The Center on Democracy, Development, and the Rule of Law (CDDRL) congratulates Landry Signé for his recent awards in recognition of his pioneering work to advance democratic causes and community leadership in North America. Signé is a 2011-2013 Banting Postdoctoral Fellow at CDDRL where he researches the conditions that create, maintain and sustain democracies and economic development. His Banting fellowship is supported by the Social Sciences and Humanities Research Council of Canada. Prior to joining CDDRL, Signé was a visiting scholar at the Stanford Center on African Studies.

On May 19, Signé received the Outstanding Visionary Leadership Award during the 2012 African Network Conference in San Jose, California. Signé was recognized by The African Network for his pioneering role in promoting entrepreneurial opportunities, accountable governance, and economic development for Africa in the Silicon Valley and North America. Signé has been helping to redefine Africa as a continent of economic opportunity through an innovative course he teaches at Stanford Continuing Studies bringing Silicon Valley executives and Stanford students together to spur business and investment strategies.

A week earlier, Signé was awarded the Jury’s Favorite Award for Vision and Inspiration by the African Business Network during their Excellence Vision and Inspiration Gala in Montreal, Canada. Signé was bestowed with this award for his work with the Political Commission of Montreal, the United Nations Association of Canada-Montreal, and the United Nations Missions Committee in New York to champion projects to advance political, economic and social development. One of the projects he supported reinforced the importance of art for economic development, and resulted in a $26 million grant allocated to the Montreal Museum of Fine Art by the Government of Quebec and the Government of Canada.

Signé dedicated the award to, “All the people and institutions who - undercover or in the spotlight - contribute through their visionary actions to improve citizen involvement, to create more individual and collective opportunities, and to generate a better and happier life for the current and next generations.”

Signé completed his PhD in political science in 2010 with the Award of Excellence from the University of Montreal, and has been bequeathed the Award for Best International PhD Dissertation of 2011 by the Center for International Studies and Research. Signé is a member of the Stanford University Provost's Advisory Committee on Postdoctoral Affairs and is the co-chair of the Stanford University Postdoctoral Association whose mission is to represent and advocate for the interests of the postdoctoral scholar community, and to enrich their experience at Stanford University.

A frequent commentator on issues of African governance and economic development, Signé has appeared in The New York Times, Reuters, and Afrik-News.

As recently as 2007, the United States seemed headed towards ever greater fossil fuel import dependence, as domestic oil and natural gas production dwindled and consumption continued to grow.   Five years later, the landscape looks dramatically different. An explosion in natural gas production from shales has overturned paradigms and sparked bold talk of LNG exports. While less remarked-upon, unconventional oil production has followed suit, helping to boost liquids output 20% from 50-year lows and vaulting North Dakota ahead of Alaska to become the nation’s second-largest oil producer. A new order is emerging in the coal market as well, with efforts underway to ship cheap, low-sulfur coal from the western U.S. to China.

The new role for the U.S. as a hotbed of production and technology development for unconventional resources, a reduced import market, and a possible key exporter of natural gas and coal raises a host of political, economic, and environmental questions. The goal of this conference is to contribute to insightful and data-driven dialogue on these pressing (and often politically-charged) issues by bringing together academics, policymakers, industry experts, and other stakeholder groups.

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PESD director Frank Wolak spoke on role of congestion revenue rights (CRRs) and financial transmission rights (FTRs) in improving energy market efficiency at the Energy Risk magazine’s 16^th annual 2-day conference.   His talk focused on the question of whether CRRs and FTRs issued by the market operator in Locational Marginal Pricing (LMP) markets improved or degraded wholesale electricity market performance.  

Wolak argued that CRRs and FTRs issued by market participants were more likely to improve market performance than those issued by the market operator.    Frank also participated in a panel on the future of liquefied natural gas (LNG) in the US and around the world given tremendous increase in shale gas production in the United States and likely increase in other parts of the world.

Despite accelerating economic growth in India over the last thirty years, India’s structural transformation remains stunted, said economist Hans Binswanger-Mkhize at a May 10 FSE symposium on global food policy and food security. Unlike China, urban migration and labor absorption have been slower than expected, especially in the typically labor-intensive manufacturing sector. Formal sector jobs are few and declining as a share of employment, and agricultural employment (and growth) remains low.

