Reports from the Economic Front

a blog by Marty Hart-Landsberg

Monthly Archives: January 2016

Stop the TPP

Members of the Obama administration continue to promote the Transpacific Partnership (TPP) agreement as a boon to the US economy.  Freeing trade, they claim, will boost economic activity which means more investment, production, and employment.  And, when challenged, they point to the work of prominent economists whose research is said to substantiate their claim.

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A January 2016 study of the economic consequences of the TPP by the Peterson Institute for International Economics is an example.  This study, which calls the agreement “a notable accomplishment” and “a substantial positive response to slowing world trade growth”, has been touted by the US government and received positive media coverage.

The Washington Post says:

The Peterson Institute study is the most thorough independent assessment of the economic impact of the TPP, the largest regional trade accord in history. The Obama administration hopes the findings will help persuade Republican leaders in Congress to schedule a vote on the deal before the November presidential vote.

However, a careful look at its projections and even more importantly its assumptions, makes clear that we are not being told the truth about the real aims or intended beneficiaries of the agreement.

The authors of the Peterson Institute study find that approval of the agreement will bring the following benefits to the US:

Economic modeling can show . . . the effects of the scheduled liberalization elements of the TPP, provided it is ratified by its members. The estimates reported here suggest that the TPP will increase annual real incomes in the United States by $131 billion or 0.5 percent of GDP, and annual exports by $357 billion, or 9.1 percent of exports, over baseline projections by 2030, when the agreement is nearly fully implemented. Incomes after 2030 will remain above baseline results by a similar margin. Both labor and capital will benefit, but labor will get a somewhat more than proportionate share of the gains in total.

It is worth emphasizing that this study has been the most positive in terms of estimated gains so far published.  For example, an earlier study by the Department of Agriculture concluded, “Eliminating intraregional tariffs and TRQs [tariff rate quotas] will have zero or small positive effects on [TPP] members’ real gross domestic product (GDP). There are no measurable effects on U.S. real GDP in 2025 relative to the baseline scenario.”

Despite its positive assessment of the agreement, the Peterson study’s projected gains are strikingly small.  While an income boost of $131 billion by 2030 may sound like a lot, it is basically a rounding error in an economy with a current GDP of approximately $18 trillion.

Dean Baker makes the same point this way:

it is important to put the projected gain of 0.5 percent of GDP as of 2030 in some context.  [A Washington] Post article told readers:

“If those projections [from the Peterson Institute study] are correct, that additional growth would help a domestic economy that has struggled to regain the growth rates of previous decades in the wake of the Great Recession.”

The study’s projection of a cumulative gain to GDP of 0.5 percent by 2030 implies an increase in the annual growth rate of 0.036 percentage points. This means that if the economy was projected to grow by 2.2 percent a year in a baseline scenario, it will instead grow at a 2.236 percent rate with the TPP, assuming the Peterson Institute projections prove correct.

The claim that the agreement will boost exports by $357 billion also gets positive media attention.  It makes for a nice headline, but if reporters had only read the study itself they would find, on page 7, the following statement about the model used for the study:

The model assumes that the TPP will affect neither total employment nor the national savings (or equivalently trade balances) of countries. This “macroeconomic closure” assumption allows modern trade models to focus on the goals of trade policy—namely sustained productivity and wage increases through changes in trade patterns and industry output levels.

Almost all mainstream economists use computable general equilibrium models to estimate the effects of trade agreements.  These models require researchers to assume, as a condition of the model, that the tariff changes under study will have no effect on employment or trade balances, both of which are assumed to be in equilibrium.  So, while the Peterson Institute study projects a boost in exports of $357 billion, it also must project a boost of imports of $357 billion.

In other words, when economists use computable general equilibrium models to estimate the consequences of trade agreements they are, by assumption, ruling out the possibility of any increase in unemployment, capital flight, or trade deficits.  Isn’t that reassuring?  No wonder that these studies all tend to sing the praises of free trade agreements.

Of course, there are other ways to model free trade agreements, and economists that use them come to very different conclusions.  But of course their studies get little attention.

A case in point: In January 2016, economists with the Global Development And Environment Institute at Tufts University published a study of the TPP that uses the United Nations Global Policy Model.  This model allows changes in tariffs to change employment and inequality and incorporates the impact of such changes on aggregate demand and economic growth as well as trade balances.

