March 21, 1999
Web posted at: 11:43 p.m. EST (0443 GMT)

In this story: North Korea sanctions may be eased Difficult trade situation RELATED STORIES, SITES

SEOUL, South Korea (CNN) -- South Korea's policy of openness with North Korea should be maintained even in the face of any "serious provocation" by the communist state, Minister of Foreign Affairs and Trade Hong Soon-young said on Monday.

"If North Korea commits a serious provocation, such as another missile launch, (the ministry) will maintain the basic principle of the engagement policy and employ measures to put on diplomatic pressure," Hong told President Kim Dae-jung.

Since his inauguration in February 1998, Kim has kept a policy of engagement with Pyongyang despite several incidents which the South Koreans considered provocative.

North Korea stunned the world last August when it test-launched a three-stage rocket that flew over Japan and into the Pacific. Tokyo suspended aid and talks on normalizing ties afterward.

At a review of international trade and foreign policy in Seoul, Hong said on Monday the government would enlist diplomatic cooperation to heighten pressure on North Korea in the event of another incident while not abandoning its engagement policy.

The opposition has criticized Kim's "sunshine policy" of boosting business and cultural ties with the North as having too many carrots and not enough sticks.

Kwon Jong-rak, director-general in charge of North American affairs, told the review session the United States was expected to consider easing its economic sanctions on North Korea following last week's U.S.-North Korea nuclear agreement.

The agreement allows U.S. access to an underground North Korean construction site, which Washington suspected of housing a secret nuclear project.

But Kwon said any easing of sanctions would still be linked to progress on other issues between the United States and North Korea, including terrorism and missile development.

Regarding the outlook for South Korea's foreign trade, Minister of State for Trade Han Duck-soo said the country was faced with a worsening international environment.

"Last year, there was little domestic resistance (in industrialzed nations) toward absorbing exports from Asian countries because economic crises in these countries were a very urgent issue," Han said.

But a subsequent sharp growth in trade deficits in the industrialized world could lead to heightened trade friction with South Korea's trading partners, he said.

Kang Byong-il, director-general of trade promotion, said the country had yet to make progress in resolving several domestic issues so that Korea can lure more foreign direct investment.

"Foreigners have a strong interest in, and are keeping a close eye on, the progress in the labour-management relationship, efforts to improve transparency in corporate accounting and corporate restructuring efforts," Kang said.

Reuters contributed to this report.