The United States has a strong economic and political interest in seeing the Korea unified as a democratic capitalist state. The specifics of US interests and involvement in unification are partly contingent on scenario: excluding the horrific possibility of war, the main two scenarios come down to a protracted, consensual process in which North Korea maintains sovereignty for a significant transitional period and an abrupt collapse and absorption scenario along the lines of the German experience. In contrast to the fundamentally benign German experience, one variant on the collapse and absorption scenario could involve an extended period of violent political opposition to South Korean rulefollowing state collapse. This might involve a quarantine, or resemble the situation that has developed between Israel and Palestine, and would impede economic revitalization and dampen the benefits documented in this paper.
Which of these two basic scenarios―prolonged consensual unification or abrupt collapse and absorption― prevails revolves around whether North Korea successfully addresses its economic, political, and diplomatic challenges and survives permanently as an independent political entity, or whether the multiple stresses that the regime confronts prove unmanageable and it experiences abrupt change, culminating in its absorption by South Korea. Ultimately the key determinant is the capacities of the North Korean leadership. While the rest of the world can influence incentives at the margin, we should not exaggerate how much influence we have on these internal developments.From the standpoint of US policy the distinction between these alternative scenarios is critical, however. 
This paper begins by reviewing some general equilibrium model (CGE) results for Korean unification which are used to benchmark the magnitude of the “unification shock.” This work is complemented by gravity modeling of bilateral merchandise trade. The modeling work presented in this paper indicates that the thoroughness and rapidity of economic reform in the North matters noticeably in the calculation of the economic impacts on the US. The more traumatic collapse scenario followed by successful rehabilitation of the economy in the northern part of the peninsula generates a larger impact on the US. In such a scenario, conservatively estimated, US merchandise trade with North Korea might expand from virtually nothing to approximately $1 billion, with a possible additional $300-425 million in services trade.  The actual expansion of two-way trade could be much higher: if North Korea simply exhibited the same propensity to trade with the US as does South Korea, a decade after unification bilateral trade could be as high as $20 billion.
The goods trade would likely consist mainly of North Korean exports of light manufactures in return for American capital goods and agricultural products. Other products of North Korea such as metals used in the electronics industry would be imported by the assembly operations of US firms outside the US, and might be considered “indirect” exports to the US. The US would export business and professional services to North Korea and import travel and tourism services.  US firms would also invest in North Korea, but under a protracted, consensual unification scenario, labor standards issues could pose a constraint.
Similarly, US economic interaction with North Korea is constrained by a dense web of sanctions and other measures, some in the form of Congressional legislation, others in the form of Executive orders that discourage economic integration between the two countries. In a consensual unification scenario, these sanctions will impede economic integration between the US and North Korea. There is no guarantee that either the President or the Congress will act even if relations improve between North and South Korea.  The removal of these constraints would actually be easier in a collapse and absorption scenario in which the North Korean state would disappear, rendering most if not all of these measures moot, and economic exchange would occur on the basis of the relatively liberal set of rules and practices observed between South Korea and the US. A modest peace dividend, perhaps boosting bilateral trade by $50 million, could obtain under this scenario.
Under either scenario, the binational commission created in Annex 22-B of the KORUS agreement could be used to rapidly liberalize trade if circumstances warranted. Depending on scenario and sequencing treatment of the northern part of the peninsula under agreements such as the Trans-Pacific Partnership (TPP) could be either relatively straightforward or problematic.
Unification is likely to be very expensive. There is a role for the US public to play both bilaterally and through the international financial institutions (IFIs). The capacity of the US government to contribute directly will be partly a function of its own fiscal situation which is highly uncertain. But contributions to unification finance should not be thought of strictly as a public sector activity. The private sector will have a critical role to play as well. Indeed, the ultimate economic contribution of the US to Korean unification is likely to come through the private sector; foreign direct investment constitutes the institutional mechanism for both technology transfer and the links to marketing and distribution networks globally that North Korea currently lacks. Aid should seek to complement and encourage such private flows,not provide a substitute for them.