution. I would put it most 
charitably that North Korea is going to have to analyze this 
for a little longer, and maybe they will find a way to include 
this in the eventual solution because it has to be there.
    The Chairman. Clearly, as you just pointed out, from the 
time you had these initial talks with the North Koreans last 
fall, much has happened in the world, including Libyan 
renunciation of weapons of mass destruction. Coincident with 
this or as a part of this, we have witnessed these revelations 
of A.Q. Khan and all of the transactions that apparently 
involved North Korea, Libya, Iran, and Iraq, as well as a 
number of situations. Maybe more will be forthcoming. This does 
add a good bit more texture to the whole business.
    As you point out, you have arrived at a situation where 
another round may occur in June. Other talks amongst some of 
the parties will be occurring fairly continuously. You have 
suggested, at the end of the day, that North Korea must come to 
a conclusion as to what kind of a relationship it wants to have 
with us, with China, with the other parties. You have just 
suggested that they have not quite come to that conclusion at 
this point. You have stated--and I think this is important--
that the road map of how to get there has been laid out, and 
that clearly the other five parties had direct conversations. 
It was not one on one, or somebody rushing out of the room in 
protest, but apparently sort of a full-scale exploration of 
what will be required in the relationship. Is that a fair 
summation of what you saw?
    Mr. Kelly. Yes, sir, I think that is a very fair summation. 
The fact is I was asked personally by the North Korean 
delegate. He said, why do you not give us the proof about our 
uranium enrichment, and I just said, Mr. Kim, Mr. Vice 
Minister, the reason that countries often enter into uranium 
enrichment programs is because they are more easily concealed 
than plutonium programs, and if I were to give you all that 
information, it might make it easier for you to conceal it. It 
was that kind of a direct exchange of information that we will 
just have to continue.
    But uranium enrichment is a serious problem. It was a 
problem when I went there in October 2002. And it is the 
violation of the Agreed Framework and several other agreements 
that has led us to where we are now, and it is going to have to 
be addressed in one form or another.
    The Chairman. I was intrigued that in your direct testimony 
today you said you have also made it clear that there were 
other issues that can be discussed as the nuclear issue begins 
to unfold. Missiles, conventional forces, serious human rights 
concerns could be discussed. Progress could lead to full 
normalization. That final possibility, it seems to me, may be 
new in terms of our diplomacy, or maybe not so. Please say 
something more about that.
    The thought in the past was that here is a regime that was 
odious, and we have described how we think they are. You are 
suggesting a number of things along this road map that we ought 
to discuss long before we get to it. At the end of the trail, 
maybe, we will reach full normalization of relationships.
    Mr. Kelly. During 2002, Mr. Chairman, when I was scheduled 
to go and then finally did, the President had directed us to 
enter into what was called a bold approach of negotiations, and 
I in fact presented this to the North Koreans when I was there 
in October 2002.
    There are serious differences in many areas between the 
U.S. and the DPRK, but we are ready to address these in 
discussions with them, the items you listed and others as well. 
The problem, of course, was that in the summer of 2002, we 
received the information of this alternate nuclear weapons 
program and that was such a violation of the Agreed Framework, 
that we had to make clear that we had to have the process of 
resolving the nuclear issue well underway before the rest of 
this could begin.
    The Chairman. I appreciate your mentioning that this talk 
occurred in 2002. When I previously mentioned last fall, the 
years seemed to flood together, but in fact it was not 2003. It 
was the fall of 2002 when you had this initial important 
conversation, and when you had the revelation by the North 
Koreans about the uranium program, which has floated over this 
situation ever since.
    Mr. Kelly. But we did not say, Mr. Chairman, that every 
last part of the dismantlement of the nuclear program must be 
complete before there can be any progress on other measures, 
but it is very important that we begin the progress and we see 
the commitment of the DPRK toward ending nuclear weapons. And 
they have said that they do not believe that the Korean 
Peninsula should include nuclear weapons, that this is just a 
deterrence of some vague threat from the U.S.A. President Bush 
has talked about security assurances that can be documented, 
but we need to start work on the nuclear program and then many 
other things can begin to happen.
    The Chairman. You made a very important comment that China 
has made a decision that it is unacceptable to have nuclear 
weapons on the Korean Peninsula, and that they have adopted 
that as a part of their negotiating posture.
    Mr. Kelly. Yes, sir. The CVID, complete, verifiable, 
irreversible dismantlement, of the nuclear weapons programs of 
whatever origin is necessary and all of the countries 
participating in the six-party talks agree to that, except of 
course the DPRK.
    The Chairman. Senator Hagel.
    Senator Hagel. Mr. Chairman, thank you.
    Secretary Kelly, welcome. Thank you for your good work.
    Mr. Secretary, how would you assess the intelligence on 
North Korea that has been provided by the American intelligence 
community over the last 2 or 3 years, certainly since you have 
had the responsibility that you have today? Has it been good, 
bad, what?
    Mr. Kelly. I think it is very solid, Senator Hagel. I was 
out of government for 12 years before I came back, and it was 
my impression, when I was working on North Korea at both the 
White House and the Pentagon in the 1980s during the Reagan 
administration, I was very much struck with how little concrete 
information, other than technical information, that we really 
had about North Korea. There has been a lot of work over that 
time and I think this is pretty solid, and the information we 
got in the summer of 2002 about uranium enrichment is an 
example.
    Senator Hagel. So overall, you would rate it as improved 
from where it was.
    Mr. Kelly. Yes, sir, I would. This is a very difficult 
target. There is no more closed society in the entire world, 
and getting human information especially is excruciatingly 
difficult. But it is not impossible. North Korea is isolated, 
in many respects a self-isolation, but it does need things from 
outside. It needs the key elements for its nuclear programs. It 
needs money. It needs, for that matter, food and fuel. It is 
also engaged in illicit activities of drugs and counterfeit 
currency outside of its borders, and these two provide 
opportunities and vulnerabilities. So I would say the 
intelligence is much better, and I think the dedication of the 
community is really quite laudable.
    Senator Hagel. Secretary Kelly, you may have noted this in 
your statement, and I apologize. I walked in in the middle of 
it. But staying on, to some extent, the theme of intelligence, 
can you bring us up to date on what you know about the 8,000 
nuclear rods? Were they reprocessed? Were they there when you 
had been told they would be, or where did they go? Just give us 
a status, as much as you can, in an open hearing.
    Mr. Kelly. The answer, Senator Hagel, is we do not know 
what has happened to the 8,017 fuel rods. We know from the 
visitors in January that they are not in the pool in which they 
once resided. It is possible that some or all of them have been 
reprocessed into plutonium, but I do not think there is firm 
information. After all, since the international monitors from 
the IAEA left in the beginning of January 2003, we really have 
not had the kind of firsthand information that is necessary for 
something of that detail. There is probably more that you could 
learn in a closed hearing filling in the details, but the fact 
is it is quite possible that they have reprocessed all of that.
    Senator Hagel. Are you concerned about not knowing? 
Obviously, as much information as we can get is important, but 
how much of a concern is that to you?
    Mr. Kelly. Well, it is a concern that that matter has been 
taken and that if they have been reprocessed, there would be 
fissionable plutonium that could certainly be turned into a 
significant number of nuclear weapons. That is very much our 
concern and why we are determined to work on this problem, and 
we are not going to give up on it.
    Senator Hagel. Do we have any idea today what might be in 
the North Korean inventory in the way of nuclear weapons?
    Mr. Kelly. I believe the testimony has been that we are of 
the opinion that there are one or two nuclear weapons. That was 
based on plutonium that was obtained more than 12 years ago. I 
am not aware of any assessment based on what may or may not 
have been reprocessed recently.
    Senator Hagel. Do you think then it is likely or not likely 
that North Korea would possess more than two nuclear weapons if 
the numbers that we were last aware of were a few years ago and 
we are uncertain about 8,000 nuclear fuel rods and other 
uncertainties?
    Mr. Kelly. It is certainly possible, Senator Hagel, and if 
it has not occurred, it certainly has not been for lack of 
trying. It is obvious that North Korea is trying to generate 
nuclear weapons in many ways and vigorously develop them.
    Senator Hagel. Would you also give us your assessment of 
the dynamic between the South and the North, the people, the 
attitudes, the texture of that? I noted in your statement and 
in response also to Chairman Lugar's question about the 
Chinese. What about the South? How do they view this?
    Mr. Kelly. South Korea views this in a very complex way and 
one that is different from what it was 10 years ago because now 
there is a multiplicity of contacts, literally scores if not 
hundreds of contacts, including at least a couple times a year 
meetings at the ministerial level. Two transportation corridors 
have been opened north of Seoul and near the east coast. There 
is a tourist arrangement, the development of the railroad link 
north of Seoul, and the possibility of the Kaesong Industrial 
Zone development.
    That said, though, the Government of the Republic of Korea 
has made clear, in so many words and in their actions as well, 
that nuclear weapons on the part of North Korea is not to be 
tolerated, that it is an intolerable development, and that it 
will impede their relations. The ROK was very forthright and 
strong about that in our meetings.
    That said, South Korea has a vibrant economy. It has a 
neighbor nearby whose instability and threats affect, for 
example, financial ratings and the ability of some South Korean 
companies to borrow money at the rates that they might wish to 
do so. So it is not surprising that there often is a sense of 
wishing that somebody would ``take care of these guys'' or a 
wish that we could all just forget about them, but we cannot 
and they cannot. After much discussion in its democracy, the 
ROK always does the right thing in my experience.
    Senator Hagel. Do you believe the current South Korean 
Government is as committed to the United States' position on 
North Korea as past South Koreans governments have been?
    Mr. Kelly. It is absolutely committed to the complete, 
verifiable, and irreversible end of the nuclear weapons 
program, and it is an alliance that has developed very firmly. 
We saw some of that today. The new Foreign Minister of the 
Republic of Korea called on President Bush. President Bush has 
had recent conversations with President Roh of South Korea, and 
the relationship is in excellent shape.
    The Republic of Korea has recently, through its national 
assembly, committed to sending some 3,000 of its military 
forces to Iraq to help stabilize that very important and 
dangerous situation. This is an alliance that is working very 
well.
    Senator Hagel. So your answer is this administration in 
South Korea today is just as committed and in just as much 
alignment with U.S. policy toward North Korea as past South 
Korean governments.
    Mr. Kelly. Yes, sir. In fact, I would say it is possible 
they may even be more committed than perhaps some South Korean 
governments at some time have been.
    Senator Hagel. Thank you. Mr. Chairman, thank you.
    The Chairman. Thank you, Senator Hagel.
    Mr. Secretary, when Sid Hecker came before our committee 
following his visit with four other distinguished Americans, 
including Keith Luse, who is in our hearing room today, he gave 
a tutorial to the committee on this whole process. It was very 
helpful to all of us. Even having listened to testimony for 
many years, many of us found it very instructive to learn what 
a rod is, and, if there are 8,000 of these, what happens when 
you lift them all out of a reactor and begin stripping 
plutonium, a very tedious process. People work very hard at 
this, take the plutonium off, accumulate bits and pieces and 
ounces and finally maybe pounds. Then we make a calculation of 
how many pounds might conceivably make a crude weapon of some 
sort in some form.
    As Sid Hecker then pointed out to us, the envelope closed 
when things got interesting in terms of his questioning. In 
other words, the rods are out. The plutonium is being 
extracted. You can make the calculations and do the math if in 
fact all of this happens day by day, month by month. But at the 
point where we can see what the residue is--is it in a blob 
called a bomb or a weapon of some sort? That was out of sight.
    And then, as he pointed out to us, there is the very 
important aspect of the delivery mechanism. Even if you did 
have a mass of this plutonium in some form that excited other 
particles, there remains the question of how you ever get it to 
some place. Although the North Koreans have demonstrated 
extraordinary rocketry, missilery and so forth, and terrorized 
the Japanese surrounding both sides of Japan on one occasion, 
the fact is that the machining, the refinement of this process 
to get to the type of warhead that might fit on one of these 
situations is an extraordinary achievement.
    We do not rule any of this out because a lot of information 
was going on back and forth for 20 years, as we know with the 
A.Q. Khan correspondence or missions or so forth. So it is not 
necessary that each nation discover it all on their own. You 
might leapfrog ahead to get bits and pieces of something that 
is helpful.
    On the other hand, it also illustrates the other side of 
this. That is that the President's speech at the National 
Defense University outlined the fact that for us the greatest 
danger is probably proliferation. By this I mean the trade by 
the North Koreans themselves, the bits and pieces of their 
program, as opposed to the actual construction of a bomb in 
some crude form or some crude delivery mechanism that may or 
may not ever exist. The fact is that nations that are curious 
about developing these things may find some stock and trade.
    Our dilemma in the war against terrorism, as the President 
was pointing out, is less one of a nation state that has a 
return address, that has responsibility against which 
deterrence might work, than that posed by subgroups unknown to 
us or not very well known to us who may create trouble or a 
horrible disaster. We have already had that inflicted upon us 
on 9/11 by people who obviously are not a nation state and who 
had been almost unknown to us. We initially lacked very good 
after-the-fact intelligence of who they were and where they 
came from.
    It seems to me that the President's point likewise is the 
one you have made today. It is an important one, this 
proposition that it does not pay to build weapons of mass 
destruction, and that if you are thinking about doing it, 
forget it, because this is going to lead to bad results.
    On the other hand, if you already have made the mistake, 
even if you have been making it for years, as in the case of 
Libya, there can be extraordinary outcomes in a fairly short 
period of time. We had a hearing on Libya last week and someone 
from the State Department came over and pointed out five 
sanctions had been lifted that very day by the President of the 
United States, including travel of Americans to the country and 
liberation of a good number of business interests. All of this 
came in a very, very short period of time following the 
cooperation, following 55,000 pounds of nuclear material and/or 
machines or plans to Oak Ridge, Tennessee from Libya, with more 
still to come.
    So you have made the point in all of these hearings. 
Unhappily knowledge does not flow back and forth from the 
leadership of North Korea to the rest of the world all that 
readily. There would be no reason for the North Koreans to be 
following breathlessly on newscasts night by night what was 
happening in Libya. Yet the fact that you were able to sit down 
with six countries and discuss these things for a few days and 
few hours is in itself newsworthy, maybe for the North Koreans. 
It might begin to implant an idea which, as you point out, may 
not take hold instantly, particularly with a good number of 
naysayers and those who are wedded to the thought that this is 
North Korea, this program. Without it, there might not be a 
regime; there might not be a future.
    That will take dramatic diplomacy on our part, to be able 
to sketch out a vision for tomorrow for the North Korean 
leadership, but that is what you are about, and I admire that. 
In fact, the process is continuing, as opposed to everybody 
walking away in a huff. The world finds it encouraging. That is 
why most of the accounts of the talks were optimistic. 
Something is going to continue given the basis you already 
have.
    It appears to me that the general proposition of the 
President on proliferation is a very important one. North Korea 
is not the only case in point. As the A.Q. Khan story goes, and 
we take a look at where all of this goes, we have different 
types of negotiations in different places, but all with the 
same thought that it is not useful ultimately if a nation-state 
wants to develop its economy, its politics, its relationship 
with us and with others to pursue this route. Perhaps South 
Africa and Brazil, to name two, came to that conclusion some 
time ago, and profitably so.
    The other thing that I just wanted to comment on was that 
you have a paragraph here that is tremendously important. You 
suggest, for instance, that the ASEAN countries are not NATO, 
that they are not a group of countries that can normally come 
together in heavy lifting in diplomacy. One of the byproducts, 
or maybe one of the good results of the conference of the six 
that is going on, may be that you all are visiting with each 
other. The fact is that there could be a much stronger 
diplomatic initiative here with regard to a whole host of 
problems that either are there in the area or might be down the 
trail. That is highly encouraging. That would make it 
worthwhile to continue these talks indefinitely, even if there 
was some discouragement with North Korea.
    As a veteran diplomat, you could perhaps amplify on that. I 
would simply comment that I appreciated your putting that in 
your testimony, in addition to an update on North Korea. That 
is the future of multilateral diplomacy in Asia. Ties that have 
been forged because of this very difficult problem. Do you have 
any supplementary comment you would like to make on any of 
that?
    Mr. Kelly. Well, thank you, Mr. Chairman. The main comment 
I think I would make on the future of the northeast Asia 
security dialog, as exemplified by the six-party process, is I 
was really struck last week that this is only the second go-
round and the way and the manner and the directness with which 
these diplomatic and security interests were being exchanged by 
all the parties and especially by Japan, by the Republic of 
Korea, China, and Russia, and ourselves gives some promise. We 
have never had anything remotely like this process.
    But the focus now is on the nuclear weapons and the fear of 
proliferation, and to use this multilateral process to 
convince, if convincing is needed, the DPRK that we are not 
demanding that they commit suicide. We are asking that they 
take steps, make a choice that is more than ultimately--that 
can be quite rapidly in their own interest.
    The Chairman. Senator Hagel.
    Senator Hagel. Mr. Chairman, thank you.
    Secretary Kelly, what do you know about North Korea's 
support of terrorist groups now, al-Qaeda, other groups that we 
are aware of?
    Mr. Kelly. I am not aware of any links of the DPRK to al-
Qaeda or, for that matter, other terrorist organizations. There 
is a bad history, of course, going back to the 1980s of blown-
up airliners, the bombing of the South Korean cabinet in 1983, 
incursions that even went through into the 1990s in South 
Korea. The abductions of Japanese, the abductions of South 
Koreans are a problem. But there is not recent evidence, of 
which I am aware, of terrorist acts being directly supported by 
the DPRK. But this is another matter on which, if we can start 
making some progress on nuclear weapons, that we would be 
prepared to engage the North Koreans.
    Senator Hagel. Thank you.
    What is your assessment of the stability of Kim Jong-il's 
government, his personal position in North Korea?
    Mr. Kelly. I do not think I know, and I do not know that 
there are any Americans that have a very good view of that 
question. By the normal logic, the economy of a country, the 
ability to feed itself, the ability to produce the goods that 
it needs I think most would believe that North Korea would have 
collapsed a long time ago. But it has not. It has a security 
process that obviously works a lot better than the rest of it. 
But it is very hard to judge what the pressures, the internal 
pressures especially, may be on Mr. Kim Jong-il.
    Senator Hagel. Do you believe that North Korea is now 
facing or possibly could be facing a humanitarian crisis, food 
crisis?
    Mr. Kelly. Yes, sir. The World Food Program has made that 
very clear. They sent us two letters in December about the 
developing food crisis. The reports out of the country are a 
little bit mixed, but there is a structural food problem and 
there has been that for years. And the ability of the 
international community to make donations has been reduced a 
bit. It is not possible for North Korea under any conditions to 
grow the food it needs and its economy is obviously not well 
enough to pay for it. So there have been serious cases of 
starvation and many, many thousands, perhaps hundreds of 
thousands of lives that have been lost to starvation in the 
past, and we hope that that is not the case. The World Food 
Program is working. Humanitarian efforts proceed but this is 
not a good situation for at least some of the people of North 
Korea.
    Senator Hagel. You mentioned economic consequences in North 
Korea's economy. Do you see any shifts, any changes in the 
prospects for North Korea's economy?
    Mr. Kelly. There have been some measures taken that may not 
be easily reversible. There are these reports of some markets, 
particularly in Pyongyang. There has been a shift from rather 
than simply providing food and shelter at no cost to providing 
some wages for people and then setting a price. This is so 
basic that it is just beginning, and it is obvious that some 
imbalances are occurring because whether you put it in Euros or 
dollars, the inflation rates, to the extent they are measurable 
at all, have risen very, very fast. So we have a situation I 
think in which many North Koreans who have never had to carry 
foreign money around in the past are having to do so now.
    It appears that some people, particularly in the capital, 
are doing a lot better. I have a feeling that this is not a 
universal situation, but once again, Senator Hagel, information 
is most sketchy and incomplete and you hear quite varying 
anecdotes from people who visit.
    Senator Hagel. What do we know about North Korea's role in 
continuing to provide, prescribe weapons technology, 
production, assistance to Iran, the past Iraqi regime under 
Saddam Hussein, other nations? Chairman Lugar touched upon this 
a bit in his remarks about Pakistan. Any enhancement of the 
Pakistan issue as well. Are they still doing business on 
missile technology? And anything that you could give us to 
address that general area we would appreciate.
    Mr. Kelly. In an open hearing, Senator, I think there is 
probably not a lot that I can say in any authoritative way 
about that. It is my understanding that there are no military 
transactions of any kind going on now with Pakistan, but that 
has certainly not always been the case.
    Senator Hagel. As to Iran?
    Mr. Kelly. Iran I am frankly not as up to date as I should 
be, and frankly, sir, I do not know the line between sensitive 
information and other information. There has been a military 
supply relationship with the Iranians of some sort in the past, 
and I am frankly not able to go beyond that, sir, but I will be 
glad to provide you with a briefing either by myself or others.
    Senator Hagel. Thank you, Secretary Kelly, and we will set 
that up.
    Thank you, Mr. Chairman.
    The Chairman. Well, thank you, Senator Hagel.
    Secretary Kelly, we appreciate very much your testimony and 
your thoughtful and well-informed answers to our questions. We 
look forward to visiting with you again as you progress along 
this trail, which we are hopeful will lead to success.
    Mr. Kelly. Thank you, Mr. Chairman, very much.
    The Chairman. Thank you for coming.
    The Chair would like now to call to the witness table Mr. 
Terence Taylor, president and executive officer, U.S. Office of 
the International Institute for Strategic Studies; Mr. Victor 
Cha, associate professor of Government, School of Foreign 
Service, Georgetown University; Mr. Tom Malinowski, advocacy 
director of Human Rights Watch. Gentlemen, we welcome you.
    As I mentioned to Secretary Kelly, your full statements 
will be made a part of the record. We would ask you to 
summarize those so we could proceed to questions. Please take 
the time you need to make your points, but if you could 
summarize within a 7- to 10-minute period of time, that would 
be helpful.
    I will call upon you in the order that I announced your 
presence, first of all, Mr. Taylor, then Dr. Cha, and then Mr. 
Malinowski. Mr. Taylor, would you proceed.

