The TPP from Mexico’s Point of View

 

Trans Pacific Partnership (TPP):

  • The TPP is a multilateral agreement that establishes a free trade zone among 12 nations: USA, Canada, Mexico, Peru, Chile, Australia, New Zealand, Japan, Malaysia, Singapore, Vietnam and Brunei.
  • The negotiation concluded on October 5, 2015 and was signed early 2016. The TPP is subject to ratification in 2 years—by 85% GDP of the signing members.
  • Other countries that have announced interest in joining include: Colombia, Philippines, Thailand, Taiwan, South Korea and Indonesia. China has not announced interest, as economic analysis shows intangible benefits of doing so.
  • The TPP members entails a combined population of 800 million people or 11% of world´s population, 36% of global GDP, 25% of global commerce and 28% of Foreign Direct Investment (FDI) attraction.
  • According to a World Bank analysis in the January 2016 Global Economic Prospects report, the TPP could raise member country GDP by an average of 1.1% by 2030, and increase trade by 11% over the same period.
  • A recent study by the Peterson Institute projects that the TPP would lead to an increase of US$357 bn in annual imports when its effects are fully felt in 2030. This increase in imports would be equal to 1.4% of projected GDP in that year.
  • As a founding member, Mexico has veto rights over future potential members.
  • Currently, 67% (US$574 bn) of Mexico’s commerce and 53% (US$228 bn) of Mexico’s FDI is within NAFTA. Commerce with countries included in the TPP other than those in NAFTA (USA and Canada) add an additional 5% (US$40 bn) in commerce and 2% (US$14 bn) in FDI for Mexico.
  • According to current figures, 72% of Mexico’s commerce (US$574 bn) and 55% (US$225 bn) of FDI is within the TPP. Most of it linked to the USA.
  • The TPP is based on the “rule of origin”, under which the importer is responsible for certifying that the good is originated within the region to be granted TPP’s tax benefits.

 

 

The full version of this note can be found on Seeking Alpha. Follow us (LATAM PM) for live research updates.