The Newsletter 83 Summer 2019

New opportunities and strategies for multilateral economic cooperation in the Northeast Asia region

Quan Zhe-Nan

Due to geographical proximity and different conditions of economic development and endowed resources, the interdependence of elements of production (such as resources, labor, capital, and technology) is considerable in the Northeast Asia region, with its huge market and great potential for further development. In other words, the economic conditions for multilateral economic cooperation are clearly present. Economic cooperation in the region, however, continues to be led by bilateral investment and exchange (China-Japan, China-Republic of Korea (ROK), China-Russia, and China-Democratic People’s Republic of Korea (DPRK)); multilateral economic cooperation is extremely limited.

One of the key elements responsible for this weak multilateral economic cooperation has been the Cold War structure that continues to leave its mark on the region, the conflict between the two Koreas being the main reason for the continuation of this Cold War structure. Since the signing of the ceasefire agreement in 1953, the Korean peninsula has continuously witnessed conflict between the DPRK and the US-ROK Military Alliance and the US-Japan Military Alliance. Territorial conflicts between China and Japan, Korea and Japan, and Russia and Japan, along with differing viewpoints on historical issues (such as the Japanese colonial occupation of the Korean Peninsula and the Japanese invasion of China) have also resulted in discord within the region. As a result, security arrangements have yet to be firmly established. At the same time, the US has been able to utilize its military alliances with the ROK and Japan, as well as the strong dependence that the economies of China, the ROK, and Japan have on the US economy, to maintain its strong influence in the region.

Recently, however, the region has come to experience significant changes. In April 2018, the DPRK government proclaimed that its ‘Economy-Nuclear Parallel Development Policy’ had fulfilled its historic task, and that the capabilities of the party and the entire state would now be focused on an ‘Economic Development Policy’, the aim of which is to establish a socialist economic system. Based on economic theory, the examples of successful economic development by developing countries, and the nature of its endowed resources, it is clear that in order for the DPRK, with its small-scale economic system, to achieve sustainable economic development, the nuclear issue must first be resolved, UN sanctions must be lifted through improvement of international relations, and exchange and cooperation with the global economic system must be strengthened. Given that the DPRK’s motivation for nuclear development is to ensure the security of the regime, there is plenty of reason to believe that once the regime’s security has been ensured, the DPRK will achieve denuclearization and focus on economic development. Indeed, following Kim Jong Un’s 2018 New Year’s address, attempts were made to improve international relations by holding summit meetings with China, the ROK, and the US.

Bordering the Tumen River Area, the DPRK is located in the center of Northeast Asia. In the instance that sanctions are lifted and relations with the ROK improved, allowing the DPRK to open its borders and reform its markets, then it will become possible to establish a land route (consisting of roads and railways) connecting the Korean Peninsula, the Northeast region of China, Russia’s Far East, and Mongolia. With the development of infrastructure, such as highways and high-speed trains, travelling between the aforementioned regions in a single day would become possible, resulting in the formation of a huge international market. The opening of the ports of Najin, Chongjin, and Wonsan would also act to provide Japan with a gateway to the Northeast region of China and Mongolia. What makes the DPRK attractive for investors is not only its labor force and natural resources but also the size of the market and its potential for long-term growth, both of which are also dependent on the formation of a wider international market (at the core of which is the Tumen River Area) and its active growth.

It is therefore clear that multilateral economic cooperation in Northeast Asia is dependent on an improvement of international and military relations throughout the wider regional sphere, as well as economic integration. As such, the DPRK’s efforts towards change represent a valuable opportunity that must not be wasted; the denuclearization of the Korean Peninsula and the replacement of the armistice agreement with a peace treaty must be achieved in order to ensure the stability of the region and to open the doors for multilateral economic cooperation. In addition to this, attempts must also be made to establish the framework and institutions that will allow multilateral economic cooperation to take place. The integration of China’s ‘Belt and Road Initiative’ (BRI) and the ROK’s ‘New Economic Map Initiative’ can be an example of this, resulting in the formation of a Trans-Eurasia trade route that can facilitate the smooth exchange of elements of production and goods. Multilateral economic cooperation should particularly be focused on that which is beneficial to all parties involved, such as tourism, energy, regional development, environmental protection, and sustainable growth.

The Tumen River Area, due to its geopolitical location within the Northeast Asian world, presents an ideal backdrop against which such new efforts and strategies for multilateral economic cooperation may manifest themselves. The area also has the potential to become an incubation ground for a new system of labor division, a new type of value chain, and the development of a platform for ecommerce that may contribute to the development of the region’s small businesses. Ultimately, this might also lead to the realization of a FTA between China, the ROK, and Japan. As such, it is possible to argue that the Tumen River Area may be one of the places where the key to long-term peace, prosperity, and multilateralism in Northeast Asia may be found.

Quan ZheNan, Professor and Director of College of Economics and Management, Yanbian University