 STATEMENT OF TERENCE TAYLOR, PRESIDENT AND EXECUTIVE OFFICER, 
   U.S. OFFICE, INTERNATIONAL INSTITUTE FOR STRATEGIC STUDIES

    Mr. Taylor. Thank you very much, Mr. Chairman. I am most 
grateful for the opportunity to appear before you.
    I come at this subject as a former inspector in a number of 
different countries in formal and informal inspection systems. 
So the ideas I put forward are my personal views but they are 
very much informed by the International Institute for Strategic 
Studies' book that has been published on North Korea's weapons 
programs, which has been provided to your staff. So some of the 
data and technical detail is in this book, which you have.
    Secretary Kelly I think accurately referred to the 
political context and I would perhaps summarize it very briefly 
that a successful and convincing disarmament process by a 
country requires at least two important conditions. Firstly, of 
course, the obvious one, a genuine leadership decision to 
disarm, which of course, may be subject to certain conditions, 
and also genuine and credible cooperation. Inspection has to be 
two-sided. It is not one-sided. So the disarming country has to 
comply with whatever compliance mechanism is being applied.
    I think a genuine decision to disarm is credible and 
convincing in itself, and I was very struck by the challenge 
you put in your introductory remarks. You used the term 
``absolute verification'' in your remarks. As a former 
inspector, I find that very challenging.
    But if there is an obvious decision to disarm, a kind of 
verification system and the detail that you would need is 
rather different than if you are engaged in a very elaborately 
choreographed dance with a country that has not decided fully 
to disarm. And we have witnessed that in the case of Iraq as a 
classic example, and of course, over the past 20 years or so 
with North Korea since it acceded to the Nuclear Non-
Proliferation Treaty in 1985. It took 7 years before they 
accepted the safeguards agreement in that particular case.
    If we were to look at South Africa, there was not an 
elaborate verification system. The international community was 
convinced. They ended their program and they gave up their 
weapons. There were visits by individual countries and 
governments. Some assurance was sought. The International 
Atomic Energy Agency was involved, but it was not an elaborate 
process. And you and Secretary Kelly referred to Libya and the 
process that is going on there, without elaborate international 
protocols. So I think it is well worth having that in the back 
of our minds as we think about this issue.
    Disarmament is obvious. You can see it. I think that is a 
very important point. If it not obvious, there is usually a 
problem.
    I will just make a few remarks about what needs to be 
verified, and I say convincingly verified, probably by a 
combination of the International Atomic Energy Agency or 
whatever mechanism might be set up--I am looking ahead as an 
optimist--or some possible agreement.
    First, in plutonium-related activities, obviously there 
needs to be a precise accounting of the production of plutonium 
prior to 1992. It requires an examination of records, analysis 
of waste disposal sites, and so on, and other related 
activities.
    The claims about reprocessing the 8,000--and I now know 
8,017--spent fuel rods will need to be verified. If the North 
Korean claims are true, over time this could result in an 
increase in the number of weapons that could be manufactured. 
It is very hard to assess that, but it could be in the range of 
two to five, if they really reprocessed all those rods over 
time. I do not mean these weapons already exist, of course.
    Given North Korea's record, confidence that a program will 
not be restarted cannot be assured without removing from the 
country all the spent fuel and separated plutonium. That has to 
be part of the process, and this will require logistic support 
being provided most appropriately by one or more of the 
participants in the six-party talks.
    The Yongbyon 5 megawatt reactor and related facilities--we 
must not forget the related facilities that fabricate fuel--
would have to be decommissioned under international 
supervision. The IAEA could take a leading role in that to make 
sure it is done safely and effectively. This could be done 
either by removal of the components or with destruction onsite, 
and that may actually even be the safest way.
    The construction work on the other reactors, although work 
has stopped, the 50 megawatt reactor and the 200 megawatt power 
stations, would have to end and an assessment made as to 
whether critical components should be removed or destroyed.
    Given the admissions--and we have heard more today from 
Secretary Kelly about the uranium enrichment program. That has 
to be part and parcel of the process. We have had admissions 
and then denials of a clandestine uranium enrichment program, 
and there is a distinct lack of information; I suspect not only 
in the public domain but also in the government domain too.
    The minimum steps required in this context, as I see it are 
as follows. As Pakistan was the most likely source of supply 
for the gas centrifuge design and components, a full disclosure 
of the exchanges between North Korea and those in Pakistan and, 
of course, Abdul Qadeer Khan and his colleagues and others in 
Pakistan, is required from both countries. Given the transfer 
of the technology and possibly equipment might have only taken 
place in the late 1990s, the industrial effort required to 
construct and operate a production plant, if you take account 
of that, it is unlikely that North Korea is yet in a position 
to produce weapons-grade HEU, highly enriched uranium. 
Nevertheless, given that North Korea may well have most of the 
materials in country, unchecked it could conceivably have a 
capability to produce perhaps up to 75 kilograms of HEU per 
year. That is enough for two or three simple implosion type 
devices. The calculations for this you can find in our IISS 
book.
    There is less certainty that fissile material was exchanged 
between North Korea and Pakistan, either HEU or plutonium. And 
a judgment on this is only possible with full disclosure on the 
nature of the exchanges. And the lead on this really has to 
come from Pakistan.
    If it is determined there is a uranium enrichment program 
in North Korea, then the sites would have to be declared, 
inspected, and dismantled. Confidence in this step could only 
be reasonably assured by an agreement to allow whatever 
inspection commission is set up to visit all suspect sites. 
However, this would only work if North Korea volunteered 
accurate information on the status and location of enrichment 
facilities. We would not want this inspection commission to 
play ``catch as catch can,'' recalling the words of Dr. Hans 
Blix, when he was talking about the Iraqis, even in the late 
stages of the inspections by the U.N. inspectors in Iraq.
    As part of a verification process, one would have to deal 
with the weapons and delivery means. It is not just a question 
of the enriched uranium and the plutonium. As we have heard 
earlier in this hearing, North Korea might have produced enough 
plutonium to make at least two nuclear weapons. That is the 
common assessment. And if reprocessing of spent fuel has, 
indeed, taken place--we do not know for sure, of course, that 
has happened--then if it got underway early, what we need to do 
is to find a way of dealing with that particular aspect. 
Probably the most promising aspects of a verification process 
are those related to the production of fissile material. 
Convincing evidence of the absence of operational nuclear 
weapons has to be a necessary part, but proving a negative is 
an extraordinary challenge. And it would be of particular 
interest to know whether or not North Korea has the design for 
a weapon to fit a missile warhead such as the No-dong. The 
challenge here once again is proving a negative, and the 
exchanges with Pakistan are particularly relevant in this 
context.
    Just a few points on the oversight of the disarmament 
process. There are probably three models. One could be one like 
the process taking place, or similar to the process taking 
place, in Libya, with the United States taking the lead, with 
assistance from the IAEA, and neighboring countries.
    Another would be a U.N. inspection commission of some kind.
    And a third would be an oversight body drawn from the five 
countries most intimately concerned, the four neighbors of 
North Korea and the United States, with the IAEA as an integral 
part of the process, but a commission of some kind that is 
overseeing it altogether. I think that one seems to me to be 
the most appealing. It is difficult enough as it is to climb 
this mountain ahead of them in the six-party talks without 
setting up a commission, but I think there is little 
alternative to this.
    Also, perhaps a Libya model in the case of North Korea, 
that is a more informal process, given the arraignment of the 
forces, 17,000 artillery pieces within range of Seoul, the 
capital of South Korea, for example--I think there has to be a 
more formal process. There is no question about it. Perhaps 
involving five of the six parties.
    Sequencing, coordination of the benefits of cooperation are 
the key to making it work. I have said little about that and I 
will not say a lot about that. I think others might want to 
speak about that. Appropriate responses in the form of security 
assurances, normalization, diplomatic relations, economic 
assistance, energy assistance and special measures might be 
required. But given the poor track record on the part of North 
Korea in fulfilling disarmament accords, it would seem 
reasonable to require a disarmament process be front-loaded and 
demonstrated through verification and dismantlement before 
substantive rewards are given.
    The trap for the United States and North Korea's neighbors 
engaged in the six-party talks is to avoid being drawn into a 
lengthy procedural process while, for example, a clandestine 
uranium enrichment program continues, enabling enough fissile 
material to be produced to equip a small arsenal. That is the 
real danger that we face now, and that requires elaborate 
choreographing to get around that particular difficulty.
    It would be important, Mr. Chairman, for a verification 
process to demonstrate early a genuine commitment to disarm. We 
know disarmament when we see it. It is obvious. One way to 
achieve this is to provide the opportunity for North Korea to 
demonstrate its intentions through a concurrent process of 
revelations on both plutonium and highly enriched uranium, 
those two routes to nuclear weapons. And a key to progress in 
this regard is full disclosure from Pakistan. That must not be 
forgotten. As we found in dealing with Iraq, much of our 
information came from other countries. We are dealing with a 
network. So there are actions required outside the country 
itself.
    It is vital to know what technology was transferred. Did it 
go beyond gas centrifuge technology and material to weapon and 
missile warhead design? A very important question to be 
answered. As things stand, it seems there is a good chance that 
technology in both respects was transferred, in which case it 
is not just a case of monitoring dismantlement, but also of 
maintaining confidence that prohibited programs will not be 
restarted, and this will require some form of planning for 
continuous monitoring of compliance with any agreement.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Taylor follows:]

