DRAFT Syllabus

 BSAD 295; CDAE 295, PA 295, RESNR 285:
The North American Free Trade Agreement: The View from the South. 
A Field Course in Guadalajara, Mexico
Time, Place:

April 14, 21, 28 and May 15, 4-6 PM, Room TBA
May 21-June 4, 2005, Guadalajara, Mexico
June 9, 6-9 PM

Instructor: Joshua Farley
Offices: 205H Morrill Hall
Office hours: TBA
Telephone: 656-2943
E-mail:  Joshua.farley@uvm.edu

Course Summary
Course objectives
Topics to Be Covered
Resources
Course Requirements
Grading
Field projects (including project steps)
Tentative schedule

Course summary

    This course is a general introduction to free trade agreements utilizing a case study of the North American Free Trade Agreement between Canada, the US and Mexico.  we will be emphasizing the Mexican viewpoint.  The course is centered around a two week visit to Mexico's second largest city, Guadalajara. Faculty from UVM are working with faculty at Universidad Panamericana (http://www.up.mx/), one of the leading private universities in Mexico, to offer this program.

    Free trade is a highly polarizing issue.  Its proponents argue that free trade increases economic freedom, stimulating efficiency and growth in all participating countries, and such growth is necessary to alleviate global poverty.  As Mexico grows wealthier, there will be less illegal immigration into the US.  Many proponents go on to claim that a healthy environment is a luxury good, and people only begin to care about the environment after their other needs are met. Economic growth will therefore provide the resources and concern necessary to clean up the environment. In other words, free trade is economically efficient, socially just and ecologically sustainable. 
    In contrast, the opponents to globalization argue that free trade does not necessarily lead to economic growth in all countries, and where it does promote growth, the resulting gains are generally concentrated in the hands of the few.  Cheap Mexican manufactures, they argue, have contributed to the 'great sucking sound' of American jobs moving south to Mexico, increasing unemployment and lowering wages among blue-collar workers in the US and Canada.  Cheap American corn moving south into Mexico increases the poverty of Mexico's small corn farmers-- already the poorest of the poor.  Furthermore, 'free trade' agreements do not actually promote free trade but instead serve the interests of large and powerful corporations, and weaken the ability of national governments to address national problems. More international trade means more transportation, accompanied by an inevitable increase in green house gas emissions.  In the competition for markets, countries engage in a race to the bottom to lower environmental standards and wages and increase their comparative advantage.  In other words, opponents of free trade make exactly the opposite claims of its proponents: 'free trade' as promoted by NAFTA is economically inefficient, socially unjust and ecologically unsustainable.
    This course will look at NAFTA and some of the impacts of globalization from both perspectives.  We will review the theories of free trade, examine the assumptions under which they hold true, and assess the extent to which those assumptions hold true in NAFTA.  We will look at empirical outcomes concerning economic growth, income distribution and environment.  We will listen to the views of Mexicans, ranging from wealthy CEOs, government officials and academics to indigenous corn farmers and enviromental NGOs.
   While in Mexico, students will be working on group projects focused on a particular economic sector, and examining the triple bottom line of economic efficiency, social justice and ecological sustainability.  Faculty are currently workingto develop the projects in collaboration with Mexican partners and stakeholders, and will arrange for at least one Mexican student to participate in each project.   Prior to leaving for Mexico, students will be expected to complete a number of assigned readings on free trade and NAFTA, a literature review for their projects, and a complete project proposal.  Completed projects will be due 2 weeks after our return.
   Problem-based couses are different from traditional courses for several reasons.  While academics in universities study disciplines, people in the real worldstudy problems.  That is, problems do not respect the artificial boundaries of disciplines, and complex problems can rarely be understood from within the narrow framework of a single discipline.  In addition to the skills of disciplinary analysis, this course will focus on the skills of interdisciplinary synthesis, and the communication of research results to decision makers who can use them.  

Course objectives:

Our overall objective for this course is to learn about different theories of free trade and how they explain the empirical outcomes we see in the North American Free Trade Agreement.  We expect students to approach the course with an open mind, listen to alternative points of view, and test what they learn through their own empirical research in  Mexico. 

Specific objectives required to achieve this include:
1.  Understand the different theories of free trade.
2.  Understand the structure of NAFTA, and the extent to which it meets the assumptions of free trade theories.
3.  Understand the impact of NAFTA on the democratic decision making process, with a particular emphasis on Chapter 11.
4.  Assess the empirical data on NAFTA in the light of competing theories.
5.  Apply a solid understanding of theory and empirical outcomes to specific case studies in Guadalajara.
6.  Develop more effective oral and written communication skills. 

