Mexico and the Trans-Pacific Partnership

Author: Juan J. Palacios, University of Guadalajara

Claude Barfield noted that the most significant development at the G20 Summit in Los Cabos was the decision to invite Canada and Mexico to join the Trans-Pacific Partnership (TPP).

Although other initiatives with a global reach were also launched at that summit, this particular decision represents a substantive advance in the liberalisation of trade in the Pacific, and is a major step toward the materialisation of the TPP. By inviting Canada and Mexico, the TPP’s promoters are securing the participation of two of the four largest economies in the Americas, while also completing the incorporation of all three members of the North American Free Trade Agreement (NAFTA).

The move is particularly significant because the incorporation of Mexico and Canada will consolidate the trans-Pacific character of the TPP. After all, one of the most distinguishing features of this partnership vis-à-vis other major regional trade accords is that it is the first to include countries from both sides of the Great Ocean, with the additional circumstance that it includes countries from the Americas, Asia and Oceania. This is why Barfield views the TPP as ‘a potential vehicle for a trans-Pacific regional vision’. And although two other Latin American countries had already joined the initiative — Chile and Peru — Mexico’s involvement stands out because this country generates nearly half of Latin America’s manufacturing exports, of which about four-fifths correspond to high-technology goods.

The road to Los Cabos was long and winding. The Mexican government expressed its interest in joining the TPP simultaneously with Canada and Japan at the 2011 APEC summit meeting in Honolulu. From then on the Mexican government pushed hard to gain prompt acceptance; both President Felipe Calderón and his minister of the economy earnestly lobbied in US government circles over the following months to receive backing. But things did not proceed as fast as they wanted. In a meeting of NAFTA’s leaders in Washington in April 2012 Calderón urged US President Barack Obama to soon come to a decision about Mexico’s application. But Obama responded that his administration was still consulting with other members of the negotiating group about how Mexico, Canada and Japan could comply with the high standards required by this agreement.

Calderón’s sudden rush to join the TPP contrasts notably with the lack of interest, and even reluctance, he showed in previous years. Two things could have persuaded Calderón to change his views: the political benefits he could obtain by having Mexico accepted during his term, which was to end in one year’s time, and the economic gains a US$180 billion TPP market could potentially offer his country.

The fact is, though, the Calderón administration has not been interested in widening Mexico’s economic exchange with Asia in general. This has been particularly evident in its lack of political will to move ahead with the negotiations for an FTA with South Korea, which started in 2007 and have been stalled since 2008. Calderón has maintained this stance even though the deal with South Korea would yield substantial benefits for Mexico, and despite the fact that this country holds trade deficits with virtually all of its Asian trading partners.

In contrast, in 2011 his government signed FTAs with South American countries like Peru and Colombia and consolidated the ones signed by previous administrations with all Central American countries into one single Mexico–Central America FTA.

A general Latin American bias has therefore marked the Calderón administration. The bias reflects the traditional inclination displayed by Calderón’s predecessors for at least the last half a century toward the United States as regards Mexico’s foreign trade. This has resulted in a highly skewed trade structure, for over four-fifths of Mexican exports go to its northern neighbour. Consequently, the TPP seems to be a most promising opportunity for NAFTA’s Latin American partner to finally take an effective step toward the diversification of its trade relations.

The irony is that, like his three predecessors, Calderón has acknowledged East Asia’s economic potential and so has officially expressed a keen interest in expanding Mexico’s trade with this region. Indeed, all of the last four Mexican presidents have been fervent advocates of free trade and have pledged to contribute to its realisation in the Pacific Rim at large. Accordingly, Mexico has maintained an active participation in all trans-Pacific economic cooperation bodies, especially APEC. But, as noted, in practice Calderón has lacked an actual commitment to those objectives for most of his term in office, a posture that changed last year when he finally decided to request Mexico’s entry to the TPP.

Looking forward, what Mexico needs is a government that goes beyond the official discourse and implements a new foreign policy based on common sense and economic fundamentals, aimed not only at promoting and facilitating the expansion of Mexico’s trade with East Asia, but also at forging solid and lasting economic partnerships with its trading partners in that region.

Juan J. Palacios is Professor at the Department of Political Studies, University of Guadalajara, Mexico, and a member of PAFTAD’s International Steering Committee.