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Dr. Sáez's recent paper offers a new perspective on the relationship between ex ante barriers to entry and ex post second-generation reforms. Building upon theoretical insights from the literature on new entry, the paper will show why some types of barriers to entry exist in transitional economies. The paper will then show how market segmentation imposes structural barriers to entry will likely affect the level of political opposition that builds during the implementation of second generation reforms. In order to provide empirical support for this theoretical construct, the paper will specifically highlight the experience of financial services reform in India in order to develop an argument about the existing challenges and likely success of second-generation reforms that stemmed from initial barriers to entry.

Lawrence Sáez is a senior associate member at St. Antony's College, Oxford and he teaches international politics at the School of Oriental and Asian Studies in London. Prior to living in England, Dr. Sáez was an assistant research political scientist at the Institute of East Asian Studies and visiting scholar at the Center for South Asia Studies, University of California, Berkeley. He was also the associate editor for South Asia at Asian Survey. He holds a B.A. in political science from the University of California, Berkeley; an M.A.L.D. in international relations from the Fletcher School of Law and Diplomacy; and a Ph.D. in political science from the University of Chicago.

His research is focused around comparative political economy and fiscal federalism in developing countries. He is currently working on trying to understand how globalization has affected subnational economic growth and the provision of public goods in emerging markets. He is the author of Banking Reform in India and China (Palgrave MacMillan 2004).

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Lawrence Sáez Visiting Fellow, Center for International Studies Speaker London School of Economics
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John W. Lewis is professor emeritus of Chinese politics at Stanford University's Center for International Security and Cooperation and a frequent visitor to China and North Korea. He wrote this for the Mercury News.

Beijing tries to read mixed U.S. signals in Korea diplomacy By John W. Lewis

For the past year China has led the quest for a negotiated solution to the Korean nuclear crisis. It facilitated and hosted three-way talks with the United States and North Korea a year ago this week and two sessions of the six-party talks (adding South Korea, Japan and Russia) in August and February. Its officials crisscrossed the globe to explore potential areas of common interest and compromise and this week hosted North Korean leader Kim Jong Il to explore options for the beleaguered Korean Peninsula. Yet, in each of the formal talks, the Chinese have been discouraged by the minimal results. They are now questioning U.S. intentions toward Korea and, in the longer term, toward China.

Beijing considers the unchecked expansion of North Korea's nuclear weapons to be a real possibility, and its reasoning starts with the record of U.S. policies toward nuclear proliferation. That record, the Chinese argue, is mixed and often contradictory. As a result, China worries that Washington might continue to tolerate the program so long as Pyongyang did not cross key red lines, such as the transfer of nuclear materials to terrorists.

Whatever Beijing's past position on nuclear matters, many senior Chinese now regard nuclear weapons on their border to be a direct threat to their national security and suspect Washington of downplaying that danger. For them, it is no great leap to the conclusion that the unfettered growth of the Korean program might embolden others in Asia, including Taiwan, to acquire nuclear weapons despite verbal opposition from Washington. Beijing's leaders can easily imagine how that nightmarish turn of events would undermine the nation's drive toward modernization and end strategic cooperation with the United States.

Despite the fact that all parties at the six-party meeting in February endorsed the dismantling of the North's nuclear weapons program, the Chinese fear that the talks may be dead in the water. Following that meeting, they began to debate other ways to resolve the crisis. They had already reorganized the leadership team responsible for North Korean affairs, and that team had begun acting to prevent the worst case, including offering further inducements to Kim Jong Il this week. Whereas last fall the talk of deepening U.S.-China cooperation on Korea pervaded the news, now, especially after Vice President Dick Cheney's uncompromising stand on Korea and Taiwan last week, the reverse is occurring.

