Order Code IB98045
Issue Brief for Congress
Received through the CRS Web
Korea: U.S.-Korean Relations —
Issues for Congress
Updated September 27, 2002
Larry A. Niksch
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
U.S. Interests in South Korea
Recent Issues
Relations with North Korea
Nuclear Weapons
North Korea’s Missile Program
Weapons of Mass Destruction
Conventional Force Reductions and Pullbacks
North Korea’s Inclusion on the U.S. Terrorism List
Food Aid
North Korean Refugees in China
Responding to South Korea’s Sunshine Policy
U.S.-South Korean Military Issues
U.S.-South Korean Economic Relations
Political Issues

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Korea: U.S.-Korean Relations — Issues for Congress
SUMMARY
The United States maintains a strong,
position on the sunshine policy is mixed,
multifaceted alliance relationship with South
supporting some elements but having reserva-
Korea that has for decades served vital inter-
tions about others.
ests of both sides. Against the background of
continuing difficulties in dealing with North
The sunshine policy also has resulted in
Korea and the dramatic consequences of the
mounting controversy in South Korea over the
Asian economic crisis, the two governments
presence of 37,000 U.S. troops. Growing
face a range of security, economic, and politi-
numbers of South Koreans seek a reduction of
cal issues that involve the Congress in its
U.S. military forces. Incidents between U.S.
oversight and appropriations capacities, and
military personnel and South Korean civilians
in frequent exchanges between congressional
has necessitated U.S.-South Korean negotia-
offices and the South Korean government.
tions on several such issues.
Heading the list of issues is how to deal
South Korea is an important economic
with the North Korean regime. The Bush
partner of the United States. The United
Administration seeks policy changes from
States has sought to influence South Korean
North Korea regarding weapons of mass
economic reforms arising from the 1997 Asian
destruction, conventional forces, and interna-
financial crisis. Bilateral trade disputes have
tional inspections of its nuclear facilities. The
resurfaced in 2000 and 2001 regarding auto-
Bush Administration also faces policy deci-
mobiles, pharmaceuticals, beef, and steel.
sions on food aid to North Korea, North Ko-
Intellectual property rights remain a point of
rea’s inclusion on the U.S. terrorism list, and
contention.
U.S. responses to South Korea’s “sunshine
policy” toward North Korea. President Kim
South Korea has become more demo-
Dae-jung seeks reconciliation with North
cratic politically, a success for U.S. policy
Korea following the historical North-South
since 1987. President Kim Dae-jung
summit meeting of June 2000. He has urged
approaches the end of his term with declining
the United States to engage North Korea and
popularity and growing criticism over his
make concessions to Pyongyang as a support
economic policies and the sunshine policy.
for his policy. The Bush Administration’s
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MOST RECENT DEVELOPMENTS
The Bush Administration announced on September 26, 2002, that it would send
Assistant Secretary of State James Kelly to North Korea on October 3-5 for negotiations.
On September 17, Japanese Prime Minister Koizumi visited Pyongyang. North Korean
leader Kim Jong-il admitted that North Korea had kidnapped Japanese and apologized. The
two leaders agreed to begin talks over normalization of relations, including a substantial
package of Japanese economic aid to North Korea. North and South Korea agreed in
August 2002 on steps to implement economic agreements of 2000, including the connection
of rail and roads across the demilitarized zone.
BACKGROUND AND ANALYSIS
U.S. Interests in South Korea
U.S. interests in the Republic of Korea (R.O.K. — South Korea) involve a wide range
of security, economic, and political concerns. The United States has remained committed
to maintaining peace on the Korean Peninsula since the 1950-1953 Korean War. This
commitment is widely seen as vital to the peace and stability of Northeast Asia where the
territories of China, Japan, and Russia converge. The United States agreed to defend South
Korea from external aggression in the 1954 Mutual Defense Treaty. The United States
maintains about 37,000 troops there to supplement the 650,000-strong South Korean armed
forces. This force is intended to deter North Korea’s (the Democratic People’s Republic of
Korea — D.P.R.K.) 1.2 million-man army, which is deployed in forward positions near the
Demilitarized Zone (DMZ) dividing North and South Korea.
Since 1991, attention has focused on the implications of North Korea’s drive to develop
nuclear weapons (see CRS Issue Brief IB91141, North Korea’s Nuclear Weapons Program,
for background on this set of important issues) and long range missiles. A bilateral Agreed
Framework designed to ease concerns between North Korea and the United States over North
Korea’s nuclear program was signed on October 21, 1994, and is being implemented. The
United States attempted to negotiate restrictions on North Korea’s development of long range
missiles. Also of concern is the widespread food shortage inside North Korea.
The United States played a major role in fostering South Korea’s remarkable economic
growth, and has carefully monitored and supported international efforts to help South Korea
deal with its current economic and financial crisis, the most serious since the Korean war.
U.S. economic assistance to South Korea, from 1945 to 1971, totaled $3.8 billion. The acute
financial crisis in late 1997 saw Seoul receive a $57 billion bailout from the International
Monetary Fund (IMF) amid strenuous U.S. government and financial sector efforts to fend
off a credit collapse in South Korea.
The United States is South Korea’s largest trading partner and largest export market.
South Korea is the seventh largest U.S. trading partner. The United States has long viewed
South Korean political stability as crucial to the nation’s economic development, to
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maintaining the security balance on the peninsula, and to preserving peace in northeast Asia.
However, U.S. officials over the years have pressed the South Korean administration with
varying degrees of intensity to gradually liberalize its political process, broaden the popular
base of its government, and release political prisoners. In recent years, South Korea has
become more democratic.
