The 'Livelihood Loophole' And Other Weaknesses Of N. Korea Sanctions | KERA News

The 'Livelihood Loophole' And Other Weaknesses Of N. Korea Sanctions

Sep 15, 2016
Originally published on September 15, 2016 11:39 am

The ground had barely stopped shaking from North Korea's most recent nuclear test last week when the international condemnations began.

President Obama called the test destabilizing and provocative. South Korean President Park Geun-hye said the test displayed North Korean leader Kim Jong Un's "maniacal recklessness." Even North Korea's longtime ally China said it "resolutely" opposed the test.

Almost as fast came calls for additional sanctions on the North. But North Korea is already one of the most heavily sanctioned countries in the world. And so far, these punitive measures have yet to achieve their aim — forcing North Korea to denuclearize, or at least return to the negotiating table.

"It's the same response every time. I don't think we're getting a lot of innovative thinking," says Jim Walsh, an international security researcher at MIT who, along with Harvard's John Park, looked into how sanctions work.

"We asked ... if sanctions are effective and, if not, why not? What are their unintended consequences and how they might be improved," Walsh explains.

The most recent round of U.N. sanctions — which U.S. Ambassador Samantha Power called the "toughest ... in more than two decades" — was passed by the Security Council in March, following a North Korean nuclear test in January.

They clearly did not dissuade the North from carrying out last week's test.

"North Korea has innovated," Walsh says. "We impose sanctions, but they have taken countermeasures, and we keep doing the same thing over and over again, singing the same song only a little louder, and they've taken actions that help them evade sanctions."

One sanctions workaround for North Korea's nuclear program has been to station North Korean businessmen in China. While there, they work with a network of private Chinese companies to procure arms.

"So these private Chinese companies were able to order parts and materials from other Chinese companies or from European companies that had set up production platforms in China, selling their goods without ever knowing that they were ultimately going to the North Koreans," Walsh says.

Still, several rounds of sanctions have had an impact. The sanctions and North Korea's reclusive nature have made the North increasingly cut off from other countries. That has deepened its dependence on China for trade, business and travel. An estimated 90 percent of North Korea's trade is with or via China.

"China doesn't want a failed nuclear weapons state on its doorstep. So it's not going to cut off oil or coal or iron or something that threatens directly the survivability of the government," Walsh says.

China did sign on to U.N. Resolution 2270, the package of new sanctions in March. The resolution called for cutting off trade in commodities, such as coal. Many analysts thought that was a big deal at the time, since coal is North Korea's No. 1 export and makes up an estimated 35 percent of the economy there.

But before signing on to the sanctions, China insisted on a key loophole called the "livelihood exemption." It allows the export of a product if cutting it off might affect the livelihood of the exporter, so long as the revenue doesn't go to North Korea's nuclear program. The problem is, companies self-certify that's the case.

"I think because of this sort of potentially large carve-out, the Chinese are roughly saying, 'Well, this coal is fine,' " says Troy Stangarone, senior director of congressional affairs and trade at the Korea Economic Institute.

"Right now the Chinese are essentially letting most of the trade go through. This is one of the challenges — all of the sanctions, each country has to do their own implementation. By saying something is for a 'livelihood' purpose, it does give you enough wiggle room to say, 'Well, we can let this go through.' "

Which raises a key question about escalating any sanctions going forward: What's the point, if they're not enforced?

Jim Walsh says his research shows sanctions work only as a first step on the road to diplomacy.

"Eventually you have to take the pressure or the leverage you get from sanctions and translate that into a political strategy, and that means negotiation," he says.

He and his research partner, Park, also suggest investigating North Korea's trading and arms procurement efforts as more of a business case study and less a security problem. Because tracing the money could lead to more understanding — and solutions — when it comes to stopping private or black market deals.

But getting to negotiations or a closer scrutiny of the North's business affairs, Stangarone says, requires an important partner that so far has been reluctant to play the role.

"For better or worse, a lot of the pressure has to come from the Chinese side. Because if they allow trade to continue apace, then the signal it sends to Pyongyang is that business as usual is fine," Stangarone says.

For its part, China says it's not interested in new, heavier sanctions, arguing that additional punitive measures would only make the situation worse.

But that won't stop the U.S. and its allies from pressing for them, because the options are few.

"I think this boils down to, in essence, one of the least bad options," Stangarone says.

Haeryun Kang contributed to this story.

Copyright 2017 NPR. To see more, visit http://www.npr.org/.

STEVE INSKEEP, HOST:

How do you solve a problem like Korea - North Korea, to be specific? The U.S. and its allies are taking up sanctions, yet again, as a way to punish North Korea for its fifth nuclear test, the strongest yet. But the sanctions already in place were supposed to be the toughest yet, and they did not stop North Korea from advancing its nuclear program. From Seoul, NPR's Elise Hu asks why.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED WOMAN: (Speaking foreign language).

ELISE HU, BYLINE: When the announcement of yet another rules-breaking nuclear test came from Pyongyang, the cycle of international condemnations started quickly. And almost as fast as the angry reactions came calls for additional sanctions to economically cripple the North.

JIM WALSH: It's the same response every time. I don't think we're getting a lot of innovative thinking.

HU: Jim Walsh is an international security researcher at MIT, who, with Harvard's John Park, looked into whether sanctions work. What they found regarding sanctioning North Korea was similar to what the world has observed in 2016.

WALSH: North Korea has innovated. We imposed sanctions, but they have taken countermeasures. And we keep doing the same thing over and over again, singing the same song only a little louder. And they've taken actions that help them evade sanctions.

HU: One workaround for North Korea's nuclear program is to move North Korean businessmen into China to live and work. While there, they can hire a network of private Chinese companies to do arms procurement for them.

WALSH: So their fingerprints weren't on it. So these private Chinese companies were able to order parts and materials from other Chinese companies or from European companies that had set up production platforms in China, selling their goods without ever knowing that they were ultimately going to the North Koreans.

HU: A situation kind of created by all of the existing sanctions. And North Korea getting increasingly cut off from other countries has only deepened its dependence on China. An estimated 90 percent of North Korean trade is to or through China.

WALSH: China doesn't want a failed nuclear weapon state on its doorstep, so it's not going to cut off oil or coal or iron or something that threatens directly the survivability of the government.

HU: China did sign on to this year's, quote, "toughest sanctions yet." The language included cutting off the trade of minerals like coal. Coal is the North Korean economy's No. 1 export. But before signing on, China also insisted on a key loophole called the livelihood exemption. It allows the export of a product if cutting it off might affect the livelihood of the exporter.

TROY STANGARONE: I think because of this sort of potentially large carve-out, the Chinese are roughly saying, well, this coal is fine.

HU: Troy Stangarone is with the Korea Economic Institute.

STANGARONE: Right now the Chinese are essentially letting most of the trade go through.

HU: Which raises a key question about escalating any sanctions going forward. What's the point if they're not enforced? Jim Walsh.

WALSH: Eventually, you have to take the pressure or the leverage you get from sanctions and translate that into a political strategy. And that means negotiation.

HU: But getting there, Troy Stangarone says, requires a partner.

STANGARONE: For better or worse, a lot of the pressure has to come from the Chinese side because if they allow trade to continue apace, then the signal it sends to Pyongyang is that business as usual is fine.

HU: China, for its part, says it's not interested in heavier new sanctions, arguing they would drive an already difficult situation into a dead end. Elise Hu, NPR News, Seoul. Transcript provided by NPR, Copyright NPR.