Jack Harding, Head of Political Risk

On Thursday last week, Donald Trump and Kim Jong Un met in Hanoi, Vietnam, for their second summit on the denuclearisation of North Korea and the possible lifting of international sanctions. In the morning, hopes on both sides of the negotiating table for striking a deal appeared to be high; Kim Jong Un even fielded his first ever question from a foreign journalist who asked about his mood going into the talks. He replied, “From what I feel right now, I do have a feeling that good results will come out.” However, by the afternoon, these hopes had been dashed and talks were abruptly called off.

 

The impasse seems to have arisen from the intransigence of both parties who adopted an ‘all-or-nothing’ approach to the negotiations. According to Trump, the US demanded the closure of all nuclear facilities in exchange for the lifting of some sanctions; while North Korea demanded the lifting of all sanctions in exchange for the closure of one facility. According to the US, the site in question was the Yongbyon Nuclear Research Center – believed to be the only location in the country capable of creating the fissile materials required to produce nuclear weapons.

 

Trump, who prides himself his ability to negotiate “good deals” clearly saw North Korea’s proposal as a “bad deal” for the US. While the closure of the Yongbyon site would certainly have been a positive step, it would have done nothing to allay suspicions over other covert enrichment facilities or concerns over how to deal with any weapons that may already have been produced. However, Trump’s blunt refusal to compromise was also a message to Beijing before the imminent round of trade talks. He told reporters: “I’m never afraid to walk from a deal. And I would do that with China, too, if it didn’t work out.”

 

Despite Trump’s statement, negotiations with China are not as black and white as he might like to make out. Beijing’s political and economic leverage over North Korea ensures it remains a major bargaining chip in any trade talks. Trump recognised this influence in Hanoi when he stated that ‘93 percent of the goods coming into North Korea come through China’ and, furthermore, that ‘China has been a big help’. This is putting it mildly; the only reason that the sanctions took hold was because Beijing agreed to back them and, with Chinese exports to North Korea falling by over 35% in 2018, the resultant economic crisis and food shortage were major factors in bringing Kim Jong Un back to the table again after the June 2018 summit.

 

More importantly, if the US presents China with a trade deal that it deems to be unacceptable, it could simply ease sanctions in order to alleviate the economic pressure on North Korea. This would remove any incentive for Kim Jong Un to renegotiate with the US and effectively return the global security situation to the height of tensions seen in 2017. Through North Korea, global security and economics have become deeply intertwined; Trump’s failure to reach any kind of an agreement with Kim has presented China with a potentially decisive strategic option as the two countries go into further trade talks this month.

 

Trump and Xi Jinping are expected to formally sign an agreement on trade at the Mar-a-Lago resort at the end of March, but this week will likely see the announcement of some of the early details. While it is likely that a deal will include a roll-back of many of the tit-for-tat tariffs, China’s political leverage will mean that the substantive, institutional changes to Chinese trading practices that Trump has so publically sought are unlikely to materialise

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