Recent Issues
Relations with North Korea
As part of a policy review toward North Korea, President Bush issued a statement on
June 6, 2001, outlining policy objectives related to implementation of the U.S.-North Korean
1994 Agreed Framework on North Korea’s nuclear program, North Korea’s missile program,
and its conventional forces. He stated that if North Korea took positive actions in response
to the U.S. approach, the United States “will expand our efforts to help the North Korean
people, ease sanctions, and take other political steps.” President Bush’s designation of North
Korea as part of an “axis of evil” in his January 29, 2002 State of the Union address clarified
the Administration’s policy that had emerged after the June 6 statement. The policy is aimed
at reducing and/or eliminating basic elements of North Korean military power, including
weapons of mass destruction (WMDs), nuclear weapons and/or nuclear weapons-grade
materials, missiles, and conventional artillery and rocket launchers positioned on the
demilitarized zone (DMZ) within range of the South Korean capital, Seoul. The
Administration’s emphasis on WMDs mounted after the Central Intelligence Agency gained
documentary evidence in Afghanistan that al Qaeda seeks WMDs and plans new attacks on
the United States. This reportedly influenced the Bush Administration to broaden the
definition of the war against terrorism to include states like North Korea that potentially
could supply WMDs to al Qaeda.
The Administration’s strategy is to employ public accusations and warnings to pressure
North Korea to make policy changes regarding its military assets in line with U.S. objectives.
Since July 2001, the Bush Administration has warned that it will suspend construction of the
two light water nuclear reactors in North Korea (a provision of the 1994 U.S.-North Korean
nuclear Agreed Framework) unless North Korea soon comes into compliance with its
obligations to the International Atomic Energy Agency to allow full-scope inspections of
nuclear facilities. The Bush Administration made a number of statements calling on North
Korea to pull back artillery and rocket launchers from the DMZ. Beginning with statements
in November 2001 and dramatically in the State of the Union address and in subsequent
pronouncements, the Bush Administration set a demand that North Korea stop the export of
missiles and weapons of mass destruction to the Middle East and South Asia, eliminate these
weapons from its arsenal, and allow verification of such steps. President Bush’s repeated
declarations since the State of the Union that he would not stand by while this threat mounts
constitute a broader warning to North Korea alongside the explicit warning of shutting down
the light water reactors.
Administration officials say that they want a comprehensive negotiation with North
Korea on all these issues. The Administration has given no indication that it would offer
North Korea reciprocal measures, including reciprocal military measures, for North Korean
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agreement and steps to reduce its military power in these areas. Public statements by the
Administration continually call for North Korea to take actions unilaterally. During his visit
to South Korea in February 2002, President Bush issued a general offer to “welcome North
Korea into the family of nations, and all the benefits, which would be trade, commerce and
exchanges.” Bush Administration officials reportedly have indicated in private remarks that
the Administration believes that it does not have to offer strict reciprocal measures or
compensation for North Korean concessions.
In June 2002, Administration officials placed food aid to North Korea as a new agenda
item for U.S.-North Korean negotiations. Previously, negotiations with the North Korean
government were carried out by the United Nations World Food Program. The U.S. officials
announced new food aid of 100,000 tons of grain but asserted that future food aid would
depend on North Korea agreeing to three conditions: access of food aid donors to provinces
(mainly in the north and northeast) which the North Korean government has barred aid
donors from entering; a larger monitoring capability for the donors; and allowing donors to
conduct a nation-wide nutritional survey.
Nuclear Weapons. U.S. policy since 1994 has been based largely on the U.S.-North
Korean Agreed Framework of October 1994. The Agreed Framework was negotiated in
response to U.S. concerns over nuclear facilities that North Korea was developing at a site
called Yongbyon. Existing facilities included a five megawatt nuclear reactor and a
plutonium reprocessing plant. Two larger reactors were under construction. U.S.
intelligence estimates concluded that these facilities could give North Korea the capability
to produce over 30 atomic weapons annually. North Korea had concluded a safeguards
agreement with the International Atomic Energy Agency (IAEA) in 1992, which gave the
IAEA the right to conduct a range of inspections of North Korea’s nuclear installations.
However, North Korea obstructed or refused IAEA inspections, including refusal to allow
an IAEA special inspection of a underground facility, which the IAEA believed was a
nuclear waste site. The IAEA hoped that a special inspection would provide evidence of past
North Korean productions of nuclear-weapons grade plutonium. Secretary of Defense
Rumsfeld estimated that North Korea has from two to five warheads in a statement of August
2001 in Moscow. The U.S. National Intelligence Council published an estimate in December
2001 “that North Korea has produced one, possibly two, nuclear weapons.” Undersecretary
of State John Bolton cited this estimate in May 2002 to accuse North Korea of operating a
covert nuclear weapons program.
The Agreed Framework provided for the suspension of operations and construction at
North Korea’s known nuclear facilities, the safe storage of nuclear reactor fuel that North
Korea had removed from the five megawatt reactor in May 1994, and the provision to North
Korea of 500,000 tons of heavy oil annually until two light water nuclear reactors are
constructed in North Korea. The United States is obligated to facilitate the heavy oil
shipments and organize the construction of the light water reactors. Before North Korea
receives nuclear materials for the light water reactors, it is obligated to come into full
compliance with its obligations as a signatory to the Nuclear Non-Proliferation Treaty,
especially its obligations to allow the full range of IAEA inspections specified in the North
Korean-IAEA safeguards agreement of 1992.
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The Korean Peninsula Energy Development Organization (KEDO) was created to
implement provisions of the Agreed Framework related to heavy oil shipments and
construction of the light water reactors. Lead members are the United States, Japan, South
Korea, and the European Union. Japan and South Korea are to provide most of the
financing, estimated at $5-6 billion, for the construction of the light water reactors. The
Agreed Framework set a target date of 2003 for completion of the first of the light water
reactors. There have been delays in the project, some caused by North Korea and others by
legal and bureaucratic obstacles. KEDO officials now project the completion of the first
light water reactor in 2008. Bush Administration officials estimate that by 2005,
construction will reach the point when nuclear components will be delivered to North Korea.
KEDO also has faced rising costs of providing the annual heavy oil allotments to North
Korea. Since October 1995, North Korea has received the annual shipments of 500,000 tons
of heavy oil. The cost has risen from about $30 million in 1996 to $95 million in 2000 and
$80 million in 2001. Congressional appropriations for the financing of the heavy oil
shipments and financing of KEDO has risen from $30 million in FY1996 to $55 million in
FY2001. Congress granted the Bush Administration request for $95 million for FY2002.
