Chin Kin Wah will join CIS in July as visiting Professor in ASEAN and International Studies. He is currently Associate Professor, Department of Political Science, National University of Singapore and is a former Director of the Centre for Advanced Studies, Singapore. Dr. Chin's research and teaching focus upon issues of regional security in the Asia Pacific and intra-ASEAN relations. Dr. Chin will be in residence until December.
Klaus Conrad will join CIS in September as visiting Professor in German and European Studies, and remain in residence until April 1997. He is currently Professor of Economics at the University of Manheim, Germany. While at CIS, Dr. Conrad will present a number of public lectures and teach both an undergraduate course in microeconomics and a seminar course on the international relations of the environment.
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Managing Global Financial Markets: The Role of the G-7 - A public luncheon presented by Dr.Robert Hormats, Vice Chairman of Goldman Sachs. (June 10, 1997, Toronto).
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In today's global economy , governments and educators must rethink how they prepare the young generation for the changing world of work. It is vitally important that bridges be built between education and employment. Such bridges will provide young people with portable skills and supply business with employees who have the competence to respond to the changing workplace with self-initiated further education.
Human capital theory tells us that individual effort and investment in education, skills acquisitions and credentials will translate into employment and career prospects. Status attainment theory assumes that social opportunities and constraints are less important in school-to-work transitions than social origin and individual aspirations. In a period of accelerated economic change and technological innovations, both approaches are losing their ties with social reality because they do not account for the complex interaction over time between labour market segmentation, institutional dynamics, e.g. business restructuring, and individual decision making. This interaction creates unintended discrepancies between individuals' educational investments and employment outcomes. These discrepancies may very well become chronic when the economy does not create enough entry jobs and/or private and public employers only offer temporary contracts and part-time jobs.
For example, increased participation in post-secondary education is influenced by the shift to service sector and professional jobs, deregulation of labour standards, together with increasing self-employment. These shifts are expressed in a growing selectivity of employers' criteria for hiring, training and promotion. These trends send signals to parents and students concerning rising requirements for job entry and careers.
Thus, the relative duration of the life phases of adolescence and young adulthood have become contingent on educational and training pathways and their connections with the labour market. Societies that recognize and reward vocational and academic skills in very different ways have established various hierarchies of education-to-employment routes which vary by social class, gender and race. These pathways and structural variations influence young people's activities and goals in their education and employment, and they inform employers' expectations and perceptions of young job applicants. For instance, while Germany and the UK offer organized linkages between school and the labour market via the dual system (Germany) or the Youth Training Scheme (UK) and further education for the non-college bound, the US and Canada offer little continuity and rewards for this group. In Canada, work-bound secondary school graduates tend to perceive their job future as requiring little skill and knowledge, regardless of their grades in high school. College-bound students, on the other hand, see clear incentives to obtain good grades in high school, because they are important for college admission. Rosenbaum (in an article appearing in volume 1 of the Journal of Research on Adolescence) explains these different life course orientations by referring to the influence of an unequal distribution of employment rewards on young people's transitional decisions. This mentality also informs US and Canadian employers' hiring decisions, who, quite in contrast to the UK, tend not to trust youngsters under 25 to be responsible enough to be offered full time responsible jobs. Thus, if they are considered at all, they will only get part time or temporary jobs. This, according to a report by the Canadian Youth Foundation, has become a dominant job entry pattern for both high school and college graduates in Canada in the 1990s.
In North America, employers and the public alike take youth's high job turnover for granted ( as the "floundering period". In the UK, non-university bound adolescents are expected to enter employment; in Germany they are expected to move through an apprenticeship on to full-time employment. Hence, contrary to human capital and status attainment theories, the transitions from school to work are shaped by social origin and the linkage between institutionalized selectivity of the education system and employers' recruiting and training practices. This interplay is anticipated by young people and translated into pathway decisions that have lasting effects on their life course.
The life course perspective conceives of transitions as being determined neither by social class nor by labour market dynamics. Transitions from school to work are constructed by individuals in the context of social origin educational selection, work experiences and employment options; their realistic decisions are more time-dependent and complex than rational educational investment and status attainment models suggest. Young people tend to make reasonable choices under very different circumstances, that is, adequate to the more or less limited range of education and employment options available to them.
