While the U.S. and Canada are key trade partners to Mexico, other countries including Britain are becoming more important in Mexico’s global trade strategy.
With Mexico’s energy reform now in play, and NAFTA having closed on its 20th anniversary, the centrist government of President Enrique Peña Nieto is actively courting trade deals and investments that look well beyond the United States, with Asia and Europe a key part of the Latin American giant’s global strategy.
“The United States, Mexico and Canada are all part of the negotiations of the Trans-Pacific Partnership, a potential trade agreement among 12 Pacific Rim countries, including Japan,” says Chris Wilson, an associate at the Woodrow Wilson International Center for Scholars’ Mexico Institute in Washington, DC. “This is both an opportunity to update NAFTA, which was created before things like e-commerce even existed, and a chance to open markets in the fast growing Asia-Pacific region.”
The Trans-Pacific Partnership, or “TPP,” has been criticized for its secrecy and for the possibility that the trade agreement could trump domestic law, thus weakening governance in sensitive areas such as the environment and labor. There is also concern – and this is something that Mexico expressed during the most recent summit in Toluca with the U.S. and Canada – that the NAFTA countries are not developing policy and speaking with one voice.
“Trade policy is an obvious area where Mexico could harmonize more with the U.S. and Canada,” says Wilson. “Unfortunately, even though the countries of North America have many common interests in the negotiations, they have not been coordinating their negotiating positions.”
Britain Gets Serious about Mexico
This certainly isn’t discouraging other countries with an eye to trade opportunities in Mexico. Great Britain is a prime example. In February planeloads of British executives and politicians arrived in Mexico, including Nick Clegg, the Deputy Prime Minister.
The resulting charm offensive made it clear that Britain was serious about the economic opportunity provided by Mexico. Along with a cadre of journalists, Clegg brought representatives from 40 British companies, including oil giants BP and Shell. To add political heft, Lord Livingstone, Britain’s minister for trade, also came to Mexico City. Livingstone, a former CEO of British Telecom (BT), provided added legitimacy to the mission.
“Historically, we have underperformed,” said Livingstone in Mexico City, referring to the UK’s previous lackluster interest in Mexico though noting that in recent years “UK trade with Mexico has grown by about a third.”
Clearly, this recent push from Britain comes in large part as a result of Mexico’s newly-liberalized oil sector, which will allow foreign participation for the first time since 1938. Mexico’s national oil company, PEMEX, doesn’t have the expertise to extract oil from the Gulf of Mexico’s deepest waters, but the British (and the Norwegians, too), have significant deep water drilling expertise from their experience in the North Sea.
Slow and Steady Wins the Trade Race
Britain’s interest is perhaps best understood in the context of what is still a limited economic relationship. Exports to Mexico account for only 0.4 percent of the total from the United Kingdom, despite the fact that Mexico has already implemented its own bilateral trade pact with the European Union. With this in mind, the UK’s optimism, and the heavy political representation on the trade mission, can be seen as part of Mexico’s larger reform agenda. This has included a broadening of the tax base, breaking up the telecom monopoly, and reforming the educational system to make it more accountable.
“The reforms achieved by the Peña Nieto administration in its first year were nothing short of historic,” says Wilson from the Woodrow Wilson Center. “But the hard work of passing secondary legislation and successfully implementing the reforms still lies ahead and will prove difficult.”
Mexico’s push to liberalize its economy and increase global trade is part of a long-term strategy that is active on many fronts, and includes pre-existing partners. For example, the United States is pursuing a Transatlantic Trade and Investment Partnership (TTIP) with Europe, with Mexico taking a wait-and-see approach with the understanding that its membership in NAFTA could assist with future agreements.
“It seems unlikely that Mexico will join the TTIP negotiations, but I think it is basically inevitable that they will have to join after the U.S. and EU reach an agreement,” says Wilson. “It is impossible for the U.S. to harmonize regulations with Mexico, Canada and the EU without those bodies harmonizing regulation among each other at the same time.”
The Toluca summit ended with a trilateral declaration that included announcements covering energy, borders and transportation. Energy got a boost with the promise of a North American energy ministers’ meeting later this year. In addition, border issues were addressed with a plan to harmonize trusted traveler programs, and there was an (albeit vague) reference to a North American Transportation Plan to focus on regional freight movement.
That’s all well and good, but Mexico has challenges at home that affect its trade status.
“It seems to me that the Mexican government will still be quite busy at home in the years ahead,” says Wilson. “Public security continues to be an extremely pressing issue in some parts of Mexico. That said, internationally Mexico will seek to complete the Trans-Pacific Partnership and use the economic reforms of 2013 to attract foreign investment.”
For that to happen, infrastructure investment will be a big part of the story. Mexico just completed the impressive highway from the Pacific Coast to Durango, cutting travel times from seven hours to two and half, with additional resources being put to work to build out ports and rail systems for a well-integrated, value added supply chain. That all suggests significant trade growth in years to come – and room for plenty of players.
Timothy Wilson is a Canadian journalist based in Guadalajara, Mexico. He covers business and technology, as well as cultural and political news. Aside from Global Delivery Report, he freelances for the Canadian Broadcasting Corporation and the Globe & Mail, among other outlets. His blog, “La politica es la politica” covers breaking stories from Mexico and Central America. Follow Tim on Twitter @TimothyEWilson.