The Agreed Framework came under increasing debate in 2000 and 2001. Critics
charged that the two light water reactors could give North Korea the ability to produce large
amounts of nuclear weapons grade plutonium. They cited potential safety problems with the
reactors and asserted that North Korea’s substandard electric power grid could not transmit
electricity produced by the reactors. Supporters of the Agreed Framework argued that it
continues to fulfill its original aim of shutting down North Korea’s Yongbyon nuclear
reactors and plutonium reprocessing plant, which could have produced many nuclear
weapons after 1994 if operations had continued. They acknowledged the safety and grid
problems but predicted that these will be resolved in the future. (KEDO officials, however,
stated that KEDO will reject North Korean demands that KEDO finance reconstruction of
the electric grid.) Supporters of the Agreed Framework rejected the critics’ claim that North
Korea would be able to use the light water reactors to produce nuclear weapons, arguing that
this type of reactor is “proliferation resistant.”
The Bush Administration considered the Agreed Framework in its North Korea policy
review in the spring of 2001. Among the options it considered was a proposal floated by the
Clinton Administration in 2000 to eliminate one of the light water reactors and substitute
conventional power facilities of equal capacity. President Bush’s policy statement of June
6, 2001, declared an objective of “improved implementation of the Agreed Framework
relating to North Korea’s nuclear activities.” According to Administration officials, the
policy insists that North Korea soon begin the process of coming into full compliance with
its obligations to the IAEA. The Administration asserts that North Korea must begin this
process well prior to the point when the Agreed Framework specifies that North Korea must
be in full compliance, since the IAEA states that, once North Korea allows a full range of
IAEA inspections, the IAEA will need three to four years to determine whether North Korea
is in full compliance with the Nuclear Non-Proliferation Treaty. U.S. officials reportedly
have said that point will come by 2005 when construction of the first light water reactor will
reach the stage of delivery of nuclear components. Beginning in July 2001, Administration
officials warned that if North Korea does not begin the process of compliance with
obligations to the IAEA, the Administration would suspend the light water reactor project.
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North Korea has rejected the Bush Administration’s call for earlier compliance with the
IAEA, demanding instead that the United States supply it with electricity until the
construction of the light water reactors is completed. In March 2002, the Bush
Administration used the right of waiver and refused to issue a certification to Congress that
North Korea was complying with the Agreed Framework. Administration officials described
this an added warning to North Korea to begin compliance with the IAEA.
Suspicions that North Korea was operating a secret nuclear weapons program came into
the open in August 1998 with the disclosure that the U.S. Defense Intelligence Agency (DIA)
had concluded that a North Korean underground facility located at Kumchangri was possibly
a nuclear-related installation. The Clinton Administration responded to the disclosure by
pressuring North Korea to allow the United States access to the Kumchangri facility. An
agreement was reached on March 16, 1999, providing for multiple inspections of the site in
return for at least 500,000 tons of new U.S. food aid to North Korea. The first visit took
place in May 1999, a second in May 2000. Administration officials declared that no
evidence of nuclear activity was found. However, reports indicated that North Korea had
removed equipment from the facility prior to the first U.S. visit. Undersecretary Bolton’s
May 2002 accusation that North Korea operates a covert nuclear program re-raises this issue.
North Korea’s Missile Program. On August 31, 1998, North Korea test fired a
three stage missile, dubbed the Taepo Dong-1 by the U.S. Government. The missile flew
over Japanese territory out into the Northwest Pacific. Parts of the missile landed in waters
close to Alaska. North Korea claimed that the third stage of the missile was an attempt to
launch a satellite. U.S. intelligence agencies responded with a conclusion that North Korea
was close to developing a Taepo Dong-1 missile that would have the range to reach Alaska,
the U.S. territory of Guam, the U.S. Commonwealth of the Northern Marianas, and the
Japanese island of Okinawa, home to thousands of U.S. military personnel and their
dependents. Reports since 2000 cite U.S. intelligence findings that North Korea is
developing a Taepo Dong-2 intercontinental missile that would be capable of striking
Alaska, Hawaii, and the U.S. west coast with nuclear weapons. U.S. and Japanese
intelligence agencies reportedly estimated in 2001 that North Korea had deployed up to 100
medium-range Nodong missiles. First tested in 1993, the Nodong missile has an estimated
range of 600-900 miles. The upper range would cover all of Japan including Okinawa.
Throughout the 1990s, North Korea exported short-range Scud missiles and Scud
missile technology to a number of countries in the Middle East. After 1995, it exported
Nodong missiles and Nodong technology to Iran, Pakistan, and Libya. In 1998, Iran and
Pakistan successfully tested medium range missiles modeled on the Nodong. North Korea
reportedly shipped 50 complete Nodong missiles to Libya in 1999.
The test launch of the Taepo Dong-1 missile spurred the Clinton Administration to
intensify diplomacy on North Korea’s missile program; negotiations had begun in 1996. The
Administration’s 1999 Perry initiative set the goal of “verifiable cessation of testing,
production and deployment of missiles exceeding the parameters of the Missile Technology
Control Regime, and the complete cessation of export sales of such missiles and the
equipment and technology associated with them.” Dr. Perry and other officials seemed to
envisage the negotiation of a series of agreements on the individual components of the North
Korean missile program; each agreement would build progressively toward termination of
the entire program. The Perry initiative offered North Korea steps to normalize U.S.-North
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Korean relations, an end to U.S. economic sanctions, and other economic benefits in return
for positive North Korean actions on the missile and nuclear issues. This produced in
September 1999 a qualified North Korean promise not to conduct further long-range missile
tests, which North Korea repeated in June 2000. The Clinton Administration responded by
announcing in September 1999 a lifting of a significant number of U.S. economic sanctions
against North Korea. It published the implementing regulation for the lifting of these
sanctions on June 19, 2000.
No further agreements on missiles were concluded by the end of the Clinton
Administration. After a year of negotiations, North Korea sent a high level official to
Washington in October 2000. Secretary of State Albright visited Pyongyang shortly
thereafter, and missile talks intensified. Unlike Perry’s view of a series of agreements, the
Clinton Administration proposed a comprehensive deal covering all aspects of the issue.
