Flashcards in Key Case Studies Deck (25)
what can the NAFTA case study be used for?
to illustrate the positive and negative consequences of economic globalisation
economic globalisation has had many effects on the economies of countries involved in international agreements such as NAFTA
some are good, such as increasing trade, growth in the economy and the creation of jobs BUT some are bad, such as job losses from the US to Mexico, wage stagnation and the rise of illegal immigration
the US seems to be the country that benefits most from economic globalisation
what is NAFTA?
the North American Free Trade Agreement (NAFTA) is a three-country accord negotiated by the governments of Canada, Mexico and the United States
entered into force in 1994 and was implemented gradually through 2008
provided for the elimination of most tariffs on products traded between the three countries
liberalisation of trade in agriculture, textiles and automobile manufacturing was a major focus
the deal also sought to protect intellectual property, establish dispute resolution mechanisms and implement labour and environmental safeguards through side agreements
while the US has already completed a free trade agreement with Canada in 1988, the addition of Mexico was unprecedented
what was the goal of NAFTA?
the goal for all three countries was the integration of Mexico with the highly developed, high wage economies of the United States and Canada
the hope was that freer trade would bring stronger and steadier economic growth to Mexico, providing new jobs and opportunities for its growing workforce and thus discouraging illegal immigration from Mexico
for the US and Canada, Mexico was seen as a promising new market for exports and as a lower cost investment location that could enhance the competitiveness of US and Canadian companies
what is the overall impact of NAFTA?
NAFTA fundamentally reshaped North American economic relations, driving an unprecedented integration between the developed economies of Canada and the United States and Mexico, a developing country
NAFTA encouraged a more than tripling of regional trade and cross-border investment between the three countries also grew significantly
what have opponents of NAFTA argued?
opponents of NAFTA seized on the wage differentials with Mexico, which had a per capita income just 30% of that in the US
US presidential candidate Ross Perot argued that trade liberalisation would lead to a “giant sucking sound” of US jobs fleeing across the border
President Donald Trump says that NAFTA has shifted US manufacturing production and jobs to Mexico and in 2017, his administration reopened negotiations with Canada and Mexico with the aim of reforming the deal
what do supporters of NAFTA argue?
supporters of NAFTA like Presidents Bush and Clinton argued that the agreement would create hundreds of thousands of new jobs each year
Mexican President Carlos Salinas de Gortiari saw it as an opportunity to modernise the Mexican economy, so that it would “export goods, not people”
how has NAFTA positively affected the US economy?
since NAFTA, US trade with its North America neighbours has more than tripled, growing more rapidly than US trade with the rest of the world — Canada and Mexico are now the two largest destinations for US exports, accounting for more than a third of the total
most estimates conclude that the deal had a modest but positive impact on US GDP — a total addition of up to $80 billion to the US economy upon full implementation, which is several billion dollars of added growth per year
while the costs are highly concentrated in specific industries like auto manufacturing, the benefits of the deal are distributed widely across society
it is estimated that some 14 million jobs rely on trade with Canada and Mexico, while the nearly 200,000 export related jobs created annually by the pact pay 15-20% more on average than the jobs that were lost
NAFTA helped the US auto sector compete with China — by contributing to the development of cross-border supply chains, NAFTA lowered costs, increased productivity and improved US competitiveness
as Mexico is so close, goods can go back and forth and the manufacturing industries in the three countries can be very integrated — these linkages have given US automakers an advantage in relation to China, which would be much more difficult to achieve without NAFTA’s tariff reductions and protections for intellectual property
what have economists and experts suggested about the positive impact of NAFTA on the US economy?
