American Enterprise Institute

October 12, 2006

[Edited transcript from audio tapes.]

2:45 p.m.	Registration
3:00	Panelists:	Dan Blumenthal, AEI
		Nicholas Eberstadt, AEI
		James R.Lilley, AEI
	Moderator:	Gary J. Schmitt, AEI
4:00	Adjournment

Proceedings:

Gary J. Schmitt: Good afternoon and welcome to AEI, and, particularly, welcome to our AEI briefing on the Fallout of the North Korean Nuclear Test. I’m Gary Schmitt. I’m Director of the strategic program here. We’re going to try to begin pretty quickly. Let me introduce my panelists.

We’ll go in the order of youth first, so, we’ll start with Dan Blumenthal who is a Resident Fellow here in Asian studies, who was the Director of the Office in the Department of Defense and handled China, Taiwan and Mongolia during the first George Bush term. Up next will be Nick Eberstadt who is the Henry Wendt Chair in Political Economy here at AEI and who is a well-known author and has written several volumes on North Korea already, and with one coming out very soon. And then, finally, Ambassador James Lilley, Senior Fellow in Asian studies here at AEI, former Ambassador to both China and the Republic of Korea and whose book I highly recommend, his memoir, China Hands, is a great read and not only is it a great read, it is a great understanding of the whole region.

So, without further ado, I’m going to ask each of our speakers to go about 10 minutes so that’ll let us have plenty of time for questions and answers following their presentations. So, Dan, you’re up first.

Dan Blumenthal: I guess, since we’re going by youth, the comments will get wiser and wiser as we move along, so, you’ve got to bear with me first. It’s interesting, the best you can read from what the Administration is saying right now is that somehow this is not a crisis, or this is not, sort of downplaying it. But, you have to ask yourself the question, if this is not a crisis, what is? You have a charter member of the access of evil who’s, by all accounts, I think we have to be prudent and assume has tested a nuclear weapon, he’s a serial proliferators, as we know, sells anything to anybody, who survives off of proliferation because it has no economy to speak of, still holds on fast to the doctrine of reunification, forcefully, if necessary, of the Korean Peninsula, has fired missiles over Japan, can obliterate Seoul with artillery, and now has tested a nuclear weapon.

So, what, if this isn’t a crisis, I don’t know what is. It’s my strong belief that the world is a different place, overnight, since after he tested the weapon.

I think the responses by the Administration have been, while incoherent, the responses by their democratic opponents have been downright irresponsible and out of touch with evidence and with reality. I think that a lot of times people who take a more hawkish view are called ideologues. I think you can get into something called engagement ideology where you ignore all evidence and all history and just say let’s keep engaging and keep using diplomacy. The first step has been to blame Bush as if the DPRK hasn’t been pursuing these weapons for decades. I think this is highly irresponsible in a time of national crisis. And then, of course, any cursory glance of the diplomatic history has proven just how much diplomacy all presidents since Reagan have engaged in, how many inducements, how many bribes, how many cajolements Kim Jong Il and his father were given to give up these weapons.

The first president, President Bush, pulled U.S. tactical nuclear weapons out of South Korea, the South Koreans signed a Korean Free Peninsula Agreement; of course, they were the only ones to hold to it because quickly Kim Jong Il cheated on it, which got us to what people call the first crisis in 1993-94.

And, of course, the Clinton Administration, at that time, signed an Agreed Framework, which Kim Jong Il, which North Korea signed on to basically give up their nuclear program, I mean, they called it a freeze with a long-term goal of dismantlement. That, as we know, today, has been violated, it was violated throughout the ‘90s by the highly enriched uranium program, involvement with the AQ Khan network, violated almost as soon as it was signed. They’ve cheated on their nuclear commitments, they’ve cheated on their missile commitments.

If you remember, 1998 was the year that the North Koreans tested their missiles over the waters of Japan and then agreed to a moratorium thereafter. They’ve cheated on everything that they’ve signed. Basically, the Agreed Framework, which maybe was a reasonable way to go at the time to give diplomacy a try, but, again, that was 12 years ago, was violated almost as soon as it was signed. So, this notion that diplomacy hasn’t been tried or engagement hasn’t been tried, again, is just ignoring evidence and history.

The Bush Administration has engaged in diplomacy. We got a statement last year by the North Koreans, once again committing to dismantling their program. Very soon afterwards it was violated. It was violated, the North Koreans first announced that they were going to test nuclear weapons earlier this year, then they test fired missiles, in breach of the moratorium agreement, and now they’ve actually tested a nuclear weapon.

I think if we can conclude one thing through the evidence of history is that the North Koreans and Kim Jong Il desperately want a nuclear weapon and nothing can be done to stop them. They’ve cheated when engagement was high, when Secretary Albright visited the region, and they’ve cheated when they were isolated. It really makes no difference and it’s because sometimes no amount of persuasion or diplomacy will work if Kim Jong Il sees this as so central to his survival and so central to his really mad ideology.