The type of institutional linkage between school and work is crucial for promoting skill profiles, work habits and career resources, as well as the readiness for life-long learning. Such competence is not only essential for the wealth of nations which compete in a global economy, but also for a person's economic independence, social identity and adaptability to changing labour markets. Countries that provide institutionalized passages and credentials for non-college bound youngsters, like Germany, Austria, Switzerland and Denmark have the lowest youth unemployment rates in the world. They also have a labour force with flexible intermediate skills. According to their economic development and cultural traditions, these societies do not only reward the college route, but vocational education and training is also a respected transition pathway to employment. In contrast to this transition and support system, young people in North America who do not proceed to college do not find any organized pathways that would train and socialize them at the same time. Thus, we find higher youth unemployment, more fragmented transitions and uncertain destinations in Canada and the US than in Germany.
Transplanting the German dual system into Canada will not work, however. Nevertheless, there must be a commitment in Canada to train young people who do not enter or drop out of university. Considering the German experience, training in the workplace should build on training for the workplace. Why? Sequences of ad hoc training-on-the- job reproduce a limited concept of portable skills which may very well be more expensive for business compared to a vocational education and training (VET) system that lays the foundation for pro active and self-responsible work and learning behaviour in the workplace. Furthermore, team work and flexible work habits require a stable and coordinated training environment, monitored by expert tutors, modelled on the master craftsmen.
Canada has relied on immigration as a reservoir of skilled workers for much too long. This has prevented government and business from establishing a VET system for the intermediate technical, communication and service skills. Such skills are vital for the public and private sector, where high tech is to be applied and equipment to be assembled, maintained and repaired rather than invented. Moreover, in a period of rapid technological change further training in the workplace must build on a generally skilled work force. This may be more cost-efficient in the long-run than ad hoc upgrading by further training.
The majority (approx. 60%) of Canada's young population does not acquire a college or university degree. This puts them in a transition at risk and is a life-long disadvantage compared to university graduates. From a life course perspective, they are at risk of entering a transient job history. The future of work requires a solid intellectual and practical preparation for various forms of paid jobs, self-employment and continued learning. Though the creation of more entry jobs is very urgent, it will not solve the problem of youth unemployment and will not improve career prospects of the young people who do not have the chance to acquire a certified profile of portable skills. Chronic youth unemployment and a lack of skills training undermine not only Canada's economy, but also contribute to the growth of a social underclass of young people.
One innovative solution: invest in a community college-based pathway of occupational education and training which is linked systematically to company-based work experience through a coordinated curriculum of theoretical knowledge and skill acquisition. This pathway should be open to all non-university bound youth who have participated in co-op programs in high school. This transition arrangement, when institutionalized, would signal to young people that there is indeed a socially accepted transition alternative to a university education.
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In 1997, Canada will Chair APEC (the Chair rotates annually among all members). CIS recently hosted a conference: The Future of APEC, held on May 15, 1996. It was sponsored by both the Canadian International Development Agency and the City of Toronto. John Klassan opened the conference by presenting his insights into the issues that APEC faces in 1997, and how Canada, as Chair, will address these issues. Here is an excerpt from Mr. Klassan's speech.
As we look forward to 1997, one of the key issues that we will focus on (and something that we have started to work on already) is the question of management. APEC has grown in an ad hoc manner. It started in 1989 with the formation of several working groups. From there, it has grown to form a rather large superstructure of ministerial meetings, economic leaders meetings, foreign and trade minister meetings, and a whole range of sectoral minister meetings and a number of expert working groups. Indeed, at last count there were over 31 expert working groups. This is a large number when you consider that APEC operates with a relatively small secretariat (in Singapore) that functions on a budget of only 4 to 5 million dollars. This is a small amount compared to other international institutions.
The APEC process, the forum, has suffered from a certain lack of management. There is a need particularly for the secretariat to come to grips with what it should do: what kind of services it should offer, what role it should play within the larger process of APEC. Some fear that Canada is trying to bureaucratize APEC. This, of course, is not the case. We are not trying to establish an OECD or WTO type secretariat. However, we would like there to be more focus, and at the same time, the best management of the resources that all the members are pouring into this forum.