North Korea offered to prohibit exports of medium and long-range missiles and related
technologies in exchange for “in-kind assistance.” (North Korea previously had demanded
$1 billion annually.) It also offered to ban permanently missile tests and production above
a certain range in exchange for “in kind assistance” and assistance in launching commercial
satellites. Pyongyang also offered to cease the deployment of Nodong and Taepo Dong
missiles. It proposed that President Clinton visit North Korea to conclude an agreement.
The negotiations reportedly stalled over four issues: North Korea’s refusal to include short-
range Scud missiles in the commitment to cease the development and deployment of
missiles; North Korea’s non-response to the U.S. position that it would have to agree to
dismantle the already deployed Nodong missiles; the details of U.S. verification of a missile
agreement; and the nature and size of a U.S. financial compensation package. North Korean
leader Kim Jong-il told European Union officials in May 2001 that he would continue a
moratorium on missile test launches until 2003, and he agreed to extend the moratorium
indefinitely in his meeting with Japanese Prime Minister Koizumi on September 17, 2002.
President Bush’s June 6, 2001 statement set a goal of “verifiable constraints on North
Korea’s missile programs and a ban on its missile exports.” Administration officials have
emphasized the necessity of a strong verification mechanism in any missile accord. After
the January 2002 State of the Union speech, the Administration repeatedly described North
Korea as a dangerous proliferator of missiles, and they demanded that North Korea cease
exporting missiles and missile technology. However, the Administration has offered no
specific negotiating proposal on missiles. As stated earlier, Administration officials
reportedly oppose offering North Korea specific compensation in exchange for North Korean
concessions on the missile issue.
Weapons of Mass Destruction. The Bush Administration’s emphasis on North
Korea’s weapons of mass destruction (WMDs) resulted from the September 11 terrorist
attack. The Clinton Administration stressed nuclear issues but did not include North Korea’s
chemical and biological weapons as priority elements in the Perry initiative. A Pentagon
report on the North Korean military, released in September 2000, stated that North Korea had
developed up to 5,000 metric tons of chemical munitions and had the capability to produce
biological weapons, including anthrax, smallpox, the bubonic plague, and cholera. The Bush
Administration expresses a fear that North Korea might sell nuclear, chemical, or biological
weapons to a terrorist group like al Qaeda or that al Qaeda might acquire these weapons from
a Middle East country that had purchased them from North Korea. In November 2001,
President Bush included North Korea’s WMDs as part of the “war against terrorism” when
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he stated: “We want to know. Are they developing weapons of mass destruction? And they
ought to stop proliferating. So part of the war on terror is to deny terrorist weapons.” In the
State of the Union on January 29, 2002, he described North Korea as “a regime arming with
missiles and weapons of mass destruction.” He warned that “The United States of America
will not permit the world’s most dangerous regimes to threaten us with the world’s most
destructive weapons.” Upon departing for his trip to East Asia, President Bush stated on
February 16, 2002, that “America will not allow North Korea and other dangerous regimes
to threaten freedom with weapons of mass destruction.”
The Bush Administration has not accused North Korea of providing terrorist groups
with WMDs. When asked about this in a joint press conference with South Korea’s Defense
Minister on November 15, 2001, Secretary of Defense Donald Rumsfeld answered “we do
not have anything specific.” There are reports from the early 1990s that North Korea
exported nuclear technology to Iran and that North Korea assisted Syria and Iran to develop
chemical and biological weapons capabilities.
Conventional Force Reductions and Pullbacks. Before and after taking office,
Bush officials stated that the Administration would give conventional force issues priority
in diplomacy toward North Korea. These officials stressed the objective of securing a
withdrawal of North Korean artillery and multiple rocket launchers from the positions just
north of the demilitarized zone (DMZ), where they threaten Seoul, located just 25 miles
south of the DMZ. The Bush June 6, 2001 statement set the goal of “a less threatening
[North Korean] conventional military posture.” Advocates of such an initiative argue that
North Korea might be more interested in a negotiation because of the progressive weakening
of its conventional forces in the 1990s. They point out that monitoring of a pullback of
North Korean artillery and multiple rocket launchers from the DMZ would be easier to
monitor than any agreements on nuclear or missile issues. They believe that easing the
central military confrontation on the DMZ is the key to resolving other military issues,
including weapons of mass destruction.
Bush Administration statements hold that North Korea should withdraw unilaterally its
artillery and rocket launchers from the DMZ in order to facilitate negotiations with the
United States. According to the Washington Post, February 2, 2002, Secretary of State Colin
Powell said that North Korea should remove its artillery from the DMZ as a good will
gesture. President Bush stated on February 16, 2002, that North Korea would “be told
directly by us during conversations. . .Move your arms back” from the DMZ. This stated
goal of near-term North Korean force pullbacks contrasts sharply with a U.S.-South Korean
study announced on February 27, 2002, on conventional force reductions. The study
concentrated on confidence-building measures with North Korea (military exchanges of
personnel and information) as a short- to medium-range goal. The study postulates actual
force reductions as a distant objective. The study plans in the future to examine strategy and
the details of actual force reductions. Some observers believe that this joint study suggests
that the Bush Administration has de-emphasized seeking conventional forces reductions and
pullbacks in favor of more modest confidence-building proposals, which date back to the
1980s. They attribute this to South Korean opposition to negotiations on conventional
forces, possible opposition from elements of the U.S. military, and the Bush Administration’s
reluctance to offer North Korea reciprocal military measures involving U.S. forces.
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North Korea’s response to Bush Administration statements have denounced the
Administration for proposing unilateral North Korean withdrawals from the DMZ. North
Korea also has used this to reject the general U.S. proposal to open talks. However, North
Korean statements also have pointed out that Pyongyang in the past has proposed
conventional force negotiations and pullbacks (these past proposals have included the total
withdrawal of U.S. forces from South Korea). Some experts believe that the Bush
Administration will have to include mutuality and military reciprocity in any proposal for
conventional force negotiations. They argue that the United States and South Korea will
have to offer North Korea a pullback of some U.S. and R.O.K. forces from the DMZ in order
to obtain North Korean agreement to pull back artillery, rocket launchers, and other forces.
