after the cold war: from geopolitics to geoeconomics nafta and the gospel of free trade
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AFTER THE COLD WAR:FROM GEOPOLITICS TO
GEOECONOMICS
NAFTA and the Gospel of Free Trade
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REQUIRED READING
• Smith, Talons, chs. 7-9
• Course Reader #3, Blecker and Esquivel, “NAFTA, Trade, and Development”
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AFTER THE COLD WAR: THE GLOBAL ARENA
1. Collapse of the Soviet Union2. U.S. military primacy: the “unipolar moment”3. Economic multipolarity: Europe, Japan, others?4. Transnationalization and non-state actors5. A “third wave” of democratization?
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DIMENSIONS OF UNCERTAINTY
•Distributions of power: the “layer cake” model•Military = unipolar•Economic = tripolar•Interdependence = diffusion
•Absence of “rules of the game”
•Hesitancy in the United States
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ON “GLOBALIZATION”
• Factors:
– End of Cold War=reduction of political barriers
– Communication technologies
– Transnational enterprises: production chains and consumer markets
– Movement of people and goods, legal and illegal
• Features:
– Inexorability, inevitability
– Politics the result of economics
– Inclusion vs. exclusion?
– Claim: no ideology
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THE 1990s: GEOECONOMICS AND
“INTERMESTIC” ISSUES
• Ideological consensus (or “end of history”?)
• Implausibility of revolution
• Fragmentation of “Third World”
• The rise of “intermestic” issues:– Free trade– Drugs and drug “wars”– Immigration
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THE GOSPEL OF FREE TRADE
The Lost Decade (1980s) and Its Legacies
Dynamics of the debt crisis
The Washington Consensus:
•The role of the state•Liberalization of trade•Privatization, the private sector, and foreign investment
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North American Free Trade (NAFTA)? Why? Why Then?
Global Scenario:
Economic multipolarity and rivalry (Japan, EU)Geopolitical uncertaintyEmphasis on “geoeconomics”
U.S. Perspectives:
Supplement to FTA with CanadaSupport for neoliberal reforms in MexicoGrowing Mexican-American population within U.S.
Mexican Perspectives:
Exhaustion of alternativesNeed to stimulate growthPerpetuation of Salinista policies
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NAFTA: What Is It?
A “free trade” area:
Not a customs union Nor a common market
Characteristics:
• Uneven levels of development• Cultural and political variation• Hub-and-spoke arrangements (with U.S. at center)• Absence of supranational authority (preservation of sovereignty)
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Assessing Results: The Problem of Cause-and-Effect
NAFTA in comparison with:
• Initial expectations (and political rhetoric)
• Liberalization (mid-1980s)
• Global and/or U.S. economic conditions
• Long-term economic and social trends
• Short-term shocks (e.g., Mexican peso crisis of 1994-95)
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Economic Performance: Expansion of Trade
General effects:
• More efficiency (in production and consumption)• Greater market size (thus higher returns)• Tougher competition
Questions:
1. Who takes part in the trade? (55 % large firms, 40% maquiladoras, > 5% small firms (~ 2.1 million firms)
2. What about trade diversion?
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Mexican Exports, 1985-2005(billions USD $$)
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Oil exports Non oil exports
1985 = 27 bn, 1994 = 61 bn, 2205 = 214 bn
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Expansion of Trade, 1993-2005(millions USD $$)
288,530375,778
475,803568,736
615,226 626,456
772,369
0100,000200,000300,000400,000500,000600,000700,000800,000900,000
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Mexico-U.S. Mexico-Canada Trilateral trade
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U.S. Trade with Mexico and Latin America, 1993-2005 (millions USD $$)
138060.0
170108.6
39917.5
62100.4
85937.6
131337.9109720.5
34455.542472.5
53697.058464.7
67370.078829.1
122873.0
0.0
20000.0
40000.0
60000.0
80000.0
100000.0
120000.0
140000.0
160000.0
180000.0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Mexico Latin America
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U.S. Imports: Key Trading Partners, 1993-2005 (millions USD $$)
170108.6
25101.5
21730.3
43781.4
34825.8
51032.6
243470.131539.9
17118.1
39917.5
0.0 50000.0 100000.0 150000.0 200000.0 250000.0 300000.0
Mexico
China
South Korea
Taiwan
Great Britain
2005 1993
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Foreign Direct Investment in Mexico, 1980-2004
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GDP Growth in Mexico
1945-1980 ~ 6.5%
1995 -7.0 % 1996 5.1 1997 6.8 1998 4.9 1999 3.8 2000 6.6 2001 -0.2 2002 0.7 2003 1.5 2004 4.6 2005 2.8 2006 5.0 2007 3.2 2008 1.3 2009 -6.8
Note: Growth does not necessarily reduce poverty, and often increases inequality.
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Unforeseen Shocks:
Mexican peso crisis of 1994-95September 11, 2001Drug-related violence, 2008-09
Current Challenges:
Expansion of the development gapInfrastructure (including roads)MigrationEnergySecurity problems
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Key Points of Disputation:
•Environmental protection
•Labor rights
•Overall development strategy
•Dependence on United States
•Development gap
•Consolidation of U.S. hegemony
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Blecker-Esquivel• “NAFTA has basically failed to fulfill the promise of closing the Mexico-
U.S. development gap…”
• Zero economic convergence (GDP per capita), no reduction in incentives for Mexicans to migrate
• Modest impact on employment (500,000 in both countries)
• Lag 2000-08:
– Emergence of China
– Increased value of peso
• Reasons for lack of convergence:
– Badly implemented reforms
– Reform paralysis
– Lack of a domestic engine
• Future prospects:– U.S.-Mexico trade a two-way street
– Convergence could reduce migration
– Health and elder care
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The Public Assertion: Free Trade = Democracy
The Silent Bargain: International Dimensions
•Political stability and social peace
•Access to petroleum
•Leverage vis-à-vis economic rivals
•Compliance on foreign policy
POLITICAL EFFECTS
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Political Consequences (1)
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Political Consequences (2)
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Now What? Hemispheric Integration?
1. Expansion of NAFTA (through new memberships)
2. FTAA negotiating process
3. Bilaterals and minilaterals:
• U.S.-Chile• U.S.-Central America• U.S.-Peru• U.S.-Colombia (?)