economists like Gary Clyde Hufbauer and Cathleen Cimino-Isaacs of the Peterson Institute for International Economics emphasise that increased trade due to NAFTA produces gains for the overall US economy
some jobs are lost due to imports, but others are created and consumers benefit significantly from falling prices and improved quality of goods created by import competition
a 2014 study of NAFTA’s effects found that about 15,000 jobs are lost each year due to the pact, but that for each job lost, the economy gains roughly $450,000 in the form of higher productivity and lower consumer prices
some jobs in the US have been lost as positions moved to Mexico, but without the pact, even more would have otherwise been lost
many economists also assert that the recent troubles of US manufacturing have little to do with NAFTA, arguing that manufacturing in the US was under stress decades before the treaty
how has NAFTA negatively affected the US economy?
critics argue that NAFTA is to blame for job losses and wage stagnation in the US, which has been driven by low-wage competition, companies moving production to Mexico to lower costs and a widening trade deficit
the US-Mexico trade balance swung from a $1.7 billion US surplus in 1993 to a $54 billion deficit by 2014
Dean Baker, an economist for the Centre for Economic and Policy Research, argues that the surge of imports caused the loss of up to 600,000 US jobs over two decades, though he admits that some of this import growth would have happened even without NAFTA
many workers and labour leaders blame NAFTA for the decline in US manufacturing jobs — the US autosector has lost around 350,000 jobs since 1994, a third of the industry, while Mexican auto sector employment spiked from 120,000 to 550,000 workers
Dean Baker argues that increased trade also puts downward pressure on wages for non-college educated workers, who are more likely to face direct competition from low-wage workers in Mexico
Edward Alden, from the Council of Foreign Relations, says that anxiety over trade deals has grown because wages haven’t kept pace with labour productivity and income inequality has risen — trade deals have hastened the pace of these changes
how has NAFTA positively affected the Mexican economy?
most studies have found that NAFTA had a positive impact on Mexican productivity and consumer prices
it gave a major boost to Mexican farm exports to the US, which have tripled since NAFTA’s implementation
hundreds of thousands of auto-manufacturing jobs have been created in the country — Mexican auto sector employment has spiked from 120,000 to 550,000 workers
NAFTA was a continuation of economic liberalisation that saw Mexico transition from one of the world’s most protectionist economies to one of the most open to trade — Mexican policymakers saw NAFTA as an opportunity to both accelerate and “lock in” these hard won reforms to the Mexican economy
in addition to liberalising trade, Mexico’s leaders have been able to reduce public debt, introduce a balanced budget rule, stabilise inflation and build up foreign reserves
the flow of legal and illegal immigration reversed after 2008, as more Mexican born immigrants began leaving the US than arriving — experts attribute this to stricter border enforcement, changing demographics in Mexico and fewer available jobs in the US along with more in Mexico (positive for the US too)
how has NAFTA negatively affected the Mexican economy?
Mexico was hit hard by the 2008 US recession due to its dependence on exports to the US market — in 2009, Mexican exports to the US fell 17% and its economy contracted by over 6%, Mexico returned to growth in 2010 with its GDP expanding over 5%, but this growth fell to around 2% in 2014/15
there has been a disconnect between the promises that the pact would deliver rapid growth, raise wages and reduce emigration
between 1993 and 2013, Mexico’s economy grew at an average rate of just 1.3% a year, during a period when Latin America was undergoing a major expansion
poverty remains at the same level as in 1994 and the expected wage convergence between US and Mexican wages did not happen, with Mexico’s per capita income rising at an annual average of just 1.2%, far slower than Latin American countries like Brazil, Chile and Peru
Mexican unemployment also rose, which some economists have blamed on NAFTA for exposing Mexican farmers, especially corn producers, to competition from heavily subsidised US agriculture — a study led by the Centre for Economic and Policy Research estimates that NAFTA put almost 2 million small-scale Mexican farmers out of work, in turn driving illegal migration to the US
NAFTA has driven the growth of foreign investment, high-tech manufacturing and rising wages in the industrial North, while the largely agrarian South remains detached from this new economy — Mexico’s rising inequality stems from NAFTA-oriented workers in the North gaining much higher wages from trade related activity
how can it be argued that NAFTA has not been responsible for Mexico’s recent economic performance?