What China can do in these circumstances is quite limited. Its influence on North Korea is largely determined by what the United States does or doesn't do. By refusing to negotiate on a staged process leading to the eventual dismantlement of Pyongyang's nuclear weapons, Washington has tacitly allowed the North's program to proceed. It has rejected proposals for a temporary freeze, technical talks and any interim steps short of the unconditional and complete ending of the program. The result is virtual paralysis.

Beijing has been able to work with North Korea only when it could find areas of potential compromise between Washington and Pyongyang. It cannot or will not act

alone to exert pressure because this would jeopardize its influence on the North. Contrary to a widely circulated story, Beijing did not cut off energy shipments to North Korea for three days in 2003. Beijing would not take such a counterproductive action when its main influence with the North lies in the kind of quiet diplomacy being practiced this week with Kim Jong Il.

Many in Beijing are beginning to question whether there might be a more promising approach with Pyongyang. Should the Chinese, South Koreans and Russians conclude that making progress toward the common goal of the North's complete nuclear disarmament is out of reach, for example, they reluctantly might translate their joint offer of aid in February into a quid pro quo for a partial agreement, such as a limited freeze, that would allow the situation to stabilize. China could worry that such an independent action could endanger the common front with Washington. At the same time, it could calculate that the United States would be sufficiently pleased with any solution that halted the North Korean nuclear program.

None of these developments may come to pass, of course, but who could have imagined a year ago that Washington would have permitted the situation to deteriorate to the present point?

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For the past year China has led the quest for a negotiated solution to the Korean nuclear crisis. It facilitated and hosted three-way talks with the United States and North Korea a year ago this week and two sessions of the six-party talks (adding South Korea, Japan and Russia) in August and February. Its officials crisscrossed the globe to explore potential areas of common interest and compromise and this week hosted North Korean leader Kim Jong Il to explore options for the beleaguered Korean Peninsula. Yet, in each of the formal talks, the Chinese have been discouraged by the minimal results. They are now questioning U.S. intentions toward Korea and, in the longer term, toward China.

Beijing considers the unchecked expansion of North Korea's nuclear weapons to be a real possibility, and its reasoning starts with the record of U.S. policies toward nuclear proliferation. That record, the Chinese argue, is mixed and often contradictory. As a result, China worries that Washington might continue to tolerate the program so long as Pyongyang did not cross key red lines, such as the transfer of nuclear materials to terrorists.

Whatever Beijing's past position on nuclear matters, many senior Chinese now regard nuclear weapons on their border to be a direct threat to their national security and suspect Washington of downplaying that danger. For them, it is no great leap to the conclusion that the unfettered growth of the Korean program might embolden others in Asia, including Taiwan, to acquire nuclear weapons despite verbal opposition from Washington. Beijing's leaders can easily imagine how that nightmarish turn of events would undermine the nation's drive toward modernization and end strategic cooperation with the United States.

Despite the fact that all parties at the six-party meeting in February endorsed the dismantling of the North's nuclear weapons program, the Chinese fear that the talks may be dead in the water. Following that meeting, they began to debate other ways to resolve the crisis. They had already reorganized the leadership team responsible for North Korean affairs, and that team had begun acting to prevent the worst case, including offering further inducements to Kim Jong Il this week. Whereas last fall the talk of deepening U.S.-China cooperation on Korea pervaded the news, now, especially after Vice President Dick Cheney's uncompromising stand on Korea and Taiwan last week, the reverse is occurring.

What China can do in these circumstances is quite limited. Its influence on North Korea is largely determined by what the United States does or doesn't do. By refusing to negotiate on a staged process leading to the eventual dismantlement of Pyongyang's nuclear weapons, Washington has tacitly allowed the North's program to proceed. It has rejected proposals for a temporary freeze, technical talks and any interim steps short of the unconditional and complete ending of the program. The result is virtual paralysis.