The rural non-farm sector has been left to pick up the slack, and has emerged as the largest source of new jobs in the Indian economy. This will likely remain so over the next few decades given that two-thirds of India’s growing population is projected to live in rural areas. Add to the equation the need to increase crop yields by 50 percent under changing climate conditions and it becomes apparent that improving rural incomes and supporting agricultural growth is essential to decreasing poverty and unemployment in India now and in the future.

“The importance of India's rural non-farm sector shows us that structural transformation does not follow a recipe,” said commentator Marianne Banziger, a senior scientist at the International Maize and Wheat Improvement Center (CIMMYT) in Mexico.

While non-farm jobs offer significantly higher wages than farm labor, most jobs are informal and/or insecure (i.e., no health benefits, unemployment insurance or pensions). These jobs go mostly to men 18-26 years old who have some education, while the illiterate and women struggle to transition into this sector. Retail trade and transport, construction, and services (internet and phone booths, maintenance and repair of motor vehicles, and hotels and restaurants) are growing especially fast, partly due to urban-rural spillovers, but manufacturing is still only 20 percent of non-farm jobs.

“For rural households, non-farm employment is not distress employment, but a profitable diversification strategy,” said Binswanger-Mkhize. “At the same time, it has selectively absorbed young males into wage employment, decreased the number of farmers, and increasingly concentrated women in agriculture, contributing to a progressive feminization of agriculture.” 

As a result, farms on average have declined in both land and household size, and have moved toward the production of higher-valued goods and a modern model of part-time farming. This transformation concerned Banziger.

“Will the urban and land-less poor be held hostage by part-time farmers?” she asked.

Banziger projects in the next 20 years food and energy price inflation will likely exceed the income growth of the urban poor. Food price increases will push net consumers, who spend a third of their income on food staples, back into poverty.

“For food prices to remain constant, farmers yield gains will have to increase by 50 percent on essentially the same land area, with less water, nutrients, energy, labor and as climate changes,” said Banziger. "The more we delay investments, the steeper the challenge.”

Fortunately, small farmers are now better equipped to respond to these challenges, but are still limited by scale. Precision irrigation and fertilization technology coupled with remote sensing and cell phone technology enable better yield predictions that affect nutrient application. Better farm-level nutrient management increases farmer income and nutrient use efficiency.

For an optimistic Indian future to be realized government policy must support ways in which households increase their incomes, said Binswanger-Mkhize. A positive outcome for rural areas depends on continued urban spillovers, and on better agriculture and rural development policies, institutions, and programs.

Productivity growth needs to be sustained at very high levels. This requires more responsive, accountable, and better-financed research systems, more diversification of agriculture, and larger, better financed, and more accountable agricultural extension system. India currently employs one-seventh the number of extension workers as China.

"Rapid policy and institutional change will be required to overcome poor performance of many government programs," said Binswanger-Mkhize. "Current subsidies to fertilizer, electricity, water, and support to crop prices are already large, but are an inefficient means to transfer income to farmers."

Direct payments may be a more efficient way of supporting income growth. This is beginning to happen with fertilizers, but should be extended to electricity and food subsidies, said Binswanger-Mkhize.

“Maybe the people who have been disadvantaged in the past are the core for future change. With appropriate support, smallholder farmers can become the engines for agricultural productivity growth and transform India's growing economy,” concluded Banziger. 

At a ceremony at the Harvard Faculty Club on May 23, 2012, the Centennial Medal — the highest honor awarded by Harvard University’s Graduate School of Arts and Sciences — was given to Karl Eikenberry, the Payne Distinguished Lecturer at the Freeman Spogli Institute for International Studies at Stanford University.

The Centennial Medal is awarded each year to a select group of Harvard University’s most accomplished alumni. Centennial Medalists are Graduate School alumni who have made fundamental and lasting contributions to knowledge, to their disciplines, to their colleagues, and to the world at large. The medal was first awarded in June 1989, on the occasion of the 100th anniversary of the founding of the Graduate School of Arts and Sciences.

At the award ceremony, the Graduate School’s interim dean, Richard J. Tarrant, read a testimonial to Eikenberry’s accomplishments and leadership. Following is a slightly condensed version of that testimonial. 