The authors of this study conclude:

The TPP would generate net GDP losses in the USA and Japan. For the USA, GDP would be 0.54 percent lower than it would be without the TPP, ten years after the treaty enters into force. We also project that Japan’s GDP would decrease by 0.12 percent as a consequence.

Economic gains would be negligible for other participating countries – less than one percent over ten years for developed countries, and less than three percent for developing countries. These projections are similar to the Peterson Institute’s finding that TPP gains would be small for many countries.

The TPP would lead to employment losses in all countries, totaling 771,000 lost jobs. The USA would be the hardest hit, with a loss of 448,000 jobs. Participating developing economies would also suffer employment losses, as greater competitive pressures force them to limit labor incomes and increase production for export.

All of these studies are concerned only with trade, narrowly defined.  They don’t take up the likely consequences of the many other chapters of the TPP that are designed to boost corporate power and profitability.  For example, as Dean Baker explains:

It is also worth noting that the [Peterson Institute] study does not appear to factor in the losses associated with higher prices for the items that will be subject to stronger and longer patent and copyright protection. Stronger intellectual property protections were quite explicitly one of the main goals of the deal and were one of the last major issues to be resolved. As a result of the TPP, the countries that are party to the agreement will be paying more for prescription drugs and other protected products. The effect of longer and stronger IP rules is the same as a tariff, except we are talking about raising the price of protected items by many times above their free market price. This is equivalent to a tariff of several thousand percent on the protected items.

And then there is the investment chapter, with its investor state dispute settlement mechanism, which empowers transnational corporations to sue governments in a special tribunal if public policy reduces their “distinct, reasonable investment-backed [profit] expectations.  No doubt about who gains from this power.

The takeaway: the TPP is bad for working people, in the US as well as in the other member countries.  And, the US government, US transnational corporations, and the US media are engaged in a deceitful sell job.  The TPP, as well as other similarly structured trade agreements currently being negotiated, such as the European-US Transatlantic Trade and Investment Partnership (TTIP), must be opposed.

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Searching for the Global Middle Class

The latest hype, designed no doubt to take attention away from declining living and working conditions in core economies, is that a new global middle class is emerging.  The implication is that capitalist globalization continues to work its “magic,” although now it is happening in the so-called third world.  Reality doesn’t match the hype.  Search all you want—it is hard to find real evidence of the emerging new global middle class.

Steve Knauss highlights the talk:

Over half the world will be middle class by 2030, predicts the United Nations Development Program (UNDP) in its report on “the Rise of the South.” The Economist, not known to be shy, claims we’re already there, thanks to “today’s new bourgeoisie of some 2.5 billion people” across the global South that have become middle class since 1990. The OECD, perhaps the boldest of all, postulates that India – currently one of the poorest countries on earth – could find more than 90 percent of its population joining this “global middle class” within 30 years, from around 5 or 10 percent today.

It all sounds pretty impressive until you learn how membership in the new global middle class is determined.  It includes those whose real income (in purchasing power parity dollars) is at least $10 per day.  That means at least $3650 in annual earnings gets you membership in the new global middle class.

To appreciate how low that figure is one has to know what purchasing power parity means and how it is used to calculate income.  There are two main ways to make comparisons in earnings across countries, something needed for global claims.  One is to convert national earnings into dollars using the exchange rate.  However, this is not considered very reliable.  Exchange rates move all the time, making comparisons unreliable.  Even more problematic, many of the goods and services people consume are not internationally traded so changes in exchange rates do not affect their well-being.

The other method, the one most commonly used, relies on purchasing power parity calculations.  In brief, the World Bank constructs a basket of consumer goods and services and determines its dollar cost in the United States in a particular year; the most recent year was 2011.  Then, it determines the national cost of a similar basket in other countries.  Finally, it calculates a purchasing power parity exchange rate for the dollar and the currencies of these other countries using these relative costs.

An example: suppose that the constructed basket of goods costs $200 in the US.  And suppose that the “equivalent” basket of goods costs 800 Rupees in India.  We can then can construct a purchasing power exchange rate between the two currencies.  In my example, 1 Rupee equals $0.25.  Or said differently an Indian with 4 Rupees is said to be able to command the same value of goods and services as someone in the US who has $1.  Thus, an Indian earning 8000 Rupees would be said to earn the equivalent of $2000.

