They aren't carrots, or rewards, or blackmail payments, Clinton administration officials say when describing what U.S. special envoy William J. Perry recently dangled in front of North Korea in return for Pyongyang's eschewing nuclear weapons and long-range ballistic missiles.

Instead, officials say that Perry, who traveled to North Korea as President Clinton's envoy earlier this month, outlined two "pathways to the future." One leads toward confrontation with the United States and its regional allies, South Korea and Japan. The other leads toward a normalization of U.S. relations, a lifting of trade sanctions and a pledge that Washington won't try to overthrow the Stalinist, hermit-like regime in Pyongyang.

A new obstacle appeared yesterday, when the State Department revealed that a U.S. citizen visiting a North Korean economic zone near the Chinese border was arrested on June 17. U.S. officials said the detained American, whose identity was not disclosed, was on a trip related to building a hospital and a garment manufacturing business. So far, Swedish diplomats, who represent U.S. interests in North Korea, have been unable to gain access to the American.

Even before the arrest, Perry's effort to "engage" North Korea had provoked criticism from lawmakers, human rights activists and experts who say that the positive Perry "pathway" would only prolong the life of an oppressive government that is developing weapons of mass destruction for self-preservation and extortion.

"They'll never have a policy of cooperation with the outside world. They exist to have nothing but a policy of confrontation," said Chuck Downs, author of a book about North Korea and a foreign policy adviser to House Republicans.

"The current engagement policy helps the survival of the current leadership, which is fighting against its own people," added Se-Il Park, a professor at Seoul National University who was a senior adviser to former South Korean president Kim Young-sam.

Perry has not said anything publicly about his efforts, which began last November after Congress asked for a policy review in return for authorizing money for North Korean food aid.

Administration officials say Perry might not even issue a written report, out of concern that it would become a target rather than a guideline. He has, however, briefed President Clinton, senior State Department officials and members of Congress.

Administration officials argue that engagement with North Korea is the only responsible policy, because Pyongyang could develop nuclear weapons faster than the United States could change the leadership or outlook in the North.

"It would take time, time we don't have," said one person familiar with Perry's proposals. A senior administration official added that "history teaches us that such regimes do not go quietly in the night." Moreover, despite three years of famine, experts believe the North Korean regime "is not in danger of imminent collapse," said the senior official.

"Our major concerns with North Korea are not how it governs itself domestically, but how it behaves internationally and its capacity to do damage some distance from its borders," said another administration official. "We want to induce responsible behavior in return for benefits from the United States at the political level."

Perry's supporters stress that he does not favor new financial or aid commitments by the United States. "Buying them out is equivalent to blackmail. That sets a bad precedent, and this administration couldn't deliver anyway," said one official involved in the policy review.

Administration officials also stress that they want North Korea to halt tests on ballistic missiles, a new demand that goes beyond the 1994 "Agreed Framework." Under that agreement, North Korea pledged to stop developing nuclear weapons in return for $5 billion in fuel oil assistance and aid to build safer, light-water nuclear power plants whose fuel would be sent to other countries for reprocessing.

"Anything put on the table would be more for more, not less for less," said a senior administration official.

Concerns about ballistic missiles were heightened by a North Korean test last year and by recent intelligence reports that North Korea is preparing to test a new long-range ballistic missile capable of striking the United States.

Some critics say that too much aid -- a total of $419 million since 1995 -- already has been given to North Korea. Nicholas Eberstadt, a visiting fellow at the American Enterprise Institute, called North Korea's foreign policy "military extortion."

When Perry visited Pyongyang this month, he led the highest ranking delegation of Americans to go there since the Korean War. The group was feted by dancers and serenaded with a chorus of "Clementine." They visited a farm cooperative and the birthplace of the late North Korean leader, Kim Il Song, father of the reclusive current leader Kim Jong Il. Their meetings with senior government and military officials were covered positively by North Korea's tightly controlled press and television.

But the Perry visit was followed closely by North Korean incursions into disputed waters off South Korea. A South Korean naval vessel sank a North Korean boat, killing about 30 North Koreans. North Korea also arrested a South Korean housewife who was a tourist in the North and charged her with espionage, a challenge to South Korean President Kim Dae Jung's "sunshine policy" of engagement. The woman was released on Friday.

A new long-range ballistic missile test would deal the most severe blow to Perry's initiative. At a symposium at the conservative Heritage Foundation, Assistant Secretary of State for East Asian and Pacific Affairs Stanley O. Roth said future tests "would have very serious consequences."

Questions also linger about a huge underground tunnel that the United States suspected of being the location of an enrichment plant for nuclear weapons material. North Korea let inspectors into the site, and a 14-person U.S. team found a network of empty tunnels. Though inspectors concluded that the tunnels are not suitable for an enrichment facility, the location's purpose remains a mystery.

"Maybe it was an underground shopping mall," a senior administration official said wryly. Another inspection is due in May next year, but critics say hundreds of other tunnels should be inspected.

American, South Korean and Japanese officials met in Washington yesterday to coordinate what steps to take next. A former Clinton administration official says that policymakers are looking for a new approach because 50 years of isolating North Korea have accomplished little. "Perry wants to co-opt and modify behavior by incentives," he said. "Many would argue that ostracism has been the main prop of regimes like North Korea and Cuba because they can blame everything on the beastly Americans."