So, I think what we’re faced with today is this fundamental choice. On the one hand, the Administration is talking tough and threatening sanctions and retaliation, but also of returning to these talks, which I think is rather incoherent. On the hand, I think the democrats are saying, let’s ignore 12 years of history and somehow get back to the Agreed Framework, which I’ve just gone through, has been violated on so many occasions and it is no longer in touch with reality.

So, the fundamental choice is, given this evidence of the history of negotiating and cheating, do we still believe that Kim can be persuaded through diplomacy to give up his weapons, or, do we believe now that we have to defend ourselves by containing him, by deterring him and by working over time to bring him down? I think that’s the fundamental choice before us. There’s no getting around that. I think if you’re in the first camp I really think you’re being, the camp of ignoring all this history and getting back to the table, you really are in the camp of being an ideologue at this point, ignoring the evidence.

Kim will not give up, the reality as we face it today is Kim will not give up his weapons, it’s all he has to survive, and China will never really try to convince him to do so. That’s the reality we face today. And, so, what do we do about it? Like I said, we have to begin to contain him, to defend ourselves, to defend ourselves and our allies from two threats, from the threat of attack and the threat of proliferation, and then recognize that the weapons will only go away when he does. We have to work hard to reassure our allies in the region, Japan and South Korea, in particular, that our nuclear umbrella is good, and that means a number of force posture issues that we need to put in place so that Japan doesn’t decide to go nuclear, because I don’t think that would be a good idea for us.

We have to have a sufficient deterrent force. We have to hermetically seal, to the extent possible, the hermit kingdom with inspections and tracking and all that we possibly can do in that regard. Then we have to work, over the long haul, to build a coalition of people who are serious about defending themselves, just as we did in other times in our history, and also to delegitimize him, and there, the policy options, I think, flow. There are a lot of policy options in that regard, whether it’s getting refugees out and working hard on a campaign to feed people and make sure that the DPRK government isn’t in charge of that, and more and more sort of separate him from any legitimacy that he has or any control that he has over his people.

Containment and deterrence is not an optimal policy, it’s not a happy policy, but it’s the only realistic alternative we have, and we have to start now to build this coalition and take this as a crisis before we’re in even more danger.

Nick Eberstadt: Well, there’s good news and there is bad news about the North Korean nuclear crisis. The good news, I guess, is that one of the governments engaged in the six-party talks really does have a well thought out strategy for how to break the impasse and get out of the logjam. The bad news is that that government happens to be the DPRK, Kim Jong Il’s North Korea. I think that over the past months for those of us who are obtuse we have been getting repeated messages as to what the North Korean strategy is for breaking the logjam and for resolving the nuclear stalemate.

I have a secret way of understanding what the North Korean government intends to do. I read what they say. I listen to what they say and pay attention to their pronouncements and their arguments. It’s a little bit out of fashion, I admit, to do something like that, it may seem almost semiotic, but, sometimes it’s really quite informative, especially if one is dealing with a revisionist government, as the DPRK most clearly is.

In another time and another place long ago before many of us were born, there was another revisionist in power who wrote a funny little book. People in sophisticated circles in Europe and the United States back then said, could that silly little Austrian really mean what he said in that book? And you know what the silly little Austrian meant what he said in that book. So, sometimes it’s good to read what people say.

What does the DPRK say about its overall objectives in the world in which obviously this quest to build intercontinental ballistic missiles and nuclear weapons may figure rather importantly? Well, it says a couple of things. It says that it is deeply dissatisfied and deeply distrustful of the international capitalist world economy and sees the globalization process, I suppose we would call it, as a potential instrument of ideological and cultural infiltration that could bring down their regime, dissatisfied with the world economy.

They certainly indicate that they’re dissatisfied with the U.S. security architecture in Northeast Asia with the system of bilateral security arrangements the United States has with South Korea and with Japan, which has done so much to promote democratization and prosperity in that area of the world. And, the North Korean government will tell anybody who will listen to them that they are dissatisfied with the existence of the state of the Republic of Korea on the Korean Peninsula. That the Republic of Korea is a cancerous monstrosity that should be stricken from the face of the earth, that it is run by American puppets, I guess that would be the Hong Myunhui government, and maintained only by American force of arms and bayonets, and that in any better world, a unification under an independent socialist state, which would be the Kim family and Kim Jong Il would be the rightful destiny and future of the entire Korean people.

Well, sometimes it’s important to listen to what people say, as I indicated. Now, is the DPRK government being irrational in its attempted launch of long-range intercontinental ballistic missiles, attempted, apparent attempted detonation of nuclear weapons? Some people say so. It’s also good to remember that the North Korean government is a government that is preternaturally disposed to gaming everything out, especially the sorts of things that it undertakes in high-risk, high-danger terrains.

It would seem most unreasonable of us to assume that the North Korean government had not carefully thought through all of the contingencies and scenarios that its leadership could imagine before, (1) making that lovely missile launch on the 4th of July, and, (2) this attempted, apparent attempted nuclear weapons detonation.

It seems reasonable to surmise North Korean leadership would believe they have dominance, escalation dominance in all of the different scenarios that they could have mapped out for themselves. It may not have calculated very well, but I think that we should do them the courtesy of understanding at least that about their approach to the world.