                  Prepared Statement of Terence Taylor

    If there were an agreement with North Korea what kind of 
verification would be required?
    What is the significance of the links with Pakistan?

                           POLITICAL CONTEXT

    A successful and convincing disarmament process by a country 
requires at least two important conditions. First, a genuine leadership 
decision to disarm, which may be subject to certain conditions in a 
staged process; secondly genuine and credible cooperation by the 
disarming country with whatever compliance mechanism is being applied. 
A genuine decision to disarm can be credible and convincing if these 
conditions are met. One well-known example is South Africa when it 
divested itself of its nuclear weapons in 1992. While it is too early 
to make a definitive judgment it appears this may also be the case with 
Libya. Once a government is convinced that the benefits of disarmament 
outweigh the benefits of continuing, or at least retaining the 
capability to develop, an illegal weapons programme, the verification 
process becomes less challenging. North Korea is a state that has yet 
to fulfill these two conditions as the record over nearly two decades 
clearly shows. I make these points to make clear that with regard to 
these difficult cases there is no standard inspection system, with 
technical equipment and particular procedures that can assure the 
international community that a disarmament process is genuinely 
underway, that can be effective independently of the political context.

                       WHAT NEEDS TO BE VERIFIED?

    At a minimum the following key elements need to be convincingly 
verified by a combination of the IAEA and, probably most appropriately, 
an international commission:
Plutonium related activities
   There needs to be a precise accounting of the production of 
        plutonium prior to 1992. This will require examination of 
        records, analysis at waste disposal sites. And other related 
        activities. A task that the IAEA is well suited to conduct.

   The claims about reprocessing the 8,000 spent fuel rods will 
        need to be verified. If the North Korean claims are true, over 
        time, this could result in an increase in the number of weapons 
        that could be manufactured; it is hard to estimate precisely 
        the number of additional weapons but it would be in the range 
        of two to five.

   Given North Korea's record, confidence that a programme will 
        not be restarted cannot be assured without removing from the 
        country all spent fuel and separated plutonium. This would 
        require logistic support provided, most appropriately by one or 
        more of the participants in the six-party talks.

   The Yongbyon 5 MW(e) reactor and related facilities to 
        fabricate fuel would have to be decommissioned under 
        international supervision with, most appropriately, the IAEA 
        taking the lead to ensure it is being done safely and 
        effectively. Removal or destruction on site of the components 
        would be essential.

   Construction work on the 50 MW(e) and 200 MW(e) power 
        stations would have to end and an assessment made as to whether 
        critical components related to the construction of these 
        reactors should be removed from the country or destroyed.

                      URANIUM ENRICHMENT PROGRAMME

    Given the admissions and then denials of the possession of a 
clandestine uranium enrichment programme, and the lack of information, 
this would be the most challenging aspect of any verification 
activities. As experience in Iraq shows, if the nature of the regime 
does not change, proving a negative by an inspection process is a near 
impossible task.
    The minimum steps required in this context are:

   As Pakistan was the most likely source of supply for the gas 
        centrifuge design and components, a full disclosure of the 
        exchanges between North Korea and Abdul Qadeer Khan and his 
        colleagues and others in Pakistan is required from both 
        countries. Given that the transfer of the technology (and 
        possibly equipment) might have only taken place in the late 
        1990s, and the industrial effort required to construct and 
        operate a production plant, it is unlikely that North Korea is 
        yet in a position to produce weapons-grade HEU. Nevertheless, 
        given that North Korea may well have most of the materials in 
        country, unchecked it could conceivably have a capability to 
        produce perhaps up to 75 kgs of HEU per year (enough for two to 
        three simple implosion-type weapons) in about five to seven 
        years time.

   There is less certainty that fissile material (perhaps 
        plutonium as well as HEU) was exchanged between Pakistan and 
        North Korea. A judgment on this is only possible with full 
        disclosure on the nature of the exchanges--the lead on this 
        should come from Pakistan.

   If it is determined that there is a uranium enrichment 
        programme in North Korea then the sites would have to be 
        declared, inspected and dismantled. Confidence in this step 
        could only be reasonably assured by an agreement to allow 
        whatever inspection commission is set up to visit all suspect 
        sites. However, this would work only if North Korea volunteered 
        accurate information on the location and status and location of 
        the enrichment facilities.

                       WEAPONS AND DELIVERY MEANS

    As is well known intelligence reports indicate that North Korea 
might have produced enough plutonium to make at least two nuclear 
weapons. If reprocessing of spent fuel rods has indeed taken place 
there could in time be more. The North Koreans have at least once 
claimed to have already made a nuclear weapon--later this had been 
modified to being ``on the way to producing a nuclear deterrent.'' 
While the most promising aspects of a verification process getting 
underway early are those related to the production of fissile material, 
convincing evidence of the absence of operational nuclear weapons would 
seem to be a necessary part of the process. Of particular interest 
would be to know whether or not North Korea has the design for a weapon 
to fit a missile warhead such as the No-dong. The challenge here, once 
again, is that of proving a negative.

                  OVERSIGHT OF A VERIFICATION PROCESS

    There are three possible models for oversight of the disarmament to 
assure obligations are being met:

   One could be an ad hoc process with the U.S. taking the lead 
        with assistance from the IAEA and neighbouring countries as 
        needed. This is more in line with the approach in Libya;

   Another could be the setting up of a UN inspection 
        commission by a UN Security Council mandate;

   A third is to set up an oversight body drawn from the five 
        countries most intimately concerned, that is to say those 
        involved in the six-party talks. It would be important to also 
        have the IAEA as an integral part of this process.

    The last of these three options seems to be the most appealing as 
the oversight of a disarmament process would have to be sequenced and 
coordinated with other aspects of a comprehensive process. This is more 
likely to be achieved, difficult enough as it is, within the forum of 
the six-party talks than in the wider UN Security Council setting. In 
any case it is probably wise to distance the UN Security Council from 
the day to day compliance oversight in the event that a serious setback 
in the process with broader international security consequences occurs. 
Given the arraignment of forces (conventional and others) along the 
border between North and South Korea and the nature of the regime in 
the North, there is no prospect for an ad hoc process to succeed.

      SEQUENCING AND COORDINATION WITH THE BENEFITS OF COOPERATION

    I have said little about the sequencing and coordination of these 
verification activities with appropriate responses in the form of 
security assurances, normalisation of diplomatic relations and energy 
and economic assistance. Given the poor track record on the part of 
North Korea in fulfilling disarmament accords it would seem reasonable 
to require that the disarmament process be front-loaded and 
demonstrated through verification and dismantlement, before substantive 
rewards are given. The trap for the U.S. and North Korea's neighbours 
engaged in the six-party talks to avoid is to be drawn into a lengthy 
procedural process while, for example, a clandestine uranium enrichment 
process continues enabling enough fissile material to be produced to 
equip a small arsenal of nuclear weapons.
    It would be important for a verification process to demonstrate 
early a genuine commitment to disarm. One way to achieve this is to 
provide the opportunity for North Korea to demonstrate its intentions 
through a concurrent process of revelations on both the plutonium and 
HEU routes to nuclear weapons. A key to progress in this regard is full 
disclosure from Pakistan. It is vital to know what technology was 
transferred. Did it go beyond gas centrifuge technology and material to 
weapon and missile warhead design? As things stand it seems that there 
is a good chance that the technology in both respects was transferred. 
In which case it is not just a case of monitoring dismantlement but 
also of maintaining confidence that prohibited programmes will not be 
restarted; this will require some form of continuous monitoring of 
compliance with any agreement.

    The Chairman. Well, thank you very much, Mr. Taylor. I am 
aware that you must leave at 6 p.m. and perhaps that will be 
true of all of us. I wanted to be reassuring that I know of 
that. We appreciate the time that you have already devoted 
prior to coming to the table. We appreciate your testimony.
    Dr. Cha, would you proceed.