Bush Administration pronouncements on the necessity of North Korean pullbacks have not
included any reference to mutuality or military reciprocity. As indicated previously, the
President’s June 6 list of possible incentives to North Korea were political and economic in
nature rather than military. Thus, a key issue for the Administration is whether it can achieve
conventional force negotiations without a reference to mutuality and military reciprocity in
a proposal for negotiations.
North Korea’s Inclusion on the U.S. Terrorism List. Beginning in February
2000, North Korea began to demand that the United States remove it from the U.S. list of
terrorist countries. It made this a pre-condition for the visit of the high level North Korean
official to Washington. Although it later dropped this pre-condition, it continued to demand
removal from the terrorist list. In response to the terrorist attack of September 11, 2001,
North Korea issued statements opposing terrorism and signed two United Nations
conventions against terrorism.
The South Korean government also urged the United States to remove North Korea
from the terrorism list in order to open the way for North Korea to receive financial aid from
the World Bank and the International Monetary Fund (IMF). U.S. law P.L. 95-118, the
International Financial Institutions Act, requires the United States to oppose any proposals
in the IMF and World Bank to extend loans or other financial assistance to countries on the
terrorism list. The Kim Dae-jung Administration advised the Clinton Administration in July
2000 to drop from consideration past North Korean terrorist acts against South Korea. The
Kim Dae-jung Administration advocated North Korean admission to the World Bank and the
IMF; it probably calculates that admission, which P.L. 95-118 does not cover, would be a
step toward convincing the United States to remove North Korea from the terrorism list and
thus allow Pyongyang to receive financial aid from these institutions.
Japan urged the Clinton and Bush administrations to keep North Korea on the terrorism
list until North Korea resolved Japan’s concerns. Japan’s concerns are North Korea’s
sanctuary to members of the terrorist Japanese Red Army organization and evidence that
North Korea kidnapped and is holding at least ten Japanese citizens. The Clinton
Administration gave Japan’s concern increased priority in U.S. diplomacy in 2000. Secretary
Albright raised the issue of kidnapped Japanese when she met with Kim Jong-il in
Pyongyang in October 2000. A high ranking State Department official met with family
members of kidnapped Japanese in February 2001 and reportedly assured them that the Bush
Administration would not remove North Korea from the terrorism list. (See CRS Report
RL30613, North Korea: Terrorism List Removal?) Kim Jong-il’s admission of kidnapping
Japanese during the Kim-Koizumi summit of September 2002 did not resolve the issue. His
claim that 8 of the 13 admitted kidnapped victims are dead and his ambivalence regarding
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the return to Japan of the four living Japanese raised new issues for the Japanese government,
including DNA testing of the remains of the dead, North Korean compensation to the
families of the victims, and the possibility that more Japanese were kidnapped. (North Korea
claims not to know the whereabouts of the thirteenth kidnapped victim.)
The State Department’s annual report on terrorism for 2001 also cited evidence that the
Moro Islamic Liberation Front in the Philippines, a combination guerrilla and terrorist group,
had received North Korean arms. In June 2002, the Bush Administration appeared to add
conditions for removing North Korea from the U.S. terrorist list. Deputy Secretary of State
Richard Armitage stated in a June 2002 speech that North Korea would have to acknowledge
the 1983 bombing of the South Korean presidential delegation in Rangoon, Burma, and the
blowing up of a South Korean airliner in 1987.
Food Aid. Agriculture production in North Korea began to decline in the mid-1980s.
Severe food shortages appeared in 1990-1991. In September 1995, North Korea appealed
for international food assistance. From 1996 through 2001, the United States contributed
about 1.8 million tons of food aid to North Korea through the United Nations World Food
Program. The Bush Administration announced 100,000 tons of new food aid in May 2001
and 105,000 tons in December 2001. The Bush June 6 statement indicated that it would use
food aid as a negotiating incentive to North Korea in diplomacy over nuclear, missile, and
conventional force issues. The Bush offer to “expand our efforts to help the North Korean
people” suggested continued U.S. food aid but linked in part to progress on issues like
missiles, conventional forces, and North Korea’s nuclear program. The Clinton
Administration used food aid to secure North Korean agreement to certain types of
negotiations and North Korean agreement to allow a U.S. inspection of the suspected nuclear
site at Kumchangri. Critics have asserted that the use of food aid in this way negates
consideration of two other issues: the weaknesses in monitoring food aid distribution in
North Korea and the absence of North Korean economic reforms, especially agricultural
reforms.
The U.N. World Food Program requested donations of 611,000 tons of food for North
Korea in 2002, but it cites a decline in donations. It acknowledges that the North Korean
government places restrictions on its monitors’ access to the food distribution system, but
it believes that most of its food aid reaches needy people. Several private aid groups,
however, withdrew from North Korea because of such restrictions and suspicions that the
North Korean regime was diverting food aid to the military or the communist elite living
mainly in the capital of Pyongyang. It is generally agreed that the regime gives priority to
these two groups in its overall food distribution policy. The regime, too, refuses to adopt
agricultural reforms similar to those of fellow communist countries, China and Vietnam,
including dismantling of Stalinist collective farms. While such reforms resulted in big
increases in food production in China and Vietnam, North Korea continues to experience
sizeable food shortages year after year with no end in sight. It is estimated that one to three
million North Koreans died of malnutrition between 1995 and 2002.
The conditions set on future food aid by the Bush Administration in June 2002, cited
above, appears to result from two factors. One is the influence of Andrew Natsios, the
Director of the U.S. Agency for International Development, who was intimately involved in
food aid programs to North Korea in the 1990s. His 2002 book, The Great North Korean
Famine, highlights a view that the North Korean government employed duplicity and
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manipulation of food aid donors. The second factor may be the influence of the newly-
emerging issue of North Korean refugees in China.
North Korean Refugees in China. This issue confronted governments after March
2002 when North Korean refugees sought asylum in foreign diplomatic missions in China
and the Chinese government sought to prevent access to the missions and forcibly removed
refugees from the Japanese and South Korean embassies. The refugee exodus from North
Korea into China’s Manchuria region began in the mid-1990s as the result of the dire food
situation in North Korea’s provinces in the far north and northeast along the Chinese border.