Should the North Korean government fear the international reaction from governments that might punish DPRK financially? That’s one thing that we hear about a lot these days. If one were in North Korea’s circumstances, one might have one’s doubts, especially if one had access to relatively recent trade and financial data about North Korea’s relations with South Korea and North Korea’s relations with China. Over the first eight months of this year, that would be including two months, almost two months after the missile launches, North Korea’s trade with South Korea went up, not down, and even until 17 minutes ago, at the beginning of our session, the South Korean government was insisting that its Kaesong project within North Korea, made in North Korea goods, should be part of the Free Trade Agreement, which he had hopes to have with the United States.

As for China, between January and August of this year China’s shipments of goods to North Korea increased by 10 percent, and its net transfers, its net subsidies to North Korea increased by over 20 percent. In fact, on its current glide path, China is on a trajectory for transferring nearly $1B in subsidies to the DPRK state this year.

So, if one were to see those sorts of sign posts, signals in the outside world, why would someone in North Korean leadership positions not, wish to have more, more tests of all different sorts, would proliferation be off the table, nuclear proliferation? Well, since it has been, to date, impossible to detect the American redline, perhaps it is an infrared redline and one can’t see it, maybe so, but, maybe also not.

To conclude some ruminations, there are some unpleasant similarities in the diplomatic dynamics that we see with North Korea today to a situation I mentioned earlier in far away Europe, conference diplomacy and rearmament and revision of states and all the rest. That time in Europe is now known by historians as the inter-war period. It was a time of considerable illusions, at least for many statesmen involved, but, of course, there was also an end to the illusions.

I’d submit to you that we live in an age when there are also quite a few illusions about the DPRK, and the question before us is going to be whether we come to an end of those illusions sooner or later.

Ambassador James Lilley: I think all of us approach this somewhat differently, but that’s the spirit of AEI. I’m going to start mine off by an old Chinese expression, same bed, different dreams, tong chuang yi meng. And we analyze the approach of each major country involved in this process, and, first, we take a look at China. And, certainly, China’s objective is to prop up a North Korean regime with the idea of eventually reforming it economically.

I think Hu Juntao said that in North Korea the politics are okay, but the economics are not good. This gives a sense of what way the Chinese look at this. Anyway, the Chinese look at this as a long-term project, of changing this regime through engagement, through bribery, through coercion, through pressure, but, the important thing is it’s going to be done their way, not our way.

I think, second, you look at the Republic of Korea and South Korea, and, certainly, the key here is what we call economic seduction, and the gaisong [ph.] industrial zone is the key element of this, and they talk about 100,000 workers by 2015, and they’ll be able to bring them in, introduce them to the capitalist system, quality control and cost accounting, and that sort of thing, and eventually work them out of it. This is the pattern in Eastern Europe they say, and, therefore, eventually as we absorb North Korea and we become the prominent force up there, we will take the nuclear weapons and throw them in the Pacific Ocean, and your problem will be solved.

In our case, the United States’ focus is directed right at the weapons of mass destruction. We are very concerned about proliferation, about these weapons getting into the hands of the triads or the mafia or al-Qaida, and, of course, North Korea has extensive connections with these groups for narcotics and counterfeit money, counterfeit cigarettes, you name it, they’re in very deeply with the triads, and, of course, it’s natural to get, smuggle these weapons out to people that hate us.

But I think the good news, to paraphrase Nick, is, what the North Koreans have done is what our diplomats could not do, and that’s merely bring the five powers much closer together. The North Korea with their missile shots and their defiance and their nuclear, supposed nuclear test have really driven the Chinese, the South Koreans and the United States and Japan certainly closer together. That is the essential nightmare of the North Koreans, it’s why they hate the six party talks, because they see this collusion and cohesion against them.

Again, some of the parties are more flexible than others, certainly the South Koreans have their reason for mixing romanticism with takeoverism, and the Chinese have their own way of doing this, keeping in mind their very, very high stakes in what happens in the North Korean Peninsula. This goes way, way back in Chinese history. They are very concerned.

I bring up one thing that we had a Chinese speaker in this room, Tao Bin Way [ph.], he was the interpreter for Kim Il Sung and Mao Zedong way back in the ‘50s, and he gave a rather sterile talk here, but, in private conversations later he said, you’ve got to understand, America, that this evolutionary process has taken place, and he points to me and says, you were there during the Korean War, you understand what was happening then and you understand what’s happening now. It is a tremendous evolution in the Chinese approach to the Korean Peninsula.

We have gone from north to south, we are beginning to discipline the north in terms of their drive to take over the south, the Chinese were terribly punished when Kim Il Sung struck the south in June, 1950. They lost Taiwan, in effect. So they say, what Tao Bin Way is trying to tell you is that we know what’s happening in North Korea, and, in fact, he predicted the famine of 1995, but he also counseled us, and the Chinese could be quite duplicitous of this sometimes, watch what you see, this evolution of trends taking place, we move from fighting you to working with you.

