Trump, Mexico, and the TPP

The article “Mexico ready to discuss NAFTA with Trump, eyes non-US TPP” discusses Mexico and their actions with respect to the TPP post the Donald Trump vote. (http://www.reuters.com/article/us-usa-election-mexico-idUSKBN1352N0?il=0) Per the article “Mexico is willing to discuss NAFTA with U.S. President-elect Donald Trump but may seek to circumvent the United States on a broader trans-Pacific deal if necessary…”. The main mission of the discussions are to “persuade Trump how beneficial NAFTA… had been for North America”, and how “… the world is not competing by country, it’s competing by region…”. While currently no date has been established, both parties are anticipating one soon. “Mexico and the United States do about half a trillion dollars in trade every year, with the balance of commerce favoring the smaller country by tens of billions of dollars”. Despite this, Mexico is the US’s second-biggest foreign goods market after Canada. How will these negotiations play out? Only time will tell.

Anti-Corruption Within the TPP

 

If you have been following the Trans-Pacific Partnership you will know that it was signed on February 4, 2016 and is now pending ratification before taking effect. After years of negotiation, what happens now? One of the major concerns moving forward is corruption; how to avoid corruption, and how to respond if it takes place. The article “Anti-corruption Measures In The TPP Agreement” (http://www.livingstonintl.com/global-perspectives/anti-corruption-measures-in-the-tpp-agreement/ contains a great summary of the measures both past and present that will assist in this endeavor.

“Confidence in the rule of law is critical for trade and investment to flourish. Corruption, in particular, is an insidious impairment to effective commercial activity and cannot be tolerated as a cost of doing business.” To help combat this potential enemy, the TPP will employ both past and present policies. Among the past policies to be utilized are the:

  • 1977 U.S. Foreign Corrupt Practices Act (FCPA)
  • 1999 Organization for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials
  • 2003 United Nations (UN) Convention Against Corruption

To support these previously instilled practices, the entire 26th chapter of the TPP, titled “Transparency and Anti-Corruption” is dedicated to this same movement. This chapter specifically addresses topics such as:

  • Requiring the publication of laws, regulations, procedures and administrative rulings
  • Guaranteeing due process
  • Promoting rules against conflicts of interest

It is the hope that the TPP will provide benefits to all countries involved, but its success is dependent on maintain honesty and consistency among all parties involved. As stated in the article, “… the framework for anti-corruption is already in place within the TPP. When ratified and enacted, it will be up to the Parties to eliminate corruption as a trade barrier.”

Peru and the TPP

With the global market as prominent as it is, any major global trading agreement is something to research and understand. The TPP, or Trans-Pacific Partnership, is one of the bigger agreements made in recent history, and one of the major players in this agreement is Peru. What part does Peru play and what are some of the benefits they will get from being a member of this agreement? The article “The TPP will give Peru direct access to markets such as Australia and New Zealand” (http://www.amcham.org.pe/publicaciones/articulos.php?art=3) touches on these questions and dives into their respective answers. Three of the main takeaways with respect to Peru are shown below:

  1. “Peru will see its exports increase by $3.2 billion by 2025, once the TPP is finalized.
  2. Peru will now have access to Australia, New Zealand, Malaysia, and Vietnam and their corresponding markets.
  3. “Many of the benefits will be seen in non-traditional sectors, such as agricultural exports”

With the TPP being such a talking point, especially now during the Presidential debates, it will be interesting to monitor the progress of this agreement, and how Peru actually benefits from being part of this free trade agreement. Will the benefits be the same as this article predicts? Only time will tell.

Mexico’s Procurement Commitments within the TPP

The article “TPP Procurement: Mexico’s Commitments” (http://trade.djaghe.com/) provides an excellent summary of Mexico’s procurement plans under the new Trans-Pacific Partnership agreement. The article divides these plans into five main segments which are thresholds, coverage of entities, coverage of goods and services, traditional measures, and permanent measures.

  1. Thresholds: Mexico has decided to mirror the procurement thresholds utilized under NAFTA, a few of which are $79507 for goods and services, as well as $10,335,931 for construction services.
  2. Coverage of Entities: Similar to the Thresholds section, Mexico has agreed to use the same coverages as are used under NAFTA. Additionally, as in NAFTA, Mexico will not cover any sub-central entities.
  3. Coverages of Goods and Services: Contrary to Coverage of Entities and Thresholds, Mexico will not follow their pre-arranged coverages of goods and services established under NAFTA, in which, as of 2005, utilizes a negative list of excluded services. Like most parties within the TPP, Mexico plans to use a positive list for goods purchased, while continuing to exclude the same services that are excluded under NAFTA.
  4. Transitional Measures: Mexico has stated they will utilize the same transitional measures that were applicable to NAFTA between 1994 and 2002. These transitional measures, however, do not apply to Canada, Japan and the US.
  5. Permanent Measures: Following after Transitional Measures, Mexico plans to mimic the permanent measures used under NAFTA that favor its domestic industry.