There is a second important issue of balance within APEC between trade liberalization and facilitation, and economic and technical cooperation. There are the two fundamental components to the Osaka Action Agenda. The emphasis to-date has been on the trade policy side. The economic and technical cooperation side has been largely run by the working groups. A distinction can certainly be made (and it is something that we will try to bring out in 1997) between trade liberalization and trade facilitation. When we talk about trade liberalization, we are often discussing tariffs: What does open regionalism mean in terms of tariffs? Are they binding or are they not? What are about free riders? Are you going to allow the Europeans to benefit for virtually nothing? These are all good questions, but in the longer term (and you can begin to see it right now), APEC will have a stronger impact in the area of trade facilitation. Consider the customs work program that is going to lead to a tremendous facilitation of trade, and in many respects is much more important than eliminating a five percent tariff. It includes the elimination of transportation bottlenecks, the harmonization of customs forms, and all those things required to reduce the transaction costs of trade.
One certainly cannot deny that tariff rates are important, however, the non-tariff costs of trade including time delays for customs clearance, inspections, and the like can be equally burdensome. In fact, as the size of a firm falls, these non-tariff customs costs become more significant; they turn into more of a burden for small and medium sized enterprises than larger firms. This is why the trade facilitation agenda is so important to APEC, and can be its greatest legacy.
There is another question that the agenda of today's conference raises: Is open regionalism viable? I believe that it is. One must keep in mind that APEC is a forum that continues to evolve, indeed, this is one of its most interesting aspects. I believe that APEC provides a framework, and an impetus that helps to shape the drive towards liberalization. This is one of the benefits of the concept of open regionalism and the APEC process.
Another issue that we would like to focus on in 1997 is the question of what role the private sector should play in the APEC process. The 1991 Seoul APEC Declaration recognizes "the important contribution of the private sector to the dynamism of APEC economies" and calls for more active participation of the private sector in APEC. Getting the private sector more deeply involved in APEC is critical to its long term success. Right now, we have established the APEC Business Advisory Council (ABAC). It is cast as a senior level, business group that will meet with leaders in November and present the private sector's view on trade liberalization as it pertains to the Asia-Pacific. Canada is a firm supporter of ABAC.
In the longer term, however, it is more important to encourage private sector involvement at the grass roots level ( in the working groups. In Canada, we have already considerable success in the transportation and telecommunications working groups, both of which have very strong private sector participation. This is largely due to the fact that the Canadian private sector recognizes the value of the APEC agenda and what it could potentially do for them in the Asia Pacific region.
This is a model that we would like to develop further with respect to other working groups. We would like to encourage other APEC members to bring more private sector representation into the working groups. Trade is about the private sector, particularly trade facilitation, and therefore one must have input from the private sector in order to ensure that their concerns about trade liberalization are being met. Certainly, encouraging an increased presence of the private sector is something that we will focus on in 1997. We will do this in a couple of ways. First, by encouraging more participation in the working groups, and second, by hosting three sectoral ministerial meetings: one on transportation, another on the environment and a third on small and medium sized enterprises. (These will be separate from the 1997 summit.) I see these meetings as entailing a high degree of private sector participation with interaction between the private sector and political leaders. Up until now, this kind of interaction between the private sector and the ministerial bodies has been done on a rather hap-hazard basis. We would like it to become more of a regular part of the APEC process.
There is also the question of APEC's role in the area of security cooperation in the Asia Pacific region. This is part of the bigger question: should we broaden APEC? Should we broaden its focus to include more than trade liberalization, facilitation and economic and technical cooperation? Should APEC become more involved in issues of regional security and the politics of the region? No, it should not. In many respects, the APEC process is still in its infancy. We still need to gain more confidence with one another. The focus of APEC now is on trade liberalization, facilitation and technical and economic cooperation. We need to gain more experience with each other in these areas before we even begin to consider introducing new elements into the APEC agenda.
Finally, let me briefly comment on the broader issue of institution building. In the last year there has been a noticeable increase in the credibility of APEC. For instance, when policymakers discuss issues such as investment, and consider Canada's position in the WTO or the FTAA, it is interesting to note that APEC is now part of the these considerations. APEC has become an important part of that larger multilateral process. I believe this is a recognition of an increase in APEC's credibility. This is certainly an example of how far APEC has come, and I definitely believe it has the potential to go further.
