On June 21, Secretary of State Rex Tillerson and Secretary of Defense James Mattis will meet with their Chinese counterparts, State Councilor Yang Jiechi and General Fang Fenghui, Chief of Joint Staff of the People’s Liberation Army in Washington for the inaugural session of the U.S.-China Diplomatic and Security Dialogue. The top U.S. priority at the dialogue is finding common ground with China on curbing North Korea’s nuclear weapon and missile development.
The dialogue emerged from the April summit between President Donald Trump and Chinese President Xi Jinping at Trump’s Mar-a-Lago resort. The summit has opened the door to greater cooperation between Washington and Beijing, and Wednesday’s dialogue will determine whether the time is right for cooperation on North Korea.
In a departure from the Obama Administration, the Trump White House has identified North Korea as a major national security priority. Last week, Mattis called North Korea “the most urgent and dangerous threat to peace and security,” in a written statement to the House Armed Services Committee.
As did previous U.S. administrations, the Trump Administration has called on China to exert greater leverage on its ally North Korea to bring it back to denuclearization negotiations. While previous presidents have often come away disappointed by how much pressure China has been willing to exert on North Korea, there are indications that Beijing may be using its economic leverage to greater effect.
As part of upholding a UN Security Council resolution, China announced in late February that it would no longer receive coal imports from North Korea. Over the course of March and April, China eliminated North Korean coal imports, depriving the North Korean regime of foreign currency. In 2016, these exports generated nearly $1.6 billion for North Korea and accounted for 40 percent of its trade revenue.
While China has upheld its commitment to the coal ban, it has purchased greater quantities of iron ore, low-end manufactured goods, and seafood – goods not strictly banned by the UN – resulting in an overall increase in trade revenue for North Korea compared to 2016. While this demonstrates commitment to UN-enforced international sanctions, it does not contribute to the ultimate goal of sustained economic pressure on the North Korean regime.
Beijing may also be dissuading Chinese businesses from contracting North Korean labor, a practice the UN identifies as exploitative, and it estimates 50,000 workers worldwide may generate as much as $1.5 billion for the state. As many as 19,000 of these workers are in China. According to the Nikkei Asian Review, beginning in March of last year, Chinese officials began informally telling firms in the provinces bordering North Korea not to contract North Korean workers. While this measure is useful to Beijing for registering “its displeasure with Pyongyang’s missile and nuclear testing,” as an informal policy, it could be easily reversed and does not demonstrate a strong commitment to the sustained pressure needed to demonstrate cooperation to the U.S. and to bring North Korea back to negotiations.
At this week’s dialogue, the U.S. hopes to make a deal with China that will demonstrate true cooperation and bring sustained pressure against the North Korea regime: secondary sanctions. Secondary sanctions in this instance would target the Chinese firms and entities that facilitate trade and financial transactions that allow the North Korean regime to supply and fund its weapons programs and block their access to the U.S. financial system.
China has so far been reluctant to target its own firms, though the Administration has warned it may act unilaterally. Speaking before the Senate Foreign Relations Committee last Tuesday, Tillerson said, “We are in a stage where we are moving into this next effort of ‘Are we going to have to, in effect, start taking secondary sanctions [on countries illegally doing business with North Korea],” and went on to say that the U.S. had been in conversation with Beijing on this issue.
Secondary sanctions are especially appealing from the U.S. perspective because they allow the United States to use the considerable influence of its financial institutions. If, for example, a Chinese firm is blacklisted from transactions with U.S. banks because of connections to North Korea’s weapons programs, it could no longer do business with U.S. firms, nor could it have access to the U.S. financial system, and its reputation would be damaged, leading other banks to avoid it in turn.
Secondary sanctions are also appealing because they can cause the most damage to the networks that support North Korea’s weapons programs, according to a new report by C4ADS. The report argues that the highly interconnected network of logistical and financial transactions that allow North Korea to acquire the funding and supplies it needs for its weapons programs is centralized around vital people or firms and can therefore be disrupted with well-targeted secondary sanctions.
The issue with this approach is that China is reluctant to target its own firms out of fear of domestic backlash, or to allow the U.S. to become more involved in its domestic affairs. In discussing this option at the dialogue, Tillerson should be mindful of what the U.S. would have to give up to get China on board with secondary sanctions, as well as what the cost would be to the bilateral relationship of pursuing such sanctions without China’s blessing.
If the U.S. and China do reach a deal to cooperate on North Korea, negotiations with the North Korean regime are still not guaranteed, let alone the success of such negotiations. Even if China may be willing to cooperate with the U.S., North Korea can still choose not to cooperate with either country.
Will Edwards is an Asia-Pacific and defense analyst at The Cipher Brief. Follow him on Twitter @_wedwards.