Mexico and the US: A Renewed Alliance

On Oct. 8, Mexico became an official member of the world’s most important global trade talks: negotiations on a Trans-Pacific Partnership. Those talks promise to set new standards for international trade, strengthen North American competitiveness and open paths for increased sales of North American goods, creating more jobs in the U.S., Mexico, Canada and elsewhere.

In addition to the U.S., TPP participants include Australia, New Zealand, Chile, Peru, Singapore, Vietnam, Malaysia and Brunei. With the addition of Mexico and Canada — and with others likely to join in the future — it’s past time to appreciate the stakes involved in this historic economic alliance and particularly Mexico’s importance to the talks.

For starters, the TPP seeks to create a free trade zone that not only eliminates tariff and non-tariff barriers to goods and services, as all traditional trade agreements do. It also strives to develop regional supply chains, speed the movement of goods, coordinate regulatory regimes across nations, stimulate innovation, help small and medium-sized companies export more, and ensure state-owned enterprises compete fairly with private companies.

In other words, the TPP seeks to drag trade agreements into the 21st century.

Mexico’s position as a burgeoning economy and a world trade leader makes it the perfect addition for the U.S. and the rest of the TPP participants. Mexico already has a $1 trillion economy, with a young and dynamic population of more than 110 million people, 80 percent of whom will be in the middle class by 2030, according to a study by the Brookings Institution. Mexico is the largest Latin American economy in the Pacific and, with its entry into the TPP, will be the fourth largest of its 11 negotiating partners.

Mexico, which has expanded and diversified its trade through free trade agreements with 44 countries, unilateral tariff reductions, substantial regulatory reforms and simplified permit procedures, is well-prepared for those negotiations. For example, we’ve also stepped up efforts to work with the United States on increased regional cooperation, including high-level regulatory coordination, as well as on stimulating innovation, building a modern and efficient border, and promoting exports of small and medium-sized enterprises.

Moreover, it should be remembered how intertwined the U.S. and Mexican economies have become. Mexico is, dollar for dollar, the most dynamic U.S. export market. As the second-largest U.S. export destination, Mexico consumed nearly $200 billion in U.S. goods last year (more than China and Japan combined). In addition, last year’s $34 billion increase in U.S. exports to Mexico outpaced the value increase to all the priority export markets for Washington’s National Export Initiative.

Even more notable is the fact that, after 18 years of the North American Free Trade Agreement, the substantial integration of the U.S. and Mexican economies has a multiplier effect when exporting to third nations. In a very real sense, the U.S. and Mexico now produce goods jointly for global consumption, a development reflected in the fact that 37 percent of the value of Mexico’s global exports comes from the U.S.

Finally, for every dollar Mexico gains from exports, 50 cents is spent on U.S. goods and put back in U.S. coffers. So Mexico’s inclusion in the TPP is of considerable value to Washington — not only because it promises to provide an immediate boost to U.S. exports but also because increased Mexican sales to TPP markets would translate into more U.S. exports as well, a virtuous cycle. In particular, because North America’s production chains are so highly integrated, many manufacturing sectors — automotive, aerospace, electronics, electrical equipment, chemical, steel and food processing — will likely benefit.

The inclusion of Mexico and Canada in TPP membership will result in a 21st century trade agreement that encompasses 30 percent of the world’s GDP, 22 percent of world imports and 19 percent of world exports.

Mexico and the U.S. have been successful partners and trade allies for almost two decades under the North American Free Trade Agreement. It’s time to move to the next step in strengthening our economic partnership and to conquer new markets together. All in all, the result of the TPP talks and Mexico’s inclusion in them promises to be more jobs on both sides of the border. This is atop the nearly 6 million U.S. jobs that U.S.-Mexico bilateral trade already supports, according to a 2010 U.S. Chamber of Commerce study.

That’s why the TPP and Mexico’s inclusion in it are worth keeping on your radar screen.

Francisco de Rosenzweig is Mexico’s undersecretary for foreign trade.

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