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?

 

Mexico Reaping Rewards from the TPP

In the article “American Jobs Leaving for Mexico – Ford Motors Just Showed Us What the TPP Will Do to the US Economy” (http://www.dcclothesline.com/2016/02/11/american-jobs-leaving-for-mexico-ford-motors-just-showed-us-what-the-tpp-will-do-to-the-us-economy/) , a recent announcement from Ford Motors is discussed due to the TPP, as well as other future actions that TPP may cause. Per the article Ford Motor Company recently announced plans to manufacture 500,000 vehicles at a new facility in Mexico. This announcement comes at the heels of a similar announcement by General Motors, who announced a $5 billion investment to double its productions capacity in Mexico by the year 2018. Is this caused directly by the TPP? “While the TPP has been touted by politicians as an extraordinary benefit to the US, Mexico’s labor costs will instead help that country’s economy reap the rewards, already evidencing the enormous trade deal’s similarities to NAFTA(the North American Free Trade Agreement), which many have come to view as a disaster for the US”. According to the article, Ford’s announcement comes after negotiations by the United Auto Workers union for more expensive labor contracts. Incidentally, hourly rates in the US are already around five times greater than those in Mexico, and are expected to expand further in the future. Will this trend continue with other auto manufacturing companies? Will it extend to other manufacturing industries as well?

Trouble Behind the Scenes

In a recent article in the HuffPost, side talks between the U.S. and Japan during crucial TPP negotiations is discussed. Japanese officials reported that they were under the impression that the U.S. was representing both Canada and Mexico. Canadian and Mexican officials disputed this fact and were upset by the Japanese assumption. The negotiations were to allow more Japanese auto parts into the North American auto industry. How may Japanese relations with Canada and Mexico be affected in the future? How may U.S. relations with Canada and Mexico be affected? How may Japanese and U.S. relations be affected?

NAFTA on Steroids?

In an article (http://www.telesurtv.net/english/news/NAFTA-on-Steriods-National-Mexican-Union-Protests-TPP-20160130-0007.html) posted following a TPP negotiation team meeting in which Roberto Zapata, the head of the organization, stated that Mexico was ready to join the TPP, the Mexico National Workers Union have openly rejected the signing of the Trans-Pacific Partnership. “We say no because it was negotiated without consulting us, but also because it will bring serious consequences for Mexico, United States, Chile, Canada, and Peru.” Additionally, the protesters argued that only transnational corporations will benefit from the signing of the TPP. Additionally, two noble prize winners, Joseph Stiglitz and Paul Krugman, oppose the TPP because they argue “it has the potential to harm people’s quality of life and it is an agreement that has been negotiated in secret”. In reference to the 1994 free trade agreement that Mexico signed with the US and Canada that ended in “disaster for local agriculture”, this new TPP is a “NAFTA on steroids” and could “negatively impact food security and undermine Mexican farmers”. Are these arguments valid? What are the potential benefits for Mexican farmers that are not being recognized?

Will the TPP Destroy Jobs in Mexico?

In a translated job article title “TPP Will Destroy Jobs in all Partner Countries”( http://www.pressreader.com/mexico/el-economista-mexico/20160119/281724088557322/TextView), future projections made by Tufts University are analyzed. One of the first and most impactful projections is that Mexico will lose 78,000 jobs within the first 10 years of being in the TPP, while still achieving a .98% growth within the same time period. In continuation, the article suggests that every member of the TPP would experience job loss to some degree as a “result of the application of the standards and trade liberalization that establishes the agreement”. The article projects that Mexico would rank second in jobs lost, losing only to the United States. Do these projections seem plausible? Would these countries agreed to the TPP if such job loss was imminent? If correct, what measures can be taken to counteract these negative outcomes?

Potential Dangers to Mexico from the TPP

With Mexico being a member of the TPP and a Spanish version of the TPP now being available to the public, significant research has been done into what the implications will be. The article “The Dangers of the TPP to Mexican Legislation Regarding Intellectual Property” reviews some of these negative effects. The article starts off by noting that the TPP agreement will “promote negative changes on copyrights, access to culture or intermediary liability”. This forces local legislation to comply with TPP dispositions, which are projected to have a big impact on rights. Per the article, it will have especially detrimental implications with respect to the “matter of intellectual property” by “promoting a scheme based on restrictions and sanctions out of proportion”. Some of the topics that are specifically address in the TPP are frames to protect copyrights, technological protection measures, the Mexican Federal Penal Code, stronger sanctions against infractions to Copyright, and a ban on the use, production, modification, or selling of satellite signals. According to the article, it is “possible to detect that the TPP represents an imminent risk to public life” as it not only effects the ability to access culture on the internet, but “its administrative and penal sanctions may provoke an inhibitor effect that damages freedom of speech”. While the actual implications won’t be known until more time has passed, it is noteworthy to monitor these accusations and their potential harmful effects on Mexico.