At a time when the peace process in the Korean peninsula appears to be stalled, it seems appropriate to put forward a new approach which the leaders of both Koreas could explore if they see possibilities to develop and adapt it.
A possible way forward to rebuild trust across the Korean peninsula would be a Korean Peninsula Agriculture Community (KPAC), leading in due course potentially to a Korean Peninsula Economic Community (KPEC). This approach has been inspired of the experience of the European Union which developed out of an initial trade agreement in 1951. It is set out below for leadership of North Korea and South Korea to consider.
We have chosen December 13th 2021 to put this proposal on our website because it marks the 30th anniversary of the signing of the joint agreement on North-South reconciliation. The following articles relating to the Korean economy, which were agreed by the leaders of North Korea and South Korea 30 years ago, seem still relevant today:
- Article 1: Both Koreas recognize and respect the system of the other.
- Article 10: Both Koreas to resolve peacefully, through dialogue and negotiation, any differences of views and disputes arising between them.
- Article 15: In order to promote the integrated and balanced development of the national economy and the welfare of the entire people, engagement by both Koreas in economic exchanges and cooperation, including the joint development of resources, the trade of goods as intra-Korean commerce, and joint ventures.
- Article 16: Exchanges and cooperation by both Koreas in various fields such as science and technology…
- Article 19: Reconnection of the railway and the previously severed roads, and the opening of sea and air routes.
- Article 22: In order to implement the agreement on exchanges and cooperation in the economic, cultural, and other fields, joint commissions for each sector, including a Joint South-North Economic Exchanges and Cooperation Commission…
This could be a hopeful road marker from the past, which may be worth revisiting and developing in various ways today, such as through the possibility of a Korean Peninsula Agriculture Community (KPAC) as a way to rebuild good relations between the two Koreas.
It is worth noting that KPAC is in harmony with the US incremental approach towards mutually assured security for the peninsula, and the Chinese desire to develop and extend its Belt and Road Initiative eastwards. Thus it seems to be potentially a fruitful avenue to explore.
This proposal is based on what we have learnt from talking to many concerned international experts, and the evidence we have gleaned from our research. Our hope is that these ideas stimulate the key parties to develop their own solutions. RPI would welcome views on this proposal to expand our understanding.
Introducing the Korean Peninsula Agriculture Community (KPAC) approach to initiating peace in the Korean peninsula
What is an ‘Agriculture Community’?
It is an agriculture sector agreement between two (or more) jurisdictions about what goods could be exchanged in regard to agricultural outputs and inputs in the context of developing shared policies for the agricultural sector. This then results in the increased exchange of agricultural products between the two (or more) jurisdictions.
What prevents this from happening now?
The main issue is the sanctions by UN and other individual state actors which are preventing North Korea exporting agricultural goods to any other country or importing either agricultural products or agricultural inputs from any other country.
What might be the objectives in setting up KPAC?
- It could help to take advantage of the complementarities of the North Korean and South Korean economies as it would include a free trade agreement.
- Because trade is not enough to build trust, a Community could be a way to help develop deeper levels of cooperation and mutual benefit.
- It should be noted that KPAC could develop gradually into a Korean Peninsula Economic Community (KPEC), to cover an increasing number of products and services.
Are there products which could North Korea and South Korea be expected to trade?
- North Korean could export: kimchi ($200 million), fish and marine products ($200 million), nuts and forestry products ($150 million), and other labor-intensive agricultural products such as ginseng, flowers and, in the long term, pork.
- South Korean could export: agricultural machinery, plastic sheeting, fertilizers, insecticides/pesticides, and agricultural and fishing equipment.
What could be the terms of the trade?
- Regarding the currency, because neither North Korea nor South Korea operate a fully market-based system for food production due to significant subsidies, initially prices would need to be determined by discussion between representatives of both administrations.
- There would also need to be quality control protocols and inspections mutually agreed between North Korea and South Korea.
How could trust be built through the Agriculture Community?
- Through North Korea and South Korea developing shared policy for production of different crops and livestock products, forestry products and marine products, undertaking joint research projects, exchange of research scientists, and exchange visits by agricultural and livestock sector civil servants and farmers.
How could the Agriculture Community be expanded?
- The Agriculture Community could expand gradually to become an Economic Community through including
- other products such as textiles and health products.
- cross-sectoral trade, such as industrial minerals in exchange for transport or communications equipment.
- In terms of building trust between North Korea and South Korea, it could develop gradually to include shared policy for other economic sectors and related exchange of research scientists, professionals and civil servants.
- There could be development of jointly owned science parks and innovation hubs to accelerate technological development and international technology transfer.
How could RPI’s currency proposal1 help KPAC to work effectively and what side benefits would it have?
- The proposal for an Intra-Peninsula Won (IPW) acting initially as a unit of account and then as a medium of exchange would facilitate trade without the use of other currencies or the need for further sanctions exemptions.
- Initially, negotiated prices would gradually move towards market prices in North Korea and provide market-based signals for the future exchange rate between the North Korean and South Korean Won.
- It would provide mechanisms to prevent the possibility that North Korea or South Korea would develop a structural trade deficit.
- It would help North Korea to develop its central bank, and perhaps also a commercial banking payment system.
- It would increase North Korean and South Korean incentives to invest in agricultural research and to reform their agricultural sectors to both increase farm productivity and increase incomes for farming communities.
Why might the US support this initiative?
- Because KPAC would lead to modernisation of the whole North Korean economy if implemented successfully, US agreement to support KPAC could provide a framework for the US to open discussions with North Korea about incremental denuclearization in parallel with necessary incremental sanctions exemptions required for KPAC.
Why might China and the international community support this initiative?
- KPAC might create the opportunity for China to expand the Belt and Road Initiative eastwards. It might also create the opportunity for China to increase trade with North Korea in the long-term through the modernisation of the North Korean economy.
For similar reasons connected to both security and long-term trade opportunities, Russia and Japan are also likely to support this initiative.