Topics to Be Covered

In order to understand how NAFTA works and the impacts it has on efficiency, distribution and sustainability in Mexico, the US and Canada, we will need to cover the following topics:
1.   Ricardo's theory of comparative advantage, and the assumptions under which it holds true.
2.   The theory of absolute advantage, and the assumptions under which it holds true.
3.   The structure of the NAFTA agreement and the side agreement on the environment. 
4.   The empirical outcomes from NAFTA, with an emphasis on growth, distribution and environment.
5.   The Mexican economy
6.   The Mexican viewpoints: Business, Academia, Government, Farmers and Civil society

Resources:

Local Partners: Universidad Panamericana


Workbook in applied problem solving approaches to ecological economics

This is a draft of a forthcoming textbook by Josh Farley, Jon Erickson and Herman Daly.  It lays out an approach to applied problem solving projects intended to help you set up a problem, analyze it, synthesize the elements of your analysis into a more complete understanding of the whole, then communicate your results to those who can act on the information.  It carefully outlines the steps to developing proposals for problem based research. 

Web Sites:

Institute for International Economics http://www.iie.com/research/globalization.htm
Economic Policy Institute http://www.epinet.org/subjectpages/trade.cfm
The NAFTA treaty http://www-tech.mit.edu/Bulletins/nafta.html
North American Agreement on Environmental Cooperation http://www.naaec.gc.ca/
NAFTA secretariat  http://www.nafta-sec-alena.org/DefaultSite/index.html
Public Citizen's NAFTA site http://www.citizen.org/trade/nafta/

Course Requirements:

There will four mandatory class meetings prior to departure: the first to introduce the course, the second (we hope) for a presentation by a representative of the North American Agreement on Environmental Cooperation (the NAFTA environmental side agreement), the third for students to present their background research on the impacts of NAFTA in three specific economic sectors adn overall, and the fourth for students to present their proposals for research to be conducted in Mexico. A number of mandatory readings will also be assigned.  Students will be responsible for initiating their research under the guidance of the professors, but our approach will be more 'guide by the side' than 'sage on the stage.'  We will stress communication skills, and there will be at least 2 presentations required. The final presentation will take place in either Mexico or Vermont based on the project undertaken. We expect our project partners to be in the audience. It must be a professional quality presentation.  The trip to Mexico is not a vacation: We will devote at least 8 hours per day to lectures and projects.  You will be free to enjoy the city on evenings and weekends, on the condition that you are fully alert during course time. There will also be a weekend trip to the beach resort town of Manzanillo.

Required readings (tentative):

Daly and Farley, Ecological Economics: Principles and Applications. Washington, DC. : Island Press.  2003
    Part V: International Trade
Chapter 17: International Trade
Chapter 18: Globalization
Chapter 19: International Flows and Macroeconomic Policy

Taylor and Moosa, Macroeconomics 2
    Part 4: Economic Development and Interational Trade
 Chapter 19. Economic development
Chapter 20. The gains from international trade
Chapter 21. International trade policy

Excerpts from In Defense of Globalization and Free Trade Today by Jagdish Bhagwati

Jagdish N. Bhagwati, Arvind Panagariya, Bilateral Trade Treaties Are a Sham Financial Times, July 13, 2003

Selections from Paul Samuelson's recent work

Selections from William Baumol's recent work

Tentative Grading Scheme:

The bulk of your grade will be determined by your course project
Class Participation:     25%
Project proposals:      20%
Final Project:              30%
Presentations:             25%

Field Projects (UNDER CONSTRUCTION!)

We are currently working to develop projects on three economic sectors of particular importance to NAFTA and other global trade agreements. At this time, we expect the sectors will include:

1)    Textiles (manufacturing): For many years, the United States has maintained a quota system on textile imports, limiting the quantity that could be imported from individual countries. For many years, Mexico and other countries were opposed to this quota. However, as China has surged as an exporter of low cost textiles, other countries have enjoyed the quota, as it has protected their export market against China. The textile quota however officially came to an end on January 1, 2005. What impact will this have on Mexico? What impact will it have on the US textile industry?
We are trying to develop a project in collaboration with Cabot Hosiery Mills Inc., a manufacturer for leading brands of socks located in Northfield, Vermont.  A family owned business, Cabot has attempted to ward off the outsourcing of manufacturing jobs in their plant through improvements in efficiency in their manufacturing process and offering a high level of expertise in product design. Students will examine the strategy at Cabot Hoisery Mills as well as the textile market in Mexico.  Students will develop a range of recommendations for senior management at Cabot upon return to Vermont.

