After five years of intense negotiations, the Trans-Pacific Partnership agreement has finally been completed, intertwining economies from the American and Asian continents. The long-awaited agreement comes as part of the efforts by leading countries to devise legal frameworks that will result in further globalization. It was announced on the fifth of October by the Trade Ministers of each participating country. These include the US, Mexico, Canada, Australia, Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore, and Vietnam, countries which account for 40% of the global GDP and 25% of the value of global trade. Notably, China is not included. The deal ensures each country will receive considerable benefits from it, as it protects each of their most sensible industries. In part, this is what delayed the agreement by so long.
The TPP is expected to affect up to 40% of the global economy, and will remove up to 18,000 import-export tariffs in favor of standardized trade rules, leading to improved labor and environmental laws. Although the partnership has been reached, there are still a few steps to be taken left before it can enter into effect. Only once the US has completed the required consulting process will the other members be authorized to ratify the agreement. Before this can happen, the US has 30 days to present the agreement to Congress, and another 60 to submit it to the public, after which President Barack Obama will be required to sign it. This is not expected to take place until the first trimester of 2016, according to Ildefonso Guajardo, Mexico’s Minister of Economy. Each participating country will then have to evaluate the deal and agree to it, while considering the public’s opinion, expressed through a vote in 2016.
Christine Lagarde, Managing Director of the International Monetary Fund (IMF), has highlighted the positive implications of the deal, stating that it would generate significant profitability. The world’s largest commercial agreement in two decades will bring nothing less than increased foreign investment and opportunities for global trade for the countries involved. Furthermore, Guajardo has identified the Asia-Pacific region as the one which will see the highest economic growth rates in the world in the near future, meaning Mexico, and all States involved, will reap many benefits. Focusing on our continent, Guajardo ensures that the TPP will further strengthen the integration of North America’s production chain, fostering the creation of the world’s most competitive commercial region.
What this means for Mexico
Mexico, thanks to its strategic geographical position, is well positioned to have a distinct advantage for engaging with markets around the globe. Be it with TPP members, or not. In terms of partners, the deal brings six new ones for Mexico, as the country already had agreements with Canada, Chile, Japan, Peru, and the US. Alfonso Navarrete Prida, Minister of Labor and Social Welfare, expects the country to “receive direct productive investment” as a result of this advantageous situation. Foreign investment in Mexico should be followed by an upsurge in labour, playing a key part in Mexico’s economic fortuity. Navarrete Prida summarizes the implications for Mexico as follows: “The treaty will enable [Mexico] to have further economic growth, a solid workforce, and the expansion of industries where Mexico excels.”
In terms of the Mexican oil and gas industry, the Ministry of Economy is considering the possibility of submitting the energy sector to TPP regulations. Until now, it has never been included in any alliance or partnership the country has signed, including NAFTA, given it was closed to private investment until last year. A review by BBVA Bancomer dated back to 2014 suggested that including the Mexican Energy Reform into the TPP would deepen the integration of North America, and as such, should be sought after. In turn, the consultation firm Iqom, sees the integration of the Mexican Energy Reform into the TPP as a reasonable next step, given the Government’s openness to both national and international investment.