The Impact of North Korea Opening Into the Global Market

North Korea is taking strides to unify itself with South Korea, ultimately with the goal of creating a singular nation. Earlier in the month, North Korea adjusted its time zone to match South Korea’s — and though this may seem like a very simple act, it was more than just a symbolic one.

Matching time zones make it easier for commerce to occur, and opens the door even further to trade. This trade may have wide-reaching consequences, especially with its implications regarding China.

To be sure, we are still a long way off from a united Korean peninsula. However, unification is the stated goal of the governments in both Pyongyang and Seoul. With North Korea more pacified now than it has ever been, it’s time to take a look at what a unified Korea would mean for the global markets.

The Cost and Value of Reunification

For many, the unification of North and South Korea is more than an economic goal; it is an ethical one. Nevertheless, it’s worth it to consider the financial realities of the situation.

It’s difficult to say what the true cost of unification will be, as aid is likely going to be needed throughout North Korea. The United Nations food agency is currently looking to distribute food in North Korea, where many are said to be starving; unfortunately, there is an issue with funds.

At the same time, South Korean businesses such as Hyundai are looking to start doing business in North Korea, obviously seeing it as an opportunity for expansion. A unified Korea could mean that Korean companies have an easy access to an untapped market. At this point, no one truly knows how wealthy North Korea i, as a nation, nor how much aid it may require.

The North Korean Economy: Coal, Forced Labor, and Hacking

A significant portion of North Korea’s infrastructure has relied upon exports of coal to China. Apart from this, North Korea has been sending out laborers and engaging in cyber attacks. Indications are that the country does not have a firm economic basis, which limits its own input in the global scale. Though the country may have land and people that it can turn into valuable economic resources, the land will need to be restructured and the residents of North Korea will have to be trained and educated.

It is consequently unlikely that North Korea is going to be making any major investments in the global marketplace quickly, though it may see some increase in profitable tourism. North Korea is already proposing a new air route to South Korea, and it’s important to remember that during the division, many families were pulled apart. Now that a reunification is occurring, there are many South Koreans who may want to see their separated family members, as well as South Koreans who may be looking to invest in businesses and real estate in the area.

As its economy opens up, North Koreans may also seek to learn trades, get an education, and become laborers throughout the East Asian area. This is a very different picture than was previously foreseen, as many were concerned that aggression between North and South Korea would lead to floods of refugees. Rather than refugees, there will be willing immigrants looking for opportunities.

China, Korea, and Trade

China and North Korea have historically been allies in the area of trading, and the United States has become quite aggressive in Chinese trade recently. Both the governments of China and the United States have been emphasizing their role in the Korean reunification. This creates an additional level of political complexity, as the animosity between China and the United States continues to grow.

China and the United States are both heavily reliant upon each other when it comes to both trade and debt. In recent months, the Trump administration has been attempting to find a resolution to what it perceives to be an imbalance between the two countries. Despite pressure from the United States, China’s exports have remained solid, and its surplus with the United States has grown.

It’s possible that trade tariffs may make some industries in America, such as the steel industry, stronger; however, it also means that industries that rely upon strong trade with China may be seeing some changes in the coming months, as bonds between China and Korea become stronger, and the relationship continues to sour between China and the United States.

Though the future is uncertain, it looks like the majority of sentiments are positive. South Korea has not been overly impacted by fears of unification consequences, and there are many benefits being seen — such as the possibility that a new and open North Korea may be able to offer young, cheap labor to the rest of East Asia. The largest impacts will likely be related to trade and more bountiful labor, and may ultimately lead to a stronger Asian workforce and market.

Regards,

Ethan Warrick
Editor
Wealth Authority