Of course this method has its own difficulties.  For example, imagine how hard it is to develop national indices that are equivalent.  How do we calculate the average price of a good or service in a country?  And are the goods and services in one country, say the US, really equivalent to the goods and services in another country, say India?

Regardless, putting doubts about the methodology aside, we can now return to our standard for reaching the global middle class.  Our international agencies seek to count individuals who earn the annual equivalent of $3650 in the US as middle class.  That certainly seems like a stretch!

The following chart highlights the distribution of global income in purchasing power dollars using development agency categories.

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As Knauss explains:

Even taking the data at face value, 71 percent of humanity is poorer in real terms than the $10 PPP threshold. . . . This is compared to 79 percent in 2001, owing to a modest increase in families crossing the $10 PPP line but remaining concentrated very close to it . . . . There was consequently an expansion of those living on between $10 and $20 per day from 7 percent of humanity in 2001 to 13 percent today.

That’s it. That’s the whole basis for the “global middle class” hype. If one were to select even a slightly more reasonable standard – for example, $20 PPP, or the real living standard equivalent of a family of four in the United States with a total income above $29,200 – there is no global middle class to speak of whatsoever. Only 16 percent of humanity – 13 percent in 2001 – enjoys this standard of living, composed of the majority of the population across the West, where real substantial middle classes exist, and the elites in the South, very rarely more than 15 or 20 percent of the population, and much more often substantially less.

Still, a look at the chart does show a significant fall in the share of world population that made less than $3 a day.  This however appears largely due to “the historic wave of ‘depeasantization’ throughout the neoliberal era.”  In other words, as people are forced off the land and into urban areas they become part of the cash economy.  Whether their higher money wage compensates for their loss of access to land is another issue, one that should make us pause before declaring them better off.

More generally, the gains over the 2001 to 2011 period were driven by international processes that are now moving in reverse.  The global economy is clearly slowing.  Already declines in exports of manufactures and commodity prices are undoing past gains in poverty reduction in Asia, Africa, and Latin America.

Capitalist globalization does indeed appear to be working magic.  But, as Oxfam’s recent report shows, only for the benefit of those at the top of the income scale.

  • In 2015, just 62 individuals had the same wealth as 3.6 billion people – the bottom half of humanity. This figure is down from 388 individuals as recently as 2010.
  • The wealth of the richest 62 people has risen by 44% in the five years since 2010 – that’s an increase of more than half a trillion dollars ($542bn), to $1.76 trillion. Meanwhile, the wealth of the bottom half fell by just over a trillion dollars in the same period – a drop of 41%.
  • Since the turn of the century, the poorest half of the world’s population has received just 1% of the total increase in global wealth, while half of that increase has gone to the top 1%.
  • The average annual income of the poorest 10% of people in the world has risen by less than $3 each year in almost a quarter of a century. Their daily income has risen by less than a single cent every year.

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North Korea In The News

The North Korean government claims to have detonated a hydrogen bomb on January 6, 2016,  its fourth test of a nuclear weapon since 2006.  Most analysts believe that what was actually tested was a less powerful atomic bomb or perhaps a “boosted-fission weapon.”

Regardless, the media is full of stories questioning Kim Jung-un’s motives or sanity and discussing the possibility of the UN placing yet more sanctions on North Korea.

As for motives, here is what the New York Times thinks its readers should know:

What might North Korea be trying to accomplish with its threats?

In the past, United States administrations and South Korean governments managed to tamp down periodic heightened tensions with North Korea by offering concessions, including much-needed aid, in return for the North’s promising to end its nuclear weapons programs. Many analysts believe that North Korea is again seeking aid and other concessions, while some suggest that it merely wants to be recognized as a nuclear state, like Pakistan.

Still others suggest that the North genuinely fears an attack by the United States or South Korea and views the warnings as deterrence. Highlighting a perceived threat from abroad is also a favorite tool the North Korean government uses to ensure internal cohesion in an impoverished country that has experienced enormous privation, including devastating famine and continuing pervasive hunger.