The North Korean government reportedly suspended the state food rationing system in these
provinces beginning about 1993 and never allowed international food aid donors into them.
The number of refugees is unknown, since China has not issued official figures. Estimates
cover a huge range, from 10,000 to 300,000.
China followed conflicting policies reflecting conflicting interests. Generally, China
tacitly accepted the refugees so long as their presence was underground and/or not highly
visible. China also allowed foreign private non-government groups (NGOs), including South
Korean NGOs, to provide aid to the refugees, again so long as their activities were not highly
visible. China barred any official international aid presence, including any role for the
United Nations High Commission for Refugees. It also interrupted its general policy of tacit
acceptance with periodic crackdowns that included police sweeps of refugee populated areas,
rounding up of refugees, and returning them to North Korea.
Chinese officials for years urged North Korea to adopt agricultural reforms similar to
China’s reforms since the late 1970s, including the abolition of collective farms and
communes. However, North Korea remains as China’s last communist ally, and China
supports the North Korean regime and trying to prevent any scenario that would lead to a
collapse of the Pyongyang regime. Chinese officials fear that too much visibility of the
refugees and especially any U.N. presence could spark an escalation of the refugee outflow
and lead to a North Korean regime crisis and possible collapse. China’s crackdowns are
sometimes a reaction to increased visibility of the refugee issue. China’s interests in
buttressing North Korea also has made China susceptible to North Korean pressure to crack
down on the refugees and return them. The Chinese government also appears reluctant to
establish the precedent of allowing any United Nations presence on its soil.
The new situation in 2002 resulted from the activism of several South Korean and
European NGOs, which decided to confront China and North Korea on the refugee issue.
These NGOs assisted a small number of refugees to travel to Chinese cities where there are
foreign diplomatic missions and seek asylum from foreign governments and repatriation to
South Korea. China’s attempts to prevent this added to the world-wide publicity, and China
eventually allowed all of these refugees to emigrate to South Korea. China, however,
reportedly instituted another crackdown in Manchuria against both the refugee population
and the foreign NGOs. Chinese security authorities reportedly tortured captured refugees to
gain information on the NGOs that assisted them. South Korea, which previously had turned
refugees away from its diplomatic missions, changed its policy in response to the new
situation. It accepted refugees seeking entrance into its missions and allowed them entrance
into South Korea, and it negotiated with China over how to deal with these refugees.
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The Bush Administration gave the refugee issue low priority. President Bush did not
raise the issue with Chinese leaders when he visited China in February 2002. The
Administration has asserted that South Korea should have the lead diplomatically in dealing
with China. However, the Administration’s new conditions for future food aid to North
Korea may be a response to the refugee situation. The Administration’s demand for food
donors’ access to all regions of North Korea points to the northern provinces from which
most of the refugees have come. Congress has been more active on the issue. The issue has
been aired in hearings. In June 2002, the House of Representatives passed H.Con.Res. 213,
which calls on China to halt forced returns of refugees to North Korea and give the U.N.
High Commission on Refugees access to the North Korean refugees.
Responding to South Korea’s Sunshine Policy. U.S. responses to President
Kim Dae-jung’s “sunshine policy” has been an issue since South Korea achieved a
breakthrough in relations with North Korea with the meeting of Kim Dae-jung and North
Korean leader Kim Jong-il in Pyongyang, June 13-14, 2000. Their joint declaration said
North Korea and South Korea would work for economic cooperation, cultural and sports
exchanges, and meetings of divided Korean families. The summit apparently was in part the
result of Kim Dae-jung’s speech in Berlin in March 2000. He offered to provide large scale
economic aid to rebuild North Korea’s infrastructure. Following the summit, Seoul and
Pyongyang negotiated agreements on the restoration of a railway and road across the DMZ,
investment guarantees and tax measures to stimulate South Korean private investments in
North Korea, provision of 600,000 tons of South Korean food aid to North Korea, and flood
control projects for the Imjim River. A meeting of defense ministers occurred but with little
result. President Kim called on the United States to support his sunshine policy by
normalizing diplomatic relations with North Korea, negotiating a missile agreement with
Pyongyang, and removing North Korea from the U.S. terrorist list. However, the sunshine
policy stagnated after December 2000. North Korea demanded that South Korea supply it
with two million kilowatts of electricity and rejected a South Korean reply proposing a
survey of North Korea’s electrical grid. North Korea broke off talks in March 2001 and
suspended implementation of the 2000 economic and family reunion agreements.
The issue of whether the Bush Administration supports President Kim Dae-jung’s
sunshine policy has been discussed since the Bush-Kim summit in March 2001. The Bush
Administration periodically issues a general statement that it supports the sunshine policy.
However, the U.S. response to the component parts of the sunshine policy indicates a mixed
U.S. reaction. The Clinton and Bush administrations supported South Korea’s proposals to
build a railroad and road across the demilitarized zone and assist North Korea in flood
control of the Imjim River. They also supported North-South agreements to reunite divided
Korean families and for investment guarantees for R.O.K. firms investing in North Korea.
However, the Bush Administration appears to have reservations over other components
of the sunshine policy. As stated previously, the Bush and Kim administrations appear to
disagree over North Korea’s inclusion on the U.S. terrorism list. The U.S. military command
in Korea and the Central Intelligence Agency reportedly believe that North Korea has gained
greater financial flexibility to make military purchases because of the nearly $400 million
it has received from the Hyundai Corporation during 1999-2001 for the right to operate a
tourist project at Mount Kumgang in North Korea. (According to informed sources, Hyundai
made additional secret payments to North Korea. Hyundai denies making secret payments.)
According to the South Korean newspaper, Choson Ilbo, February 25, 2001, U.S. officials
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voiced this concern to South Korean intelligence chief, Lim Dong-won, during his visit to
Washington in February 2001 and that the CIA delivered a memorandum to the R.O.K.
government containing a list of weapons that North Korea recently purchased from overseas.
