```

[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

                  NORTH KOREA: LEVERAGING UNCERTAINTY?

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                        INTERNATIONAL RELATIONS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 16, 2000

                               __________

                           Serial No. 106-126

                               __________

    Printed for the use of the Committee on International Relations

        Available via the World Wide Web: http://www.house.gov/
                  international--relations

                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
65-823 CC                   WASHINGTON : 2000

                  COMMITTEE ON INTERNATIONAL RELATIONS

                 BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania    SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa                 TOM LANTOS, California
HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska              GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey     ENI F.H. FALEOMAVAEGA, American 
DAN BURTON, Indiana                      Samoa
ELTON GALLEGLY, California           MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida         DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina       ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California         SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois         CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California          ALCEE L. HASTINGS, Florida
PETER T. KING, New York              PAT DANNER, Missouri
STEVE CHABOT, Ohio                   EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South     BRAD SHERMAN, California
    Carolina                         ROBERT WEXLER, Florida
MATT SALMON, Arizona                 STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York               JIM DAVIS, Florida
TOM CAMPBELL, California             EARL POMEROY, North Dakota
JOHN M. McHUGH, New York             WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas                   GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina         BARBARA LEE, California
PAUL E. GILLMOR, Ohio                JOSEPH CROWLEY, New York
GEORGE RADANOVICH, California        JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
                    Richard J. Garon, Chief of Staff
          Kathleen Bertelsen Moazed, Democratic Chief of Staff
                Peter Brookes, Professional Staff Member
                   Joan I. O'Donnell, Staff Associate

                            C O N T E N T S

                              ----------                              

                               WITNESSES

                                                                   Page

The Honorable Wendy R. Sherman, Counselor, U.S. Department of 
  State..........................................................     4
The Honorable Douglas Paal, President, Asia Pacific Policy Center    22
Mitchell B. Reiss, Director, Reves Center for International 
  Studies, College of William and Mary...........................    25
Scott Snyder, Representative of Asia Foundation/Korea............    27

                                APPENDIX

Prepared statements:

The Honorable Benjamin A. Gilman, a Representative in Congress 
  from New York and Chairman, Committee on International 
  Relations......................................................    38
The Honorable Wendy R. Sherman...................................    41
The Honorable Douglas Paal.......................................    49
Mitchell B. Reiss................................................    52
Scott Snyder.....................................................    57

 
                  NORTH KOREA: LEVERAGING UNCERTAINTY?

                              ----------                              

                        THURSDAY, MARCH 16, 2000

                          House of Representatives,
                      Committee on International Relations,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10 a.m., in room 
2200, Rayburn House Office Building, Hon. Benjamin A. Gilman, 
(Chairman of the Committee) presiding.
    Chairman Gilman. The Committee will meet once again to 
review U.S. policy toward North Korea. This is the fifth 
hearing on the Democratic People's Republic of Korea, the DPRK, 
in the last 18 months held by our Full Committee on 
International Relations.
    Today's hearing will focus on the status and the prospects 
for our policy toward North Korea in the aftermath of Dr. Bill 
Perry's report to the Congress last October. We are pleased to 
have gathered a distinguished group of witnesses to discuss 
this very important national security issue.
    Regrettably, our concern about North Korea and our policy 
still remains unabated. Let me discuss why we feel that way. 
The CIA reported in Congressional testimony last month that 
North Korea is continuing to develop the Taepo Dong II--an 
intercontinental ballistic missile--despite a test moratorium, 
and could launch that missile this year should it decide to do 
so.
    The intelligence community, CIA, further states that a 
three-stage Taepo Dong II would be capable of delivering a 
several-hundred kilogram payload anywhere in the United States. 
The CIA has also concluded that the DPRK is the world's major 
supplier of ballistic missiles and technology, primarily to 
South Asia and to the Middle East. Their transfers to Pakistan, 
Iran, Syria, and Libya pose a significant threat to our 
national interest, to our American forces, and to our allies.
    It has also been alleged that North Korea may be pursuing a 
uranium-based nuclear weapons program while the cost of heavy 
fuel for the 1994 Agreed Framework is likely to top $100 
million this year. There is a continuing concern about being 
able to get the IAEA into North Korea to conduct its assessment 
of their nuclear program, as well as finding willing 
underwriters for the nuclear reactor project.
    In recent testimony, the Commander of U.S. Forces of Korea 
called North Korea ``the major threat to stability and security 
in Northeast Asia, and the country most likely to involve our 
Nation in a large-scale war.''
    General Schwartz further stated that North Korea's goal is 
to unify the peninsula by force. American military dependents, 
Embassy staff, and their families in Seoul were recently issued 
14,000 gas masks because of the North Korean chemical weapons 
threat.
    According to our Commander in Chief of the Pacific, North 
Korea conducted its largest conventional force exercise in 
years this past winter. Admiral Blair went on to say that North 
Korea continues to divert a disproportionate share of their 
meager national wealth to their military programs.
    The DPRK recently declared the nullification of the 
Northern Limit Line, where they fought a sea battle with South 
Korea last summer, and Pyongyang bought 40 Mig-21 fighter jets 
from Kazakhstan for some $8 million.
    Recently, the Japanese police seized 250 kilograms of 
amphetamines believed to have originated in North Korea. That 
seizure, with an alleged street value of 15 billion yen, or 
$139 million, was the fifth largest single haul of illegal 
drugs ever seized in Japan.
    Confronted with impossible access to the most vulnerable 
groups of North Korean citizens, the French NGO, Action Against 
Hunger, withdrew from North Korea after 2 years. Their press 
release stated, ``We are convinced that the international aid 
flowing into North Korea is not reaching the people most in 
need, and that thousands of people continue to die despite the 
massive food aid provided to that government.'' In their press 
conference announcing their decision, the French group said 
that international food aid is undoubtedly being diverted to 
the military and to the civil servants.
    The Director of Central Intelligence said that instead of 
pursuing real reform, North Korea's strategy is to garner as 
much aid as possible from overseas, and has directed its global 
diplomacy to that end. This means more people will needlessly 
starve as Pyongyang chooses ideology over reform.
    Our State Department is considering removing North Korea 
from the list of state sponsors of terrorism despite the fact 
that North Korea abducted Japanese citizens for use in their 
intelligence apparatus, continues to harbor Red Army hijackers, 
and is reportedly involved in political assassinations abroad. 
DPRK agents recently may have also kidnapped a South Korean 
clergyman working in China near the border.
    The DPRK continues to severely oppress its citizens, and 
the international community has not spoken out forcefully 
enough about the day-to-day horrors of the North Korean gulag. 
In a highly celebrated case, several North Korean defectors 
were forcibly repatriated from China to a certain death.
    Diplomatically, North Korea is willing to talk with anyone 
but South Korea. They talk with Rome, Canberra, and Tokyo, but 
not with Seoul. Despite numerous overtures toward Pyongyang, 
Seoul is rebuffed time and time again.
    Furthermore, it was reported this morning that talks in New 
York over a visit to the United States by a high-level North 
Korean official have broken off without any agreement. This 
visit was first proposed by Dr. Perry almost a year ago. These 
recent developments are hardly encouraging.
    As the North Korea Advisory Group pointed out in its report 
last October, before all of this took place, the threat to the 
United States and global interests of North Korea continues to 
grow, despite almost 6 years of engagement and close to $1 
billion in aid.
    It is clear that the challenges presented by North Korea 
are significant, and managing the threat is a tremendous policy 
undertaking. We look forward to today's testimony on how we 
plan to deal with the ever-widening and deepening threat 
presented by the DPRK to our own interests.
    We want to thank our good Ambassador Sherman for being with 
us today.
    Allow me to yield time to Mr. Gejdenson, our Ranking 
Minority Member.
    [The prepared statement of Chairman Gilman appears in the 
appendix.]
    Mr. Gejdenson. Thank you, Mr. Chairman. I, too, welcome 
Ambassador Sherman. She was an able advocate for the State 
Department when she headed up their Legislative Affairs Bureau. 
If she could handle Congress, we know that she will be able to 
handle North Korea as well.
    I think there is clearly a case that while there is great 
consternation here and elsewhere in how to deal with North 
Korea, and there is a great sense that it poses a threat to the 
United States and many in the international community, few of 
us have any real solutions on how to deal successfully with the 
North Koreans.
    The North Koreans have aggressively pursued programs that 
have harmed millions of their people, leading to starvation and 
leaving their population decimated. Unfortunately, their 
nuclear missile programs, which began in the 1980's, are still 
a potential threat, even if some of that has been stalled.
    It seems clear that the North Koreans, with their missile 
flight tests and other policies, tend to use these to leverage 
their position in the international community.
    We are in a difficult position. Millions of North Koreans 
are starving, with a government that seems to care little for 
its own population. Maybe they sense that our own humanity 
prevents us from simply walking away and trying to be more 
confrontational. However, I think that the one thing the North 
Koreans have to know is that there is a limit to the patience 
of the U.S. Congress and the American people.
    Their failure to move forward in this new round of 
negotiations is a very bad signal, and I think that both 
Democrats and Republicans alike in Congress are losing patience 
with the North Korean government, which believes it can 
continue to live in this wonderland where its irresponsible 
policies threaten the world and threaten their own population.
    Thank you, Mr. Chairman.
    Chairman Gilman. Mr. Bereuter.
    Mr. Bereuter. Mr. Chairman, I appreciate the words of my 
two colleagues and the introduction of Ambassador Sherman. 
However, I will defer my comments prefering first to hear from 
our witnesses.
    Chairman Gilman. Thank you very much.
    With that, I would like to welcome our first panelist, 
Ambassador Wendy Sherman. It is a pleasure to welcome you back 
to our Committee as one of the State Department's leading 
policymakers on North Korea.
    Wendy Sherman was confirmed by the United States as 
Counselor, Department of State, with the rank of Ambassador, 
for the tenure of her service in July 1997. Prior to assuming 
that position, from April 1996 to 1997, Ambassador Sherman was 
President and CEO of the Fannie Mae Foundation.
    From 1993 to 1996, Ambassador Sherman served as Assistant 
Secretary for Legislative Affairs in the Department of State. 
From 1991 to 1993, Ambassador Sherman specialized in strategic 
communications as a partner in the political and media 
consulting firm of Doak, Shrum, Harris, and Sherman. Prior to 
that, she directed EMILY'S LIST.
    We thank Ambassador Sherman for being with us once again. 
You may feel free to summarize your remarks and submit your 
entire statement for the record. We have asked our Members to 
withhold their questions until your testimony is complete.
    Ambassador Sherman, please proceed.

    STATEMENT OF THE HON. WENDY R. SHERMAN, COUNSELOR, U.S. 
                      DEPARTMENT OF STATE

    Ambassador Sherman. Thank you very much, Mr. Chairman. 
Thank you, Ranking Member Gejdenson, and Subcommittee Chairman 
Mr. Bereuter, for being here this morning. Thank you very much 
for the opportunity to discuss the Administration's North Korea 
policy.
    I have submitted a fuller written version of my testimony 
for the record, and I will try to summarize my comments and 
make time for your questions.
    Just this last September, Dr. William J. Perry presented 
the findings and recommendations resulting from his 10-month 
long review of our policy toward North Korea. I have been very 
privileged to be part of the policy review team as the senior 
government official who worked most closely with Dr. Perry, and 
I chair an interagency working group responsible for 
implementing the report's recommendations.
    Mr. Chairman and Members, I completely agree with you: the 
Korean Peninsula remains one of the most volatile areas in the 
world. Our overarching goal there is simple--achieving lasting 
peace and stability and removing the threat that it poses for 
the United States, for our allies, and for the world.
