Understanding Kim Jong Un’s Economic Policymaking: Foreign Trade Narrative

Attention on North Korean external trade tends to focus on the numbers, the import-export balance or earnings from specific export commodities, such as coal. The most recent spate of United Nations Security Council (UNSC) sanctions was designed to limit export of commodities on the grounds that earnings from these have been funding the Democratic People’s Republic of Korea’s (DPRK or North Korea) weapons programs.

However, in this piece, we will examine trade from the perspective of underlying internal policy discussions, and to some extent, the differences in view about trade as both an economic and a political act. As we have done throughout this series of articles, we rely on Kyo’ngje Yo’ngu and the Journal of Kim Il Sung University, which is also known as Hakpo, as our primary resources.[1] These journals have been the North Korean regime’s premier economic journals in which new ideas have been introduced and discussed.

To some extent, trade has been the easiest of the various topics that we have tackled thus far. This is because the discussions in the journals are more straightforward and, with few exceptions, are less centered on ideological axles than others.

In this article, we review these journals’ invocation of the socialist enterprise responsibility management system (SERMS)—Kim Jong Un’s key reform initiative meant to give greater latitude to individual economic units across planning, production, and management of resources and profits—to justify new ideas on foreign trade. We then examine the journals’ handling of diversification, one of Kim’s key instructions related to foreign trade and the sensitivities involved in trading with capitalist countries. Although the views supporting economic reform prevailed for a time in the economic journals, the North’s shift to conservatism in recent years has taken a toll on its trade policy.

Decentralizing Trade

The arguments for and against new ideas about trade that are presented in these journals follow familiar lines. They usually start with providing some orthodox views before pushing against the boundaries of what has been considered acceptable thus far.

Notably, several articles are built on Kim Jong Un’s economic reform initiatives to justify new ideas on trade. For example, two articles in 2015—one published in the July edition of Kyo’ngje Yo’ngu and the other in Hakpo later that year—cited SERMS as supporting the decentralization of the external trade sector and giving greater trade autonomy to individual enterprises. As we noted in an earlier piece, SERMS was mentioned for the first time in a Hakpo article at the end of 2014, but it was not until the spring of 2018 that the two journals started discussing SERMS and its specific aspects in earnest. As such, these two aforementioned articles on foreign trade are among the earliest to use SERMS as a way to advocate for additional new policies.

After noting that “all independent-accounting enterprises” should “carry out business activities proactively and with initiative, in line with the requirements of SERMS,” the Kyo’ngje Yo’ngu article went on to argue:

Today’s actual condition where [we] have come to deal with only capitalist markets calls on all independent-accounting enterprises to carry out external economic activities proactively. Independent-accounting enterprises should actively realize the modernization of equipment and production and technical processes while resolving [the issue of] necessary raw and other materials and equipment on their own. They should do so by proactively carrying out external economic activities to the extent possible with the trade rights granted by the state. To that end, independent-accounting enterprises should fully guarantee the funds necessary for the production of trade goods.[2]

The Hakpo article went even further, detailing a wide range of “newly granted rights” that those enterprises had under SERMS:

Under the SERMS, trade, equity joint venture, and contractual joint venture rights include the rights of enterprises to independently enter into and fulfill trade contracts or equity joint venture and contractual joint venture contracts; establish and use export bases; independently conduct interviews overseas; engage in international communications with foreign counterparts; sell the enterprise’s products to foreign countries; make external payments through independent accounts with domestic and foreign banks; receive income distributed according to the investment ratio; and deal with contract violation incidents by means of arbitration and such.[3]

Diversifying Trade

In a recent article discussing Europe’s inflation and energy issues, the North Korean Foreign Ministry website admonished: “One of the ways out of the current economic crisis is to diversify external trade. This is common economic knowledge.”[4]

The diversification of trade is a principle that Pyongyang preaches, not just for other countries to follow. It is an oft-repeated policy the North itself has attempted to implement for years. Kim Jong Un, for example, called for “making foreign trade multilateral and diversifying it so as to smash the hostile forces’ sanctions and blockade maneuvers” at a party plenary meeting in March 2013.[5] At the Seventh Party Congress in 2016, he said, “one-sidedness should be removed in foreign trade,” and even noted: “[We] should… advance multifaceted exchange and cooperation with even capitalist countries.”[6]

In keeping with Kim’s instructions, the two journals have published multiple articles on the importance of diversifying trade.

