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AFTER THE COLD WAR: FROM GEOPOLITICS TO GEOECONOMICS

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 Collapse of the Soviet Union

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AFTER THE COLD WAR: FROM GEOPOLITICS TO GEOECONOMICS

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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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