NAFTA AND THE GOSPEL OF FREE TRADE The

NAFTA AND THE GOSPEL OF FREE TRADE The Lost Decade (1980 s) and Its Legacies Dynamics The of the debt crisis Washington Consensus The Role of the State Liberalization of Trade Privatization, the private sector, and foreign investment

North American Free Trade (NAFTA)? 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

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)

Assessing Results: The Problem of Cause-and-Effect NAFTA in comparison with: • Initial expectations (and political rhetoric) • Liberalization (mid-1980 s) • 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 Trade General effects: • More efficiency (in production and consumption) • Greater market size (thus higher returns) • Tougher competition Questions: 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, 2005 = 214 bn

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 $$)

U. S. EXPORTS TO MEXICO Quoting from Carla Hills, former USTR: “Last year [2013], roughly 14 percent of U. S. exports went to Mexico—more than went to Brazil, Russia, India, and China combined. Indeed, Mexico buys more U. S. goods than the rest of Latin America combined, and more than France, Germany, the Netherlands, and the United Kingdom combined. ”

Foreign Direct Investment in Mexico, 1980 -2004

GDP Growth in Mexico 1945 -1980 ~ 6. 5% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -7. 0 % 5. 1 6. 8 4. 9 3. 8 6. 6 -0. 2 0. 7 1. 5 4. 6 2. 8 5. 0 3. 2 1. 3 -6. 8 5. 1 4. 0 1. 1

Unforeseen Shocks: Mexican peso crisis of 1994 -95 September 11, 2001 Drug-related violence, 2008 -present Global financial crisis, 2008 -present (? ) Current Challenges: Expansion of the development gap Infrastructure (including roads) Migration Energy Security problems

Key Points of Disputation: • Environmental protection • Labor rights • Overall development strategy • Dependence on United States • Development gap • Consolidation of U. S. hegemony

Recent Research “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… except for U. S. unemployment rate 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

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

Hemispheric Integration? Or Division? 1. Expansion of NAFTA (through new memberships) 2. FTAA negotiating process (RIP) 3. Bilaterals and minilaterals: • • • U. S. -Chile U. S. -Central America (+ Dominican Republic) U. S. -Peru U. S. -Colombia U. S. -Panama Alianza del Pacífico (Chile, Colombia, Mexico, Peru + others? )