Many people around the world are worried about the unstable
situation in North Korea. One way the US has tried to get North Korea to change
its plans to continue launching missiles and testing weapons is by imposing
trade sanctions.
But one reason these sanctions haven’t really worked is that
North Korea’s domestic economy has been growing and so the country does not
consider itself as dependent on foreign trade with many other countries. A
recent Bloomberg article reported that North Korea’s economy (GDP) grew nearly
4% last year—the fastest pace in seventeen years. Another main reason the
sanctions don’t work is that China which is a major trade partner, continues to
trade strongly with North Korea. China has only really banned coal exports to
North Korea but continues to allow trade in other goods. Finally, a third
reason North Korea’s economy continues to do well, according to the Bloomberg
article, is that it no longer is a pure socialist economy but has been moving
in the direction of capitalism. There are signs of markets where equilibrium
falls where supply equals demand—as laws have been loosened to permit firms to
hire and fire workers more easily and do business with firms that they choose.
I can understand why continued trade with China would be a
big reason for North Korea’s economy continuing to grow strongly. China makes
so many goods cheaply and in large volume. Last week, it was reported by CNBC that
Chinese banks were putting sanctions on North Korea to try to eliminate
financial support, under US pressure. One point that’s worth keeping in mind in
the CNBC article is that China is not happy for the US leaving the
Trans-Pacific Partnership Agreement, a trade agreement involving many
countries. So the US doesn’t really have a right to pressure China on trade
policy when the US doesn’t play fair on other trade agreements. All in all, it’s
clear that when countries make decisions about how and with which countries
they trade (or do not), their can be some very complicated side effects in other areas of policy.
https://www.cnbc.com/2017/09/26/wilbur-ross-on-north-korea-trade-with-china-and-economy.html
I'm not sure how accurate the economic growth of North Korea is, but China definitely seems to be holding a grudge on the United States for abandoning the agreement. The US government should handle this issue in a more serious manner, since it involves a country with a nuke.
ReplyDeleteI'm not sure how accurate the economic growth of North Korea is, but China definitely seems to be holding a grudge on the United States for abandoning the agreement. The US government should handle this issue in a more serious manner, since it involves a country with a nuke.
ReplyDeleteAccuracy of the data could be a problem since N. Korea is secretive. And just a few days ago, N. Korea's representative at the UN blamed the US for try
Deleteing to prevent economic development of N. Korea. He said that N. Korea would be self reliant if it had to despite economic sanctions and would stand up to the US.
http://www.livemint.com/Politics/TFg3TOD3DVNE55AQRMR9QJ/North-Korea-accuses-US-of-blocking-development.html
I looked into North Korea's exchange rate to see if it was poor as well (correlating with the poor net exports) but it too was low. The country is doing the right thing by improving their domestic economy though. They should continue to build it up, however, if they want to keep growing exponentially then they must improve trade. The U.S. leaving the TPPA obviously doesn't help but China is still a very useful source. It will be interesting to see how their economy fairs in the future and how they will go about improving their allies.
ReplyDelete