According to the Chinese border city of where most of bilateral trade between North Korea and China is conducted, Chinese firms have proposed establishing a non-tariff trade market between the two nations so that they can trade cheap goods without tariffs.
Chinese firms made this proposal when they met with Pak Ung-sik, director of the North’s Korean International Exhibition Corporation in Dandong. Pak viewed this proposal positively, hoping to hold more discussions over it with other North Korean authorities.
China once established a non-tariff trade market between two nations in 2010 in Tumen which is another Chinese border city in the northeastern Jilin province. However, worrying that participation of civilians in the market may spread the banned materials and enrage the North’s leadership, North Korea quickly suspended the non-tariff trade market with China.
For North Korea, China is the economic lifeline, but the North Korea’s constant pursuit of nuclear ambitions is putting a strain on their political relationships.
In 2014, North Korea marked the first decline over its trade with China since 2009: North Korea’s annual trade with China fell 2.4 percent from 2013. While in 2013 the North’s trade with China totaled $6.54 billion, it totaled $6.39 billion in 2014.
http://www.koreaherald.com/view.php?ud=20150330000685
In the last weeks, several blogs have discussed China’s efforts to enhance their presence in the international market. Considering the problems of overcapacity and relatively low consumption levels suffered by China, the fact that the country is trying to establish better trade relationships with neighboring countries and the rest of the world makes sense.
North Korea is too poor to make any difference to the overall Chinese economy! As a WTO China already has access to most markets (and vice-versa, those countries can export to China).
Should we not view this as a political policy and not an economy policy? Furthermore, part of the political component may be “window dressing”: the government has a hard tine stopping firms from doing something with NKorea as an intended market.
I am reminded of the lecture from former Korean Security Advisor Amb Chun. He mentioned how North Korea agreed to and honored political agreements with their neighbors only when the agreements were beneficial to them. As soon as North Korea felt an agreement would no longer benefit them more than the other party, they would no longer honor the agreement. Chun mentioned that North Korea would not even acknowledge attempts at communication when they felt it was not in their best interest.
Note that China began its international-side reforms with the creation of the Special Economic Zones. The SEZs were like bonded warehouses – no tariffs and minimal paperwork when things came in or went out, but strict rules against “smuggling” from the SEZs into the rest of China. So what China has proposed is straight from their own experience.
Many of China-N Korean relationships are created on an official-by-official basis. I wonder how centralized this new initiative is by China’s leadership. What political advantage does China gain through a relationship with N Korea?
In my opinion, China is protecting North Korea from collapsing. North Korea now is increasingly dependent on China. Under Chinese influence, it will be an invaluable buffer against U.S. troops stationed in South Korea.