    STATEMENT OF DR. VICTOR D. CHA, ASSOCIATE PROFESSOR OF 
  GOVERNMENT, SCHOOL OF FOREIGN SERVICE, GEORGETOWN UNIVERSITY

    Dr. Cha. Well, thank you. Senator Lugar, thank you. It is a 
pleasure to have the opportunity to testify again before your 
committee.
    I have been asked to speak on the status of North Korea's 
economy and I am going to do that in three ways: very briefly, 
overview what the economic reforms are, assess their meaning, 
and then talk about how they relate to the security equation.
    In terms of an overview of the North Korean economic 
reforms, the July 2002 market liberalization reforms generally 
have four parts to them. The first was a basic monetization of 
the economy, which meant lifting price controls and allowing 
supply and demand to determine prices. Second, the government 
abandoned the artificially high value of the North Korean won, 
depreciating the currency to try to induce foreign investment. 
Third, the government decentralized economic decisionmaking, 
including cutting government subsidies and allowing farmers' 
markets to operate, transplanting managerial decisions to the 
local industries. And then fourth, the government pressed 
forward with the special administrative and industrial zones to 
try to induce foreign investment.
    There is no denying the significance of these July 2002 
reforms. They represent the first attempt in the regime's 
history at wide-scale economic change. They have tried to 
encourage competition with these reforms, and visitors to North 
Korea talk about a new spirit of entrepreneurship, albeit 
limited.
    But the fact that these reforms are significant does not, 
however, make them successful. The obstacles to success are 
many. First, one should not interpret these measures as the 
equivalent of North Korea's religious conversion to capitalism. 
Many of the reforms are situationally rather than 
dispositionally motivated, and what I mean by that is they are 
reforms that are coping mechanisms to deal with problems in the 
economy immediately more than they are a longer-term decision 
to convert to capitalism.
    Second, the economic reforms will test the government's 
ability to deal with these three problems have emerged as a 
result of the reforms. That is high inflation, economic losers, 
and urban poor. Low supply and low output have led to massive 
increases in price and further devaluation of the currency. 
Just by comparison, in 1979, China's initial price reforms 
drove up the price of rice by 25 percent. In North Korea, it is 
estimated now that the price of rice has gone up by at least 
600 percent, if not more, and the North Korean currency has 
depreciated exponentially.
    Finally, there is fragmentary evidence that even in those 
sectors of the labor force favored with the largest wage hikes, 
these groups are still discontented. Defectors coming across 
the Chinese border complain that the promise of higher wages 
has not been kept with workers receiving only about 800 won and 
then nothing after October 2003. So the upshot here is that 
money illusion is quickly wearing off in North Korea, giving 
way to a new class of urban poor and economic losers, 
potentially numbering in the millions that could be difficult 
to control.
    Third, the ultimate success of these reforms rests on the 
North's capacity to secure international food supplies, to 
secure loans, and to obtain technical training in a variety of 
different areas. As we all know very well, the likelihood of 
the North Koreans getting any of this without a complete and 
verifiable resolution of the North Korean nuclear problem--I 
think the chances of that are very slim.
    Let me just make three quick points in terms of linking 
these economic issues to the security questions.
    The first is this whole question of the extent to which 
North Korea's economic reforms really are its ticket out of its 
current problem. I mean, is this the way that they get out of 
their current problem, their current box, if you will? And I 
think the answer there is no, and my pessimism does not stem so 
much from the flawed nature of the economic reforms, flawed as 
they are, but from the larger political lessons that history 
has taught us about closed regimes like North Korea that 
attempt reform. And that is simply Kim Jong-il needs to open up 
to survive, but in the process of opening up, he unleashes the 
forces that lead to his demise. Can he hold things together as 
he opens up? History's waste bin has been littered with former 
dictators that have tried to do that and have not been 
successful.
    Second, do these economic reforms really mean that North 
Korea has changed? Does it really mean that the North Korean 
regime is seeking to turn over a new leaf? The reason I raise 
this question is I think the common assumption is that they 
look at the economic reforms that are taking place in North 
Korea and they immediately assume that that means that the 
North Korean security preferences have changed. While that 
theoretically could be possible, there is no logical connection 
between the economic reforms and the security intentions. In 
other words, just because they are making economic reforms, 
does not necessarily mean they want to trade all of their 
nuclear weapons away for the economic goodies. In fact, it 
could be the case that North Korea wants both. They want food, 
fuel, and security as part of the economic reform plan, but in 
the end, they also want to keep some of their capabilities. And 
that goes along with North Korea's sort of ideology of rich 
nation, strong army.
    The final point I would like to make and one that has 
already been made in different ways earlier is that the Libya 
example is a very interesting example to look at in terms of 
this, and I know that for many, when you raise this question, 
they talk immediately about the differences between the North 
Korean and the Libyan case. And granted, there are many 
differences, but there are also a lot of similarities. In both 
cases you are talking about countries with very hostile 
relations with the United States. Both sought nuclear weapons 
not for the purposes of trading them away, but for the purposes 
of keeping them. Both suffered from international sanctions and 
pariah status for years. Libya was a more active supporter of 
terrorism more recently than North Korea, and the United States 
actually attacked Libya, which it has not done with North 
Korea.
    So given these comparisons, arguably Libya's turnaround is 
actually a harder case than North Korea's, and I think that is 
something that we often do not think about. The fact that North 
Korea may already have nuclear weapons--this is always the 
argument that you hear about the differences between the two. 
The fact that North Korea may already have nuclear weapons I 
think is immaterial to the comparison because, as you said 
yourself, Senator, earlier on, the whole purpose of this 
exercise is to get the North Koreans to understand that moving 
in the direction of nuclear weapons does not make the regime 
more secure. It makes the regime less secure. And that was a 
compellent exercise that looks as though it has succeeded with 
Libya, and I think that is our challenge with North Korea.
    Thank you very much.
    [The prepared statement of Dr. Cha follows:]

                Prepared Statement of Dr. Victor D. Cha

         NORTH KOREA'S ECONOMIC REFORMS AND SECURITY INTENTIONS

    Senator Lugar and distinguished committee members, I thank you for 
the opportunity to testify again before your committee. I have been 
asked to comment on the status of North Korea's economy. I do this not 
as an economist but as a political scientist, and therefore may be ill-
equipped to answer specific microeconomic questions about the North's 
reforms. Nevertheless, I hope I can offer some political judgments 
about the likely success of these reforms. In particular, I will try to 
shed light on complex relationship between these economic reforms and 
the path toward a peaceful resolution of the nuclear weapons dispute 
with Pyongyang. My brief remarks here summarize written testimony that 
I respectfully request be submitted for the record.

Overview of North Korea's Economic Reforms
    The July 2002 market liberalization reforms undertaken by North 
Korea are generally associated with four measures. The first is a basic 
monetization of the economy. The government abolished the coupon system 
for food rations, relaxed price controls, thereby allowing supply and 
demand to determine prices. In order to meet the rise in prices, the 
government also hiked wage levels--for some sectors by as much as 20-
fold [110 won/month to 2000 won/month, and for other ``special'' wage 
sectors by as much as 60-fold (government officials, soldiers, miners, 
farmers)]. Small-scale markets have sprouted up all over North Korea 
and the public distribution system has broken down.
    Second, the government abandoned the artificially high value of the 
North Korean won, depreciating their currency from 2.2 won to $1 US to 
150 won to $1 US. This measure was aimed at inducing foreign investment 
and providing export incentives for domestic Firms. The ``unofficial'' 
value of the currency has depreciated further since the reforms some 
estimate 700 won or even lower).
    Third, the government decentralized economic decisions. Measures 
entailed cutting government subsidies, allowing farmers markets to 
operate, and transplanting managerial decisions for industry and 
agriculture from the central government into the hands of local 
productions units. Enterprises have to cover their own costs. Managers 
have to meet hard budget constraints.
    Fourth, the government pressed forward with special administrative 
and industrial zones to induce foreign investment. The Sinuiju Special 
Administrative District is a proposal for an open economic zone for 
foreign businesses designed to exist completely outside DPRK regular 
legal strictures. The Kaesong Industrial District is another project 
designed in particular to attract small and medium-sized South Korean 
businesses, and the Kumgang Mountain site provides hard currency from 
tourism. All three projects sought to avoid the mistakes and failures 
of the first Rajin-Sonbong project attempted by the North in 1991, 
although these projects are still hampered by the lack of adequate 
infrastructure among other problems.

Significance
    There is no denying the significance of the July 2002 reforms. They 
represent the first attempt in the regime's history at widescale 
economic change. In addition, while DPRK propaganda still maintains 
anti-capitalist rhetoric and spurns market economic principles (unlike 
the cases of China and Vietnam), the regime now admits flaws in the 
socialist style economy as the source of the problem rather than 
blaming its economic woes on outside actors.

        . . . the socialist economic management method is still 
        immature and not perfect. . . . If we stick to this hackneyed 
        and outdated method, which is not applicable to the realities 
        of today, then we will be unable to develop our economy.\1\
---------------------------------------------------------------------------
    \1\ Editorial Comment, Rodong Shinmun, November 21, 2001.

    By decentralizing decisions, and separating the local economy from 
the central economy, local governments and counties can set their own 
production levels and prices, which encourages competition. State-owned 
enterprises have incentives now to meet government production targets 
and then sell surplus on the open market for profit.\2\ Visitors to 
North Korea note a new, albeit limited, spirit of entrepreneurship. 
Caritas and other international relief organizations report makeshift 
small-scale markets with kiosks selling drinks, cigarettes, and cookies 
as the public distribution system has basically broken down.\3\
---------------------------------------------------------------------------
    \2\ Marcus Noland, ``West-Bound Tram Leaving the Station: Pyongyang 
on the Reform Track'' October 14-15, 2002 http://www.iie.com/
publications/papers/noland1002.htm accessed February 25, 2004.
    \3\ ``NK Embarks on Initial Phase of Market Economy,'' Korea Update 
Vol. 14, No. 10 (September 30, 2003).
---------------------------------------------------------------------------
Dangers
    The fact that these reforms are significant does not, however, make 
them successful. The obstacles to success are many; allow me to 
delineate three of the more prominent ones. First, one should not 
interpret the July 2002 measures as the equivalent of North Korea's 
religious ``conversion'' to capitalism. Neither the language nor the 
nature of these initial reforms appear to have the same conviction of 
those seen in China or Vietnam. Moreover, many of the reforms arguably 
are situationally--rather than dispositionally-motivated--i.e., they 
constituted coping mechanisms to deal with immediate problems rather 
than a wholesale, prescient shift in economic ideology. Pyongyang 
authorized monetization of the economy and authorization of farmers 
markets to buy and sell goods, for example, largely because the public 
distribution system had broken down. Similarly, local managers were 
given more leeway not because the central government ``trusted'' their 
entrepreneurial capabilities, but because plunging outputs and high 
absentee rates for workers required some drastic measures.
    Second, the economic reforms will test the government's ability to 
deal with the triple horns of inflation, economic losers, and urban 
poor created by the monetization of the economy. Low supply and low 
output have led to massive increases in prices and further devaluation 
of the won. By comparison, in 1979 China's initial price reforms drove 
up the price of rice by 25 percent. In North Korea, the price has gone 
up by at least 600 percent, and the won has depreciated from 150 won 
(to $1 US) to at least 700 won.\4\ The reforms probably enabled Kim 
Jong-il to gain control of the economy by hurting those black marketers 
who held large amounts of won before the currency devaluation, but 
fixed income workers have been badly hit by the rise in prices. In 
addition, there are many workers being laid off by companies forced to 
cut costs. Finally, there is fragmentary evidence that even those 
sectors of the labor force favored with the largest wage hikes (6000 
won) are discontented. Defectors coming across the Chinese border 
complain that the promise of higher wages has not been kept, with 
workers receiving only 800 won and then nothing after October 2003.\5\ 
The upshot is that ``money illusion'' is quickly wearing off in North 
Korea, giving way to a new class of urban poor, potentially numbering 
in the millions that could be difficult to control.
---------------------------------------------------------------------------
    \4\ Oh Seung-yul, ``Changes in the North Korean Economy: New 
Policies and Limitations,'' in Korea's Economy 2003, Korea Economic 
Institute, Washington DC, 2003, pp. 74-76; Transition Newsletter World 
Bank at www.worldbank.org/transitionnewsletter/janfebmar03/pgs1-6htm 
accessed February 25, 2004. For more extreme estimates as high as 
50,000 won to $1 US, see Asia Times October 22, 2003 (Jamie Miyazaki, 
``Adam Smith Comes to North Korea'') http://www.atimes.com/atimes/
Korea/EJ22Dg01.html accessed February 25, 2004.
    \5\ Transition Newsletter World Bank at www.worldbank.org/
transitionnewsletter/janfebmar03/pgs1-6htm accessed Feb. 25, 2004.
---------------------------------------------------------------------------
    Third, the ultimate success of the reforms rests on the North's 
capacity 1) to secure international food supplies until the reforms 
start to increase agricultural output domestically; 2) to secure loans 
to finance shortages in cash-flow for managerial enterprises; and 3) to 
obtain technical training in accounting, fiscal policy, finance and 
other requisite skills.\6\ The North's ability to secure this magnitude 
of help will depend on a satisfactory resolution of the nuclear crisis 
(the relationship between the economic reforms and North Korea 
intentions on the nuclear program is discussed below). In the interim, 
however, Pyongyang has been able to muddle through with the help of aid 
from China and South Korea. North Korea needs to meet the upward 
pressure on prices created by the reforms with either increased 
production (not feasible yet) or increased imports. The growth in North 
Korean imports over the past two years has largely been financed by aid 
inflows from Seoul and Beijing. As Nicholas Eberstadt argues, Chinese 
aid goes beyond what is publicly reported, with the best indicator 
probably being the trade deficit between the two countries: ``The 
DPRK's seemingly permanent merchandise trade deficit with China 
actually constitutes a broader and perhaps more accurate measure of 
Beijing's true aid levels for Pyongyang (insofar as neither party seems 
to think the sums accumulated in that imbalance will ever be corrected 
or repaid).'' \7\ In addition to Chinese aid, the North has received 
easily over $1 billion in aid from South Korea, over 1 million tons of 
food from Japan, and over $1 billion in aid from the United States 
since the mid-1990s. Indeed, these aid ``revenues'' have probably 
constituted the most successful part of its economy today.
---------------------------------------------------------------------------
    \6\ Ruediger Frank, ``North Korea: Gigantic Change and a Gigantic 
Chance Nautilus Policy Forum Online, May 9, 2003 http://
www.nautilus.org/fora/security/0331--Frank.html accessed February 25, 
2004.
    \7\ Nicholas Eberstadt, ``North Korea's Survival Game,'' unpub. 
paper, presented at the AEI-Chosun Ilbo meeting, February 12-13, 2004, 
Washington, DC.
---------------------------------------------------------------------------
    Perhaps the most interesting discussions about North Korea's 
economic reforms are the political questions and judgments they 
instigate rather than the success of the reforms themselves.
Rich Nation, Strong Army?
    First, do these economic reforms constitute North Korea's primary 
path out of its current decrepit state? In other words, do the nature 
of these reforms--on a grander scale--promise the Kim Jong-Il regime 
its stated goal of ``kangsong taeguk'' or rich nation/strong army? I 
answer this question not as an economist but as a political scientist 
when I say that I do not believe such a goal is achievable. My 
pessimism stems not so much from the flawed nature of the reforms 
(flawed as they are), but from the larger political lessons that 
history has taught us about closed regimes that attempt such reforms. 
Kim Jong-Il, like many totalitarian leaders before him, faces a 
fundamental and almost inescapable reform dilemma--he needs to open up 
to survive, but in the process of opening up, he unleashes the forces 
that lead to the regime's demise. Resisting the system in North Korea 
today is virtually impossible because the society is so closed. The 
masses are preoccupied with basic subsistence. And the elite seek only 
to ensure their relative share of the sparse gains that could be had 
from the system rather than contemplating a change of it. Any opening 
begins to generate a spiral of expectations and inexorable forces for 
change--the overturning of systems like North Korea occur not when 
things are at their absolute worst, but when they begin to get better.
    Arguably, the first step in this direction was taken with the July 
2002 price reforms. These reforms have affected a much wider swath of 
society (in terms of inflation, currency value, etc.) than a closed off 
special economic zone. Hence, what is good economically for North Korea 
may be bad for the Kim Jong-il regime. Could the DPRK leader hold 
things together as he seeks economic reform? History's wastebin is 
littered with other similarly-intentioned dictators.

