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NORTH KOREA NEWSLETTER NO. 227 (Sept. 13, 2012)

FTA with China May Allow Preferential Tariffs on Kaesong-made Goods

SEOUL (Yonhap) -- South Korea and China have agreed in principle to allow preferential tariffs on goods produced in the inter-Korean industrial complex in the North Korean border city of Kaesong under their bilateral free trade pact, officials here said on Sept. 6.

   Seoul and Beijing have been in negotiations over the free trade deal since May of this year, expecting the talks to take two years. China is South Korea's largest trading partner, with bilateral trade expected to reach US$300 billion by 2015.

   During their latest round of negotiations, the two countries agreed to remove tariffs on each other's products within 10 years after the implementation of their free trade accord.

   "Although details have been not yet decided (on Kaesong-made products), both countries agreed on putting a clause regarding so-called outward processing zones in the text," said an official at the trade ministry.

   The industrial complex in the North was born out of the inter-Korean reconciliation in 2004 that boomed following the first summit of the two Koreas in 2000. The complex was designed to combine cheap North Korean labor with South Korean capital and technology.

   As of May, 51,452 North Koreans worked at about 123 small labor-intensive South Korean plants in the complex, according to government data.

   South Korea's free trade pacts with Singapore and the 10-member Association of Southeast Asian Nations (ASEAN) recognize some products made in the Kaesong complex as South Korean products.

   Similar free trade deals with the U.S. and the European Union (EU), however, took a vague approach to the issue.

   The agreements call for the establishment of a committee to discuss whether the Kaesong industrial zone should be given preferential treatment a year after the FTA takes effect.

   South Korea and the EU implemented their free trade pact in July of last year, and a similar trade pact with the U.S. went into effect in March of this year.


North Korea May Use Biological Weapons: U.S. Government

WASHINGTON (Yonhap) -- The United States believes that North Korea may use biological weapons some day, which poses another major security threat on top of its nuclear weapons drive, according to an annual U.S. government report.

   "The United States judges that North Korea may still consider the use of biological weapons as an option," the State Department on Sept. 6 said in its new report on international agreements and commitments to arms control, nonproliferation and disarmament.

   North Korea became a state party to the Biological Weapons Convention (BWC) in 1987.

   "North Korea continues to develop its biological research and development capabilities, but has yet to declare any relevant developments as part of the BWC confidence-building measures," the report read.

   The department said North Korea's continued nuclear development, including its uranium enrichment activities and ongoing construction of a light-water reactor, violates U.N. Security Council resolutions and the communist nation's own commitments under the 2005 deal with its nuclear negotiation partners -- South Korea, the U.S., China, Russia and Japan.

   Pyongyang announced its withdrawal from the Nuclear Non-Proliferation Treaty (NPT) in January 2003.

   Although North Korea conducted two nuclear tests in 2006 and 2009, respectively, and may prepare for a third one, it is unable to become a nuclear-weapons state as defined by the NPT, which limits that classification to five nations, the department said.

   "We will not accept North Korea as a nuclear-weapon state," it said.

   This year's report struck largely a similar tone on North Korea with the previous one.

   A notable difference is the assessment of its suspected nuclear ties with Myanmar, also known as Burma.

   In last year's report, the U.S. said it is on alert to any signs of Myanmar's nuclear weapons-related activities or intentions.

   The U.S., however, said in the new version that "concerns that the United States expressed in last year's compliance report regarding Burma's interest in pursuing a nuclear program, including the possibility of cooperation with North Korea, were partially allayed."

   The U.S. is apparently starting to gain some trust in Myanmar amid its nascent move towards democracy.


S. Korea, China Keeping 'Close Watch' on Nuclear Reactor Progress in N. Korea

SEOUL (Yonhap) -- South Korea and China are keeping a "close watch" on the progress in North Korea's light-water atomic reactor project that experts say may help expand the North's nuclear weapons capacity, a high-ranking Seoul official said on Sept. 7.

   Seoul and Beijing shared concerns over the swift progress North Korea has made in building an experimental light-water reactor at its main nuclear complex in Yongbyon, when chief nuclear envoys from the two sides held talks in Beijing in early September, said the foreign ministry official with direct knowledge of the talks.

   Lim Sung-nam, Seoul's top envoy to the six-party talks aimed at ending the North's nuclear weapons program, met with his Chinese counterpart Wu Dawei and other officials during his two-day visit to Beijing this week to discuss "recent developments in North Korea's nuclear issues," the ministry said earlier.

