AFTER THE COLD WAR: FROM GEOPOLITICS TO GEOECONOMICSREQUIRED READINGSlide 3Slide 4ON “GLOBALIZATION”Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Mexican Exports, 1985-2005 (billions USD $$)Expansion of Trade, 1993-2005 (millions USD $$)U.S. Trade with Mexico and Latin America, 1993-2005 (millions USD $$)U.S. Imports: Key Trading Partners, 1993-2005 (millions USD $$)Foreign Direct Investment in Mexico, 1980-2004Slide 17Slide 18Slide 19Blecker-EsquivelSlide 21Political Consequences (1)Political Consequences (2)Slide 24AFTER THE COLD WAR:FROM GEOPOLITICS TO GEOECONOMICSNAFTA and the Gospel of Free TradeREQUIRED READING•Smith, Talons, chs. 7-9•Course Reader #3, Blecker and Esquivel, “NAFTA, Trade, and Development”AFTER THE COLD WAR: THE GLOBAL ARENA1. 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 StatesON “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 ideologyTHE 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”–ImmigrationTHE GOSPEL OF FREE TRADEThe Lost Decade (1980s) and Its LegaciesDynamics of the debt crisisThe Washington Consensus:•The role of the state•Liberalization of trade•Privatization, the private sector, and foreign investmentNorth 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 policiesNAFTA: What Is It?A “free trade” area: Not a customs union Nor a common marketCharacteristics:• 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-EffectNAFTA 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 TradeGeneral effects:•More efficiency (in production and consumption)•Greater market size (thus higher returns)•Tougher competitionQuestions: 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 $$)1985 = 27 bn, 1994 = 61 bn, 2205 = 214 bnExpansion of Trade, 1993-2005(millions USD $$)U.S. Trade with Mexico and Latin America, 1993-2005 (millions USD $$)U.S. Imports: Key Trading Partners, 1993-2005 (millions USD $$)Foreign Direct Investment in Mexico, 1980-2004GDP Growth in Mexico1945-1980 ~ 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 -6.8Note: Growth does not nec essarily reduce poverty, and often increases inequality.Unforeseen Shocks:Mexican peso crisis of 1994-95September 11, 2001Drug-related violence, 2008-09Current Challenges:Expansion of the development gapInfrastructure (including roads)MigrationEnergySecurity problemsKey Points of Disputation:•Environmental protection•Labor rights•Overall development strategy•Dependence on United States•Development gap•Consolidation of U.S. hegemonyBlecker-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 careThe Public Assertion: Free Trade = DemocracyThe Silent Bargain: International Dimensions•Political stability and social peace •Access to petroleum•Leverage vis-à-vis economic rivals•Compliance on foreign policyPOLITICAL EFFECTSPolitical 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