We were at the Olympics in 1988, we’re moving in this direction. Irreversible. I think, then, when you start looking at the North Koreans, what are they up to? I think my colleagues described this rather well, but I’d only add that the North Koreans are now, it seems to me, moving away from the responsible stakeholder China, which is part of the Chinese head, not the other half, and they are trying to make common cause with the anti-U.S. groups in the world, and I’m talking Hugo Chavez, Bashir in Sudan, Castro, Robert Mugabe, whoever you want to choose, that is going to, the guy, whatever it is, that guy in Iran, he’s trying to get a solid front with these people, to develop with North Korea at the spearhead of this, having the nuclear weapons, defying the United States, we work together.

So, I think this is a trend that’s happening to them, they want to be a hero of the Third World. And then when you switch over and look at China, I paraphrase something that Chris Hill said once, you always have to look at China through the three villas prism, and, if you’re in Gallutai [ph.], the VIP quarter in Northwest Beijing, you have a villa here with Bob Zelig [ph.] talking to Dai Bingguo, of the Chinese Foreign Ministry, talking about very complicated, interesting, challenging, international financial questions. And the Chinese are sophisticated, understanding, and tough.

If you move up to the next villa, you see Li Jinzhang, their Foreign Minister, getting together with the six party talks, working relentlessly to get a joint agreement, getting the Koreans, dragging them out, 10:00, after they’re drunk at night, to get them to cable back to Beijing for instructions. He gets the thing out and we see a sophisticated diplomatic process in Beijing.

Go to the third villa. Who is in there? Robert Mugabe of Zimbabwe? Who preceded him? Kareemof Uzbekistan [ph.]? Who might have been there before? Pol Pot, Milosevic [ph.], Andvere Roja [ph.]? The third villa harbors the residue of the Chinese Marxist, Leninist, Communist movement, and you never can quite take that out of the Chinese. It’s there and the North Koreans are trying to play to that one, in addition to their buffer zone mentality.

So I think you’ve always got to keep this in mind. But I do see in the North Koreans, and in their survival to stay in power, that you get an element of desperation and you begin to see an element of incompetence. We’ve seen this again and again with them.

Again, I think Nick is right that they’re very cunning and plan carefully when they take us on, but you also see, this ain’t the old man. This guy works in more of a sort of impetuous way. He strikes here, he strikes there, he goes after, then he pulls back, he starts economic forums, screws it all up, pulls back. He’s groping. He’s clever, he’s shrewd, he’s cunning, but he just doesn’t have the feel for it. But he knows that what he wants out of this whole thing is to bring back the good ole days, and I’m talking about the good ole days in the ‘90s when, in addition to what China puts in, a $1B or so a year now, we put in an enormous sum of money to bribe this guy, $680M of food aid, 500,000 tons of heavy oil a year at $30.00 a barrel. You figure that out. It’s a lot of money. And then the two light water reactors.

Again, I think they are up to trying to force China to keep its payments coming. The argument is simple, that they say, the Koreans say, you either feed us in North Korea, you can feed us in Manchuria, would you like to have two million Koreans to feed there, or, do you want to feed us here? Tough, very tough bargaining. They want to preserve this. They want to preserve the Republic of Korea keeping up its development aid. No matter how often they are insulted, they want to keep this up.

And, they want us, the United States, to do what a whole chorus of voices in the United States are saying is the answer to this thing, is direct talks with them and to lift the restrictions on the McCall [ph.] Bank and other banks, and they’d also like us to pay for, to stopping their missile exports. They almost got there in December of 2000, and then they let it slip away, but they were working to get back to those good ole days. I think you see this desperation of lashing out, defiance.

Again, I think the United States with China and South Korea and Japan, we come together and we have a longer-term view of how we handle this thing. Ours is to get at those weapons of mass destruction and control proliferation. The Chinese is to support the regime and gradually reform it. South Korea, over time, to really take it over and then get rid of the nukes. But we’ve got to work out common areas where we can take what China wants to do and we want to do and get a common program.

All right, so, China wants more time, be patient they say, let us do it our way. We say, okay, we’ll listen to you, but, you have to help out on the proliferation security initiative, you have to begin looking at their ships, their aircraft and work with us, you don’t have to necessarily join, but, South Korea join the PSI, begin to tighten this noose on proliferation if we, in fact, go along with them on stretching out the timeframe for it.

Again, I think all of us agree that sanctions administered carefully, let’s say aimed at the nuclear industry with teeth in it, and, to a degree, at the banking sector, get at them, the Japanese already have, and it begins to tighten, and that’s a dangerous game with these guys. But, often, Chinese speculate about what the North Korean regime is like, and I think one of the characterizations that I have for it, it’s as though the Gang of Four won over Deng Xiaoping in 1976. That’s what Korea’s got, it’s got Madame Mao [ph.] and that crowd running them. It’s a vicious control regime, a record of violence and a record of incompetence.

