The text of the lecture given at the seminar on the Re-unification of Korea, on 10th May, 2001, in the city of São Paulo – SP – Brazil.
At the beginning of this year Brazil became the first Latin American country to establish diplomatic relations with the People’s Democratic Republic of Korea (North Korea), following similar action by some member countries of the European Union (EU). This diplomatic re-positioning was a result on one hand, of the efforts of President Kim Dae-jung of the Republic of Korea (South Korea), made to engage the support of the international community in the process of détente in and pacification of the peninsula, a process in which both he and the leader of North Korea, president Kim Chong-il, were involved. These commendable efforts earned President Kim Dae-jung the recognition of the international community in the form of the Nobel Peace Prize which he was awarded in Sweden in December of last year. On the other hand, the process of re-establishing formal diplomatic relations between Brazil and North Korea, in accordance with the terms of the Vienna Convention on Diplomatic Relations, is due to the belief of Brazil, that an eventual national Korean re-unification, which will allow the people of the North to reach, over a short period of time, the same level of development as that reached by the South Koreans, will benefit not only the cause of world peace, but also bi-lateral relations with Brazil, principally in the area of trade.
The projections that can be made for the growth of trade between Brazil and North Korea must necessarily take into consideration the extraordinary success story of bi-lateral exchanges with South Korea. In the year 2000 bi-lateral trade between Brazil and South Korea passed the 2 billion dollar mark, making the aforementioned country Brazil’s third largest trade partner in Asia, coming after Japan and china. In the same year Brazilian imports from South Korea reached a value of 1.5 billion dollars, having grown in the aforementioned period by around 40%! In turn the amount of Korean investment in Brazil passed the important 750 million dollar point. All of the estimates, be they national or international, strategic or technical, both in terms of bi-lateral exchanges as well as in terms of Korean investment in Brazil are not only optimistic but also fairly encouraging.
The main products that are exported from Brazil to South Korea are iron and steel, minerals, waste from the provisions industry, wood pulp and aluminium, which are responsible for 75% of Brazil’s sales to Korea. The main articles exported from South Korea to Brazil are machines, equipment, electronic material, telephones, television monitors and tyres which make up 60% of Korean sales to Brazil. The average rates of customs duties in Brazil, at 14%, and in South Korea, at 13.8%, are similar. At the end of the Uruguay Round of GATT Brazil ratified 100% of its duties with the World Trade Organisation (WTO) whilst South Korea ratified approximately 91% of its duties with the same organisation. In terms of bi-lateral trade Brazil has been complaining about the relatively high agricultural duties imposed by South Korea which are at an average level of 50%, and about the use of non-tariff barriers, particularly in the area of regulations aimed at sanitation. Despite this, there has been no legal disagreement between the two countries within the sphere of the WTO.
Today there remains a great disparity between the economic models of South and North Korea. For example, whilst South Korea has a population of 46 million, North Korea only has a population of 22 million, less than half that of its neighbour. In addition to this there is a dramatic difference in the level of economic development of the two countries: Whilst the Gross Domestic Product (GDP) of South Korea is approximately 500 billion North American dollars, North Korea’s GDP is barely 23 billion North American dollars. Whilst South Korea’s foreign trade amounts to approximately 280 billion dollars, or more than 50% of its GDP, North Korea’s foreign trade is at a level of barely 1.6 billion dollars, or less than 10% of its GDP, making it one of the world’s least dependant countries on foreign trade. The economic models of the two countries are radically different: whilst South Korea advocates the free market system and employs this system excellently, North Korea runs itself with a centrally planned economy, a system which in the recent past has shown itself to be incapable of promoting sustained economic and social development.
However, there is a great deal of uniformity between the two Koreas in some social indicators, something which augurs very well for the current process of détente, economic co-operation and eventual national re-unification. In the first place, there is an undeniable common ethnic identity between the populations of the two countries and in second place there is also a common linguistic identity of similar proportions. Lastly, the inhabitants of both countries have an incredibly rich cultural heritage, created over thousands of years, which represents a foundation of fundamental import for the creation of economies of scale, the organisation of production activities and the promotion of factors that create efficiency in the making of comparative advantages, all of which bring with them a greater degree of competition in international trade.
Currently, bi-lateral trade between Brazil and South Korea exceeds the value of the entire amount of foreign trade of North Korea. Despite this, trade between Brazil and North Korea in the year 2000 was nothing to be sniffed at, as could have been supposed at first glance as it was worth a total value of 240 million dollars, around 12% of the value of trade with South Korea, with a Brazilian deficit of approximately 23 million dollars.
When examining the Gross Domestic Products of North and South Korea in terms of the proportion of trade conducted with Brazil one arrives at the surprising conclusion that proportionally, Brazilian trade with North Korea surpasses Brazilian trade with its southern neighbour. This significant statistic shows the great potential that exists for an increase in exchanges between the two countries. However, it must be stated that this notable potential for growth cannot materialise until economic reform is carried out in North Korea, bringing with it substantial economic growth and also until the process of political détente has made significant progress. At such a time the process of growth in bi-lateral relations will certainly be driven forward by the industrious Korean community that is situated in Brazil.
Curiously, in order for the process of political détente to be moved forward, there seem to be obstacles neither on the North Korean nor on the South Korean side. The only obstacles that do seem to be surfacing come from the side of the United States of America which intends to take advantage of the regional instability in the area in order to win domestic approval for its programme of using space for military purposes, Star Wars II, which is demanded by its sophisticated military industry. It is up to Brazil and all other well-intentioned nations, both developing and developed, to give their enthusiastic support to the efforts of North and South Korea to bring détente and peace to the peninsula, by encouraging economic co-operation, economic reforms in North Korea and, eventually, the re-unification of the nation of Korea. President Fernando Henrique Cardoso has already pledged that he will follow these important policies which also enjoy the unreserved support of Brazilian society and its business community.
Everyone will benefit from the implementation of such policies!