The Korea Herald, February 5, 2001, quoted a spokesman for the U.S. Military Command
in Korea that “I know that military experts at home and abroad are concerned about
Pyongyang’s possible diversion of the [Hyundai] cash for military purposes.” South Korea’s
Unification Minister stated before a Korean National Assembly committee on April 2002
that the government was aware of a possibility that North Korea would use the Hyundai
payments for military purposes. The Kim Dae-jung Administration has touted the Mt.
Kumgang project as a highlight of its sunshine policy. It has decided to financially subsidize
the project, which has been a big money loser for the financially troubled Hyundai
Corporation.
The Bush Administration also has reservations over Kim Dae-jung’s proposal that the
1997-1999 Four Party Talks (North and South Korea, the United States, and China) be
reconvened and used for North-South negotiation of a Korean peace agreement to replace
the 1953 Korean armistice agreement. Past U.S. administrations endorsed North-South
negotiation of a peace agreement, and President Reagan originally proposed Four Party Talks
as a vehicle for peace negotiations. President Kim did not raise his four party talks proposal
directly during the March 2001 summit, but Bush Administration officials appeared to be
skeptical toward President Kim’s peace initiative. The Bush Administration appears
concerned that a peace agreement without provisions for conventional forces reductions and
pullbacks would create a false sense of security and could undermine South Korean
public/political support for the U.S. troop presence in South Korea.
The Bush Administration is known to have concerns over North Korea’s proposal that
South Korea provide North Korea with 2 million kilowatts of electric power in the near
future. South Korea did not accept the proposal but offered to send a survey team to North
Korea to study North Korea’s electric system. The Bush Administration reportedly is
concerned that 2 million kilowatts of electricity is the exact amount that the two light water
nuclear reactors, which North Korea is to receive under the Agreed Framework, would
provide North Korea. The Administration reportedly believes that if South Korea agreed to
the North Korean proposal, this would remove incentives for North Korea to meet its
obligations to the International Atomic Energy Agency to allow a full range of inspections.
The Kim Dae-jung Administration has supported the general Bush Administration goals
toward North Korea, but it has urged the Bush Administration to make greater efforts to
negotiate with North Korea. After President Bush’s declaration of North Korea as part of
an “axis of evil,” R.O.K. officials expressed misgivings about the Bush Administration’s
policy of public pressure and warnings toward North Korea. Top R.O.K. presidential
adviser, Lim Dong-won, stated in late March 2002 that the Bush Administration’s “hardline
stance against the North. . .could develop into a security crisis on the Korean peninsula.”
North Korea’s blockage of implementation of the agreements of 2000 continued until
August 2002. Efforts to renew negotiations over implementation floundered, and North
South relations reached a nadir in June 2002 when the North Korean navy attacked South
Korean naval units. However, North Korea expressed “regret”over the incident, and
negotiations in August 2002 produced a family reunion held in September and agreements
to implement economic agreements of 2000. A key agreement called for the North and
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South Korean militaries to construct the rail and road linkages through the demilitarized zone
(DMZ) in east and west sectors. Work actually began on September 18, 2002, with target
dates of December 2002 for the western sector and spring 2003 for the eastern sector. South
Korea is to supply needed materials to North Korea for the road and rail connections.
U.S.-South Korean Military Issues
South Korea’s fear of military threat from North Korea has declined since the mid-
1990s. In June 1999, South Korean naval forces inflicted severe damage on the North
Korean navy in a serious naval clash in the Yellow Sea, which experts attributed to superior
South Korean technology and antiquated North Korean weaponry. According to recent polls,
South Koreans increasingly do not register the same level of concern as many Americans
over a North Korean invasion threat, suspected nuclear weapons development, ballistic
missile testings, and missile sales abroad. In congressional testimony in March 2001,
General Thomas Schwartz, U.S. Commander-in-Chief in Korea, asserted that the North
Korean military threat was growing due to the size of its forces (over one million) and
armaments, the holding of large North Korean field exercises in 2000, and especially the
concentration of artillery and multiple rocket launchers within range of the South Korean
capital, Seoul. Schwartz’s testimony received criticism within South Korea and from a
number of U.S. experts. The critics argue that North Korean conventional military
capabilities have eroded since the early 1990s due to the obsolescence of offensive weaponry
like tanks and strike aircraft, logistics/supplies deficiencies, the absence of major field
exercises from 1994 to 2000, food shortages among even North Korean front-line troops on
the DMZ, and the decline in the physical and mental capabilities of North Korean draftees
after a decade of malnutrition.
Declining South Korean fears of a North Korean invasion and the inter-Korean dialogue
have produced a growing debate in South Korea over the U.S. military presence. Small
radical groups, which demand a total U.S. military withdrawal, have been joined by a
network of non-government civic groups. Several prominent South Koreans have proposed
changes in the size and functions of U.S. troops, including a proposal to convert U.S. troops
to a peacekeeping force. Some polls, including a poll commissioned by the State
Department’s Office of International Information Programs in September 2000, show a
majority of South Koreans in favor of a reduction in the number of U.S. troops in South
Korea. The official U.S. position is that the United States has no plans to reduce the number
of U.S. troops in South Korea. In March 2002, the U.S. and R.O.K. governments announced
a ten-year program to reduce by nearly 50% the bases and land used by U.S. forces in South
Korea but that the total number of 37,000 U.S. troops would remain.
The North-South summit of June 2000 intensified this debate. The debate centers on
two issues: (1) the impact of the U.S. military presence on prospects for advancement of
President Kim’s sunshine policy and (2) disputes between the U.S. military and South
Korean civilians. Attitudes toward one affect attitudes toward the other. Kim Dae-jung
states that he discussed U.S. troops with Kim Jong-il at the summit and that the North
Korean leader agreed that U.S. troops should remain in South Korea. Reportedly, however,
the two Korean leaders also discussed changing the role of U.S. troops from a military
combat force to that of peacekeepers.
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This debate has been intensified by new controversies over the conduct of the U.S.
military and U.S. policy. A number of incidents and issues in 2000 resulted in mounting
South Korean public criticism of U.S. troops. The Clinton Administration in its final days
concluded two agreements with South Korea that settled contentious issues. One was a new
Status of Forces Agreement, completed in December 2000 after six years of negotiations.
