North Korea’s Tariff and Non-tariff System: Implications for Integration into the International Economy

The purpose of this study is to analyze North Korea's tariff and non-tariff regimes to reveal the direction of North Korea's trade policy and the structure and characteristics of its legal and institutional framework, and to identify priority reforms in trade-related laws and regulations as North Korea seeks to open up and integrate into the international community. According to the Tariff Rate Manual (2005), North Korea imposes tariffs at the 8-digit HS code level, and there are a total of 10,529 imported goods with specified tariff rates, mainly import duties, but also export duties on some export-controlled goods. A key feature of North Korea's tariff rates is the low overall level of tariffs. Based on the basic tariff rate in foreign currency, the average nominal tariff rate was 5.5% and the average real tariff rate was only 4.6%. In 2005, the average nominal tariff rate for all countries in the world, including about 150 WTO members, was 8.1%, which is higher than North Korea's nominal tariff rate of 5.5%, so North Korea's tariff rate is low compared to the global average. North Korea's non-tariff barriers were established for the purpose of establishing a centralized governance system for national management of foreign trade, with the goal of building a self-reliant national economy, enhancing the quality of the national defense forces, and strengthening the party-state system. North Korea's foreign trade is subject to state management and control under the principle of state monopoly and is conducted in accordance with state plans, and foreigners are not allowed to trade freely. The direction of North Korea's trade reform is toward “tariffications,” which means removing non-tariff barriers and increasing tariff barriers to close the resulting gaps in trade regulations. North Korea should eliminate the non-tariff system and replace it with a tariff system because it is difficult for North Korea to communicate with the international community due to the distinctive characteristics of trade in a socialist country.