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Topic: 4: NAFTA & US hegemony: Canada and Mexico ( Kit: Quintero-Ramírez; Mize, R.L.; Pantaleo, K; Wise, C. ; Wise. T.A.; Abboushi, S.) WST Financial Meltdown (2008) Trade liberalization (Neoliberalism) Continental Commodification The Wonderful World of NAFTA (Part 1, 2) min p1 7 min p2 NEED TO KNOW | After NAFTA | PBS min 0c1 2011

Thesis: Under U.S. hegemony, NAFTA has integrated Canada and Mexico into a continental free-trade system. As a result, Canada’ s raw materials are exploited for reconstructing the declining U.S. global hegemony. As a result of US-led 2008 financial meltdown, workers face a sharply depressed job market in a de-industrialized Canada barely buffeted by the welfare system. In contrast, Mexican cheap, but skilled and surplus labour is exploited for restructuring the industrial sector in the U.S. The failure of the US financial system has worsened the unemployment of the Mexican workers intensifying their poverty as they have no welfare system. Both, Mexican and Canadian economies, have become dependent on the U.S. through the commodity chain of exploitation.

Peripheries: NAFTA Periphery: Mexico Semi-periphery: Canada Arguments in the literature: 1.Wise T. A.(2011): Hegemony and dumping NAFTA + U.S. Farm Subsidies Devastates Mexican Agriculture min 1.Abboushi, S (2010): US trading power, US disregard for agreements, land-ownership structure vs. strategy of acquisition; and Managed (not Free) trade 3.Quintero Ramirez (2002) NAFTA deindustrialized & depressed labour conditions in Canada and exploits workers in Mexico

4. Susan George: WTO is ineffective you tube uploaded May 5, 2011) 5. Wise, R.D & Cypher, J.M (2007). Cheap-labor embodied Mexican exports but not achieving new high-value added production or specialization. Source: The Strategic Role of Mexican Labor under NAFTA: Critical Perspectives on Current Economic Integration, THE ANNALS OF THE AMERICAN ACADEMY, March Carol Wise (2009): Regional market integration of US, Canada and Mexico has been superseded by China’s use of NAFTA to facilitate its entry into US through Mexico

7. Gandasegui, M.A (2006) Kit #17: Using its hegemony, US wants to gain advantages over 4 areas in making trade agreements with each country in LAm : 1.Government contracts 2.Pharmaceutical markets 3.Agricultural markets 4.Intellectual property (GRAIN 2004).

8. Katherine Pantaleo (2010). the murders as gendered sexual serial killings primarily perpetuated and caused by: NAFTA, Gender issues & Corruption of the criminal justice system. NAFTA's Ultimate Effect on Mexico P1 of april 9.29 min murder city Charles bowden NAFTA's Ultimate Effect on Mexico P2 of min 9. Cormier & Targ (2001) Globalization led to workers’ poverty & global income inequality Cormier, D & Targ, H, (2001) Globalization And The North American Worker. Labor Studies Journal, Spring 2001 v26 i1 p42 Paul Ciccantell (2001). NAFTA and the Reconstruction of U.S. Hegemony: The Raw Materials Foundations of Economic Competitiveness. (Statistical Data Included), Canadian Journal of Sociology, Wntr 2001 v26 i1 p57

How does NAFTA de-industrialize & depress labour conditions in Canada and exploit workers in Mexico? (Quintero Ramirez: 2002) By: Reducing the number of full-time jobs Subcontracting work outside the plant Increase of part-time workers Piecework outsourced to home work

Core: NAFTA & US (as Core): Power of the US: Neoliberalism is imposed on Mexico and Canada Impact of US financial boom-bust cycles affect their trade balances. Semi periphery and Periphery: Continental commodification of Canada’s (semi periphery) and Mexico’s (Periphery) raw materials slides

D Driving force of Global market integration: (Cormier & Targ: 2001) Neoliberalism (NL) deregulate commercial activity. Liberalize trade, open for foreign investments. Deregulate finance/currency, privatize the economy, ensure private property protection Why should Canada and Mexico adopt NL? US’s enforcement: How? By integrating Canada and Mexico through NAFTA As requirements of loans: WB, IMF & SAP Feb 2010: UNCTAD’s new economic report shows that neoliberal policies have negatively affected the countries that were forced to follow them

Why does Mexico as a peripheral country bow to American hegemony IMF requires each country to balance export vs. import payment in trade. It lends money to bridge the gap (imports minus exports) and imposes the rules of neoliberalism (LAPDoGS) on the borrowing country.