The Soldier-Statesman: Karl Eikenberry, AM ’81, regional studies–East Asia

Karl Eikenberry, who served as US ambassador to Afghanistan from 2009 to 2011, is the “very model of a modern soldier-statesman,” says Graham Allison, the Douglas Dillon Professor of Government at the Harvard Kennedy School, with a nod to Gilbert and Sullivan.

Eikenberry, a graduate of the US Military Academy at West Point, is now the Payne Distinguished Lecturer at the Freeman Spogli Institute for International Studies at Stanford. He had a 35-year career in the Army, retiring as lieutenant general in 2009 when President Obama tapped him to lead the diplomatic mission in Afghanistan.

His involvement with that country has been long and deep. Prior to becoming ambassador, he was deputy chairman of the NATO Military Committee in Brussels, where he was heavily involved in the mission in Afghanistan, and regularly traveled there. From 2005 to 2007, he guided military efforts on the ground as commander of US-led coalition forces, and earlier, he served as US security coordinator and chief of the Office of Military Cooperation in Kabul, where he aided efforts to establish and strengthen the Afghan army and police force. “Karl was given extremely difficult assignments in Afghanistan,” says his Harvard mentor Ezra Vogel, the Henry Ford II Professor of the Social Sciences, Emeritus. “He has, under trying circumstances, provided assistance to the Afghan government and Afghan people and leadership to Americans in Afghanistan.”

Over the course of his career, Eikenberry served in key strategy, policy, and political-military positions, including as director of strategic planning and policy for the U.S. Pacific Command in Hawaii, as defense attaché at the United States Embassy in Beijing, and as the Defense Department’s senior country director for China, Taiwan, Hong Kong, and Mongolia.

In addition to his master’s degree from Harvard, Eikenberry was a National Security Fellow at the Kennedy School. He earned a second master’s in political science from Stanford, and he has an advanced degree in Chinese history from Nanjing University in China. His wide curiosity and astute grasp of the history and culture of the Far East, the Middle East, and international politics are revealed in his numerous articles on military training and tactics, history, and Asia-Pacific security issues. When he was appointed ambassador, Admiral Mike Mullen, the former chairman of the Joint Chiefs of Staff, said that it was “Karl’s experience as a soldier-scholar” that would prove crucial to fostering the kind of strong civil-military relationship required to enable good governance to take root and hold. Mullen added, “He knows the enemy, he knows our allies, and he knows himself.”

Since leaving Afghanistan, Eikenberry has written and spoken about the ethical dilemmas of war, political use and misuse of military deployment, and the need for military accountability. He has also become a leading voice in a conversation about the relationship between the economy and our national security.

“Integrity, service, honor, commitment, decency, intelligence. Karl Eikenberry embodies what it means to be an American patriot,” says Stephen Krasner, the Graham H. Stuart Professor of International Relations at Stanford. Indeed, Eikenberry’s service and achievements have earned him the highest military and diplomatic honors, including the Defense Distinguished Service Medal, the Defense Superior Service Medal, the Legion of Merit, and the Bronze Star.  
 

During the annual China-Japan-Korea summit, held mid-May in Beijing, Premier Wen Jiabao, Prime Minister Yoshihiko Noda, and President Lee Myung-bak announced their intention to begin negotiating a trilateral free trade agreement (FTA).

The news closely followed the implementation of the Korea-U.S. FTA and negotiations over the Trans-Pacific Partnership (TPP) FTA championed by the Obama administration, both taking place in March. It potentially places Japan and Korea on awkward footing as they balance relations with China, an important regional leader, and the United States, an ally of many decades’ standing.

What could this proposed East Asia FTA mean for the United States, for the three countries pursuing it, and for global economics and security?

Joseph L. C. Cheng, a visiting professor at Shorenstein APARC and a professor of international business at the University of Illinois where he also serves as director of the CIC Center for Advanced Study in International Competitiveness, suggests the FTA could have a far greater impact beyond boosting economic growth in East Asia. Possible outcomes range from reducing resources for strengthening the U.S. domestic infrastructure to providing leverage for negotiating with North Korea over its nuclear program.

