[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
  U.S. POLICY TOWARD NORTH KOREA II: MISUSE OF U.S. AID TO NORTH KOREA

=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                        INTERNATIONAL RELATIONS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                            October 27, 1999

                               __________

                           Serial No. 106-81

                               __________

    Printed for the use of the Committee on International Relations





 Available via the World Wide Web: http://www.house.gov/international 
                               relations

                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
63-194 CC                   WASHINGTON : 2000




                  COMMITTEE ON INTERNATIONAL RELATIONS

                 BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania    SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa                 TOM LANTOS, California
HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska              GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey     ENI F.H. FALEOMAVAEGA, American 
DAN BURTON, Indiana                      Samoa
ELTON GALLEGLY, California           MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida         DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina       ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California         SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois         CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California          ALCEE L. HASTINGS, Florida
PETER T. KING, New York              PAT DANNER, Missouri
STEVE CHABOT, Ohio                   EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South     BRAD SHERMAN, California
    Carolina                         ROBERT WEXLER, Florida
MATT SALMON, Arizona                 STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York               JIM DAVIS, Florida
TOM CAMPBELL, California             EARL POMEROY, North Dakota
JOHN M. McHUGH, New York             WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas                   GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina         BARBARA LEE, California
PAUL E. GILLMOR, Ohio                JOSEPH CROWLEY, New York
GEORGE RADANOVICH, California        JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
                    Richard J. Garon, Chief of Staff
          Kathleen Bertelsen Moazed, Democratic Chief of Staff
                           Mark Kirk, Counsel
              Peter T. Brookes, Professional Staff Member
                   Joan I. O'Donnell, Staff Associate


                            C O N T E N T S

                              ----------                              
                               WITNESSES

                                                                   Page

The Honorable Tony P. Hall, a Representative in Congress from 
  Ohio...........................................................     4
Mr. Benjamin Nelson, Director, International Relations and Trade, 
  National Security and International Affairs Division, General 
  Accounting Office..............................................    21
Ms. Gary L. Jones, Associate Director for Energy, Resources and 
  Science, Community and Economic Development Division, General 
  Accounting Office..............................................    23
Dr. Nicholas Eberstadt, Visiting Scholar, American Enterprise 
  Institute......................................................    41
Mr. Joseph S. Bermudez, Jr., Senior Analyst, Jane's Intelligence 
  Review.........................................................    43
Ms. Nancy Lindborg, Executive Vice President, Mercy Corps 
  International..................................................    45

                                APPENDIX

Prepared statements:

     The Honorable Benjamin A. Gilman, a Representative in 
      Congress from New York and Chairman, House Committee on 
      International Realations...................................    54
    Rep. Tony P. Hall............................................    56
    Mr. Benjamin F. Nelson.......................................    63
    Ms. Gary L. Jones............................................    74
    Mr. Joseph S. Bermudez, Jr...................................    86
    Ms. Nancy Lindborg...........................................    95

Additional material:

    ``Light Water Reactors and Nuclear Weapons in North Korea: 
      Let's Be Fair With Our Comparisons submitted by Rep. Tony 
      P. Hall....................................................    99


  U.S. POLICY TOWARD NORTH KOREA II: MISUSE OF U.S. AID TO NORTH KOREA

                              ----------                              


                      Wednesday, October 27, 1999

                  House of Representatives,
              Committee on International Relations,
                                           Washington, D.C.
    The Committee met, pursuant to notice, at 10:05 a.m. in 
room 2172, Rayburn House Office Building, Hon. Benjamin A. 
Gilman (Chairman of the Committee) Presiding.
    Chairman Gilman. The Committee will come to order.
    Today, the Committee will hold the second in a series of 
hearings this month on our Nation's policy toward North Korea. 
Today's hearing will focus on U.S. aid to the DPRK, the missile 
threat and North Korea's future. We are pleased to have 
gathered a distinguished group of witnesses to discuss these 
matters.
    Five years ago, our Nation embarked on a massive assistance 
program for North Korea. Today, the DPRK stands as the No. 1 
recipient of our Nation's assistance to East Asia. Total aid, 
including food assistance, is valued at over $645 million since 
1995. That figure is expected to exceed $1 billion next year.
    The American people may not be fully aware of the true 
scale of this massive aid program. Today, our Nation and our 
partners in the Korean Peninsula Energy Development 
Organization, known as KEDO, provide at least 45 percent of 
North Korea's heavy fuel oil needs. Our Nation also provides 
over 80 percent of the internationally donated food aid to 
North Korea. In sum, we feed one out of every three North 
Koreans.
    There is a growing concern in the Congress about our policy 
toward North Korea. As U.S. assistance is growing, so is the 
range of their missiles. It is now believed that two types of 
North Korean intercontinental ballistic missiles can strike the 
continental United States with weapons of mass destruction. For 
the first time in our history, we are within missile range of 
an arguably irrational rogue regime. Regrettably, we cannot 
defend against that threat.
    We are also concerned about the use of our aid. According 
to the nonpartisan General Accounting Office, the GAO, at least 
$11 million of fuel aid has been diverted by the North Korean 
government. Fuel monitoring is dependent upon the North Korean 
power system, which is often out of service.
    We have also learned that, despite assurances from the 
Administration that U.S. aid will not go where food cannot be 
monitored, at least 14,000 tons of food aid, valued at $5 
million, was diverted to military counties where monitors are 
denied access.
    One question looms large in any discussion of aid for North 
Korea. We know that the government of North Korea is primarily 
responsible for its economic collapse and food shortage due to 
its misguided policies. If this were any other country, they 
would be moving ahead on agricultural and economic reforms that 
would lead North Korea back to food security.
    For instance, Ethiopia went from famine to grain exporter 
in just 5 years. No such reforms are presently under way in 
North Korea. North Korea continues to hold out one hand for 
aid, while in the other hand it holds a gun. This has resulted 
in a very successful cycle of political blackmail and extortion 
within the international community.
    Finally, we are concerned about the human rights situation 
in the DPRK. This pressing issue receives far too little 
attention. North Korea classifies its people into 51 groups, 
with over 7 million people regarded as members of the hostile 
class, and I put that in quotes.
    These people are starving, and our aid is stolen from their 
mouths. North Korea has hit a new low in human rights, founding 
``9.27 prisons'' where hungry children are incarcerated. To my 
knowledge, the Administration has yet to ask North Koreans for 
international access to these 9.27 prisons, even though they 
were identified over a year ago by a Committee staff delegation 
which went to visit North Korea.
    We are calling upon the Administration to request that the 
International Red Cross be granted access to these prisons in 
order to monitor the health of the hundreds of thousands of 
children who are trapped inside.
    I think we have assembled the right people here today to 
address these issues. We look forward to their testimony, and I 
want to thank all of our witnesses for coming.
    I now turn to Mr. Gejdenson, our Ranking Minority Member, 
for any opening statement he may wish to make.
    Mr. Gejdenson. Thank you, Mr. Chairman; and let me say that 
I think every Member on this panel feels for the men and women 
and the children in North Korea. The North Korean government is 
a threat, but it is the greatest threat to its own people. The 
tragedy that they have visited upon the children and the men 
and women in North Korea is something that, I think, the entire 
world is shaken by, and it obviously leads us all to great 
concern dealing with that government.
    I am particularly happy that we have our colleague Mr. Hall 
with us today. I think he has been in North Korea five times 
and is someone who is familiar with dealing with these kinds of 
relief efforts, hardly ever occurring in open, democratic 
societies. In very many of these instances they are either war-
torn or they are totalitarian and authoritarian regimes, and 
again, most often, their own people suffer the most.
    I believe Dr. Perry has developed a program for the United 
States that meets our National interest and has ceased their 
building of a nuclear capability and has gotten their 
assurances to end missile tests. Clearly, we have to watch, and 
I commend, frankly, all of those in Congress who continue to 
press for more openness, more access and more information, but 
I do believe we have to keep in focus how important it is to 
try to end this rogue regime's assault on its own citizens in 
its attempt to develop missile technology and weapons of mass 
destruction.
    Thank you.
    Chairman Gilman. Thank you, Mr. Gejdenson.
    Mr. Pomeroy.
    Mr. Pomeroy. Thank you, Mr. Chairman.
    I think this is a very, very important hearing. The issue 
before us involves our ability to track the food aid we have 
provided to North Korea. At all times, as we consider the 
question this morning, I think we have to have at the forefront 
of our thoughts the dimension of the crisis itself. The 
estimates of lost lives in North Korea due to starvation ranges 
from 1 to 2 million people--1 to 2 million dead from starvation 
in North Korea.
    One hears reports about literally an entire generation of 
stunted children, stunted by virtue of malnutrition, never able 
to obtain full physical size, but what we also know in terms of 
its debilitating impacts on mental development, never able to 
fully realize their intellectual capabilities as well due to 
the absence of adequate food.
    So even as we consider our ability to monitor food aid, let 
us never forget for a second that people are starving today in 
North Korea, joining the 1 to 2 million others.
    This hearing also occurs, Mr. Chairman, in the context 
where several different groups are taking a look at this 
question. One group that we have discussed already in this 
committee is the Republican Conference Task Force on North 
Korea. It is very unusual, of course, to take a major foreign 
policy question, take it outside of the Committee of 
jurisdiction, and then within the majority party only 
constitute a body looking at that very important issue. That is 
what has occurred here, and I think it is very unfortunate.
    The action of this task force has produced a report. That 
report has been released to the National Journal. Upon its 
release of the draft report, members of the Minority said, now 
that you have made this public, can we at least take a look at 
what you have done? We have been refused even today to have 
copies of this report given to us. You can give it to the 
press, give it to the world, but, for God's sake, keep the 
Minority out of participating in discussions on North Korea in 
the context of this special Speaker's Task Force on North 
Korea.
    This is much too important an issue for partisan politics. 
One of the things I hope we will be able to do in this open 
hearing, this open bipartisan hearing this morning, is look at 
one of the allegations contained in that task force report as 
it relates to food aid, according to the National Journal--we 
rely on the National Journal because you haven't given it to us 
yet to read ourselves. Apparently, you don't want us to pick it 
apart or at least do some fact-checking for you.
    The report alleges, ``significant diversions of food and 
fuel aid,'' and so I hope in the course of the meeting this 
morning we will be able to look at whether or not there is 
substantiation for this ``significant diversion''.
    Congressman Hall, one of the leading experts in the country 
on North Korea and the dissemination of humanitarian aid, has 
been there five times and will tell us momentarily there is no 
evidence of significant diversion. All of the world food 
programs that are participating will tell you there is no 
evidence of significant diversion. The GAO will tell you there 
are problems in auditing food aid, but they will not tell you 
they have evidence of significant diversion, and so one wonders 
where in the world this so-called Majority task force is coming 
up with stuff.
    Saying something doesn't make it so. You have got to have 
the underlying facts, and so it concerns me greatly that 
unsubstantiated allegations of this type are thrown out in the 
context of Congress considering cutting-off all food aid, which 
would accelerate the rate of starvation and malnutrition in 
North Korea.
    Let us with an open mind this morning explore whether or 
not there is substantiation of this allegation of significant 
diversion, even as we look at and acknowledge problems in 
auditing the food aid there.
    Thank you, Mr. Chairman.
    Chairman Gilman. Thank you, Mr. Pomeroy. I just might add 
that no one has called for cutting-off food aid in Congress at 
this point.
    Any other Members seeking recognition?
    If not, if no other Member is seeking recognition, I would 
like to welcome our first panelist, Congressman Tony Hall of 
Ohio, former Chairman of our Select Committee on Hunger, and I 
was pleased to serve with Mr. Hall on that distinguished panel. 
It is a pleasure to welcome you to our Committee.
    He is one of Congress' leading activists on food aid around 
the world and particularly North Korea, and we want to thank 
you for your past concerns about North Korea. We are pleased 
that you are able to join us today.
    If you wish to put a full statement in the record, we will 
do it without objection. Please proceed.