I’m reminded, when I was talking with somebody, that going to Jimmy Carter up to Pyongyang in 1994 and rescued the world from war, I think that’s a questionable assumption, but, I went back and looked at the Cold War files, and, I saw a striking parallel between the way Jimmy Carter was treated and the way that Erich Honecker of East Germany was treated. Kim Il Sung would take Honecker in and say, I love you, you’re wonderful, you’re a thoughtful man, you’re a socialist, you support me in all my endeavors. And then they drop down to the negotiating and the North Koreans would kick the Germans right in the groin, finger in the eye, and push them right to the wall with the most vile and nasty language to squeeze more money out of them and get them to do things.

When Erich Honecker fell, they brushed it off, they said, he wasn’t socialist enough, that was his problem. North Korea then becomes the socialist bastion in the world. I end on that note because there is no solution, but I think what has happened out of this whole thing is you’ve got this cohesion among the powers, and you’ve got different objectives, different timing, but it seems to me you’re beginning to get together, and if we get a halfway decent U.N. security council revolution that gives the moral high ground.

The real action is down when China starts to manipulate the trading it’s going through or South Korea really pushes through on the negative side that North Korea faces if they do the sorts of things that they’re doing. Thank you.

Gary J. Schmitt: We’ll got to questions right now. Please, wait for the microphone and identify yourself, and, as usual, just ask a question, please. Thanks.

Daphne Finn [ph.]: Daphne Finn with ET TV. A Chinese special envoy from China come to Washington, DC to meet with President Bush for this issue, today, this morning, and it seems to me that the U.S. rely on Chinese very much for the sanction tour in North Korea. With the Chinese great influence here in this situation, will Washington lose some bargaining chips on other, some other bilateral issues, for example, like economy, human right in Taiwan?

I also have a second question, who is to blame, which of the Administrations is to blame for this not so successful North Korea policy? What impact will you bring to the election in November? Thank you.

Nick Eberstadt: I’ll do the second question and maybe Dan or Ambassador Lilley will do the first. I can tell you which Administration is responsible for the crisis, it’s the Kim Jong Il administration. I mean, it’s pretty easy. Lest one think that we’ve gone from a golden age to a brass age in terms of diplomatic negotiations with the DPRK over the last six years, let me remind you of something that happened almost exactly six years ago.

The highest ranking North Korean official ever to visit the United States, Vice Chairman Jo Myong Rok, the number two man in the DPRK National Defense Commission, came to the White House and came to the State Department and actually had a dinner in his honor at the State Department. He raised a toast, this was in October of 2000, the height of earlier hopes about negotiations with the DPRK. He raised a toast to the crowd assembled in Washington and he said more or less this, I’ll get the words almost right, he said, “I have been instructed by Kim Jong Il to tell people in Washington that our countries can move from confrontation to cooperation and from hostility to friendship as soon as Washington is willing to offer guarantees for the territorial integrity and the national sovereignty of the DPRK.”

This is what he told everybody in the State Department. Just think about that for one second. What does the DPRK say that its territorial integrity is? You might want to look at the North Korean Constitution and see how North Korea defines the Korean Peninsula. North Korea behavior has not changed. North Korea’s objectives have not changed over the last ten years. We may have been a little bit slow at recognizing it, but, the outlook is very continuous.

Dan Blumenthal: I would say on the first question, the secret envoy, here’s where we get into problems, and that is that if we want Japan to be reassured that our nuclear umbrella and our security guarantees to Japan are good, and that they don’t have to take a more independent defense stance and a nuclear stance, which I think we do, then this business of relying on China and taking China’s position on issues has got to end because after the missile launch the Japanese, in July, the Japanese were privately very upset with the U.S. position, which was essentially the Japanese had taken a very strong resolution to the U.N., the Chinese had asked for more time.

And, essentially, the United States said, okay, we’re going to let you go to Pyongyang and we’re going to water down this resolution, and that’s when you got talking to Japan about strike capabilities against Pyongyang. So, we have a problem here, and that is one of alliance management and keeping Japan within the framework of our alliance.

On the second question, I agree with Nick on who is to blame, but, I will say something about the current political [inaudible]. You have, on one hand, Senator John McCain, a presidential hopeful, saying, basically, the game is up, we have to contain these people and we have to defend ourselves. On the other hand, you have Senator Hillary Clinton, who I don’t think has realized what Nick has pointed out about what revisionist states do, what you do when you negotiate with them, wants to ignore 12 years of negotiating history and say that somehow we can talk these people out of their revisionist goals.

Gary J. Schmitt: I just want a little footnote. There’s plenty of bipartisan failure when it comes to North Korea. The North Korean nuclear program began in the Reagan Administration and we’ve made a hash of it for 20 plus years.

Gary Mitchell [ph.]: Thanks, Gary Mitchell, from The Mitchell Report. In addition to my take on what I’ve heard here today, and that’s subject, that’s part of the question, was, whether I heard you properly, and, in other fora around town recently, this seems to be a situation that was [inaudible, recording problem] Gertrude Stein [ph.], of all people, several years, decades ago, when she said, there ain’t no solution, there never was no solution, and there ain’t going to be no solution.