Core: NAFTA & US (as Core): Power of the US: Neoliberalism is imposed on Mexico and Canada Impact of US financial boom-bust cycles affect their trade balances. Semi periphery and Periphery: Continental commodification of Canada’s (semi periphery) and Mexico’s (Periphery) raw materials

WST: US’s commodification of Canadian and Mexican raw materials: How? 1. Continentalization of the 3 economies Corporatization of production in NAFTA countries Continental expansion of US’s MNCs Continental enforcement of neoliberalism 2. FT FT-terms favourable to the US GCC & Continental commodity chain

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Global Integration by trade agreements in Table 1 US vs. European Union (EU). European U: Sovereign states may resist global integration because it would mean surrendering national control on economic policies CU allows greater bargaining power between trading nations FTA may appeal to small states as exporters need to adjust only to block standards not to global standards.

WST: Continentalization of the three economies & US (Core’s)hegemony: Mexico (periphery) and Canada (semi-periphery) are integrated through NAFTA Favourable terms of trade for the US (unequal exchange) US disregards WTO’s decisions

FT: Continental commodification of Canada’s (semi periphery) and Mexico’s (Periphery) raw materials US power within NAFTA leads to the continental commodification Under the US hegemonic power Mexico and Canada abide by the US strategies.

How does a hegemon in a trade block make gains? Political influence Terms-of-trade (TOT) Discrimination against non-members Greater influence over multilateral trade negotiations

Impact of Neoliberal Trade Policies: UNDP Human Development Report 2004 : 46 countries’ people are poorer today (2004) than in 1990 Liberalization and privatization restrict countries’ supply of basic services WB conditionality undermines local service industries that cannot compete with trans- national service corporations

Rafael Garduño Rivera 2010

UN Economic and Social Council, 2000: committee on human rights reports: Most global trade is controlled by multinational enterprises Trade and commerce have serious human rights implications WTO: gender insensitive Patents for genetically engineered species – economic high-jacking.

US hegemony Advanced industries, technology & market (P) Mergers and expansion of MNCs (NDL) Financial stability (P) Largest & desirable market for capital and for export (P) Mexico: Periphery Raw material based industrialization/ agriculture (Mexico)( unequal trade : UT) Development model – locked in by US market (oil demand & manufacturing) (lack economic resistance to US market) Export dependence (since 1970s, oil to pay debt dependence on US) Smaller domestic market & lacks LAm’s economic development pull NAFTA: Impact of US on Mexico

US hegemony Advanced industries, technology & market (P) State support of MNCs: Mergers and expansion of MNCs (NDL) for capital accumulation Neoliberalism, Washington Consensus, market liberalization Financial stability (P) Capital flow from and dominant pull of the largest market for export (P) Canada: Semiperiphery Continental integration of raw materials industries ( heaviest, bulkiest, and largest volume, e.g., petroleum, iron, coal, aluminum and copper, for industrial production.) Promote higher technology manufacturing and service sector industries as the Development Model Maintain export dependence on US as a secure market ( U.S. negotiators aimed for and got 'secure and enhanced access' to Canada's resource sector) Smaller domestic markets & less globally powerful NAFTA: Impact of US on Canada

Canada (Semi-periphery) Manipulative power Different goals in negotiating CUFTA: protect resource and manufactured exports from U.S. trade discrimination (stronger State and econ stability) Regulated NAFTA ties with US but weakened by continentally integrated economy 1980s: NEP (National Energy Program), of Canadian government aimed at self-reliance in oil and natural gas & increased investment & production & restricted exports Restrictions on US re: foreign ownership of petroleum, uranium production, mining leases, transportation industries Mexico (Periphery) (Weaker state and dependence on Core and semi-periphery) Different goals in negotiating NAFTA: promoting economic and political restructuring were central (lack of powerful and stable State) Locked in dependence on exports of oil and raw resources & US industries shaped its econ. development Mexico, a major world producer of lead and zinc, pollution intensive production, drew U.S. investment (UT) US demand for bulky/heavy raw resources has continentally tied Mexico to the capital and markets of US & Canada NAFTA: Comparing impact of US on Mexico and on Canada

WST: US’s commodification of Canadian and Mexican raw materials: How? 1. Continentalization of the 3 economies Corporatization of production in NAFTA countries Continental expansion of US’s MNCs Continental enforcement of neoliberalism 2. FT FT-terms favourable to the US GCC & Continental commodity chain

Ciccantell (2001): NAFTA: an institutional framework of integrating raw materials Why was U.S. interested in NAFTA? US raw materials supply systems were declining To access cheap labour and to gain new markets Name a resource that is expensive today: oil & gas e.g.: oil price increases of led to decline of U.S. economic competitiveness

Core: NAFTA & US : 1. Problems of U.S. & its MNCs: How did they solve insecure supplies of the raw materials ? Canada’s & Mexico’s oil, natural gas, and other natural resources 2. Why was US interested in these supplies? To reduce for U.S. MNCs’ cost of production to advance their profit &competitiveness.

