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In advance of the Mar-a-Lago summit, the Financial Times conducted an interview with the President on a range of foreign policy topics, led by North Korea (coverage here; an edited transcript here). Although terse, the interview provides some important clues to how the President will approach the issue at the summit.
First, there was some concern that the review of North Korea would not be completed in time to allow a full airing of the issue. The FT claims that “two people familiar with the review” say the review conducted by the NSC is in fact complete; one source said it was accelerated in advance of the summit. Second, the president reiterated his claim (with which I happen to agree) that “China has great influence over North Korea.” It is hard to think otherwise given that China accounted for as much as 90% of the country’s overall merchandise trade according to my estimates for 2016.
Third, the interview appears to confirm the expectation that secondary sanctions will play a large role in the discussions. The interview unfolds in a somewhat circuitous manner. The president starts with an implicit threat: that if China cooperates on North Korea it would be good, but if they don’t “it won’t be good for anybody.” The incentive to get them to talk? “I think trade is the incentive. It’s all about trade.” The FT then pivots to a discussion of the bilateral imbalances, and there is some suggestion that North Korea could even be linked to those wider trade issues. But the president then suggests that the wider trade relationship and the question of imposing specific tariffs is not likely to be on the table (“I don’t want to talk about tariffs yet, perhaps the next time we meet.”) This would be consonant with the two Executive Orders on trade, which appeared to kick the can down the road.
When the discussion returns to North Korea, the president expresses confidence that the United States can solve the problem without China’s help. This would be consonant with belief in a military option but also with an approach that works secondary sanctions against Chinese firms as the key point of leverage. (I discuss secondary sanctions in an October 2016 post here.)
Is such an approach credible? If the President does not link North Korea to broader bilateral trade issues, the leverage will depend on targeting enough Chinese companies that it would have a seriously disruptive effect on the bilateral China-DPRK trade relationship, on which North Korea clearly depends. The problem: I don’t think anyone—even the Chinese and North Koreans let alone the US Treasury—know how much of the trade is passing through channels that are vulnerable to that sort of pressure, i.e., firms for which the costs of being cut out of the US market—including the financial market—exceed the gains from continuing to do business with the North. I am dubious, but this crucial experiment might finally be run, and if it is, it could well settle once and for all the debate about sanctions and engagement. If it succeeds in having serious material effect and North Korea is forced back to the table, the proponents of sanctions will be right. The problem has been that sanctions were never seriously tried because of China’s enabling of the Kim regime. But if the effort fails, it shows that not only sanctions advocates but the President are wrong, and that there is ultimately no way to solve the problem unilaterally.
The decision tree at that point: go kinetic or figure out how to work with Beijing on a negotiated solution. The FT also provides information on how the administration sees the default option: K.T. Macfarland—just recently offered the position as ambassador to Singapore—is quoted as saying that “there is a real possibility that North Korea will be able to hit the US with a nuclear-armed missile by the end of the first Trump term.”