    STATEMENT OF THE HON. TONY P. HALL, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Mr. Hall. I want to thank you, Mr. Chairman, for the chance 
to come before your Committee.
    We seem to be testing the theory today that honorable men 
and women can disagree quite often lately, and I want to thank 
you for letting me have the time to disagree with you in 
person. I know your views about North Korea--and some of the 
Members of the Committee--and I know that they are sincerely 
held. I appreciate your hearing my testimony this morning. I 
want you to know that mine are sincerely held as well.
    As you know, and as you have stated, I have been to North 
Korea in the past 3 years 5 times. I spend as little time as 
possible in the Capital so I can focus on the people in remote 
areas whose condition is far worse and whose suffering is 
oftentimes hidden from outsiders.
    I don't make these trips out of any particular interest in 
North Korea. In fact, my first experience with that regime was 
when President Reagan asked me to go to the memorial service 
for the South Korean cabinet ministers killed by North Korean 
agents in Burma in the 1980's. I could not understand what 
North Korea was doing in those days, and I still can't figure 
out why they do some of things that they do today.
    The reason I go to North Korea is the same reason I went to 
Sudan last year, and the year before that to Rwanda, Sierra 
Leone, Angola and Somalia--because of the humanitarian crisis 
its people are facing. Most experts I talk to believe two 
million or more Koreans have died in this crisis. Some people 
who have been on the China border say that 3.5 million have 
died. I think that is probably a little bit high. I am not 
sure. But we do know that it is twice the number of Ethiopia's 
famine, which was supposedly the worst famine of the past 50 
years. This is the worst famine in the world today. That is the 
reason I go, and that is the reason why I am here today.
    I have three problems with the GAO's report on food aid to 
North Korea. My first is that it is a negative bias that does 
not track with my own experience and that of many of the aid 
workers who serve in North Korea. I have detailed some of the 
most serious omissions in my written testimony on page 2, and I 
hope you will take an opportunity to look at these.
    Another significant flaw is the report twists spot checks 
of 10 percent of the schools, hospitals and orphanages that the 
World Food Programme supplies into a finding that 90 percent 
have not been visited. This ignores the fact that that is twice 
the usual number of spot checks the World Food Programme makes 
in other countries.
    The World Food Programme is not policing the delivery of 
every grain of aid. It focuses on ensuring that delivery 
systems in place are working.
    Worst of all, the report suggests that you can't believe 
your eyes--that until there is proof that food aid is not being 
diverted, the improving conditions all recent visitors have 
observed in North Korean children is irrelevant. Yet, this 
report does not cite even a single instance where food aid has 
been diverted from hungry people to the military or to the 
governing elites. In fact, it notes that there is no evidence 
of such diversions.
    There is an old saying that fits the GAO work on this 
report to a T, one Congressman Armey recently cited on the 
Floor. It holds that an economist is someone who spends all his 
time proving that something which works in real life could not 
possibly work in theory. This is what the GAO has demonstrated 
with this report, to the detriment of this Committee's 
oversight work and to the GAO's shame.
    My second complaint about the GAO report is that if we 
accept the standard it lays out, we risk raising the bar so 
high that we will never be able to help starving people again. 
If conditions in North Korea or any desperate place were 
perfect enough to get the GAO seal of approval, there would be 
no famine there in the first place. It is never open and 
transparent societies that are the ones in trouble. They can 
always feed themselves. It is other places like Ethiopia, 
Somalia, North Korea, and Sudan; the reason is the regimes 
which don't respect human rights are regimes that don't respond 
to the people's human needs either.
    If we refuse to help people who live under brutal regimes, 
even when we can hide behind the excuse that we can't 
absolutely guarantee they are getting food, we are betraying 
President Reagan's policy that a hungry child knows no 
politics. Our country is better than that. We are clever enough 
to find ways around the hurdles like the ones detailed in this 
report.
    The World Food Programme and the private charities working 
in North Korea see the human cost of letting the perfect be the 
enemy of the good, and we should support them in this 
tremendous good that they are doing.
    My third major quarrel is that the ultimate result of this 
report is to effectively remove a tool that Congress uses to 
meet its oversight responsibility, and that is the GAO 
investigation. The publication of a report that selectively 
excludes the context in which the WFP operates, and virtually 
all evidence that contradicts investigators' preconceived 
views, virtually guarantees that no GAO investigator ever will 
be allowed into the Hermit Kingdom. That will insult Congress 
and undermine our colleagues' support for humanitarian aid, and 
that is why the GAO's decision to rush its work and publish 
something so incomplete deserves criticism.
    The historic turn of events last month made it even more 
likely that a second visa request may have been granted. I was 
disappointed to learn that instead of seizing that opportunity, 
the GAO proceeded on its original timetable. The result is the 
GAO investigated North Korea by going only to Rome. It opted 
for a quickie investigation of one of the largest humanitarian 
operations in the world, instead of a thorough one. It produced 
a report that aid workers don't find credible, a report that 
does nothing to help U.S. and U.N. Representatives press for 
greater access. It also foreclosed the Congress from getting a 
true picture of what is happening to the people inside North 
Korea.
    Mr. Chairman, there is no one who cares more about feeding 
hungry people than me, and there is no one who would make a 
bigger racket than I would if food donated to starving people 
were diverted to anyone else. I do not spend time for the heck 
of it going to hospitals and orphanages and visiting TB 
patients and sick children, AIDS patients and other people to 
help the leaders of the countries, especially ones who aren't 
doing enough to ease the suffering of their people. I do it to 
help people who know little about politics, people who want 
simply to eat and want to survive.
    Mr. Chairman, I want to inform the Committee that I met 
with David Walker about these concerns. I understand his 
colleague, Ben Nelson, will include some of the clarifications 
in his testimony. I appreciate that. I want to thank both of 
them for looking into the reports that a key member of the 
investigative team may have brought a personal agenda to this 
work. I was heartened by Mr. Walker's interest and by his 
acknowledgment that the World Food Programme has taken more 
precautions in North Korea than it does anywhere else.
    In closing, I want to say a few things about the people 
besides hungry North Koreans who benefit from the improving 
U.S.-DPRK relationship.
    First: America's service-men and -women, 37,000 of whom are 
stationed in South Korea. I have heard time and time again from 
our own military that they wholeheartedly support humanitarian 
aid to the people of North Korea, not only because it is a 
humane response to a real need, but because it is an easy 
investment to make on peace on that dangerous border. I want to 
reemphasize that every time I go to North Korea I always stop-
off in Japan and South Korea. I talk to our military, and to a 
man, enlisted men and officers say this humanitarian aid is 
making a difference, and it is helping with peace on the 
peninsula.
    Second: American farmers. We are blessed not only by a 
prosperous and free democracy but also by the world's most 
productive farmers. Without last year's surplus wheat, our 
contributions to the World Food Programme work in North Korea 
would probably be half of what they are. The grain our farmers 
grow is transforming ordinary North Koreans' views about 
America.
    Third: American allies. President Kim Dae Jung, a hero to 
democracy activists everywhere, has devoted considerable energy 
to bringing peace to the Korean Peninsula through his policies 
of constructive engagement. Japan also supports U.S. efforts to 
improve relations with North Korea, and nothing is more central 
to these efforts than our response to the North or to the 
United Nations' appeal for food and medicines for desperate 
North Koreans.
    Finally, I want to share my experience of some of the 
famines I have witnessed. After the crisis ends, but almost 
never until then, some people overthrow their leaders. Some 
don't. Whatever they do about their government, however, people 
who survive it remember famine as the worst kind of hell. They 
remember who helped them as those around them were dying, and 
they never forget who found excuses to do too little to save 
their family and friends.
    This GAO report ought to renew our resolve to keep pressing 
Pyongyang to give the World Food Programme and others fuller 
access. It ought not be an excuse to tighten the rules on food 
aid so much that we cannot help people in North Korea and in 
other countries who are in dire need. I would submit that your 
quarrel is not with the World Food Programme. It is not with 
one of the most conscientious and aggressive executive 
directors this organization has ever had--a leader who has 
turned ships around and refused to play Pyongyang's game. It is 
not with Mercy Corps or the other American charities working in 
difficult conditions, but getting the job done.
    Mr. Chairman, I appreciate your determination to ensure 
that our food is getting to the people in North Korea who know 
nothing about politics--people who only want to eat, who want 
to survive. But as the Committee examines our policy toward 
North Korea, I urge you to set aside the contempt--sometimes a 
contempt that is earned and one that all Americans feel for 
this totalitarian state--as you make your judgments. I urge you 
to focus attention on the nuclear and missile issues that I 
believe are your real concern, and to do all you can to support 
the humanitarian aid that is saving hundreds of thousands of 
innocent lives.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Hall appears in the 
appendix.]
    Chairman Gilman. Thank you, Tony Hall, for being here 
today.
    As I mentioned before, Congressman Hall has been one of our 
leading advocates of food aid for North Korea, and I want you 
to know that there is no proposal, at least on this side of the 
aisle, for any cut-off of food aid. However, we are concerned 
about the responsibility for the food shortages I know you have 
explored in the past. Is it the weather or the government that 
is responsible for the food shortage?
    Mr. Hall. It is many things, Mr. Chairman. It is, first, 
this Hermit Kingdom relied so much on the former Soviet Union 
to bail them out with food aid and medicines and those kinds of 
things. As you know, when the former Soviet Union came apart, 
they no longer really helped North Korea, so food aid and 
medicines were not sent, and China doesn't help as much as they 
used to.
    Second, you have a country that is 80 percent mountainous, 
so the growing regions are not sufficient to support the 
country's needs. Their farming methods are the old collective 
system, the old Communist system, and they don't work. They 
have depleted their soil and destroyed much of their land.
    I am not a farming expert. I have had farming experts--
agricultural experts travel with me to North Korea. There are 
few trees; they have torn them down. They also have suffered 
from drought. They have suffered from floods. Anything you can 
imagine that would happen to a country has happened to them. 
Plus, they have a very oppressive regime.
    Chairman Gilman. Mr. Hall, have they made any effort to 
reform their agricultural policy?
    Mr. Hall. They are making some. They are inviting more and 
more people into the country that are agricultural experts. 
They are sending a few of their people outside, particularly to 
Australia. There are farmers in our country asking some of 
their farmers and agricultural experts to come over for a few 
weeks. They are a long way from making reforms.
    Chairman Gilman. With other recipients of food aid we have 
insisted on radical reforms to their economy to ensure that 
those societies can feed themselves in the future. Why can't we 
be more insistent on reforms so that the North Koreans can 
eventually feed themselves? Is there any objection to doing 
that?
    Mr. Hall. There is no objection from me. It is something I 
press them on every time. Every time I press them on it, from 
the standpoint of reforms of their agriculture policy, they 
always say, we are a sovereign nation; this is the way we are 
going to run our government. This is not an easy government, 
Mr. Chairman.
    Chairman Gilman. We recognize that.
    Mr. Hall. If it was an easy government, we wouldn't be in 
there. If it was an easy government, they would be taking care 
of their people. This is not an easy government to get along 
with, so every time you raise the issue of reform they get 
stubborn, they get defensive. They will say, I am a sovereign 
nation; you don't really have the right to ask. But I have 
noticed lately, the past time I was there, that we have had 
some very good talks. They are starting to make reforms, but 
they are gradual. They are very slow.
    Chairman Gilman. Congressman Hall, with regard to taking 
care of their people, what about their resistance to monitors 
to make certain the food assistance gets to the people?
    Mr. Hall. As I said before and one of the things that I 
have taken issue with in the GAO report is the World Food 
Programme checks about 10 percent of the food going in and out.
    Chairman Gilman. So 90 percent of the food is not 
monitored?
    Mr. Hall. Yes, and let me just stress that part. The GAO 
used the figure of 90 percent, like, oh, wow, this is a big 
figure, they are not monitoring 90 percent. We don't monitor 90 
percent any place in the world.
    Chairman Gilman. We monitor more than 10 percent, do we 
not?
    Mr. Hall. No. In most places we do not, especially in 
Ethiopia in the 1980's. The World Food Programme will tell you 
if they spot check 5 percent in other countries that is the 
standard. They do 10 percent in North Korea. So it is twice the 
average.
    Chairman Gilman. Of course, in other countries there is no 
prohibition for monitoring, and it is our capability of 
monitoring. Here in North Korea we find an inability to monitor 
if we wanted to undertake more monitoring.
    Let me ask you a further question. Do you agree that our 
State Department should insist on access to the 9.27 prisons 
for the hungry children?
    Mr. Hall. I think we should continue to press on that, no 
question about it. Wherever hungry people are in the country 
who we can find and get to, we should continue to press it, 
absolutely.
    Chairman Gilman. With regard to your criticism of the GAO 
report and the integrity of the report, my staff had checked 
with GAO and they stand by their report. I regret that some are 
criticizing the integrity of the investigator.
    I want to thank you, Mr. Hall, for being here, and I now 
turn to Mr. Pomeroy.
    Mr. Pomeroy. Thank you very much, Mr. Chairman.
    I have great regard for the Chairman. He does have a bill, 
however, that I believe would affect the continued provision of 
food aid to North Korea, and, in fact, I believe it would cut 
it off. I would like your opinion as an expert relative to this 
matter. The legislation at issue, which has been introduced, 
and in fact is H.R. 1835, would require the following 
conditions to be certified before further food aid could be 
provided, and I will just read them to you.
    ``The government of the Republic of Korea concurs in the 
delivery and procedures for delivery of the United States food 
assistance to North Korea.''
    That one would be met. They strongly do concur that this 
food aid should continue. Is that correct, Mr. Hall?
    Mr. Hall. Absolutely.
    Mr. Pomeroy. Second, ``previous United States food 
assistance to North Korea has not been significantly diverted 
to military use.''
    Do you have thoughts in terms of whether or not we can 
somehow come up with a certification as to all prior food aid 
we have provided?
    Mr. Hall. That is very, very difficult. It is a very hard 
thing to prove.
    From time to time I have had people come to me and say, did 
you see that recent report where the North Korean submarine 
infiltrated the waters of South Korea, and did you see the food 
that they showed? They had canned food, and that shows that our 
food is being diverted.
    I say that is very interesting. We don't give canned goods 
to North Korea. We give food to the World Food Programme, and 
it is brought in by ships--it is brought in as grain in the big 
holds, and then we bag it there.
    So the food that comes into North Korea that might be 
American food is probably bilateral assistance. I have said to 
South Korea on a number of occasions, never send bilateral 
assistance to a government like this because it will never be 
monitored. You don't require it. I have said it also to the Red 
Cross in South Korea, don't give bilateral aid. You can't check 
it. But our aid that goes to the World Food Programme, they 
check 10 percent of it, and that is twice above what they 
normally check in other countries.
    So these stories that we hear about American food showing 
up in North Korean submarines, this is not U.S. food that we 
have donated. It is probably coming from either China or South 
Korea, and it is bilateral assistance. There are about four or 
500,000 metric tons of this that is not monitored. This is not 
U.S. food aid.
    Mr. Pomeroy. A fundamental question seems to be, at a time 
when we have yet, and I don't think we will hear from the GAO 
this morning proof of significant diversion, to place the 
burden on proving no significant diversion without proving the 
diversion is a bit much. What are we going to do? Ask the 
Hermit Kingdom, this bizarre, completely objectionable regime, 
to provide us some kind of big-six Price Waterhouse audit 
trail? I mean, how are you going to meet these conditions? I 
agree that they have a very pernicious impact, even though they 
may not on their face.
    Let me just ask you whether the GAO looked at--beyond 
monitoring--looked at basically the health status of the 
population, from whatever source available, to determine 
whether or not there appears to be some food aid that is doing 
some good.
    Mr. Hall. They never looked at that. There are enough 
significant reports out to show that the food aid is absolutely 
making a difference. I have seen the difference in the 5 times 
I have been there. The last time I was there, in August, it was 
clear that it has made a tremendous difference.
    The biggest problem in North Korea right now is not that 
our food aid is not making a difference; it is that they have a 
tremendous health problem. They have a TB epidemic and all 
kinds of waterborne diseases. They have no medicines in the 
country. They are operating on people without pain medication. 
I always visit hospitals and orphanages. They hold people down 
when they operate on them because there is no pain medication.
    They use the same cotton gauze after they get done 
operating on people. They wash it and dry it on the windowsill, 
and use it again for the next person.
    There are no antibodies in the country. There is a severe 
health crisis. So what's needed next we need--some more 
medicines going into the country, and there are virtually none 
in there.
    Mr. Pomeroy. Secretary Perry has indicated that he has 
observed improving nutrition by just general observation and 
anecdotal report. That apparently comports with your own 
evaluation, and the GAO certainly had some capacity to try to 
gather some of that information as well in making a conclusion 
on food assistance.
    Mr. Hall. They did not gather it. They didn't go to North 
Korea. They got turned down once, and they didn't reapply for 
visas.
    Oftentimes, I get turned down. I got turned down, one time, 
five times. You have to continue to press them to get in. The 
fact is, because of this report, I think GAO--which to me has 
always been a tremendous agency that I have always respected--
to their discredit, they are finished. They are never going to 
get into North Korea with this kind of report because it is not 
accurate. I think they have hurt us; they have hurt the 
Congress. We are not going to get a good report now on North 
Korea from our own people. This is a group that is supposed to 
be independent, and as a result of this report we are not going 
to get true monitoring. We are going the have to depend on our 
NGO's and the World Food Programme, which we always have. They 
are adequate, but it is not the kind of report that we need.
    Mr. Pomeroy. Thank you.
    Chairman Gilman. The gentleman's time has expired. Thank 
you, Mr. Pomeroy.
    Mr. Houghton.
    Mr. Houghton. Yes. Mr. Hall, in trying to wrap this 
together, what does it all mean for us? I mean, the GAO is 
persona non grata, and we shouldn't do bilateral aid and a 
whole variety of things are out there. Do you see any position 
for us over the next 2 or 3 years, other than through the World 
Food Organization?
    Mr. Hall. Mr. Houghton, the food aid is making a difference 
in North Korea. It is making a difference in that more and more 
of their children, their women, their handicapped and their 
older people, are now living as a result of it.
    Second, it is buying us time. If you were to talk to our 
military and our military experts, the ones who are on the 
scene in South Korea--we have 37,000 troops there--they will be 
the first to tell you that this humanitarian aid is making a 
difference.
    I always take military people in with me. They have taken a 
very good look at the situation. They believe that it is making 
a difference. It is bringing peace to a very difficult 
situation.
    South Korea is with us. Japan is with us. We are speaking 
with one voice.
    Third, we never use food as a weapon. We go any place in 
the world where people are starving. We have always done that.
    If you want to take a regime that was very difficult, go 
back to Ethiopia in the early 1980's. The way this government 
came into power was by coming into the cabinet meeting of the 
former cabinet of Haile Selassie, and the leader, Mengistu, 
mowed down everybody with a machine gun. That is how he started 
his government.
    If there has ever been a hideous government, it is that 
one, and we gave them a tremendous amount of food aid. You know 
how we did it? We went around the government. We never gave 
bilateral aid. We gave aid through our NGO's, through the World 
Food Programme, through UNICEF. We trust these people. We have 
worked with them year after year. We believe that they deliver 
tremendous amount of goods with low overhead. We are doing the 
same thing in North Korea. We are doing what we have always 
done. We are not saying we love this government; we don't. We 
are not saying that they are our best friends; they are not. We 
are not saying that we respect them because we have major, 
major difficulties with them.
    What we are saying is, we are helping their people live. It 
is paying tremendous benefits for all the people in the Korean 
Peninsula and for the people who will live because they are 
going to remember who helped them long after this.
    Mr. Houghton. I applaud you and I applaud the efforts of 
those people who have been involved in this.
    I guess you can't really help an entire society by food aid 
programs. You can help certain amounts of people, I don't know 
what the percentage is, but if their trees are all down and the 
farming land is not productive, where does it all go? Is this 
just a Band-aid or is this really the beginning of a 
resuscitation of that economy?
    Mr. Hall. This is a beginning, and it is keeping some 
people alive, probably hundreds of thousands of people alive. 
The kind of reforms that you are talking about--reforestation, 
medicines, hospitals, equipment, agriculture reforms--we can't 
give that. We are prohibited by law from giving those kinds of 
aid programs to North Korea. The only thing we can give is food 
aid.
    Mr. Houghton. Thank you very much.
    Chairman Gilman. Thank you, Mr. Houghton.
    Mr. Hastings.
    Mr. Hastings. Thank you very much, Mr. Chairman, for having 
this hearing; and, Representative Hall, thank you so much for 
your testimony. Let me see if I can go in yet another direction 
to draw on the benefits of the enormous experience that you 
have, Tony, in this arena.
    If you were to analyze just briefly any other report that 
you know of that the GAO may have done regarding food 
distribution in the world and compared this one, how do you 
rate it? I have heard your criticism, but is this standard? For 
example, I'm sure that GAO must have done reports on other food 
distribution programs. Do you follow where I am coming from?
    Mr. Hall. I have followed GAO reports on a number of 
matters, not only food aid but many things that we in Congress 
have asked them to do. I have always been very, very supportive 
and very pleased over their neutrality and how they have looked 
at an issue. I was very surprised at this report when I read 
it. Actually, I didn't believe it. I thought, how did they get 
this report? I have been there 5 times, and they did not ask to 
come see me until their report was finished. My staff asked 
them to come see me. They just came to see me last week. That 
is first.
    Second, they made this report by gleaning what other people 
said, and they kind of twisted it, in my opinion, and took it 
out of context. So instead of saying the World Food Programme 
checked 10 percent, which is 100 percent above what they 
normally do, of food supplies, they missed out on 90 percent. 
That is a kind of twisting of words. I am surprised that they 
did those kinds of things.
