South Korea & North Korea

Historical Background

The 1950-1953 Korean War not only resulted in a tremendous loss of life and destruction of property, but also left a wide rift among Koreans.

After the war, both sides confronted each other across the Demilitarized Zone (DMZ), amidst the tension of the Cold War.

While North Korea pursued Communist unification based on its logic of a so-called "One Joseon (meaning one Korea)," South Korea considered its government as the only legitimate entity on the Korean Peninsula with unification being an extension of its sovereignty. These rigid, uncompromising views made accommodation between the two sides impossible until the 1960s.

However, the international environment became more reconciliatory in the 1970s. The two Koreas recognized each other's government, which marked an epochal change in their attitudes toward reunification. The first positive sign of change came on Liberation Day in 1970 with a call from the South for bona fide peaceful competition with the North.

In August of the following year, South and North Korean Red Cross representatives held the first face-to-face meeting in 26 years since the division. Both governments cooperated with each other in trying to achieve family reunions for those separated during the Korean War.

In 1972, the two governments reached an agreement on principles of unification, and announced the results in the July 4 South-North Joint Communique. Since then, both governments have continued to talk intermittently and had contacts through various channels despite many obstacles.

In 1985, a memorable event resulted from the Red Cross Talks: members of separated families, 50 from each side, visited the other side to find their long-lost relatives. Other notable events were the South-North Economic Talks (1984) and preliminary conferences for South-North National Assembly Talks (1985). Unfortunately, these additional channels of talks between the South and the North were suspended for various political reasons.

In the 1990s, rapid changes occurred in Socialist bloc countries, which politically influenced the Korean Peninsula. Of note, in 1990, the South-North High Level Talks between the Prime Ministers from both sides started and in 1991 produced the "South-North Basic Agreement." It recognized that the South and North were in a "temporary special relationship" in the process toward reunification.

Inter-Korean Exchanges & Cooperation

Trade between South and North Korea was legalized in South Korea by the July 7 Special Declaration of 1988. In 2003, trade between the two Koreas reached US$724.21 million.

Based on a policy of separating economics from politics, South Korea introduced a measure to expand inter-Korean economic cooperation on April 30, 1998. Seoul now allows executives of major business companies as well as economic organizations to visit North Korea for business purposes.

In the area of trade and business ventures, the government has increased the number of goods for import on a blanket approval basis while reducing the number of items that require prior approval from 205 to 186. The government also eased restrictions on shipments to North Korea of manufacturing facilities for the production of goods by South Korean enterprises in North Korea and eased restrictions on the amount of investment allowed in the North.

While maintaining a strong national security system, the government will steadily expand inter-Korean economic cooperation as relations between the South and North continue to improve.

Inter-Korean trade in 2003 recorded at $724.2 million, up 12.9 percent from a year earlier. A total of $289.2 million worth of merchandise was shipped from North Korea to South Korea, a 6.5 percent increase, while $434.9 million worth of goods were sent to the North, a 17.5 percent surge. A bulk of North Korean exports includes agricultural, fishery, and textile products. Major South Korean goods were chemical industrial and textile products. Cargo and cruise operations between North and South Korea totaled 2,022 in 2003, up 10.7 percent from the previous year. Inter-Korean shipping, on the other hand, posted 1.04 million metric tons, 0.7 percent down.