Beijing has been able to work with North Korea only when it could find areas of potential compromise between Washington and Pyongyang. It cannot or will not act alone to exert pressure because this would jeopardize its influence on the North. Contrary to a widely circulated story, Beijing did not cut off energy shipments to North Korea for three days in 2003. Beijing would not take such a counterproductive action when its main influence with the North lies in the kind of quiet diplomacy being practiced this week with Kim Jong Il.

Many in Beijing are beginning to question whether there might be a more promising approach with Pyongyang. Should the Chinese, South Koreans and Russians conclude that making progress toward the common goal of the North's complete nuclear disarmament is out of reach, for example, they reluctantly might translate their joint offer of aid in February into a quid pro quo for a partial agreement, such as a limited freeze, that would allow the situation to stabilize. China could worry that such an independent action could endanger the common front with Washington. At the same time, it could calculate that the United States would be sufficiently pleased with any solution that halted the North Korean nuclear program.

None of these developments may come to pass, of course, but who could have imagined a year ago that Washington would have permitted the situation to deteriorate to the present point?

JOHN W. LEWIS is professor emeritus of Chinese politics at Stanford University's Center for International Security and Cooperation and a frequent visitor to China and North Korea.
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Dr. Nasr's talk will focus on the implications of change of the balance of power between Shi'as and Sunnis for regional politics in Iraq and for the emerging trends in Sunni militancy in the region.

Vali Nasr is a specialist on contemporary Islam and its relations to politics in the Muslim world. His recent work is focused on emerging patterns in Islamism, in particular with regard to Shi'i-Sunni sectarianism. He is the author of The Islamic Leviathan: Islam and the Making of State Power (Oxford University Press, 2001); Mawdudi and the Making of Islamic Revivalism (Oxford University Press, 1996); an editor of Oxford Dictionary of Islam (Oxford University Press, 2003). His works on political Islam and comparative politics of South Asia and the Middle East has been published in a number of journals including, the New York Times, Comparative Politics, Asian Survey, Daedalus, Middle East Journal, and International Journal of Middle East Studies, as well as in numerous edited volumes on the Middle East, South Asia, political Islam and comparative politics. His work has been translated into Arabic, Indonesian, Chinese, and Urdu. Dr. Nasr has been the recipient of fellowship grants from the John D. and Catherine T. MacArthur Foundation, the Harry Frank Guggenheim Foundation, and the Social Science Research Council.

Dr. Nasr earned his degrees from the Massachusetts Institute of Technology (Ph.D., 1991), the Fletcher School of Law and Diplomacy (MALD, 1984), and Tufts University (BA, 1983).

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Vali Nasr Professor, Middle Eastern and South Asian Affairs Department of National Security Affairs, Naval Postgraduate School, Monterey, CA
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Ludger Kuehnhardt was born in Muenster (Germany) in 1958. He is Director of the Center for European Integration Studies (ZEI), a think-tank of the University of Bonn which he helped to set up since 1997(www.zei.de). Prior to this, he was Chair of Political Science at the University of Freiburg and worked as Speechwriter for the former German President Richard von Weizsaecker. Ludger Kuehnhardt has been a Visiting Fellow ot Stanford's Hoover Institution in 1995/96. He was a Public-Policy Fellow at the Woodrow Wilson Center for International Scholars in Washington D.C. in 2002 and a Visiting Professor at Dartmouth College in 2000. He is a Visiting Professor at the Catholic University of Milan and at the Diplomatic Academy in Vienna.

Prof. Kuehnhardts research interests center on transatlantic relations and European foreign and security policy in light of the joint new challenges in the Greater Middle East. He is also conducting research on the constitution-building process of the European Union and its ramification for European identity. His research interests include the "globalization" of regional integration processes and its link to the European integration experience.

He has wide range experiences in political and academic consulting work and has lectured in all continents. He studied history, philosophy and political science in Bonn, Geneva, Tokyo and at Harvard's Center for European Studies.

Ludger Kuehnhardt is the author of more than twenty books on Europe, transatlantic relations,political theory and history of ideas.