2)    Agriculture: Agriculture is a highly divisive issue in international trade. The US, Europe and the other wealthy nations offer enormous subsidies to the agricultural sector, making it very difficult for less wealthy nations to compete. As an example, some cotton farmers in the US receive annual subsidies of up to $106 million per year, and the US sells cotton on the global market for 41% of its production cost. Corn is also heavily subsidized, and corn exports from teh US to Mexico have soared under NAFTA. Wholesale corn prices have decreased in Mexico, making it much harder for corn farmers to make a living. While it might seem that lower corn prices would benefit poor Mexicans, the retail price of corn meal and tortillas, staple foods in Mexico, have perversely risen. Corn farmers in Mexico are already the poorest of the poor, and may be further impoverished by NAFTA. In addition, farmers in the US primarily grow a limited number of hybrid corn varieties, while farmers in Mexico growh hundreds if not thousands of ancestral varieties. As farmers in Mexico are forced out of farming, there is a real danger of losing genetic diversity accumulated over thousands of years. The rate of extinction of agricultural plants and animals far exceeds that of any category of wild species. To complicate matters more, Mexico has a ban on growing genetically modified corn, but it appears that imported corn is being planted. Many people are concerned that this GMO corn will contaminate ancestral varieties. Finally, agricultural production in the US is generally uses more fossil fuels and chemicals than production in Mexico, which may have adverse environmental impacts in the US. We will be consulting with our Mexican partners to decide which crop is most relevant to the Guadalajara area (one of the major crops near Guadalajara is the Agave cactus, used to make tequila, but the US certainly does not compete with Mexico in this area!).

3)    Information: Our economy is increasingly driven by information technology, and intellectual property rights have played a very important role in global trade agreements. Information is entirely different than most other 'commodities', as it does not wear out through use but rather improves. Guadalajara boasts a well developed information technology sector. We are working with our partners to develop a case study of this sector.

Tentative Schedule

Problem solving courses are by their nature flexible.  We may change this schedule significantly as the course proceeds. Currently we expect to meet about 4 times before leaving for Mexico for about 1.5  hours each time. We will leave for Mexico shortly after the Spring semester ends.

April 14:

Lecture topics: Introduction to course and course projects

Readings:

Assignment: Choose project

April 21:

NAFTA and the Environment
 
Readings:

Assignments:

1. Empirical data on the impacts of NAFTA should be quite straightforward, but unfortunatley the data is subject to highly ideological interpretations in the popular press. Ideology is more or less a view of the world held by an individual  and used to interpret facts and observations. Much of it is based on moral principles about which perfectly reasonable people might disagree.  But ideology should work hand in hand with science.  Scientists observe nature, formulate hypotheses to explain what they observe, then test these hypotheses through experiments and further observations. If these experiments and observations refute the hypotheses, the scientist rejects them and develops new ones.  If the empirical data supports the hypotheses, then over time they become theories, which are still subject to the same empirical tests. An ideologue is one who refuses to test his/her hypotheses and theories, or disregards the evidence when the tests refute the hypotheses.  There are of course different ways of interpreting the same set of facts. 

5 teams of students will research the popular media for articles on NAFTA.  Each team will concentrate on a particular source of information, and present what they find.  The sources we will use include:
The Nation
The New York Times
The Christian Science Monitor
Time Magazine
The Wall Street Journal

Students will present the results of their research in week 3.  Our goal is to understand the actual impacts of NAFTA, and how these impacts can be interpreted based on people's underlying ideological assumptions.

2. Initiate literature review for projects

April 28:

Student presentations on NAFTA

Assignment:  Finish literature review and integrate into statement of problem

May 15:

Student presentations on field projects

Assignment:  Finish and turn in project proposal: Statement of problem; Goals and Objectives; Methodology. 

week 1 in Mexico:

2 Morning lectures followed by field research in the afternoon
Lecture topics may include the following:
The Classical theory of free trade and the origins of NAFTA  
The Ecological Economics of Free Trade: Impacts on distribution and the environment
The Enviromental Kuznets curve
Latin American Economic History
Financial contagion: The Tequila Crisis
Mexican perspectives: Large corporations
Mexican perspectives: Small businesses
Mexican perspectives: Small corn farmers
Mexican perspectives: Environmentalists
The Mexican Economy

Weekend trip to a Pacific coastal community.

week 6 (second week in Mexico):

Lecture topics may include the following
Beyond NAFTA: The FTAA and the WTO
LOIS(local ownership import substitution) vs. TINA (there is no alternative)

Research projects
Final presentations