    Since 1994, the Agreed Framework has been at the center of 
our DPRK policy, and key to any ultimate success in achieving 
our goal. Two events in 1998, however, called that policy into 
question. That summer we found ourselves in protracted 
negotiations with the DPRK to gain access to a site at 
Kumchang-ni that we suspected might be the future site of a 
nuclear reactor.
    If confirmed, the existence of such activities would have 
violated the Agreed Framework and jeopardized its continued 
viability. A visit to the site last May demonstrated that it 
was not involved in such activities, and we will revisit the 
site this spring. As was confirmed in the talks that Ambassador 
Kartman just completed in New York, we will return in May.
    The experience, nonetheless, demonstrated the need for a 
mechanism to address similar concerns should they appear in the 
future, at least until such time as the DPRK comes into full 
compliance with its IAEA obligations under the terms of the 
Agreed Framework.
    Separately, in 1998, North Korea fired a long-range 
missile, the Taepo Dong I, over Japan in an apparently failed 
attempt to launch a satellite. Even though missile controls are 
not part of the Agreed Framework, this test firing rightly 
provoked a storm of protest in both the United States and 
Japan, and led to calls in both countries to end support for 
the Agreed Framework.
    There is no doubt in my mind, however, that had we aborted 
the Agreed Framework, the DPRK would have responded by 
reopening its nuclear facility at Yongbyon. This would have 
placed the DPRK in a position to resume production of weapons-
grade plutonium, and eventually to arm those very missiles with 
nuclear warheads--the very worst of all possible worlds.
    During that period in 1998, the Congress called for a 
review of policy toward the DPRK. President Clinton and 
Secretary Albright agreed with the Congress and asked Dr. 
William J. Perry to assemble a policy review team. Over the 
course of 10 months, we met with experts inside and outside of 
the U.S. Government, including all of you on this panel and 
many Members of Congress and their staffs.
    We traveled several times to East Asia to consult with our 
allies in the Republic of Korea and Japan, and with China's 
leaders. We also exchanged views with the EU, Russia, 
Australia, and other interested countries. We visited Pyongyang 
to talk with the leadership of the DPRK, and we have reported 
to this Committee on that visit.
    Through many long sessions with our ROK and Japanese 
allies, we discussed how best to pursue our common goals of 
peace and stability, while taking into account our respective 
interests. After many months, we reached a common approach and 
a common understanding. The Perry Report is the result.
    The comprehensive approach recommended by Dr. Perry, and 
developed in close consultation with our two allies, gave 
highest priority to our security concerns over DPRK nuclear 
weapons and missile-related programs. The strategy he 
recommended envisioned two paths.
    On the first path, the U.S. would be willing to move step-
by-step in a reciprocal fashion toward comprehensive 
normalization if the DPRK was willing to forego its nuclear 
weapons and long-range missile programs.
    Alternatively, if North Korea did not demonstrate its 
willingness, by its actions, to remove these threats, the 
United States would seek to contain them by strengthening our 
already strong deterrent posture.
    Because the second path is both dangerous and expensive, 
but most importantly because it is so dangerous, we and our 
allies all strongly prefer the first alternative, if we can go 
down that road.
    As I have indicated, perhaps one of the most fundamental 
things to result from the Perry process has been extraordinary 
coordination among the three allies, which is stronger than at 
any time in the past. This is largely the result of the newly 
instituted trilateral coordination oversight group, or TCOG--
perhaps not the world's greatest acronym--created nearly 1 year 
ago to ensure more frequent, close consultation among the 
United States, South Korea, and Japan, at the subcabinet level. 
I chair our delegation to that TCOG.
    We have met nine times trilaterally over the past year, 
including a meeting of foreign ministers and a summit meeting. 
Allied support for the U.S. approach is strong, in part because 
the Perry report is, in essence, a joint project. In January, I 
visited Seoul and Tokyo on one of our many trips there. I met 
with President Kim Dae-jung, participated in a TCOG meeting, 
and met with Japanese leaders.
    During our discussions, President Kim again expressed his 
full support for our policy as complementary to his own policy 
of engagement. We, in turn, fully concur with his view that 
North-South dialogue remains central and key to ultimate peace 
on the peninsula.
    We hope the DPRK leadership will have the foresight to take 
advantage of the opportunities before it to address issues of 
mutual concern, and to move its relationship with the United 
States, the ROK, and Japan, more rapidly down the path toward 
normalization and ultimate peace and stability.
    There are increasing signs that other members of the 
international community would be prepared to increase their 
contacts with the DPRK as the DPRK addresses the international 
community's legitimate concerns. Italy has recently established 
diplomatic relations with the DPRK.
    The Australians and the French both recently sent 
delegations to Pyongyang. Canada received an unofficial DPRK 
delegation. The Philippines is considering establishing 
relations, and, as you know, Japan is about, probably at the 
beginning of April, to move forward in normalization talks with 
the DPRK. We are consulting constantly and closely with our 
friends and allies on North Korea policy to ensure that our 
approaches are coordinated.
    Guided by the Perry recommendations, U.S. policy is making 
progress in the step-by-step reciprocal approach recommended by 
the Perry Report. In September, the DPRK announced its 
intention to refrain from long-range missile tests of any kind, 
while high-level discussions were underway to improve 
relations. This was a small but important step in dealing with 
our proliferation concerns.
    In September, we announced our intention to ease certain 
economic sanctions against the DPRK. More recently, the North 
accepted Dr. Perry's invitation for a reciprocal visit to 
Washington by a high-level DPRK visitor. From March 7th to just 
yesterday, March 15th, in New York, Ambassador Charles Kartman 
and Vice Foreign Minister Kim Gye Gwan held their third round 
of preparatory talks for the high-level visit. Further 
preparatory talks will be needed before the visit occurs.
    The DPRK did agree yesterday in New York to recommence 
talks related to our concerns about the DPRK's missile program, 
and to begin a new negotiation on implementation of the Agreed 
Framework. As you know, as part of the positive path outlined 
in his report, Dr. Perry proposed talks to deal with our 
continuing concerns about DPRK missile-related and nuclear 
weapons-related activities. We are glad that the DPRK has now 
agreed to proceed with those negotiating tracks.
    Finally, the DPRK reconfirmed yesterday its agreement for 
another visit to Kumchang-ni in May of this year. The 
negotiations leading to a DPRK high-level visit have been 
difficult, and, knowing North Korea, will remain difficult, as 
are all negotiations with the DPRK. These discussions continue.
    Nonetheless, we and our allies remain convinced that the 
visit would advance our interests. We view the visit as an 
opportunity for both sides to demonstrate their intention to 
proceed in the direction of a fundamentally new relationship. 
It would be an important, but, as Secretary Albright said, a 
modest step, and would make clear to the DPRK that as it 
addresses our security concerns we are prepared to reciprocate 
by taking other steps to improve ties with the DPRK.
    As we move forward in our relations with North Korea, the 
Agreed Framework will remain central to our policy. The turnkey 
contract, the light water reactor construction, was signed on 
December 15, 1999, and became effective on February 3rd. This 
means that construction can now, as soon as winter is over, 
begin in earnest.
    As you know, the ROK in Japan committed respectively to 
providing 70 percent of the actual costs--that is the Republic 
of Korea--and the yen equivalent of $1 billion for Japan, based 
on the current estimated cost of $4.6 billion. Since the 
turnkey project became effective, South Korea has already 
disbursed nearly $120 million, and Japan over $51 million, to 
KEPCO, the primary contractor for the project.
    We believe the Framework continues to be our best means of 
capping and eventually eliminating the threat of DPRK nuclear 
weapons by replacing the dangerous and frozen graphite-
moderated reactors with proliferation-resistant light water 
reactors.
    Faithful implementation of the Agreed Framework by all 
sides is absolutely essential to keeping the DPRK's nuclear 
activities at Yongbyon and Taechon frozen, and to the 
maintenance of stability on the peninsula.
    We do need, and have appreciated, the Congress' continued 
support in order to continue to live up to our side of the 
bargain by helping to provide heavy fuel oil, even as fuel oil 
prices, as you all know very well, are painfully high and have 
a difficult impact on our project as well.
    In doing so, we will, of course, continue to hold the DPRK 
strictly to its own obligations and commitments under the 
Agreed Framework, including the rapid conclusion of spent fuel 
canning and resumption of North-South dialogue.
    While we are striving to advance our nonproliferation 
goals, we remain committed to addressing other issues of 
concern with the DPRK. We have and will continue to do all we 
can to improve the monitoring of food aid and other 
international assistance to North Korea. We will continue to 
monitor, condemn, and work multilaterally to gain improvement 
in the DPRK's dismal human rights record. We will support 
UNHCR's effort to address the plight of North Korean refugees.
    As suggested in the Perry Report, we will pursue our 
serious concerns about the DPRK's chemical and biological 
weapons multilaterally. We will also continue to seek 
information on the alleged North Korean drug trafficking and 
other illegal activities.
    Bless you, Mr. Chairman.
    Chairman Gilman. Thank you.
    Mr. Gejdenson. Is that part of your official statement?
    Ambassador Sherman. Absolutely.
    Chairman Gilman. I like that.
    Ambassador Sherman. I am also very personally committed to 
ensuring that we resolve, as fully as possible, the status of 
the American soldiers who remain unaccounted for from the 
Korean War. As we approach the 50th Anniversary of that 
conflict, this is absolutely critical.
    The DPRK has been cooperative on this issue in the past, 
but the current lack of progress is more than a disappointment. 
This is a very important issue for veterans, for the families 
of those still missing, and for all Americans. We have an 
obligation to continue to press the DPRK to work with us on 
this very critical issue.
    Let me stress, as I seek to conclude, Mr. Chairman, that we 
are attempting to pursue a constructive dialogue with the DPRK 
that addresses our central security concerns and leads us more 
rapidly down the path toward full normalization only as those 
concerns are addressed.
    The Cold War still exists on the Korean Peninsula. We hope 
that our dialogue will be a crucial step toward ending it. We 
are under no illusions that it will be an easy path. We 
recognize fully that everything we and our allies do in 
diplomacy requires, first and foremost, the maintenance of a 
strong allied deterrent posture. This is fundamental.
    In fact, the Perry Report stresses, and Dr. Perry has said 
directly to the DPRK, that there would be no change in our 
conventional forces. Congress' support of our forces in the 
region remains essential. The presence of 37,000 U.S. troops in 
South Korea and 47,000 in Japan demonstrates our commitment to 
stand with our allies against any threat of aggression.
    With our South Korean and Japanese allies, however, we 
believe that this comprehensive two-path strategy recommended 
by Dr. Perry offers the best opportunity to change the 
stalemated situation on the Korean Peninsula in a fundamental 
and positive way. Through these efforts, we hope to lead the 
Korean Peninsula to a stable, peaceful, and prosperous future.
    In closing, Mr. Chairman and Members, I would like to cite 
a senior Administration military leader on the Korean Peninsula 
who told me the following in my most recent trip there. He 
said, ``When I came here 18 months ago, I thought I would have 
to fight a war. Thanks to the efforts of your team, I see this 
as an increasingly remote possibility.''
    Mr. Chairman, making war an increasingly remote 
possibility, working to address our concerns about weapons of 
mass destruction, and addressing pressing human needs--these 
are challenging and hard-to-achieve objectives. It will take 
time--unfortunately, probably lots of time--to accomplish them. 
I know, however, that we share these goals, and, working 
together, I believe we can and will succeed in this mission.
    I thank you very much, and I am happy to take your 
questions. Thank you, Mr. Chairman.
