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- 2019.4
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The second North Korea–United States Hanoi Summit broke down without producing an agreement. Although the denuclearization talks between North Korea and the United States will need to progress further for the situation to become clear, it appears that the U.S. considers sanctions against North Korea are having an impact on the North Korean economy, and is strongly pressuring North Korea to implement complete denuclearization first, before lifting sanctions.
This paper analyzes the impact of sanctions on North Korea's economy in 2018 by analyzing North Korea's trade with China. We obtained statistics from China Customs, i.e. the General Administration of Customs of the People's Republic of China, on China's trade with North Korea by country, HS code, province, and trade type in 2018. Our analysis focused on three possibilities: a decrease in imports and exports, a rise in North Korea's alternative export items, and a possible slowdown in industrial production.
In summary, it seems that sanctions have adversely affected the North Korean economy. Exports have almost stopped due to the sanctions, and imports related to industrial production have almost stopped as well. As firms face difficulties in foreign currency earning, it seems they have been importing groceries that can be sold in private markets in order to absorb for-eign currency from North Korean citizens.
In 2019, North Korea's total exports are expected to remain at or slightly rise over 2018 levels. The nation is expected to increase exports to some extent based on its experience with sanctions. However, given the fact that North Korea is not importing capital goods, export growth will likely remain within a very limited range. In 2019, North Korea's total imports are expected to remain at or slightly drop from 2018 levels. The main reason for this decline in imports is that North Korea is having a difficult time earning foreign currency due to the current sanctions.
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