Time on Whose Side?
    Another question raised by the DPRK's economic reforms--in 
combination with international relief aid--is whether they suffice in 
providing the regime enough resources to continue muddling through. The 
public policy debate on North Korea implicitly refers to this as the 
``time is on whose side?'' question. Some believe time is on the side 
of the United States and allies as it can simply wait out the DPRK 
regime, applying constrictive measures like the proliferation security 
initiative, thereby slowly allowing the regime to collapse of its own 
weight. Indeed, some estimates put the DPRK's revenues from missile 
sales and illicit activities at nearly one-tenth their former value as 
a result of PSI measures. Others believe time is on the side of the 
North Koreans as Pyongyang feels no pressure (diplomatic or otherwise) 
to stop building their nuclear weapons programs while they continue to 
subsist on international goodwill and contributions to their ``aid-
based economy.'' Proponents of the former view implicitly believe that 
the U.S. objective is regime change. Proponents of the latter view 
believe the North Korean objective is to become the newest nuclear 
weapons state.
    The answer to this question, in my opinion, is somewhere between 
these two extremes and is entirely dependent on tactics (rather than 
the goals of the U.S. and DPRK). Whose side time is on depends not on 
the success of Pyongyang's economic reforms but on the unreported aid 
that continues to flow from South Korea and China to the North. North 
Korea can continue to muddle through in the face of international donor 
fatigue, the complete cessation of humanitarian aid from Japan, and 
other aid sources as long as Seoul and Beijing continue to aid North 
Korea. Reliable numbers on South Korea's unreported aid are difficult 
to come by. Since 1995, the ROK Unification Ministry estimates that 
$2.4 billion in aid has been provided to North Korea by Japan, the 
U.S., South Korea, the EU, and the UN (food, fertilizer, medicine, and 
fuel oil). But one suspects that there is another story behind the 
official statistics. As one long-time international aid worker very 
familiar with North Korea put it figuratively, ``North Korea has its 
own `911' number--access to state-of-the-art health care, agricultural 
support, and aid . . . and that number rings in Seoul.'' \8\ In the 
case of China, it has been reported that Beijing provides some $470 
million in aid annually to North Korea, amounting to 70-90 percent of 
fuel imports and 30 percent of grain imports.\9\ China has reportedly 
increased shipments of corn and wheat in early 2003; and last fall 
during the visit of Wu Bangguo reportedly offered $50 million in aid. 
Japanese media reported that the aid was nominally for a glassworks 
plant, but Pyongyang could spend the aid at their discretion.\10\ China 
has also increased trade in 2003 with NK by nearly 40 percent according 
to the Korean International Trade Association. North Korean fuel 
imports from China rose 53.2 percent to $187 million reflecting the end 
of U.S. shipments of HFO. If these aid inflows were to cease or 
constrict in any way, North Korea would feel significantly more 
pressure in the status quo than they do now despite the activities of 
the PSI.
---------------------------------------------------------------------------
    \8\ Off-the-record comments by international relief worker.
    \9\ Pan, Philip P. ``China Treads Carefully Around North Korea,'' 
Washington Post, January 10, 2003, p. A14.
    \10\ Chambers, ``Managing a Truculent Ally: China and North Korea, 
2003,'' unpub. Manuscript, Fairbank Institute, Harvard University, 
February 23, 2004; ``China's Top Legislator Meets DPRK premier,'' 
Beijing Xinhua, October 30, 2003; ``China to Provide Grant-in-aid to 
DPRK,'' Pyongyang KCNA, October 30, 2003; International Herald Tribune, 
Jan. 12, 2004.
---------------------------------------------------------------------------
Economic Intentions, Security Preferences?
    The economic reforms, regardless of their ultimate success, are 
significant for the political debate over North Korea. Many argue that 
the unprecedented and far-reaching nature of the reforms demonstrate 
North Korean intentions to seek integration into the international 
community, to receiving engagement by the U.S. and allies, and to trade 
their nuclear programs for help from the outside world. The danger of 
fixating on the economic reforms, however, is that we may be 
attributing much more to North Korean security preferences than exist 
in fact. There is no logical link between DPRK desires to reform on the 
economic front and a change in their security intentions. To seek 
economic reforms and pursue a ramping up of national power through 
nuclear weapons and ballistic missiles is not only plausible, but also 
fully consistent with the concept of ``rich nation, strong army.'' This 
is not to deny that there could be economic arguments for pursuing WMD 
programs to augment/replace their conventional military. But the point 
is that the DPRK could divorce its economic intentions from its 
security preferences. Economic reform does not necessarily mean they 
are equally interested in trading away their nuclear weapons--a common 
and mistaken assumption made by many analyses of the economic reforms. 
Pyongyang could, in fact, want to have its cake and eat it.

The Stakes for North Korea and the ``Libya model''
    Perhaps the most important lesson of studying North Korea's 
economic reforms is the simple and most parsimonious one--the stakes 
are not only high, but the survival of the regime hinges on their 
success. In this sense, the stakes for North Korea in terms of 
potential gains are arguably even higher than those experienced by 
Libya. Libyan leader Gaddafi's announcement to allow unconditional 
international inspections and disarmament of the country's nuclear 
programs in return for the promise of international support has 
elicited many observations of how different the North Korea and North 
African cases are. Gaddafi's ear was had by a group of open-minded 
reformists (including his son). Secret negotiations through the 
British--and outside any interagency process--took place for years 
before an agreement. And as North Koreans are fond of saying, Libya did 
not yet have nuclear weapons when it agreed to dismantlement.
    Despite these differences, there are a number of striking 
similarities between the two cases. Both countries had very hostile 
relations with the United States. Both initially sought nuclear 
weapons, not for the purpose of trading them away, but for the purpose 
of keeping them. Both suffered from international sanctions and pariah 
status for years. Moreover, Libya was an active supporter of terrorism 
more recently than North Korea. And the United States actually attacked 
Libya, followed by a period of UN sanctions, neither of which have 
occurred yet in the North Korea case. Given these comparisons, arguably 
Libya's turnaround was a harder case than that of North Korea. The fact 
that North Korea may already have nuclear weapons (i.e., compared with 
Libya's potential capabilities) is immaterial to the comparison. As 
noted, both countries pursue WMD for the purpose of keeping them 
initially. It was only after a period of compellent sanctions that 
Tripoli made the critical calculation that moving in the direction of 
nuclear weapons made the regime less, not more secure. This is the same 
compellent challenge I believe we face with North Korea.

    The Chairman. Thank you very much, Dr. Cha.
    Mr. Malinowski.

  STATEMENT OF TOM MALINOWSKI, WASHINGTON ADVOCACY DIRECTOR, 
                       HUMAN RIGHTS WATCH

    Mr. Malinowski. Thank you, Mr. Chairman, Senator Hagel. 
Thank you for inviting me and for keeping the human rights side 
of this as part of the picture throughout your examination of 
North Korea.
    My job here is to argue that there are really two reasons 
why we ought to be losing sleep over this country: first of 
all, the nuclear issue which threatens our security, but also 
political repression so complete that it should seriously 
challenge our conscience. Some day when this country does open 
up, I predict we are going to be truly horrified by what we see 
and find there, and we are going to ask ourselves whether we 
could have, whether we should have said or done more today to 
address those issues.
    Now, it is a closed society. Human rights groups cannot go 
there. There is a lot that we do not know, just as there is a 
lot that we do not know about the nuclear issue and everything 
else. But as people began to come out of North Korea during the 
famine, we did gain witnesses who could speak to their 
experiences, and now there is a great deal we do know.
    We know, of course, that this is a government in North 
Korea that attempts to control every aspect of people's lives, 
including their private lives. There is no free press, no civil 
society, no freedom to worship even privately.
    We know that the government divides all North Korean 
citizens into three classes, core, wavering, and hostile, upon 
which everything from your access to food, medicine, education, 
employment depends, and that these classifications pass on from 
generation to generation.
    We know that people who run afoul of this system are 
punished severely, often in the system that you mentioned, 
Chairman Lugar, of penal labor colonies that are reminiscent of 
the Soviet gulag, where it has been estimated that up to 
200,000 prisoners are now held, worked, tortured, starved often 
to death.
    We also know, of course, that the North Korean Government 
has sought to isolate its people completely from the outside 
world, indeed, from all knowledge of the outside world. Reading 
foreign publications or listening to foreign broadcasts is a 
crime. Leaving the country is also a crime.
    Now, most repressive regimes that we are familiar with try 
to deny their people the right to demand an alternative way of 
life. The North Korean Government has attempted to deny people 
the ability to even imagine an alternative way of life.
    And what is particularly unique about this country is that 
people have endured this system of total control for over 50 
years, which means that the vast majority of North Koreans do 
not even remember living in a different kind of country. There 
is no precedent for this. This is not East Germany. This is not 
China. This is not Vietnam. It is a country that we need to use 
the word ``Orwellian'' to describe because we really have to 
turn to literature to find the vocabulary to describe the 
situation.
    Now, there has been some change over the last decade, 
brought about in part by this famine as people started escaping 
north to China, bringing their stories with them. 
Unfortunately, in China the migrants have also faced terrible 
abuses, including the risk of being forced back to North Korea 
where they are detained, interrogated, and punished by their 
government for the crime of having left.
    Now, the question we all face is what can we do, if 
anything, from the outside about these horrors, and in facing 
that question, the first conclusion I come to is that further 
isolation of North Korea is not going to help. Now, it is 
tempting to hope that squeezing this country further might 
bring about some kind of destabilization or collapse, but for 
that to happen, someone inside the country is going to have to 
act, and unfortunately there is political opposition in North 
Korea, no civil society from which an opposition could emerge, 
and little awareness of the very idea that opposition is even 
possible.
    As for hunger, well, no totalitarian government has ever 
been brought down by a famine. In fact, these kinds of 
governments often use hunger to keep their people docile and 
dependent on the state. So it works the other way around.
    The state of war between North Korea and the United States 
also does not help because it enables the government to keep 
mobilizing people to work for the state and to mobilize this 
sense of hatred of the outside world.
    So the bottom line for me is this. The North Korean 
Government has imposed this isolation on itself. It is a 
deliberate defense mechanism against a political awakening by 
its people. It has turned North Korea, in effect, into a cage, 
but a cage in which there are a few tiny holes in which 
virtually everyone in the country is desperately trying to peer 
through. And our human rights agenda, I think, has got to be to 
widen those holes as much as possible, at least to begin with 
so that more light can shine through.
    Now, how do we do that? Information is key. There are 
proposals to expand foreign broadcasting to North Korea, which 
ought to be pursued as people begin to bring radios in 
clandestinely. We should seek every chance to get humanitarian 
organizations, human rights organizations into the country and, 
of course, to press the North Koreans to give them better 
access and freedom of movement. That kind of contact could help 
create among North Koreans at least the consciousness that a 
different existence is possible, and it could also help expose 
the horrors that they face more to the outside world, which 
would place, in turn, more pressure on the government to stop 
denying them and to start gradually doing something about them.
    Now, obviously, North Koreans are going to try to control, 
manipulate all of these contacts. So I do not think we can 
simply pursue engagement entirely on North Korea's terms. And 
then the question is, how do we set the right terms and should 
setting the right terms be part of the current dialog with 
North Korea on the security issue? That is the key challenge.
    Now, I am not going to argue that human rights issues by 
themselves should stand in the way of a nonproliferation 
agreement because obviously even from just a human rights 
perspective, that is an imperative, to prevent the use or 
spread of a nuclear weapon. But if we are going to be talking 
about an agreement that begins to provide the North Koreans 
with significant economic benefits, particularly significant 
outside foreign investments, then I believe the human rights 
issues and humanitarian issues do need to be placed on the 
table, even if the demands are modest, greater access by U.N. 
human rights experts, greater transparency in humanitarian 
distribution, for example. I think the North Korean Government 
does need to understand now that these are important 
international concerns.
    We can also, of course, approach North Korea's neighbors, 
the Chinese, to stop pushing refugees back, the South Koreans 
to be a little bit less silent about these problems, and to 
also coordinate with the EU nations which have their own dialog 
with North Korea that could be usefully employed.
    I think, in conclusion, I would just say that figuring out 
how to deal with this regime is obviously a strategic 
imperative. It is also a moral imperative of the highest order, 
and I would say that the two are linked in ways that we ought 
to remember. I think it is the lesson that we learned from 
having dealt with the Soviet Union during the cold war, that it 
is possible, in fact, it is sometimes imperative, to deal with 
regimes like this on arms control for the sake of our security, 
even as they continue to repress their people. It is possible 
to manage insecurity in this way, but we do not banish 
insecurity that way. As we learned in those days, we did not 
eliminate the underlying security problems in Europe until 
there was change on the other side of the Iron Curtain, and I 
believe in the long run, the same will be true in Korea and 
that ought to be one of our goals.
    Thank you.
    [The prepared statement of Mr. Malinowski follows:]