In a recent interview, Cheng spoke in-depth about the nuances of the trilateral East Asia FTA.

If the proposed China-Japan-Korea FTA is realized, what could the impact be on the U.S. economy and economic policy?

These three countries are currently ranked the second (China), third (Japan), and fifteenth (Korea) largest economies in the world. With a combined population of 1.5 billion, they account for about 20 percent of the world’s GDP and total exports. In 2011, their three-way trade reached $690 billion, and the United States sold them a total of $213.6 billion worth of merchandise (over 14 percent of U.S. total world exports in 2011).

If realized, the proposed FTA could have both negative and positive effects on the U.S. economy. On the negative side:

• First, cross-border trade and investment would most likely increase among China, Japan, and Korea, but not with the United States. Whether the FTA would result in decreased U.S. trade and investment with these countries and by how much will depend on the range of industries and product categories covered by the FTA and how rigorously it will be enforced. Most of this negative impact from the FTA would be with China. This is because the United States already has an FTA with Korea, and Japan (along with Canada and Mexico) is likely to join the U.S.-led TPP FTA which is currently under negotiation.

• Second, if the FTA did cover the industries and product categories that disadvantage the United States, small-and-medium sized export firms (SMEs) would be the most negatively affected by the decline in U.S. exports to the three member countries. This is because over 90 percent of U.S. SMEs do not conduct manufacturing overseas (and thus cannot produce and sell in these three countries to benefit from the FTA), and their market access is dependent on the U.S. government’s trade initiatives. The SMEs account for about one-third of total U.S. exports and provide most of the domestic job growth.

• Third, not only would the three member countries import less from the United States, they would also invest less in the United States (but invest more in one another). When announcing the FTA talks, China’s Premier Wen expressed hope that Japan and Korea will be the primary destination for China’s outward investment. This decline in foreign investment from the three member countries in the United States could have a negative impact on domestic job growth and funding for business expansion and public revitalization projects (e.g., infrastructure replacement and modernization).

• Fourth, because FTAs disadvantage trade from non-member countries, U.S. multinational corporations (MNCs) could be forced to produce and sell goods from their plants in the three member countries (instead of those in the United States) in order to stay competitive. This would mean moving jobs overseas. Also, because these member countries have bilateral FTAs with many other countries in Asia (e.g., the China-ASEAN FTA introduced in January 2010), U.S. MNCs might find it beneficial to increase production there (China, Japan, and Korea) for export to the region. Again, this would result in transfers of jobs overseas and also reduced investment by U.S. MNCs at home (which could help create jobs and grow the domestic economy).

On the positive side, the proposed FTA could result in fewer imports from the member countries into the United States. This would provide an opportunity for U.S. manufacturers, particularly the SMEs, to increase their domestic production to fill the demand-gap and recapture the market-share that has been lost to imports. If U.S. manufacturers could produce unique, high-quality products at an affordable price, they would be able to not only attract new domestic customers and keep them but also open new export markets in other countries, including China, Japan, and Korea.

As for potential impact on U.S. economic policy, the Obama administration might feel the need to speed up the TPP negotiations (which might require making the final FTA less comprehensive and less rigorous than originally proposed) and put the agreement in place ahead of the proposed China-Japan-Korea FTA. Also, the administration might be pressured by the business community to start FTA talks with China, as has been suggested by Maurice Greenberg, chairman of Starr International Company Inc. and former AIG chief. These FTA talks will take years to conclude and implement. In the meantime, the United States should introduce new economic policies to revitalize the domestic manufacturing sector and help position it for enhanced international competitiveness.

Could there be an impact on the struggling economies of Europe?

The proposed FTA would most likely have a similar impact on Europe, namely decreased trade and investment with the three member countries of China, Japan, and Korea (assuming the agreement included industries and product categories that disadvantage Europe). Because of Europe’s worsening debt crisis, the negative impact there would likely be greater than it would be on the United States. Currently, the European Union (EU) has an FTA with Korea, but not with China or Japan. Also, with the exception of Norway, none of the European countries is in FTA talks with China. Switzerland is the only European country with an FTA with Japan. This is not good news for Europe if it wishes to benefit from increased trade and investment with China, Japan, and Korea.

Is there a potential upside for the global economy?