Missing from all the discussion about North Korea is the actual history of US-North Korea relations.  That is unfortunate, to say the least, since that history would make clear that the US has repeatedly offered and then just as quickly withdrawn its concessions even when the North has complied with US demands.  It would also make clear that the North has always sought and been responsive to meaningful US overtures.  There is no big mystery about what North Korea wants.  It wants a peace treaty ending the Korean War and normalized relations with the US.

As for that history, I think much of what needs to be known can be found in the following previously published May 2, 2013 blog post.

The Need To Work For Peace On The Korean Peninsula

This long post examines the causes of and offers a response to the dangerous escalation of tensions on the Korean peninsula.

While the details of U.S.-North Korean relations are complex, the story is relatively simple.  In brief, the U.S. government continues to reject possibilities for normalizing relations with North Korea and promoting peace on the Korean peninsula in favor of a dangerous policy of regime change.  Unfortunately, but not surprisingly, the U.S. media supports this policy choice with a deliberately one sided presentation of events designed to make North Korea appear to be an unwilling and untrustworthy negotiating partner.

As a corrective, in what follows I offer a more complete history of U.S -North Korean relations, focusing on the major events that frame current tensions over North Korea’s nuclear program.  This history makes clear that these tensions are largely the result of repeated and deliberate U.S. provocations and that our best hope for peace on the Korean Peninsula is an educated U.S. population ready and able to challenge and change U.S. foreign policy.

Historical Context

Perhaps the best starting point for understanding the logic of U.S.-North Korean relations is the end of Korean War fighting in 1953.  At U.S. insistence, the fighting ended with an armistice rather than a peace treaty.  A Geneva conference held the following year failed to secure the peace or the reunification of Korea, and U.S. demands were the main reason for the failure.

The United States rejected North Korean calls for Korea-wide elections, supervised by a commission of neutral nation representatives, to establish a new unified Korean government, a proposal that even many U.S. allies found reasonable.  Instead, the U.S. insisted, along with South Korea, that elections for a new government be held only in the North and under the supervision of the U.S. dominated United Nations.  Needless to say, the conference ended without any final declaration, Korea divided, and the United States and North Korea in a continuing state of war.

Up until the late 1980s/early 1990s, an interrelated, contentious but relatively stable set of relationships—between the United States and the Soviet Union and between North Korea and South Korea—kept North Korean-U.S. hostilities in check.  The end of the Soviet Union and transformation of Russia and other Central European countries into capitalist countries changed everything.

The loss of its major economic partners threw North Korea’s economy into chaos; conditions only worsened the following years as a result of alternating periods of flood and drought.  The North Korean government, now in a relatively weak position, responded by seeking new trade and investment partners, which above all required normalization of relations with the United States.  The U.S. government had a different response to the changed circumstances; seeking to take advantage of the North’s economic problems and political isolation, it rejected negotiations and pursued regime change.

It is the interplay of U.S. and North Korean efforts to achieve their respective aims that is largely responsible for the following oft repeated pattern of interaction: the North tries to force the United States into direct talks by demonstrating its ability to boost its military capacities and threaten U.S. interests while simultaneously offering to negotiate away those capacities in exchange for normalized relations.  The United States, in turn, seizes on such demonstrations to justify ever harsher economic sanctions, which then leads North Korea to up the ante.

There are occasional interruptions to the pattern.  At times, the United States, concerned with North Korean military advances, will enter into negotiations.  Agreements are even signed.  But, the U.S. rarely follows through on its commitments.  Then the pattern resumes.  The critical point here is that it is the North that wants to conclude a peace treaty ending the Korean War and normalize relations with the United States.  It is the U.S. that is the unwilling partner, preferring to risk war in the hopes of toppling the North Korean regime.

The Framework Agreement, 1994-2002

The U.S. government began to raise public concerns about a possible North Korean nuclear threat almost immediately after the dissolution of the Soviet Union.  These concerns were driven by many factors, in particular the U.S. need for a new enemy to justify continued high levels of military spending.  Colin Powell, then head of the Joint Chiefs of Staff, explained in testimony to Congress that with the Soviet Union gone, the United States was running out of enemies.  All that was left, he said, was Fidel Castro and Kim Il Sung.

The North had shut down its one operating reactor in 1989 for repairs.  In 1992, the CIA claimed that the North used the shutdown to reprocess plutonium and was now in possession of one or two nuclear weapons, a claim disputed at the time by the State Department.  The North also denied the claim but offered to settle U.S. nuclear concerns if the United States would enter into normalization talks.