   South Korea is concerned that the North's reactor under construction might be a cover to stockpile enriched uranium, a fissile material used to make bombs, although North Korea claims the project is for producing electricity.

   "During the talks in Beijing, the two sides exchanged views that they are keeping a close watch on the North's new light-water atomic reactor," the official said on the condition of anonymity.

   "But, both sides don't see any serious situations with regard to the reactor," he said, confirming that the issue was a major topic in talks between Lim and Wu.

   In late August, the International Atomic Energy Agency said North Korea has made "significant" progress in the light-water reactor project. Citing satellite imagery, the U.N. agency said the North has put a dome over the facility.

   The official said North Korea also installed "cooling pumps" in the reactor.

   Asked whether North Korea could complete building the reactor with its own technology, the official declined to answer.

   South Korea and China also see "no immediate sign" of another nuclear test by North Korea, the official said.

   Concerns persist that North Korea might carry out a third underground nuclear test after its much-hyped launch of a long-range missile fizzled in April. Media outlets have reported the North appears to have completed preparations for such a nuclear test.

   North Korea's previous launches of long-range missiles in 2006 and 2009 were followed by nuclear tests. The international community has warned that the North, already under U.N. sanctions for the nuclear tests, will face tougher sanctions if it goes ahead with another test.

   The six-party talks, which involve the two Koreas, the United States, China, Russia and Japan, have been dormant since late 2008.


Unification Church Delegation Did Not Discuss Inter-Korean Ties

PAJU, South Korea (Yonhap) -- A delegation of Unification Church officials who visited North Korea to accept condolences over the death of church founder Rev. Sun Myung Moon did not discuss inter-Korean ties with the North during their two-day stay in the socialist country, a church-affiliated businessman said on Sept. 8.

   The delegation, including Moon's seventh and youngest son, Hyung Jin Moon, and Park Sang-kwon, the president of the church-invested Pyeonghwa Motors in North Korea, returned to South Korea through the South's border city of Paju earlier in the day, after receiving condolence calls from the late founder's relatives in the North and top North Korean officials.

   The late Moon died of pneumonia at his religious town northeast of Seoul on Sept. 3 at the age of 92. A native of what is now North Korea, Moon built close personal ties with the North's late founding leader, Kim Il-Sung, which led his church to invest in automaking and tourism projects in the isolated country.

   During the visit, the North mourned Moon's death by sending a condolence wreath in the name of North Korean leader Kim Jong-un and awarding the late founder with a posthumous prize recognizing his contribution to inter-Korean reconciliation and unity.

   Speaking to reporters at an inter-Korean immigration office in Paju, Park, the Korean-American businessman, said the visit had no other purpose than to accept the condolences of mourners.

   "There were no discussions at all with the North regarding inter-Korean exchanges and cooperation, (the South's) flood aid (to the North) or political issues," he said.

   The North Korean leader sent a message expressing his sadness over Moon's death through his powerful uncle Jang Song-thaek, who read out the message in person, he added.

   "(The message said Kim Jong-un) will not be able to forget the relationship between Rev. Moon and (late North Korean leader) Kim Il-sung," Park said. "(The message) also said (Kim) is heartbroken (over Moon's death)."

   Hyung Jin Moon, the son and heir to the late church founder, also told reporters about the grief his relatives in the North felt over his father's death.

   "My grandmother and aunt cried a lot," he said. "My relatives were in much grief." The church has said about 70 relatives of the late founder, including his younger sister, currently live in his hometown of Jongju, North Phyongan Province.

   Park also said the North expressed its willingness to welcome a visit by Moon's widow, Han Hak-ja.

   The Unification Church and the North have exchanged condolence delegations for funerals for key figures including late North Korean leader Kim Jong-il since Sun Myung Moon's meeting with North Korean founder Kim Il-sung in the North in 1991.


Wife of Ex-N.K. Leader Got Hospital Treatment in Germany: Sources

BERLIN (Yonhap) -- Kim Ok, the rumored fourth wife of late North Korean leader Kim Jong-il, was treated for a cervical disk problem and coxitis at a hospital in Berlin in May, sources in Berlin said on Sept. 8.

   Kim, 48, arrived in the German capital via Beijing and stayed at a hotel while receiving treatment at the Charite hospital, according to multiple South Korean residents here, who asked not to be named.