    [The prepared statement of Ambassador Sherman appears in 
the appendix.]
    Chairman Gilman. Thank you, Ambassador Sherman, for your 
extensive statement. We want to thank both you and Dr. Perry 
for your good work in trying to find a peaceful solution to the 
problems in North Korea.
    Ambassador Sherman, it was reported this morning that the 
talks on a high-level visit by senior North Korean officials to 
Washington have broken down. This seemed to be a critical 
milestone in the Perry process. Can you tell us why those talks 
failed? How does that delay your intentions to begin missile 
and nuclear talks with North Korea? How does that affect your 
desire to get North Korea to sign a written agreement to halt 
missile testing?
    Ambassador Sherman. First of all, Mr. Chairman, I don't 
exactly see what happened in New York in exactly the same way 
you do, which probably doesn't come as a surprise. I don't see 
it as the talks having broken down or having failed. I see it 
as part of a very tough and continuing negotiating process that 
we expected to take time.
    In the Perry process, and in the Perry Report, we sought to 
address two immediate, we thought, highest priority fundamental 
concerns. That is, the implementation of the Agreed Framework 
and concerns about ongoing nuclear-related activities, and the 
missile program that North Korea has. In that report, we 
suggested that there needed to be a reintensified missile 
negotiation and a new negotiation on implementation of the 
Agreed Framework.
    Oddly, nowhere in the Perry Report do we suggest a high-
level visit. The high-level visit actually became a concept 
that arose out of a discussion with the North and a desire to 
reciprocate an invitation that we put on the table when we were 
in Pyongyang that they were welcome to come to Washington.
    So we are actually quite pleased with the outcome from New 
York, as difficult as it was and as difficult as the days ahead 
will be, in that we expect very soon to have that reintensified 
missile negotiation underway, to have the Agreed Framework 
implementation negotiation underway, and to continue our 
conversation on the high-level visit. I fully believe that will 
take place.
    The two negotiations may take place in advance of it, but I 
think the sequence matters less than trying to reach our 
security objectives.
    Chairman Gilman. Has a new date been set for further 
discussion?
    Ambassador Sherman. A new date has not yet been set, but I 
would expect that to happen in the next few days. Ambassador 
Kartman had to come back and consult with us. They had to go 
back and consult with Pyongyang.
    Chairman Gilman. Ambassador Sherman, why did the President 
not certify that North Korea has not diverted assistance 
provided by our Nation for purposes for which it was not 
intended, or that North Korea is not seeking to develop or 
acquire the capability to enrich uranium or any additional 
capability to reprocess spent nuclear fuel?
    Ambassador Sherman. On the diversion of assistance issue, 
we believe, based on the Perry Report and reports from within 
North Korea, that assistance is reaching the targeted 
population. So the President used his waiver authority on that 
certification provision.
    On the uranium issue, the way that certification is 
written, it goes to the intention of North Korea. To tell you 
quite frankly, Mr. Chairman, having sat across from North 
Koreans, it is very hard to conceive of what their intentions 
are. One can hypothesize, one can apply logic, but it is very 
hard to know, actually sitting across from anyone, what their 
intentions are.
    So we felt, again, to be fully accurate to the Congress, we 
could not certify as to North Korea's intentions, but, rather, 
use the waiver authority which the legislation provides.
    Chairman Gilman. Thank you, Madam Ambassador. What were the 
results of the recent talks in New York? Why is our Nation now 
considering removing North Korea from the terrorism list? What 
objectives did you actually achieve? What criteria does our 
Nation have for removing North Korea from the terrorism list?
    How will we be dealing with the Japanese kidnappings, the 
Red Army hijackers, the incursions into South Korea and Japan, 
and politically motivated assassinations and kidnapping, such 
as the recent one of a South Korean clergyman?
    Ambassador Sherman. Thank you, Mr. Chairman. Ending 
terrorism in the world is one of the highest priorities for the 
U.S. Government. It poses a substantial threat to American 
citizens, as I think America has seen quite painfully in the 
last few years. So, it is in the United States' interest to get 
North Korea to take those steps which would end its state 
sponsorship of terrorism and any terrorist activities that it 
might undertake.
    There are two ways that a country can be removed from the 
list of state sponsors of terrorism. Both contain the concepts 
of cessation and credible forbearance of terrorism. I can go 
through, if you would like, the excerpts from the law, which I 
am sure you know, that specify the kinds of things that must 
take place for a country to come off the terrorism list.
    I would suspect that our process with North Korea will take 
time. Michael Sheehan, Ambassador Sheehan, who is the head of 
our counterterrorism office--an office which you, Mr. Chairman, 
had a great deal to do with making sure it had prominence, 
focus, and the attention of the Secretary of State--met with 
the North Koreans in an introductory meeting where he merely 
laid out what it took under our law to come off of the 
terrorism list, and the process of negotiations that we wanted 
to undertake to talk with the North Koreans about taking the 
steps they would need to take to no longer be seen as a 
terrorist country.
    I would suspect that we will have follow-on negotiations 
and discussions. I think this will take some time to do. Let me 
hasten to add that before Ambassador Sheehan even had the 
introductory talks, in the TCOG that I held in Seoul with Japan 
and South Korea--both bilaterally and trilaterally--we 
discussed the terrorism issue. Bilaterally particularly, I 
spoke with both countries about what their particular concerns 
were that they hoped we would address.
    So we very much have in mind the concerns of our allies as 
we undertake this particular discussion. However, it will take 
some time, and I would be happy in a closed session to brief 
you or your staff about each specific requirement. I don't 
think it would be good tactically to have that discussion in 
public.
    Chairman Gilman. Thank you very much, Madam Ambassador.
    Mr. Gejdenson.
    Mr. Gejdenson. Thank you, Mr. Chairman.
    Who are North Korea's closest allies? Are the Chinese 
helping them, either economically or with military technology?
    Ambassador Sherman. North Korea is considered an ally of 
China, and China of North Korea. China does supply oil and 
food. I believe we have very good reason to know, in fact, that 
in urging North Korea not to test launch a long-range missile, 
and to agree to the moratorium on such launches, that China 
played a very positive role in encouraging them to not 
destabilize the peninsula further by undertaking test launches.
    It is ironic, Congressman Gejdenson--because some of our 
goals are probably not the same--that we share objectives in 
this area. China has no interest in an arms race on the 
peninsula. That is because of North Korea, but that is also, 
quite frankly, because of Japan and Taiwan. China has no 
interest in people having nuclear weapons on the Korean 
Peninsula because it is destabilizing not only for South Korea 
and Japan, but for China as well.
    So we believe that China has actually played a constructive 
role in getting North Korea to end its isolation and to move 
forward in working in a somewhat coordinated fashion, though 
not in the same way that the ROK and Japan do with us.
    Mr. Gejdenson. Now, what are the relationships in the 
Middle East? Are they primarily, sales, where the North Koreans 
sell rockets of some kind, and the Middle Eastern countries buy 
them? Or are the relationships more significant than that?
    Ambassador Sherman. I believe, Congressman, the 
relationships are largely of exporters and importers. There are 
some details of those relationships that I would be glad to 
discuss with you in a private session.
    Mr. Gejdenson. I would like to have that. Then what about 
Russia? Do the Russians have any kind of relationship with the 
North Koreans?
    Ambassador Sherman. The Russians do have a relationship 
with the North Koreans. Foreign Minister Ivanov recently went 
to sign a friendship agreement in Pyongyang. He spoke with 
Secretary Albright before he went and briefed us when he came 
back. In fact, we suggested some messages that he might want to 
take, and he did, indeed, do so. We try to stay in close touch 
with Russia.
    I think it is significant that although I believe the DPRK 
was interested in a military alliance with Russia, Russia did 
not want to proceed in that direction. There is no longer a 
military alliance between Russia and North Korea.
    Mr. Gejdenson. Are there any other countries, other than 
China, that have a relationship that is significant with North 
Korea?
    Ambassador Sherman. I think other countries are trying to 
develop a relationship, in part because they have adopted the 
approach of our trilateral alliance, and of the Perry Report, 
to believe that if we can begin to bring North Korea out of its 
isolation--out of the closed hermit kingdom that many people 
describe it as--that we might have a better chance of getting 
them to join the norms of the international community. That is 
a hypothesis that we are testing out, and I don't know, to tell 
you the truth, what the answer to that will be.
    Italy will be visiting. Foreign Minister Dini, is going to 
be visiting Pyongyang, and he is stopping here for a 
consultation before he goes. I believe that we will probably 
see normalization of relations with other countries as well in 
the coming days. But all of these countries are doing it quite 
slowly, usually by double-hatting their Ambassadors in Beijing, 
and then moving very slowly in close consultation with all of 
us who are involved in policy toward North Korea.
    Mr. Gejdenson. What countries have the most significant 
diplomatic relationship at this point with North Korea, and 
have an ambassador there, have a significant presence, either 
economically or politically, in the country? China, obviously, 
would be----
    Ambassador Sherman. China obviously, Russia, and then there 
are several other countries. I don't know the number.
    Do you know the number?
    Mr. Gejdenson. Does Vietnam have a significant----
    Ambassador Sherman. Yes.
    Mr. Gejdenson [continuing]. Presence there?
    Ambassador Sherman. They have a presence. They have a 
presence, and as does Sweden, and there are a few others. We 
can get you the list, Congressman. I don't think we would say 
that any of them have a staggeringly significant relationship. 
In fact, it is not a post that people clamor to take on.
    Mr. Gejdenson. What a surprise.
    What are the most significant economic relationships with 
the private sector that exist? Are there any large private 
corporations--whether it is hotels, industrial, or service 
sectors, in North Korea?
    Ambassador Sherman. Probably the largest and most 
significant economic relationship is with South Korea. Hyundai 
opened a tourism project at Kumgang Mountain. They are also 
working to put together an agreement for, in essence, what we 
might call an enterprise zone. There have been, I think, in the 
last year over $300 million spent in North Korea in the tourism 
project. Samsung has opened up a project in North Korea.
    In fact, I met with the president of Hyundai Asan when I 
was last in Seoul. The amount of private sector relationship 
with North Korea is growing quite significantly. In my 
discussions with President Kim Dae-jung, although the North has 
not yet developed a government-to-government relationship with 
South Korea in the way that we all would hope it to be, the 
private sector relationships, I think, are heading in a very 
positive direction, and ultimately will require, probably for 
infrastructure reasons, a relationship with the South.
    Mr. Gejdenson: I will finish with this. Those private 
sector relationships are, indeed, with the government of North 
Korea, because if you are doing a tourism project in North 
Korea, there is no private land ownership or----
    Ambassador Sherman. No.
    Mr. Gejdenson [continuing]. Sector that you would sign up 
with. So it is an agreement between a corporation in South 
Korea and the government of North Korea.
    Ambassador Sherman. Correct. With the knowledge and 
understanding of the South Korean government.
    Mr. Gejdenson. Thank you.
    Chairman Gilman. Mr. Bereuter.
    Mr. Bereuter. Thank you, Mr. Chairman.
    Ambassador Sherman, I want to express my sincere 
appreciation to you, to Secretary Perry, to Ambassador Kartman, 
and to all of the assistants and support people you have, in 
focusing on these important North Korean issues for us. I wish 
you well, and I hope you will convey that to them.
    Ambassador Sherman. I will, indeed. Thank you.
    Mr. Bereuter. Ambassador, Secretary Albright, within the 
last month, has answered questions before the Committee, 
including one I addressed to her. I asked her if the resumption 
of missile flight tests of the Taepo Dong II would signify a 
decision by the DPRK to follow the path of confrontation, the 
second of the two paths that Secretary Perry has put before 
them.