The Clinton Administration rejected the invitation and began planning for war.  War was averted only because of Jimmy Carter’s intervention.  He traveled to North Korea and brokered an agreement with Kim Il Sung that Clinton reluctantly accepted.  The resulting 1994 Framework Agreement required the North to freeze its graphite-moderated reactor and halt construction of two bigger reactors.  It also required the North to store the spent fuel from its operating reactor under International Atomic Energy Association (IAEA) supervision.

In exchange, the U.S agreed to coordinate the building of two new light water reactors (which are considered less militarily dangerous) that were to be finished by 2003.  Once the reactors were completed, but before they were fully operational, the North would have to allow full IAEA inspections of all its nuclear facilities.  During the period of construction, the U.S. agreed to provide the North with shipments of heavy oil for heating and electricity production.

Perhaps most importantly, the agreement also called for the United States to “move toward full normalization of political and economic relations” with the North and “provide formal assurances to the DPRK against the threat or use of nuclear weapons by the United States.”

Tragically, although rarely mentioned in the U.S. media, the U.S. government did little to meet its commitments.  It was repeatedly late in delivering the promised oil and didn’t begin lifting sanctions until June 2000.  Even more telling, the concrete for the first light water reactor wasn’t poured until August 2002.  Years later, U.S. government documents revealed that the United States made no attempt to complete the reactors because officials were convinced that the North Korean regime would collapse.

The Bush administration had no use for the Framework Agreement and was more than happy to see it terminated, which it unilaterally did in late 2002, after charging the North with violating its terms by pursuing nuclear weapons through a secret uranium enrichment program.  Prior to that, in January 2002, President Bush branded North Korea a member of the “axis of evil.”  In March, the terms of a new military doctrine were leaked, revealing that the United States reserved the right to take preemptive military strikes and covert actions against nations possessing nuclear, biological, and chemical weapons as well as use nuclear weapons as an option in any conflict; North Korea was listed as one of the targeted nations.  In July, President Bush rejected a North Korean request for a meeting of foreign ministers, calling Kim Jong Il a “pygmy” and a “spoiled child at the dinner table”

It is certainly possible that North Korea did begin a uranium enrichment program in the late 1990s, although the Bush Administration never provided proof of the program’s existence.  However, what is clear is that the North did halt its plutonium program, allowing its facilities to deteriorate, with little to show for it.  The failure of the United States to live up to its side of the agreement is highlighted by the fact that North Korea’s current demands are no different from what it was promised in 1994.

The North Korean government responded to the Bush administration’s unilateral termination of the Framework Agreement by ordering IAEA inspectors out of the country, restarting its plutonium program, and pledging to build a nuclear arsenal for its defense.

Six Party Talks, 2003-7

Fearful of a new war on the Korean peninsula, the Chinese government organized talks aimed at deescalating tensions between the United States and North Korea.  The talks began in August 2003 and included six countries—the United States, North Korea, South Korea, Japan, China, and Russia.  Two years of talks failed to produce any progress in resolving U.S.-North Korea differences.  One reason: the U.S. representative was under orders not to speak directly to his North Korean counterpart except to demand that North Korea end its nuclear activities, scrap its missiles, reduce its conventional forces, and end human rights abuses.  The North, for its part, refused to discuss its nuclear program separate from its broader relations with the United States.

Finally, in mid-2005, the Chinese made it known that they were prepared to declare the talks a failure and would blame the United States for the outcome.  Not long after, the United States ended its opposition to an agreement.  In September 2005, the six countries issued a Joint Statement, which was largely a repackaged Framework Agreement.  While all the countries pledged to work towards the denuclearization of the Korean peninsula, most of the concrete steps were to be taken by the United States and North Korea “in a phased manner in line with the principle of ‘commitment for commitment, action for action’.”

