The U.S. Ambassador to South Korea, Alexander Vershbow, has paid a very public visit to the Kaesong Industrial Park, and the initial signs are good. Vershbow, a man who seeks the public debate his predecessors so often avoided, has not shied from stating some rather blunt views about North Korea. Thus, the fact that the North Koreans allowed his visit to go forward at all is surprising. Best of all, Vershbow snooped around, took pictures, and even seems to have sought a peek at the books, with his thoughts on the workers’ paychecks (or absence thereof). His reaction was cyptic:
“It was useful in getting more information about Kaesong, which I will pass on to my colleagues in Washington,” the diplomat said. “There are some questions people have in their minds about Kaesong, and I hope the information that I pass back will be helpful to my colleagues in understanding better what’s happening in Kaesong.” He said there were talks underway to organize a visit by the North Korea rights envoy, Jay Lefkowitz, “probably next month.”
Here’s the money quote:
The ambassador dodged a question on his government’s support for the complex, calling it tricky, but said he had seen quite a lot of U.S.-produced equipment while looking around.
That’s a highly significant statement.
Before some of us helped put Kaesong on the map as a human rights issue, it was a technology control issue, which requires us to talk some law, specifically the U.S. Department of Commerce’s extremely detailed technology control regulations. Those regulations are intended to keep sensitive or dual-use American technology out of the hands of our enemies. They apply to both direct exports and reexports to other end users.
This excellent primer describes how each listed product has a unique five-digit alphanumeric code known as an Export Control Classification Number (ECCN). Using this ECCN, it’s possible to determine what controls apply to each listed item here, which leads you to a country chart (15 C.F.R. sec. 738) that is updated frequently, but for which North Korea’s blocks have pretty much all been checked since 2001. Those blocks consist of a series of reasons for which the export restrictions were imposed: chemical and biological weapons, nuclear nonproliferation, national security, missile technology, regional stability, crime control, anti-terrorism, or the firearms convention (notice anything missing in there?). North Korea, for more good reasons I can count (see pretty much every entry I’ve ever posted here) hits every one of these except firearms convention controls.
Would a South Korean transfer of U.S. technology to a South Korean plant that happens to be inside North Korea violate the controls? We found the answer last year, when South Korean attempted to transfer items listed in one category of sensitive technology — telecommunications equipment, which often has dual-use applications:
[T]he export administration regulations (EAR) of the U.S. stand in the way as the country restricts exports of dual-use items, which can be converted for military purposes, to embargoed destinations including North Korea. Under the policy, a license is required for virtually all exports of products using more than 10 percent of U.S. technology or components.
“To avoid the EAR, we tried to procure telecom equipment from European manufacturers like Ericsson, Alcatel and Siemens. But the hitch is that their products may cross the 10-percent threshold and for this reason they are hesitant,” Park said. He added the European big names fear unauthorized exports of telecom gears to the North might arouse the ire of the U.S., which can prevent exports of their products to the U.S.
Because the controls apply not only to direct U.S. exports to listed nations, but also to reexports to listed nations, Ambassador Vershbow’s pictures are more than a simple threat to the North Koreans’ line of credit. If South Korean companies transferred technology to North Korean in violation of end-user rules (15 C.F.R. pt. 744), the offending South Korean companies could be facing sanctions of their own. That would be yet another earthquake in U.S.-South Korean relations, already severely strained by the unraveling of the military alliance and the likely collapse of U.S.-Korea Free-Trade talks as President Bush’s fast-track authority ticks away, and opposition in both the United States and South Korea grows.
One of the main sticking points has been the U.S. refusal to treat goods produced at Kaesong as South Korean products for FTA purposes. Very few nations, after all, have FTA’s with the United States, and it makes little sense for North Korea to enjoy a privlege that stalwart ally and trading partner Japan lacks. The import controls on North Korea are at 31 C.F.R. sec. 500.586; they were recently updated with this notice in the Federal Register banning U.S.-owned vessels from flying the North Korean flag. The Treasury Department’s Office of Foreign Assets Control has a good summary of the import sanctions currently in effect; more here. What about assembling or finishing Kaesong-made materials in the South? We’ve thought of that. You can see pretty much all of it by typing the word “Korea” into the search window here.
There was another interesting vignette at Kaesong when Vershbow’s North Korean guide ““ almost certainly loaded with a prefabricated tirade ““ asked Amb. Vershbow about his opinion on human rights in the North. Vershbow wisely declined the guide’s opening to let fly with her canned David vs. Goliath setup before a gallery of sympathetic journalists. Watching Vershbow’s performance leaves you somewhat rueful that no one of his caliber was available to represent our interests for the last critical decade, when matters deteriorated to the woeful state at which they’d arrived when he was confirmed.
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