    Third, they went to Rome to investigate North Korea. Now, 
how do you investigate North Korea by only going to Rome?
    Fourth, they have raised the standard on what it is going 
to take to help these very difficult governments, whether they 
are Communist governments or whether they are dictatorial 
governments. The standard is now so high that, if we were to 
follow what they have said in this report, we won't be able to 
go anyplace. The places that we could go under this logistic 
are ones that are already helping their people.
    I don't understand GAO. I really don't. It is a very, very 
good agency, but, on this one, there is a lot of criticism 
deserved.
    Mr. Hastings. I guess they would come back and argue that 
the office of the World Food Programme in Rome had some 
accountability issues in dealing with their paperwork, but I 
agree with you. I think it ignores what you know so well and I, 
in a limited way.
    A report like this for example, can discourage the World 
Food Programme where there is no opportunity. It does appear to 
offer a serious rebuttal at this point, and I am assuming at 
some point we will do that. But you and I know for a fact--I 
have been in the southern Sudan when shooting was going on, as 
you have, and the World Food Programme is delivering food 
through Christian factions and the Muslim factions fighting 
each other and fighting against governments at the very same 
time. So they do an enormous job, and it is not certain in any 
instance when you are dealing with a regime like North Korea 
that every ounce of wheat or food that is being distributed is 
going to arrive at its destination.
    I would urge that if we wanted to do one that is serious, 
Russia is going to have serious problems real soon. I stood on 
the streets in St. Petersburg outside a port and laughed 
because I am street smart at how much food, which wasn't coming 
from the United States but was coming from another source, 
wasn't going to the trucks like it looked like it was intended 
to go.
    So you can always find those kinds of things. You can go to 
the ports of New York and find some of it didn't get there in 
the first place. No reflection on New York--this is also true 
in the Miami area. But my point is that somewhere along the 
line, we need to be very, very careful with these kinds of 
reports, because the people that have the responsibility of 
conducting the actual distribution are deserving of more than 
just criticism from afar.
    That is all I have, Mr. Chairman.
    Mr. Hall. If I thought, as I said in my testimony, that any 
of this food was being diverted in any way, I would be the 
first one to say, if it is going to the government and to the 
military, then don't send it to this country.
    Second, every time that I have been in the country, I have 
always met with all the NGO's, including the World Food 
Programme. There are always about 25 or 30 there representing 
the different groups that are working there--European groups, 
et cetera. Every time, I ask them, can you cite for me any 
diversion of food, can you give me anything on that? They have 
always said, we cannot cite one example. Does it happen? I am 
sure it does. But if it was happening in any major way we would 
hear about it. I'm sure we would hear about it.
    Mr. Hastings. Thank you, Representative Hall.
    Thank you, Mr. Chairman.
    Chairman Gilman. Thank you, Judge Hastings.
    Mr. Sanford.
    Mr. Sanford. I thank the gentleman for his great testimony.
    I guess I come from a different school of thought on this 
thing in that, to me, Tony, this is a question about markets. I 
have got a number of young sons, one of whom I am in the 
process of trying to teach to ride a bike. It seems to me that 
if I never, ever let my hands off the back of that bike he 
would, at best, slowly learn how to ride the bike--or more 
likely, never learn how to ride the bike.
    You think about governments--I mean, right now you have got 
Russia target bombing different parts of Chechnya, and yet on 
the other hand, we are indirectly providing aid. It seems that 
a lot of governments can do a lot of things if they are not 
held accountable by the markets. To me, the oil we send in, the 
food that we send in, helps to perpetuate a regime that is, by 
all standards, very, very repressive.
    so, first, I am struggling with the market impact of what 
is going on and how this may, in fact, as the gentleman from 
New York had suggested earlier, be a Band-aid for what is going 
on there. It may, in fact, slow reforms. It may slow change in 
the government. I would ask your thoughts on the element of 
Band-aid.
    The second thing that I would bring up would be what you 
just last said, and that was, if it was, in fact, the case that 
food was being diverted, you yourself would say we shouldn't be 
sending the food. That to me brings this straight back to this 
GAO report. I mean, we talk about GAO like it is something 
abstract, and yet, if I am not mistaken, these are NGO 
investigators back, over your right shoulder, and they are not 
obstructions. If you were to point to one of them and say, yes, 
either one of them is incompetent or one of them has a strong 
bias--I don't think you would say it is that one versus that 
one, or would you? GAO is right there, and they seem like 
professionals, they look like professionals. Every other GAO 
report that I have gotten--most people in government seem to 
think a lot of those reports.
    So I don't understand the idea of relying on GAO reports on 
a consistent basis for other areas of government, but then when 
it comes back to being conflicting saying, well, it doesn't 
make any sense here. Because, again, the people who produced 
it, or at least components in the production of it, are 
standing there over your right shoulder.
    Mr. Hall. That is a good question. I have come here to talk 
about the GAO report because I was very worried about the 
Chairman and the Members, about the kind of bill that they may 
have introduced in the past couple of months. If we had to 
follow it, you would have to cut-off aid to North Korea because 
there is no way we can fulfill those conditions.
    When I heard the GAO was going to do a report, I said to 
myself, good, great, let us take a neutral look at this. I have 
been there 5 times. You know what? I still don't understand 
this place. It is difficult. They hide so much.
    Yet I have eyes. I know what I am looking at, and I know 
what I am seeing when I go into hospitals and orphanages and 
schools. When I go up-country and I stay up-country, I can just 
walk around and see it. But they had a chance, too, to go there 
if they had pressed it. They asked once, and they got turned 
down. Everybody gets turned down. The Chairman's gotten turned 
down, but he has also had some of his people go into the 
country.
    GAO didn't talk to me. They don't have to talk to me, but 
they could have talked to some other people that have been in 
there. They could have pressed their point. They could have 
cited reports that would show that the food aid and the 
programs there are working.
    What I am concerned about is that report was written in 
such a way that, if I was reading it and never had visited 
North Korea, I would say, well, maybe we shouldn't give them 
food aid because it is probably being diverted.
    Mr. Sanford. So you are saying one of those folks right 
back there has a bias against North Korea?
    Mr. Hall. I can't point my finger at anybody, and I 
wouldn't do that. What I am saying is their report is biased, 
and it is not accurate.
    Mr. Sanford. That would be your opinion.
    Mr. Hall. That is about as clear as I can get it. That is 
my opinion.
    The other thing, what you said in your first part, North 
Korea can take care of themselves. These people are very 
difficult people, but they are hardy, they are hard workers. 
There is no heat in the country. There is no power in the 
country. All the factories are closed down. The people are all 
stunted, the children, I mean. There are so many orphans in the 
country it is unbelievable. There are hardly any senior 
citizens left. You don't see them anymore. A lot of them died.
    The situation is so bad that if you were there and you came 
with me to see this, you would say to yourself--our policy in 
this country has never been to use food as a weapon. We have 
said we would always help a hungry person, and we have always 
done that. We have never held back.
    If you want to hold back on nuclear programs, you want to 
hold back on development assistance, you want to not lift 
sanctions, those kinds of things because of their policy on 
missiles, that is one thing. But never hold back food and 
medicines, and we never have. I guarantee if you saw these 
people die, you would say these people don't know anything 
about this government. They want to live, they just want to 
make it. You would say, those are my children. Those are human 
beings, and we should help them, period. That is all I am 
saying here.
    If this GAO report was used in conjunction with this bill, 
all aid to North Korea would be cut-off, I guarantee you. We 
are the biggest supplier of food to North Korea, and so that is 
why I have come here in such a very strong way against this 
report. I am surprised at GAO because I know that they are much 
better than this.
    Chairman Gilman. Thank you, Mr. Sanford.
    Mr. Ackerman.
    Mr. Ackerman. Thank you, Mr. Chairman.
    If I can take the liberty of disagreeing with my colleague, 
you are a big deal. I have served in this body for over 17 
years, and I have carefully followed your work over that time. 
You have so successfully filled the shoes of the legendary 
Mickey Leland, and in a way that is so quiet and without 
calling any attention to yourself in a selfless fashion, 
traveling to so many places to care for those that need, that I 
think that you are one of the true heros of this Congress.
    Mr. Hall. Thank you.
    Mr. Ackerman. There is nobody that I know of in this 
Congress, either body, that has done the kind of work that you 
have done on behalf of hungry and starving children all over 
the world. You have the admiration not just of myself, but 
anybody who has followed these issues, and your credentials are 
absolutely impeccable.
    That being said, North Korea is indeed a pretty sorry 
place. There are children and people that are starving, without 
question. There is food that is going there that is inadequate, 
and we sit here and quibble about whether or not some of the 
food is being diverted.
    I have been to North Korea as well. I know that in that 
nation of a little over 20 million people, which means about 10 
million men, probably 7 million of which are of fighting age, 
of which there is a million men standing army, North Korea has 
one of the largest standing armies in the world. You add that 
up, plus all of those in the reserves, and everybody in the 
country anywhere near the capital, at least, is in uniform. In 
addition to the standing army, there are millions and millions 
who are also part of the army.
    If you have a country where all of the people are in the 
military, how many children--this is a rhetorical question--how 
many children are not the children of soldiers? Innocent 
children, most of them have fathers who wear uniforms and carry 
guns. Do they not get fed?
    That is not to say that the army is supposed to divert the 
food. It is supposed to be distributed in an equitable way. But 
is there any country to which aid is given, either from 
external sources or from within--can we say that the food that 
we have for people who are on welfare is distributed without 
any diversion? Do we have waste and fraud and diversion within 
our system? Do we not fight that in this Congress all the time? 
Is it not those who disagree with providing aid to the poor 
altogether who just narrow in on the aspect of let us not do 
this because it is not distributed 100 percent efficiently?
    We have fought those fights together, and I think we have 
to be cognizant of those nonissues when we deal with North 
Korea as well.
    One of our colleagues before brought up the issue of market 
impact in North Korea. Is there a market? You have been there 
five times. Is there any market in North Korea?
    Mr. Hall. There is no market there.
    Mr. Ackerman. So there is no market impact on anything?
    Mr. Hall. If there is a market, it is illegal.
    Mr. Ackerman. Markets are illegal. So there is no market 
impact on anything, it is a complete nonissue, and those who 
are familiar at all with the area know and understand that.
    You are zeroing in on the GAO report. The GAO is an office 
that we have had tremendous confidence in over the years. I 
think that it is regrettable that there has been so much doubt 
cast upon this particular report, and I think that perhaps this 
should not spill over on to the entire agency.
    But a question was asked before that had me a little bit 
confused. That was, did the author of the report have any bias 
against North Korea? I would ask if the author of the report, 
in your view, had any bias against the World Food Organization?
    Mr. Hall. I don't know a lot about this. This continues to 
come up frequently since this report came out. What I have 
heard is that one of the investigators, one of the persons who 
had something to do with this report, applied for a job with 
the World Food Programme a few years ago. It was a very good 
job, and he was turned down. Some people have felt that that 
played a part in this report. I don't know.
    My staff asked Mr. Nelson about this, and he assured us 
that they would look into this potential problem.
    Mr. Ackerman. Thank you. I think the next panel should 
expect that we will ask that question.
    One further comment, if I may, Mr. Chairman. One of our 
colleagues brought up the analogy of teaching children to ride 
a bicycle. Sometimes you have to let go of the bicycle, 
otherwise they don't learn how to ride a bike. I taught my 
children how to ride a bicycle, too, but in putting them on the 
bicycle the first time, I wouldn't let go as they were going 
down a 45 degree incline toward the river.
    The other thing is, when we talk about maybe we should go 
in and insist, as we do elsewhere, that people get their house 
under control economically, that they put in certain reforms 
before we help feed them. We don't do that. When children are 
starving, we don't rush in to the family and say, well, let me 
take a look at how you are keeping your checkbook or what you 
are spending your money on. You feed the children first as you 
work on the politics and the program in another forum. I don't 
think that we should take out the politics. I would ask you to 
comment on that--to take out the politics of a country that is 
one of the most repressive regimes in the world on the poor, 
innocent children that are going to have to grow up within that 
regime.
    Mr. Hall. First off, Mr. Ackerman, I appreciate your 
statement. What you said about me was very kind. It is not 
true, but it is very, very kind. I love hearing it, and I 
wished I could make a statement after that as well as you could 
the way you have articulated this whole situation.
    This is a particularly difficult situation, the Korean 
Peninsula, and not only because people are starving to death, 
which we are trying to address. The fact is we have 37,000 
American troops there, so the food shortage is very relevant to 
us. It is also very relevant to the South Koreans, because they 
are within a short missile range where a lot of damage could be 
done very quickly. At any one time we have several hundred 
thousand Americans in Seoul, which is very close to the DMZ.
    There are so many things involved with this. First, it is 
the right thing to do because we don't use food as a weapon, we 
are helping people to live, and there has been a big change in 
North Korea toward us as a result of that.
    Second, and this is something I cannot overemphasize, our 
military people in South Korea have said to me, time and time 
again, can't you keep the rhetoric in Congress down on the 
North Koreans? We believe this humanitarian aid, the trips that 
I have taken, and the Perry trip have really helped. Can't you 
keep the rhetoric down? It is very dangerous here, it is a very 
stressful time, especially with the rhetoric coming out of 
North Korea, the missile tests, et cetera, This food aid has 
made a tremendous difference, and it is helping with the peace 
process. The fact that the President lifted the sanctions 
bought us a lot of time, a lot of time.
    The bottom line in North Korea and other countries in 
crisis, is government people and military people, they never 
die. They always have food. They have their own reserves. They 
grow their own food. They are probably getting a significant 
amount of their own food for government and military people 
from China as bilateral aid that is not monitored.
    Our aid is monitored as best we can. We can do much better, 
and we are always pushing. I remember when the World Food 
Programme only had three people in the country. Now they have 
100, and a good portion of them are monitors. We are not 
monitoring as best we could, but we are making checks. I myself 
have seen food being delivered to people in very small villages 
to take home. That doesn't say that there isn't some kind of 
diversion.
    We are doing the right thing. It is a difficult political 
climate, but I can't tell you how proud I am of this country, 
of our staying in there in a most difficult situation and 
helping people we don't know a whole lot about, people who have 
been sheltered in this Hermit Kingdom for 50 years. If 
everybody in this room here was sheltered for 50 years in this 
room, without getting out, as soon as we got out the door we 
would seem kind of strange to other people as well. That is 
what has happened. They are changing gradually.
    Chairman Gilman. Gentleman's time has expired.
    We are pleased to be joined today by the gentlelady from 
Florida, Mrs. Fowler, who is a Senior Member of the Armed 
Services Committee and also a Member of the Speaker's Task 
Force on North Korea. Mrs. Fowler.
    Mrs. Fowler. Thank you, Mr. Chairman, and I want to thank 
Congressman Hall for all that he does and continues to do for 
needy people around the world.
    I share the views of my colleague who spoke earlier, 
because I know how much you do and how much you care in your 
efforts. You have been to North Korea probably more than any 
other Member of Congress, so you do have a great knowledge and 
better understanding than many of us of what is going on there. 
But I also share some of the concerns that have been expressed 
by some of my colleagues. When you use a phrase like ``buying 
time'' when we are giving this aid, my view is that it bought 
them time to make more nuclear weapons.
    This is a regime that, I think, we have to trust but 
verify. We have to work with them and move forward together, 
but we have to verify every step of the way, whether it is food 
aid or fuel aid or whatever kind of aid we are giving. But, as 
you have said, it is very difficult to understand how they 
operate and what they do.
    I would just like to ask a question that you alluded to 
earlier on, and it has been of concern to me. In going back to 
this reference of riding a bicycle and whether you do or not 
depends on how you learn, one of the factors that hasn't 
received much discussion in the GAO report is the environmental 
policies in North Korea. Those directly relate to production of 
food. You refer to the deforestation that you have seen 
throughout the country. There are a lot of other unwise 
environmental policies that the country has followed which have 
contributed to a lot of the disasters that they have 
chronically, and that have an impact on their food production.
    So I just am interested, in light of this massive food aid 
program that we have that is ongoing with them today, what if 
anything our government is doing, or do you think we should be 
doing in terms of insisting on some changes in their 
detrimental environmental policies? Because, again, they will 
never get to the point of being able to sustain themselves in 
food production if we don't do some of that, too. We are ready 
to force environmental policies. We want to on trade agreements 
with other nations. What are we doing with this nation as far 
as trying to get them to move forward in that area? Do you have 
any information on that? I didn't know. . .
    Mr. Hall. First off, we are not doing anything. We can't. 
We are limited by law because we cannot be part of any 
development assistance for this country. Until that law 
changes, we cannot contribute or be part of any reforestation, 
agriculture reforms, or other developments.
    There are some reforms that North Korea has agreed to with 
UNDP, a package of environmental and agriculture reforms.
    Mrs. Fowler. That is what I meant as our insisting on some 
of these types of reforms--conditioning our aid, our food aid, 
our fuel aid, or any of these types of aid on that being part 
of it--that we are not doing it for them, the reforms, but they 
themselves in working with the appropriate groups.
    Mr. Hall. I see nothing wrong with conditioning development 
assistance on certain reforms. I don't see any problem with 
that at all. I think we should. I have problems with putting 
conditions on food assistance.
    Mrs. Fowler. On fuel or things like that?
    Mr. Hall. There should be no conditions, period. Give food, 
keep people from dying. That is it, period. That should always 
be our policy. That has always been the policy of our 
government. We have always had that policy, even toward the 
worst regimes of the world, and that should always be our 
policy.
    These other policies, agricultural aid, environmental aid--
the reason there are no trees in the country is because they 
don't have any power. People are going up in the hills and 
cutting all the trees down. If you stay up-country, out of 
Pyongyang--a lot of people just go into Pyongyang, they see 
people look a little bit better, they are dressed a little bit 
better--but you get out of the capital, there are no plants 
working. There is no heat in any hotels. There is no power in 
the hospitals. People are walking everywhere. You can be on the 
road and you will never see a car, or the only thing you will 
see is maybe a military truck. That is it. They don't have 
power. So what they are doing is they are going up into the 
hills, and they are cutting the trees down.
    Mrs. Fowler. As you know, part of our effort is to help 
them with their power. I have deep concerns about what this 
Administration is working out. We were in a briefing, the 
Chairman and I, a couple of weeks ago when we received 
information that is not classified--some of what we got is 
classified--that the two light-water nuclear reactors that the 
Administration is moving forward to allow the North Koreans to 
have are such that they could produce several score of nuclear 
weapons a year with the plutonium drawn-off of them versus the 
one they had been using which could only produce a handful, and 
that there are other forms of producing electricity. If this 
was a country really interested in producing electricity for 
their citizens and really interested in peace, there were other 
manners in which this could have been done.
    I do worry about the Administration sacrificing the short-
term together with the long-term national security of the 
United States of America, and I think that is something we have 
to continue to work on. That isn't a subject for which you are 
here today, but those types of things color the way many 
Members of Congress look at it.
    Mr. Hall. I am not an expert, Mrs. Fowler, on the nuclear 
reactors and the 1994 Agreed Framework in that program, but I 
did read the various debates and excerpts from the last debate 
you had on it. I think Mr. Cox referred to a capability to 
produce several hundred nuclear missiles. That has been 
refuted. That is not correct. As a matter of fact, I think 
there is a report here today by scientists saying that there is 
no way----
    Mrs. Fowler. They are definitely going to throw-off several 
hundred kilograms of plutonium per year, and the answer we get 
is, well, it is not, ``weapons-grade plutonium''. It can be 
used to make nuclear weapons. We have had scientific testimony 
about that.
    Mr. Hall. Here, again, I am not an expert. This report just 
came out today to the Committee. So I think they don't feel 
that what Mr. Cox said was accurate.
    Mrs. Fowler. Mr. Cox was in the same briefing I was in, and 
Dr. Graham, who provided us with that testimony, is pretty 
knowledgeable in that area. We all want to help them with 
providing electricity. As you say, part of the key is getting 
heat, getting electricity, but we prefer to do it in manners in 
which it would be used peaceably and not used against us, but 
that is for another day.
    Thank you very much for all that you do and continue to do 
around the world. You really set a good example for everyone.
    Mr. Hall. Thank you.
    Chairman Gilman. Thank you, Mrs. Fowler.
    What report were you referring to, Mr. Hall?
    Mr. Hall. This is by the Institute for Science and 
International Security. It is titled, ``Light Water Reactors 
and Nuclear Weapons in North Korea''. It says, ``Let's Be Fair 
with Our Comparisons'', and it is a report that just came out 
today. I haven't even read it.
    Chairman Gilman. What is the date on that report?
    Mr. Hall. October 27th.
    Chairman Gilman. We will be pleased to make it part of our 
record, without objection.
    We want to thank you, Mr. Hall, for your time and for being 
here with us and for your observations which I am certain will 
be of help to our Committee. Thank you, sir.
    Mr. Hall. Thank you, Mr. Chairman.
    [The information referred to appears in the appendix.]
    Chairman Gilman. We will now move to our second panel.
    I would like to welcome the next panel comprised of 
Benjamin Nelson, Director of International Relations and Trade 
Issues with the General Accounting Office; and Ms. Gary Jones, 
Associate Director for Energy Resources and Science Issues, 
Community and Economic Development Division of the General 
Accounting Office.
    We welcome both of you. Please feel free to summarize your 
statements. We will submit your entire statement for the 
record. I would ask our Members to withhold their questions 
until your testimony is complete.
    Chairman Gilman. Mr. Nelson, you may proceed as you wish.