Unfortunately, the day after the Joint Statement was issued, the United States sabotaged it.  The U.S. Treasury announced that it had “proof” that North Korea was counterfeiting $100 bills, so called super notes, an action it said amounted to war.  It singled out the Macao-based Banco Delta Asia, which was one of North Korea’s main financial connections to the west, for supporting the country’s illegal activities, froze its dollar accounts, and warned other banks not to conduct business with it or service any North Korean dollar transactions.  The aim was to isolate North Korea by denying it access to international credit markets.  The charge of counterfeiting was rejected by the North, most Western currency experts, and even China and Russia who were given a presentation of evidence by the U.S. Treasury.  However, fearful of possible U.S. retaliation, most banks complied with U.S. policy, greatly harming the North Korean economy.

The timing of the counterfeit charge was telling.  The U.S. Treasury had been concerned with counterfeit super notes since 1989 and had originally blamed Iran.  The sum total identified was only $50 million, and none of the notes had ever circulated in the United States.  This was clearly yet another effort to stop normalization and intensify economic pressure on North Korea.

The North announced that its participation in Six Party talks was contingent on the withdrawal of the counterfeit charge and the return of its Banco Delta Asia dollar deposits.  After months of inaction by the United States, the North took action.  On July 4, 2006, it test-fired six missiles over the Sea of Japan, including an intercontinental missile.  The U.S. and Japan condemned the missile firings and further tightened their sanctions against North Korea.  In response, on October 8, 2006, North Korea conducted its first nuclear test.  Finally, the U.S. agreed to reconsider its financial embargo and the North agreed that if its money was returned and it received energy supplies and economic assistance it was willing to once again shutdown its nuclear facilities, readmit international inspectors, and discuss nuclear disarmament in line with steps toward normalization of relations with the United States.

The Six Party talks began again in December 2006 but the process of securing implementation of the Joint Statement was anything but smooth.  The U.S. chief negotiator at the talks announced in February 2007 that all frozen North Korean deposits would be unfrozen and made available to the North within 30 days; the North was given 60 days to shut down its reactor.  However, the Treasury refused to withdraw its charges, and no bank was willing to handle the money for fear of being targeted as complicit with terrorism.  It took the State Department until June 25 to work out a back-door alternative arrangement, thereby finally allowing the Six Party agreement to go into effect.

The Six Party Agreement, 2007-9

As noted above, the Six Party agreement involved a phased process.  Phase 1, although behind schedule because of the U.S. delay in releasing North Korean funds, was completed with no problems.  In July 2007, North Korea shut down and sealed its Yongbyon nuclear complex which housed its reactor, reprocessing facility, and fuel rod fabrication plant.  It also shut down and sealed its two partially constructed nuclear reactors.  It also invited back IAEA inspectors who verified the North Korean actions.  In return, the U.S. provided a shipment of fuel oil.

Phase 2, which began in October, required the North to disable all its nuclear facilities by December 31, 2007 and “provide a complete and correct declaration of all its existing nuclear programs.”  In a separate agreement it also agreed to disclose the status of its uranium enrichment activities.  In exchange, the North was to receive, in stages, “economic, energy, and humanitarian assistance.” Once it fulfilled all Phase 2 requirements it would also be removed from the U.S. Trading with the Enemy Act and the State Sponsors of Terrorism list.

North Korean complaints over the slow delivery of fuel oil delayed the completion of this second phase.  However, in May 2008, North Korea completed the last stage of its required Phase 2 actions when it released extensive documentation of its plutonium program and in June a declaration of its nuclear inventory.  In response, the U.S. removed North Korea from its list of state sponsors of terrorism.

However, the U.S. government failed to release the remaining promised aid or end the remaining sanctions on North Korea.  It now demanded that North Korea accept a highly intrusive verification protocol, one that would open up all North Korean military installations to U.S. inspection, and made satisfaction of Phase 2 commitments dependent on its acceptance.  The U.S. was well aware that this demand was not part of the original agreement.  As Secretary of State Rice stated, “What we’ve done, in a sense, is move up issues that were to be taken up in phase three, like verification, like access to the reactors, into phase two.”

The North offered a compromise—a Six Party verification mechanism which would include visits to declared nuclear sites and interviews with technical personal.  It also offered to negotiate a further verification protocol in the final dismantlement phase.  The U.S. government rejected the compromise and ended all aid deliveries.

