GROUP DEAL

Mexico 2016 | ECONOMY | FOCUS: THE TRANS-PACIFIC PARTNERSHIP

The Transpacific Partnership (TPP) is nearing the final stages of coming into effect among signatory countries, bringing with it the hopes and concerns of moving one step further in the direction of an integrated global economy.

In October 2015, following seven years of negotiations, Mexico was one of the 12 countries to sign the Transpacific Partnership Agreement (TPP), which aims to liberalize trade and harmonize intellectual property, labor, and environmental regulations among Pacific Rim countries. The agreement, which includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam, brings together around 40% of global GDP and a third of the world's population, making the TPP one of the largest multilateral trade agreements in a generation.

Mexico's Secretary of Economy argues that the TPP will bring numerous benefits to the country. The agreement, which opens the door to six new markets with 150 million potential consumers, is expected to increase Mexico's exports by 36% annually, and it will maintain and consolidate the country's preferential access to the North American and Japanese markets. President Peña Nieto celebrated the agreement, stating, “The TPP will strengthen Mexico's commercial integration with the world.” President Peña Nieto added that the agreement would “translate into greater investment opportunities and better paying jobs for Mexicans.”
However, the path to the final agreement has not been without controversy. Mexican critics echoed many of the same concerns that have been raised on an international level regarding issues such as investor-state dispute settlement, intellectual property regulations, and—above all—the secrecy of the negotiations. In addition, one of the main concerns raised was the fact that since Mexico is already one of the world's most open economies, it has little to gain from further liberalization. A study by the World Bank concluded that Mexico will see the least benefit of any TPP signatory, with only a 4.7% increase in exports over the next 15 years. The ratification of the agreement by the Mexican congress was still pending at the beginning of 2016.

Despite these concerns, the Mexican government remains optimistic about the TPP, projecting that it will bring in $150 billion to the Mexican economy over the next five years. Proponents say that the agreement, when combined with the achievements of NAFTA, will turn the North American market into the most dynamic and competitive economic region in the world. It also deepens the preferential access to Chile and Peru—two important markets in Latin America and partners in the Pacific Alliance—as well as Japan, with which Mexico signed an FTA in 2004. Moreover, the TPP opens six new markets barely explored by Mexican exports that can become complementary due to the nature of their economies. Additionally, the number of signatories looks set to increase, as Colombia, Indonesia, the Philippines, Thailand, and South Korea have all expressed their interest in joining the TPP.

The private sector in Mexico has also received the agreement optimistically. Ildefonso Guajardo, Secretary of Economy, said that Mexico was able to position its offensive and defensive interests early in the negotiations, which were established accordingly with the private sector through the Consultative Committee for the TPP, present in 30 rounds of negotiations. The Consejo Coordinador Empresearial (CCE) also celebrated the agreement, declaring it the most ambitious trade agreement to date. On the other hand, Francisco González Díaz, CEO of ProMéxico, said that the TPP will foster a deeper integration with countries where Mexico has existing manufacturing chains and aims to ease border processes by eliminating trade barriers. In an exclusive interview with TBY, Luis Fernando Goya, Director General of Consultants in Foreign Trade and Investment (COCEI), said, "The TPP represents a big opportunity for business but we should be careful in taking the opportunities given by this agreement, especially in fields such as rules of origin or intellectual property, where Mexico faces several problems.” Alfredo Nolasco, Chief Country Representative for Bombardier in Mexico, told TBY “The TPP opens a new framework for the expansion of the company to new markets, Mexico being our company's foundation in Latin America.”