STATEMENT OF BENJAMIN NELSON, DIRECTOR, INTERNATIONAL RELATIONS 
          AND TRADE ISSUES, GENERAL ACCOUNTING OFFICE

    Mr. Nelson. Good morning, Mr. Chairman and Members of the 
Committee. I am pleased to be here today to discuss certain 
issues relating to food aid to North Korea.
    Let me say at the outset, we fully recognize the many 
interests that the United States has in connection with North 
Korea. While our food aid has been provided for humanitarian 
reasons, this is but one of many North Korean issues which are 
of interest and concern to the United States.
    I also would like to make clear that we recognize the 
difficulty of the situation in North Korea. We also understand 
the conditions under which the WFP is operating, and I would 
like to make clear that we do not doubt that there are problems 
in North Korea caused by a food shortage.
    The humanitarian challenge in North Korea is real. While 
there are differences of opinion regarding the severity of the 
conditions, there is no disagreement that much human suffering 
has resulted from the past and current food shortage. In 
addition, based on available information, it appears that 
women, children and the elderly are bearing a disproportionate 
share of this human suffering.
    The WFP has taken special steps to deal with the challenges 
associated with this food shortage, including various 
constraints imposed by the North Korean government. 
Specifically, they have assembled a comparatively large country 
presence and have developed monitoring procedures that are more 
extensive than in many other food aid countries. There is 
general agreement among U.S. Government and NGO officials that 
the WFP is trying hard and doing well under very difficult 
circumstances. Moreover, there is evidence that outside food 
aid is making a difference, especially in the case of 
malnourished children.
    Given this background and, hopefully, the required context, 
I would now like to address the primary subject of my 
testimony, namely, what is being done to provide accountability 
for U.S. Government donated food aid to North Korea. My 
statement is based on the results of our recently issued report 
to this Committee on that subject.
    As has been established, the United States is one of the 
largest donors of food aid to North Korea, with cumulative 
donations of about $365 million since 1996, and most of this 
aid is channelled through the United Nations World Food 
Programme. The U.S. Department of State says that this food aid 
is being provided for humanitarian purposes, but believes that 
donations may also improve the climate for bilateral relations 
generally.
    Our charge was, first, to examine whether the WFP can 
adequately account for U.S. Government donated food aid to 
North Korea and, second, to prevent possible diversions of food 
aid to the military and ruling elite. I would like to point out 
that we were not tasked to determine whether food aid is 
needed, the impact of the food aid, the living conditions of 
the citizens of North Korea, nor whether the food aid program 
should be continued.
    In short, the answer to the specific questions that we were 
asked to address, recognizing that context is always needed for 
policymakers, the simple answer, the inescapable answer, is 
that the WFP under current conditions cannot provide assurance 
that the food is being stored and used as planned. That is our 
primary conclusion, and I believe that any analysis of the 
facts we observed would lead to that same conclusion, and it is 
consistent with the views of numerous other organizations who 
have experience in North Korea.
    I would like to point out that we base the conclusion that 
the WFP doesn't have reasonable assurance upon three basic 
building blocks. The first one is that the North Korean 
government limits the ability of the WFP to assure 
accountability. The government controls the distribution of 
food and restricts the WFP's ability to monitor how the food is 
used. In other words, there are no independent checks on 
locations where food is distributed. Independent, random visits 
are not permitted, and the WFP is working in an environment 
where it does not have complete information about the number, 
name and location of institutions or the number of 
beneficiaries.
    The second major reason is the limitations in the tracking 
system that is used in North Korea. While food is tracked from 
the port to country warehouses, deliveries to institutions that 
actually distribute the food are not tracked.
    The third principal reason is that the North Korean 
government has not provided the kind of audit reports that are 
normally found in a food aid situation. The government to date 
has not provided a single one of the reports that are required 
in the agreement with the WFP.
    In conclusion, Mr. Chairman and Members of the Committee, 
the WFP and U.S. officials have emphasized that there is no 
evidence of significant diversions to military or government 
elite. However, due to North Korean constraints, the WFP is 
unable to provide independent assurance that food aid 
distributed by North Korean authorities is reaching targeted 
beneficiaries, and we view this as an essential element of 
accountability over U.S. donations. We make recommendations 
aimed at improving accountability by using diplomatic means to 
encourage North Korea to allow greater oversight and by 
encouraging the WFP to provide comprehensive and timely 
reporting on food aid distribution within North Korea.
    Mr. Chairman, this concludes my opening statement. I will 
be pleased to answer any questions about our work or any of the 
other matters that have been raised here today regarding the 
GAO.
    Chairman Gilman. Thank you, Mr. Nelson.
    [The prepared statement of Mr. Nelson appears in the 
appendix.]
    Chairman Gilman. Ms. Jones.

  STATEMENT OF GARY L. JONES, ASSOCIATE DIRECTOR FOR ENERGY, 
     RESOURCES AND SCIENCE ISSUES, COMMUNITY AND ECONOMIC 
DEVELOPMENT DIVISION, GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY 
      PHILLIP THOMAS, EUGENE E. ALOISE AND RICHARD SELDIN