In February 2009, the North Korea began preparation to launch a satellite.  South Korea was preparing to launch a satellite of its own in July.  The North had signed the appropriate international protocols governing satellites and was now providing, as required, notification of its launch plan.  The Obama administration warned the North that doing so would violate sanctions placed on the country after its nuclear test.  In response, the North declared that it had every right to develop its satellite technology and if the U.S. responded with new sanctions it would withdraw from the Six Party talks, eject IAEA monitors, restart its reactors, and strengthen its nuclear deterrent.

The North launched its satellite in April.  In June, the U.S. won UN support for enhanced sanctions, and the North followed through on its threat.  In May the North conducted a second nuclear test, producing yet another round of sanctions.

Recent Events

In April and December 2012 the North again launched earth observation satellites.  Although before each of these launches the U.S. asserted that these were veiled attempts to test ballistic missiles designed to threaten the United States, after each launch almost all observers agreed that the characteristics of the launches—their flight pattern and the second stage low-thrust, long burntime–were what is required to put a satellite in space and not consistent with a missile test.

After the December launch, the only successful one, the U.S. again convinced the Security Council to apply a new round of sanctions.  And in response, the North carried out its third nuclear test in February 2013.  The North Korean Ministry of Foreign Affairs pointed out that there have been “more than 2,000 nuclear tests and 9,000 satellite launches” in the world, “but the UN Security Council has never passed a resolution prohibiting nuclear tests or satellite launches.”  The Security Council responded to the North’s nuclear test by approving stricter sanctions.

In addition to sanctions, the U.S. has also intensified its military provocations against the North in hopes of destabilizing the new North Korean regime led by Kim Jung Un.  For example, in 2012, U.S.-South Korean military analysts conducted the world’s largest computerized war simulation exercise, practicing the deployment of more than 100,000 South Korean troops into North Korea to “stabilize the country in case of regime collapse.”  As part of their yearly war games, U.S. and South Korean forces also carried out their largest amphibious landing operations in 20 years; 13 naval vessels, 52 amphibious armored vehicles, 40 fighter jets and helicopters, and 9,000 U.S. troops were involved.

As part of its March 2013 war games, the U.S. flew nuclear-capable B-2 Stealth bombers over South Korea; these are also the only planes capable of dropping the 30,000-pound Massive Ordnance Penetrator bomb, which was developed to destroy North Korean underground facilities.  Nuclear-capable B-52 bombers also flew over South Korea, dropping dummy munitions.  The United States also sent the nuclear-powered submarine USS Cheyenne, equipped with Tomahawk missiles, into Korea waters.

The North Korean government responded to these threats in three ways.  First, the content of their declarations changed.  In particular, they began to focus their own threats on the U.S. as well as South Korea.  For example, the government stated, “If the US imperialists brandish nuclear weapons, we — in complete contrast to former times — will by means of diversified, precision nuclear strike in our own style turn not just Seoul, but even Washington, into a sea of fire.”  It also asserted, for the first time, that its nuclear weapons were no longer negotiable.  At least, not “as long as the United States’ nuclear threats and hostile policy exist.”

Second, the government put North Korean forces on full alert, including all artillery, rockets, and missiles.  Kim Jong Un announced that the country would “answer the US imperialists’ nuclear blackmail with a merciless nuclear attack.”  Finally, it announced, in April, that it would restart its uranium enrichment program and its Yongbyon reactor.

What Lies Ahead

The Obama administration has adopted what it has called the doctrine of “strategic patience” in dealing with North Korea.  But as made clear from above, in reality the U.S. has continued to pursue an aggressive policy towards North Korea, motivated by the hope that the regime will collapse and Korean reunification will be achieved by the South’s absorption of the North, much like the German experience.

The consequence of this policy is ever worsening economic conditions in the North; continuing military buildup in the United States, Japan, China, and both North and South Korea; a strengthening of right-wing forces in South Korea and Japan; and the growing threat of a new war on the Korean peninsula.  There are powerful interests in Japan, South Korea, and the United States that are eager to further militarize their respective domestic and foreign policies, even at the risk of war.  Tragically, their pursuit of this goal comes at great cost to majorities in all the countries concerned, even if war is averted.

The North has made clear its willingness to enter direct talks with the United States.  It is only popular pressure in the United States that will cause the U.S. government to change its policy and accept the North Korean offer.  It is time for the U.S. government to sign a peace treaty finally ending the Korean War and take sincere steps towards normalization of relations with North Korea.