Bush Hints at More Ties to N. Korea : Diplomacy: He hopes to entice Pyongyang to speed pledged inspections of nuclear sites. As a first step, U.S. cancels a joint military exercise with South Korea.

President Bush held out the prospect today that the United States will expand its ties to North Korea as an incentive to the Pyongyang regime to open its nuclear facilities to inspection.

In a first step, Bush announced the cancellation of joint U.S.-South Korean military exercises known as “Team Spirit” that for decades have served as a symbol of the nations’ resolve against the north.

The moves were part of an effort to seize an opportunity opened by North Korea’s agreement to an accord with Seoul last week that calls for a ban on nuclear weapons in the Korean Peninsula.

But White House officials said that North Korea had responded in lukewarm fashion to the offer of better relations. And Bush, maintaining a tough line toward Pyongyang, reasserted a U.S. commitment to maintain its 40,000-strong contingent of American troops here undiminished, at least until Pyongyang opens its doors to nuclear inspectors.

The withdrawal of U.S. nuclear weapons from South Korea in recent months has enabled Seoul to declare that its territory is nuclear free. But the United States believes that Pyongyang may be within two years of being capable of producing nuclear weapons of its own.

And despite the agreement between the two Koreas, the issue of how North Korean facilities are to be inspected has not yet been resolved. The Administration has remained somewhat skeptical that Pyongyang will fulfill its pledge to permit access to its nuclear plants.

By dangling the prospect of improved relations before the increasingly ostracized Pyongyang, the Administration hopes to speed its compliance to allay lingering fears that North Korea could emerge as a renegade nuclear power.

“Now let’s see you do it,” White House Press Secretary Marlin Fitzwater said Sunday in describing Bush’s approach.

A senior Administration official conceded, however, that the Pyongyang regime of President Kim Il Sung appeared resistant to the overture. Although North Koreans would like Western economic help, he said, they are “nervous about getting too close to us.”

Reacting to what appeared to be a U.S. effort to increase pressure on the north, a government spokesman in Pyongyang complained that the United States in recent days had dispatched U-2 spy planes over its territory in a provocative action.

In an interview here today with ABC-TV, National Security Adviser Brent Scowcroft declined to discuss such operations but said the United States will continue its “intelligence surveillance of North Korea,” at least until Pyongyang agrees to a nuclear inspection system.

The effort to accelerate the denuclearization of North Korea was described as Bush’s top priority in a three-day visit that began when the President arrived here Sunday night after visits to Australia and Singapore.

Bush met this morning with President Roh Tae Woo after having dined with him Sunday night at the Blue House, the home of the Korean leader. He planned to discuss ties with Pyongyang in a news conference later today.

During his visit here, Bush is expected also to urge Roh to overcome Korea’s “growing pains” and agree to the further opening of a market for agriculture and services that has often shut out U.S. exports.

But White House officials said Bush is not likely to raise explicitly in his talks with Roh the issue of barriers to imports of U.S. rice out of recognition that the issue is politically sensitive in South Korea, where farmers make up a powerful voting bloc.

While the Administration still regards South Korea as overly protective, Seoul’s trade surplus with the United States, which was $9.6 billion in 1987, dropped to $2.4 billion in 1990 and to $1 billion last year, according to U.S. calculations. South Korea, however, claims that it had a $700-million trade deficit with the United States in 1991.

The President will save his sharpest words on trade for a visit to Tokyo beginning Tuesday. Scowcroft said today that Bush will press Japan further to allow imports of more U.S. autos and auto spare parts. America’s trade deficit with Japan last year was $40 billion.

On the issue of security on the Korean Peninsula, Administration officials, in an ironic twist, indicated that part of the motivation for the White House haste in seeking the nuclear inspections in the north lies in the mounting difficulties encountered by Pyongyang.

With some U.S. intelligence estimates predicting the collapse of the Communist regime there by year’s end, the officials said that the United States hopes to guard against the prospect that a newly unified Korea might have second thoughts about casting nuclear weapons aside.

The growing accommodation by North Korea toward the south means that for the first time since World War II, the message delivered by an American President here will be mostly positive toward Pyongyang.

“His tone toward North Korea will be one of improving relations,” White House spokesman Fitzwater said of Bush’s approach. Still, on the nuclear issue, the President is expected to add a stiff dose of verbal pressure as part of his effort to persuade Pyongyang to comply with its Dec. 31 agreement.

“What we still have to see is whether the words on paper get implemented,” one senior Administration official said.

During its 46-year history, North Korea has shown little fealty to its agreements and has yet to permit inspections by the International Atomic Energy Agency despite having signed in 1985 the Nuclear Non-Proliferation Treaty.

But a senior U.S. official traveling with Bush indicated that mounting economic difficulties in a North Korea whose government has mounted a campaign to persuade its citizens to eat just two meals a day may now make Pyongyang somewhat more compliant.

“We would consider doing more if they are responsive in the security area,” the official said in briefing reporters aboard Air Force One as Bush flew here Sunday. The United States could expand the ties, he added, “if we get a sense that they’re not just diddling us with words.”

Relations between the United States and North Korea in recent years have been limited to low-level talks between representatives in Beijing in 16 meetings since 1988.

It would be the most positive gesture by Washington to Pyongyang since the Korean War began more than 40 years ago, a conflict in which the United States lost 54,000 men and suffered 103,000 casualties.

It was unclear to what degree those ties might now be expanded, and Bush was not expected to make his announcement on the issue until later today during a joint news conference with Roh.

White House aides said they expect Bush to speak generally about U.S. willingness to expand the dialogue with the north and to hold out, at least implicitly, the prospect of closer economic ties as a a reward for cooperation on the nuclear issue.