                  Prepared Statement of Tom Malinowski

    Thank you Mr. Chairman for giving me the opportunity to testify 
today, and for ensuring that North Korea's appalling human rights 
record remains part of the picture as we consider the way forward with 
Pyongyang.
    All of us here agree that North Korea is a country over which we 
should be losing sleep. I would argue that there are two reasons for 
that, not merely one--certainly the nuclear program, which threatens 
our security, but also political repression so complete that it should 
seriously disturb our conscience. Some day, when North Korea does open 
up, and we see with our own eyes the conditions we can now only glean 
from refugee accounts, we will be horrified. And I predict we will ask 
ourselves whether we should have said and done more today, just as 
people wonder whether they should have said and done more to defend the 
victims of persecution when Stalin ruled the Soviet Union or during the 
Cultural Revolution in China. North Korea is to our time what those 
experiments in negative utopia were to their time.
    I should stress that we do not have perfect knowledge of what is 
going on in North Korea, no matter what the issue, including human 
rights. North Korea is so closed that human rights organizations cannot 
go there and conduct the thorough, well documented and corroborated 
research that we do in most other countries around the world.
    But since the North Korean famine in the 1990's when thousands of 
North Koreans began fleeing their country to China, with a few managing 
to make it to South Korea, we have been able to gather increasingly 
reliable accounts from people who have experienced North Korean 
repression first hand. My organization, Human Rights Watch, issued a 
report two years ago on the plight of North Korean asylum seekers in 
China, a report that also included many refugee accounts of conditions 
inside North Korea. Last year, the U.S. Committee for Human Rights in 
North Korea issued a report, also based on refugee accounts, exposing 
North Korea's extensive system of prison camps. The stories gathered 
from North Koreans who have escaped do not yet allow us to paint a 
complete and comprehensive picture of life inside their country. But 
they are largely credible and consistent. There is a great deal we do 
now know.
    We know that North Korean government seeks to control virtually 
every aspect of its people's political, economic and private lives. All 
citizens are required to demonstrate loyalty to the government and its 
ruling ideology; no criticism of any kind is permitted. There is no 
free press and no civil society. There is no freedom of religion--even 
private, independent worship is prohibited. No organizations of any 
kind are allowed to exist independent of the state.
    We know that the government divides all North Koreans into three 
classes ``core,'' ``wavering'' and ``hostile,'' depending on their 
loyalty to the state and social background. Those belonging to the 
``core'' class get preferential access to food, medicine, education and 
employment; those at the bottom of this class system suffer permanent 
discrimination and the most intense persecution, a fate that is passed 
from generation to generation.
    We know that those who run afoul of the state are punished 
severely, often in a system of penal labor colonies that are 
reminiscent of the old Soviet Gulag. It has been estimated that up to 
200,000 political prisoners toil in these prison camps in North Korea. 
They are often tortured, starved, and forced to perform slave labor in 
mining, logging and farming enterprises. For many, imprisonment is a 
death sentence.
    Those sentenced to such camps include not only people accused of 
crimes but their parents, children, siblings or other relatives. 
Likewise, people may be punished or blacklisted in North Korea not just 
for their own political opinions or actions but for the imputed 
opinions or actions of relatives, even long-dead ancestors. People 
whose parents or grandparents were suspected of collaborating with the 
Japanese during Japan's occupation of Korea or those who went south 
during the Korean War, for example, are often assigned to the worst 
schools, jobs and localities, and sometimes wind up in labor camps.
    We also know that the North Korean government has sought to isolate 
its people completely from the outside world, indeed from all knowledge 
of the outside world. All televisions and radios are fixed so they can 
transmit only state channels. Reading foreign publications or listening 
to foreign broadcasts--or tampering with TV's or radios for this 
purpose--is a crime. Leaving the country is also a crime.
    Most repressive governments deny people the right to demand an 
alternative way of life. The North Korean government has attempted to 
deny people the ability even to imagine an alternative way of life. It 
has attempted to create a society in which everything that is not 
required of its citizens is forbidden to them; a society in which 
freedom of choice does not exist, even in day to day life. Many people 
have described this as ``Orwellian.'' And it is telling that only in 
literature can we find the vocabulary to describe what we know of North 
Korean society. It is a society like no other in the world today. And 
one of its most historically unique, and troubling, features is that 
the people of North Korea have endured this system of total control and 
isolation for over 50 years--for multiple generations--which means that 
the vast majority of North Koreans have no memory of living in a 
different kind of country.
    The greatest change North Korea has experienced in the last decade 
was brought about by the famine that began in the 1990's--for the first 
time, large numbers of North Koreans began fleeing the country. Tens of 
thousands of North Koreans now live in hiding in China (the estimates 
range from 10,000 to 300,000), mainly in the province of Jilin, mixed 
among Chinese citizens of Korean ethnicity. To reach China they have 
defied their government's criminal prohibition on illegal exit and 
China's rigorous border controls. They are inaccessible except to a 
handful of intrepid journalists and activists, and barely acknowledged 
by China, which maintains a policy of immediate expulsion to maintain 
good relations with North Korea and to deter further migration.
    Once in China, these migrants face a range of abuses, from 
extortion to rape to forced prostitution and trafficking to torture in 
prison. They are unable to call on the Chinese government for 
protection. China is a party to the 1951 UN Convention on the Status of 
Refugees and its 1967 Protocol (the Refugee Convention), which forbids 
states to push back migrants ``to the frontiers of territories where 
[their] life or freedom would be threatened on account of . . . race, 
religion, nationality, membership of a particular social group or 
political opinion.'' But China refuses to protect North Koreans, 
regardless of their reason for leaving, and regardless of the 
likelihood they will be persecuted on return.
    In fact, even if they did not leave for political reasons, North 
Koreans who are forced back to their country face a high likelihood of 
persecution, if only because the act of leaving North Korea made them 
criminals in the eyes of their government. North Korean authorities 
detain and interrogate returned migrants about their activities and 
experiences in China. Many are imprisoned for up to several months in a 
string of detention facilities along North Korea's border with China. 
Those suspected of more serious offenses, including repeated border 
crossings, contact while in China with South Koreans or foreign 
missionaries or aid workers or journalists, as well as marriage, 
pregnancy or other evidence of a sexual liaison while in China, are 
subject to greater punishment, including being sent to a labor camp 
and, in some cases, reportedly, execution. There are also reports that 
women who were pregnant when they were returned to North Korea have 
been subjected to forced abortions, or had their babies killed 
immediately after birth.
    As we learn of these horrors, Mr. Chairman, the question we face is 
what can be done about them from the outside?
    We can begin by approaching North Korea's neighbors. China should 
be pressed to stop forcibly returning North Korean migrants to their 
country, to grant all North Korean migrants an indefinite humanitarian 
status that would protect them from harassment, extortion and 
exploitation, and to give the U.N. High Commissioner for Refugees a 
presence on the North Korean border and a role in screening asylum 
seekers. These issues should be part of any discussions the United 
States conducts with China on North Korea. South Korea should also be 
challenged to be less silent about the plight of North Koreans. At the 
very least, South Korea should support the resolution on North Korea 
that the U.N. Human Rights Commission will be considering in the next 
few weeks, instead of remaining completely on the sidelines as it did 
last year.
    But the most difficult challenge lies in deciding whether more 
direct efforts can be made to ease repression inside North Korea 
itself.
    In facing this challenge, the first conclusion I come to is that 
further isolation of North Korea will not help.
    Some may hold out hope that squeezing North Korea will destabilize 
its government or even bring it down, leading inevitably to a better, 
freer life for its people. But it is hard to see how such a strategy 
would actually work. Just who will act inside North Korea to bring such 
change about, and how? There is no political opposition in North Korea, 
no civil society from which an opposition could emerge, and little 
awareness of the very idea that opposition is possible. As for hunger--
it might lead North Koreans to despair, even to anger, but history 
teaches that it rarely drives people to revolt. The North Korean 
government has presided securely over many periods of economic 
distress. Its leadership and elite supporters have been well taken care 
of. Its failed economic policies are not necessarily a threat to its 
political control; after all, their primary purpose has been to help 
maintain political control.
    The formal state of war that has existed between North Korea and 
the United States and its allies also has arguably helped the 
government maintain its grip. It has enabled the government to stoke 
fear and even hatred of the outside world among its people, to distract 
them from their daily sacrifices, to mobilize them for labor and 
service to the state. Once again, all we have to do is to dig up our 
old copies of Orwell's 1984 to see how this phenomenon works.
    The bottom line is this: North Korea's isolation has been self-
imposed. It is a deliberate defense mechanism against a political 
awakening among the North Korean people and against political change. 
Those who seek change should therefore work to ease that isolation, on 
the right terms. Our human rights agenda for North Korea should begin 
with bringing this nation out of solitary confinement. It should be to 
shed the light of day on its people so that a better day can come.
    We should be working to increase the amount of information 
trickling into North Korea from the outside world. As more North 
Koreans obtain radios clandestinely, more foreign broadcasting, as 
Senator Brownback has proposed, will be essential. We also should be 
seeking every opportunity to get humanitarian and human rights 
organizations into North Korea, including representatives from the U.N. 
High Commissioner for Human Rights, and pressing the North Korean 
government at every turn to give them greater access and freedom of 
movement.
    In short, the more outsiders we can get into North Korea, whether 
aid workers, human rights monitors, journalists or diplomats, and the 
more we can get for them the ability to move around the country, to see 
beyond what the government wants them to see in the Potemkin capital of 
Pyongyang, the better.
    Such contact could help break through the wall of isolation and 
disinformation the North Korean government has built between its people 
and the world. It could help to create among North Koreans a 
consciousness that a different existence is possible. This is the 
essential first step if there is to be any internal pressure for change 
in the country.
    Already, there are some very limited possibilities of change in 
North Korea that can be directly attributed to the limited contacts 
that now exist with the outside world. Many residents in border towns 
are aware of the reality of life outside North Korea either because 
they have been to China or because they have watched Chinese TV despite 
the risk of arrest and imprisonment. A relatively small number of North 
Koreans also have been increasingly exposed to visitors--mostly 
tourists from South Korea--in two resort areas where they are allowed 
to sell food and interact with the tourists. Although they are 
loyalists hand-picked by the state, one cannot ignore the ``word-of-
mouth'' effect their interaction with South Koreans could have.
    More contacts could also help expose to the world the horrors North 
Koreans endure. I believe that this kind of exposure would at least 
place some pressure on the North Korean government to ease its 
repression. The concerns of the outside world may not be paramount for 
North Korea's leadership. But the government does seem to care, 
somewhat about its reputation--enough to deny that labor camps and 
torture and deprivation exist, enough to put on elaborate shows for 
visiting foreigners to convince them its people are happy, well fed, 
and free. As more outsiders have access to North Korea, and as North 
Koreans have more access to them, it will be harder for the North 
Korean government to deny reality. Instead, it may feel increasingly 
compelled to alter it.
    At the same time, we should not assume that diplomatic dialogue and 
economic engagement with the North will by itself produce the kind of 
contact with the world that encourages greater respect for human 
rights. The North Korean government will of course do everything it can 
to prevent foreigners from interacting with ordinary people and to 
manipulate what they see and hear. It will seek to ensure that foreign 
investors deal only with the state and try to retain an iron grip over 
the lives of workers in enterprises foreigners invest in. It will try 
to keep information and ideas out even as money and aid flow in. 
Engagement and interaction with the outside world should not, 
therefore, be pursued on North Korea's terms alone.
    How can we ensure that the terms of engagement with North Korea at 
least favor change? Should we press human rights and humanitarian 
issues as part of the current U.S. dialogue with the North Korean 
leadership, even as the nuclear issue remains unresolved?
    I am not going to argue that these issues should stand in the way 
of a non-proliferation agreement with North Korea. The use of a nuclear 
weapon by North Korea or by a terrorist group that obtains such a 
weapon from Pyongyang would be a horrific tragedy. Preventing it is 
also a paramount human rights imperative.
    But if we are talking about an agreement that transforms the North 
Korean government's relationship with the international community, an 
agreement that provides it with significant economic benefits, an 
agreement that opens the door to significant foreign investment in 
North Korea, then human rights and humanitarian issues should be on the 
table. Even if the demands are modest--greater access to North Korea by 
U.N. human rights experts, for example, or greater transparency in 
humanitarian aid distribution--the North Korean government needs to 
understand now that these are important international concerns.
    Outsiders who go to North Korea as it opens will also carry an 
extraordinary set of responsibilities, and should not assume that their 
mere presence in the country is enough to encourage change. Aid workers 
will have to struggle hard to fulfill their humanitarian obligations 
while reporting to the world what they see, and, to the best of their 
ability, preventing aid from being stolen or manipulated to serve the 
North Korean elite. Foreign investors who do business with North Korean 
state enterprises will have to avoid becoming complicit in horrific 
practices like slave labor. Indeed, I believe that that governments and 
the private sector should work together to develop a specific code of 
conduct for companies that plan to do business in North Korea, one that 
addresses the challenges responsible investors will face there as in no 
other place in the world.
    In sum, we should do everything we can now to ease the suffering of 
the North Korean people, because that is the right thing to do, and 
because we will want to have something to say to future generations who 
ask of us ``what did you do when you learned of the horrors North 
Koreans endure?'' But addressing the human rights tragedy in North 
Korea is more than a moral imperative--it is, ultimately, part of the 
larger challenge of building a more secure Korean Peninsula.
    We just need to remember the lessons of dealing with the Soviet 
Union during the Cold War. We learned then that in the short run, it is 
possible and often necessary to strike agreements with repressive 
governments that diminish the threat of nuclear war. We learned that it 
is possible to manage insecurity through arms control. But we could not 
banish insecurity in this way. The underlying tensions that might have 
led to war between the Soviet Union and the West did not disappear 
until people behind the Iron Curtain won their freedom and their basic 
human rights. I believe the same will be true in Korea. I believe that 
is one of the paramount goals we should be working for, right now, for 
the sake of the North Korean people, and the security of all people.