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Recently China has experienced unprecedented levels of economic growth. If the growth trajectories of other East Asian economies can serve as a guide then one can not help but be optimistic about China's prospects for sustaining high growth over the medium and long term. However, there is also a great deal of uncertainty as to how far China could realize its full development potential in the years to come. This very much depends on how China will come to grips with a number of critical constraints that it faces.
As the crucial banking and SOE reforms (which are actually interdependent) have not achieved important breakthroughs, the government's prime objective of establishing a market-based macroeconomic management system remains unfulfilled. This means that the Chinese economy, without the usual built-in macroeconomic stabilizers, will continue to experience violent fluctuation. But until the transition to a full market economy is completed, China will continue to suffer from the inefficiency of a partially-reformed economy.
Other aspects of institutional reform involve changes to China's legal system. All modern states have clear rules and regulations that set out the limits of authority and define the general behaviour of market participants. The absence of any recognizable rule of law is the weakest part of China's institutional structure. This particular weakness stems from the Chinese tradition of "rule of man". Needless to say, a strong and transparent legal framework can can reduce corruption and inefficiency and thereby lead to lower transaction costs for business, particularly foreign. Since economic reform, China has enacted over 160 new laws, over half of which have been related to commercial laws. But legal reform goes beyond the simple process of law making or setting up a judicial system. It has to build up an effective legal infrastructure with an independent judiciary (i.e. one that is free from the Party control). China, as primarily a Confucian state with no Greco-Roman legal traditions, needs to undertake greater efforts to foster the necessary "legal culture".
These institutional and political reforms may ultimately weaken the Party's monopoly of power. But the potential gain in popularity for the Party as a successful modernizer can offset the loss of its old legitimacy. The main challenge of the Party in the years ahead is, therefore, how to manage those institutional changes.
Secondly, another macro social issue with serious economic and political consequences is the growing income disparity between the fast-growing coastal zones and the backward interior provinces, between urban and rural areas, or between industrial and agricultural sectors. The current Ninth Five-Year Plan, 1996-2000, has emphasized the need for a new development strategy to narrow the various development gaps in China, indicating that Beijing can no longer shrug off this problem.
Thirdly, China has to step up the social security reform, which was actually one of the unfulfilled components of China's 1994 reform package. China's old social security system is based on the danwei (or work unit), which was developed for the highly regulated society under Mao's time. But the reform has since eroded the danwei system before a new social security system to suit the operation of market economy is in place. A new social security system is needed to deal with such problems as labour mobility, ageing population, as well as facilitating the reform of SOEs.
Since China is the world's largest producer of grain, China's food problem, if mishandled, could also become a world food problem. If China were to import 10% of its total grain production, it would seriously disrupt the world grain market. In other words, China must maintain its high level of food self-sufficiency and strong food security. China is simply too big to specialize in manufactured exports and then to import food, as in the case of Japan or the NIEs.
For an effective long-term solution to the agricultural problem, however, the government has to properly manage China's agricultural decline (which is inevitable as industrialization gets under way), with a balanced policy that will not squeeze farmers too hard and too fast, and raise agricultural productivity by stepping up technological progress.
By comparison, China's energy sector is already giving out an early warning signal. China's present consumption of energy on a per-capita basis is still very low, e.g. its per-capita energy use in 1992 was only 600 kg (oil equivalent), compared to 3,600 kg for Japan and 2,660 kg for South Korea. Further economic growth will certainly raise China's overall level of energy consumption, with serious implications for the world energy market because of China's huge demand potential. Despite being the world's sixth largest oil producer (149 million tons in 1995 or about 5% of the world's oil output), China has become a net importer of oil since 1993. China may have to import 50 million tons of crude oil a year by 2000. Beyond 2000, the situation will depend on China's investment in oil and gas exploration.
China's dynamic economic growth is already exerting a lot of pressures on China's existing water and land resources as well as its environment: only about 20% of industrial waste and 15% of sewage flowing into China's rivers are treated. The Chinese themselves will mainly bear the costs of pollution. But there is also considerable cross-border pollution because of China's heavy reliance on coal. In many parts of China, airborne levels of sulphur dioxide in winter have exceeded World Health Organization guidelines.
