An analysis of North Korean trade amid warming global relations utilizing RCA, RSCA and TBI

  • Aaron R Stephens Hartwick College 1 Hartwick Drive Oneonta, NY 13820
  • Ramin Kasamanli Assistant Professor of Accounting Department of Business Administration and Accounting

Abstract


Based on high profile meetings with South Korean and US leaders, North Korean denuclearization and global economic cooperation is within sight. This paper seeks to outline trade policy opportunities for North Korea given such breakthroughs. This research summarizes international trade in North Korea and identifies sectors of the economy that are poised to further develop the North Korean economy. Employing three measures of trade specialization – RCA, RSCA, and TBI, this paper analyzes time series trade data from 2011 to 2018 in order to reveal specialized export sectors in North Korea. Chinese and UN bans on exports have been particularly damaging to exports from North Korea based on 2018 data. North Korea has comparative advantages in several sectors: coal, fisheries, and apparel among other areas. Trade in North Korea would lead to rapid industrialization and development if the country opens its economy; a well-managed approach would serve to direct development in specific sectors without sacrificing others; moreover, this research advises which sectors can be used to develop North Korea in an early stage of openness.

Author Biography

Aaron R Stephens, Hartwick College 1 Hartwick Drive Oneonta, NY 13820

Dr. Aaron Rae Stephens is an assistant professor of business administration at Hartwick College. He completed his doctorate in international trade at Pusan National University in the heart of East Asia. He has an extensive career guiding and teaching graduate and undergraduate students at two of Korea’s finest universities. Dr. Stephens is also an aspiring author with publications in journals throughout the world and books sold globally. His areas of expertise include, international business, marketing and logistics.

References

Athukorala P. & Narayanan, S. (2018). Economic corridors and regional development: The Malaysian experience. World Development. 106, 1-14.

Balassa, B., (1965). Trade liberalization and ‘revealed’ comparative advantage. The Manchester School of Economic and Social Studies. 32, 99-123.

Kim, B. E. Korean economy 'on the verge of possible deflation. (September 18, 2019). The Korea Times. Retrieved September 25, 2019, from https://www.koreatimes.co.kr/www/biz/2019/09/488_275767.html

Connel, J. (2019). Tourism as political theatre in North Korea. Political Geography. 68, 34-45.

Danish, Baloch, M. A., Mahmood, N. & Zhang, J. W. “Effect of natural resources, renewable energy and economic development on CO2 emissions in BRICS countries”, Science of the Total Environment. 678, 632-638.

Denyer, S. China suspends North Korean coal imports, striking at regime's financial lifeline. (February 18, 2017). The Washington Post. Retrieved September 16, 2019, from https://www.washingtonpost.com/world/china-suspends-north-koreas-coal-imports-striking-at-regimes-financial-lifeline/2017/02/18/8390b0e6-f5df-11e6-a9b0-ecee7ce475fc_story.html

Department of Defense (USA). (2019). Indo-Pacific Strategy Report. Retrieved September 2, 2019, from https://media.defense.gov/2019/Jul/01/2002152311/-1/-1/1/DEPARTMENT-OF-DEFENSE-INDO-PACIFIC-STRATEGY-REPORT-2019.PDF

Dibooglu, S. & Cevik, E. I. (2016). The effect of North Korean threats on financial markets in South Korea and Japan. Journal of Asian Economics, 43, 18-26.

Fifield, A. Ban on North Korean clothing exports will hurt women the most, experts say. (2017). The Washington Post. Retrieved on September 24, 2019, from https://www.washingtonpost.com/world/ban-on-north-korean-clothing-exports-will-hurt-women-the-most-experts-say/2017/09/16/2a6ec716-995c-11e7-a527-3573bd073e02_story.html

Grzelczyk, V. (2014). New approaches to North Korean politics after reunification: The search for a common Korean identity. Communist and Post-Communist Studies, 47(2), 179-190.