many experts argue that Mexico’s recent economic performance has been affected by many non-NAFTA factors
the 1994 devaluation of the peso drove Mexican exports, while competition with China’s low-cost manufacturing sector likely depressed growth
unrelated public policies, such as land reform, made it easier for farmers to sell their land and emigrate
Mexico’s struggles have largely domestic causes, such as poorly developed credit markets, a large and low productivity informal sector and dysfunctional regulation
which country seems to have benefited most from NAFTA?
the US has benefited most from NAFTA
while some jobs have been lost, increased trade due to the pact has actually produced gains for the overall US economy
for example, around 15,000 jobs are lost each year, but for each job lost the US economy gains roughly $450,000
there has also been increased trade and growth in the US economy since the pact
whereas unemployment rises in Mexico, its economy is only growing very gradually and there is still a huge wage difference between Mexico and the US
what can the Syrian Civil War he used as a case study for?
illustrates the international community’s inability to resolve conflict
an example of a general trend — civil wars are lasting longer and are increasingly likely to end with a one-sided victory rather than a peaceful negotiated settlement
what is the Syrian Civil War and why has the international community been ineffective in resolving it?
the Syrian Civil War, which began in 2011, has proved to be the biggest humanitarian disaster of the 21st-century
out of a pre-war population of 22 million, it is estimated that almost 5 million refugees have fled the country and over 6 million have been displaced internally
the CFR Conflict Tracker characterised the status of the conflict as “unchanging” in 2018
despite the enormous scale of this human tragedy, the international community has failed to work together to resolve the crisis
the UNSC has failed to agree on appropriate action to take because the P5 disagree on who they should support
the USA, France and the UK all align themselves with the Syrian rebels, while China and Russia have consistently backed the Syrian government
SYRIAN CIVIL WAR: what are the three distinct international political environments in recent history?
the Cold War — lasted from 1946 to 1989, characterised by bipolarity between the United States and the Soviet Union
post-Cold War era — 1990 to 2001, marked by the end of the bipolar era and the rise of the ‘new world order’, characterised by US hegemony and a common recognition of international norms, such as the recognition of human rights and the need to resolve disputes peacefully (Francis Fukuyama: the end of history)
2001 attacks of 9/11 — the beginning of the war on terror, characterised by rising authoritarianism and a renewed focus on security, increasing multipolarity, instability and strife (Samuel Huntington: the clash of civilisations)
SYRIAN CIVIL WAR: how have attitudes to civil wars changed?
during the Cold War, civil wars ended 5 times more often in victory rather than in settlement
conflicts in Cambodia, El Salvador and Mozambique did not end in negotiation because of the investment of both superpowers in supporting local proxies to defeat the other — zero sum game
with the end of Cold War bipolarity, the US sought to build a liberal international order based on democracy and open markets — the winner takes all, zero-sum norms of the Cold War gave way to a search for positive sum solutions
although the United States and its allies could ensure victory for their preferred sides, they instead sought to broker negotiated settlements as a path towards future peace and democracy
SYRIAN CIVIL WAR: how did civil wars change after 9/11?
after 9/11, the US was faced with the threat of international terrorism and challenges to its hegemony by a rising China and a resurgent Russia
as a result, different norms have come to characterise the global order....
• non-negotiation with terrorists
• militarily defeating terrorist organisations
• prioritising stabilisation over democratisation, even if that means bolstering authoritarian rule
consequently, across today’s battlefields (DRC, Yemen, South Sudan) external actors are again fuelling different sides of civil wars with the aim of helping one side win outright
governments paint rebels as terrorists in an effort to legitimise their pursuit of complete victory and to solicit support from outside powers
such strategies would not have been so widely accepted during the 1990 to 2001 period of democratisation but in conflict zones, it is now legitimate to try to defeat groups labelled as terrorists and to promote authoritarian rule in the name of stability
how is the Syrian Civil War typical of recent civil wars?