    Do you agree with her view? Do you know whether or not 
Secretary Perry would agree with that view?
    Ambassador Sherman. I think what we believe, Congressman, 
as I said, we would know if North Korea was choosing the second 
path by its actions. There is no question that if they launched 
a Taepo Dong II missile, it would be a very serious action, and 
we would be in immediate consultation with the Congress and 
with our allies on those steps that we would need to take.
    I think, more importantly, or as importantly, when the 
Taepo Dong I overflew Japan, the response in Japan and here in 
the United States, and rightly so, was one of concern. One can 
see that you could be down a downward slippery slope quite 
quickly. So I think it is a very dangerous situation we would 
have to take extremely seriously. I know that Dr. Perry feels 
that way as well.
    Mr. Bereuter. Do you think it would suggest that they have 
decided to take the path of confrontation or to continue on it 
perhaps?
    Ambassador Sherman. I think it would certainly show that 
they, for the moment at least, had chosen not to take the 
positive path. What we tried to do in the Perry Report and in 
the classified report that was submitted to Congress is to 
build a ledge, so to speak, Congressman, because I don't think 
we want to go from a missile launch to war, if that can be 
avoided.
    Although it would certainly mean they were not on the 
positive path, we would need to take those actions that would 
help us from going on a downward slope quickly toward war and 
conflict.
    Mr. Bereuter. The second path is basically to prepare our 
capacities to deal with a continued or a more militant North 
Korea, as I understand it.
    Ambassador Sherman. Yes. It includes----
    Mr. Bereuter. It is not a matter of war or----
    Ambassador Sherman. Right. Not a matter of war necessarily, 
but a way, if they took negative actions, that we could 
strengthen our deterrent posture, but also what we could do 
politically and economically, which sometimes is equally as 
important.
    Mr. Bereuter. Ambassador, on February 15th of this year, a 
memorandum was sent to the Committee which conveyed a 
memorandum of justification about the certifications and intent 
to waive certifications required under various statutes to 
continue our participation in KEDO.
    On page 3 of that unclassified memorandum, it says, 
specifically, that North Korea's agreement to freeze and 
eventually dismantle its declared graphite-moderated nuclear 
reactors and related facilities at Yongbyon and Taechon has 
halted activities that, had they not been stopped, would have 
given the DPRK a nuclear weapons capability.
    My question is: Is this suggesting that North Korea does 
not have a nuclear weapons capacity, or is it suggesting that 
the Agreed Framework has halted the North Korean nuclear 
weapons development program? Which is it?
    Ambassador Sherman. What it is and what we have said 
repeatedly is that the Agreed Framework halted the plutonium 
production through graphite-moderated reactors at Yongbyon and 
Taechon, which is the quickest and surest way to the 
development of nuclear weapons.
    Dr. Perry has said in front of this Committee that we 
have--we all have concerns about whether, as he calls it, the 
physics of nuclear weapons is still occurring, because that 
could take place in a room smaller than this.
    One of the reasons that we want an Agreed Framework 
implementation negotiation, which the North has now agreed to, 
is to get at some of those concerns that would be realized in 
the Agreed Framework, but would not be realized until all IAEA 
full safeguards were in place, which will take some time 
because of the steps that are in the process of the Agreed 
Framework.
    Mr. Bereuter. Then I think that is a misleading statement 
in that memorandum because it does say that the agreement has 
stopped what would have given the DPRK a nuclear weapons 
capability. It appears to me that you are not saying North 
Korea does not have a nuclear weapons capability right now.
    It is just that the nuclear weapons development program and 
the judgment behind the certification has been stopped. 
However, the capacity may be there now. At least----
    Ambassador Sherman. I think, though, part of it is the 
passive verb. There is no question that the facilities at 
Yongbyon and Taechon would have given the DPRK a nuclear 
weapons capability.
    Mr. Bereuter. But they are not saying they don't have one 
now.
    Ambassador Sherman. But we are not saying anything about 
that here.
    Mr. Bereuter. Right. OK.
    May I have one more question, Mr. Chairman.
    Chairman Gilman. Without objection.
    Mr. Bereuter. Thank you.
    Ambassador, this would seem like a question that should 
have been asked a long time ago, but maybe it has and I am not 
aware of it being asked or the answer to it. Has the Department 
of Energy, or any Federal agency, made preliminary decisions 
regarding the licensing of nuclear reactors or nuclear 
technology to North Korea?
    Has Secretary Richardson or his predecessor, Secretary 
O'Leary, made any commitments regarding the expedited licensing 
of nuclear technology that eventually would reach the DPRK? It 
goes to what safeguards would have been put in place or which 
would still need to be put in place. Are you aware of the 
answer to those questions?
    Ambassador Sherman. I think one of the reasons that it may 
not have been asked in that way, Mr. Bereuter, is that the 
light water reactors that are being built are being built 
through KEDO, which is a consortium of countries and an entity 
that is responsible for the development of those light water 
reactors.
    The primary contractor for those light water reactors is 
KEPCO, which is a South Korean entity. So I will go back----
    Mr. Bereuter. But it is----
    Ambassador Sherman [continuing]. What my colleague is 
telling me is there are no licenses yet, and we would need to 
put a nuclear cooperation agreement in place first, prior to 
such licensing.
    Mr. Bereuter. Because those are U.S.-licensed 
technologies----
    Ambassador Sherman. Yes.
    Mr. Bereuter [continuing]. That would be put in place 
through the South Korean entity, through the KEDO entity, I 
believe.
    Ambassador Sherman. Yes. As you know, Congressman, there is 
a sequence of events that need to take place, the nuclear 
cooperation agreement being one of them, before key components 
are in place and the construction is complete.
    Mr. Bereuter. So you would expect or convey to the 
Department of Energy that they need to be in consultation with 
Congress to assure that the safeguards that they need to 
negotiate yet would meet statutory requirements?
    Ambassador Sherman. I am sure they will be, and we will be 
in very close consultation with Capitol Hill as we present a 
nuclear cooperation agreement at the appropriate time.
    Mr. Bereuter. Thank you, Mr. Chairman, for your indulgence.
    Thank you, Ambassador.
    Chairman Gilman. Thank you, Mr. Bereuter.
    Mr. Royce.
    Mr. Royce. Ambassador Sherman, if I could ask you, The Los 
Angeles Times not too long ago reported that North Korea has 
been conducting major military exercises, showing capabilities 
that have caught analysts off guard. The L.A. Times reports 
that Pentagon officials have said that these exercises were 
being supported by the food aid that the U.S. and others are 
providing the regime in the North.
    Now, what is your response to this criticism? Is The L.A. 
Times wrong in that report, in your view?
    Ambassador Sherman. I believe that Admiral Blair testified 
in front of this Committee and said quite publicly that the 
winter military exercises were quite large, quite 
sophisticated, and quite good. I would not differ with Admiral 
Blair in that regard.
    It is true the scale of operations during the winter cycle 
did exceed what had been observed over past years. But I want 
to remind the Committee that we have never shrunk from the 
fact--and it is part of our grave concern about North Korea--
that their million man army is formidable; that the artillery 
and supplies that they have, although not as up to date as they 
would like to be, probably without some of the spare parts they 
want, could do catastrophic harm to our allies and to our 
troops. We take it quite seriously.
    As for the food issue, Congressman, it is also my 
understanding, though I was not here, that Admiral Blair said 
that at the end of the day, food aid did not make a difference, 
in his judgment, in the capabilities of that million man army, 
and that it was the American tradition to provide such food 
aid. He believed it was the right way to go.
    There is no question, and we have said this before 
publicly, that food aid--food is fungible, and there is no 
question in my mind but that North Korea wants to feed its 
military first and foremost. They cannot produce enough food 
for their own people, and probably the food they do produce 
goes first to their military, and then foreign food aid goes to 
others in the population.
    We do believe, through the monitoring of the WFP, although 
it is not perfect and we are always trying for better 
monitoring, that, in fact, food is reaching the most vulnerable 
populations. Those who have been there frequently have seen, 
just with their own eyes, a difference in terms of the health 
and welfare of children, women, and the elderly.
    Mr. Royce. We were providing some 500,000 tons of fuel each 
year. Do we know if that fuel was used in these military 
exercises?
    Ambassador Sherman. We do not believe so, Congressman. One 
of the reasons that we wanted to provide heavy fuel oil was the 
fact that it is harder to convert heavy fuel oil to other forms 
of fuel. I cannot tell you with a guarantee and a certainty 
that they have not gone through the process which would enable 
them to do that, but it is one of the reasons that heavy fuel 
oil was chosen.
    Mr. Royce. If the analysts are caught off guard by the 
magnitude of the military exercises, perhaps we should focus on 
that question, since we are still providing the fuel.
    I recently had the opportunity to travel to Macau, and 
there have been reports in their papers about growing illegal 
North Korean activities there. North Korea allegedly is using 
Macau banks to launder money gained from drug trafficking. It 
is also, we heard, using Macau as a base of an operation that 
is counterfeiting $100-dollar U.S. bills. Is this a serious 
concern, this activity? Maybe you could shed some light on the 
counterfeiting of U.S. $100-dollar bills by North Korea?
    Ambassador Sherman. I am aware of these reports, 
Congressman, and we are very concerned about them. This is a 
very sensitive subject because it goes to a number of areas. I 
would be pleased to have someone come up and give you a full 
brief, but I would rather not do that in a public hearing.
    Mr. Royce. The last question I would ask you is the 
Administration and our South Korean partners have been engaged 
with the North Korean regime for several years now, providing 
all types of aid. However, I am a little hard-pressed to see 
how the North Korean regime's behavior has been modified.
    Do we really believe that this aid is leveraging reform in 
North Korea for at least more responsible international 
behavior? If that is the case, what are the signs that you 
could share with me that this is working right now?
    Ambassador Sherman. I am very glad you asked this question. 
I happen to have a card here ready for it. It is hard, and it 
is very frustrating. I have many colleagues who have been at 
this a whole lot longer than I have been. I think to myself on 
the days--which is almost every day with North Korea--that I am 
intensely frustrated, I think of other parts of the world where 
negotiations have taken a long time.
    Ambassador Dennis Ross, who is a tremendously able 
negotiator, has been working on Middle East peace for 10 years. 
We didn't see the end of the Soviet Union for more than 40 
years. We tend to think of timeframes in 2, 4, 6, and 8 years. 
It has something to do with our election cycle probably. But 
North Korea sees life and time in 40-year increments. Somebody 
gets to be the head of North Korea for 40 years, and then dies 
and his son takes over.
    So their sense of time is quite different than ours. Their 
approach to proceeding on these issues is quite different than 
ours.
    That said, Congressman, you have every right to ask, so 
what has this gotten us anyway? Let me tell you what I think we 
have achieved, even in this very painful, difficult, slow 
process.
    There is no question in my mind that the Agreed Framework 
froze plutonium production, and plutonium production was and 
still remains the fastest way to nuclear weapons. If that 
reactor, that potential reprocessing plant, were to startup 
again today, in months we would have dozens of nuclear material 
for nuclear weapons.
    Second, we have gotten far enough in our relationship with 
North Korea that when we have a crisis, when we have a problem, 
we are able to negotiate our way to the other side; Kumchang-ni 
being the best example of that. That was a crisis situation. 
The Congress, understandably, the intelligence community, the 
policy community, the Secretary of State, the President, and 
the Secretary of Defense, were quite concerned that Kumchang-ni 
was a nuclear reactor site, given its size and given some of 
the characteristics of it.
