VULNERABILITY OF NORTH KOREA TO FREE WORLD ECONOMIC PRESSURES

Created: 1/28/1968

OCR scan of the original document, errors are possible

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To ceune ccowic Inconveiiloiico to forthbolizo Freo World dicep.:roval of the illor.al seizure of the Pueblo, end iacrecac pressures on tre recuse to release the crew and vessel.

Concept

The follovinf* measures nljjht be atten.ited;

nultilrtaral enVrgo on trade wit"', forth Xoraa. CCtCi*plus Japan) prohibit tha export to forth Korear-iteglc Items. Trie United States hoa, for oovoralthe possibility of obtalnlnc CCCOi: egrecuent forcontrols on exerts to coTninist areas ofsia than

on exports to TJr-.strm SaropO andR (thoDrilled "Chlnn differential"). The United States prohibits virtually all trade and financial transactions with Vorth Xoraa arxl co ild pro.ose that cthere do tho sere.

Japrnese prohibition of trade and uithdrrual of ships. Most North Korean trade Is withUSnd Corxunist China and noatby land routes. However, aboutor cent is vita thaorld. Japan isgoat yreo World inporter of forth "Corean coeds; the majority oforld ships calling at forth Korean porta ore of Japanese registry.

Cessation ofJorldxirta. 'Ibest eccourrU far half cf Froe lorld exports to forth Korea. Australia and Prance are cu routl;*wheat.

ction

The icpact of increoaodorld controla on trade andwould be snail. Total wheat ivorio are runitingevel ofoer cent of forth Korean rc^uirer-enta. If this treda were stopped, forth Korea could either out rations, switch to othsr food (Trains, or oircurr.-ont6 they i*XX) tons of Crtnadien wheat via thg USSR). The other half of Free World exports to Forth KoreaeEgi of oc^ii^:ont, narmf ectu:eS, srd industrialorisls which can probnbjy bo obtained fron alternative eoix-unist sourcesut serious delay* Tf ?rsQ Itorld vessels vera ro-xived froc. tho trade, an additional burden would bo thrown either on cceinunist fins or OORrontSt chartered vessels or on lund transport routes. Th* prelin nary CXA view ia that tho added burden oc shipping or on land routes would not be significant.

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APPROVED FOR RELEASE DATE:1

I.'ITXSi XlSW. TOU ECvWiaC i1TSS

Ourartrw-re uould rrtg.nl sembargo as going far beyond the COCG: criteria for selective stretcgic controls. They uould observe that, even during the Korean war, the cultilatoral embargo ua3 oeloctive. They uould view ourtjotiv-jtion as unrelated to tho COCa: objoetive of linitins the corr-unist mlUtcry potential. If tho embargo were proposedefinite cut- off cV.te, It mightligntly better chence of acceptance (other participating countries uerew tllat the original Chln^'Torth Korea controls continued. But it Is unlikely thatould r'-rco toemporary total embargo (adoption uould require unaniiaous aGi-oe-vent). If vo attempted this, prospects for the "China differential" TUgtrt be der:oged. France, the United JCingdca, Jprmnest tVntany have all Indicated their opposition to any significant Increase in controls on exports to East Asiia.

Japan would probably respondeparate approach by pointing out thepOisiuility for thara to deny exportson-twist country lr. Asia in the absence of parallel action by other major Western trading co^mtries.

Australia might be synpa*heticequest to stoj whept shipsstots. But there uould pi^bably be problems of breaking contracts. It, eiy ever.t, it vould be difficultpoae effective controlseat becnuso of tho number of potential suppliers and of circuitous routes.

of Advente/tea eiri OleMyrmtaraa

The unlikellh-wd of obtainivc agr-onont to traden COCCIor in Mlr-tszal effortsjor trading countries plus the estimate that the ccmuiilst countries could promptly provide eubstttutos for Free World supplies seriously Unit the prospects for these posaiblo economic measures.

Wo night altelvtatively coneiier holding outbait. economic controluid pro quo for forthwe nry hold so:uq iJ-irth Xorean assets that were

blocked0 (probably not uoxu t'-^in one or tvo million dollars; Treasury Is checking tha figures). Although sjaTl, tlie unblocldng of such assots right under cortain circuristancos ba considered an acceptable alternative to paymentfine."

-thur Siilth

IC)

oo DT. ptptl* on Torth Ifcreon Foreign TcCo end on I'ortli Korean Piofcinc Floofc

lr. Stanley Soowsflald

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Original document.

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