My question is, and I’ll keep it focused on DPRK, since that’s why we’re here today, but, that’s not the only issue that we’re looking at, we, collectively, talk a lot about policy options, and I guess my question is, are there really any, and were there ever really any, or, is this just what we call stuckness?

Ambassador Lilley: Getting back to this lady’s question and your thoughts, the name of the game between U.S. and China is emerging more and more as an economic financial and commercial gain. It’s led by Hank Paulson of the Treasury, he’s a very powerful, intelligent man, who has been to China and is trying to get a strategic dialogue on economics going with them. I think that’s very important to remember because the South Koreans and the Chinese believe the Achilles heels of the North Koreans is their economy.

At the sweep of globalization in which China and South Korea are almost intimately involved, along with Taiwan in Silicon Valley, is a huge force that really cannot be stopped, it’s below the government level. It moves in Silicon Valley, in Taiwan, in Beijing. What it’s done in one of our so-called flashpoints of Asia, it’s taken the yattering about independence, use of force, all these things that we constantly talk about, on sales to Taiwan, interference in internal affairs, this has been overtaken by the enormous dynamics of the economic relationship. You could spend your time watching the latest remarks by the North or Beijing’s reaction thereto, that’s the game in town, that gets the headlines, independence versus use of force.

And, yet, this other force is so big and powerful it’s just pushed right by it. I think there’s a thought that somehow North Korea is going to get caught in this trap, and they’re going to run around with their nuclear weapons, waving them in the air, and their missiles and their chemical and biological weapons, and they’re going to be drowned by the force of this because of the countries that are involved in this huge new dynamic, economic movement, Japan, South Korea, China, ourselves.

Dan Blumenthal: I think that, I’ll take a stab at that, I think you raise a very good point, which is, any administration coming into power never had any good options at all, I mean, this is not a country that was sealed off, this was a country that, I think we say has been pretty committed to gaining nuclear weapons no matter what we offer and what we do. I think, my personal view is that we’re left with getting out of the illusion that somehow we’re going to find just the right diplomatic technique or persuasion device and really take seriously that today, tomorrow, the next day, these people can sell a weapon to Iran or to some sort of terrorist group, these people can launch another missile, this time nuclear tipped, and we must defend ourselves, we must contain the threat.

And we must realize that the threat isn’t going to go away until he goes away, and that doesn’t mean that we need to launch a military attack tomorrow, but it does mean that we need to work towards that day. Again, I don’t think it’s a good policy option, I don’t think it’s an optimal policy option, but I think it’s the only one we’re left with.

Gary Schmitt: Actually following up on Ambassador Lilley’s point, Nick, I wanted to ask you a question. Ambassador Lilley has laid out a sort of coherent plan from the Chinese point of view about what they would like to see happen in North Korea and their own expectations about what that might lead to in North Korea.

Two questions, one is, is the Chinese economic plan for North Korea that Ambassador Lilley laid out actually acceptable to North Korea, so, that’d be the first question, and, the second one would be, if it was acceptable, would a more prosperous economically viable North Korea be less of a threat or more of a threat?

Nick Eberstadt: A more prosperous Kim Jong Il government will be a greater threat. That’s pretty simple. That’s what they do. The Kim Jong Il government’s approach to the outside world, I think, is pretty clear. We’ve had a while to look at the track record. Even if one takes a look back to the last years of the Kim Il Sung government when Kim Il Sung said that his son was running most domestic policy and other policies as well, I think we got a pretty fair idea of the viewpoint. If Chinese leadership is successful in gaining influence over the DPRK through economic interactions, that will be the first time in North Korean history that such leverage has accrued from increased contact, economic contact with other countries.

The North Korean government has an attitude, which some might say is rather ungrateful, toward subventions and blandishments from abroad. In fact, they don’t look at foreign gifts as being altruistic donations, they look at them as being tribute, which is rightfully theirs, taken from less worthy states that don’t realize Pyongyang is, in fact, the new center of the East Asian order.

Stanley Kurtz [ph.]: Stanley Kurtz from the Ethics and Public Policy Center. I’d like to get a better understanding of the real interests and the perception of interest of the South Koreans. On the one hand we’ve got a picture here that says the South Koreans think they’ve got a lot of time. They don’t have to worry about the short-term in the way that the Americans do because proliferation to other states is not an immediate concern to them because nuclear terror in their city is not an immediate concern to them.

On the other hand, it seems as though the sort of scenario that someone like Nick Eberstadt paints says that there isn’t necessarily that much time even for the South Koreans because at the moment that the North Koreans are able to arm a long-range missile they will, in effect, break America’s security guarantee for the south, force the south to go nuclear and perhaps start a lot of gamesmanship. So, is that a fair statement about the real interest of the South Koreans, that they don’t, in fact, have the luxury of waiting in the way that they think they do and what would they say if you laid that out to them, how would they argue with that perception?

Nick Eberstadt: I guess the argument from the theoreticians of sunshine would be kind of akin to what Dr. Pangua [ph.] said in Candid, can’t be, this must be the best of all possible worlds, so, North Korean government must wish to be reformed by our entreaties. I’m not sure there’s a Plan B there, at least not for that crew. As far as real interest and perceived interests are concerned, well, I guess if I’m correct, and it’s not yet clear that I’m correct in this assessment, but, if I’m correct, there’s a lot of opportunities if you run hedge funds.

