AFTER THE COLD WAR: FROM GEOPOLITICS TO GEOECONOMICS

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AFTER THE COLD WARFROM 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
• 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?

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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 Warreduction 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
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
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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
• 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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Mexican Exports, 1985-2005(billions USD )
1985 27 bn, 1994 61 bn, 2205 214 bn
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Expansion of Trade, 1993-2005(millions USD )
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U.S. Trade with Mexico and Latin America,
1993-2005 (millions USD )
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U.S. Imports Key Trading Partners, 1993-2005
(millions USD )
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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
1994-95 September 11, 2001 Drug-related violence,
2008-09 Current Challenges Expansion of the
development gap Infrastructure (including
roads) Migration Energy Security 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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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

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Political Consequences (1)
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Political Consequences (2)
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• 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 (?)