    Ms. Jones. Thank you, Mr. Chairman.
    My remarks this morning are based on our report on the 
status of heavy fuel oil delivered to North Korea under the 
October 1994 U.S.-North Korea Agreed Framework. I want to 
discuss the two areas we reported on.
    The first area is the status of heavy fuel oil funding and 
deliveries. As of July 31st, 1999, 1.9 million metric tons of 
heavy fuel oil had been delivered to North Korea at an 
approximate cost of $220 million. Contributions by the United 
States, the European Union and 21 other countries, as well as 
loans, financed these purchases.
    For the first 3 years of the 1994 Agreed Framework's 
implementation, shipments to North Korea were not regular and 
predictable because KEDO did not always have sufficient 
funding. For the past 2 years, shipments have been more regular 
due to increased funding from the organization's members and 
other countries and decreasing commodity and freight prices. 
However, a recent rise in these prices resulted in KEDO 
requesting additional funds to pay for this year's remaining 
scheduled deliveries. The United States provided a little over 
$18 million to cover these deliveries, bringing the total U.S. 
contribution for fuel oil purchases to about $157 million.
    The second area we reported on is the controls in place to 
detect the diversion of heavy fuel oil and any limitations to 
these controls. The U.S. State Department and KEDO began 
implementing a monitoring system in 1995. The purpose of this 
system is to ensure that the seven North Korean heating and 
electricity generating plants that are authorized to use KEDO-
supplied oil use it only for heating and electricity 
production. KEDO's portion of the monitoring system consists of 
meters that measure the flow of heat to boilers, recorders that 
compile daily and cumulative information on flow rates, and 
periodic monitoring visits to each plant.
    KEDO has experienced recurring problems with its monitoring 
system. Monitoring equipment installed at each of the seven 
sites did not work at various times since it was installed. 
However, neither KEDO nor its contractor, Fluor Daniel, has 
found evidence of tampering with the equipment that could have 
caused these outages. Rather, they attributed these problems to 
power outages and widely fluctuating electrical frequency at 
the facilities that is akin to power surges and drops. 
Equipment that was initially installed to compensate for the 
fluctuations did not completely fix the problem. However, KEDO 
hopes that more advanced equipment recently installed will 
allow for continuous monitoring.
    KEDO's monitoring system by itself is not designed to 
provide complete assurance that the heavy fuel oil delivered to 
North Korea is being used as prescribed by the 1994 Agreed 
Framework. For example, KEDO does not monitor the tanks and 
excavated open pits that store some KEDO-supplied heavy fuel 
oil at delivery ports and at plants where it is being consumed. 
Also, monitoring equipment is not installed on the numerous 
rail cars and pipelines used to transport the heavy fuel oil 
from the delivery ports to storage, then to the plants where it 
is consumed.
    A January through April, 1999, outage of KEDO's monitoring 
equipment at the Sonbong Thermal Power Plant illustrates the 
limitations of KEDO's monitoring system. During this period, 
North Korean data, which was all that was available since 
KEDO's flow monitors were not working, reported that heavy fuel 
oil was being consumed at levels substantially exceeding those 
historically recorded at Sonbong. North Korean data were based 
on the levels of heavy fuel oil in the plant's storage 
facilities. However, since flow meters didn't work and KEDO 
does not monitor storage facilities, it could not verify North 
Korea's statistics or their explanation as to why the oil 
consumption was high.
    To supplement KEDO's monitoring system, the U.S. Government 
uses national technical means to provide additional confidence 
that the heavy fuel oil is being used for heating and 
electricity generation. The U.S. State Department reported to 
the Congress in March, 1999, that KEDO's monitoring system, 
along with these national technical means, give the Department 
confidence that the heavy fuel oil has largely been used as 
prescribed by the 1994 Agreed Framework. While they admit that 
it is theoretically possible to extract other types of fuel 
from this oil, State Department officials believe that the 
process would produce such a small amount of more useful fuel 
that there would be little incentive to do so. State Department 
officials have acknowledged that over 5 years perhaps 5 
percent, or 75,000 metric tons, of heavy fuel oil has been used 
for unauthorized purposes. According to State, however, there 
is no clear evidence of any significant diversion to 
unauthorized purposes.
    Thank you, Mr. Chairman. That concludes my remarks.
    Chairman Gilman. Thank you very much.
    [The prepared statement of Ms. Jones appears in the 
appendix.]
    Chairman Gilman. Did any of our other panelists wish to 
testify?
    In that case, I note that your work did not include a visit 
to North Korea, Mr. Nelson, to perform independent checks on 
food distribution locations. What were your efforts to try to 
get into North Korea, and what was the disposition of those 
efforts?
    Mr. Nelson. Mr. Chairman, we did try to visit North Korea, 
but I would like to put the visit in perspective. We tried to 
visit North Korea, and we were supported by the U.S. State 
Department, as well as the World Food Programme, but we were 
ultimately denied visas.
    We were working to produce a report in time that was needed 
by the Congress, and we put forth a great effort. 
Unfortunately, we were not allowed to get in.
    But the fact that we did not visit North Korea does not 
diminish the quality of our findings and observations. If we 
had gone to North Korea under the same conditions that the WFP 
has to operate under, we would have been controlled, and we 
would not have had independent access to the distribution 
facilities.
    So, under this scenario, normally it would be GAO's 
practice to visit locations to see firsthand what is going on, 
but typically we have freedom of access or we have the ability 
to select the locations that we visit. In this particular case, 
we would not have had the freedom to do so. However, I must 
admit that a visit would have been beneficial in that we would 
have had a firsthand observation.
    Chairman Gilman. Mr. Nelson, have you had an opportunity to 
monitor food distribution in other countries where we provide 
aid? Has your agency monitored or assessed the competency of 
our food aid to other countries?
    Mr. Nelson. That is correct, Mr. Chairman. GAO has done 
extensive work in this area and has monitored specific food aid 
efforts in different locations. The primary difference in this 
case is the independence and the access.
    In the other food aid countries, the WFP and other 
officials have much more freedom to select the institutions, to 
do random spot checks and to have more control over the 
handling and distribution of the food. The reports that we have 
seen from all of the members of the consortium that are working 
there is that their access to the institutions is limited, and 
in some cases, the response to those visits are seemingly 
staged such that all of the numbers add up. All of the 
statements can support the same type of outcome.
    Chairman Gilman. Mr. Nelson, did you have an opportunity to 
speak to any of the country directors of the World Food 
Programme in North Korea, from North Korea?
    Mr. Nelson. Yes, sir, we did. I did not personally speak 
with the country director. The members of my team did. Mr. Phil 
Thomas, who is on my left here, in fact had quite a lengthy 
conversation with the country director. He can respond to any 
specific questions you might have or just elaborate on what I 
said.
    Chairman Gilman. Mr. Thomas, would you be kind enough to 
tell us something about that discussion you had with the 
country director?
    Mr. Thomas. We met with Douglas Broderick when he was on 
home leave in July this summer, and essentially it was an 
attempt to get general information on the WFP's program.
    Chairman Gilman. What did Mr. Broderick have to say about 
his capability in monitoring the food aid to North Korea?
    Mr. Thomas. That they were constantly working with the 
North Koreans to improve monitoring and accountabilities, and 
that the system was not perfect but that they were trying very 
hard to upgrade the system.
    He was an advocate of our getting into North Korea. He 
wanted to assist in the approval of our visas, and we were 
confident we were going to get in, up until the day before we 
were to go and our trip was canceled.
    Chairman Gilman. Mr. Thomas, did you ask at the U.S. State 
Department for help with obtaining visas for that?
    Mr. Thomas. We did.
    Chairman Gilman. Did they try to assist you?
    Mr. Thomas. That was our understanding, Mr. Chairman. We 
spoke to officials at State, AID, USDA, and WFP, and they all 
were strongly supportive of our getting into country. I believe 
PVOC members were also supportive of us getting into country.
    Chairman Gilman. Mr. Hall testified that had you made 
sufficient, adequate attempts to get in, you probably would 
have been granted a visa. What is your opinion?
    Mr. Thomas. We have no prior experience in attempting to 
get into North Korea. We tried vigorously to get in, but we 
were on a very tight timeframe because we were required to get 
a report to you by the end of September or early October. We 
had constructed a timeframe to go into North Korea in early 
August, and we got the response the day before saying that they 
did not want us in. Through intermediaries we were told that 
they felt they had enough monitoring and auditing, and that our 
trip was unnecessary. We felt it was a fairly strong response.
    Chairman Gilman. I understood they listed about 10 reasons 
why you would not be granted a visa.
    Mr. Thomas. This is correct, but essentially they boiled 
down the fact that they were being adequately monitored by the 
WFP.
    Chairman Gilman. Did Mr. Broderick have any information 
with regard to diversion of food assistance?
    Mr. Thomas. He did not. He said that there may be minor 
diversions, I think as Congressman Hall may have referred to 
earlier, but that generally the system was pretty tight.
    Chairman Gilman. Thank you very much, Mr. Thomas.
    Mr. Nelson, in light of our larger national security and 
humanitarian concerns regarding North Korea, what exactly is 
the importance of accountability in this case?
    Mr. Nelson. Mr. Chairman, I think that has been established 
earlier, I believe, by Congressman Hall in that our objective 
is to feed the hungry and provide food to those with the 
greatest need. Our goal is to provide food for children, women 
and the elderly. Accountability is important to assure that 
those objectives are being met, that the food is, in fact, 
going to those who are most in need, and that is an essential 
element for continuing support of the program.
    Chairman Gilman. Mr. Nelson, you heard the prior testimony. 
One of your investigators was personally attacked. Do you have 
any statement you would like to make about that?
    Mr. Nelson. Yes, I would, Mr. Chairman.
    Chairman Gilman. Please.
    Mr. Nelson. First of all, I would like to say that the 
assertions that were made concerning an individual of my staff 
were thoroughly looked into and found to be without merit.
    Second, the GAO product is an institutional product. Every 
report that leaves the GAO undergoes a rigorous review by 
disinterested third parties, as well as scrutiny by each level 
of senior management, by the way, which is a frequent complaint 
of the staff, that they have to go through too many hurdles to 
get their reports out. Nevertheless, that process has served us 
well over the years, and this product underwent the same kind 
of scrutiny that any other GAO product would go through. There 
are procedures in our process to assure that no one individual 
can influence the outcome of a message and that counter 
positions are fully disclosed and developed.
    So, the allegation involves whether a person at GAO 
actually applied for a job at the WFP, and in fact that is 
true, but it is irrelevant to the quality of this report.
    Chairman Gilman. Thank you, Mr. Nelson.
    Mr. Ackerman.
    Mr. Ackerman. Thank you, Mr. Chairman.
    It is just unfortunate and regrettable that happenstance 
has taken place, because it certainly has created a cloud of 
confusion, shall we say, as to the veracity of the report 
itself.
    Despite the fact that it can go through as many procedures 
as possible by staff and senior staff, nobody could disagree 
with anything that anybody would say in this matter, as a 
matter of fact, because nobody has been there. That is 
basically the premise of your report, that you couldn't get in 
to monitor what the World Food Programme was actually doing. 
Isn't that accurate?
    Mr. Nelson. That is correct, sir.
    Mr. Ackerman. I will do my last question first. Is the 
World Food Programme doing a good job in North Korea?
    You can look at me. You don't have to look at the Chairman 
when you say it.
    Mr. Nelson. I would have to say the consensus is they are 
doing quite well under very difficult circumstances.
    Mr. Ackerman. I will take that as a yes. The 
circumstances--they are not able to change the circumstances to 
do a better job. Are they doing the best job they can under the 
circumstances?
    Mr. Nelson. Sir, I wouldn't be able to render an informed 
opinion as to whether they are doing the best they can do. What 
I can say is that the plan or strategy that they developed for 
North Korea would be more aggressive than other situations. 
However, we have to go back to my earlier statement that says 
they have not been able to implement that plan.
    Mr. Ackerman. Through no fault of their own?
    Mr. Nelson. Through no fault of their own.
    Mr. Ackerman. Is there a way, in your opinion, that they 
could have done a better job?
    Mr. Nelson. I think there is some discretion regarding 
whether to delay a shipment or to impose other penalties that 
the WFP could possibly use, but I think overall, the consensus 
is they are doing a fairly good job there.
    Mr. Ackerman. That is a very important statement, and I 
appreciate that.
    You say that you were under a time constraint to get this 
report to the Chairman. You said before, in answer to his 
question, that you were basically rushed. Why were you under a 
time constraint to rush this report to the Chairman?
    Mr. Nelson. Mr. Congressman, I don't believe I said that we 
were rushed.
    Mr. Ackerman. You said, ``we operated under a time 
constraint, as you know, Mr. Chairman, to get this report to 
you''.
    Mr. Nelson. Yes.
    Mr. Ackerman. Why were you rushed to get the report to the 
Chairman?
    Mr. Nelson. Congressman, we try to honor the requests that 
we get from you all regarding when you need a particular 
product, and we work with you on the scope of work.
    Mr. Ackerman. Did you advise the Chairman, or is it 
anywhere in the report, that you could have done a better job 
had you not been rushed?
    Mr. Nelson. No, sir, it is not, because I believe that the 
product we produced will meet all of our relevant standards for 
both quality of evidence, clarity of presentation, as well as 
sources of information.
    Mr. Ackerman. Could you tell us what percentage of the food 
is diverted to the army?
    Mr. Nelson. We have no information that food is being 
diverted to the army.
    Mr. Ackerman. None whatsoever?
    Mr. Nelson. We are not aware of any.
    Mr. Ackerman. Can you tell us what percentage of the oil is 
being diverted to the army?
    Ms. Jones. We could discuss that with you, Mr. Ackerman, in 
a different venue.
    Mr. Ackerman. I appreciate that, but there is no way of 
telling what amount of food, if any, is being diverted to the 
army. I think that you have run into the same problem that the 
World Food Programme has run into, that the U.N. has run into, 
that the IAEA has run into, to walk North Korea back from the 
precipice of nuclear calamity, and that is, you really can't 
get in. You do know that there are starving people in North 
Korea?
    Mr. Nelson. Yes, sir, that is very well established.
    Mr. Ackerman. Very well established. You do know it is the 
policy of this country to try to assist those people that are 
starving?
    Mr. Nelson. I understand that, sir.
    Mr. Ackerman. We are doing that to the best of our 
ability--the World Food Programme is, as you said before, to 
the best of their ability under the circumstances?
    Mr. Nelson. Under the circumstances.
    Mr. Ackerman. I appreciate it. Thank you very much. Your 
testimony has been very helpful today.
    Chairman Gilman. The gentleman's time has expired.
    Mr. Knollenberg, who is here with us from the Foreign 
Operations Subcommittee of the Appropriations Committee, and 
also serves as a Member of the Speaker's Task Force on North 
Korea. Mr. Knollenberg.
    Mr. Knollenberg. Mr. Chairman, thank you very much. I 
welcome the panel.
    I want to focus on the oil issue, specifically the 
diversion matter. I appreciate the idea that we can get some 
facts on the table regarding the Administration's policy with 
North Korea. I know some Members have expressed concerns about 
partisanship in this process, but, when the dust settles from 
all of that, I am afraid we all have no choice but to deal with 
the facts. Having been, as the Chairman mentioned, a Member of 
the Appropriations Subcommittee on Foreign Operations since we 
first started funding the Administration's 1994 Agreed 
Framework, I would like to point out two facts pertaining to 
U.S. law regarding aid to North Korea.
    First: By law, in order for U.S. aid to be disbursed to 
North Korea in the form of KEDO-supplied heavy fuel oil, North 
Korea must be, ``complying with all provisions of the Agreed 
Framework''. Now, that fact should seem logical enough. 
Congress is simply requiring North Korea to live up to the 
provisions it agreed to in 1994. This condition has been 
included in the Foreign Operations Appropriations Acts since we 
first began appropriating aid to North Korea through KEDO.
    Second: The 1994 Agreed Framework specifically states that 
KEDO-supplied heavy fuel oil shall only be used for, ``heating 
and electricity production''. In other words, any use of this 
oil for purposes other than heating or electricity production 
constitutes a violation of the 1994 Agreed Framework.
    If we put these two facts together, we have some simple 
logic I think that anybody can understand. Under current law, 
if North Korea diverts KEDO-supplied heavy fuel oil to purposes 
outside of the 1994 Agreed Framework, U.S. aid to North Korea 
through KEDO must cease. So the question that we must ask today 
is, has oil been diverted? If the answer is yes, U.S. law says 
we have to stop giving aid to North Korea. Again, this is a 
simple fact. It is counter to U.S. policy.
    Regarding the question of diversion, Ms. Jones, I would 
like to ask you about GAO's investigation. According to the 
report, the U.S. State Department officials have acknowledged 
there is evidence that some of the heavy fuel oil has been 
diverted. However, the report also states that, according to 
the State Department, there is no clear evidence of any 
significant diversion to unauthorized purposes of the 500,000 
metric tons of heavy fuel oil that is delivered annually to 
North Korea. The question I would like to get to here is, what 
is the State Department's definition of significant? The State 
Department says there has been some diversion, but it isn't 
significant. I must say, this inconsistency deeply concerns me 
and, I think, many people. So the question, Ms. Jones, is, did 
the State Department offer GAO any further explanation of their 
definition of a significant diversion?
    Ms. Jones. Mr. Knollenberg, in the course of our work in 
trying to determine what significant meant, you look at the 
legislative history and the law itself, and there was no 
definition. So we went to the State Department to try to 
clarify what their criteria would be in terms of defining 
``significant''. The U.S. State Department does not have 
criteria for that, but in discussing it with State Department 
officials, one told us that he would say that maybe 100,000 
metric tons in one given instance could be considered 
significant, or if it was given to the military it might be 
considered significant. However, he also said that you could 
drive a truck through the word ``significant'' from a 
definitional standpoint.
    Mr. Knollenberg. So is 5 percent significant? Is 25 percent 
significant? Does it have to be 100 percent to be significant? 
I guess close enough for government work--is that what we are 
looking at? Now, what is GAO's definition of significant?
    Ms. Jones. I would not try to define the word 
``significant'' as it applies to this legislation. That would 
not be our role to do that.
    Mr. Knollenberg. I believe it is clear this report contains 
significant evidence of significant diversion. Given its 
evidence and consistence with U.S. law, aid to North Korea 
should cease, and I urge my colleagues, the Administration and 
the American people to consider this report very, very 
carefully before we spend any more money to aid North Korea.
    Mr. Chairman, I yield back.
    Chairman Gilman. Thank you, Mr. Knollenberg.
    Mr. Gejdenson.
    Mr. Gejdenson. Thank you.
    First, I would like to go to their use of heavy fuel oil. 
Is that No. 6? Is that what it is, generally?
    Ms. Jones. Excuse me, No. 6?
    Mr. Gejdenson. Is that what it is generally referred to in 
the oil business?
    Ms. Jones. It is at the bottom of the rung, yes, sir.
    Mr. Gejdenson. So it is very heavy. It has to be heated to 
be used.
    Ms. Jones. Yes, sir.
    Mr. Gejdenson. Can it be refined for diesels or other 
things?
    Ms. Jones. It can be refined, but it takes an awful lot to 
get it there.
    Mr. Gejdenson. It is a low-grade oil used generally in 
furnaces?
    Ms. Jones. Correct.
    Mr. Gejdenson. If there was a diversion, it was diverted to 
heat something else or generate electricity someplace else. You 
are not making rocket fuel out of this? You are not making 
gasoline? You are not making diesel oil?
    Ms. Jones. Typically, heavy fuel oil is used for heating, 
that is correct.
    Mr. Gejdenson. I would like to ask Mr. Nelson, is there any 
way that you can estimate what is happening to the people in 
Korea as far as their diet situation since the food aid has 
begun? Has there been a general improvement, has it stayed the 
same or has there been a deterioration for the general public 
since the food aid program has begun, Mr. Nelson?
    Mr. Nelson. Congressman, there have been reports by 
different individuals of improvement in the health condition of 
children in particular. There have also been reports of 
increased attendance at schools where there is food aid. 
However, there has not been a broad, comprehensive survey of 
the impact of the food aid that we are aware of.
    UNICEF conducted what we call a baseline study, and had 
intended to follow up in cooperation with the WFP each year to 
try to determine the impact. However, the government has not 
permitted this second survey to take place. So the evidence is 
anecdotal, and it is the findings of different individuals, 
including Congressman Hall, who have visited North Korea.
    Mr. Gejdenson. As for the transparency or the lack of 
transparency in North Korea on the food program or the oil 
program, we actually have more visibility--there is more 
transparency in these two programs than almost anything else 
the paranoid isolationist government in North Korea allows for. 
Is that a fair assessment?
    Generally, we have a society here that has blocked off all 
contact with the world. Yet in these two areas, we have had 
some monitoring, imperfect as it is, that is interrupted or 
what have you, and we have had some reviews, but it is better 
than the rest of the information we get on the rest of society; 
is that a fair assessment?
    Mr. Nelson. Congressman, I have no basis to comment on that 
particular statement.
    Mr. Gejdenson. Let me ask you a little more precise 
question. Ms. Jones, your sense is yes? We get more information 
about the oil that we send them than the general information we 
get about North Korea?
    Ms. Jones. As Mr. Nelson said, I wouldn't have the 
information to be able to respond to that directly.
    Mr. Ackerman. Would the gentleman yield?
    Mr. Gejdenson. Yes, I would be happy to yield.
    Mr. Ackerman. Are there not meters on the flow of oil such 
that you can actually come up with numbers?
    Ms. Jones. That is correct.
    Mr. Ackerman. There are no meters on anything else?
    Ms. Jones. That, I don't know.
    Mr. Gejdenson. Reclaiming my time, I guess that you haven't 
done a report. I am not trying to put you in a box, but it 
seems to me anybody who has read a newspaper in the last 30 
years recognizes it is a very closed society. We get virtually 
no information out of that society, and in these two instances, 
while we have imperfect information, we get more information 
than we generally get out of North Korea. I can tell you that 
because I read newspapers, not because of any particular, 
secret reports that I have read from the intelligence 
community.
    I think you have done your job as you were instructed to do 
it. I think that what we in Congress have to decide is what is 
the next best alternative course. I think there is a general 
agreement we would all like more information from the North 
Korean government. I think there is general agreement we would 
like to see a nice democracy with freedom of speech and a free 
market so the people in North Korea wouldn't be starving. The 
question is, how do we get from where we are, a country that 
has imposed isolation on itself, that has caused the death of 
hundreds of thousands, maybe millions, of its people through 
starvation, and has threatened both its immediate neighbors and 
now potentially even neighbors some distance away?
    We are involved in a policy with our allies in the region, 
the South Koreans, Japanese, and others, where there is a sense 
that we are doing the right thing.
    I would just ask if there are any recommendations from any 
of the panel Members on what actions we could take that might 
give us the kind of response that, I think, we all would like 
to see, which is more information and more openness. Let's 
start maybe with Eugene here and work our way down. Are there 
any proposals that you think that we have a reasonable 
expectation of succeeding in that we might demand more 
information from the North Koreans?
    Mr. Aloise. In terms of the heavy fuel oil, which is what I 
could speak to, they are making progress in upgrading those 
meters.
