DESPITE the dramatic changes that swept the communist world in 1989, the militaristic and secretive Hermit Kingdom of North Korea remained unaffected. Rather than follow the lead of his one-time Soviet patron in adopting glasnost and perestroika, Pyongyang's "Great Leader" Kim Il Sung withdrew North Korean students from Eastern Europe to contain the freedom virus and moved closer to China's gerontocracy, which used bullets to retain power.On the surface, little has changed two years later. North Korea's military remains arrayed for war north of the Demilitarized Zone (DMZ), and Pyongyang appears dedicated to building a nuclear weapon. Joint Chiefs of Staff chairman Colin Powell recently opined that he was down to just two "demons" to justify the Pentagon's budget, one of whom was Kim Il Sung. Yet even the obvious threat posed by the North's potent military cannot obscure signs of a thaw on the peninsula. Last fall, North and South Korean officials met officially for the first time in 40 years and began negotiations on a nonaggression treaty. Although Pyongyang's rhetorical attacks on the Republic of Korea (ROK) remain sharp, contacts between the two nations continue; most recently, they formed a joint table tennis team to compete in the world championships in early May. Even more significant, both North and South Korea appear poised to become members of the United Nations. The ROK has long wanted to join, but the Democratic People's Republic of Korea (DPRK), arguing that separate memberships would reinforce the peninsula's division, instead advocated a joint seat. Moscow's official recognition of South Korea last year, however, removed the threat of a Soviet veto of the ROK application, which must be approved by the Security Council. Officials in Beijing, who recently o pened a trade office in Seoul, have apparently told Pyongyang that they will no longer block South Korea's membership. To avoid almost total isolation, the North now says it will apply for its own seat. The loss of virtually all of its communist allies has caused the North to enter negotiations with Japan over formal recognition and financial aid. Discussions so far have achieved little, but the mere fact that Pyongyang is talking to its one-time colonial master demonstrates that important changes are occurring in the North. There even seems to be interest in warming relations with the United States. The North Korean UN mission, for instance, recently circulated a brochure encouraging foreign investment, citing the DPRK's willingness to allow "full and tax-free remittance of all dividends and capital." Indeed, it would appear that there exists in Phongyang what Carnegie's Selig Harrison has called a "policy struggle" between hard-line traditionalists and moderate technocrats. As far as we know, no one has formally challenged Kim Il Sung's hold on power. But at least some officials seem to genuinely want their country to rejoin the international community. And the US should help North Korea do so. THE first step for Washington would be to eliminate restrictions on personal travel to and nonstrategic trade with the DPRK. There are no better ambassadors for the US than private individuals engaged in academic, cultural, and economic exchange.Second, the US should build on the recent meetings held in Beijing by encouraging additional talks between American and North Korean diplomats. As part of this process, the US should enlist Chinese, Japanese, and Soviet officials and press for "cross-recognition" between the two Koreas and the major powers. Pyongyang has resisted this step, but it also refused to consider dual entry into the UN. Third, the US needs to move arms control to the forefront in East Asia. South Korea has 10 times the GNP and twice the population of the North; it is capable of taking on responsibility for its own defense. Washington and Seoul should develop a plan to phase out US forces, starting with tactical nuclear weapons. The two countries should then challenge North Korea to respond by agreeing to inspection of its nuclear facilities by the International Atomic Energy Agency, pulling its troops back from their ad vanced positions along the DMZ, demobilizing some armored and infantry units, and entering into serious arms reduction talks. Successful negotiations would lead to an acceleration of the American withdrawal and forestall a major South Korean arms buildup. The positive signs emitted by Pyongyang are faint, but they are still positive. The US should take advantage of this opportunity to help reduce tensions on the Korean peninsula. We, and most important, the Koreans - both North and South - have nothing to lose and much to gain.