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This is the second in a two-part series looking at the North Korea Sanctions Enforcement Act of 2014 (H.R. 1771). The first piece is available here.

To date, U.S. sanctions on North Korea have had both a strategic and defensive purpose. The strategic aim is to sharpen the choices Pyongyang faces by raising the costs of pursuing its nuclear and missile programs and providing incentives to return to the Six Party Talks. The defensive motivation of sanctions is to limit North Korea's capabilities and proliferation activities by curtailing its trade-and in both directions-in proscribed systems and dual-use technologies. This defensive motivation has undergirded the support the U.S. has secured for a succession of steadily-tightening UN Security Council resolutions. Those resolutions have secured support in large part because they have maintained a sharp line between limitations on WMD-related trade-which is thoroughly proscribed-and commercial trade, which is not.

Proponents of sanctions typically come at the task with a variety of aims, and the North Korea Sanctions Enforcement Act of 2014 is no exception. The bill constitutes a shift in both the aims of U.S. sanctions policy and the means of implementing it. The effort to target foreign entities that are either supplying or purchasing from North Korea's WMD complex is completely justified, and fully in line with the spirit of existing UN Security Council resolutions as well. The U.S. should also engage on the human rights issue, and should name, shame and designate those who are responsible for the country's gross human rights violations. A valuable aspect of the Commission of Inquiry process-which HR 1771 supports-will be to identify the units and individuals responsible for the most gross violations, such as the maintenance of the country's sprawling system of political prison camps.

Yet the bill also raises long-standing questions about whether sanctions are likely to work and whether they may even have perverse consequences. With respect to means, the legislation marks what Josh Stanton has called a financial constriction strategy against the regime. A key barrier to U.S. sanctions policy is to exercise leverage in the absence of any significant trade and investment. A core component of the HR 1771 strategy-borrowed from earlier experience with Banco Delta Asia-is to not only target North Korean entities, but to use U.S. market power to induce desired behavior by foreign commercial entities as well. The pursuit of secondary sanctions offers market players a choice: do they want to do business with the giant U.S. market or throw their lot with North Korea? The strategy appears to sidestep the need to rely on foreign governments for enforcement, including China, by encouraging foreign entities to choose the commercially prudent course.

One concern, however, is whether the legislation has intentionally or unintentionally blurred the line between WMD-related and commercial trade. The justification for doing so is arguably legitimate. In such a highly centralized regime, it is difficult if not impossible to draw the line between illicit and commercial activities. Nonetheless, to date the international community has sought to draw such a line, and for several reasons. The outside world has a strong interest in encouraging reform and opening of the North Korean economy, to shift its strategic orientation away from the byungjin line of trying to pursue economic development and nuclear weapons simultaneously. If this legislation were to have the effect of encouraging deeper economic integration, it would be through an initial phase of even greater isolation, autarchy and external controls.

The extent of that isolation will depend on how North Korea and China respond to the threat of secondary sanctions. One of the perverse effects of the post-2003 sanctions efforts is that North Korea has become increasingly dependent on China; my estimates with Marc Noland suggest that China may account for as much as 70 percent of the DPRK's total trade. This growing dependence has had the odd consequence of reducing the influence of sanctions as trade has shifted toward the weakest links in the sanctions chain. China probably provides fewer direct supports than is commonly thought, but it remains strongly committed to a strategy of deep economic engagement with the country. It is possible that firms and particularly banks conducting business with North Korea will reconsider, and that is a good thing. But we should not have exaggerated expectations; there are plenty of firms and financial institutions that will continue to ply this trade, and we are unlikely to get much sympathy from Beijing in tracking them down. To the contrary, the Chinese government has already signaled its concern about the use of secondary sanctions and has shown little inclination to use the economic leverage over North Korea that it quite obviously has. Will this legislation make cooperation with China on North Korea easier or harder?