Most of the expected economic benefits resulting from the proposed FTA will go to the three member countries of China, Japan, and Korea. The Chinese government estimates that the FTA could raise China’s GDP by up to 2.0 percent, Japan by 0.5 percent, and Korea by 3.1 percent. The Korean finance ministry estimates that the FTA could boost the nation’s economic growth by up to 3.0 percent and create as many as 330,000 jobs over a decade. This is consistent with the experience of the introduction of the China-ASEAN FTA in January 2010, which caused trade in the region to increase by about 50 percent in that year.

The expected economic growth in the three member countries (and the Asia-Pacific region) could, in the longer term, lead to increased imports from the United States and other Western countries for goods and services that they cannot produce or do not produce enough of. This might result from increased spending by individual consumers on luxury and unique goods and/or government purchase of advanced technologies for infrastructure projects. The increased imports would certainly help lift the global economy by creating more jobs and generating greater incomes in the exporting countries.

When announcing the proposed FTA in Beijing, the three leaders from the member countries made it a point that they will work together to ease regional disputes and tensions, particularly on the Korean Peninsula. They also expect the FTA to help provide a comprehensive and institutional framework in which a wide range of bilateral and trilateral cooperation would evolve, with the goal of maintaining the Asia-Pacific region as the growth center of the world economy. (Currently over 50 percent of the world’s economic growth is taking place in Asia.) To the extent that this can be accomplished, the proposed FTA will have farther-reaching consequences than being just a regional trade agreement.

What is driving the announcement about the intended FTA at this specific point in time?

It is not clear if the announcement was purposefully timed to meet certain strategic objectives. However, a number of factors and recent developments suggest that the timing is quite beneficial to the member countries.

First, the three countries had been in discussion about the proposed FTA for over ten years prior to the announcement. Two of the three principals, China’s Premier Wen and Korea’s President Lee will be leaving office by year’s end and would certainly like to be remembered as architects of this important treaty by participating in its announcement. 

Second, the deteriorating economic crisis in the EU and the slow recovery of the U.S. economy make it very clear to the three leaders that they need to stimulate internal consumption and investment to maintain economic growth in their respective countries. Announcing the proposed FTA now helps ease concerns about the global economy and signal to international investors that the Asia-Pacific region will remain the center of the world’s economic growth for many years to come.

Third, from China’s standpoint, the recent scandals of Bo Xilai and the blind civil rights activist Chen Guangcheng brought negative attention to the country for the entire month of April. The mid-May announcement of the proposed FTA helps redirect the world’s attention to the economic success of China and its influential role in shaping the future of the global economy.

Finally, the recent threat of a third nuclear test from North Korea might have been another contributing factor to having the announcement made sooner rather than later. China might have thought about the proposed FTA as a message to North Korea that China is now working closely with South Korea and Japan to maintain the Asia-Pacific region as the world’s center of economic growth, and thus any new nuclear provocation from North Korea would be considered an unfriendly act.

What could be the biggest challenges to the ratification of the FTA? Can they be overcome?

Historical animosity and territorial disputes between the three member countries will be the greatest challenges to both the FTA negotiation and its final ratification. Korea has recently suspended the signing of agreements on military cooperation with Japan because of public opposition, particularly from the older generations who have bitter memories of Japan’s colonial rule. Japan and China have long been in dispute over territorial claims in the East China Sea. Both Japan and Korea have also been calling for China to put more pressure on North Korea to stop further nuclear provocations. 

In addition to these historical and political obstacles, there will be opposition from interest groups within each country against the proposed FTA for fear of negative economic consequences. For example, Chinese manufacturers might not want increased imports from Japan and Korea to reduce their market share. Japan currently has a big surplus from trade with Korea; thus Korea might not want to have more imports from Japan. Also, the three member countries are quite unbalanced in terms of the liberalization steps that they have already taken and they also have different visions for their economic future.

It will take great diplomatic skills on the part of the negotiators to overcome these challenges. The FTA talks will be difficult and take many years to produce an agreement. Alternatively, the three member countries might choose to smooth the negotiations by avoiding sensitive issues and making the agreement far less comprehensive and rigorous. This would, however, also make the FTA less economically important and consequential.