the Syrian Civil War is a typical example of a contemporary civil war
more than 400,000 people have been killed, 5.5 million have fled the country and 6 million have been internally displaced
the UN estimates that at least 30 million Syrians are currently in need of humanitarian assistance, which is more than half of the prewar population of 22 million
the war has endured because of external actors like Iran, which moved early in the conflict to provide support to Assad (its most important ally in the region), deploying several thousand of its own soldiers to Syria and helping the regime to assemble militias
since 2015, Russia has been the key backer of the Assad regime through direct military intervention — such outside support has prolonged the war by bolstering the regime every time it looks ready to collapse
2007-09 GLOBAL FINANCIAL CRISIS: what happened?
the crisis started in the middle of 2007 with the onset of the credit crisis, particularly in the USA and the UK
decisive events took place in the USA — the two government-sponsored mortgage corporations (Fannie Mae and Freddie Mac) were bailed out by federal authorities and the investment bank Lehman Brothers succumbed to bankruptcy
banking crises erupted elsewhere and stock markets went into freefall worldwide, massively reducing share values and indicating a global recession, which lasted in most countries until 2009, although much of Europe re-entered recession in 2011
the crisis was linked to the inappropriate lending strategies adopted by US banks and mortgage institutions (the sub-prime mortgage market)
these high risk loans were lent to applicants with poor or non-existing credit history and were highly unlikely to be repaid, so when the scale of toxic debt became apparent, shockwaves run through the US financial system and beyond
this was the first genuinely global crisis in the world economy since the stagflation crisis of the 1970s and it gave rise to the most severe falls in global production levels since the Great Depression of the 1930s
2007-09 GLOBAL FINANCIAL CRISIS: how did international organisations tackle the crisis?
national governments initiated and the G20 coordinated the recapitalising of banks, substantial cutting of interest rates and a boost to domestic demand by allowing spending to exceed taxation
such international action prevented a recurrence of the most serious mistake made in the aftermath of the 1929 Wall Street Crash, a resort to protectionism, which led the financial crisis to turn into a deep and prolonged economic crisis
it appeared that these massive efforts had been successful as most major economies returned to growth in 2009
international organisations were able to tackle the crisis and it was clear that states could not do it individually
this challenges state sovereignty and shows that states can no longer operate as unitary actors, they must cooperate in an increasingly globalised world
2007-09 GLOBAL FINANCIAL CRISIS: what demonstrated that globalisation is an irreversible trend?
the Great Depression of the 1930s led to a shift towards Keynesianism, while the stagflation crisis of the 1970s contributed to the abandonment of Keynesianism and the rise of neoliberalism
however, there has been relatively little evidence of a similar shift in response to the 2007-09 financial crash
globalisation is clearly continuing there has not been a shift away from it, despite the crisis — this suggests that globalisation is an irreversible trend
2007-09 GLOBAL FINANCIAL CRISIS: what happened in Asia and what does this suggest?
the crisis can be seen as a pivotal moment in the transfer of power in the global economy from the West to the East, particularly from the USA to China
the ability of emerging economies, like China and India, to produce massive quantities of cheap manufactured goods helped to conceal the deeper structural economic defects in the developed world
China and many emerging economies weathered the storms of the 2007-09 crisis far better than the developed economies — for instance, China experienced only a mild dip in its growth rate during this period
demonstrates that some states are still able to exert national sovereignty and shield themselves from the consequences of globalisation, as China did during the global financial crisis
however, the world is clearly more interdependent than ever before — economic recovery in the USA is important to China because China holds much of the USA’s sovereign debt, so the developing world needs recovery in the developed world to provide a market for its manufacturing goods
2007-09 GLOBAL FINANCIAL CRISIS: what does this case illustrate?
underlines the irreversible trend of globalisation
national sovereignty is declining — challenges the idea that states are still able to exert sovereignty as they are all interdependent and need to work together to recover after global crises
arguably, the spread of neoliberal capitalism has been due to economic globalisation and many argue that the 2008 financial crisis was due to the faults in neoliberal capitalism — therefore, globalisation caused the crisis
no state could shelter itself due to the world being an increasingly interconnected place — in a globalised world, no economy is an island