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North Korea Foreign Trade
North Korea's foreign trade is characterized by its
relatively low value, chronic trade deficits, and small number of
trading partners. In 1990 almost 83 percent of total trade was
conducted with the Soviet Union, China, and Japan. Although
modest in scale, accompanied by wide and frequent swings from
year to year, and even negative growth in some years, trade
levels have grown over the years. Based on estimates from the
returns of trading partners, exports and imports grew from
US$307.7 million and US$434.1 million, respectively, in 1970, to
US$1.86 billion and US$2.92 billion, respectively, in 1990
(see table 6 and
table 7, Appendix). North Korea's total exports were
comparable to only 2.9 percent of South Korea's exports of
US$65.02 billion in 1990. North Korea's trade value also is small
in relative terms when compared with that of South Korea and
other newly industrializing economies. The trade ratio (total
trade value relative to GNP) in 1990 was 20.7 percent, with
export and import ratios of 8.1 percent and 12.6 percent,
respectively. The comparative ratio for South Korea was 56.7
percent--with 27.3 percent and 29.4 percent, respectively, for
exports and imports.
Except for a few years since 1946, the trade balance has been
characteristically unfavorable. North Korea attracted worldwide
notoriety in 1976 when it defaulted on its payment of foreign
debt to Western countries. The debt had resulted from massive
purchases of capital goods from West European countries and Japan
in the early 1970s, which had drastically increased the trade
deficit. Imports are supposed to be paid for by increased export
earnings and short-term credits, neither of which has occurred.
The oil shock of late 1973 and the onset of the recession and
worldwide stagflation also took their toll. Prices of North
Korea's minerals declined sharply because of a worldwide
recession that lowered demand. Foreign exchange reserves
dwindled, leading to the debt crisis. After suspending payments,
North Korea tried to reschedule the payments, but its payment
record is erratic; the debts continue in the early 1990s, and
unpaid interest continues to mount. At the end of 1989, the total
foreign debt was estimated at US$6.78 billion: 45.9 percent, or
US$3.13 billion, was owed to the Soviet Union; US$900 million to
China; and US$530 million to Japan. According to South Korean
sources, the total debt had increased to US$7.86 billion at the
end of 1990.
Despite North Korea's flirtation with Western developed
countries, the Soviet Union, China, and Japan remain its
principal trading partners. In the late 1940s and 1950s, more
than 90 percent of trade was conducted with communist countries.
In the 1960s, this dependency began to gradually decrease, and in
the mid-1970s, with P'yongyang's sudden turn to the West for
imports of machinery and equipment, the slide accelerated. This
dependency fell to its lowest point in 1974--only 51.5 percent of
total trade; it began to rise again when North Korea, having
defaulted on payment of its debt, found it difficult to obtain
credit to finance imports from the West. The ratio of trade with
communist countries was 72.7 percent and 71.4 percent,
respectively, in 1989 and 1990.
The Soviet Union has consistently been North Korea's largest
trading partner, accounting for about half of total two-way trade
in the late 1980s and 55.9 percent and 56.8 percent in 1989 and
1990, respectively. It is followed by China, with 12.5 percent
and 11.4 percent in 1989 and 1990, respectively. Since the early
1960s, Japan has emerged as the third largest trading partner--
10.7 percent and 19.7 percent in 1989 and 1990, respectively.
Japan remains a major continuing link with the advanced market
economies. For some years in the mid-1980s, imports from Japan
exceeded those of China. Most of the trade deficits originate in
communist countries; an exception was in 1974-75 when an import
surplus from Western countries exceeded that from communist
countries.
The Soviet Union also is the largest source of import
surpluses. In 1989 and 1990, trade deficits with the Soviet Union
constituted 63.5 percent and 57.7 percent, respectively, of the
total deficit. The corresponding ratio for China was 20.3 percent
and 28.6 percent, respectively. North Korea had depended
predominantly on the Soviet Union and China for its trade credits
in the late 1980s, but in 1990 P'yongyang began to lean more
toward Beijing. From 1987 to 1990, North Korea consistently
accumulated a trade surplus with Japan.
A major factor in North Korea's renewed reliance on the
Soviet Union in the 1980s--both as supplier of imports as well as
the chief destination for exports--was the difficulty of
marketing its products elsewhere; a second important factor was
the West's reluctance to extend additional credits. In a trade
agreement signed in November 1990, North Korea was required, for
the first time, to use hard currency in its commercial
transactions with the Soviet Union beginning in 1991. China also
notified North Korea to use hard currency in their mutual trade
beginning in 1992. This requirement will have a serious adverse
effect on the trade value, the balance of payments, and the
domestic energy situation. There are signs that the initial
attempts to enforce the hard currency rule caused Soviet-North
Korean trade to plummet in early 1991. For example, petroleum
deliveries from the Soviet Union plunged from 410,000 tons in
1990 to 45,000 tons in the first half of 1991. In order to
prevent a further decline, the Soviets conceded some
unidentifiable amount of transition time before fully enforcing
hard currency payments. Because of the decline in oil imports,
the Soviet-aided Sngri oil refinery in Ch'ngjin was at least
temporarily closed. Consequently, North Korea has increasingly
turned to China and Iran for petroleum.
North Korea's principal exports are non-ferrous metals--
mostly zinc, lead, barites, gold, iron and steel, and textile
yarn and fabrics, magnesium, metal-working machine tools,
military equipment, cement, vegetables, and fishery products. Its
main imports are advanced machinery, transport equipment, highgrade iron and steel products, crude petroleum, wheat, and
chemicals. Of almost US$1.7 million of imports from the Soviet
Union in 1990, machinery and transport equipment constituted by
far the largest category of imports--22.4 percent; garments
constituted 53.6 percent of exports amounting to approximately
US$1 million that same year. Petroleum and petroleum products
imported from the Soviet Union declined sharply from 21.5 percent
in 1987, to 10.9 percent in 1988, and to 6.7 percent in 1990.
North Korea's main imports from China are energy-related
products--coal, briquettes, petroleum, and petroleum products;
they constituted 38.4 percent and 38.5 percent of imports,
respectively, for 1989 and 1990. Other imports include cereals
and cereal preparations, oil seeds, rubber products, textile
fibers, fruits and vegetables, foodstuffs, and machinery and
equipment. Metallurgical exports, including magnesium, steel, and
nonferrous metals, are the largest category of exports to China,
comprising 37.2 percent of total exports in 1990. Other exports
to China include anthracite coal, cement, fish, and seafood.
Machinery is the largest import from Japan, making up 23
percent of the total, followed by textile fibers and products,
base metal and products, chemicals, plastic and rubber products,
and electric and transport equipment. Making up about 40 percent
of the total in 1989-90, the main exports to Japan are minerals,
in particular iron and steel, zinc, magnesium, aluminum, and
lead. Other export items to Japan are vegetables, marine
products, textile fibers, anthracite coal, apparel and clothing
accessories, and precious metals.
Data as of June 1993
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