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John W. Lewis, director of the CISAC Project on Peace and Cooperation in the Asian-Pacific Region, led a private delegation of American experts and officials to North Korea and the country's nuclear weapons facility in Yongbyon. The visit took place January 6-10, 2004, and was the first visit by outsiders to that country's nuclear facilities since North Korea expelled international inspectors a year ago.

Accompanying Lewis were the former director of Los Alamos National Laboratory Sigfried Hecker, former State Department official Jack Pritchard, and two staffers from the Senate Foreign Relations Committee, Frank Jannuzi and Keith Luse.

Lewis and the others briefed U.S. government officials upon their return. Hecker, a nuclear weapons expert, testified before the Senate Foreign Relations Committee on January 21 and 22 about their visit to the Nuclear Scientific Research Center in Yongbyon.

The visit generated intensive interest from the media.

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Digital_Photo_(Sawada).jpg PhD

Chiho Sawada holds Ph.D. and M.A. degrees from Harvard University (specialty in East Asian history; secondary field in Western intellectual history) and a B.A. from the University of California, San Diego (major in economics; minor in visual arts). In addition, he has attended the Fletcher School of Law & Diplomacy (concentration in International Politics and Development), conducted research at numerous other institutions in Asia and the United States, and served stints in U.S. Embassies in Beijing and Seoul.

Dr. Sawada is currently working on several collaborative and individual research projects: (1) Historical Injustice, Redress, and Reconciliation: Global Perspectives, (2) Public Diplomacy and Counter-publics: Asia and Beyond, 1945 to the present, and (3) Student and Urban Cultures in Colonial Contexts. He recently contributed a chapter entitled "Pop Culture, Public Memory, and Korean-Japanese Relations" to the first volume of project one, Rethinking Historical Injustice in East Asia (Routledge, forthcoming). For project two, he is lead organizer of a Stanford workshop and conference, and editing the conference book. Project three is a book project that expands his dissertation to consider colonial context not just in Northeast Asia, but also India, Southeast Asia, and Africa.

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Stephen J. Stedman
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On November 4, 2003, %people1%, CISAC Senior fellow, was appointed research director for the United Nations' new High-level Panel on Threats, Challenges, and Change. The panel is charged with examining current global threats and analyzing future challenges to international peace and security.

Stephen Stedman, senior fellow at the Stanford Institute for International Studies (SIIS), has been appointed research director for the United Nations' new High-Level Panel on Threats, Challenges and Change. Stedman will leave for New York City next month for the remainder of the academic year.

On Nov. 4, U.N. Secretary General Kofi Annan appointed Stedman and 16 members of the blue-ribbon commission, which is chaired by Thailand's former Prime Minister Anand Panyarachun. The panel is charged with examining current global threats and analyzing future challenges to international peace and security. The group will not formulate policies on specific issues or on the United Nations' role in specific places, but it will advise the organization on reforms necessary to cope with emerging challenges. The panel will complete a 10,000- to 15,000-word report by late next year.

Stedman, a senior fellow at the Center for International Security and Cooperation (CISAC) at SIIS, has served as a consultant to the United Nations on issues of peacekeeping in civil war, light weapons proliferation and conflict in Africa, and preventive diplomacy. His most recent co-authored publications include Ending Civil Wars: The Implementation of Peace Agreements (2002) and Refugee Manipulation: War, Politics and the Abuse of Human Suffering (2003).

Asked about the genesis of his new appointment, Stedman said he has developed relations with a set of people at the United Nations during the last six years. "A lot of the work I've done has had resonance in the U.N.," he said. "Policymakers read it and they understand I have sympathy for people who have to make tough decisions."

CISAC co-director Scott Sagan said the appointment is a "great tribute to the quality and policy relevance of the work that Steve has done over his career."

