China, Korea, and the Comprehensive and Progressive Transpacific Partnership
In recent weeks, China and Korea have expressed their intention to join the Comprehensive and Progressive Treaty of Trans-Pacific Partnership (“CPTPP”).
On the one hand, the Korean government announced that it pledged to work this year to join CPTPP during a ministerial meeting on international economic policies for 2021. Joining CPTPP is reportedly placed among Korea’s top10 strategic international economic policies. Since 2018, the Korean government, like other States, has expressed its interest in participating in this Free Trade Agreement.
For more information Donga, Business Korea, and Insider Trade, and for more information on Korea and Mexico trade see Mexico and Korea Doing Business.
China and CPTPP
In the last couple of weeks, Henry Gao, a trade academic, has been quite active in his Twitter account. For instance, on January 13th, he noted that Yu Jianhua (former Chinese ambassador to the WTO) was appointed as the new international trade representative, a Ministerial position that had been vacant for over two years. According to Mr. Gao, China is going to negotiate «something big».
A couple of days later, the Chinese Ministry of Commerce (MOFCOM) released that it was considering joining CPTPP, plus there has been a significant reshuffling of government positions within MOFCOM.
VTZ considers that the intention of these States to become CPTPP parties is a natural reaction to the geopolitical situation and the pandemic. We note that expanding CPTPP membership to Korea and, particularly China, may face significant resistance from Mexico and its private sectors, such as the steel, chemical, and textile sectors.
Moreover, VTZ recalls article 32.10 of USMCA that establishes that a USMCA party may terminate USMCA if another party has entered into another FTA with a non-market economy. In that sense, Mexico (and Canada) may argue against China’s membership in CPTPP as it may jeopardize USMCA and their trade relations with the USA. Moreover, Australia is also facing certain Chinese trade-restrictive measures, which are being challenged at the WTO. The Australia-China trade frictions are, of course, additional hurdles against China.
In any case, we deem that the CPTPP membership will most likely focus on the UK. After UK’s accession, then CPTPP membership may eventually open a round of discussions with China and /or Korea.
COVID-19 and Economic Reactivation Plan in Mexico
Last week, the Ministry of Economy announced the «Economic Reactivation Plan» to face the economic impact caused by the COVID-19 pandemic in Mexico in a press conference. The so-called plan will focus on four pillars that encompass priority sectors for the Mexican economy as well as a variety of actions. VTZ highlights specific actions of each pillar:
Internal market, employment, and business:
1) developing the 4.0 industry, 2) increasing local value-added through tax benefits, 3) working hand in hand with industries that add value to the domestic and export markets, such as the steel industry, chemical, electrical, electromechanical, plastics, medical devices, automotive and aerospace, and 4) develop productive chains and national supplier platforms. Also, the Ministry will focus on supporting SMEs.
Investment promotion and facilitation:
1) attracting foreign investment with the support of embassies and consulates in coordination with the private sector and investment funds and, 2) regarding USMCA, establishing production plants of foreign companies that are seeking to relocate to promote the North America region.
1) promoting international trade, 2) negotiating trade agreements, 3) diversifying and increasing exports to new and existing markets, and 4) facilitating international trade through the recently created National Committee for Trade Facilitation.
Regionalization and sectors:
1) continue with the tax benefits for the southern border and taking advantage to attract investment, and 2) continue with the development of the priority infrastructure projects that can help to promote ancillary businesses with different business organizations.
We consider that this «so-called» plan is, in its face, a re-statement of the Ministry’s policies established at the beginning of the current administration. There are few (to none) measurable objectives, plus we find it interesting that the Ministry claims that it has as a policy to negotiate new agreements, without specifying the country or countries. Needless to say, we consider that the Ministry is possibly referring to the UK as well as the pending steps regarding the modernization of the Free Trade Agreement with the European Union, or will there be a surprise?
Changes in International Trade Procedures?
As noted in news outlets, the Minister of Economy, Tatiana Clouthier, acknowledged last Wednesday that some international trade procedures, such as permits, have been very slow due to bureaucracy within the Ministry as a result of the austerity measures. However, the Ministry of Economy indicated that they are committed to finding mechanisms to streamline international trade procedures.
It is important to note that Dora Rodríguez Romero has been appointed as the new Director-General on Trade Facilitation and International Trade.
Also, last Friday, January 22, 2020, the National Committee on Trade Facilitation was created per the Facilitation Trade Agreement of the WTO. Business Organizations, such as COMCE (for which VTZ is a member), may be invited to the meetings without the right to vote.
In this sense, we wonder whether soon there will be a 180º shift in trade facilitation measures in Mexico.
VTZ in PECC
Finally, VTZ managing partner, Adrian Vázquez, and VTZ’s Chinese Desk Director, Susana Muñoz, attended the relaunching of the Mexican Chapter of the Pacific Economic Cooperation Council (PECC), which was attended by high-level government officials.