An Open Door to North Korea

By Russell Working

Along the waterfront in the port city of Dandong, China, a cottage industry has sprung up that relies on a single product: the secretive land just across the Yalu River. Streetside traders sell badges decorated with the stare of North Korea's late leader-god, Kim Il-sung. For 25 cents, a woman lets visitors peer through binoculars at the North Korean city of Sinuju. On the embankment nearby, a Chinese boat takes tourists on a trip that runs within 15 yards of the opposite bank. The view from there reveals little: rusting patrol boats, windowless factories, a Ferris wheel that never moves.

For Dandong, a city of 700,000, proximity to a train-wrecked economy has, paradoxically, proved a boon--and not just for street vendors. Merchants here are discovering that even a paranoid state obsessed with central planning and suspicious of all things foreign cannot slam every door to the world. And where there's an opening, there is money to be made.

Just ask officials at Dandong's Hai Feng Foreign Trade Co. Ltd. When managers at a North Korean state-owned metal works recently began fantasizing that the company's wire coat-hangers might one day grace foreign closets, there was no way to pursue international markets directly. Since few citizens of the neo-Stalinist state are allowed to travel abroad, it's tough to make contacts with prospective buyers. So the company asked Hai Feng to explore the possibility of selling its products outside North Korea.

"This morning, we received a railcar full of aluminum hangers," a Hai Feng executive, who asked not to be identified, said recently. "We're selling them to Switzerland." Added Li Baoguo, 42, a trader who imports seafood from across the Yalu: "Businessmen in Dandong don't need to get a passport to visit Sinuju. You just need to get a border card. So it's easy to drive over and work with them."

Dandong's business ties across the Yalu have grown even as the communist nation's foreign trade has shrunk, following the withering away of the Soviet Union. Dandong's two-way trade with the North amounts to $180 million per year, officials estimate. And it took root even as North Korea's total trade volume fell from $4.2 billion in 1990 to $1.3 billion in 1998, according to the Foreign Business Development Assn., a Beijing nongovernmental group seeking to promote trade with Pyongyang. Roger Barrett, a Briton who serves as the group's chief representative, said many private Chinese companies are finding ways to do business with North Korea. In the past few years, a Chinese outfit sold ostriches to a North Korean collective farm, and an automobile factory provided Pyongyang with 80 double-decker buses.

SECONDHAND CADILLACS. In Dandong, private trade has grown rapidly, said Thomas J. Payne, president of Thomas Payne Market Development in San Mateo, Calif. Payne--whose firm advises businesses entering difficult markets--has himself sold Peruvian chili peppers to the North via Dandong. Five years ago, he said, trade with North Korea was limited to state-to-state deals. "Now...private companies are doing full-time wholesale of products into North Korea and also pulling them out," Payne said. "That never would have existed five years ago, and all of a sudden, it's there."

Michael Sun, a Dandong businessman, has shipped everything from army uniforms to used Cadillacs and Toyotas for the North Korean elite. His company also owns a store in Pyongyang that sells Chinese products such as Zonghau toothpaste, Bat electric fans, Phoenix bicycles, Golden Dragon vegetable oil--and anything else he thinks he can unload. The store's clientele consists of foreigners and a few select party members: Payment is in hard currency only.

The trade across the Yalu is visible every morning along the waterfront in Dandong. Just before 9 a.m., trucks loaded with cargo and covered with tarpaulins line up at a border checkpoint. The bulk of the exports from China consists of food--bags of rice and flour--but there are also rolls of what looks like linoleum wrapped in plastic. Drivers often toss boxes of Tsingtao beer, chewing gum, crackers, and other goods on top of their trucks. Most of this is destined for members of Korea's ruling elite.

SEA CUCUMBER. Much of Dandong's brokering brings in a controversial partner, from Pyongyang's point of view: South Korea. Since North Korean businessmen can't visit the South, they sell crab, squid, abalone, sea cucumber, and other seafood through Dandong, several businessmen said. The refrigerated products are sent on to South Korea, which does not charge tariffs on products from the North. North Korea also sends raw silk for processing in Dandong, ships it back to make clothing, then sends the clothes back to Dandong to sell through middlemen. Other brokers provide cover for North Korean companies in dealing with buyers who are reluctant to give their business to Pyongyang. One Dandong company imports North Korean clothing for a Chinese company. It will be labeled "Made in China" and sent on for sale in the U.S. and Europe, a company spokesman said.

Around foreigners, North Koreans are reticent on any subject, and trade is no exception. Pyongyang's embassy in Beijing refused to comment for this story, and Korean businessmen in Dandong were likewise wary of interviews. Certainly the closed nation beyond the Yalu is a far cry from China's business-crazy variety of communism. (One Chinese government minder, guiding me around in a car driven by a People's Liberation Army soldier, ended up proposing that we form an import-export company together.) But if North Koreans want to see what liberalized trade can do for a country, they need only look across the Yalu. On a recent night, Dandong, with its 25-story hotels and office buildings, glowed with streetlights and the neon signs of restaurants and video arcades. On the Korean side of the river, exactly 11 lights were scattered across an otherwise blacked-out Sinuju. Maybe someday it will dawn on the planning geniuses in Pyongyang that self-reliance isn't everything it's cracked up to be.

Working reports on East Asia from Vladivostok.

Edited by George Foy

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