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
REQUIRED READING
• Smith, Talons, chs. 7-9
• Course Reader #3, Blecker and Esquivel, “NAFTA, Trade, and Development”
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?
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
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
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
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
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
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)
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)
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?
Mexican Exports, 1985-2005(billions USD $$)
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Oil exports Non oil exports
1985 = 27 bn, 1994 = 61 bn, 2205 = 214 bn
Expansion of Trade, 1993-2005(millions USD $$)
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
U.S. Trade with Mexico and Latin America, 1993-2005 (millions USD $$)
138060.0
170108.6
39917.5
62100.4
85937.6
131337.9109720.5
34455.542472.5
53697.058464.7
67370.078829.1
122873.0
0.0
20000.0
40000.0
60000.0
80000.0
100000.0
120000.0
140000.0
160000.0
180000.0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Mexico Latin America
U.S. Imports: Key Trading Partners, 1993-2005 (millions USD $$)
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
Foreign Direct Investment in Mexico, 1980-2004
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.
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
Key Points of Disputation:
•Environmental protection
•Labor rights
•Overall development strategy
•Dependence on United States
•Development gap
•Consolidation of U.S. hegemony
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
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
Political Consequences (1)
Political Consequences (2)
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 (?)