If you want to know why sanctions haven’t stopped Kim Jong Un, look no further than the northeastern Chinese city of Dandong.
It’s the site of the bustling China-North Korea Friendship Bridge, which links Dandong and the North Korean city of Sinuiju, a place Kim’s father, Kim Jong Il, designated a special administrative region in 2002 as part of market-economy experiments. Fourteen years on, its rail and truck traffic is a metaphor for why neither Washington, nor Seoul nor the United Nations has brought the Kim dynasty to heel. And it’s where Donald Trump should look if he wants to take a hard line on China without killing the global economy.
President-elect Trump’s promised Chinese trade war — with tariffs as high as 45 percent — would be a pyrrhic victory, slamming global growth and boosting living costs. Here’s a better idea: wage a commercial war instead by sanctioning Chinese companies that keep the Kims in business. It would simultaneously get Xi Jinping’s attention and chasten the world’s most dangerous regime.
Barack Obama’s White House got things rolling in late September. The Justice Department indicted Dandong Hongxiang Industrial Development and four company officials as conspirators in evading North Korean sanctions. According to U.S. officials, these parties violated laws against money laundering and supporting “weapons of mass destruction proliferators.” The U.S. initiated civil forfeiture actions to grab funds in 25 bank accounts thought to belong to Dandong Hongxiang and various front companies.
The step set off as many alarm bells in Beijing as Pyongyang. While hawks dream of airstrikes on Pyongyang, Obama homed in on a key area of China-North Korean sensitivity. Before Sept. 26, few costs had been imposed on Beijing’s defiant support for Kim’s economy and weaponization. Trump should ramp up this campaign both in action and rhetoric. His administration should name, shame and blacklist companies helping Pyongyang export iron ore, coal or other goods, the proceeds of which fill Kim’s coffers.
“If we treat China as part of the problem, which it most certainly is, then we can begin to craft solutions,” China expert Gordon Chang wrote in Forbes recently. Xi, he argues, “will stop supporting North Korea only when the costs of doing so are too high. So far, his country has suffered almost no penalty.”
This is an extraordinarily perilous moment as Trump, a leader with zero impulse control and a twitchy Twitter finger, enters the White House just as South Korean President Park Geun-hye looks to be on the way out. Kim may see these dual transitions as an opening to troll world powers. At the same time, the intelligence community worries a China trade war will close all routes for cooperation on containing Kim’s nuclear ambitions. Hence the wisdom of targeted “secondary sanctions” on China Inc.’s North Korea business in sectors including finance, mining and transport, not broader trade between the two biggest economies.
It’s a huge opportunity for Trump to put a foreign policy win on the board and throw Beijing off balance. Presidents Bill Clinton, George W. Bush and Obama all tried their hands at talking tough on Pyongyang, extending the odd olive branch and doubling down on sanctions — all to no avail. Steadily, the Kims have developed long-range missiles that can reach the U.S. mainland.
And then there’s the Kim Inc. angle: the extent to which Pyongyang is selling its advances to tyrants and terrorists around the globe. Experts like David Albright of the Institute for Science and International Security warn that North Korea continues to import components vital to nuclear weapons development via China. Along with targeting offending mainland executives, Trump might consider using North Korea trade flows to put Xi’s government in the hot seat.
It’s a wiser strategy than tossing a Smoot-Hawley Act 2.0 at a fragile world economy. Even a tempered-down trade clash could invite a replay of the 1930s and savage global growth. Why not sit down with Xi and craft a bilateral U.S.-China trade pact? Or, pull China into the Trans-Pacific Partnership and demand greater reciprocity from Beijing as a face-saving way to preserve Obama’s deal.
Such a strategy would comfort Wall Street. A trade war would have multinational companies turning against the Trump White House in droves. It also might undermine Trump’s hopes of getting them to repatriate profits to create new U.S. jobs. Open enmity would put the more than $228 billion multinationals have invested in China at risk. And the stock market would likely tank as investors factor in the fallout for Apple, General Motors, Boeing, General Electric, Microsoft and other iconic names.
Just like Beijing’s tolerance of commerce between Dandong and Sinuiju, that may be a bridge too far. Even for a hardliner like Trump and investors who voted for a leader threatening to show China who’s boss.
William Pesek is executive editor of Barron’s Asia. www.barronsasia.com
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