    Ambassador Kartman, through very patient and tough 
negotiations--he is one of the most tenacious negotiators I've 
ever met. You would not want to sit across from him. He can sit 
and stare at you for hours and not blink and not move until you 
are ready to move in his direction. He managed to gain access 
to Kumchang-ni, not just once but as many times as it took to 
satisfy our concerns. As I said, the North Koreans just 
reconfirmed again the visit in May of this year.
    Third, again, through very tough negotiations, the North 
Koreans have agreed to suspend their launch and testing of 
long-range missiles while conversations and dialogue go on with 
us. This is no small action. It is not that they have stopped 
all of the development of their missile program. I do not 
believe they have. But it----
    Mr. Royce. That is the question I have, because I don't----
    Ambassador Sherman. Right. It is very, very hard to 
continue development of a program if you cannot test. If you 
cannot test, it is harder to market your weapons. If you do not 
test and you only have one missile, it is hard to give it a 
whirl because you don't know whether it is going to work or 
not.
    So folks who are missile negotiators, who--Bob Einhorn, who 
is our Assistant Secretary for Non-Proliferation, would tell 
you that the single most important thing anyone can do to slow 
down, if you cannot yet stop a missile program, is to stop the 
testing.
    We have a long way to go. We are very glad that North Korea 
has agreed to reintensify the missile negotiation to schedule 
the next missile negotiation, because as the Perry Report says, 
our goal is to end North Korea's long-range missile program, to 
get a verified program to end the development, deployment, 
testing, and export, which is critically important. That 
remains our objective.
    We also now have, as I mentioned, commitments to a 
reintensified missile negotiation, Agreed Framework 
implementation, which gets to nuclear-related concerns. We will 
have ongoing terrorism talks, which is a tremendous interest.
    Fourth, or fifth--I don't know where I am in the list--food 
aid is very controversial, but it is, as Admiral Blair said, 
the American way. We have fed vulnerable, starving-to-death 
people, and that is important. It is still important to our 
country.
    Finally, and I think quite critical to whether we will 
ultimately succeed here or not--and I still don't know whether 
we will--is that we have constructed and now carried out the 
strongest trilateral consultation, I think, in our security, 
both military and political, relationship with South Korea and 
Japan. We have now proceeded also to further multilateralize 
that approach, so that we are in consultation and coordination 
with virtually everyone who is approaching North Korea.
    Chairman Gilman. The gentleman's time has expired.
    Dr. Cooksey.
    Mr. Cooksey. Thank you, Mr. Chairman.
    Thank you, Madam Ambassador. Let me ask you, what is the 
main source of financial aid? I understand they receive about a 
billion dollars, apparently, a year in financial aid. What 
country gives them cash? Do any countries give them financial 
aid directly?
    Ambassador Sherman. I don't know any country that gives 
them hard cash. I would have to consult with my colleagues. I 
don't believe so. Our contribution is heavy fuel oil, and some 
administrative expenses to KEDO, and our food aid. When the 
Congress has monetized that food aid, it gets upwards to 
several hundred million dollars.
    The EU makes contributions toward KEDO. China gives oil and 
food. Hyundai, which is a private corporation that we discussed 
earlier, does make payments to North Korea for the mountain 
tourism project. But there is no government that I can think of 
that gives cash, except those governments which buy missiles 
and missile technology from North Korea.
    We believe that North Korea exports that technology for 
three reasons. First, as status and pride that they, in fact, 
can do this. Second, as a leverage in its relationships with us 
and others in the world. Finally, for hard currency. We don't 
think the hard currency is the primary reason because although 
it is substantial, it is not really as much as one would think.
    Mr. Cooksey. I would assume that they don't really export a 
lot besides missiles and misery. What will it take for them to 
collapse financially, to have just a financial collapse?
    Ambassador Sherman. It is hard to answer that question, 
Congressman, because I think many people would have predicted 
that North Korea would have collapsed already. Certainly, I 
think, a couple of years ago a lot of analysts thought they 
would, but I think virtually every analyst would say today that 
they are not going to collapse.
    One of the fundamental premises of the Perry Report, which 
leads one to certain conclusions, is that we have to deal with 
this regime as it is, not as we wish it to be, because it is 
not in danger of imminent collapse. That is the view of our 
South Korean allies who are quite closer to the situation than 
we are, and I think of most analysts.
    There is no question that if one believes they are on the 
verge of imminent collapse, then one might have adopted one of 
the proposals that we outlined in our report which we rejected. 
If you thought they were in imminent collapse, one might move 
to try to undermine the regime because you might think you 
could do it rather quickly.
    We rejected that proposal because we don't believe they are 
in imminent collapse, and to undermine a regime takes a long 
time. During that time they would develop weapons of mass 
destruction further, and make it even more difficult to get 
them to give up their indigenous program.
    Mr. Cooksey. I know that we have given them food and heavy 
oil, but you gave me an answer about what the world has gained 
from it. I accept that as a reasonable answer and probably a 
good response.
    I would assume, as I look out over this audience, that 
there is someone in here that is a representative from North 
Korea. It probably wouldn't be too difficult to guess who they 
are. How long will it take for people that are North Koreans to 
come to this country and see the way we operate here in an open 
forum, to see that there is a better way of doing things? Will 
there be people that have seen the outside of North Korean that 
would go back and be the basis for a revolt?
    Maybe there is someone in this room--is there likely to be 
someone in this room--does anybody want to raise their hand 
that is a North Korean?
    Ambassador Sherman. I doubt it, Mr. Cooksey, because North 
Koreans cannot travel outside of a 25-mile radius of New York, 
where they have a permanent representative at the U.N., without 
permission by the State Department. Those who were with 
Ambassador Kartman in New York did get permission to go to 
Georgia for a meeting at Georgia Tech tomorrow, but we know 
where North Koreans travel in this country, unless, of course, 
they are here in ways that we are not aware of.
    So I would suspect there isn't a North Korean in this room, 
but I couldn't guarantee it.
    Chairman Gilman. The gentleman's time has expired.
    Mr. Cooksey. Thank you, Mr. Chairman.
    Thank you, Madam Ambassador.
    Ambassador Sherman. Thank you.
    Chairman Gilman. Ambassador Sherman, one last request. If I 
heard you correctly, you said you were quite pleased with the 
results of your New York talks. I am concerned about the New 
York talks, the fact that North Korea has rebuffed us once 
again on scheduling a high-level visit, and the fact that North 
Korea has rebuffed us once again in providing a written 
assurance on the ban on missile tests, and the fact that North 
Korea has once again rebuffed us on agreeing to the specific 
agenda for the follow-on missile and nuclear talks, which 
should be part of a joint communique of the recent visit.
    So tell us a little bit, what made you so pleased with all 
of that?
    Ambassador Sherman. When I said I was pleased, it is 
because I feel that we are still taking steps forward in this 
process. I think probably I get pleased maybe perhaps with less 
than would please you, Mr. Chairman, because this is a very, 
very difficult process. So if you can take forward steps with 
North Korea, then one is ahead in this process.
    In the overall scheme of things, there is no question. I 
wish we had a date for a high-level visit. I wish we had the 
agenda completely nailed down. I wish that we had already had 
the missile negotiation, the Agreed Framework negotiation. I 
agree with you. I would be even more pleased if those things 
had occurred.
    However, we did make forward movement in a process in which 
forward movement, small steps, one at a time, is the way that 
we are going to solve this problem. I wish it were otherwise. I 
truly do. I know Ambassador Kartman, who has to sit for hours 
and hours and hours with some of his team who are here, across 
from the North Koreans wish that more progress would go 
forward.
    I think, fundamentally, there was no rebuff of our 
objectives. There was no disagreeing that, in fact, we are 
still proceeding toward a high-level visit. The missile 
moratorium remains in effect, which is crucial to meeting our 
ultimate objectives around their missile program.
    We are still proceeding in very small steps--I agree with 
you, very small steps--very slow, small steps. However, we are 
still moving in a forward direction, and that, I think, is what 
our allies believe is necessary and what we have agreed to with 
South Korea and Japan, as Japan is proceeding in its own 
bilateral track.
    The one last thing I would add, Mr. Chairman, is I had a 
meeting yesterday with one of our colleagues from Japan, and 
one of the points he made, which I think is quite true, is that 
we have to look at the aggregate of what is occurring. We 
believe, and Japan and South Korea believe, that any progress 
each of us makes is part of the aggregate progress that all of 
us are making toward dealing with North Korea because we are 
working together.
    So, if Japan has its bilateral talks because they are in 
such close coordination with us, we are moving forward on the 
objectives of the Perry Report. If South Korea moves, both in 
its private economic channels and, I hope sometime soon, in 
North-South direct government channels, toward reaching those 
objectives, we are reaching our common objectives.
    I am not as pleased as I would like to be, but we are at 
least still moving forward.
    Chairman Gilman. Mr. Bereuter.
    Mr. Bereuter. Thank you, Mr. Chairman.
    Both the Chairman and I are interested in whether the North 
Koreans have agreed to dates certain for talks on missiles. I 
would also ask a second question. Since North Korea is the 
world's worst proliferator when it comes to missile technology, 
and since non-U.S. independent sources indicate that North 
Koreans are working on nuclear development programs elsewhere 
in Asia, to what extent are we making that an element in our 
talks with them to try to get a commitment that they are going 
to abandon this kind of third country work on missile 
development and nuclear development?
    Ambassador Sherman. Without getting into the specifics of 
the issues that you are discussing----
    Mr. Bereuter. I just want to know if it is being taken into 
account--third country.
    Ambassador Sherman. Yes, absolutely. The reason for the 
Agreed Framework implementation talks, as I said, is to address 
our concerns that we either cannot get to soon enough because 
of the Agreed Framework implementation guideline and 
parameters, or where other concerns have been raised that we 
want to address as it was in the Kumchang-ni situation.
    In the missile talks, absolutely. We are quite concerned 
about the range of activities of North Korea. I cannot today 
give you dates for the missile and the Agreed Framework 
implementation. As I said earlier, Ambassador Kartman had to 
come back to us. Kim Gye Gwan had to go back to Pyongyang. But 
we expect those dates to be set very soon through the New York 
channel.
    Mr. Bereuter. Thank you.
    Thank you, Mr. Chairman.
    Chairman Gilman. Thank you, Mr. Bereuter.
    The Committee stands in recess until the vote is completed. 
We will continue very shortly.
    Ambassador Sherman, we thank you for your appearance.
    Ambassador Sherman. Thank you.
    Chairman Gilman. I don't think there is any need for you to 
stay.
    Ambassador Sherman. Thank you very much, Mr. Chairman.
    Chairman Gilman. Thank you.
    [Recess.]
    Mr. Cooksey [presiding]. I would now like to welcome our 
second panel headed by Douglas Paal. Mr. Paal is President of 
the Asia Pacific Policy Center and a former senior staff member 
of Asian Affairs on the National Security Council during the 
Reagan and Bush Administration. We are glad you could join us 
today to give us your perspective on the Korean problem.
    Mr. Paal will be followed by Dr. Mitchell Reiss. Dr. Reiss 
is the Director of the Reves Center for International Studies 
at the College of William and Mary. We welcome your 
perspectives on the North Korean policy dilemma as a former 
policy advisor at KEDO.
    Finally, we will hear from Scott Snyder of the Asia 
Foundation. Mr. Snyder represents the Asia Foundation in Seoul, 
and recently published a book on North Korean negotiating 
behavior. We are glad you could join us today to give us your 
perspective on North Korea's negotiating tactics and strategy.
    Welcome to all of you. I know that many of you have 
appeared before Congress previously. For the sake of time, I 
would request that you summarize your remarks and have your 
full statement appear in the record.
