Eight reasons why reopening Kaesong could be a deal-breaker for the U.S.-Korea alliance

More and more, I am hearing that Moon Jae-in, the left-wing front-runner in the South Korean presidential election, is talking about reopening and expanding the Kaesong Industrial Complex. It’s apparent that Mr. Moon and his supporters haven’t thought through the potential legal and diplomatic consequences of that. Perhaps this post will help concentrate some minds by telling Koreans, in frank terms, what most people in Washington really think about that idea.

1. Kaesong violates U.N. sanctions.

I heard somewhere that Moon Jae-in calls himself a lawyer (a human rights lawyer, no less). Perhaps Mr. Moon should devote a moment of his legal acumen to reading the U.N. Security Council’s sanctions resolutions on North Korea. Earlier this year, the South Korean government acknowledged that North Korea probably used Kaesong funds to pay for nukes. How is that anything but a flagrant violation of U.N. Security Council Resolution 1718, paragraph (d), which requires states to ensure that money they pay Pyongyang isn’t used for nukes? Resolution 2321, paragraph 32, bans public and private support for trade with North Korea, “including the granting of export credits, guarantees or insurance to their nationals or entities involved in such trade.” Does Moon really think anyone will invest in Kaesong without those subsidies, which the U.N. has since prohibited? Yes, there is a provision for a U.N. committee to approve that support. Expect the U.S. to block that approval, for the reasons that follow.

2. Kaesong paves the road to war.

How can South Korea ask other countries to follow the U.N. sanctions it would be violating if it reopens Kaesong? Reopening Kaesong would also deprive the U.S. of credibility to demand that China, or African or Middle Eastern states, follow the resolutions when our own ally is also violating them. Abandon sanctions and you’ve abandoned our last hope of disarming Kim Jong-un without war. The choice the U.S. would then face comes down to a preemptive strike, or abandoning Korea to its fate. If North Korea poses a direct threat to the United States, don’t assume President Trump would consider those to be mutually exclusive options.

3. Does Kim Jong-un take payment in ChocoPies?

North Korea is now designated as a Primary Money Laundering Concern, and North Korean banks can’t access the international financial system. Many of its banks are also directly blocked from the financial system, and more will be before this year is over. What is Moon Jae-in planning to pay the North Koreans with — ChocoPies? Because paying in dollars — Kim Jong-un wants dollars — is going to be very difficult. For Moon Jae-in to subsidize the same target we’re sanctioning will put the U.S. and South Korea at cross purposes.

4. Kaesong could lead to a catastrophic breakdown in the U.S.-Korea alliance.

Worse yet, reopening Kaesong would mean that while U.S. taxpayers would be subsidizing South Korea’s defense, South Korea would be subsidizing North Korea and its nukes. How long before that shows up in Donald Trump’s Twitter feed? American taxpayers won’t stand for that, nor should they. Why should we effectively subsidize both sides of this conflict, all while bearing a rising risk that U.S. involvement on South Korea’s behalf is feeding a direct North Korean threat to the U.S. homeland? Americans are willing to bear a certain amount of cost to defend allies, but not neutrals, frenemies, or enemies. If Kaesong reopens, expect to see more calls for U.S. disengagement from Korea. Koreans shouldn’t count on President Trump to be the cooler head who prevails over that sentiment.

Worse, reopening Kaesong would effectively mean that U.S. troops and their families would be hostages to the interests of both Koreas, limiting U.S. options for neutralizing a North Korean threat to the United States. In Washington today, one increasingly hears talk of preemptive strikes to prevent Pyongyang from gaining the ability to nuke Seattle. If President Trump decides to pursue that option (see my previous comment on “cooler heads”) the U.S. would have every incentive to disengage from South Korea first, to limit U.S. casualties in the event of retaliation. That could take the form of a breakdown in cost-sharing talks, unilateral “restructuring” of the alliance, or an unscheduled NEO exercise.

5. Kaesong incentivizes proliferation.

The other day, I tweeted a story about how Israel is asking President Trump to prioritize North Korea’s disarmament, because of the message it would send around the world if North Korea becomes a de facto recognized nuclear state. What Moon Jae-in and his supporters must understand is that North Korea’s nukes are not just a Korean problem or a regional problem — they’re a global problem. North Korea’s suspicious links to Iran, its construction of the Al-Kibar reactor in Syria, and its willingness to sell any weapon to any buyer are far greater threats than its missiles will ever be. Kaesong’s backers promised us, of course, that Kaesong would soothe North Korea and encourage it to disarm. How’d that work out?