    Ms. Jones. I think in terms of our work on the 1994 Agreed 
Framework, we have done a number of reports on that. What we 
have said is basically the North Koreans have certain 
commitments that they are making, and that we should make sure 
that they are standing to those commitments.
    Mr. Nelson. As we say in our report, I think one of the 
things that we can do, given the very difficult circumstances 
and our broad interests there, is to recognize that food is 
very important, and continue to push for greater access and 
more independent monitoring in light of the fact that we need 
continued public support for the program. We need to make it 
clear that it is in the interests of North Korea to provide us 
with greater access.
    Mr. Thomas. The Executive Director of the World Food 
Programme, Catherine Bertini, recently went to North Korea. 
Part of her visit has always been to emphasize greater 
cooperation, more transparency, more participation in 
monitoring and accountability, and we would encourage that to 
continue. We think that is very important, and we think 
implementation of our recommendations would also be a step in 
the right direction.
    Thank you.
    Mr. Gejdenson. Thank you.
    Chairman Gilman. Thank you, Mr. Gejdenson.
    Mr. Sherman.
    Mr. Sherman. Yes. I would like to focus a little bit on 
diversion and substitution. As previous questioners have 
elicited, we provide 500,000 metric tons of this very heavy 
sludge No. 6 oil. Do we have any reason to believe that North 
Korea has even the capacity to take that sludge and refine it 
into gasoline? Do they have the kind of refinery that could 
even try to do that?
    Ms. Jones. Mr. Sherman, we would be happy to discuss that 
with you in a different venue.
    Mr. Sherman. Second, that 500,000 metric tons, how does 
that compare with the amount of oil that North Korea imports on 
its own?
    Ms. Jones. The 500,000 metric tons a year is about 45 
percent of North Korea's annual needs.
    Mr. Sherman. Does North Korea import its own No. 6 heavy 
oil with its own money?
    Ms. Jones. I believe they do, yes.
    Mr. Sherman. It would be kind of silly then for--I am not 
going to withdraw the question about them trying to refine the 
No. 6 into fuel because they wouldn't have to. The very fact 
that they are importing No. 6 with their own cash proves that 
they are using all the No. 6 for No. 6 purposes. The No. 6 we 
give them for No. 6 purposes which, as you have previously 
testified, is for the generation of heat, mostly for electric 
generation. So there doesn't seem to be any material diversion 
going on there. I am sure that if they are buying with their 
own cash No. 6 oil, they must be using all the No. 6 oil we 
give them for No. 6 purposes.
    As to the issue of food, as I understand our agreements 
with North Korea, they are free to move into any village, take 
all of the agricultural produce from that village, and use it 
for their military, the Communist Party or the elites, and to 
provide that village with aid in substitution for the 100 
percent tax or taking of the grain produced by that village. 
Now, as I understand it, our aid is only supposed to go to 
children under eight, mothers and the elderly, but those folks 
all live in families. So if you are providing aid to them, you 
could be providing aid to every peasant family in that village, 
or in all of the villages of North Korea.
    Given this, does it make any difference whether the grain 
that we are giving them is used in substitution so the Korean 
grown grain can be used for the military or whether it is 
diverted? Is there a difference--that it makes a difference?
    Mr. Nelson. Of course, food is fungible, and I think you 
present a very solid scenario of what might happen. 
Unfortunately, we do not have the ability nor did we attempt to 
try to make that determination. We looked at the accountability 
mechanisms that were in place and rendered a judgment as to 
whether they were adequate to assure that the food was reaching 
the targeted groups. We had reservations about that system.
    Mr. Sherman. But even if we knew that for every sack of 
grain that went to any village from us, that another sack of 
grain, locally produced grain, was leaving that village and 
going to the military or to the elites, it wouldn't be a 
violation of our agreements with North Korea, would it.
    Mr. Nelson. A member of my staff just pointed out that they 
are not food sufficient, so it does make a difference. My 
reading of late indicates that there is quite a reserve or 
stockpile for the military, but I could not give a conclusive 
or a persuasive answer regarding whether it is displacement or 
whether it is a substitution and how any diversion would 
manifest itself in North Korea.
    Mr. Sherman. The food aid we provide is what percentage of 
the total food consumed in North Korea?
    Mr. Thomas. It is about one-fourth.
    Mr. Sherman. So it would be a significant amount of moving 
of grain to take one quarter of all the grain to be consumed in 
the country, distribute that out to villages, then go to those 
villages and extract one-fourth of the total grain in the 
country. How much does North Korea import with its own cash?
    Mr. Thomas. A very small amount, approximately, I think, 
300,000 tons. It imports about 1.4 million tons perhaps, and it 
relies on food aid up to over a million tons.
    Mr. Sherman. That is a million tons of aid?
    Mr. Thomas. Right.
    Mr. Sherman. Imports with its own cash at about what level?
    Mr. Thomas. Three hundred thousand tons.
    Mr. Sherman. Three hundred thousand tons, and then 
production inside the country of roughly 4 million or 3 
million?
    Mr. Thomas. 3.5 I think someone said. These are very rough 
figures.
    Mr. Sherman. Has my time expired?
    Chairman Gilman. The gentleman's time has expired.
    Mr. Sherman. Thank you.
    Chairman Gilman. Mr. Knollenberg.
    Mr. Knollenberg. Thank you, Mr. Chairman.
    I want to now focus on the monitoring system for the heavy 
fuel oil. Here is a country that has refused to make any type 
of reforms. I know Congressman Hall has done a great number of 
good things, and he continues to be, I think, an advocate for 
the right thing, but I would remind everybody that this is the 
most oppressive country in the world. As they have the highest 
rate of violations for human rights, they have made no 
societal, economic, or agricultural reforms, this KEDO issue 
comes to mind now.
    By law, in order for U.S. aid to be disbursed to North 
Korea, Congress has to be certain that KEDO-supplied heavy fuel 
oil is not being diverted to purposes outside the 1994 Agreed 
Framework. Although KEDO has a monitoring system in place, 
which I am going to talk about, the system is limited in the 
information it can provide. According to the GAO report, which 
I have, ``there are no arrangements with North Korea for 
monitoring the large quantities of heavy fuel oil in storage or 
in transit to the plants consuming the heavy fuel oil''.
    Ms. Jones. That is correct, sir.
    Mr. Knollenberg. It goes on to state that monitoring 
equipment is not installed on the numerous railcars and 
pipelines used to transfer that heavy fuel oil from the 
delivery ports to storage, and from storage to the plants where 
the heavy fuel oil is to be consumed.
    Ms. Jones. That is correct.
    Mr. Knollenberg. So after reading this report, it seems to 
me that there are some very, very large holes in KEDO's 
monitoring system. Would you agree?
    Ms. Jones. Those are holes in KEDO's monitoring system that 
is correct, but it was not designed to give complete assurance.
    Mr. Knollenberg. I think that last statement is what I am 
looking for. It was not designed to give 100 percent assurance.
    Ms. Jones. That is because they had complementary national 
technical means to help with that assurance.
    Mr. Knollenberg. Under the current KEDO monitoring system, 
what assurances do we have that oil is not being diverted 
through storage or transit?
    Ms. Jones. I think that the U.S. State Department has 
admitted to a 5 percent diversion. Anything other than that, 
Mr. Knollenberg, we would be happy to discuss with you in a 
different venue.
    Mr. Knollenberg. I understand.
    Under the current KEDO monitoring system, that we have in 
place, designed as it is, I could say flawed, but designed as 
it is, will the President ever be able to certify whether oil 
is being diverted?
    Ms. Jones. We can't just rely on the KEDO system. It was 
not designed to do it by itself.
    Mr. Knollenberg. Couldn't the North Korean army, for 
example, intercept a railcar, take some oil out and send it on 
its way?
    Ms. Jones. I assume that that could happen.
    Mr. Knollenberg. They have been very, very limited in what 
they will allow us to inspect or to see. In fact, that has 
been, I think, where they haven't been living up to their 
commitments since the 1994 Agreed Framework was initiated.
    Ms. Jones. In terms of the oil monitoring, or are you 
talking about other issues?
    Mr. Knollenberg. I am talking specifically about how the 
design of the agreement literally allows for these holes, and 
that we can't be assured in any way that there isn't diversion 
taking place because there is no monitoring system in place 
during the transit of oil in railcars, and that kind of thing.
    Ms. Jones. I think, Mr. Knollenberg, that the KEDO system 
is looked at as really one tool in a toolbox in terms of the 
ability to determine if there are diversions. When you couple 
the KEDO system with a national technical means, there is a lot 
more confidence in terms of what is going on.
    Mr. Knollenberg. I know my time is running out here, but 
can you very briefly give us an idea as to how we might improve 
this monitoring system so that we would be able to offer some 
assurances of certification that they are living up to the 
agreement? What would have to be done?
    Ms. Jones. I think, first, that KEDO has made strides in 
terms of the monitoring system by putting in the power surge 
protectors, the power conditioning machine that is allowing----
    Mr. Knollenberg. That is new now?
    Ms. Jones. That is fairly new, yes, sir. In fact, they are 
kind of on their second generation and are hoping that it is 
going to be much more workable to ensure that there is 
continuous monitoring.
    They have also put in systems, I think it was after March, 
1997, which basically are kind of solid state systems where 
when the KEDO monitors come in periodically, they can download 
this information. It is not just the paper runs. They basically 
have some information off a computer, which, again, will give 
them more information and better information. So KEDO has made 
great strides in terms of their monitoring system to make it 
more effective.
    Mr. Pomeroy. Will the gentleman yield?
    Mr. Knollenberg. Sure.
    Mr. Pomeroy. I know the gentleman's time has expired, and 
he will be departing soon to the Appropriations Committee on 
which he serves, but before he leaves this Committee I would 
like to ask the gentleman, serving as the distinguished co-
chair of the Speaker's Advisory Group, whether or not your 
report on the matters before the Committee this morning is 
completed and if we might have a copy of it?
    By way of background, Joe, I understand that the National 
Journal has been given a draft report, and it would just seem 
in fairness, that the Democrats ought to have a report.
    Chairman Gilman. Before the gentleman yields, let me just 
clarify. The report has not been given to the National Journal. 
They were shown one paragraph inadvertently. It has not been 
released yet. It goes to the Speaker first, and he will be 
making a release within the next few days when the report is 
finally completed. At this point, it is not final status.
    Mr. Knollenberg.
    Mr. Pomeroy. In light of that helpful information, Mr. 
Chairman, either of you could respond to this, if you would. 
The National Journal reported that the report alleges 
significant diversions, quote, unquote, of food and fuel aid. 
The GAO has told us that has not been substantiated. Is that in 
your report or is that being subject to revision?
    Mr. Knollenberg. I yield again to the Chairman. Whatever 
the Journal editor reported was something they gathered on 
their own, but the Chairman has already spoken to the specifics 
of what we have released.
    Chairman Gilman. The Journal reporter spoke to one of our 
staff, and there has not been a formal release. He has not seen 
the full report. The report is still in the final stages of 
completion. Hopefully, within a few days there will be a 
submission by the Task Force to the Speaker, at which time he 
will disseminate a report to the Congress.
    Mr. Pomeroy. I thank you, Joe.
    Mr. Knollenberg. I would just like to conclude.
    I think that both sides of the aisle should focus on the 
facts which are emerging here, and let those facts be our guide 
to not only how we develop policy, but also to our insistence 
on finding out, through transparency--which has not been a part 
of North Korea's policy--just what is taking place.
    I will conclude with that. I yield back my time. I thank 
the panel very much for their testimony this morning.
    Chairman Gilman. Are there any other questions before we 
release the panel?
    Mr. Ackerman. Yes.
    Chairman Gilman. Mr. Ackerman.
    Mr. Ackerman. Mr. Chairman.
    Mr. Seldin. My name is Richard Seldin. I am counsel to the 
group, and I wanted to make----
    Mr. Ackerman. You are counsel to?
    Mr. Seldin. The GAO group on these two reports.
    One of the points I wanted to make in response to 
Congressman Knollenberg is about the 1994 Agreed Framework and 
the pledges. The pledge on the oil is a very broad pledge. It 
just talks about heating and oil production. So in terms of 
determining what a significant diversion is, looking back to 
the 1994 Agreed Framework, it is very difficult to really 
determine that because there are no criteria provided. There is 
no definitional material in the 1994 Agreed Framework.
    Mr. Knollenberg. Would you say the agreement was flawed by 
design in that regard?
    Mr. Seldin. It is a nonbinding political agreement, and I 
think both countries wanted some leverage, that is true.
    Mr. Knollenberg. I gather from what you have just said that 
there was something missing then. The latitude being granted by 
that language, as you state, suggests to me that it was drawn 
up purposely to allow for the inability to monitor what goes on 
in North Korea.
    Mr. Seldin. I can't answer that. I am not sure about the 
diplomatic history of the negotiations regarding the 1994 
Agreed Framework.
    Mr. Knollenberg. I thank you.
    Chairman Gilman. Thank you, Mr. Seldin.
    Mr. Ackerman.
    Mr. Ackerman. Thank you, Mr. Chairman.
    The word ``significant,'' I believe, was left out by design 
to allow some latitude. Nobody wanted to box anybody in.
    We can't guarantee the delivery of anything with 100 
percent certainty. Go to any of our airports and they talk 
about how much merchandise is lost at the airport by design, 
not just accidentally. I go to the garment center, and they 
talk about shrinkage. It is all built into the cost of doing 
business. I am absolutely astounded that the assertion here is 
not that the glass is half full or half empty, but rather that, 
even though we can't monitor it, at least 95 percent of the 
fuel oil is going where it should be.
    It was asserted before that, in answer to a question by our 
colleague, Mr. Knollenberg, as to weather the army have taken 
and diverted 5 percent of the oil, that they could have.
    Ms. Jones. No, I think what Mr. Knollenberg asked is could 
they take a railcar off-line and divert the oil that was in 
that railcar. It wasn't the 5 percent issue. It was basically 
could they divert a railcar.
    Mr. Ackerman. Do you have any evidence that they diverted 
any railcar?
    Ms. Jones. We could discuss that in a classified venue, Mr. 
Ackerman.
    Mr. Ackerman. Do you know the answer to the question?
    Ms. Jones. I could discuss that in a different venue, Mr. 
Ackerman.
    Mr. Ackerman. You can say that you know the answer or don't 
know the answer without giving the answer.
    Chairman Gilman. Mr. Ackerman, you are not badgering the 
witness, are you?
    Mr. Ackerman. I just wanted to know if they know the 
answer, so I don't have to go to a meeting in which I am told 
we don't know the answer.
    Chairman Gilman. I think the witness has said she would 
discuss at a different venue, indicating it may be classified.
    Mr. Ackerman. You are reading my playbook. Thank you very 
much.
    Could a group of bandits from Paris have snuck into the 
country and diverted the oil from a railcar?
    Ms. Jones. I am not sure that we want to write a novel 
here, Mr. Ackerman. I am not sure that would be appropriate for 
me to respond to that.
    Mr. Ackerman. Is it possible that that could happen?
    Ms. Jones. I wouldn't want to respond to that. I would have 
no idea.
    Mr. Ackerman. You do have an idea of whether or not the 
army diverted a railcar?
    Chairman Gilman. Mr. Ackerman, the witness has already 
responded to your previous question.
    Mr. Ackerman. What would the army do with grade six heavy 
sludge? Without giving away any great national secrets, what 
could they do with this sludge besides bathe in it?
    Ms. Jones. I don't know the capacity in North Korea to 
refine the oil, the sludge. Sludge is usually used for heating.
    Mr. Ackerman. That is correct. Could the army use it for 
anything other than heating? Does the army have the capacity to 
refine the oil? Do you know any of the answers?
    Ms. Jones. I don't know that, Mr. Ackerman.
    Mr. Ackerman. So, it is quite possible that, even if the 
army did divert a railcar with sludge, that it is very likely 
they couldn't do anything with it to begin with, even accepting 
the speculation that they could have; is that accurate?
    Ms. Jones. I don't know what they could do with the oil. I 
don't know what capacity they have.
    Mr. Ackerman. Nobody has asserted anywhere that the army 
has the capacity, or nobody believes the army has the capacity 
or their own refineries, and that is probably absolutely 
accurate from what I know.
    I thank you very much for helping us today.
    Chairman Gilman. Gentleman's time has expired.
    Any further questions? Mr. Pomeroy.
    Mr. Pomeroy. My first question would be for either Ms. 
Jones or the counsel from GAO relative to the 1994 Agreed 
Framework. In particular, in response to the last statement of 
clarification to Mr. Knollenberg, I believe you indicated that 
there was a broad political framework and whether or not there 
were benchmark achievements was impossible in light of the 
general nature?
    Mr. Seldin. I didn't say that they were impossible, but 
that is how the agreement was drawn up.
    Mr. Pomeroy. Secretary Perry has told us--Secretary Perry, 
former Secretary of Defense, has served as Special Advisor to 
the President and the Secretary of State by heading a 
commission congressionally charged to review policy to North 
Korea. Among his formal findings, they have been presented to 
this Committee as well, is that there has been no production of 
fissile material at Yongbyon since the 1994 Agreed Framework 
came into force. Does GAO know whether or not that is an 
accurate statement?
    Mr. Aloise. According to the IAEA, the freeze is in place.
    Mr. Pomeroy. Does GAO contest the accuracy of the 
Secretary's statement in this regard?
    Mr. Aloise. No, we don't.
    Mr. Pomeroy. The stopping of production of fissile material 
capable of being made into weapons-grade plutonium would seem 
to be a measurable, discernible, quantifiable achievement of 
some renown or some significance under the 1994 Agreed 
Framework. Counsel, would you respond to that?
    Mr. Seldin. Yes, I would agree with that.
    Mr. Pomeroy. Thank you.
    On to the questions relative to food assistance. I must say 
that I participated with Mr. Hall in the discussions with Mr. 
Walker and with Mr. Nelson relative to the preparation of this 
report. I appreciate the fact that the presentation today has, 
I believe, helped put into context some of the attendant 
circumstances to the report. Let me try to highlight them now.
    Does GAO accept reports from sources, be they government or 
NGO sources, that there is a significant food shortage problem 
in North Korea?
    Mr. Nelson. That is correct, sir. GAO does not take issue 
with that statement.
    Mr. Pomeroy. That malnutrition has been a significant issue 
for North Korea?
    Mr. Nelson. That is correct.
    Mr. Pomeroy. Does GAO note whether or not U.S. military 
leaders in South Korea support the effort to provide food 
assistance in North Korea?
    Mr. Nelson. GAO is not in possession of any direct evidence 
that such is the case. However, we have been told by one 
individual that he has evidence that the U.S. military supports 
the food aid program, but GAO has no direct evidence.
    Mr. Pomeroy. You made no inquiry in that?
    Mr. Nelson. I made no inquiry in that regard.
    Mr. Pomeroy. Does GAO have any information relative to the 
position of the South Korean government and the primary 
opposition party in South Korea relative to providing food aid?
    Mr. Nelson. No, sir, we do not have any information in that 
regard.
    Mr. Pomeroy. It would seem to me that those very important 
stakeholders in this question, the South Korean government, the 
opposition party in South Korea and the United States military, 
might have been noted in your report for this reason. If indeed 
there is significant belief and substantiation of diversion of 
food for military sources, it would be contrary to the 
interests of both the military and the South Korean government. 
Now, the fact that they tend to be supportive of food aid 
rather than in opposition might weigh on the question of 
whether or not there is diversion of food.
    I want to quote to you from a National Journal article 
which quotes the much-discussed Special Advisory Report, which 
is a Majority party only Task Force on North Korea. Reading 
from the National Journal, October 23rd, ``moreover, the report 
accuses the North Koreans of, quote, significant diversions, 
unquote, of food and fuel donated by the international 
community to aid the famine-wracked countryside''.
    In your work, and if I read your conclusion correctly, you 
indicate that there are not facts to confirm that finding nor 
are there facts to disprove that finding; is that correct?
    Mr. Nelson. In our review, yes.
    Mr. Pomeroy. Based on the GAO's best efforts, you have not 
been able to prove significant diversion, you have not been 
able to confirm those suspicions; is that correct?
    Mr. Nelson. That is correct.
    Mr. Pomeroy. Is the GAO aware that the Majority Task Force 
has access to some sources that you have not availed yourself 
of?
    Mr. Nelson. I am not in a position to answer that question. 
We are not familiar with the scope of work or the approach of 
the Advisory Group.
    Mr. Pomeroy. Primarily, the thrust of the GAO report 
relative to food aid is that monitoring is a problem; is that 
correct?
    Mr. Nelson. That is the thrust of our report.
    One point I would like to reiterate, Congressman Pomeroy, 
is that we did not raise a question of whether the aid should 
be provided or the impact of the aid. We were asked to examine 
whether there is reasonable assurance that it is reaching the 
intended or targeted audience. We examined the accountability 
mechanisms which would include the ability to do random checks, 
the ability to have unsupervised visits and the ability to 
audit distributions. That is our area of expertise, which is a 
management area.
    Mr. Pomeroy. Mr. Nelson, just to try to draw your 
conclusion out here, as I heard you in your opening testimony, 
you said you were charged with two tasks, confirming whether 
food aid is adequately monitored and confirming whether or not 
there have been significant diversions of food aid. As to the 
first, you think monitoring could be improved. As to the 
second, you do not have evidence of significant diversion, 
although you can't say for sure.
    Mr. Nelson. That is correct. We do not have evidence of 
significant diversion.
    Mr. Pomeroy. I am heartened by one aspect of the hearing 
today and that is the Chairman's comments that no one is 
intending to cut-off food aid. I would certainly hope not in 
light of the significant starvation issues that face North 
Korea. There is a bill, however, introduced that has conditions 
precedent before food aid could be provided. I want to ask you 
a couple of those conditions and ask if you have a conclusion 
in terms of whether or not you believe these conditions could 
be met based on your audit experience in the context of this 
audit.
    You would have to certify that previous U.S. food 
assistance to North Korea has not been significantly diverted 
to military use, and you would have to further certify that 
North Korea military stocks have been extended to respond to 
unmet food aid needs in North Korea. Do you have conclusions in 
terms of whether it would be possible to certify as to either 
of these?
    Mr. Nelson. No, sir, I do not.
    Mr. Pomeroy. You have no conclusions.
    All right. I thank the panel.
    Mr. Chairman, thank you.
    Chairman Gilman. Thank you, Mr. Pomeroy.
    I want to thank the panelists for being with us and for 
your patience and indulgence. You have provided us with 
significant information for this Committee's consideration. I 
thank our GAO for being present, and for your good work. Thank 
you.
    We will now proceed to the third panel, but before doing 
so, we will take a brief recess.
    [recess.]
    Chairman Gilman. The Committee will come to order.
    I welcome our third panel headed by Dr. Nick Eberstadt, 
Visiting Scholar at the American Enterprise Institute. Dr. 
Eberstadt recently completed his book, The End of North Korea. 
We are glad that Dr. Eberstadt is able to join us today to give 
us his perspective on the Korean problem.
    We also have Mr. Joseph Bermudez, Senior Analyst for Jane's 
Intelligence Review. Dr. Bermudez is an internationally 
recognized expert on North Korean defense issues. He is also 
the author of an upcoming book on the North Korean armed 
forces. We welcome your perspectives on the North Korean 
missile program.
    Finally, we will hear from Ms. Nancy Lindborg, Executive 
Vice President of Mercy Corps International. Ms. Lindborg, we 
are glad you are able to join us today to give us your 
perspective on food aid from the NGO's' perspective.
    We welcome our entire panel. I know that many of you have 
appeared before the Congress previously, but for the sake of 
time, I would request that you summarize your statements, and 
we will have your full statement appear in the record without 
objection. As well, I would ask our Members to withhold 
questions until all of the witnesses on the panel have 
testified.
    Chairman Gilman. Dr. Eberstadt, please proceed as you may 
deem appropriate.