    Again, I would ask Members to withhold questions until all 
of the witnesses on this panel have testified.
    Mr. Paal, proceed.

  STATEMENT OF THE HON. DOUGLAS PAAL, PRESIDENT, ASIA PACIFIC 
                         POLICY CENTER

    Mr. Paal. Thank you, Dr. Cooksey. It is a pleasure to be 
here to present the views, and I will submit a small statement 
for the record.
    Current U.S. policy toward North Korea remains a 
distasteful exercise in dealing with an obnoxious and 
threatening regime. With little to no consultation with the 
Congress, the Administration reached the Agreed Framework with 
North Korea in 1994.
    Since then, the Congress has been forced to choose between 
overturning a major international undertaking by the U.S. 
Government, which in principle would be a harmful act to U.S. 
interests, and appropriating taxpayer money every year for use 
by a despicable elite in Pyongyang. This is not a welcome 
choice, as you well know.
    You and your colleagues have tried to steer a course 
between these alternatives and have succeeded to a limited 
extent in conditioning and monitoring the flow of food and 
heavy fuel oil to North Korea. You have also succeeded in 
pressing the Administration to organize a more comprehensive 
effort under the original direction of former Defense Secretary 
Perry, and now under Ambassador Sherman.
    How successful has this approach been? In the short term, 
it appears to be a mixed result. The most likely source of 
full-scale plutonium production in the Yongbyon facility has 
ceased operations, though not yet been dismantled or 
intrusively inspected. The North has also momentarily ceased 
testing long-range missiles with a hint of willingness to enter 
into a more formal moratorium.
    In the longer term, however, we will not know probably for 
at least 4 years whether the North has found another way to 
produce nuclear weapons at sites away from Yongbyon. It 
stretches the mind to imagine that a key element of the Agreed 
Framework--satisfactory special inspections by the IAEA--will 
ever be intrusive enough in a secretive society like North 
Korea.
    To meet a high standard of investigation 8 months to 2 
years of inspections are likely to be required. It will be an 
important question during that period whether the North will 
bend to the international community in order to get the 
critical components necessary for the light water reactors 
under construction, or the international community, led by the 
United States, will bend its standards to keep Pyongyang 
cooperative.
    Before turning to the outlook for the future, I would like 
to note that I have great respect for the hard work and many 
frustrations of the civil servants who have had to work this 
wet of problems with North Korea. I was one of them myself in 
the Bush Administration. They have labored under policy 
constraints in the new Administration that leave few options, 
and all are suboptimal.
    When the Agreed Framework was adopted, the choices before 
the Administration were framed as either war or cooperation 
with Pyongyang. The absence of major conflict since then, 
despite repeated skirmishes, is, of course, an accomplishment 
for which the architects of the Framework claim credit. 
However, war has been avoided on the Korean Peninsula since 
1953 through effective deterrence. The cessation of long-range 
missile tests and the arrest of the Yongbyon nuclear facility 
are two other outcomes of the Agreed Framework. But as I have 
noted in my statement, these are qualified successes.
    The problem for the Congress and the next Administration is 
that the Agreed Framework and Secretary Perry's efforts have 
effectively postponed the ultimate confrontations with North 
Korea over nuclear weapons and missiles, and they have yet to 
address the fundamentally more serious problem of conventional 
arms on the peninsula.
    As Admiral Blair noted in his testimony here 2 weeks ago, 
despite years of poor economic performance and large-scale 
international food aid, Pyongyang surprised observers with the 
largest winter military exercise in nearly a decade.
    Alliance requirements have also limited the room for the 
U.S. maneuver. The election of President Kim Dae Jong, with his 
strong commitment to win over or undermine North Korea through 
blandishments and economic assistance, has made it more 
difficult for any Administration to take a hard line with the 
North. There may be some room, however, for a ``bad cop, good 
cop'' approach to Pyongyang, with the U.S. playing a heavier 
role to the more pacifying role of Seoul.
    The preconditions already exist in the different emphasis 
Seoul and Washington--that these two capitals give to weapons 
of mass destruction, Seoul playing this issue down much more 
than the U.S. plays it up.
    Going forward, the next Administration and Congress will 
need to rig for heavy weather. Sometime in the first year and a 
half of the next term, the IAEA will have to inspect at a level 
of intrusiveness that would be difficult in, say, Sweden, let 
alone North Korea.
    The Iraqi experience is a daunting premonition of the North 
Korean situation. The level of political support for President 
Kim Dae Jong's approach to the North also appears to be 
diminishing in South Korea as the economy there returns to 
health and the dividends of his Sunshine Policy remain lean.
    The next Administration should expect to be tested in a 
confrontation engineered by the North, as President Clinton and 
South Korean President Kim Young Sam were in 1993, with 
Pyongyang's threat to leave the Non-Proliferation Treaty. Here 
I will interject that this political component to the behavior 
of North Korea, which is very often missing from analysis and 
debate--they watch our election cycle much more closely than 
they are perceived to do.
    They have timed their challenges to leaders when they are 
new in office and are unsure of themselves. This happened in 
1993, and President Kim of Korea and President Clinton of the 
United States responded, in my view, against the previous 
Administration's background fairly weakly.
    In 1994, when the tensions were rising, they signed the 
Agreed Framework on the eve of the Congressional elections, 
perhaps believing in their own minds, if not in the minds of 
the White House, that this would somehow be a time to strike a 
deal when the Administration was looking for victory.
    I believe that they are choosing the present time, the May 
visit by a senior leader, to come and test the political 
environment in the United States and see whether the 
Administration is going to be hungrier for a deal when it is up 
against a political opponent in our own domestic contests.
    I fully expect Pyongyang to try to sweeten the deal or 
reduce its cost by confronting the U.S. and Korean leaderships 
again with a choice between confrontation or cooperation or 
classic appeasement. It will be up to the new team to fashion 
an alternative to these choices if we are to resolve our 
concerns about Pyongyang's nuclear, missile, and conventional 
weapon threats.
    Thank you.
    [The prepared statement of Mr. Paal appears in the 
appendix.]
    Mr. Cooksey. Ordinarily, I would go to the other 
statements. However, in statement four and statement seven, you 
seem to question the position of the State Department. Is that 
assumption correct? I get the impression that you don't have as 
much confidence that they are doing the right thing as 
Ambassador Sherman did. Or do you?
    Mr. Paal. There are three choices I believe that the U.S. 
Government has as broad categories for dealing with North 
Korea. One is a real confrontation. We go to the United 
Nations, we try to get votes against them, we try to isolate 
them. That was the choice that was put up before the President 
in 1993 and 1994. Another option is to work out some kind of 
cooperative arrangement with all of the agonizing that goes 
along with it, which Ambassador Sherman and her team have had 
to go through.
    I have always felt that there is a third option, which is 
simply to turn a cold shoulder to the North on a political 
level, but to give them opportunities to go into the 
international economic community. If they want to buy things, 
if they want to sell things, they are welcome to do it. We 
could lift our sanctions on North Korea, except for things such 
as military items, and transfer to the North, and then say, 
``Here is our phone number. If you want to do business, come to 
us.''
    Instead, we find ourselves chasing after them and 
proceeding to build a process-driven approach to North Korea, 
which yields extremely small dividends at an extremely slow 
pace, which is something that is easier for them to do because 
they don't operate in the democratic political environment 
where representatives, such as yourself, have to go to the 
taxpayers and ask for money for a despicable regime's small 
lifting of its little pinky when it takes from us.
    Mr. Cooksey. Good. Thank you. I am going to come back to 
you shortly.
    Dr. Reiss, If you would go ahead with your statement. Thank 
you.

  STATEMENT OF MITCHELL B. REISS, DIRECTOR, REVES CENTER FOR 
       INTERNATIONAL STUDIES, COLLEGE OF WILLIAM AND MARY

    Mr. Reiss. Thank you, Congressman. I would like to thank 
the Committee for inviting me to testify here today on this 
important issue.
    I would like to submit my written testimony for the record 
and then offer a brief summary of the major points.
    There are currently three myths that influence U.S. policy 
toward North Korea and impede our ability to maintain stability 
and security on the Korean Peninsula and in the region.
    Myth number one: It is impossible to negotiate with North 
Korea. Determining how best to deal with North Korea has posed 
a serious challenge for the Clinton Administration. However, it 
is possible to do business with Pyongyang, as proven by the 
experience of KEDO, an international organization that was 
created to deal with the North's nuclear weapons program by 
building two nuclear power reactors in North Korea.
    During the past 5 years, KEDO and the North Koreans have 
reached agreements that have produced real and tangible 
progress to implement this nuclear project. Many of these 
agreements deal with highly sensitive national security issues, 
such as direct transportation routes from South Korea to North 
Korea, independent means of communication from the work site to 
the outside world, and blanket immunity from prosecution for 
all KEDO workers doing business in the North.
    KEDO has shown it is possible to engage North Korea in ways 
consistent with U.S. national security interests. The KEDO 
experience also teaches the importance of demanding strict 
reciprocity. There is no such thing as a free lunch when it 
comes to North Korea. It is possible to take from the North, 
but only if you are prepared to give something in return.
    It is essential that anyone negotiating with the North not 
be afraid to walk away from the negotiating table. They should 
never be or seem to be more eager than the North Koreans to 
reach an agreement. Hard-headed engagement, which is strongly 
supported by South Korea and Japan, can work. By keeping faith 
with our allies, the United States will emerge in a much 
stronger position should North Korea decide to remain a rogue 
state.
    My final point here is that it is useful to talk with 
Pyongyang if only to make absolutely clear to them the 
consequences their actions will bring. In other words, the 
United States has a strong interest in preventing North Korea 
from ever thinking that its provocative behavior would go 
unanswered.
    The second myth is that the Agreed Framework nuclear deal 
can be attacked without harming broader U.S. national security 
interests. Despite all of the criticisms of the Clinton 
Administration's handling of North Korea, the reality is that 
the next Administration, whether Democrat or Republican, is 
unlikely to substantially change U.S. policy.
    If there is a Republican Administration come next January, 
I would expect to see important changes in policy style and 
policy execution, but little change in policy substance, with 
the possible exception of addressing the North's military 
posture along the demilitarized zone.
    Indeed, leading Republican foreign policy experts advising 
Governor Bush have already gone on record saying it would be 
difficult for a Republican Administration to overturn the 
current U.S. approach to North Korea.
    These Republican foreign policy experts recognize that the 
Agreed Framework and KEDO, Secretary Perry's report, and South 
Korean President Kim Dae-jung's Sunshine Policy, provide useful 
tools with which to deal with many of the challenges North 
Korea presents. This is not to say that the current U.S. 
approach is ideal. Far from it. It is the least worst option.
    Before dismantling the current approach, it is essential to 
formulate a viable policy alternative. Suddenly reversing 
Washington's North Korea policy without such a policy 
alternative in place would harm our relations with two key U.S. 
allies--South Korea and Japan. The likely result of such 
behavior would be the weakening of U.S. influence throughout 
all of East Asia and perhaps beyond.
    Myth number three is that KEDO doesn't need or deserve 
strong U.S. support. According to published accounts, North 
Korea's work at the nuclear facilities covered by the Agreed 
Framework has halted. This nuclear freeze is being monitored 
not only by U.S. national technical means, but also by 
international inspectors on the ground at these sites in the 
North.
    Without this nuclear freeze, which is due largely to KEDO's 
ongoing efforts, it is estimated that Pyongyang would have the 
capability to build five to six nuclear weapons a year. In 
other words, without the Agreed Framework and KEDO, North Korea 
could have a nuclear arsenal of at least 25 to 30 bombs by this 
time. Needless to say, this result would be profoundly 
destabilizing to all of East Asia and detrimental to U.S. 
stature and influence in the region.
