I don't particularly care if there's magic or not, I just figure its best to decide on it now. But one issue that I think of is that what's stopping a nation from having both exactly? Why can't a nation of mages import more advanced technology? And why can't one that prefers technical innovation recruit and hire mages?

But I do think the only restriction on people's races should be that they're not overpowered or good at everything. If someone wants to make a nation of giant ant-people, I see no reason not to let them.

EDIT: Actually, I'd like to reword my statement. I'd prefer a magic-free setting; but I don't mind that much if we have magic.