Bury North Korea in Choco Pies

James Gibney writes editorials on international affairs for Bloomberg View. He was features editor at the Atlantic, deputy editor at the New York Times op-ed page and executive editor at Foreign Policy magazine. He was a foreign service officer and a speechwriter for Secretary of State Warren Christopher, National Security Adviser Anthony Lake and President Bill Clinton.
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With their usual subtlety, the North Koreans have offeredthe conciliatory gesture of talks with South Korea on the eve of President Barack Obama's meeting with Chinese President Xi Jinping.

Let's dispense with multiple levels of artifice in one blow: The Chinese may have nudged North Korea's Kim Jong Un to make nice, but they won't push him to the wall. Kim won't knuckle under if they try, and he isn't about to do South Korea's President Park Geun Hye any favors. As Kim's basketball buddy Dennis Rodman might say, this is all about the Benjamins -- the tens of millions of dollars a year that Kim hopes to regain by restarting the Gaeseong Industrial Complex and re-opening North Korea's Mount Geumgang luxury resort for tourists from the South.

Kim closed Gaeseong in April, in an escalation of tensions following the imposition of sanctions on North Korea for its rocket launch in December and nuclear test in January. South Korea withdrew from the Mount Geumgang project after a South Korean tourist was killed by North Korean soldiers. As Stephan Haggard and Marcus Noland document on their excellentblog, the North subsequently seized the resort's assets and tried to sell them off. Together, the two ventures probably generated around $120 million a year in hard currency for the regime.

Just because talks have been offered doesn't mean they will happen, much less go well. Rumors abound, for instance, that the North has sold Gaeseong's inventory and some of its capital equipment. And even if the talks happen, the North is hardly likely to embrace denuclearization. But as thorny as this olive branch is, it's still worth grasping, both as a potential starting point for broader negotiations and because Gaeseong, for all its flaws, can push North Korea in a healthier direction and counterbalance China's growing commercial presence.

Before Gaeseong was shut, its 123 South Korean companies employed about 53,000 North Koreans. The value of its annual output had risen from $70 million in 2006 to $418 million in 2011; according to Haggard, the venture provides North Korea with $90 million a year in wages, rents, fees and taxes, in crisp U.S. dollars delivered by truck. Apparel, textiles, fibers, yarn and footwear account for about half its output. The single biggest category of goods going in and out, though, is electronic equipment; it's highly likely that some of these components then end up being re-exported from South Korea to third countries, though not to the U.S., which has rightly insisted on excluding Gaeseong products from the Korea-U.S. free-trade agreement.

Even if those 53,000 North Korean workers -- mostly women in their 30s and younger -- aren't getting anything close to their stated wages, they are still being exposed to outside influences. Or as one report from Seoul's IBK Economic Research Institute put it, "They enjoy using South Korean cosmetics and eating Choco Pie cookies during breaks" -- more than 6 million every month, apparently. Beyond the Choco Pies lies some experience of modern capitalism and some vision of a better life. In the long run, such is the stuff of revolution.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
James Gibney at jgibney5@bloomberg.net