    Unfortunately, the KEDO nuclear project is an estimated 5 
years behind schedule. KEDO needs strong support from the 
Administration and from Congress to move the nuclear project 
forward. It is useful to recall that under the Agreed 
Framework, North Korea has pledged to come clean about its 
nuclear past, to disclose how much weapons-grade plutonium it 
has separated, only after KEDO completes a significant portion 
of the two nuclear reactors it has pledged to build.
    Many people, including myself and my friend Doug Paal here, 
are skeptical whether Pyongyang will ever place all of its 
nuclear cards on the table. We delay testing this proposition 
with each day the KEDO project is stalled. We delay forcing 
North Korea to choose which path to follow--the one leading to 
greater engagement with the outside world, or the one leading 
to greater isolation and poverty with the North Korean regime.
    In conclusion, I would like to leave the Committee with 
four key points. First, it is imperative that the United States 
keep its eye on the prize. Our overriding priority is to 
maintain security and stability on the Korean Peninsula.
    Second, we must keep solidarity with our allies--South 
Korea and Japan. Anything that weakens our alliances weakens 
our security.
    Third, we need to force North Korea to make a choice 
through tough negotiating, so we can have a better sense of 
which U.S. policy is most appropriate for dealing with the 
threats that North Korea poses.
    Fourth, and finally, Congress has a crucial role to play in 
working closely to help this Administration shape our policy 
for North Korea.
    Thank you.
    [The prepared statement of Mr. Reiss appears in the 
appendix.]
    Mr. Cooksey. Thank you, Dr. Reiss. It is my understanding 
that you were working for KEDO, and you sat down across the 
table from the North Koreans and negotiated the agreement that 
proceeded with KEDO.
    Mr. Reiss. Yes, sir. For 4 years I was the chief 
negotiator.
    Mr. Cooksey. Where was this where these negotiations----
    Mr. Reiss. The negotiations took place in North Korea and 
in New York, where KEDO is headquartered.
    Mr. Cooksey. What is your opinion of the people you 
negotiated with? What was their education level? Were they 
tenacious? Were they honest?
    Mr. Reiss. They were extremely tenacious and difficult 
negotiators. I have explained in other addresses that I like to 
describe the North Koreans as smart but not terribly 
sophisticated. A lot of what we did was actually explain and 
educate the way the world worked, international standards, 
technical advances. Their people literally don't get out a lot, 
and they are not as familiar as one would hope in terms of what 
is current concerning technology levels, international 
standards, international practices.
    For the first part of many of these negotiations we spent 
an enormous amount of time explaining and educating, providing 
them with written documents and materials, so they could get up 
to speed themselves.
    Mr. Cooksey. I will probably come back to some more 
questions for you, but thank you, Dr. Reiss.
    Mr. Snyder.

 STATEMENT OF SCOTT SNYDER, REPRESENTATIVE OF ASIA FOUNDATION/
                             KOREA

    Mr. Snyder. Thank you very much for the opportunity to be 
here to address the Committee. I am also going to summarize my 
statement by first focusing on contributions of the Perry 
review process.
    I think the primary contribution has been the alignment of 
policies among the United States, Japan, and South Korea, in 
favor of working with the North Korean leadership to engage in 
mutual threat reduction in return for the creation of a more 
benign international environment necessary for North Korea's 
regime survival.
    The policy coordination effort itself is unprecedented and 
has potentially significant implications for the shape of 
future security relations in Northeast Asia, including 
perpetuation of U.S. alliances with Japan and South Korea as 
part of the shaping of that security environment.
    Another result of the policy review process has been to 
underscore both the practical limits and essentially 
unsatisfactory nature of the options available, and the 
difficulties of achieving a political consensus on how to deal 
with North Korea in the United States, Japan, and South Korea.
    The true test of success or failure of the Perry process in 
the long-term will depend on whether or not the following 
positive developments are sustainable--first, continued 
strengthened alliance coordination among the United States, 
Japan, and South Korea to prepare along the two-pronged path of 
engagement or confrontation; second, the ability of the 
Administration to move from the design phase represented by the 
policy review process to overseeing an implementation process 
while maintaining bipartisan political support; and third, an 
ongoing and regularized engagement with North Korean leaders at 
higher levels that gives North Korea a stake in and benefits 
from an engagement process, so that leaders in Pyongyang 
recognize that they have so much to lose that they cannot 
afford to walk away.
    Although it is necessary to be realistic about the ability 
of any external party to influence Pyongyang's process of 
policy formation, the relative influence of external actors and 
policies toward North Korea clearly has increased during the 
past decade from a low-level.
    This trend has critical significance for policy toward 
North Korea, in my view, because it means that the focus of the 
debate increasingly should not be over whether to provide 
external assistance, but over how to provide assistance and in 
what forms. To be more specific, it seems to me that the issue 
of whether or not that assistance is being provided in such a 
way that strengthens the current regime is a critical criterion 
that one wants to look at in terms of assessing those efforts.
    So the critical objective of the U.S. and the international 
community is how to increase the pace of positive change in 
North Korea, while the objective of Pyongyang's leadership, 
focused on regime survival, is to control the pace of change in 
ways that do not threaten their political control.
    In my view, the single criterion by which all assistance 
should be judged is whether or not that assistance increases 
the pace of change in ways that facilitate North Korea's 
integration with the international community, or whether that 
assistance actually reinforces policies or gives new life to 
systems in North Korea that have already failed.
    This benchmark has critical implications for how food 
assistance is provided, how one thinks about issues such as 
sanctions lifting for implementation of the KEDO project, and 
which actors inside North Korea are best suited to serve as 
counterparts to external parties.
    The coordinated policy approach toward North Korea that the 
Perry process has helped to put into place is important for 
several reasons. First, it manages the differences in priority 
on specific issues that may exist internally between the United 
States and Japan, or the United States and South Korea.
    Second, it reduces the ability of North Korea to exploit 
differences in the policy stances of allies.
    Third, it underscores the importance of containing North 
Korea's destabilizing behavior while expanding the base of 
resources available as part of an engagement strategy with 
North Korea.
    Fourth, it diminishes the possibility that precipitous 
unilateral action against North Korea by any single party in 
the coordination process will lead to the spread of broader 
conflicts in Northeast Asia.
    Here I would just note that the coordination process is 
demonstrated in the way in which the United States, Japan, and 
South Korea are working to approach North Korea diplomatically. 
It also has extended what I would call comprehensive deterrents 
against North Korean destabilizing action. I think this is 
particularly evident in some of the Japanese attitudes in the 
national Diet, with regards to some of the negative activities 
that North Korea is engaging in that impacts Japan in various 
ways that were mentioned earlier in the session.
     The fundamental irony in engaging North Korea is that 
North Korea has also reached a point where its options have 
narrowed to the single option of engagement with the outside 
world, despite Pyongyang's protracted search for alternatives 
to the kinds of engagement with the international community 
that will require real changes in their own system.
    The Perry process at this point is the best way to test 
North Korean intentions and frame hard choices for Pyongyang's 
leadership. Gradually, the realities of North Korea's increased 
dependence for regime survival on external inputs are being 
revealed. I think this reality is well-known to North Korean 
diplomats, including one that privately expressed to me his 
vision for improved U.S.-North Korea relations as a process 
through which two parties, both in danger of drowning, have to 
save each other.
    So, in summary, North Korea's system is caught in a 
contradiction between its long-standing revolutionary 
nationalist and socialist ideological aspirations, and the 
North Korean reality of a highly traditional dynastic and 
feudalistic system, in the words of the highest ranking 
defector, Hwang Jang Yop.
    North Korea's past approaches to the outside world have 
been highly consistent, even if they are often self-defeating. 
These days, North Korean approaches to the outside world are 
also increasingly tempered by a mix of dependency, desperation, 
paranoia, and pragmatism borne of the reality of North Korea's 
essential weakness and isolation.
    The primary achievement of the Perry review process is that 
it has provided an opportunity to manage, and possibly avoid, 
renewed crisis with North Korea, but it does not guarantee that 
crisis will indeed be avoided. The next equally difficult task 
is to test whether there is sufficient political will in 
Pyongyang to overcome some of the differences between the 
United States, South Korea, and Japan, by pursuing concrete 
tension reduction measures. In essence, the question of whether 
moving to a normalized relationship with North Korea will also 
lead to a normalized North Korea in its relations with the rest 
of the world.
    [The prepared statement of Mr. Snyder appears in the 
appendix.]
    Mr. Cooksey. Thank you, Mr. Snyder. Just in summarizing 
your message, you are saying that we should indeed provide 
external assistance that does not profit the regime or 
strengthen it, and yet external assistance that will hasten 
this change from an old out-of-date political and economic 
model to a modern world, 21st century global democracy, which 
they seem to be ions away from right now. Is that, in essence, 
what you are----
    Mr. Snyder. That is right. External assistance can be used 
to facilitate changes in North Korea, although still at a very 
limited level.
    Mr. Cooksey. Have you been to North Korea?
    Mr. Snyder. Yes, I have been there four times.
    Mr. Cooksey. Were you involved in the KEDO negotiation?
    Mr. Snyder. I have not been involved in the KEDO process.
    Mr. Cooksey. How did you happen to go?
    Mr. Snyder. These were academic study missions led in three 
cases by Professor Robert Scalapino when I was working with the 
Asia Society and at the U.S. Institute of Peace.
    Mr. Cooksey. There are some critics, and probably some who 
may have a political agenda or bias, that feel that the United 
States or this Administration has given too many concessions to 
the Koreans which put us in a dangerous cycle of political 
blackmail.
    You don't have to tell me whether or not you agree with 
that or not, but do you feel that there is a cycle going 
between them making demands and blackmailing us? You don't have 
to tell me whether or not you think it is right or wrong, but 
do you feel like there is a cycle of political blackmail?
    Mr. Snyder. I believe that part of North Korea's strategy 
in dealing with the United States is to try to draw resources 
to itself without giving very much in return. I would agree 
with some of the comments that Mitchell Reiss made earlier on 
that note.
    Mr. Cooksey. How can we break the cycle?
    Mr. Snyder. The basic vehicle by which the--what North 
Korea is doing in order to enhance its negotiating capacity 
with the United States is trying to show that it has 
alternatives to negotiation. It is trying to demonstrate 
commitment and maintain control over the negotiating agenda.
    Our objective should be to cutoff the alternatives to a 
negotiation process, and to try to maintain our own commitment 
and control over a negotiating process that leads in the 
direction that we want North Korea to go in.
    Mr. Cooksey. How long is your book?
    Mr. Snyder. Two hundred pages. I will be glad to give you a 
copy later.
    Mr. Cooksey. I buy a lot of books, but I am so far behind.
    It would be interesting to get through it or see as much as 
I could. My great passion is reading.
    Mr. Paal, do you think in light of the testimony from the 
three of you that this Administration or a future 
Administration should be tougher, should be more coercive? Is 
that the only thing that the North Koreans understand?
    Mr. Paal. I would distinguish between the tougher word and 
the coercive word. I think we have put ourselves at risk of 
many equities in East Asia if we go on a coercive, aggressive 
campaign against North Korea. Deterrence has worked for almost 
50 years at keeping them from doing large-scale operations that 
would destabilize Northeast Asia. Deterrence is being 
maintained fairly effectively now by our Armed Forces and the 
overall structure of our national defense strategy.
    Going after them encourages the process of blackmail in the 
sense of trying to win them over, get them to come to meetings. 