It provides that U.S. military personnel accused of particular, specified crimes would be
turned over to South Korean authorities prior to their trial and that such individuals would
receive certain legal guarantees from the R.O.K. government. The second agreement was
a settlement of the No Gun-ri issue, which involved the report that U.S. troops had massacred
Korean civilians at No Gun-ri in July 1950 during the early stage of the Korean War. The
agreement found that U.S. troops had killed a large number of South Korean civilians at No
Gun-ri but that there was no evidence that they were acting under orders from higher U.S.
commanders. President Clinton issued a statement of regret for the incident, but the Clinton
Administration rejected demands from South Korean groups that the United States issue a
formal apology and pay compensation to surviving family members. The Clinton
Administration also settled with South Korea the issue of R.O.K. development of missiles.
South Korea sought agreement to extend the range of its missiles, which had been the subject
of a 1979 U.S.-R.O.K. accord. An agreement announced in January 2001 will allow South
Korea to develop missiles with a range of up to 187 miles, up from the 1979 limit of 112
miles. South Korea joined the global Missile Technology Control Regime (MCTR).
Contentious issues remain. U.S. military personnel accidentally killed two South
Korean children in 2002, sparking an outcry of South Korean complaints and demands that
the soldiers be turned over to R.O.K. authorities for trial. A South Korean court in April
2001 ordered compensation for 14 Korean civilians, who claimed injury from a U.S.
bombing exercise; the court ruled that the U.S. military had violated Korean law. The Bush
Administration reportedly decided to seek a 30% increase in South Korea’s host nation
support for U.S. troops. The total cost of stationing U.S. troops in South Korea is over $2
billion annually. The South Korean direct financial contribution for 2002 is $490 million,
up from $399 million in 2000. In early 2000, large-scale criticism arose in the South Korean
media and among civic groups over the R.O.K. government’s apparent selection of the
Boeing’s F-15K fighter over European competitors as South Korea’s next generation fighter.
The controversy arose over reports and statements that the selection was made under pressure
from the Bush Administration.
U.S.-South Korean Economic Relations
In 2000, U.S.-South Korean trade totaled over $66 billion, making South Korea the
United States’ seventh largest trading partner. U.S. exports in 2000 totaled $26.3 billion.
Major U.S. exports include semiconductors, electrical machinery, general machinery,
aircraft, agricultural products, and beef. After a period of U.S. trade surpluses with South
Korea during 1994-1997, the United States has run deficits with South Korea. This is partly
due to the economic crisis which hit South Korea in 1997. In December 1997, South Korea
and the International Monetary Fund (IMF) agreed to the terms of a $58 billion financial
support package. The economic recession led to a sharp decline in most countries’ exports
to South Korea, including U.S. exports. Renewed South Korean economic growth in 1999
and 2000 resulted in a recovery in U.S. exports, but growth in U.S. imports from South
Korea was larger, causing the trade deficit to widen.
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As part of its commitment to the IMF in 1997, South Korea pledged to eliminate most
restrictions on foreign direct investment. The Kim Dae-jung Administration aggressively
liberalized R.O.K. regulations on foreign investment. As a result American companies have
invested nearly $10 billion in South Korea in the 1998-2000 period.
In early May 2000, the U.S. Trade Representative cited South Korea as a “priority watch
country” under “Special 301” (Section 182 of the Trade Act of 1974) because it deems
Seoul’s enforcement of intellectual property rights to be unsatisfactory. The United States
criticized South Korea for barriers to the sale of U.S. automobiles, pharmaceuticals, and beef.
In December 2000, the United States and Australia won a decision of the World Trade
Organization that South Korea discriminated against foreign suppliers of beef. The United
States continues to criticize South Korea for other policies, which Washington claims
discriminate against U.S. beef. In August 2001, the U.S. Federal Aviation Administration
refused a bid by Korean Air to expand airline service to the United States, citing lax safety
procedures by Korean Air. The two governments have been unable to conclude a bilateral
investment treaty because of a dispute over South Korean restrictions on foreign movies.
A surge in U.S. imports of Korean steel in 1997 and 1998 has caused the United States
to include South Korea in a group of steel-exporting countries being investigated for alleged
dumping of steel products into the U.S. market. The U.S. International Trade Commission,
an independent U.S. agency, ruled in October 2001 that several categories of imported
Korean steel had caused serious damage to the U.S. steel industry. On March 5, 2002, the
Bush Administration imposed tariffs up to 30% on imported steel, including South Korean
steel. The South Korean government responded that it was considering filing a suit against
the United States in the World Trade Organization. (See CRS Report RL30566, South
Korea-U.S. Economic Relations: Cooperation, Friction, and Future Prospects.)
Political Issues
As South Korea moved from the authoritarian regimes of the past to more
democratically-based governments of the last decade, U.S. officials have been prominent in
encouraging greater pluralism and democratic process. Former general Roh Tae Woo was
the first popularly elected president in late 1987. Former oppositionist Kim Young Sam won
the December 1992 presidential election. Kim Dae-jung won the December 1997
presidential election with 40% of the vote. However, throughout much of his term, the
National Assembly has been controlled by the opposition party. President Kim’s economic
reform program, strong economic growth in 1999 and 2000, and the North-South summit of
June 2000 gained him considerable popular support. Since late 2000, however, his
popularity has slipped due to a slackening of economic growth, the uneven progress of his
sunshine policy toward North Korea, and reports of corruption in his government. President
Kim has been criticized for attempting to impose restrictions on newspapers which criticize
his policies. The next presidential election is scheduled for December 2002. President Kim
is limited to one term under the R.O.K. constitution. His 1997 election opponent, Lee Hoi-
chang, will represent the opposition Grand National Party. President Kim’s Millennium
Democratic Party has nominated Roh Moo-hyun, a former labor union lawyer. Roh in the
past has advocated a withdrawal of U.S. troops from South Korea. He now says U.S. troops
should remain but that South Korea should gain equality in the security relationship. In
September 2002, Chung Mong-joon, son of the founder of the Hyundai group of companies,
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entered the race. He drew significant support in the polls from his successful organizing of
the World Cup soccer tournament in South Korea in June 1992.
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