Ambassador James Lilley: One thing, the Chinese have a project called The Northeast Project, and they’ve had it for a number of years, it’s supported by the Central Government, and it’s putting out a claim that goes back 1,000 years to the Tong [ph.] dynasty, and the Shila [ph.] dynasty, and it’s all aimed at, we call it Cogidor [ph.] dynasty, I don’t want to be obscure on this thing, but, if you get involved in China you have to understand historical allegory, the whole cultural revolution started with a high rate of dismissive office, nobody knew what they were talking about, and then 10 million dead people later in a huge turmoil you figure it out.

Well, what the Chinese have said is that the Cogidor dynasty in North Korea was part of China. The South Koreans are saying, oh no, it’s part of Korea. What happens is the Tong dynasty in China cooperates with the Shila dynasty in South Korea and overthrows the Cogidor dynasty. Is there something in there that’s interesting?

Now this may be all just arguing history, but the vehemence and passion with which it’s done one almost sometimes gets the feeling that they’re arguing over the dead corpse of North Korea while a patient is still alive. You could only go so far with allegory, but, we who are mired in Chinese history somehow pick this thing out and look at it, in fact, I even raised it with some very high-level Koreans, and they sort of ducked the whole question of what the Chinese were doing, indicating it was more benign than the Japanese going to the Yasukuni shrine. I don’t think it is. I think they know it isn’t as benign. So, anyway, I leave you with that thought.

Joe Winder [ph.]: I have a comment on, I’m sorry, I’m Joe Winder, former President Economic Institute. I have a comment on Ambassador Lilley’s last remark, and then a question for him. The South Koreans, of course, refer to the area between the two rivers as Condo [ph.]. And, so, they have their own view of the extent of Korean territory.

I think there is some matching element here, I’m not sure who started it, but nonetheless, I think there is this duality of contra-claims that I think the South Koreans are hoping that, well, you drop your claim, we’ll drop our claim. My question for you though, is, following up on some of the things that Nick had to say about the North Korean attitude toward the Chinese, do the Chinese have enough time, in your view, to take this long view of reforming the North Korean regime economically at least under the current Kim Jong Il leadership given his proclivities? Are they in a bit of a time squeeze, can they just let nature take its course through North Korea given the behavior of this regime? Do they feel under some pressure to perhaps engineer an act of God that would result in a regime that might be more amenable to following their strategy?

Ambassador James Lilley [??]: Well, Joe, I don’t like to try to predict Chinese behavior, the landscape is strewn with people that try to do that, but, they see it as a long-term tactic. They started out with their confrontations with the North Koreans perhaps in spades during the Korean War.

The North Koreans would not accept Chinese military aid until McArthur landed and smashed them. Then they came begging. They, of course, gave Chinese no credit for their role in the Korean War. The Chinese look at you with a frozen smile at these guys. They said to me, look, we know them, we know them ten times better than you, don’t lecture us on North Korea. But, the fact is, we’re joined at the hip. We’ve lived with these guys for many, many centuries, and we can live with them a little longer.

I think though what the Chinese have done at least on paper is that they’ve moved considerably in the direction of using their leverage and pressure of influence to begin to try to affect events on the Peninsula in directions that serve their own national interests, namely the buildup of, tremendous buildup of their leverage in the South. You know all the statistics, the biggest trading partner and the most Korean students in China, the fascination of Koreans with Chinese culture; it’s very strong stuff, along with the business problems.

But, they do that in building up and they see the American drawdown and they see that at some point their leverage in the South will pretty well match ours. That’s when the time comes when the North is going to really have to get nervous because then the North becomes more expendable and the infiltration into the North with factories, traders, businessmen coming in from across the North Korean/Chinese border, beginning to trade, trade, trade, this is something that the North Koreans I don’t think can control very well.

They’ve gotten into the fabric of the free markets, farmers markets, and other things, bringing in their consumer goods, and beginning to turn this thing in directions that make sense. They know of the idiocy of the North Koreans and their special economic zone when they got this, Yong Bin [ph.] to do their work. The guy’s in a Chinese jail for 16 years for corruption, tax evasion. That’s the way the North Koreans pick their men. I know that [indiscernible] allegedly went to Kim Jong Il and said, you’re out of [indiscernible] down to Kaesong on South Korean border because they knew this place, if they had on the Chinese border, it would turn out to be houses of prostitution, narcotics and everything else. They know this very well, but I think what we’ve seen recently, and, the proof is in the pudding, I’m not saying this is happening, but there has been a steady movement in beginning to put more pressure on North Korea. I think that’s vital.

Dan Blumenthal: I would add to that one element, and maybe this is particularly germane because I was at the Department of Defense working on China issues, and that is the PLA. The PLA, actually, the People’s Liberation Army, actually is much more in force in the region, in North Korea. The United States does not have a good sense of what it’s doing. We’ve made various entreaties to them to try to see exactly what their strategy is, what they’re thinking about. I think that it sort of goes back to the question that we had earlier about the ROK interest, if you want to get the ROK very interested, you mentioned that the PLA has plans itself for the collapse of North Korea and the final disposition of the Korean Peninsula.

