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NAFTA and Geo-Economics Post Cold War

Explore the shift from geopolitics to geoeconomics after the Cold War, focusing on NAFTA, free trade, and global uncertainties. Assess the impact of NAFTA on economic performance, trade expansion, and political effects. Understand the challenges and future prospects of this economic agreement.

charlesmlewis
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NAFTA and Geo-Economics Post Cold War

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  1. AFTER THE COLD WAR:FROM GEOPOLITICS TO GEOECONOMICS NAFTA and the Gospel of Free Trade

  2. REQUIRED READING • Smith, Talons, chs. 7-9 • Course Reader #3, Blecker and Esquivel, “NAFTA, Trade, and Development”

  3. AFTER THE COLD WAR: • THE GLOBAL ARENA • Collapse of the Soviet Union • U.S. military primacy: the “unipolar moment” • Economic multipolarity: Europe, Japan, others? • Transnationalization and non-state actors • A “third wave” of democratization?

  4. 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

  5. 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

  6. 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

  7. 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

  8. North American Free Trade (NAFTA)? Why? Why Then? Global Scenario: Economic multipolarity and rivalry (Japan, EU) Geopolitical uncertainty Emphasis on “geoeconomics” U.S. Perspectives: Supplement to FTA with Canada Support for neoliberal reforms in Mexico Growing Mexican-American population within U.S. Mexican Perspectives: Exhaustion of alternatives Need to stimulate growth Perpetuation of Salinista policies

  9. 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)

  10. 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)

  11. Economic Performance: Expansion of Trade • General effects: • More efficiency (in production and consumption) • Greater market size (thus higher returns) • Tougher competition • Questions: • Who takes part in the trade? (55 % large firms, 40% maquiladoras, > 5% small firms (~ 2.1 million firms) • What about trade diversion?

  12. Mexican Exports, 1985-2005(billions USD $$) 1985 = 27 bn, 1994 = 61 bn, 2205 = 214 bn

  13. Expansion of Trade, 1993-2005(millions USD $$)

  14. U.S. Trade with Mexico and Latin America, 1993-2005 (millions USD $$)

  15. U.S. Imports: Key Trading Partners, 1993-2005 (millions USD $$)

  16. Foreign Direct Investment in Mexico, 1980-2004

  17. 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.

  18. Unforeseen Shocks: Mexican peso crisis of 1994-95 September 11, 2001 Drug-related violence, 2008-09 Current Challenges: Expansion of the development gap Infrastructure (including roads) Migration Energy Security problems

  19. Key Points of Disputation: • Environmental protection • Labor rights • Overall development strategy • Dependence on United States • Development gap • Consolidation of U.S. hegemony

  20. 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

  21. POLITICAL EFFECTS • 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

  22. Political Consequences (1)

  23. Political Consequences (2)

  24. Now What? Hemispheric Integration? • Expansion of NAFTA (through new memberships) • FTAA negotiating process • Bilaterals and minilaterals: • U.S.-Chile • U.S.-Central America • U.S.-Peru • U.S.-Colombia (?)

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