Ha-Brookshire, J. E. and Lee, Y. (2010). Korean apparel manufacturing industry: Exploration from the industry life cycle perspective. Clothing and Textile Research Journal. 28(4), 279-294.

Ha, S. E. & Jang, S. J. (2016). National identity in a divided nation: South Koreans’ attitudes toward North Korean defectors and the reunification of two Koreas. International Journal of Intercultural Relations, 55, 109-119.

Haggard, S. & Noland, M. (2009). Famine in North Korea redux? Journal of Asian Economics. 20(4), 384-395.

Haggard, S. & Noland, M. (2010). Reform from Below: Behavioral and Institutional Change in North Korea. Journal of Economic Behavior and Organization. 73, 133-152.

Haggard, S. & Noland, M. (2010). Sanctioning North Korea: The political economy of denuclearization and proliferation. Asian Survey. 50(3), 539-568.

Hinloopen, J. & Marrewijk, C. van. (2008). Empirical relevance of the Hillman condition for revealed comparative advantage: 10 stylized facts. Applied Economics, 40, 2313-2328.

Jo, H. R. Moon faces daunting task to revive stalled nuke talks. (May 19, 2019). The Korea Herald. 19-May-2019. Retrieved September 26, 2019, from http://www.koreaherald.com/view.php?ud=20190519000126&fbclid=IwAR2DTY62FLTmqXvRq0mhQuLP-5xpSEkWVGuRHtNVemfTUuW2juCmcXwH33k

Jung, K. & Dalton, B. (2006). Rhetoric versus reality for the women of North Korea: Mothers of the revolution. Asian Survey. 46(5), 744-769.

Jung, K., Dalton, B. & Willis, J. (2018). From patriarchal socialism to grassroots capitalism: The role of female entrepreneurs in the transition of North Korea. Women’s Studies International Forum. 68, 19-27.

Kim, V. Investing in resource-rich North Korea seems like a good idea – but businesses find there’s a catch. (March 17, 2019). Los Angeles Times. Retrieved September 10, 2019, from https://www.latimes.com/world/la-fg-north-korea-investment-03172019-story.html

Kwon, H. & Chung, B. H. (2012). North Korea: Beyond Charismatic Politics. Lanham, Maryland: Rowman and Littlefield Publishers.

Lafay, G. (1990). La Measure des avantages comparatifs reveles. Economie Prospective Internationale, 41, 27-43.

Lankov, A. Who owns North Korea’s Businesses? (March 17, 2017). NK News. Retrieved September 2, 2019, from https://www.nknews.org/2017/03/who-owns-north-koreas-businesses/

Laursen, K. (2015). Revealed comparative advantage and the alternatives as measures of international specialization. Eurasian Business Review, 5(1), 99-115.

Lukin, A. & Zakharova, L. (2018). Russia-North Korea Economic Ties: Is there more than meets the eye? Foreign Policy Research Institute Spring. pp. 244-261.

Ma, A. A fishing deal with China could be the reason North Korea ‘ghost ships’ are flooding Japan. (December 17, 2017). Business Insider. Retrieved September 9, 2019, from https://www.businessinsider.com/north-korea-china-fishing-rights-deal-could-be-reason-for-ghost-ships-2017-12

Manyin, M. E. & Nanto, D. K. (2011). The Kaesong North-South Korean Industrial Complex. Congressional Research Service.

Nagai, O. North Korea Trade shrank significantly in 2018, Beijing says. (January 15 2019). Nikkei Asian Review. Retrieved September 2, 2019, from https://asia.nikkei.com/Politics/International-relations/North-Korea-trade-shrank-significantly-in-2018-Beijing-says

North Korea's nuclear programme: How advanced is it? (August 10, 2017). BBC News. Retrieved September 26, 2019, from https://www.bbc.com/news/world-asia-pacific-11813699

OECD. (2011). Globalization, Comparative Advantage and the Changing Dynamics of Trade. Paris: OECD.