   Kim, a former secretary to Kim Jong-il, is said to have started playing first lady in 2004 after the late leader's wife Ko Yong-hui died of breast cancer.

   Ko was the mother of the current North Korean leader, Kim Jong-un, who took power after his father Kim Jong-il died last December.

   The sources said Kim Ok was seen traveling in a Mercedes-Benz car with a North Korean diplomat accompanying her as an interpreter.

   Before Kim Jong-il's death, she accompanied him on his visits to China and Russia, and attended the former leader's meetings with South Korean business representatives.


North Korea, China Agree on Joint Use of Chongjin Port: Report

SHENYANG, China (Yonhap) -- A Chinese company has been allowed to share the rights to use a northeastern North Korean harbor in a deal with Pyongyang, a move expected to accelerate China's forays into the East Sea, a report said on Sept. 10.

   The North forged the agreement on the use of the port of Chongjin with the private firm based in the city of Tumen, Jilin Province, on Sept. 1, according to China's Korean-language press Yanbian Daily, which caters to ethnic Koreans living in China.

   Under the deal, Pyongyang and the company established a joint venture in charge of managing and utilizing two piers in Chongjin Port for the coming 30 years, the news report said.

   The Chinese firm invested nearly 9,430,000 euro (US$ 12 million) in the port-sharing deal, or over 60 percent of the total capital, according to the newspaper.

   The company is planning to start its first shipment through the port before the end of this year, it said.

   Pyongyang signed a similar deal with another Chinese firm in 2008 to share its rights to use Rajin Port, just north of Chongjin Port, paving the way for China to establish its presence in the East Sea area.


U.S. House Passes Bill on Adoption of North Korean Orphans

WASHINGTON (Yonhap) -- The United States House of Representatives passed a bill on Sept. 11 aimed at encouraging U.S. families to adopt North Korean children.

   The bill calls for the U.S. secretary of state to develop a strategy to facilitate the adoption of orphaned North Korean refugee children by families here. Under the legislation, the secretary would have to issue a report on the strategy within 180 days of enactment.

   The bill, introduced by Rep. Ed Royce (R-CA) in 2011, says, "Thousands of North Korean children do not have families and are threatened with starvation and disease if they remain in North Korea or as stateless refugees in surrounding countries; and thousands of United States citizens would welcome the opportunity to adopt North Korean orphans living outside North Korea as de facto stateless refuges."

   It has yet to be passed by the Senate.

   "Malnutrition, abuse, exploitation, lack of education: these are the horrors faced by many orphans of North Korean origin, who are effectively stateless and without protection," Rep. Ileana Ros-Lehtinen (R-FL), who chairs the House Committee on Foreign Affairs, said in a statement.

   "The United States is home to the largest ethnic Korean population outside of Northeast Asia, and many of the nearly two million Americans of Korean descent have family ties to North Korea. Numerous American families would like to provide caring homes to these stateless North Korean orphans."

   She said the legislation is a "responsible first step toward making that possible."


N. Korean Military's Trading Unit Pushing for Joint Ventures with China

SEOUL (Yonhap) -- A North Korean trading company affiliated with the country's military is seeking business deals with China in a bid to earn much-needed foreign currency, a source said on Sept. 12.

   "Paekho Trading Corporation is leading many kinds of foreign currency-income businesses after setting up joint ventures with Chinese companies in the Rason Economic and Trade Zone as well as the Hwanggumphyong-Wihwado economic zone and the special administrative region in Sinuiju," the source said.

   Paekho Trading Corporation, the key trading unit of the military, is believed to be the de facto operator of North Korea's joint Mt. Kumgang resort venture with the South although two agencies -- the National Economic Cooperation Federation and the Asia-Pacific Peace Committee -- are officially in charge of the now-suspended joint tourism project.

   "It seems that Paekho Trading Corporation veered into economic cooperations deals with China as the Kumgang tourism project suspension deprived it of a source of foreign currency income," the source said.

   The source also said Paekho Trading Corporation is the same entity the North said was involved in the building of the Rason International Commerce and Trade Center in the northeastern city.

   North Korea's state media said last month the construction project was "jointly funded by the Rason Paekho Trading Corporation and a real estate development company in Qin Huangdao, China."

   Former lawmakers have claimed that the trading company is affiliated with the general political bureau of North Korean People's Army.