Why the North Korea–China trade increase could be an illusion
By: Benjamin Katzeff Silberstein
North Korea–China trade is steadily growing, perhaps slowly moving back to its normal before Covid-19 -“Maximum pressure” sanctions in 2016–2017. According to the latest numbers, trade continues to grow:
Chinese outbound shipments to the isolated country surged 69% year-on-year to $166 million in April, data released by China’s General Administration of Customs showed.
The top export items in terms of value were processed hair and wool used in wigs, worth about $11.6 million, and diammonium hydrogen phosphate, a widely used fertiliser, worth $8.84 million.
But it is far from back to the “old normal” before 2017. Look, for example, at what is being exported. The biggest export products were wigs and fake eyelashes, accounting for over 66 percent of exports to China. This is part of an offshoring industry where North Korea first imports hair from China, and then locally manufactures it into wigs to export back. Sales of wigs, eyelashes and related products accounted for close to $22.7 million in April. To get a sense of proportion, consider that coal exports, formerly one of North Korea’s most central export goods, totalled $1.19 billion in 2016, a little over $99 million per month on average. So when we look at North Korea’s most central exports at the moment, they are still very small compared to the increasingly distant normal. Wigs just aren’t economically meaningful in the same way as coal.
None of this is to say the increase in trade isn’t meaningful. North Korean imports from China may be just as meaningful or perhaps even more so for the economy at this point, with inputs both for export-destined wigs and fertilizer being the central import goods. The increase in trade is certainly positive for the North Korean economy, but it does not seem to (yet) change the overall dynamics where North Korea still cannot export its formerly most important export goods openly, without circumvention and smuggling that involves significant costs. It could be that covert exports will eventually reach the old level of openly reported exports, but we don’t have any hard data to suggest that is yet the case.View Original Article