THE NEW ECONOMIC AGENDA

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THE NEW ECONOMIC AGENDA

• NAFTA and the Gospel of Free Trade

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REQUIRED READING

• Smith, Talons, ch. 10
• Course Reader, Selections 5-7 (Chambers and
  Smith, NAFTA in the New Millennium, selections,
  and WOLA, Fair Trade or Free Trade?
  Understanding CAFTA)
• Holden and Zolov, Latin America, 117-118

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PUBLIC EVENT
Drugs and Democracy in Latin America The Impact
of U.S. Policy Public lecture featuring Joy
Olson Executive Director Coletta Youngers
Senior Fellow Washington Office on Latin America
(WOLA) Monday May 9 400 p.m. Social Science
Building Room 101 (Just east of IR/PS) Light
refreshments served Presented by IR/PS (IR/PS)
AND UCSDS INTERNATIONAL STUDIES PROGRAM (ISP)
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• Introduction
• The Lost Decade 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
(Japan, EU) Geopolitical uncertainty Emphasis on
geo-economics 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
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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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• The Silent Bargain Political Dimensions
• Political stability and social peace
• Access to petroleum
• Leverage vis-à-vis economic rivals
• Compliance on foreign policy

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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)

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• Economic Performance Expansion of Trade
• Overall volume more than doubled (300 billion to
  600 billion by 2000, has almost tripled by
  end-2003)
• General effects
• More efficiency (in production and consumption)
• Greater market size (thus higher returns)
• Tougher competition
• Which can bolster growth, but not necessarily
  reduce poverty or inequality
• Questions
• Who takes part in the trade? (55 large firms,
  40 maquiladoras, gt 5 small firms ( 2.1
  million firms)
• What about trade diversion?

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Economic Performance Investment and
Employment Foreign Direct Investment
(FDI) Stock as of 1993 42.4
billion Incoming 1994-98 24.7 billion
(U.S.) 1.7 billion (Canada) 14.8
billion (elsewhere) New FDI 41.2
billion Employment Creation of 1.5 million
new jobs Decline in average wage 1994-98 25
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Economic Performance GDP Growth in
Mexico 1945-1980 6.5 1991-2000 3.2
1995 -7.0 1996 5.1 1997 6.8 1998
4.9 1999 3.8 2000 6.9 2001 -0.2
2002 0.7
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Unforeseen Shocks Mexican peso crisis of
1994-95 September 11, 2001 Current
Challenges Expansion of the development
gap Infrastructure (including roads) Migration Ene
rgy Macroeconomic policy (thus dollarization?) S
ecurity problems
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• Key Points of Disputation
• Environmental protection
• Labor rights
• Overall development strategy
• Dependence on United States
• Consolidation of U.S. hegemony

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