Stedman said his biggest challenge will be producing a report "that is both hard-hitting and has the potential for leading to change. There is a general sense within the U.N. that, basically, the effectiveness and legitimacy of the organization has been called into account. When Kofi Annan announced his intention to create the panel, he declared that the U.N. was at a crossroads where it needed to rethink how it can effectively provide collective security in today's world."

In addition to Panyarachun, the panel members include such international policy figures as former Norwegian Prime Minister Gro Harlem Brundtland; former Australian Minister of Foreign Affairs Gareth Evans; former U.N. High Commissioner for Refugees Sadako Ogata of Japan; former Russian Prime Minister Yevgeny Primakov; and retired U.S. Lt. Gen. Brent Scowcroft, former national security adviser.

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This seminar is part of the Shorenstein Forum Cross-Strait Seminar Series. Dr. Wu Xinbo is currently a professor at the Center for American Studies, Fudan University, and the Vice-President, Shanghai Institute of American Studies. He teaches China-U.S. relations and writes widely about China?s foreign policy, Sino-American relations and Asia-Pacific issues. Professor Wu is the author of Dollar Diplomacy and Major Powers in China, 1909?1913 (Fudan University Press, 1997) and has published numerous articles and book chapters in China, the United States, Japan, Germany, South Korea, Singapore, and India. He is also a frequent contributor to Chinese and international newspapers. Born in 1966 in Anhui Province, East China, Wu Xinbo entered Fudan University in 1982 as an undergraduate student and received his B.A. in history in 1986. In 1992, he got his Ph.D. in international relations from Fudan University. In the same year, he joined the Center for American Studies, Fudan University. In 1994, he spent one year at the George Washington University as a visiting scholar. In fall 1997, he was a visiting fellow at the Asia-Pacific Research Center, Stanford University and the Henry Stimson Center in Washington DC. From January to August 2000, he was a visiting fellow at the Brookings Institution.

Wu Xinbo Professor Center for American Studies, Fudan University
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Gi-Wook Shin
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A panel of five foreign policy experts, including CISAC Co-director %people1% and SIIS Senior Fellow %people2%, debated issues of North Korea and nuclear weapons on October 17, 2003 in a discussion titled "It's a Mad, Mad World: Prospects for Security, Diplomacy, and Peace on the Korean Peninsula." Moderated by %people3%, of SIIS and an associate professor of law and former State Department lawyer, the panelists examined the implications to U.S.-South Korea relations in light of continuing hostilities between North Korea and the United States.

There are "no good options" for the United States to confront or contain North Korea's nuclear weapons proliferation, according to political science Professor Scott Sagan.

Sagan, who is also a senior fellow at the Stanford Institute for International Studies, was one of five foreign policy experts who joined a panel discussion Friday titled "It's a Mad, Mad World: Prospects for Security, Diplomacy and Peace on the Korean Peninsula." Presented by the Law School, the event took place in Dinkelspiel Auditorium as part of Reunion Homecoming Weekend.

Panelists Mi-Hyung Kim, Bernard S. Black, Gi-Wook Shin and Scott D. Sagan took turns weighing in on the difficulties of U.S. diplomatic relations with North Korea during a law school-sponsored discussion. Photo: L.A. Cicero

What makes the situation even more vexing is that the objectives of neither North Korea nor the United States are entirely clear, said law Associate Professor Allen Weiner, a former State Department lawyer and diplomat who moderated the panel.

"Is the United States intent on a regime change? Or putting the nuclear genie back in the bottle?" Weiner asked.

"North Korea feels threatened by the United States and believes nuclear weapons are the only way to protect its national sovereignty," said sociology Associate Professor Gi-Wook Shin, director of the Korean Studies Program in the Asia/Pacific Research Center.

The talk came one day after North Korea announced that it is prepared to "physically unveil" its nuclear program. By Sunday, President George W. Bush announced that he would provide written assurances not to attack North Korea if the country takes steps to halt its proliferation and if other Asian leaders signed, too. Bush, who counted North Korea as part of an "axis of evil," stopped short of offering a formal, Senate-approved nonaggression treaty.