  STATEMENT OF NICHOLAS EBERSTADT, VISITING SCHOLAR, AMERICAN 
                      ENTERPRISE INSTITUTE

    Dr. Eberstadt. Mr. Chairman, Members of the Committee and 
distinguished co-panelists and guests, it is always a pleasure 
and a privilege to appear before your Committee.
    I was asked to discuss North Korea's economic prospects and 
prospects for aid-linked reform, economic reform in the DPRK 
today. Before I summarize my remarks, I should emphasize a 
couple of pretty major caveats.
    North Korea is a very difficult country to understand. The 
DPRK is a very difficult government to understand. It is such a 
different government from our own that we often lack the 
intuitive linkages that would help us to understand it. Very 
little information is available about this country. Some of the 
few pieces of information that are available seem to be 
contradictory. Finally, not least importantly, the North Korean 
government appears to be strongly committed to a policy of 
strategic deception, that is to say, to misinforming and 
disinforming the outside world about its capabilities and 
intentions.
    The surprise attack that launched the Korean War in 1950 
may be the most well-known of North Korea's efforts in 
strategic deception, but it is by no means Pyongyang's only 
effort at misinforming the outside world about its intentions 
and capabilities.
    That being said, I would venture five comments or 
observations about North Korea's economic situation and its 
prospects.
    First, it is widely known that the DPRK is currently in the 
midst of an economic catastrophe, but it is important that the 
actual nature of that catastrophe be specified. Rampant hunger 
is raging in North Korea today. I don't think there is any 
contesting that sad fact. But the hunger crisis that we see in 
the DPRK today, that is to say, a hunger crisis in a 
predominantly urbanized, predominantly industrialized economy 
during a peacetime, is utterly unprecedented in the modern 
experience.
    That hunger crisis speaks not just to agricultural failure. 
Modern industrial economies can feed their people even when 
they do not produce enough domestic food to meet their 
population's needs. North Korea's food crisis is indicative of 
a systemwide failure of the entire DPRK economy. This failure, 
moreover, did not start with the well-publicized floods, bad 
weather since Kim Il Sung's death, or even with the collapse of 
Pyongyang's Soviet block sponsors.
    The roots of North Korea's current economic catastrophe can 
be traced back much further: They go back at least a 
generation, to such milestones as the effective North Korean 
default on its Western debts back in the mid-1970's. North 
Korea's economic travails today are not a recent aberration 
but, rather, represent the culmination of a long-standing 
development trajectory--the culmination of a particular 
development strategy.
    Second, North Korea's ongoing economic disaster cannot be 
written off as simply a consequence of bad weather or bad luck. 
Rather, it is the direct and entirely predictable consequence 
of a highly perverse and destructive set of economic policies 
and practices, relentlessly pursued and stubbornly enforced.
    When one considers the North Korean economic approach--its 
adherence to rigid central economic planning; its apparent 
penchant for planning without facts; its extraordinary hyper-
militarization; its contempt for and ongoing campaign against 
the country's consumers; its disregard for prices in the 
allocation of goods and services; its indifference or even 
outright hostility toward possibilities for international, 
commercial exchange; its insistence on a particularly misguided 
variant of food self-sufficiency--we do not need bad weather or 
bad luck to explain the results that we see today.
    Third, since the country's dire condition is a very largely 
predictable consequence of the relentless enforcement of 
economic policies that range from the manifestly wasteful to 
the positively disastrous, moderating that self-punishing 
regimen could be expected to bring an almost immediate measure 
of relief to the North's beleaguered economy. The sorts of 
measures that might spark the revitalization of the North 
Korean economy are hardly secret. The path to renewal and 
resumed growth runs squarely through the international economy.
    Why then has the DPRK leadership not seized those obvious 
options for remedying the economic catastrophe that it so 
plainly confronts? Kim Jong Il's continued reticence about 
embarking upon a more pragmatic course appears to be a 
deliberate and considered decision, one reflecting the DPRK 
leadership's assessment and understanding of its own political 
system.
    I could cite many particular instances, but let me just 
cite one pronouncement from DPRK press that occurred last year 
after Kim Jong Il's succession to the top state post.
    ``It is a foolish daydream'' DPRK authorities emphasized, 
``to revive the economy by introducing foreign capital, not 
relying on one's own strength. If one wants prosperity of the 
national economy, he should thoroughly reject the idea of 
dependence on outside forces. . . we must heighten vigilance 
against the imperialist move to induce us to `reform' and 
`opening to the outside world.' `Reform' and `opening' on their 
lips are a honey-coated poison.'' As I say, this is hardly an 
isolated comment.
    Fourth, the DPRK does seem to have an economic strategy to 
see it through these perilous times. That strategy lies in 
establishing itself as a permanent recipient of government-to-
government transfer payments. At first glance, it might seem 
that such a quest for financial aid would be doctrinally 
inconsistent with the self-reliance that North Korea espouses. 
It is not. From its very founding, the DPRK has embarked on a 
perpetual hunt for subventions from abroad.
    Today, it would appear that North Korean leadership hopes 
to establish itself as an ever-more-menacing international 
security threat, thereby compelling its neighbors and, even 
better, its enemies, to propitiate the DPRK with a constant and 
swelling stream of financial gifts.
    This, I should emphasize, is not merely my surmise. North 
Korea's intentions have been spelled out in this regard by its 
highest authorities. At the same September 1998 Supreme 
People's Assembly that elevated Kim JongIl, North Korea's 
Government officially embraced a new policy objective, that of 
becoming what they call a ``powerful and prosperous state.''
    The precise meaning of that slogan was articulated in the 
following month, when DPRK media declared: ``The defense 
capabilities are a military guarantee for national political 
independence in the self-reliant economy.'' They went on to 
state, ``The nation can become strong and prosperous only when 
the barrel of the gun is strong.'' Let me repeat that, ``only 
when the barrel of the gun is strong.'' Credible military 
menace, in other words, is now at the heart of North Korea's 
economic strategy and its very strategy for survival.
    Finally, in the wake of recent events, such as the Berlin 
meetings, the lifting of some U.S. sanctions and the release of 
the Perry Report, the question arises as to what U.S. economic 
relations with the DPRK and what North Korea's international 
economic relations may look like.
    My own assessment would be that, in purely commercial 
terms, this new set of approaches should be expected to have 
only small or marginal impacts on North Korea's economic 
prospects.
    North Korea currently engages in trade not just with the 
United States, but with many other OECD countries which do not 
have the same restrictive regimes of economic sanctions. Over 
the last two decades, North Korea's trade volume, in inflation-
adjusted terms, has substantially declined with that group of 
countries. This is not because their total volume of trade has 
decreased; of course it hasn't. World trade has been 
dramatically expanding. Stagnant OECD-DPRK trade trends, 
rather, speak to restrictions on Pyongyang's part.
    There are few signs, if any, of high-level commitment to 
change the direction of economic policy in North Korea. The 
very word ``reform'' is still officially proscribed. There are 
various additional indications that I could bring to your 
attention that argue for caution or pessimism about the DPRK's 
new economic prospects. I would be happy to go into those in 
discussion. But the new direction in U.S. policy toward 
Pyongyang, by itself, should be expected to bring little 
improvement to North Korea's basis economic prospects.
    Thank you.
    Chairman Gilman. Thank you very much, Dr. Eberstadt.
    Chairman Gilman. Mr. Bermudez.

 STATEMENT OF JOSEPH S. BERMUDEZ, JR., SENIOR ANALYST, JANE'S 
                      INTELLIGENCE REVIEW

    Mr. Bermudez. I would like to thank the Chairman and the 
Committee for inviting me to share my thoughts on North Korea.
    I would like to preface my remarks with a personal 
statement that I am a horrible public speaker, and my comments 
will be very brief, but I am very good at answering questions.
    Chairman Gilman. We will take you up on that.
    Mr. Bermudez. During the past 30 years, North Korea has 
pursued a ballistic missile program. It is only in the past 10 
years, however, that we have really taken notice of it in that 
it has threatened not only our allies, but it is beginning to 
threaten us directly.
    During the past 15 to 20 years, it has taken that program 
and exported the products of the program which has extended its 
threat, indirect threat, to other allies than to just the 
United States. The rate at which the DPRK has developed its 
ballistic missile capabilities is quite astonishing in some 
aspects. This could only have been achieved with the assistance 
of outsiders, which is of grave concern.
    At present, their ballistic missile program consists of 
three families--what we call the Scud family, being the Scud B 
and Scud C, but which the North Koreans call the Hwasong, which 
means Mars, the No-dong family, and the Taep'o-dong family.
    I won't go into the details of each because that would take 
too long. However, with regard to the No-dong family, if you 
look at the time lines of its development and at the time line 
of the nuclear program, it is clear that the No-dong was 
intended to be the first system to deliver a North Korean 
nuclear weapon, had their program proceeded unabated.
    The Taep'o-dong family, which is of the greatest concern at 
the present time, is very interesting. The Taep'o-dong 1 is a 
product of taking a No-dong at the first stage and one of their 
earliest Scuds, the Hwasong, to the second stage and just 
combining them, quite simply.
    The recent test in 1998, in which they combined a third 
stage to launch a satellite, resulted in a failed launch, but 
demonstrated a number of technologies in which they have skill. 
If that system had been used as a ballistic missile instead of 
as a space launch vehicle, it would have a range in excess of 
4,000 kilometers. If they had done a few other things, it could 
have a range of approximately 10,000 kilometers with a 200-
kilogram warhead, not very significant in size, but in range it 
actually puts the United States at risk.
    The second component of the family, Taep'o-dong 2, has the 
ability to reach the United States if it uses a reduced 
warhead. It certainly can reach Alaska if everything goes well, 
for them that is. If it has a reduced warhead, it can strike 
anywhere within the United States.
    Current estimates as to the total number of missiles 
produced by North Korea run anywhere from 750 to 1,150. Of 
those, approximately 300 to 400 have been sold overseas to a 
number of states, some of which are quite surprising. These 
states include Egypt and Iran. There has been possibly some 
cooperation with Iraq, Libya, Pakistan, Syria, the United Arab 
Emirates and Vietnam.
    Probably the greatest concern about North Korea's program 
is that we simply don't know enough about it. Everybody has 
talked about the closed nature of North Korean society, and 
that is very true. North Korea has also become very adept at 
deceiving us and camouflaging its activity.
    With that, I want to thank the Committee.
    Chairman Gilman. Thank you, Mr. Bermudez.
    [The prepared statement of Mr. Bermudez appears in the 
appendix.]
    Chairman Gilman. Ms. Lindborg.