Heckscher, E. F. & Ohlin, B. (1991). Heckscher-Ohlin Trade Theory, translated, edited, and introduced by Harry Flam and M. June Flanders. Cambridge, Mass: MIT Press.

Pavone, G. A. & Sun, J. A. (2014). Coal Diplomacy: The Political Economy of North Korean Coal. Cambridge, Mass.: Harvard University.

Porter, M. E., (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press.

Reyes, G. U. (2014). Examining the Revealed Comparative Advantage of the ASEAN 6 Countries Using the Balassa Index and Lafay Index. Journal of Global Business and Trade. 10(1), 1-11.

Ricardo, D. (1817). On the Principles of Political Economy and Taxation. London: John Murray.

Rossato, F. G. F. S., Susaeta, A. Adams, D. C., Hidalgo, I. G., Araujo, T. D. A. & Queiroz, A. (2018). Comparison of revealed comparative advantage indexes with application to trade tendencies of cellulose production from planted forests in Brazil, Canada, China, Sweden, Finland, and the United States. Forest Policy and Economics, 97, 59-66.

Salam, M. & Haag, M. Atocities under Kim Jong-un: Indoctrination, Prison Gulags, Executions. (June 11, 2018). The New York Times. Retrieved September 2, 2019, from https://www.nytimes.com/2018/06/11/world/asia/north-korea-human-rights.html

Security Council Tightens Sanctions on Democratic People's Republic of Korea, Unanimously Adopting Resolution 2397 (December 22, 2017). Meetings Coverage and Press Releases United Nations. Retrieved September 22, 2019, from https://www.un.org/press/en/2017/sc13141.doc.htm

Shimbun, Y. North Korea has violated UN sanctions by selling fishing rights to China. (January 31, 2019). The Straits Times. Retrieved September, 21 2019, from https://www.straitstimes.com/asia/east-asia/north-korea-has-violated-un-sanctions-by-selling-fishing-rights-to-china

Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations. London: Strahan and Cadell.

Snyder, S. A. Where does the Russia-North Korea Relationship Stand? (April 29, 2019). Council on Foreign Relations. Retrieved September 2, 2019, from https://www.cfr.org/article/where-does-russia-north-korea-relationship-stand

Song, J. A. & Kang, B.S. Seoul risks rift with US over North Korean industrial zone. (March 21, 2019). Financial Times. Retrieved September 21, 2019, from https://www.ft.com/content/4971a95a-46b5-11e9-a965-23d669740bfb

UNIDO. (1986). International comparative advantage in manufacturing: Changing profiles of resources and Trade. UNIDO Publication Sales No. E86 II B9. Vienna: United Nations Industrial Development Organization.

Vollrath, T. H. (1991). A theoretical evaluation of alternative trade intensity measures of revealed comparative advantage. Weltwirtschaftliches Archiv. 127, 265-280.

Weak South Korean economy and cooling North Korea ties threatening Moon Jae-in's political future. (April 27, 2019). The Japan Times. Retrieved September 26, 2019, from https://www.japantimes.co.jp/news/2019/04/27/business/economy-business/weak-south-korean-economy-cooling-north-korea-ties-threatening-moon-jae-ins-political-future/#.XOtNVohKjIU

Winstanley-Chesters, R. (2018). Rare earth minerals, technology metals, and extractive landscapes in North Korea’s web of political life. The Extractive Industries and Society. 5(1), 44-51.

Yeats, A. J. (1985). On the appropriate interpretation of the revealed comparative advantage index: implications of a methodology based on industry sector analysts. Weltwirtschaftilches Archiv. 121, 61-73.

Zakharova, L. (2016). Economic cooperation between Russia and North Korea: New goals and new approaches. Journal of Eurasian Studies. 7, 151-161.

Published
2020/04/09
Section
Original Scientific Paper