CPTPP opens trade opportunities for Mexico

A major new trade agreement involving Mexico is raising hopes for juicy new export opportunities in some sectors, although others are wringing their hands.  The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), previously called the Trans-Pacific Partnership or TPP and designated the TIPAT in Mexico, entered into effect December 30, 2018 for Mexico and five other of the 11 signatory countries.  The initial group of six was joined by Vietnam on January 14.  The remaining four continue to pursue parliamentary approval of the deal and are expected to join officially in the near to medium term.  The pact updates trade rules and most importantly will reduce import tariffs between four countries in the Americas and seven countries in Asia, including Australia and New Zealand.  Importantly, China and the United States are not participating in the CPTPP.

Multiple export industries in Mexico are eyeing newly attractive markets across the Pacific, with attention particularly focused on agricultural and livestock products.  With import duties set to reduce gradually toward elimination over the next 10 years, Mexican producers are hoping to achieve double-digit annual growth in meat exports to the lucrative Japanese market during this period.  Shipments of beef, chicken and pork are expected to increase significantly, and hopes are high for products such as avocados, orange juice, berries, tequila and beer as well.  Analysts suggest that the competitiveness of Mexican food and beverage products in the CPTPP markets will benefit from the absence of the United States in the pact.  Other Mexican industrial sectors hoping to make market gains under the agreement include automotive, aerospace, medical devices and cosmetics.

Meanwhile, as is customary in Mexico, the country’s textile, apparel and footwear industries are expressing trepidation about the effects of the new agreement.  Although the industries’ bogeyman, China, is not part of the deal, producers fear the Mexican market will be flooded with cheap imports from Vietnamese and Malaysian manufacturers benefitting from government support programs.  These concerns are exacerbated by the CPTPP’s “short supply list” stipulations, which allow producers under certain guidelines to import inputs from non-CPTPP countries without jeopardizing the final product’s eligibility for duty-free importation elsewhere in the agreement zone.  Mexican manufacturers, of course, could also look for ways to benefit from the short-supply-list rules.

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