    The Chairman. Thank you very much for your testimony. Let 
me just say that I appreciate your mentioning, Mr. Malinowski, 
that our hearing was constructed to hear from Secretary Kelly 
about developments on the current negotiations for which he is 
a point man for our country, along with his associates. We also 
wished to try to think through, if Mr. Kelly is successful, or 
the six powers to be more accurate are successful, how we 
physically go about the disarmament process. What kind of an 
economy is there now? What sort of economic ramifications will 
there be? Obviously we also care about the status of human 
rights of the people, and how this might progress.
    There are a good number of people from whom we have heard 
during these hearings on North Korea over the course of the 
last couple of years who obviously have one theme to stress 
that is greater than another. For instance, to pick up your 
first point, should we have done more? Should we let our 
consciences be our guide? Many would say yes. As a matter of 
fact, one way of doing that is to strike North Korea and remove 
the regime and get on with it. In other words, why are you 
waiting? Here are people who are suffering.
    Before we get very far down that trail, South Koreans and 
others who are in South Korea, 30,000 American soldiers, 
100,000 missionaries, business people, and so forth, say well, 
what about us? We are in harm's way even while you are busy 
liberating North Koreans.
    I have made, not to be provocative, suggestions in hearings 
in which Mr. Kelly has been involved, that we might adopt as a 
conscious procedure one of encouraging refugees to come to the 
United States from North Korea. Now, we have visited, I am 
sure, through diplomatic channels with the Chinese, but they 
are very reticent to allow the first North Korean to come 
across the border. As a matter of fact, perhaps until these 
current negotiations, some of their policies have been guided 
by the need to maintain this regime, however odious it might 
be, if in fact the problem could be contained within the 
borders of North Korea, as opposed to spreading to China. The 
South Koreans have often felt the same way, despite futuristic 
thoughts of a united peninsula.
    My suggestion did not really go anywhere. Not a whole lot 
of refugees have been accepted. Not a whole lot have been 
encouraged, even though it does at least begin to open up for 
some of us a different kind of conversation with people who 
might come out, who might have something to say, or maybe even 
still have some communication, difficult as that may be, with 
their kinfolk in the country.
    I am encouraged by what we heard today. As opposed to the 
previous round of negotiations or the bilaterals that have 
preceded, there does seem to be much more of a common 
understanding that the nuclear program must go. We need much 
more conversation among the parties, as Secretary Kelly 
mentioned and as I commended. Diplomacy may be starting up in 
that part of the world more seriously, with people talking to 
each other.
    Our own relations with the Chinese have improved 
materially, I would argue, during this period of time, because 
we are visiting about North Korea. We have had some reason for 
a good number of Americans to be talking seriously about 
strategic issues, about issues of war and peace and 
negotiations. That probably has been healthy for us, as well as 
maybe for others.
    It has been reassuring to the South Koreans that diplomacy 
has proceeded this far, as opposed to there being fears that 
somehow or other a military strike might come unexpectedly for 
them and despite their strenuous objections, so that they might 
thereby be forced to come into this.
    I have never been clear about the role of the Russians in 
all of this. I want to learn more about that, maybe in future 
briefings.
    It appears to me that what Dr. Cha has to say about the 
economy is interesting, but also disquieting. Namely, there are 
reforms going on here, but as he points out, they are unlikely 
to be tremendously successful. If, in fact, the regime did 
pursue these reforms with a great deal more vigor and 
sophistication, it might be the end of the regime. You keep 
getting back again to the nuclear business, and the longevity 
of the regime, and how all this is interrelated.
    As Mr. Kelly says, we are going to have talks with some of 
the parties. We are going to be in touch all the time during 
this period of time for a formal attempt to come together, as 
the six powers, again in June. What should be the agenda for 
what we have to say to the Chinese or to the Japanese or to the 
South Koreans or to the Russians?
    In other words, given the status that Mr. Kelly describes 
of where we are now, how do we put into play each of the 
objectives that you have discussed, in addition to ones that he 
has? What should we concentrate on? How do we communicate this 
to the American people? What should be communicated to us, and 
therefore, to the world, so that there will be some 
understanding of what we are about here? This is a unique 
negotiation.
    The Iranian business is very different from that, although 
that still is in a situation of diplomacy. Very clearly we are 
not making much headway with Syria, but we might. From time to 
time we had hearings about that. Likewise, as regards the 
Indian-Pakistani situation, we are developing relations there. 
That is interrelated with what you are talking about here 
today.
    Given just the six powers situation, as it has developed, 
what advice and counsel would any of you have? Mr. Taylor, do 
you have some thoughts about that?
    Mr. Taylor. Well, I will concentrate on the disarmament 
side. I think, Senator, that what I would be looking for, if I 
was part of this process and I would be persuading the other 
parties in the talks, is that there ought to be a requirement 
for an early demonstration of a commitment to a disarmament 
process. That would have to come soon within a specified 
timeframe, and perhaps ideally to avoid a staged process, one 
after the other, being protracted over many years, two things 
that are concurrent.
    My suggestion in the final part of my remarks was something 
on the plutonium side, perhaps allowing the IAEA access to be 
able to assess and be given sufficient information to assess 
the past production of plutonium before 1992; on the other 
hand, at the same time, to be given information on the highly 
enriched uranium. That would be a challenge for North Korea, 
but I think the circumstances demand a challenge.
    And if North Korea was to respond in a positive way, I 
think that would be a very important signal. You have alluded 
and others have to the behavior of Libya. Their actions 
demonstrated an early commitment. That is what we should try to 
achieve with North Korea.
    I think North Korea is more of a challenge. I disagree a 
little bit with Professor Cha on that. I think it is nearly 1.5 
million personnel under arms, the 17,000 artillery pieces--it 
is the conventional capabilities arraigned alongside of the 
border which makes it, I think, dramatically different to the 
case in Libya. So it is more difficult to handle.
    But that is what I would recommend.
    The Chairman. Well, what about the 17,000 pieces? For 
instance, the IAEA was in North Korea, so they have had some 
experience with that. Your advice to the negotiators might then 
be to, once again, suggest that these people return, and that 
they are sort of an international validation of what has gone 
on historically.
    Meanwhile, what do we do with regard to the 17,000 
artillery pieces that are still menacing South Korea in the 
process?
    Mr. Taylor. Well, in a comprehensive agreement--and clearly 
there has to be a package--it would have to include confidence 
building measures in relation to the deployment of conventional 
forces, which are deployed predominantly toward the 
Demilitarized Zone. So the North Korean concentration of that 
nearly 1.5 million troops and the artillery and so on is very 
close to the border. So as part of a package, there ought to be 
an agreement at some point for some demonstration of 
withdrawal, of movement, and so on. But that is very, very hard 
to do. My recommendation, with some reluctance, will be to have 
two elements related to the nuclear program.
    The Chairman. So you have some sequence of this.
    Mr. Taylor. There would have to be some sequence, but be 
careful not to be drawn into a 25-phase process that takes 10 
years.
    The Chairman. Dr. Cha, what would you advise our 
negotiators?
    Dr. Cha. Well, a couple of observations, the first with 
regard to Secretary Kelly's testimony. The same paragraph that 
you picked up on struck me as well, which was the point about 
multilateralism in Asia. I think in particular, as someone who 
looks at this in scholarly circles, one of the big challenges 
in Asian multilateralism is that you could never set up these 
institutions in advance to deal with problems. I mean, the 
institutions would arise as a result of problems. I think you 
saw that with the U.S.-Japan-Korea coordination in 1994 over 
the North Korean nuclear problem, and we are seeing another 
version of it today.
    I would agree with Secretary Kelly that there is the 
potential for something like this growing into a larger 
multilateral institution in Asia. An issue-based 
multilateralism is what we have seen in Asia.
    In terms of how to talk to each of these parties as we run 
up to June or working levels before that, I think with regard 
to Japan, the message is basically that they need to stay the 
course. They have been very strong in terms of where they feel 
the North Koreans need to be on this problem and that they 
should basically stay the course and continue to pass this 
legislation that would enable them to put pressure on the 
regime if they needed to do so.
    For South Korea, there has to be a willingness to show that 
there is a red line with regard to where this sunshine policy 
or engagement policy is with North Korea. If they do not state 
where that red line is, the North Koreans will be able to 
continue to muddle through for as long as they would like. The 
key context here is that the July 2002 economic reforms have 
really put pressure on the entire country, and they have been 
able to muddle through largely because of aid they have been 
receiving from China and South Korea.
    With regard to China, as you stated, the Chinese are 
opposed to the idea of pressing on refugees or pressing North 
Korea overall because they are worried about regime 
instability. I think the main thing we have to remember there 
is there are costs that come with possibly destabilizing a 
regime. There are also costs that come with keeping hands off 
and allowing North Korea to become a full-fledged nuclear 
weapons state. And I would argue that those costs, since I am 
mandated to speak from the economic perspective today, are 
economic. They are not just security-wise because, again as 
Secretary Kelly said, it is going to have an effect on the 
entire region, financial ratings, investment confidence, if 
North Korea becomes a nuclear weapons state.
    Finally, for North Korea, again, it is the commitment to 
dismantlement that is absolutely key and acknowledging that 
there is this second program. To not acknowledge the second 
program is frankly ridiculous. It is like allowing a robber to 
sell back to you stuff he stole from your house without even 
admitting that he stole it. It is ludicrous.
    With regard to the Libya model, I do not think North Korea 
is an easy case, not at all. I am just trying to make the point 
that there is a tendency to immediately discount the 
possibility of moving along the lines of a Libya model because 
everybody starts from the premise that the two cases are so, so 
different. My only point was to acknowledge those differences 
but also say there are a lot of similarities there. So we 
should not write off the Libya model right away.
    The Chairman. Just from an economic standpoint, Mr. 
Malinowski has made the point that if in fact millions of North 
Koreans are starving, are extremely poor and continue to be, 
this might not be of consequence to a regime that was thinking 
of its own longevity. To what extent is some degree of economic 
success important to the regime? In other words, if you 
discount, say, four-fifths of the population as inconsequential 
in this, whether they live or die, what has to happen in this 
world for at least enough economic sustenance to occur that the 
regime, with its military force and whatever other trappings it 
has to stay there, can continue?
    Dr. Cha. I think the regime is able to continue as it is 
continuing now because it has been receiving help from the 
outside world.
    I think the interesting dilemma that is posed by the 
question you raise, Mr. Chairman, is that it really is a 
double-edge sword for North Korea because, on the one hand, it 
is absolutely true that regimes will not collapse as a result 
of famine. You are right. Hunger is used as a weapon. But at 
the same time, the regime needs to reform, needs to bring in 
some economic goodies to make side payments to the military, to 
sort of keep cohesion of the regime, but anything that moves 
beyond simply getting cash in hand from the outside that they 
can then distribute, anything that moves in the direction of 
real economic reform then creates the spiral of expectations, 
which, as we know, historically revolutions do not occur when 
things are at their absolute worse; they occur when things are 
at their worst and they start to get better.
    So I think in many ways, this is the dilemma that the North 
Korean regime faces. It needs to reform and it needs help, but 
that process of getting help is a very delicate walk for them, 
and it could mean regime stability or regime coherence in the 
short term, but in the longer-term, it could mean collapse.
    The Chairman. The irony of all this was illustrated for me. 
I had a meeting with 10 of the ASEAN Ambassadors last week to 
visit and catch up on things that they were most interested in. 
What is a common theme of most, if not all, is that China is 
importing from each of them huge amounts of raw materials and 
valuable metals and minerals and whatever they have. Sort of 
the great sucking sound that Ross Perot used to talk about 
really is happening as all this goes in. So they are developing 
very large balance of trade surpluses vis-a-vis the Chinese. Of 
course, in our politics we are always visiting the other side 
of this issue, as are some European countries, of huge deficits 
as all this is processed in China, or much of it at least, and 
exported in various ways.
    It is an unusual relationship. The dynamism of the Chinese 
economy, a huge movement of people from the rural areas to the 
cities, the loans, imprudent or not, of a banking system that 
may be headed toward a bubble, all of this is creating enormous 
economic excitement in the region. Here next door is North 
Korea, in which obviously that kind of excitement is not 
occurring. It is not really clear right away, I suppose, 
whether it would. It is not clear how the Chinese become 
engaged in this in a different way, rather than continuing with 
the exclusion that is keeping everybody in North Korea and 
providing these resources to the regime.
    Even though the Chinese may have changed their minds about 
the vigor with which they want to pursue the nuclear weapons, 
there is no evidence yet that they have changed their minds 
about the support of the country. As you are suggesting, that 
gives some sustenance to this regime, maybe to the exclusion of 
most of the people, but at least it keeps those folks alive. 
Trying to move on all of these tracks simultaneously, of 
course, is very important. That is what our hearing is designed 
to try to illustrate. I think this will require much more 
dialog with the Chinese.
    In any event, Mr. Malinowski, having heard all of this, 
please give us your counsel now on what the negotiators ought 
to be talking about.
    Mr. Malinowski. Sure. For my part, I would begin with 
China, obviously, and I think we have to stress the refugee 
issue, as difficult as it is for China to hear from us about 
that, as much as they fear a massive exodus of North Korea 
across that border. Sending people back to labor camps is a 
pretty bad thing, and it is a total violation of China's 
obligations under the Refugee Convention and we cannot ignore 
that. We have to keep raising that with the Chinese to persuade 
them not to do that, to engage with the U.N. High Commissioner 
for Refugees, and also to persuade the U.N. to be a little bit 
more aggressive in pressing the Chinese on that.
    Again, it is an important humanitarian concern, but as you 
mentioned, it is more than that because this movement of people 
across the border has been profoundly important in a political 
sense, both in bringing to light conditions inside North Korea, 
and as they move back, particularly if they can move back on 
their own and not to a labor camp, they bring with them word of 
mouth knowledge of the outside world, and that is profoundly 
important in the North Korean context.
    In terms of negotiations directly with North Korea, there I 
think at the appropriate time we need to focus in particular on 
the access issues. I would start modest since I think our goal 
has got to be to pry this country open as much as possible. To 
look at the problems that humanitarian groups have had in doing 
their work inside the country, not being able to hire Korean 
speakers, not being able to travel freely, to examine where the 
aid is going and who is getting it, trying to get people with 
more of a human rights focus into the country from the U.N. 
which is a bit less threatening potentially. I would focus on 
those issues at the appropriate moment in the dialog with the 
North Koreans.
    Others have proposed more ambitious ideas, for example, the 
notion of a Helsinki type agreement modeled on the Helsinki 
Accords with the former Soviet Union perhaps in exchange for 
security guarantees. That may be a bridge too far. On the other 
hand, we have seen that sometimes it is possible to get 
Communist regimes to make entirely insincere commitments on 
human rights and that then those insincere commitments can be 
used in the long run to try to press for change. And I think we 
do need to be thinking along those creative lines and at least 
testing these ideas as the dialog moves forward.
    The Chairman. Now, with your experience in human rights 
leadership, are we missing any techniques of having more 
information arrive in North Korea? We always describe this, I 
am sure correctly, as a very closed society, as a regime that 
works very hard to maintain no information that might upset the 
situation. Yet, here we live in a world in which, obviously, 
this is a strange exception. All kinds of authoritarian 
regimes, maybe even some that verge on totalitarianism, do not 
necessarily have internet service and antennae on top of the 
roofs, but on the other hand, it is extraordinary how 
information spreads in this world. We talk frequently about how 
small it is.
    Why is North Korea immune from the information revolution 
or any part of it?
    Mr. Malinowski. Well, one of the points I suggested in my 
testimony, in terms of what makes them unique, is that they 
have been at this for 50 years. If you think about the worst 
years of Stalin's terror, we are talking about maybe 15 years.
    The Chairman. There is no frame of reference, in other 
words, no memory.
    Mr. Malinowski. Yes. It is three generations. Think of what 
you can do in three generations if you run a successful 
totalitarian model and you can shut down a country and 
literally cut people off. No other government has been able to 
do this I think in historical memory. So it is a unique 
situation.
    How can we break through it? I do not believe in air-
dropping radios, for example. I think we have to be a little 
bit careful, keeping in mind that North Koreans can be killed 
and are, in fact, executed for listening to information from 
the outside world. But I think we can be increasing foreign 
broadcasting, as North Koreans on their own decide to take the 
risk of bringing in means of receiving that information.
    And I think we need to be looking at all the little ways of 
getting people in there, even if their fundamental task may not 
be to spread information. The fact that you have a humanitarian 
worker going into the countryside is a means of spreading 
information indirectly. Having a diplomatic mission there, for 
example--I would not be against normalization. I am a little 
more concerned about the investment and the economic aid than I 
am about normalization because I think having a U.S. diplomatic 
mission in Pyongyang would actually be helpful for this point 
of view. I would try to start modestly with all of these little 
things that exist everywhere else in the world but do not exist 
in North Korea.
    The Chairman. Mr. Kelly did today mention normalization. It 
is down the list after you sort of work through an arduous 
agenda, but at least that is contemplated as a possibility.
    Mr. Malinowski. I am not sure if I would make it the final 
carrot.
    The Chairman. You would move it up.
    Mr. Malinowski. I am more concerned about, for example, 
large amounts of foreign investment, particularly if you have, 
say, South Korean or Chinese companies going in as partners 
with the North Korean Government in a situation where there is 
even the prospect of slave labor being used. I think that is 
more dangerous from the point of view of caring about the human 
rights of the North Korean people as against diplomatic 
recognition, which I think gives them only symbolic benefits 
while actually helping us open the place up.
    The Chairman. At the risk this afternoon of a blatant 
advertisement of the Nunn-Lugar program, which has already 
occurred, but will reoccur now in this question, what happened 
when we finally did come to grips with people in Russia who 
were constructive about the situation is that they did not have 
very much money. In fact, they had no money for this type of 
disarmament that both sides felt was in their benefit. They had 
very large deficits in terms of technical resources, of people 
who could physically dismantle things, organize things. They 
had many people that were very brilliant in various ways but 
not necessarily in moving down the hill.
    After the IAEA comes in, let us say hypothetically, and 
they inventory what all is there, quite apart from the history, 
and get into that so that we have a feeling, root and branch, 
that we know where it all is, there will come the moment of 
truth as to who does what. Physically, who moves something? In 
the case of Libya, for example, quickly we came to the 
conclusion the United States could fly an airplane into Libya 
and load it up. Oak Ridge, Tennessee was receptive to taking it 
all. Now, that does not always work. And sometimes negotiations 
with Governors of our States or with Russians who are not 
necessarily wanting to be in the place where all this reposes 
require at least some more diplomacy. It may be too optimistic 
to think down the trail to the point at which we actually come 
to the hardware.
    What are your suggestions? Should we try to fashion some 
multilateral removal process, in which we all verify what 
happens at the same time? If so, should we divvy up the rent as 
to who does what and who pays for it, who sends people in? Mr. 
Taylor, you have thought about these things, I know. Do you 
have any suggestions?
    Mr. Taylor. I think the process that offers the best 
promise, as I mentioned in my remarks, is the six-party 
process, so that the five other parties, other than North 
Korea, should be involved in what I would describe as a front-
loaded disarmament process, which brings quick rewards, because 
time is not on our side. For example, if we do not understand 
and stop the HEU program, we know that in a few years there 
will be a significant nuclear arsenal. Then we are into a 
different strategic dimension if we end up in 5, 6, 7 years 
time with a North Korea with----
    The Chairman. Is it reasonable that five parties all decide 
that they are on the same page with regard to this immediate 
work?
    Mr. Taylor. I appreciate the difficulties. But I was very 
struck by Secretary Kelly's explanation of the process and very 
encouraged by the process, and he was indicating that, if not 
exactly on the same sheet of music, they were very much 
together on the importance of demonstrable disarmament early. 
And I think that is what one needs to go for.
    As I was suggesting, not just one thing, a thing not to go 
for is an elaborate, long process, but multi activities going 
on at the same time to give North Korea the opportunity to 
demonstrate it has taken the key decision such as we have seen 
in Libya and that is obviously demonstrated. I think equipment 
leaving the country--I think, Mr. Chairman, you mentioned 
that--I think that is one of the important stages in 
dismantling the 5 megawatt reactor and the fuel rods and so on 
and having them taken away. That is a very good early step that 
could be taken. It is visible. It is demonstrable. There is no 
doubt about it. It has to be that kind of step I think fairly 
early on.
    The Chairman. While we are all talking, that is, among the 
five at least, is it conceivable that parallel programs could 
be conjured up by these negotiators? As they think toward the 
next round, who loans money to the regime and who provides 
food? In other words, who provides humanitarian input to 
relieve the suffering at the same time that there is at least 
some visible means of there being a change in the economy? 
After all, we would still have the same regime there even after 
we have dismantled and carted out all of this, but the regime 
may be interested in what the parallel programs are. There is 
some evidence that they certainly are.
    The question you have raised is, is there hope that somehow 
they simply work out a situation in which they finally retain a 
portion of whatever was in the arms, but they also get the 
loans, and they get a certain amount of humanitarian work that 
does not really inform the public or stir things up any more? I 
am curious as to how far any of this may move because this is 
the purpose of our hearing today. We are here to examine the 
parallels and the simultaneous action. How do these things 
happen for the relief and the progress of the people, in 
addition to the safety of the world, with the nuclear arms?
    Dr. Cha, do you have a comment?
    Dr. Cha. I would agree with the point about early and 
immediate moves by the North Koreans. Their proposal of a 
freeze on one program and not admitting to the other was 
basically the same sheet of music that we have seen in the 
past, and that is certainly not the direction I think in which 
the United States wants to go in this. So there really need to 
be immediate and unprecedented steps by the North Koreans that 
we have not seen before to get any sense of confidence that 
they really are committed to dismantlement. Once we get those 
sorts of steps accomplished, this is where the multilateral 
process really is an asset because you can coordinate among the 
parties what sort of things each party will provide to North 
Korea in return.
    The Chairman. Mr. Malinowski, do you have any final thought 
about all this?
    Mr. Malinowski. Well, not much to add to what my colleagues 
here have said. To the extent we are thinking about this in 
multilateral terms, I think that is also important on the human 
rights and humanitarian side.
    The Chairman. At least you have a group. Even they do not 
act simultaneously, but they are still together for a variety 
of reasons.
    Mr. Malinowski. I think they are related substantively in 
the long run. The question is the sequencing and at what point 
do our negotiators begin to raise these issues. I think raise 
them now, and then at what point do you actually establish 
linkages to things that the North Koreans want? And I think 
there is a point down the road where that comes as well.
    Another sort of big question I have is to what extent do 
the North Koreans really care about what we think about these 
horrors and their reputation. My sense is that to some extent 
they must, otherwise why would they deny that the labor camps 
exist and why would they take foreigners, as you well know, on 
these sort of Potemkin Village shows to prove that their people 
are happy and well-fed and free if they did not, to some 
extent, want people to believe these things? I think, again, to 
the extent that we begin to pull back the curtain, I think it 
is going to be harder and harder for them to protect their 
reputation through pure denial, and they will be more 
encouraged to try to protect their reputation by beginning to 
take at least small steps forward.
    The Chairman. Hard-nosed as they may be, still with people 
dying and total depravation, there clearly is a sense of guilt 
and responsibility.
    Mr. Malinowski. They do not want us to know this. There 
must be something to that.
    The Chairman. Well, I thank all three of you very much for 
your excellent testimony, and for your thoughtful answers to 
our questions. With this, the hearing is adjourned.
    [Whereupon, at 6:02 p.m., the committee adjourned, to 
reconvene subject to the call of the Chair.]
                              ----------                              

