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Trans-Pacific Partnership AgreementImplications for Mexico and the region

Fernando PosadasIntern Trainee, CPPR

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2 Objectives of the presentation

I. What is the TPP? II. What is new in the TPP?III. Mexico and the TPP: challenges

and opportunities

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3 1. What is the TPP?

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4 The evolution of the TPP

2005 P42010 TP

P2012-13

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5

The TPP seeks:

Create a platform for a potential economic integration of the Asia-Pacific region (FTAAP).

Design an inclusive agreement to foster

economic growth and employment.

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6

Asia Pacific a priority for the US

President Obama in its speech in November 2009 in Tokyo

As an Asia-Pacific nation, the United States expects to be involved in the discussions that shape the future of this region and to participate fully in appropriate organizations as they are established and evolve.

The risk of being excluded explains the decision of its participation in the regional integration.

The TPP is a political strategy to increase the presence of US in the Asia Pacific.

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7United States lost influence in the region

• End of Cold War • China’s new

influence• Emergence of an

exclusive regional integration in Asia

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8 New TPP Members – What about China?• Chinese perspective: US effort at containing China’s influence• US perspective: Creating a rule-based framework in Asia• Economic modeling suggests China will be hurt by TPP, but not

by very much• Consensus that China is not ready for TPP-style commitments

at this time; but other, more narrowly focused FTAs under discussion by China

• China’s strategy on FTAs complicated by numerous territorial disputes with Asian neighbors, other areas of geopolitical distrust

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9 2. What is new in the TPP?

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10 FTA with high standards

1. The P4 opted to follow high standard without exclusion of any sector (agriculture included).

2. It is still open to new members

3. The TPP gathers countries willing to assume important commitments for liberalization.

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11 What does high standards mean?• Interest in new topics in the US’ FTA.:

• Labor rights, • Environmental norms, • Intellectual property protection • investment

• New “horizontal topics": • Regulatory coherence, • SMEs, • Competitiveness, • Development, • Regional integration, • Supply chains, • State enterprises

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Negotiating groups 1 Market Access - Industrial2 Market Access - Agriculture3 Market Access - Textile4 Rules of Origin 5 Trade Facilitation6 Sanitary and phytosanitary measures7 Technical barriers to trade8 Trade defense 9 Government procurement

10 Intellectual property 11 Competition policy12 Trade in services13 Financial services14 Telecommunications15 Electronic commerce16 Mobility of persons17 Investment 18 Environment19 Labor20 Institutional matters and dispute settlement21 Cooperation 222324

Horizontal topicsState enterprises SMEs

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13 3. Mexico and the TPPChallenges and opportunities

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14 Mexico in TPP

Initially Mexico refused to be part. Why?1. PAN governments adopted private sector

protectionist agenda.2. Difficulties to approve new dispositions with

Japan, Colombia and the FTA with Peru 3. Mixed signals on trade. What changed? US and Canada participation.

Only requested to become part in the APEC Honolulu Summit in November 2011 .

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15New opportunity in TPP’s expansion

• Mexico is member of the negotiations since October 2012.

• Mexico cannot renegotiate the agreements reached in previous rounds.

• Mexico will have to resolve problems which have prevented to negotiate other agreements: agriculture (Australia and New Zealand); textiles, clothes and shoes (Malaysia and Vietnam); disciplines in state sectors; intellectual property, and regulatory convergence.

NAFTA82%

LAM7%

Europe5%

Asia4% Other

2%

Mexican Exports by region (%, 2011)

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16Mexico: tariff peaks, 2012

HS Product CategoryTariff (ad

valorem %)0207 Meat an edible offal, of the poultry, chilled or frozen

Agricultural

234

0209Pig fat, free of lean meat, and poultry fat, not rendered… 254

0406 Cheese and curd 1250701 Potatoes, fresh or chilled 2450901  Coffee, whether or not roasted or decaffeinated… 721003 Barley 115.21107 Malt, whether or not roasted 1581516 Animal or vegetable fats and oils 2541702

  

Other sugars 

210Glucose and glucose syrup…Other Fructose and fructose syrup…

1001 Wheat 67

2402Cigars, cheroots, cigarillos and cigarettes of tobaco… 67

2403 other manufactured tobacco… 67

61-63Several made-up textile articles, clothing accesories and articles of apparel

Textiles and clothes 20-30

8701-03 Motor vehicles (tariff lines for used vehicles) Used vehicles 35

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17Together the TPP countries imported more than US $5 trillion in 2013

Source: Own elaboration with information from ITC Trade Map

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

1000

2000

3000

4000

5000

6000

Imports of the TPP countries (US billions)

