THE POST COLD WARERA

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THE POST COLD WAR-ERA

• NAFTA and the Gospel of Free Trade

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REQUIRED READING

• Smith, Talons, chs. 7-8
• Course Reader, Selections 3-4 (Chambers and
  Smith, NAFTA in the New Millennium)
• Holden and Zolov, Latin America, 116, 117, 122

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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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• 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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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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• 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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Foreign Direct Investment in Mexico, 1980-2004
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Economic Performance 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 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 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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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?
• 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.-Peru
• U.S.-Colombia (?)