The Chinese government has recently started to pay attention to the environmental issue. But its investment in pollution control remains only a small fraction of government expenditure; and enforcement is lax, especially in the rural areas. In the long run, China's economic development is much like a race, whereby new resources have to be quickly created so that the government can use them to cope with the by-products of development including environmental pollution.
These constraints present a formidable challenge to the Chinese leadership. It is not at all clear how the present leadership (itself undergoing the difficult process of post-Deng transition) will respond to these constraints. Nor is it certain how long it will take China to overcome these constraints. Many observers take the view that China might somehow be able to "muddle through". The point though, is that China's dynamic economic growth can be slowed, but not stifled completely. Unlike other smaller Asia-Pacific economies, China is large and diverse enough to have a sufficient internal dynamic to sustain a certain level of economic growth on its own. Given continuing peace and stability, China will ultimately get there and realize its major development objectives. It is only a matter of time.
China's own problems, from food to energy to pollution, can easily turn into regional or even global problems. It is therefore important for all international organizations to start engaging China now on all important global and regional issues. That is why Singapore and many other Asian countries support China's bid to join the World Trade Organization.Their hope, of course, is that the inclusion of China will give it the opportunity to learn how to play by global rules, and at the same time, address the constraints that it faces.
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Students who have gained admission to the University of Toronto's M.A. programmes in Anthropology, Economics, Geography, History, Philosophy, Political Science, Sociology, or Religion can apply to be one of the twenty applicants admitted to the inaugural class of the M.A. in International Relations.
The University of Toronto's unmatched resources in International Relations and interdiscplinary studies provide both the motivation, and the basis for this unique programme to be offered. The small class size will ensure that students receive an enriching and valuable learning experience that will prepare them for careers in business, government, international organizations, non-governmental organizations or further research in International Relations or related disciplines.
For more information on this programme visit the M.A. in International Relations' own web site.
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Representatives of central banks, financial ministries, regulatory agencies and financial institutions worldwide met in Toronto on May 16 and 17 to discuss these and other related issues at: Monetary and Financial Integration in an Expanding (N)AFTA: Organization and Consequences. This conference, organized by CIS and the Indiana University Department of Economics, featured participants from all three NAFTA countries, Chile, the International Monetary Fund, the World Bank, the European Commission and the Bank for International Settlement.
The conference opened on May 16, by addressing the macro and microeconomic issues associated with financial integration among trade partners. Not only was attention given to conditions in the Americas, but leading economists from Europe, including Elena Flores (Principal Administrator, Directorate for Monetary Affairs, European Community), discussed current issues among European Community countries. During that day's afternoon session, the focus shifted to the emerging legal and regulatory framework of the banking sector in the Americas. A panel of private and public sector officials discussed how banking and finance systems were evolving in each country. Some of the keynote presenters included Gerald P. O'Driscoll Jr. (Director of Policy Analysis, Citicorp/Citibank), Daniel E. Nolle (Senior Financial Economist, Office of the U.S. Comptroller of Currency), and Alejandro Alarcon (General Manager, Association de Bancos e Instituciones Financieras de Chile).
The second day of the conference featured four sessions. Grant Reuber (President, Canada Deposit Insurance Corporation) chaired a panel of economists and analysts from central banks in North America, Deutsche Bundesbank, and the World Bank. This panel discussed the design of payment and settlement systems and the management of systematic risk; the speakers presented papers that examined trends in cross-border payments, cashless transactions and the risks associated with them. The second session addressed the issues of international coordination of supervision, and regulation of financial institutions. Papers were presented by Michael Martinson (U.S. Federal Reserve), Javier Gavito Mohar (National Banking and Securities Commission), George Kaufman (Loyola University, Chicago), and John Pattison (Senior Vice President, Canadian Imperial Bank of Commerce). The last two sessions' panels discussed the regional and global aspects of financial development, and financial reforms and agreements for NAFTA countries.
Several of the papers presented at the two-day conference will be part of a publishing program that is being initiated by the conference's chief organizer: George M. von Furstenberg (Department of Economics, Indiana University). A number of the papers that examined the control of systematic risks in the financial sector, and the improvement of payment and settlement systems will be published in a special issue (Fall, 1996) of The North American Journal of Economics and Finance. Several of the other papers presented at the conference will be compiled to form a two volume publication edited by George M. von Furstenberg, and scheduled to be published in early 1997.
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