The Effect of North Korea’s Foreign Trade on Economic Growth
Authors:   Asia-Europe Perspective Association, Bae Kyu-Han , Kwon Sun-Hee , Kim Sun-Hyung 
Published: April 2019

Since 1999, North Korea’s economy has been recovering due to economic reforms, economic policies, inter-Korean economic cooperation, and support from the international community. The lack of statistical data is an obstacle in studying North Korea. Therefore, this study used statistical data of the Bank of Korea or substitution variables to obtain meaningful results on the effect of North Korean foreign trade on economic growth.
North Korea’s foreign trade is basically an auxiliary means of building an independent economic base. However, the limits of closed foreign trade policies began to appear in the 1960s, as China and the Soviet Union cut aid and military and economic transfer policies. In the 1970s, the six-year plan was initiated internally, and socialist countries’ aid was turned into loans. In addition, the repayment period of the already received loan has come and it has suffered serious foreign debt crisis. As a result, North Korea established a company dedicated to foreign trade in order to increase exports and increase imports of foreign currency. In the 1980s, various policies were introduced to increase trade with capitalist countries or third world countries, and the share of North Korean trade was shifted from Europe to Asia. As a consequence of the collapse of the socialist power in the 1990s, foreign trade, which was an aid to the self-sustaining economy, has been steadily increasing since 1998, but continues to record trade deficits. However, after North Korea’s missile tests and the first nuclear test in 2006, North Korea’s diplomatic dependence on North Korea is increasing as trade with China increases.
This study empirically analyzed the effects of North Korean foreign trade on North Korea’s economic growth by using yearly data from 1970 to 2016. As a result, North Korea’s trade was found to have a positive impact on economic growth. In particular, North Korea’s trade in the larger effect on economic growth provided a sustainable environment will get to be the trade expanding to the economic growth.
North Korea may be the driving force of economic growth in this trade because it is difficult to achieve the economic growth of the internal force. North Korea will have to promote export-led economic policies, such as South Korea.
North Korea has increased the influence of China on North Korea to China increased dependence of trade. In the long term, This result can be reduced the relationship between North Korea and South Korea and may be acting as a barrier to reunification. North Korea’s economically changes has already appeared to increased trade with North Korea in China. If the inter-Korean relations are improved North-South trade is active, we can guess that could happen is a big change in North Korea’s trade patterns. Therefore, the development of inter-Korean trade would be efficient.
It is difficult to forecast the North Korean economy because of the rapid changes in the situation on the Korean Peninsula. However, as a result of this study, the effect of North Korea’s reform opening and foreign trade on economic growth may be large and positive. If the denuclearization is smoothly implemented and the international sanctions against North Korea are eased, the degree of isolation of North Korea in the international community will also weaken. The Korean government needs to establish policies for North Korea to open North Korea and look for ways to work with the international community.