 STATEMENT OF NANCY LINDBORG, EXECUTIVE VICE PRESIDENT, MERCY 
                      CORPS INTERNATIONAL

    Ms. Lindborg. Thank you, Mr. Chairman and Members of the 
Committee. I appreciate the opportunity to be here today to 
talk a little bit about the experiences and observations of the 
Private Voluntary Organization Consortium in monitoring a 
portion of the U.S. food assistance for North Korea.
    The Private Voluntary Organization Consortium, or PVOC, is 
a group of U.S.-based relief and development organizations 
which was initially organized in response to the crushing food 
crisis that in 1996 was reaching famine proportions. There is 
ample evidence, as we have heard this morning and has been 
cited frequently by the Congress, that the number of deaths 
caused by this famine is well more than one million.
    Initially five organizations formed the PVOC: Amigos 
Internacionales, Catholic Relief Services, CARE, Mercy Corps 
International and World Vision. We have now expanded to include 
nine organizations, and collectively our agencies represent a 
broad cross-section of the American public. Our respective 
constituencies have strongly supported our efforts and the U.S. 
response to this silent famine that has claimed so many lives 
in North Korea. In addition to monitoring food aid, all the 
involved organizations have contributed substantial private 
dollars for provision of relief assistance.
    All of us share the strong conviction that it is imperative 
that the U.S. respond to this crisis with food and follow the 
policy that a hungry child knows no politics. Our experience in 
repressive and closed societies is that it is the children, the 
powerless and the elderly who suffer most.
    In August 1997, the PVOC first undertook the 
responsibilities of monitoring a portion of the food donated by 
the U.S. Government. This first mission represented a historic 
first step of engagement between the citizens of the United 
States and North Korea. Since then, we have sent in a total of 
five teams, and the fifth team is in-country now. We have 
documented each of the four completed missions to date in 
written reports to our donors, as well as frequent briefings 
here on the Hill for staffers and Members.
    We have been fully transparent in our desire for increased 
accountability and improved monitoring, and have identified the 
considerable work that needs to be done to bring this program 
in line with international monitoring standards. We also 
continue to work with our interlocutors in North Korea to 
improve the level and quality of monitoring.
    We have documented in these donor reports the significant 
improvements in our monitoring abilities, as well as our 
continued conviction that there remains an urgent need for 
continued food aid.
    In reviewing our progress since 1997, we have concluded 
that each mission has advanced our quest for more accountable 
programs and that we have built upon the experiences and 
findings of each team to improve incrementally our ability to 
monitor the food. In particular, we have increased the number 
of monitors and the amount of time they have been able to stay 
in the country. We have improved our geographic access within 
the county. To date, we have sent in a total of six Korean 
speakers, and we have distributed food to a total of some 6 
million North Koreans, for which we have received direct and 
gracious thanks.
    As we review our programs, we see a pattern of evidence 
that suggests that the food is reaching the more vulnerable 
populations. For example, in 1998, our team reported that they 
were told repeatedly by officials in food deficit counties that 
the public distribution system, which has traditionally been 
responsible for distributing food to the general population, 
has lacked grains for several years to distribute. 
International food is virtually the only food keeping these 
people alive. One county official told our team members that as 
the one responsible for securing food for his county, he could 
not sleep any more, wondering where he would get the food. We 
believe that county officials, anxious to feed as many people 
as possible, sometimes stretch the available food to feed as 
many people as they can.
    We have clearly identified both improvements in our 
monitoring capabilities within the DPRK, as well as the long 
road that remains ahead. We are convinced that this aid has 
been instrumental in saving the lives of North Koreans, as well 
as demonstrating to the people of North Korea the compassion of 
the people of the United States.
    Nine U.S. food monitors are currently in Pyongyang for a 6-
month program to monitor the current tranche of U.S.-donated 
food. Despite the monitoring challenges they face, each of the 
current monitors has expressed a desire to return. Many of the 
monitors who have gone to Pyongyang since 1997 reaffirm the 
strong benefit of building relationships with their 
counterparts in North Korea, helping to dispel the image of the 
United States as the enemy, and building friendship and 
goodwill at many levels.
    Our organizations and the diverse cross-section of 
Americans that we represent are united in our desire to support 
the saving of human lives. We remain committed both to the 
provision of aid to North Korea and to the continued effort to 
increase the accountability of our monitoring abilities.
    Thank you.
    Chairman Gilman. Thank you, Ms. Lindborg.
    [The prepared statement of Ms. Lindborg appears in the 
appendix.]
    Chairman Gilman. Permit me now to address some questions to 
our panelists.
    Critics claim, Dr. Eberstadt, that our Nation has 
repeatedly given concessions in response to threats from the 
North Korean government, thereby involving ourselves in a 
dangerous cycle of political blackmail. What would be your 
assessment of our policy, and how best can we extricate 
ourselves from that cycle while addressing our national 
security concerns?
    Dr. Eberstadt. The North Korean government faces a very 
unpromising situation in an awful lot of regards.
    One of the few rays of hope from the standpoint of North 
Korean strategists, in looking at the outside world, is that 
the constellation of governments that it confronts most 
directly--which is to say Washington, Tokyo, Seoul. Beijing, 
and Moscow, has changed very dramatically in nature since the 
end of the Cold War.
    Generally speaking, these governments have become more 
preoccupied with their own domestic concerns as opposed to 
international concerns. Generally speaking, they have moved in 
the direction of focusing on shorter-term, rather than longer-
term, problems. Generally speaking, these governments have 
become less willing to expend what some would call ``political 
capital'' for international purposes reasons.
    One way of describing that constellation of governments 
would be to say that North Korea now faces a ``weaker'' 
constellation of international actors than it did before. 
However one describes it, though, this gives North Korea's 
government more room to maneuver than it would have had during 
the Cold War era.
    Part of what the DPRK government has been consummate in 
doing, not just since the end of the Cold War but during the 
Cold War was as well, is extracting aid from big powers. In the 
Cold War era, North Korea's aid-extracting game was to put its 
hand, so to speak, in the pockets of Beijing and Moscow, 
attempting to play those two off against each other, getting 
aid from both and declaring allegiance to neither.
    With Moscow effectively out of that game, North Korea's 
approach has been to attempt to extract aid from big, and to 
Pyongyang's view, hostile powers--Washington, Tokyo and, to 
some degree Seoul. If one looks at the post-Cold War period, 
one would certainly have to say that the North Korean 
government has been very good at putting its hands in other 
people's pockets. Tactically speaking, it is expert at that.
    Strategically, though, North Korea is in a dead end. It is 
hardly clear that it can extort enough money from the rest of 
the world to revive its economy, especially given the sorts of 
economic practices that its leadership seems to prefer. 
Certainly it will not be able to extract enough money from the 
rest of the world to be able to counterbalance South Korea's 
economy, notwithstanding the problems Seoul may have had since 
1997.
    In general, I would advise American policymakers and 
American allies to be very careful about providing money to the 
DPRK regime. We would also, I think, be well advised to try to 
think about what the Korean Peninsula would look like after the 
DPRK, because it is the DPRK government itself that is the 
fundamental source of insecurity in that peninsula.
    Thank you.
    Chairman Gilman. Thank you very much, Dr. Eberstadt.
    With regard to U.S. aid, is the Administration sustaining a 
repressive North Korean regime? Is our Nation preventing the 
downfall of this odious government by continuing our 
assistance?
    Dr. Eberstadt. all government-to-government aid strengthens 
the recipient government and permits the recipient government 
to pursue its own intentions, whatever those intentions may be.
    In this regard, I think some of the discussions about 
monitoring of our food aid and our oil aid neglect another 
important point. For resources like cash or food and, to a 
lesser degree, various energy products, there is a fungibility. 
This means that any new resources given to a recipient 
government, for any specific purpose, strengthen that 
government and permit it to pursue its existing objectives. If 
those objectives are hostile to U.S. national interests, a more 
powerful problem for America is created by aid transfer.
    Chairman Gilman. Thank you again, Dr. Eberstadt.
    Mr. Bermudez, in terms of security policy, would North 
Korea ever be willing to give up its missile programs, either 
its domestic development or international sales?
    Mr. Bermudez. At this point in time, I don't think it will 
be. It might be willing and it has proven to not test 
domestically, but I don't think that it is willing to give them 
up, no. It is too much a part of the psychological makeup of 
the leadership.
    Chairman Gilman. I know that you have commented about a 
number of intelligence sources. Do you believe North Korea 
continues to infiltrate South Korea and Japan with agents in 
military reconnaissance teams?
    Mr. Bermudez. Absolutely. In fact, the governments say they 
do. They only know about it subsequently, when they capture 
somebody or when there is a mistake on the part of the 
infiltrating teams. There definitely is a very active 
intelligence-gathering network in both South Korea and Japan.
    Chairman Gilman. So as they are receiving our assistance, 
they are still infiltrating the South and also Japan; is that 
correct?
    Mr. Bermudez. It certainly appears to me, yes.
    Chairman Gilman. Mr. Bermudez, you noted that North Korea 
is the world's largest proliferator of ballistic missiles and 
technology. The Administration hasn't labeled North Korea in 
that manner. How did you arrive at that conclusion?
    Mr. Bermudez. I just look at what Third World countries 
have received and from whom they have received it, and the 
numbers speak for themselves.
    Chairman Gilman. Ms. Lindborg, one of the PVOC's own food 
aid monitors calls the food monitoring system a ``scam.'' No 
one--I repeat, no one--wants to cut-off food aid to North 
Korea, but how can we provide accountability?
    Ms. Lindborg. I think it is actually a very frustrating 
experience to be a monitor in-country, and any given individual 
is certain to have reactions from an experience of being in a 
very closed society. That is why we have tried to look over the 
total of the experience since 1997 to discern the pattern of 
improvement and of evidence that we believe the vulnerable 
populations are being fed.
    However, we do agree that monitoring needs to be improved. 
We are pressing for a more continued presence in-country, and 
we are continuing to press for better and more random visits.
    Chairman Gilman. Why were the PVOC experienced Korean-
speaking monitors not allowed to reenter North Korea?
    Ms. Lindborg. We have had some of our Korean-speaking 
monitors reenter. I think the question of returning staffers is 
less related to the Korean language ability than it is to the 
North Korean's reluctance to have people return who have had 
experience. They have indicated a preference to put a 6-month 
cap on any individual monitor, regardless of Korean language 
ability.
    Chairman Gilman. Why do they assert the 6-month limitation?
    Ms. Lindborg. I think they have their own reasons for 
wanting to limit the amount of time that any given American 
spends in-country. We are negotiating with them to change that, 
and we have recently had certain monitors able to stay longer 
and to return.
    Chairman Gilman. Why doesn't the U.N. have any Korean-
speaking monitors on its team?
    Ms. Lindborg. I can't answer that, Mr. Chairman. I think 
you will have to ask the World Food Programme.
    Chairman Gilman. Thank you.
    Mr. Pomeroy.
    Mr. Pomeroy. Thank you. My first questions are to Ms. 
Lindborg.
    The GAO concluded, after reviewing the food programs, that 
there is insufficient monitoring; and second, that they cannot 
prove or disprove significant diversion to the military of the 
food aid. Let's start with the second one.
    Some have suggested, it appears, that there might be a 
forthcoming report which suggests that there is significant 
diversion of food aid to the military. Do the programs actually 
involved in delivering the food aid have an opinion on that 
question?
    Ms. Lindborg. We have reported in each of our written 
reports to our donors that there is no evidence of diversion to 
the military or otherwise. We do agree with the GAO report that 
we are hopeful for improved monitoring of our programs, but we 
also believe that there is a pattern of evidence that suggests 
that food is reaching its targets. In part, we rely upon, as we 
do in many countries, the provision of low-value grains, coarse 
bulk grains like corn and unground wheat, which have less value 
to the elite cadres.
    We also presume, based on a great deal of anecdotal 
evidence and analysis, that the North Koreans have sufficient 
stocks from their own production to feed the military and 
political elites. Therefore, as is the case in many of these 
closed societies, it is the children and the powerless that are 
most likely to not be fed when there is a shortage of food. By 
FAO's reports, as well as DPRK reports, they are short between 
1 and 1.5 million metric tons of grain production per year. 
That means that we are feeding those who would otherwise not be 
fed.
    Mr. Pomeroy. Are the children, the elderly, the sick and 
the vulnerable a significant political force in North Korea?
    Ms. Lindborg. I certainly don't believe so.
    Mr. Pomeroy. The first question is to monitoring.
    The monitoring needs to be improved. It is very, very 
unfortunate that North Korea would raise the kinds of questions 
we are asking today, in part, simply because there is no 
transparency--there is not better transparency in terms of 
seeing the clean flow of food aid to its intended recipients. 
On the other hand, is this a unique problem with North Korea?
    Ms. Lindborg. No. Within the PVOC, the most experienced 
food NGO's of the United States operate in many very difficult 
environments, including countries like Sudan, Ethiopia, and 
Eritrea. It is always difficult in a conflict-ridden area to 
fully monitor the food. I think, as is the case in those 
countries and certainly within North Korea, there is a 
continuous effort to improve the quality of the monitoring, but 
it is certainly not unique.
    There are unique issues regarding the DPRK, however, in 
that it has been closed-off for 50 years. It is very difficult 
for them to understand some of the monitoring requirements that 
we are pressing. For that reason we are heartened to see that 
there is incremental progress because it is, to some degree, 
due to the ongoing negotiations with our interlocutors to help 
them better understand why we need to do what we need to do.
    Mr. Pomeroy. The very notion of external monitoring is 
literally foreign from their experience?
    Ms. Lindborg. It is completely foreign, and they view it 
very much as a security threat. I think it has been very 
important, as I mentioned in my testimony, to focus as well on 
the relationship-building aspects of having individuals in-
country who are face to face with our interlocutors within 
North Korea, who can begin to understand why it is that we are 
asking to monitor the food and that the food is simply for the 
provision of feeding these vulnerable populations.
    Mr. Pomeroy. Are you testifying on behalf of the----
    Ms. Lindborg. I am testifying on behalf of the nine-member 
Private Volunteer Organization Consortium.
    Mr. Pomeroy. Thank you.
    Dr. Eberstadt, if I understand the thrust of your 
testimony, it is that providing any aid into North Korea helps 
allay circumstances whereby we might bring this dreadful 
government to an end? Is that the heart of what you are saying?
    Dr. Eberstadt. Basically, sir, yes.
    Mr. Pomeroy. I would just read to you from the Perry 
Report, report of former Secretary Perry. He writes, ``Finally, 
we have determined that while North Korea is undergoing 
terrible economic hardship, these hardships are unlikely to 
cause the regime to be undermined. We therefore must deal with 
the DPRK regime as it is, not as we would wish it to be.''
    In light of the fact that they have sufficient food stocks 
for the military, political elite and that, clearly, this is a 
system that has already experienced a level of starvation, 
death and malnutrition that certainly would have provided the 
basis for political overhaul in a different political context, 
it seems to me that there is basis for what Perry has written. 
Withdrawing food aid will cause many to starve and will put 
pressure on the government. But that raises, if nothing else, 
security issues rather than likely political transition issues. 
Would you respond?
    Dr. Eberstadt. Under current circumstances, Congressman, I 
would recommend attempting to feed the needy populations as 
best we can without feeding the government, to draw the 
distinction there. However, this is a very difficult 
distinction to draw.
    Mr. Pomeroy. That is a slight clarification on my first 
question. So you perhaps can get aid to the needy populations 
without feeding the government?
    Dr. Eberstadt. Congressman, my assessment is that is a 
very, very difficult needle to thread, but it is one that is 
worth attempting to thread.
    I think there are some ways that we could attempt to 
improve the distinction between feeding the needy and feeding 
the DPRK state.
    Centralizing aid through the DPRK public distribution 
system is exactly not the way to nourish the needy in North 
Korea. It seems to me that we want many, many Mercy Corps in 
the DPRK --hundreds of thousands of PVO's doing their own good 
works separately in their own manner, attempting to make their 
own assessments of individual needs.
    To me, one of the horrifying aspects of the current hunger 
crisis in North Korea is how extraordinarily reluctant, how 
stubbornly resistant, the North Korean state has been to 
release information it possesses about the magnitude nature of 
the hunger crisis to the very agencies which wish to relieve 
it.
    I think there are diverse ways that we could promote the 
objective of nourishing the vulnerable without nourishing the 
North Korean state.
    Mr. Pomeroy. I thank you for that comment, and I think that 
is something both sides of the political aisle on this 
Committee have to pay a lot of attention to. I think we could 
advance our shared goal of feeding the needy without feeding 
the government much more constructively if we are working on 
narrow questions of distribution, improving monitoring, really 
doing the technical business of achieving just that end, rather 
than making unsubstantiated allegations that there are 
significant diversions to the military and passing 
preconditions that cannot be met, thereby precipitating 
cessation of food aid.
    I think we have common concerns, but we certainly have 
dramatically different notions in terms of how best to press 
the concerns. I think your comments are very apt to the 
differences on the Committee. Thank you very much. I thank the 
panel very much.
    Chairman Gilman. Mr. Pomeroy, thank you.
    Dr. Eberstadt, I understand North Korea uses hard currency 
to buy some very unusual items despite the famine, such as 
Mercedes cars and infant diet formulas. What can we learn from 
their buying habits?
    Dr. Eberstadt. Congressman, I think you are referring to 
some of the reported purchases of DPRK goods in the 
international marketplace, which we review through so-called 
mirror statistics.
    One thing we can learn through those statistics is that 
there seems to be a two-tiered food system in the DPRK. On the 
one hand, there are big orders of 50,000, 200,000, or 500,000 
tons of course grain. Then, on the other hand, there are small, 
specialized purchases of one or two tons of specialty cakes or, 
as you mentioned, of infant dietary food supplements--unusual 
items, but small enough in volume that one would infer that a 
rather limited group is being served.
    Maybe that just corroborates what we already know: Namely, 
that the DPRK has a small elite and a large number of people 
who are at the mercy of that elite.
    Chairman Gilman. Thank you.
    Mr. Bermudez, which of the nations are beneficiaries of 
some of the military hardware that North Korea exports?
    Mr. Bermudez. There is a very long list. The most notable 
are Syria, Iran, Pakistan, but the list is really Zimbabwe, 
Tanzania, countries in South America. A good majority of the 
countries in the world, Third World countries that is, have 
received some military assistance, whether it be material or 
personnel; and the percentage is very high in Africa and Asia.
    Could I make a comment? Everyone keeps talking about the 
armed forces or the army in North Korea, and food aid, whether 
it helps North Korea's military stature. Most people don't 
understand that within North Korea, the military is the state 
and the state is the military.
    The vast majority of North Korea's population--when you 
become a teenager, you join the Red Youth Guard, which is a 
paramilitary youth organization, and then you join the 
military. If you are not a social elite and if you are not in 
the military, you are an outcast to society. You go through 
your military service. When you come out, you go into either 
the Worker/Peasant Red Guard, which is a paramilitary force, or 
you go into the paramilitary training unit, which is more like 
an active reserve. From the age of maybe 14 all of the way up 
to 55, you are part of a military organization of the state.
    Chairman Gilman. Mr. Bermudez, what is the total population 
of that military cadre?
    Mr. Bermudez. Of all of the reserves and the military, I 
don't have the figure.
    Chairman Gilman. What would you estimate it to be?
    Mr. Bermudez. Three, 4, 5, 6--I would roughly--and I would 
have to look at my notes--8 million people.
    Chairman Gilman. Out of a total population of?
    Mr. Bermudez. I don't know total population right now, 
especially with the losses in the past 5 to 10 years.
    Chairman Gilman. My staff says 22 million. So a good fourth 
of the population is in the military?
    Mr. Bermudez. I would say a little more. They are 
controlled by the military or have military training and serve 
either as--what we would call our Reserves or our National 
Guard.
    Chairman Gilman. How much of the economic structure of 
North Korea is dependent upon the export of military supplies?
    Mr. Bermudez. Right now, a very high percentage of foreign 
trade is related to military export.
    Chairman Gilman. What do you estimate that to be?
    Mr. Bermudez. I don't have----
    Chairman Gilman. A rough estimate.
    Mr. Bermudez. I have seen estimates that vary from 50 to 90 
percent.
    Chairman Gilman. Fifty to 90 percent of the GDP is in 
military?
    Mr. Bermudez. I have seen estimates in that range.
    Chairman Gilman. Who would be the largest beneficiary of 
those military exports?
    Mr. Bermudez. Which country receives the highest percentage 
of military exports?
    Chairman Gilman. Yes.
    Mr. Bermudez. It has to be either--I would say Iran or 
Pakistan at this point. But it varies; each year it is 
different.
    Chairman Gilman. They are the largest trading partners?
    Mr. Bermudez. For military equipment at this point, yes.
    Chairman Gilman. Again, I want to thank our panelists for 
being here and for providing us with very valuable insights.
    The Committee will stand adjourned.
    [Whereupon, at 1:15 p.m., the Committee was adjourned.]
      
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                            A P P E N D I X

                            October 27, 1999

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