►▼ Where is this data from?
As North Korea does not publish data on its foreign trade, research on North Korean trade depends on the use of statistics published by its trading partners, known as mirror statistics.
This chart is based on data from KOTRA (the Korea Trade-Investment Promotion Agency) for North Korea’s global trade, and also incorporates data from South Korea’s Ministry of Unification to account for inter-Korean trade (which KOTRA data excludes). KOTRA’s data is based on mirror statistics reported by GTIS Global Trade Atlas, with corrections for possible misreporting. From 2014 onward, these corrections include approximations of China's unreported crude oil exports to North Korea.
The inter-Korean trade figures reflected in this chart include historical trade at the Kaesong Industrial Zone, an inter-Korean export processing zone that was shut down in February 2016. Trade at this zone largely consisted of South Korean exports of raw materials and inputs, and North Korean exports of value-added goods produced at the zone; total cross-border trade volumes at Kaesong reached a peak of about $2.7 billion in 2015. International practices on the inclusion of export processing zone trade in national merchandise trade statistics have been inconsistent, but this chart opts for their inclusion.
►▼ How reliable is this data?
Due to a variety of factors — including North Korea’s secrecy regarding economic data, misidentification of North and South Korea by trading partners, and other forms of misreported or unreported data from North Korea's trading partners — these figures (particularly North Korean exports) should only be regarded as estimates. Additionally, there are general weaknesses with the use of mirror statistics, such as differentials in reported import/export valuations due to shipping and insurance costs, that this chart does not account for.
The KOTRA dataset used in this chart accounts for some of the deficiencies found in reported data (for example, by estimating the value of unreported Chinese crude oil exports to North Korea), but North Korean trade statistics remain inherently imprecise. Furthermore, many categories of trade with (particularly exports to) North Korea were prohibited by a series of UN sanctions resolutions adopted in 2017. Trade in these sectors is thus illicit and unreported, and this chart does not attempt to estimate the value of this unreported trade.
►▼ What explains North Korea’s persistent trade deficit?
North Korea is functionally frozen out of international credit markets, and its currency has roughly maintained its black market value since 2013 after experiencing severe inflation from 2009 to 2012; thus, it is unlikely that the country could maintain a trade deficit of the magnitude implied by reported data. Some North Korean exports — such as informal border trade, exports in services, and arms — go unreported. Remittances from laborers abroad, illicit activities, trading company activities abroad, and other sources, as well as foreign capital inflows and foreign assistance, may also account for this gap.
North Korea's trade deficit expanded significantly in 2017, as many of North Korea's major exports were banned by UN sanctions resolutions. Although the value of North Korea's unreported or illicit exports has likely increased along with the scope of sanctions, it is also possible that North Korea has financed some of its recent imports through tapping into foreign currency reserves accumulated in years past; through unreported foreign aid of some sort or another; or through foreign investment.
►▼ Why has North Korea's foreign trade declined in recent years?
North Korea's reported foreign trade has declined every year from a peak in 2014 through 2019, when the total volume of reported trade began to increase again. UN sanctions are part of the explanation for this dynamic, but are not the only reason North Korea's foreign trade has decreased.
Falling commodity prices, possibly paired with a cooling of China-DPRK relations after the execution of Jang Song-taek in December 2013, explain the decline in North Korean trade in 2015. The drop during 2016 can be mostly attributed to the closure of the Kaesong Industrial Complex, which accounted for $2.7 billion in total bilateral trade and is estimated to have provided North Korea with roughly $100 million in annual income during its peak.
The decline in 2017 is largely attributable to a greatly enhanced UN sanctions regime. While earlier UN Security Council resolutions mostly focused on prohibiting North Korean trade in military and dual-use goods, the UN sanctions adopted in 2016 and 2017 placed increasingly punitive restrictions on North Korean commercial trade. These sanctions prohibited most of North Korea's major exports, including coal, other minerals, seafood, and textiles. UN Security Council Resolution 2397, adopted in December 2017, also placed major restrictions on North Korean commercial imports.
The rise in reported trade in 2019 is most likely attributable to an increase in North Korean sanctions evasion activities; while sanctions evasion and illicit activities do not show up directly in trade data, foreign currency earnings from these activities presumably facilitates an increase in licit imports.