Forget bombs, send in the cash: Trade is more likely to reconcile the two Koreas than diplomacy, says Aidan Foster-Carter

TODAY, senior officials from North and South Korea meet at Panmunjom in the demilitarised zone to plan what would be the first summit between the top leaders of their two states in the 49 years that the peninsula has been divided.

The southern interest is in the capable hands of Lee Hong Koo, a former professor of politics (and sometime ambassador to Britain), who was recently recalled to a rare second term as minister for unification. When he first did the job in the late Eighties Lee transformed his ministry from a dull source of anti-Communist propaganda into a serious and imaginative research and policy organisation.

On past form the omens are not encouraging. Last time north and south met, in March, the chief northern delegate threatened to turn Seoul into 'a sea of fire'. Such bellicose language remains North Korea's stock-in-trade, an earlier agreement to end mutual insults notwithstanding. Unaccountably, the North Korean media are ruder about Kim Young Sam, the former dissident who is now South Korea's first fully civilian president in 30 years, than they ever were about his coup- tainted military predecessors. They no longer call him a 'two-bit political prostitute', but 'nation-selling flunkeyist traitor' is routine. If and when President Kim and the North's Kim Il Sung do meet, the greetings should be interesting.

We have been here before, almost. Not presidents, but prime ministers from the two Koreas met on eight occasions between 1990 and 1992, when they signed several detailed and wide- ranging agreements. Joint commissions were to be established, to discuss and implement everything from business links to reunions of the millions of families tragically separated for 40 years. There was even to be a programme of mutual nuclear inspections over and above the International Atomic Energy Agency process. Yet all this has remained on paper only.

It just might be different this time, however, because of a dimension that, amid all the nuclear brouhaha, has received much less attention than it merits. The two Korean governments may be at daggers drawn, but this has not stopped their companies from doing business. Inter-Korean trade began only in 1988, and for the past three years has been running at about dollars 200m annually: peanuts to Seoul, but a valuable lifeline to Pyongyang since southern imports (of everything from zinc to gingseng gin) account for almost the entire sum.

South Korea's big conglomerates, such as Samsung and Hyundai, are keen to deepen this co-operation. North Korea's educated, disciplined and, above all, cheap workforce is exactly what they need to restore competitiveness. Already they are having goods made to order in the north - mainly low-cost clothing - but they would like to make major investments, just as Taiwanese capital has done in China.

Ironically, it is their own government that is stopping them. Seoul has made progress on the nuclear issue a precondition for allowing southern investment in the north. It goes without saying that any UN sanctions against North Korea - should relations with the IAEA and US once again deteriorate - would not only preclude such investment but also cut off the dollars 200m of trade.

As a method of dealing with Pyongyang, sanctions are a dead end. Kim Il Sung's guerrilla mentality has neither respect for nor comprehension of international norms. To punish him for breaching those norms can only intensify the siege mentality on which he thrives. Given that the largely self-

created isolation of Kim's latter-day hermit kingdom is what makes North Korea a problem in the first place, how can anyone seriously maintain that increasing that isolation points the way to any kind of solution?

To the contrary: Kim expects sticks and suspects carrots, but it is getting harder every day for him to turn up his nose at the latter. His economy shrank in 1993 for the fourth successive year, and at around dollars 20bn the entire northern GNP now equals a single year's growth in the south. The per capita income gap is 8:1 and growing. It is hard to believe that so impoverished a regime could sustain a war. And if food rations are pared any further, sustaining social peace may become problematic even in this most tightly regimented of societies.

On 4 May, the Seoul newspaper Korea Herald reported that Lucky- Goldstar, one of the four largest conglomerates, had accepted an astonishing offer from Pyongyang to take over Kim Chaek, the biggest steel works in North Korea. Lacking foreign exchange to buy coke, Kim Chaek may otherwise shut - with drastic effects throughout the northern economy. Lucky-Goldstar is keen, seeing this as a way to break out of its present concentration on electronics and get into steel and its derivatives. Yet Seoul has all such deals on ice because of the nuclear issue.

Arguably, the risks of aiding a nuclear-suspect North Korea are no greater than those of boxing Kim Il Sung into a corner. As Taiwanese and Hong Kong experience in China has shown, allowing private business to create a dense and dynamic web of partnership and mutual interest at the grassroots can provide valuable if indirect support for liberalising tendencies - and undercut hard-line forces.

That sort of leverage is exactly what the North Korean situation lacks. Without it, not only inter-Korean relations but all ties between Pyongyang and the wider world will remain at the mercy of Kim Il Sung's caprice or cunning: talks are on when he so decides, and off when he stalls.

Whether or not this inter-Korean summit comes off, President Kim Young Sam should give the green light now to Lucky-Goldstar and other South Korean businesses. As fellow Koreans, but ones who lack the taint of government and hence can bypass the political slanging matches, they are uniquely placed to embark on the overdue task of bringing North Korea into the modern world. Once this happens, we shall be on the way to defusing, if not resolving, the tension that underlies the nuclear issue.

The writer is director of the Korea Project at Leeds University, and writes a monthly newsletter, 'Korea Countdown'. He is the author of 'Korea's Coming Reunification: another East Asian superpower?' (Economist Intelligence Unit, 1992).

(Photograph omitted)