China is a big place, obviously, we hear lots of people in it, we hear lots of different things about their aims and goals. One of the new things that has been sort of trucked out as a talking point is a reminder to Americans that they still have a treaty in force with North Korea.

This especially came out after Secretary William Perry and Ashton Carter, Secretary Ashton Carter in July made a suggestion that we preempt the missile strike. I was in China at the time. I was certainly reminded by my Chinese counterpart that the treaty is still in full force. You take that with PLA deployments in [indiscernible], it adds a little bit more unpredictability to the mix in terms of just where the Chinese, just what they’re thinking about and where they will go.

Gary J. Schmitt: I just want to add one thing that after they made their statements, the ROK people came to me and said, what the hell are you Americans thinking about? You know we’re going to get hit and killed if you do this. They were just appalled that we would come out with this kind of a suggestion.

David Hearn [ph.]: David Hearn with Defense Daily and also with Space and Missile Defense Report. Yesterday, in the Rose Garden, President Bush, speaking to a news conference, extended assurances to allied nations, such as South Korea and Japan, that we would protect them from any attack by North Korea, said that he wanted to increase cooperation among the allied nations on missile defense.

My question is, do you feel that we have a missile defense system that would merit his making such assurances? Can we, in fact, have a workable system that would protect our allies?

Dan Blumenthal: I do. I think that we, however, need a lot more investment. This is another debate in the U.S. Congress that’s usually along partisan lines about how much more money ought to go to missile defense, but, certainly, I know that the Japanese felt a lot more reassured when we sent the Egess [ph.] destroyers and deployed the PAC 3s [ph.] into Japan right before the missiles were launched, and certainly are asking for more of the same. I will say this, when Secretary Perry and Secretary Carter made their statements, at the time I thought it was off, and plausible, now, I think that when you’re Japan and you’re looking at missiles on a launching pad and there’s been a nuclear test and our intelligence I guess is still, a few days later, trying to figure out exactly the nature of that nuclear test, so, intelligence is fairly uneven about these things, I think the document of preemption actually starts to become a little bit more reasonable and attractive in that particular circumstance. That’s what it’s always been about in our history.

So, absolutely, I think that this speaks for more deployments of missile defense, but it also, I think, has brought us, unfortunately, closer to the kind of very dangerous types of situations that the South Koreans were complaining about to Ambassador Lilley, which is, our allies will feel jittery, we’ll feel jittery, we won’t have good intelligence on just what sits atop those missiles, and the pressure to do something will be far greater than it was in July. So, I think we’re closer to that day.

Gary J. Schmitt: We’ll take one more question, and, I apologize, but there’s an event that’s going to take place here in this room after we break up, so, we have to cut this off pretty, a little bit shorter than we normally do.

Ambassador James Lilley: Let me just add one thing to what Dan just said, very briefly. Us reaffirming our nuclear umbrella for South Korea and Japan at least is a signal to China that at this stage in the game we are not considering them going nuclear because people have used this argument with the Chinese. You don’t do enough at North Korea, Taiwan, South Korea and Japan. I think we’re saying to them in a bargaining sense, our umbrella is there, they aren’t going nuclear, but don’t test it too far.

Guy Dinmore [ph.]: Thank you, Guy Dinmore from The Financial Times. You’ve all spoken a little bit about sanctions and Ambassador Lilley indicated that the most important notions would probably come outside the U.N. depending on what China and South Korea did. If I could put a question to Nicholas, perhaps, if we take the North Koreans at their word, as you would like us to, and they’ve said that sanctions will be considered an act of war, do you think the U.S. should continue pushing for punitive sanctions? What kind of sanctions do you think it should try to impose and do you think North Korea would retaliate in a military way somehow? Thank you.

Nick Eberstadt: I said, read what the North Koreans say because sometimes they mean it, sometimes they even mean it. They’ve been saying that economic penalties or sanctions would be tantamount to an act of war for about a decade and one-half. And, of course, it would be very much in DPRK interest to scare international actors away from economic penalties or punishments for the regime.

The history of economic sanctions and coercive economic diplomacy in the 20th century is pretty miserable, it’s pretty unsuccessful, but the North Korean economy isn’t your average bear. It’s incredibly distorted. It’s manifestly dependent upon constant concessional flows of aid from the outside. When the concessional flows of aid from the outside get down to a certain level, like only half a billion dollars a year, they have mass famine.

So, the DPRK is certainly, as a system, very vulnerable to economic penalties and pressures. If the United States and other governments are capable of bringing about economic penalties and pressures, those really could beg questions of viability and sustainability of the Kim Jong Il dictatorship.

Gary J. Schmitt: Well, on that happy note I want to thank our panelists, Dan Blumenthal, Nick Eberstadt, and Ambassador James Lilley, and I want to thank you for coming. Thanks.

[Audience applause].

[End of session].