President Obama's second-term national security team is not yet fully in place, but already it faces its first crisis. Numerous reports indicate that North Korea will soon conduct its third nuclear test. Coming on the heels of the successful December launch of a ballistic missile, these reports suggest Pyongyang may soon develop a working nuclear-weapons capability.

It is time to admit that Washington has no good options left. Years of threats, bluffs, diplomacy and carrot-and-stick deals have only proved that North Koreans are cannier negotiators than Americans. There is no indication that Pyongyang will seriously consider giving up its weapons programs for any amount of aid. It is clear that U.S. policy toward North Korea has failed and that Pyongyang is now, in effect, a nuclear power.

Is Mr. Obama's national security team courageous enough to set the tone for the next generation by declaring that North Korea is now a nuclear armed state? New Secretary of State John Kerry and soon-to-be Secretary of Defense Chuck Hagel should announce that U.S. security policy toward Pyongyang will be guided by the same considerations given to other nuclear powers.

This means making a clear declaration that any use of weapons of mass destruction by North Korea against America or its allies would be an act of war resulting in a devastating U.S. response to end the Kim regime's existence. Washington should end all further negotiations on denuclearization with Pyongyang, but it should also make public its willingness to engage in regular diplomatic discussions once the regime's human rights abuses stop.

Worryingly, though, Messrs. Kerry and Hagel appear willing to look back toward failed policies. The two have gone on record in the past in favor of direct talks with North Korea. Yet each knows that endless rounds of the Six-Party Talks have done nothing to curb North Korea's actions. Nor have bilateral agreements between Washington and Pyongyang had any success.

Entering into new talks with Kim Jong Eun at this point—in the aftermath of a successful missile test—will likely convince Kim that he can play the same games as his father and grandfather, and keep poking Washington in the eye. Should America's new national security team reward this behavior with yet another plea for negotiations, Pyongyang will have correctly calculated that nothing it does short of dropping an atomic bomb on Tokyo will elicit even the mildest American response.

The Obama administration also has to realize that China has never had any significant interest in putting severe pressure on North Korea, and that Beijing may have far less leverage than American officials hope. That means that the idea of a united diplomatic front against North Korea is as useless as the concept of bilateral negotiations.

On the other hand, simply refusing to enter into new talks is itself a dead-end. While North Korea should not expect Washington to come running every time there is an aggressive act, the idea that keeping Pyongyang cooling its heels will somehow lead to a change in behavior has also been disproven. On balance, no negotiation is better than a bad negotiation, but that simply keeps things on ice.

Hence, the need of the hour is a "reset" of Washington's strategy toward the North, to borrow the administration's phrase from another of its diplomatic misadventures. The best course of action is to declare a new era in U.S.-North Korea relations, and the first step has to be to recognize the North as a nuclear power, with all that it entails.

Such a move may cause great concern in both South Korea and Japan, but that's why Secretaries Kerry and Hagel must make absolutely clear that the U.S. will now move to contain North Korea and respond immediately to acts of aggression. This may be harder to believe in an era of downsizing the U.S. military, but doing so may work better than continually disappointing Tokyo and Seoul with claims that Washington will finally take a firm stand in the next round of negotiations.

This new era in North Korean-American relations will also have an impact on Washington's ties with Beijing. The U.S. has been continually frustrated by China's unwillingness to rein in North Korean aggression. North Korea should now cease to be an issue of tension. By the same token, new Chinese leader Xi Jinping will have to decide the degree to which he wants to be complicit in supporting a North Korea that no longer will be given diplomatic or military leeway by the U.S.

Secretaries Kerry and Hagel can start their tenure by forgoing the dead-end of negotiations and by treating North Korea like the threat that it is. The result will not only be removing doubt in the minds of America's allies and competitors but also possibly changing Pyongyang's actions. Given that North Korea cannot yet mount a nuclear response to any allied action against it, Pyongyang may decide that discretion is the better part of valor in this new era. That would be a giant step in restoring stability in Northeast Asia.

Mr. Auslin is a scholar at the American Enterprise Institute in Washington and a columnist for WSJ.com. Follow him on Twitter @michaelauslin.