Earlier this month, North Korea claimed to have finished reprocessing 8,000 spent fuel rods to produce enough weapons-grade plutonium to build a half-dozen nuclear bombs. Faced with a collapsed economy and the legacy of 1.5 million deaths from starvation in the late 1990s, the North Korean government, led by Kim Jong Il, has overtly threatened to use its small arsenal as deterrence against U.S. aggression. Although it has been difficult to verify North Korea's capabilities, international experts have asserted that its main nuclear facility in Yongbyon could produce one or two bombs a year.

Tension first heated up last October when North Korea admitted to having abandoned the 1994 Framework Agreement brokered by the Clinton administration to shut down its nuclear reprocessing facilities.

Confirming U.S. intelligence reports that North Korea possesses nuclear weapons capabilities, the former director of the CIA under the Clinton administration, Jim Woolsey, said from the audience that in 1994 the CIA was confident North Korea had enough plutonium to make one or two bombs. Estimating that its current capabilities hover somewhere around six bombs, Woolsey explained North Korea doesn't have good delivery technology. The greater concern, he said, is that it would produce enough plutonium to sell to al-Qaida.

The amount of plutonium it takes to build a bomb is the "size of a grapefruit" -- making it difficult to monitor and stop weapons material shipments, Sagan said.

Believing North Korea is posturing for economic aid and bilateral security guarantees, the United States has sidestepped direct talks and instead joined South Korea, China, Japan and Russia in a round of six-party talks with North Korea last August. Bush's announcement is seen as an effort to jump-start the next round of regional talks that were expected by the end of the year.

The crisis has taken its toll on the longstanding alliance between the United States and South Korea. Panelist Mi-Hyung Kim, a founding member of South Korea's Millennium Democratic Party and general counsel and executive vice president of the Kumho Business Group, the ninth largest Korean conglomerate, said the relationship between the United States and South Korea is the "rockiest" it has ever been because of "Bush's hard-line policy on North Korea" and the fact that wartime control of the South Korean military reverts to U.S. hands. Bilateral talks would further alienate South Korea, which fears that Seoul will become a "sea of fire," she said.

"South Korea thinks Bush is a bigger threat than nuclear weapons 35 miles to the north," Kim explained, pointing out that South Korea will bear the brunt of a military conflict. "South Korea wants to avoid war and economic burdens it can't afford," she said.

Part of the problem has been the failure of the United States to explain its policy to the South Korean people. "The United States is bad at selling its policies to publics abroad," Weiner noted. We're used to dealing bilaterally with government officials; public diplomacy is a skill we've had to learn over the past 15 years."

"A PR campaign by the United States is not going to solve this," Kim countered.

"If North Korea collapses, how will South Korea survive?" asked law Professor Bernard Black, a panelist who served as an economic policy adviser to the South Korean government. "South Korea would have to devote 30 percent of its GDP to bring North Korea up to its standard of living and that's not sustainable.

"South Korea has lived under North Korean guns for the last 50 years. North Korea can destroy Seoul at any time. South Koreans are saying, 'What's changed?' The last thing South Korea wants is to provoke North Korea to attack."

China, North Korea's closest ally, may have the most leverage through trade sanctions and has a vested interest in halting regional proliferation, Kim said. "China does not need another nuclear neighbor. ... It has enough problems with India and Pakistan." North Korea's proliferation could lead to a nuclear Japan, South Korea and "its worst fear, a nuclear Taiwan."

Predicting that nothing would come of the next round of talks until after the next U.S. presidential election, Kim said ironically, "North Korea is expecting a regime change in the United States to an administration that is more reasonable."

"North Korea is not a crazy rogue state but a dangerously desperate state," said Sagan. "When you play poker with someone who's cheated in the past, you can expect them to cheat again."

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