Core: NAFTA & US (cont’d): 3.Core-Periphery unequal exchange continues under hegemonic FT rules: FT ensures: Cheap access to heaviest, bulkiest, and largest volume raw materials Monopolistic (MNCs) extraction peripheries’ raw materials at low costs

What is ‘Direct foreign investment’? branch plants -- central mechanisms of core economies' control over their raw materials in peripheries Limit processing to certain refineries: physical relationship tightly links many extractive peripheries to particular core firms

Foreign Direct Investment in Canada FDI received in to Canada $449 billion in

John W. Foster and John Dillon1 Annual % Changes for 10 years of NAFTA Increasing Productivity (red) gains were not passed on to workers (labour costs (yellow:

Sources: Canadian Institute for Health Information, Gouvernement du Québec, Government of Canada, Institut de la statistique du Québec, International Monetary Fund, Organisation for Economic Co-operation and Development, Population Reference Bureau, Statistics Canada, US FedStats, World Bank : Mexico’s cost of living increased double that of Canada

Sources: Canadian Institute for Health Information, Gouvernement du Québec, Government of Canada, Institut de la statistique du Québec, International Monetary Fund, Organisation for Economic Co-operation and Development, Population Reference Bureau, Statistics Canada, US FedStats, World Bank. 40 mil. Poor in Mexico

Quintero Ramirez (2002): How does NAFTA de- industrialize & depress labour conditions in Canada and exploit workers in Mexico? In Canada: by Reducing the number of full-time jobs Subcontracting work outside the plant –affects jobs: - increase of part-time workers - piecework - outsourced to home work

Quintero Ramirez (cont’d) In Mexico: average of 70 hrs. per week without overtime pay - no health insurance, no benefits violation of the Employment Standards by employers – workers received no compensation under the Workplace Safety Act no welfare or UI (unemployment insurance)

Canadian Institute for Health Information, Gouvernement du Québec, Government of Canada, Institut de la statistique du Québec, International Monetary Fund, Organisation for Economic Co-operation and Development, Population Reference Bureau, Statistics Canada, US FedStats, World Bank

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NAFTA benefits the capital investors but workers lose jobs: Source: G & M Feb. 15, 2008, p.A18.(editorial) Trade Area 440 mil people : $15 Trillion (value of goods and services produced) Economies grew by : U.S. 50% Canada 54% Mexico46% NAFTA partners’ total trade /a minute $1.7 million (worth) Source: G & M Feb. 15, 2008, p.A18.(editorial)

The Wonderful World of Nafta 7 min (the wonderful World of Nafta 1/2) (2/2)

Does Canada control its own sovereignty, taxation and borrowing? Yes, but: U.S. hegemony It ensures that its huge sunk capital in raw materials, overpowers Canada’s claims to sovereignty

Pre 9/11: What % of Canadians were ‘continentalists’? Two thirds

Post-9/11: Who is a close ally of the U.S?

What is hegemony? Arrighi (2004): When a state uses its economic, political, military and cultural power to control a group of sovereign states. Arrighi, G (2004). "Hegemony and Antisystemic Movements". In I. Wallerstein, ed., The Modern World-System in the Longue Duree. Boulder, Co: Paradigm Publishers, 2004

Core: NAFTA & US : Ciccantell, P. (2001) 1. Problems of U.S. & its MNCs: How did they solve insecure supplies of the raw materials ? Ciccantell, P. (2001). Canada’s & Mexico’s oil, natural gas, and other natural resources 2. Why was US interested in these supplies? To reduce MNCs’ cost of production for U.S. to advance their competitiveness. (Ciccantell, P (2001). NAFTA and the Reconstruction of U.S. Hegemony: The Raw Materials Foundations of Economic competitiveness. (Statistical Data Included), Canadian Journal of Sociology, Winter 2001 v26: 1, p57)

Core: NAFTA & US (cont’d): 3. What does US as a hegemon want to monopolize trade in the world? Cheap access to heaviest, bulkiest, and largest volume of raw materials Maintain its hegemony to extract raw materials at low costs from the peripheries.

WST explains Core’s Globalization agenda & its consequences to the peripheries Expansion of US Hegemony: (read: Ciccantell, P: 2001) Enforced uniformity in development Hegemonic control over technologies Unsuitable, costly & centralized solutions Lack of locally effective problem solving

Wise, Timothy A. (2011) (in course kit) NAFTA + U.S. Farm Subsidies Devastates Mexican Agriculture 8.23 min Dumping margin In a case of dumping, the difference between the "fair price" and the price charged for export. Used as the basis for setting anti-dumping duties. price anti-dumping duties

Peripheries: NAFTA Periphery: Mexico Semi-periphery: Canada 1.Wise T. A.(2011): Hegemony and dumping 2.Abboushi, S (2010): US trading power, US disregard for agreements, land-ownership structure vs. strategy of acquisition; and Managed (not Free) trade 3.Quintero Ramirez (2002) NAFTA deindustrialized & depressed labour conditions in Canada and exploits workers in Mexico