One Hakpo article in 2016 emphasized that foreign trade was key to becoming an economic power, saying:

A self-supporting economic power is by no means a country with an ‘isolated economy’ or a “closed economy.” Rather, it is a country commanding a high level of external economic authority that, with strong external economic competitiveness, takes the lead in expanding and developing external economic relations with many countries around the world…A country’s external economic authority is enhanced by expanding and developing its external economic ties.[7]

The same article went on to explain the meaning of “removing one-sidedness” and “diversifying trade” as:

[We] should remove one-sidedness in foreign trade and diversify it. To remove one-sidedness in foreign trade and diversify it means to not limit trade partners to one specific country and to expand and develop it to various countries around the world…In order to remove one-sidedness in foreign trade and diversify it…[we] should develop trade even with capitalist countries that recognize our country’s sovereignty and treat us in a friendly manner.

One common theme of these passages is developing trade with multiple countries across the world rather than “one specific country,” possibly echoing the North Korean leadership’s concern—including Kim Jong Un’s, as he called for diversifying and removing one-sidedness in trade—about the country’s overdependence on China.

In April 2019, another author in Kyo’ngje Yo’ngu expressed this concern more bluntly while expressing confidence in the North’s improved trade prospects on the grounds of its “external environment.” He wrote:

In the past, the foreign trade sector was unable to remove one-sidedness and develop foreign trade in a diversified manner. This has largely to do with the fact that it was unable to improve foreign trade negotiations in line with the realities of our country’s economic development and the continuously changing and evolving global trade development trends. The scope of our foreign trade negotiating partners was too concentrated in a certain country and region…

Such an objective reality shows that it is necessary for our country to expand as much as possible its foreign trade negotiating partners not only to Asian markets, including our neighboring regions, but also to Europe, the Americas, Oceania, and Africa; study the characteristics of markets at different levels of development, such as free trade areas, customs unions, common markets, and economic alliances created and operated among regional countries; and formulate and carry out negotiation strategies to broaden trade relations…[8]

This article appears to have been written in the lead-up to the second US-DPRK summit in Hanoi in February 2019. It is also possible that the article was published despite the summit’s failure because Pyongyang was still hopeful of there being some kind of breakthrough with Washington at some point that year.

Trading With Capitalist Countries

It must be noted that some journal articles, even while supporting the idea of trade itself or the diversification of trade, have voiced concerns about the potential fallout from trading with capitalist countries.

One Kyo’ngje Yo’ngu article in 2016 clarified that trade was only intended to supplement North Korea’s efforts to build a “self-supporting national economy”:

Developing foreign trade on the basis of building a self-supporting national economy is the material guarantee that enables us to advance foreign trade on the principle of complete independence and equality…

Without one’s own things, one cannot buy necessary products or goods from other countries. Moreover, today’s reality, where we must conduct trade relations with capitalist countries, shows that independent and equal trade relations can be expanded and developed only when trade relations are advanced on the basis of one’s own economic foundation…

If we rely on imports for things that we can easily take care of by our own efforts, it would not contribute to the construction of a self-supporting national economy but rather weaken the revolutionary spirit of self-reliance, promote dependence on other countries, and increase foreign currency expenditure.[9]

Another Kyo’ngje Yo’ngu article, published earlier in the same year, explicitly stated that “political interests” were key to selecting target markets and warned against forging economic ties with political strings attached:

The important thing when selecting a target market is to first weigh political interests well. Ensuring political interests is a fundamental requirement that must be met in selecting a target market. From this, in target market selection, we should not carry out economic transactions with countries that have hostile relations with our country or raise unfair political side conditions for economic exchange.

Right now, imperialist countries, including the United States, are forcing unreasonable political demands on developing countries and independent countries.