US Japan Canada Mexico Australia New Zealand Viet Nam Brunei PeruChile Malaysia Singapore

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18Mexico’s preferential access to TPP members

Source: own elaboration with information from ITC, Trade Map and WTO

Country Imports(2013 US B)

Share in TPP

Preferential Access Market size

NFN applied

Tariff 2012EE.UU. 2328.32863 45.47% Yes

US $3.741 trillion

(75.24%)

-Japan 833.166061 16.27% Yes  

Canada 461.799509 9.02% Yes -Chile 79.616353 1.55% Yes -Peru 37.977041 0.74% Yes -

Australia 232.481271 4.54% No

US$999 Billion

(24.76%)

2.7Singapore 373.212237 7.29% No 0.2Malaysia 206.250855 4.03% No 6.5

New Zealand 39.221545 0.77% No 2.05Viet Nam 143.908622 2.81% No 9.48

Brunei D. 3.666165 0.07% No 2.5 (2011)Mexico 381.210169 7.44% - -  

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19TPP will help diversify Mexico’s exports markets

Country HS Main products exported by Mexico Value US th.% of total export

flow with the country

Vietnam

85177011Parts of thelephone sets 7,890 12.303037999Other fish, frozen, excluding fish fillets 4,473 7.0

39202099Other plates, sheets, film, foil and strips of polymers of propylene 4,464 7.0

Malaysia

85171201Telephones for cellular networks 18,242 14.726011201Agglomerated iron ores 11,822 9.5

87032301Motors cars of a cylinder cap. between 1500-3000 cc 10,476 8.4

Singapore

85171201Telephones for cellular networks 146,900 24.885423199Processors and controllers 91,950 15.5

84717001Storage units for automatic data processing machines

38,571 6.5

Australia

26070001Lead ores and concentrates 214,752 24.022030001Beer made from malt 100,491 11.2

84099199Parts suitable for use with spark-ignition combustion piston engines

55,048 6.2

New Zealand

26080001Zinc ores and concentrates 21,201 23.122030001Beer made from malt 13,213 14.4

87032101Other vehicles, with spark-ignition combustion piston engine

12,138 13.2

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20… and diversify import sourcesCountry HS Main products imported by Mexico Value US

th.% of total import

flow with the country

Tariff %

Vietnam03042999 Other fish fillets 101,842 10.5 -64041199 Sport footwear with outer soles 52,077 5.4 3064029902 Other footwear with outer soles 48,379 5.0 30

Malaysia

85423199 Processors and controllers 1,626,630 29.0 Ex.

84717001 Storage units for automatic data processing machines 381,110 6.8 Ex.

85423999 Other Electronic integrated circuits 360,919 6.4 16

Singapore84717001 Storage units for automatic data processing

machines 199,081 16.8 Ex.

85423999 Other Electronic integrated circuits 123,027 10.4 1685423199 Processors and controllers 87,752 7.4 Ex.

Australia27011201 Briquettes, ovoids and similar solid fuels

from coal 539,060 54.8 Ex.

76012099 Aluminum alloys 71,457 7.3 1626070001 Lead ores and concentrates 53,279 5.4 Ex.

New Zealand

04059001 Other butter and other fats and oils derived from milk

119,682 27.5 Ex.

04022101 Milw and cream not containing added sugar

111,404 25.6 63

04021001 Milk in powder, granules or other solid form

39,137 9.0 63

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21 TPP Opportunities for Mexico• New export opportunities for Mexican products such

as automobiles and auto parts, steel, electronics, cosmetics in one of the most dynamic economic zones

• Investment. TPP membership will allow Mexico to remain an attractive location for FDI (Mexico is 6th FDI recipient among emerging markets)

• Domestic reforms. opportunity to push for reforms that will allow Mexico to grow at higher rates (energy, telecomm, transportation, banking, fiscal)

• Institutional strengthening. Strengthen and improve its trade policy framework.

• Build trading blocs with NAFTA, Asia, LAM

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22 Challenges for Mexico• Mexico will face again some problematic issues

with Asian countries that impede some bilateral treaties with Singapore and Australia

Key Issues• Agricultura: Australia, Nueva Zelanda• Textiles, prendas de vestir y calzado Malasia,

Vietnam• Relation with CHINA

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23 4. Conclusions

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Conclusiones Del P4 al TPP

• Importance of the agreements is in its potential: South Korea, Panama, Thailand, Indonesia

• Way to finish the paralysis in the WTO

• The most ambitious effort, together with the Trans-Atlantic Agreement that is happening at the moment