We have spent a lot on food aid, and this has been very well 
documented. We have claimed humanitarian principles for the 
food, but it always tied to a meeting or an element of the 
process of making them look like they are being more 
cooperative.
    This has become very obvious to North Korea. They don't go 
to meetings unless they are going to be paid off. Then you are 
told this is a humanitarian act; it has nothing to do with the 
process.
    I think we can get somewhere between the confrontational 
and aggressive approach and the one where they are setting the 
terms and driving us along. That is where we say, ``Here is 
what we need. Here is our phone number. Meanwhile, you are 
going to confront a world that is pretty cold and unfriendly. 
Unless you change to meet the terms of that world, we are not 
going to send you the aid to save yourself.''
    Food aid is an interesting proposition. As you probably 
know from previous testimony, North Korea cannot feed itself. 
It sits on a slab of granite. It can't feed 20 million people 
in that climate on that soil.
    Mr. Cooksey. They never will be able to.
    Mr. Paal. That is right. They have to sell things or 
threaten us to give them food. We want to get them into the 
position of selling things, and to do that they have got to get 
into the international marketplace. You know all of the 
complexities and the burdens on societies to change and 
modernize and to adapt international standards.
    That is the path we want them to go on, and I think doling 
out assistance is just--it implies a kind of blessing of the 
system as it is, or at least it incurs the risk of some day 
discovering who you were feeding who was oppressing somebody 
that was not getting fed, when the records become clear. Or it 
implies an assumption that the regime is going to fall.
    We can no longer make the easy assumption the regime is 
going to fall that was made in the early 1990's. They have 
proved that they can stand up, so we have to make an adjustment 
in the way we approach it.
    Now, as I said in my prepared statement, we are also coming 
up to deadlines under the Agreed Framework which are going to 
force us either to be straight about what we really need from 
North Korea or change that and lead them to believe they can 
get a special standard and get by again.
    Mr. Cooksey. It seems to me, then, that there is a fine 
line between propping up this regime and playing the political 
blackmail game. Do you think that is a proper assumption, or a 
correct assumption? Or let me ask you this: Do you think we are 
propping up the regime at all?
    Mr. Paal. I think we clearly prop up the regime with the 
food assistance. We are not the major contributors to that. 
China is the most important contributor. I think that a new 
policy toward North Korea would have as an important component 
a much more aggressive attempt to get the Chinese to take 
responsibility for the misbehavior of North Korea and to do 
more about correcting that behavior.
    Ambassador Sherman gave a long list today of all of the 
good things China is doing. However, those are all our 
assumptions about China's behavior. The Chinese have not 
demonstrated it, and they have tried to stay out of the 
spotlight for a variety of reasons.
    We have certain common interests with China right now, but 
it is not long-term an abiding common interest. We separate 
very quickly when you go down the list of our respective 
interests in North Korea. I think we ought to be--at the same 
time we try to construct a more stable relationship with China, 
we use that stable relationship to get them to do more to help 
us achieve our objectives in North Korea.
    Mr. Cooksey. You said that North Korea is basically a 
country of granite and no ground, no place for----
    Mr. Paal. That is an overstatement, but that is the--you 
get the general point.
    Mr. Cooksey. They just do not have much land that lends 
itself to farming, and they never will have. Do you think that 
is part of the reason they have been such a belligerent country 
all of these years, because they knew they couldn't feed their 
people and they were trying to control South Korea, or acquire 
South Korea?
    Mr. Paal. In the 1950's and the early 1960's, they were 
considered the most successful example of a socialist society. 
Their productivity had been propped up by barter arrangements 
with the Communist Community of States, and they just fell 
behind. Their belligerence goes back to the very beginning, and 
it has something to do with the system that is in power in 
North Korea.
    You have got 600,000 people in a nomenclature controlling 
the other 21 million. That system is more what dictates the 
attitude of the regime, I believe, than the physical conditions 
on the peninsula. The physical conditions are not much 
different in South Korea, and we have a very different kind of 
country in South Korea.
    Mr. Cooksey. Dr. Reiss, what can North Korea export besides 
missiles?
    Mr. Reiss. They can export trouble.
    Mr. Cooksey. What good things can they export, that they 
can get some hard currency from?
    Mr. Reiss. I think there are some natural resources that 
they have--manganese. There are some other ores that have value 
on the international market. I would like to ask the other 
people on the panel if they can think of some other items. 
There aren't too many big ticket items that come to mind. I 
think ballistic missiles are their single largest source of 
hard currency, aside from perhaps counterfeiting or narcotics 
trafficking.
    I think the big concern that we have is their ability to 
export ballistic missiles to countries in South Asia and the 
Middle East. Doug was absolutely right in saying deterrence on 
the peninsula has worked for 50 years. We have deterred a 
large-scale invasion of South Korea by the North.
    What we haven't been able to deter is smaller incursions, 
terrorist acts, by North Korea. It is unclear to me whether our 
current military posture, as strong as it is, without the 
Agreed Framework and KEDO would be able to deter the North 
Koreans from building a nuclear arsenal, from exporting nuclear 
material, putting it on the marketplace along with ballistic 
missile technology, as they have done in the past.
    So deterrence is important. It is essential. However, I am 
not sure that it addresses all of the policy concerns that the 
United States has.
    Mr. Cooksey. Let me go back to the KEDO process, in view of 
your role in the--or your formal role in that organization. If 
we are not able to work out a nuclear liability for the LWR 
project, what are the delay and cost implications, particularly 
if GE backs out?
    Mr. Reiss. I think, as I said in my written remarks, that 
there would be enormous delays and increase in costs. I don't 
have a cost figure off the top of my head to give you. I can 
try and find out and provide it to you and your staff. I think 
that it would cause a significant delay. There might need to be 
some plant redesign work being done. Whoever was found to 
replace GE, the same issues of nuclear liability would arise.
    Mr. Cooksey. Who could potentially replace GE?
    Mr. Reiss. I think there is some thought that there is a 
Japanese company or companies that could build similar 
technology for the KEDO project.
    Mr. Cooksey. Does South Korea, Europe, China, or Russia--do 
any of these countries have the potential to replace them?
    Mr. Reiss. I think it is possible technically that some 
European companies may do so. I am not sure that the Russians, 
since they operate a very different type of reactor system, 
would be able to step in right away. Anybody who comes in, 
though, is going to have to fit their product into the Korean 
nuclear standard plant. So, there will be a lot of 
retrofitting, a lot of adjustments. It is going to be a very 
difficult process to try to put in a new component into an 
existing system.
    Mr. Cooksey. If their largest export is missiles, do any of 
the three of you panelists think that there is any likelihood 
that they would give up this single largest export, source of 
hard currency?
    Mr. Paal. I don't see them doing that. In fact, they have 
an unusually good circumstance. As the Rumsfeld Commission 
showed, you don't have to test missiles to have them. You can 
do a lot of tabletop testing. You can also sell a few. It 
reduces the price at which you can sell them, because people 
are not as confident they are going to get the bang for the 
buck. But if you can't get them anywhere else, you have still 
got your market.
    So, North Korea, even with the moratorium informal or 
formalized, is still in a position to continue to market these 
missiles.
    Mr. Reiss. If I could offer a slightly different answer. I 
think I would reply that we don't know the answer to that 
because we haven't put a deal on the table with the North 
Koreans. In the early 1990's, there were reports that the 
Israelis had worked out an arrangement to buy out some or all 
of the North Korean ballistic missile program, at least to 
prevent them from exporting to other countries in the Middle 
East that threatened Israel.
    There also was a statement in June 1998 in which the North 
Koreans strongly indicated that they are willing to sit down 
and negotiate a price for their ballistic missile program. The 
answer currently is that we don't know whether that is sincere 
or whether that is posturing, because we haven't been able to 
do what we need to do internally, the hard work of coordinating 
our side of the table in order to engage seriously with them on 
this issue.
    Mr. Cooksey. Ambassador Sherman had made a statement that 
she does not feel that they are likely to make a lot of 
progress in a very rapid manner, that they think in terms of 40 
years. I believe it was--wasn't that her? Do you agree with 
that assessment, that they will outwait us--that they will be 
slower in their negotiations process?
    Mr. Paal. They don't have an election cycle and we do, and 
it makes a big difference. It makes a big difference.
    Mr. Cooksey. Forty-year election cycle.
    Mr. Paal. That is right. It makes a real big difference in 
how they can approach these issues. Also, they have--they see 
negotiators come and go. It is not just the election cycle. Our 
cycle doesn't fit neatly over the Japanese and South Korean 
cycles either. They have a strong incentive to play us off 
against each other and pick and choose the times when they want 
to move.
    Mr. Cooksey. Do you think they are likely to fire another 
missile across Japan in the next 6 to 12 months?
    Mr. Paal. I cannot prove the following statement, but I 
believe it. I think some day we can prove it. That is I think 
China, in pressing North Korea to stop making life worse for 
China, by testing missiles that are leading to the theater 
missile defense in Northeast Asia, probably gave some pretty 
good tradeoffs to North Korea in terms of assistance on their 
missile program.
    This is so deeply embedded in the secrecy of the relations 
between those regimes, and so undetectable by the relevant 
intelligence means, that I clearly can't prove that at this 
point. But it is in the nature of the way they deal, that this 
is likely to be the case, in my personal view.
    Mr. Reiss. I would be a little surprised if there was an 
actual test, but I don't think we should be surprised if they 
rattle the saber a little bit and threaten to do it in order to 
ratchet up the negotiating leverage in the talks with the 
United States, and perhaps also with Japan.
    Mr. Cooksey. Do you think the other missile firing was a 
saber rattling, or do you think it was actually a test? Or was 
it all of the above?
    Mr. Paal. It is difficult to untangle their motive. They 
had--an important event took place, and there seemed to be an 
effort to launch a satellite that would signal that North Korea 
had arrived in some way. It serves the purpose of testing an 
international range missile. It serves the purpose of marketing 
such a missile. It gave them leverage in dealing with us.
    They did things such as digging a hole at Kumchang-ni. Now, 
whether that hole had a maligned intent in the initial phase or 
not, we may, in fact, have surprised them by coming in with 
300,000 tons of food to have a look at that hole in the ground 
when they weren't going to do anything but just have a hole in 
the ground. It is very hard to understand what their intentions 
are.
    Mr. Cooksey. I did see photographs of that hole in the 
ground. It was an interesting hole in the ground.
    I do appreciate your coming, all three of you--Mr. Paal, 
Dr. Reiss, and Mr. Snyder--to testify in front of this 
Committee. It is one of the many problems that we have got to 
deal with, and it is a problem that could impact everyone in 
the world. I think there are going to be some rogue nations for 
the foreseeable future.
    I did read something recently--that at the beginning of 
this Century, there was probably less than 5 percent of the 
world's population that lived under a true democracy in which 
every segment of society could vote. We were not part of that 5 
percent.
    Today, 48 percent of the 6 billion people in the world are 
in democracies and can truly vote. Hopefully, North Korea will 
get there someday, but I think they will be the last to get 
there at the rate they are going. I think that we are going to 
have some inherent costs in that delay.
    I personally feel that the quickest way to bring it about 
would be for them to collapse economically, or something along 
those lines. From everything I have gathered in the information 
that we are presented, I don't really know that there are 
people there that would move in and be part of an insurrection, 
or be part of the leadership, or have the background to be part 
of the leadership of a nation that would be able to be 
players--reasonable, rational players--with democracy as a 
political model and market forces as an economic model.
    Thank you for being here today. We are glad to have had all 
of you here and look forward to seeing you again.
    [Whereupon, at 12:14 p.m., the Committee was adjourned.]
      
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                            A P P E N D I X

                             March 16, 2000

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