Therefore, we should firmly adhere to the principle of not allowing trade with countries that could generate political losses, though it may be economically advantageous.[10]

One Hakpo article, carried in late 2015, went a step further and called on developing countries to step up trade cooperation, defining current trade relations as “subordinate and predatory created by the imperialists.”[11]

Conclusion

Our research on North Korea’s economic policymaking, as seen through its academic journals, has shown that Kyo’ngje Yo’ngu served as a platform for dueling narratives on sensitive or controversial topics, such as economic reform or defense spending, despite the conventional wisdom that there can be no dissent or inconsistencies in North Korean publications. Although the views supporting economic reform prevailed for a time, the North’s shift to conservatism across all realms in recent years has taken a toll on its trade policy as well. This has been most recently exemplified by Kim Jong Un’s report to a party plenary meeting in December 2022.

Previously, the North Korean cabinet in February 2022 pledged to “keep pushing forward the work to recover the unitary trade system of the state,” which is a far cry from the “newly granted rights” of enterprises the economic journals supported in the past. At the Eighth Party Congress in January 2021, Kim Jong Un said, “external economic activities are premised on being directed toward supplementing and reinforcing the foundation and potential of the self-supporting economy.”[12] Kim’s language mirrored the above-cited 2016 Kyo’ngje Yo’ngu article on subordinating foreign trade to the construction of a “self-supporting national economy” and indicated Pyongyang’s conservative shift on trade at the highest level.

The next installment in this series will explore how North Korea actually used the Juche ideology to build the case for, rather than against, expanding foreign trade.

1. [1]

   This paper is the third in the “Understanding Kim Jong Un’s Economic Policymaking, Part 2” series, which focuses on the external elements of North Korea’s economic policy. The first installment of Part 2 was on Kim Jong Un’s tourism policy; the second installment dealt with his economic development zone policy. This series is made possible through generous support from the Korea Foundation and the Henry Luce Foundation, and uses a modified version of the McCune-Reischauer romanization system for North Korean text. Diacritics are replaced with apostrophes. Some proper nouns follow internationally recognized spellings or North Korean transliterations instead.

2. [2]

   Quote translated from 김명심, “현시기 독립채산제기업소들에서 무역상품생산에 필요한 자금보장에서 지켜야 할 기본요구,” Kyo’ngje Yo’ngu 3, (2015).

3. [3]

   Quote translated from 김홍일, “대외경제관계를 다각적으로 발전시키는데서 나서는 중요문제,” Kim Il Sung Chonghaptaehakhakpo (Ch’o’rhak, Kyo’ngje) 4, (2015).

4. [4]

   Son U Jin, “Europe’s Dependence on Others: What Does It Show?” North Korean Foreign Ministry website, January 18, 2023.

5. [5]

   “경애하는 김정은동지께서 조선로동당 중앙위원회 2013년 3월전원회의에서 하신 보고,” Rodong Sinmun, April 2, 2013.

6. [6]

   “조선로동당 제７차대회에서 한 당중앙위원회 사업총화보고 김정은,” Rodong Sinmun, May 8, 2016.

7. [7]

   Quote translated from 장순남, “대외경제관계를 확대발전시키는것은 사회주의경제강국건설의 중요요구,” Kim Il Sung Chonghaptaehakhakpo (Ch’o’rhak, Kyo’ngje)4, (2016).

8. [8]

   Quote translated from 김현철, “현시기 대외무역협상사업을 개선하는것은 대외무역발전의 필수적요구,” Kyo’ngje Yo’ngu 2, (2019).

9. [9]

   Quote translated from 리순철, “자립적민족경제와 대외무역의 호상관계를 밝혀주신 위대한 령도자 김정일동지의 불멸의 사상리론적업적,” Kyo’ngje Yo’ngu 4, (2016).

10. [10]

    Quote translated from 태영남, “무역의 다각화전략작성에서 나서는 몇가지 문제,” Kyo’ngje Yo’ngu 1, (2016).

11. [11]

    Quote translated from 리경영, “발전도상나라들사이의 무역협조를 강화하는데서 나서는 중요문제,” Kim Il Sung Chonghaptaehakhakpo (Ch’o’rhak, Kyo’ngje) 4, (2015).

12. [12]

    본사정치보도반, “우리 식 사회주의건설을 새 승리에로 인도하는 위대한 투쟁강령 조선로동당 제８차대회에서 하신 경애하는 김정은동지의 보고에 대하여,” Rodong Sinmun, January 9, 2021.