             Additional Statement Submitted for the Record

           Prepared Statement of Senator Russell D. Feingold

    I thank Chairman Lugar and Senator Biden for holding this important 
hearing, and I thank Assistant Secretary Kelly and all of the private 
witnesses for being here today.
    Last week, another round of six-party talks came to a close in 
Beijing. According to press reports, the Chinese Foreign Minister 
closed the session by noting that ``the road is long and bumpy. But 
time is on the side of peace.''
    I would like to believe this sentiment, but I am not so sure. Time 
does not appear to be on our side here. As time passes, North Korea has 
increasing opportunities to develop its nuclear weapons program, and 
potentially to provide nuclear know-how or technology to others. Yet, 
as time passes, it is not at all clear that the U.S. gains any 
particular negotiating leverage.
    North Korea's nuclear defiance is an urgent national security 
issue. But for well over a year, it has not been clear whether or not 
the administration has a plan to get from where we are today to where 
we want to be.
                              ----------                              

            Responses to Additional Questions for the Record

Responses of Hon. James A. Kelly to Additional Questions for the Record 
                Submitted by Senator Russell D. Feingold

    Question 1. Are you confident that North Korea cannot transfer 
nuclear capacity or know-how to other actors while we wait for the next 
round of talks? On what do you base this confidence?

    Answer. North Korea's proliferation activities are of deep concern. 
By strengthening export control systems worldwide and implementing 
initiatives such as the Proliferation Security Initiative (PSI), we aim 
to stem not only North Korean but worldwide proliferation activities.
    We have made very clear to North Korea that transfer of nuclear 
capacity or know-how would be a most serious matter. We are using the 
multilateral diplomacy of the six-party talks to underline that message 
and to offer North Korea the prospect of enjoying the benefits of being 
a member in good standing of the international community by completely, 
verifiably, and irreversibly dismantling its nuclear weapons programs.

    Question 2. Some press reports suggest that the parties to the 
talks may meet in working groups before the next formal session. What 
would these working groups be working on? Is this a notional idea or a 
firm plan? What, specifically, do we hope to accomplish within these 
groups?

    Answer. The parties to the talks agreed to the establishment of a 
working group or groups, and further agreed that terms of reference 
would be discussed among the parties through diplomatic channels. Those 
diplomatic exchanges are now beginning. In general terms, we would 
expect the working group or groups to carry out instructions from the 
plenary and to develop, in a more detailed manner, understandings 
reached at plenary sessions, in order to achieve our long-term goal of 
the complete, verifiable, and irreversible dismantlement of the DPRK's 
nuclear programs.

                                 
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