North Korea's Economic Openness: Implications for Inter-Korea and U.S. Cooperation

North Korea’s international trade has increased by more than three times since mid-1990's. Using various data sources and a frontier theory of international trade, North Korea's economic gains from trade can be quantified to show the gains are substantial. This implies that the opportunity cost of abandoning economic openness is high, thus, this is an important leverage to promote North Korea’s political openness and denuclearization. However, the current economic openness of North Korea has a fundamental limitation because of its heavy reliance on China. The China-dependence pattern of its trades has only recently emerged. It is worth noting that North Korea’s trades were much more diversified before 2008. The comparative advantage analysis shows that North Korea’s trades can be diversified as before; and cooperation among North Korea, South Korea, and the United States can play an important role for the diversification if it is shaped from global perspectives rather than by the bilateral relations.

Hyeok Jeong (PhD, University of Chicago) is a professor at the Graduate School of International Studies (GSIS), Seoul National University. His main research interests include economic growth and development, productivity and inequality dynamics in relation to financial deepening and labor market issues such as human capital and demographic transition. His recent research agenda also includes the influences of firm and product dynamics on international trade, higher education reform, Korea’s long-term development process, evolution of Korea’s demographic dividends, North Korean economy, and international development cooperation on issues such as knowledge sharing and development finance. Prior to joining the faculty of GSIS in 2015, he was a professor of economics at the University of Southern California and Vanderbilt University; National Graduate Institute for Policy Studies in Japan; and the KDI School of Public Policy and Management in Korea.