While more in-depth information is available in the article listed above, as well as through other sources, this provides a great overview of Mexico’s strategic plan within the TPP, as well as the similarities and differences from NAFTA.

South Korea, Mexico and the TPP

South Korea, one of Asia’s strongest countries, was not included in the TPP deal. South Korea has expressed interest in joining the Trans-Pacific Partnership, but until now has not been allowed access. However, as expressed in the recent article “South Korea, Mexico Agree to Restart Free Trade Discussions” (http://www.livingstonintl.com/international-regulatory-updates/south-korea-mexico-agree-to-restart-free-trade-discussions/) there have been recent talks of a trade deal between South Korea and Mexico. President Park Geun-hye visited Mexico in early April, and “hinted at an interest in developing an agreement with her country’s top Latin American trade partner. President Park was also quoted saying “I think it’s meaningful for South Korea and Mexico to sign a free trade agreement to expand trade investment and strengthen economic cooperation.” The logic behind her suggesting is that while Mexico is part of the TPP, the 12-nation trade agreement is still a long way away from being implemented. As stated in the article “with the status of the agreement gummed up in the U.S. Congress and no clear path in sight for the TPP, the Mexican government seems to have decided that a deal with South Korea is worth pursuing.” Once the TPP is implemented, Mexico will have access to various Asian markets, and a free trade agreement with South Korea may not be necessary. How will these trade negotiations affect South Korea’s chances of being admitted into the TPP? Will Mexico receive push-back from other TPP members for these recent negotiation talks? Will this delay the TPP adoption even further? In the case of South Korea, Mexico, and the other TPP members, only time will tell.

The TPP, Trump’s wall, and Mexico

In the article “TPP May Hamper Mexico’s Apparel Industry” (http://news.apparelresources.com/trade-news/tpp-may-hamper-mexicos-apparel-industry/), the complex relationship between the TPP, the United States, and Mexico is examined. It is important to understand the current U.S.-Mexico relationship; last year the US exported “6.5 billion of apparel and textile to Mexico… $4 billion was fabric and $1.2 billion apparel parts”. There was also “$665M of textiles and yarn”, based on AAFA data. Likewise, Mexico sent “$4.5 billion to the U.S., about $3.5 billion of which was apparel and #1 billion textiles”. With such a successful relationship, what it happening? Upon inspection it appears that Mexico’s apparel “kryptonite” may be Vietnam. According to the article “eighty products is nothing compared to the 1,300 textiles categories that could be affected by this arrangement”. The second major hurdle for Mexico is Trump’s proposed US-Mexico wall. Mexico estimates that “$11 billion in trade flows could fall 20%, or $2.2 billion, in the wall’s first year”. What can Mexico do to elevate their apparel potential? Is it possible to form another deal with the US? What other potential avenues can they take to better their economic performance?

TTIP and TPP – A Threat to Latin America?

An article in EconoMonitor (March 21, 2016) titled “TTIP & TPP – A Threat to Latin America?” (http://www.economonitor.com/blog/2016/03/ttip-tpp-a-threat-to-latin-america/) analyzes the impact that the new regional mega-deals will have on different Latin American economies. For years, most Latin American countries have supported their economies on exporting commodities and natural resources. To face the risk that commodities’ prices are variable, these countries have implemented import-substitution industrialization policies, which mean high tariffs to protect domestic industry and discourage imports. With the TPP, it is expected that Peru takes the most advantage of this deal since the agreement could lead to a 2.4% increase in real income. On the other hand Chile and Mexico already have deep trade agreements with most of the TPP members, preventing them from expecting a relevant impact in their economies thanks to the latest commercial deal. Mercosur countries, which are not involved in the TPP agreement, such as Brazil and Venezuela are currently facing economic crisis that need them to reevaluate their access to international markets and enhance their integration in global value chains. Will the TPP members allow any Mercosur country to join the deal in the coming years? How can Chile and Mexico leverage their current position as members of the TPP deal?