Given the belligerence of Pyongyang’s recent behavior, in what sense has Kim Jong-un earned a reward that would help him win back the fraying loyalty of his elites? In what sense can we say that Kaesong would be more successful in improving North Korea’s behavior that it was between 2006 and 2016? What kind of message would it send to Pyongyang (or Tehran) that Kim Jong-un reaps a huge financial windfall by testing nukes and missiles? Pouring cash into Pyongyang through Kaesong doesn’t just undermine the financial pressure of sanctions, and consequently, a central part of our North Korea policy, it undermines the sanctions-based diplomatic strategy that’s been essential to preventing proliferation in Iran and everywhere else. That’s why Koreans shouldn’t expect the U.S. to be the only state to raise concerns about Kaesong.

6. Kaesong is slavery.

Has Seoul ever given us a credible answer to the question of how much of their so-called wages the workers actually receive? Or what rights they have to strike, quit, or demand safer working conditions? In other words, why should we see Kaesong as anything other than the mildest form of slavery North Korea has to offer? Has South Korea even demanded labor reforms or financial transparency in its dealing with the North Koreans? Doesn’t that really tell you everything you need to know about the discredited idea that engagement would lead to reform, disarmament, and peace? Kaesong has been Pyongyang’s tool to influence Seoul, not the other way around. As with all engagement with North Korea, it really raises the same old question: “Who changed who?”

7. Kaesong could kill the Free Trade Agreement.

People in both the U.S. and South Korea have already forgotten how hard it was to get congressional approval for the free trade agreement (FTA) between the two countries, or the fact that Kaesong was one of its most controversial points of contention. Annex 22-C, which covers “outward processing zones,” is widely understood as a reference to Kaesong, and a desire by South Korea to export Kaesong products to the U.S. Not only is that a non-starter, it’s a poison pill that could kill the entire FTA. If Kaesong reopens, expect to hear more questions about Kaesong-made components and parts in products exported to the U.S. through the FTA. Directly or indirectly importing goods or services from North Korea is already a felony under this executive order. On top of that, there’s a section in the Tariff Act that prohibits the import of slave-made goods into the United States.

Donald Trump’s criticism of the FTA last year reminded us that it remains controversial here, and exposed that the FTA has ferocious critics in both parties. When I worked with the Foreign Affairs Committee in 2013, I met with several hundred of the staffers from both parties who tell their bosses how to vote on legislation. That experience gave me a very good idea of how Congress feels about Kaesong, and there’s no other way to say this — Congress absolutely hates Kaesong. That sentiment includes staffers for individual members and powerful committees. I can count several occasions when staffers harangued me about their hatred of Kaesong with as much intensity as . . . as I’m haranguing you right now. As you can probably guess, not one of them ever got an argument back from me. (Update: The staffer I remember best immediately asked me whether H.R. 1771 flat-out banned Kaesong products. When I said it didn’t, her immediate reaction was to tell her boss to withhold his co-sponsorship.)

That sentiment will only rise now that blue-collar, rust-belt voters have emerged as the decisive constituency in elections. Orange Republicans and Green Democrats will both have protectionist incentives to renegotiate or cancel the FTA. Red Republicans will hate the idea of indirectly subsidizing North Korea. Blue Democrats will cave to FTA opponents like Hillary Clinton caved to Trans-Pacific Partnership opponents (because they want to win Michigan, silly). Liberals will be inflamed by the idea that Americans are buying products made (in part) by slaves. I’m generally pro-free trade, and am for the TPP, yet I have some sympathy with all of those arguments. If Kaesong reopens, I’d want to see the FTA renegotiated or canceled entirely. Is reopening Kaesong worth risking the whole FTA?

8. Kaesong didn’t work.

Now, weigh the benefits of Kaesong against those costs. The idea behind Kaesong, of course, was that it was supposed to integrate the two states’ economies and interests, which would lead to reforms, the easing of tensions, the opening of North Korea’s society, and eventually, disarmament. None of those things happened — none. I would argue that Kaesong was actually a source of tension, because of North Korea’s constant arbitrary demands, leading to the 2013 and 2016 closures, costing investors millions in uninsured losses, and guaranteeing that no sane investor would ever go in. In fact, I think I may have found the perfect metaphor for Kaesong:

If you can cite any evidence to the contrary, my comments are open. From where I sit, Kaesong was such an unmitigated failure that I find the support for it inexplicable, and — here is my main point — so do most other Americans. This isn’t to say the U.S. can’t find room for compromise with a Moon administration. I can see an accord emerge in which South Korea pursues harmless forms of engagement, such as visits by athletes and artists, or well-monitored humanitarian aid. But the U.S. position ought to be that no money must change hands, because financial pressure must necessarily play a central role in our efforts to disarm Kim Jong-un, and for years, South Korean subsidies to Pyongyang undermined that strategy. Kaesong could be a deal-breaker in the U.S.-South Korean relationship. Indeed, it may well deserve to be.