This article examines the nexus between economic ties and security on the Korean Peninsula by discussing three causal mechanisms. First, economic ties increase opportunity costs to constrain the two Koreas’ conflict behavior. Second, inter-Korean economic ties allow either or both to send a costly signal about their resolves during a crisis. Third, economic ties transform domestic interests and preferences in favor of cooperation. Through these analytical lenses, the past KIC operation did not clearly show its pacifying effect due to its low opportunity costs, weak signaling, and stalled transformation of interests and preferences in both countries. Those who support the liberal peace process with hope for the KIC resumption need to articulate these mechanisms from the longer-term perspective while acknowledging a marginal impact of pacifying security effect in the short term. Without measures to improve its efficiency of operation and seek domestic support, the KIC, if reopened, would remain liberals’ unfulfilled promise.

Abstract

I. Introduction

Theoretically linking economic ties to security
Opportunity costs
Costly signaling
Transformation of preferences and interests

The case of the Kaesong Industrial Complex
Deficient opportunity costs
Not costly enough signaling
Stalled transformation of preferences and interests

Conclusion

References