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Vancouver summit risks angering China while it pressures North Korea on trade, critics warn

Flags of China and North Korea are seen outside a restaurant in Ningbo, Zhejiang province, China, on April 12, 2016.

Joseph Campbell/REUTERS

In the summer of 2017, Shuguang Kaixuan Mining Company went to court to defend itself against a creditor who wanted back nearly $40,000 lent to support the company's business of buying and selling North Korean mineral goods.

The dispute was longstanding, but this time Kaixuan had a new defence: It had no money, since the commodities it wanted to sell were stuck in North Korea.

"Because of the sanctions against North Korea, their normal work with iron ore has been halted," said Chen Weiguo, a lawyer for the company.

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Over the course of a year in which North Korea claimed the successful detonation of a hydrogen bomb and a missile capable of reaching deep into North America, Beijing has responded with heavy new restrictions on the nuclear-armed renegade state.

Chinese seafood vendors that once relied on the North Korean catch have gone bust; even smugglers have complained that Chinese authorities have impeded their work. Beijing's actions have stood in contrast to criticism from detractors like U.S. President Donald Trump, who have accused it of doing too little.

But China won't be present at a conference of foreign ministers in Vancouver Tuesday – and critics say the U.S. agenda for the meeting, which includes the possibility of maritime interdictions against ships carrying North Korean goods, risks eroding Beijing's support at a time when sanctions appear finally to be bearing fruit. Russia, too, will not be involved in meetings this week.

China's foreign ministry has warned about "Cold War thinking" in the selection of countries who will attend the summit – many of them fought together in support of South Korea during the Korean War – saying it could "undermine the joint efforts that are being made to resolve properly the Korean Peninsula nuclear issue."

Outside China, too, observers have expressed worry about plans by U.S. Secretary of Defense Jim Mattis to attend a welcome dinner at the conference of foreign ministers, amid talk of a beefed-up naval presence near the Korean Peninsula that would almost certainly anger China.

"U.S. officials are indicating that they want to move towards a more robust effort to interdict North Korean shipments. Beijing would find that hugely provocative, especially if it appears as if a coalition of countries are side-stepping the UN Security Council," said Andrea Berger, an expert on North Korea and non-proliferation who is senior research associate at the California-based Middlebury Institute of International Studies at Monterey.

Beijing wields outsized economic influence toward North Korea, since some 90 per cent of the rogue state's foreign trade passes through China, and the country's shift in the past 12 months has been consequential.

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"China has changed its behaviour, and that has affected North Korea-China trade," said Justin Hastings, a scholar at the University of Sydney whose book, A Most Enterprising Country, catalogues how North Korea has evaded foreign trade restrictions for many years.

In recent months, Prof. Hastings's research has shown dramatic change in border areas, including among smugglers who previously boasted that sanctions had no effect on their work.

That's no longer true. Earlier in 2017, Chinese authorities told smugglers "they would cease to differentiate between different kinds of smuggling. They would say, 'Smuggling is smuggling – you smuggle guns, smuggle food, whatever, we don't care. No more smuggling,'" said Prof. Hastings.

"They also reassigned a lot of the local government officials in China who are the people serving as government points of contact with the smugglers, which disrupted the networks."

China "doesn't want North Korea to collapse," he said. But they "want to punish it."

In doing so, China has accepted losses on its own side. For years, Chinese seafood vendors processed and imported North Korean crabs and shrimp for sale. That ended with new sanctions in the summer of 2017 and the ban remains firmly in place, said Cui Yanzhi, a trader in the Chinese city of Hunchun.

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"It's not an exaggeration to say that the seafood industry in Hunchun has been shut down. Most people who used to do this have quit," he said.

In Pyongyang, there are signs that the pressure is beginning to have an effect. North Korea has noticeably softened its posture toward South Korea, agreeing last week to send athletes and a delegation to the Winter Olympics in Pyeongchang.

North Korea has gained a reputation as a nation of wily entrepreneurs who have outfoxed sanctions while turning a profit from coal, rhino horns, missile parts, digital currency, heroin and seafood – even turning the strange cachet of the "Hermit Kingdom" into a lucrative brand for overseas restaurants.

But the country's overseas trade is also "centralized, limited and vulnerable, and thus ripe for disruption," according to a report last year by C4ADS, a non-profit research organization in Washington. In 2016, 10 Chinese trading firms alone were responsible for 30 per cent of North Korean imports, and "a very small number of key executives control a disproportionate share of the trade," the report found.

Even if Beijing is not present, the Vancouver meeting can serve as a useful "show of solidarity," said Choi Kang, director of the Centre for Foreign Policy and National Security at South Korea's Asan Institute for Policy Studies.

But without Chinese participation, there are limits to how much new pressure can be applied on North Korea. And though co-hosts Canada and the United States have both said they want to push North Korea toward denuclearization, that goal may be even more difficult to accomplish.

Historically, "almost every success story in denuclearization was conditioned by regime transformation, or at least a leadership change." Mr. Choi said. "So as long as Kim Jong-un stays in power, I don't think it's possible to realize denuclearization."

Canadian foreign minister Chrystia Freeland said Canada continues to "seek a diplomatic solution" to North Korea's weapons programs.

With reporting by Alexandra Li

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