MEXICO AND THE PANORAMA OF THE T-MEC
Mar 26, 2020 11:36 AM
The Treaty between Mexico, the United States and Canada (T-MEC) seeks to continue with the successes of the original treaty, NAFTA, and among these achievements it is worth highlighting:

• Elimination of tariff barriers.
• Increase in exports.
• Greater attraction of foreign direct investment.
• Generation of regional value chains (NAFTA chains).

In all the previous items, NAFTA had important results. In the case of tariffs, these were reduced to zero, that is, the goods no longer have foreign trade taxes to pay.

Likewise, Mexican exports are mainly destined for the US market with a share of around 80%.

Regarding the attraction of foreign direct investment (FDI) by North American countries, the United States alone represents approximately 46% of FDI in Mexico.

However, the new T-MEC has even greater challenges since, in a context of globalization, the outlook looks complex in various areas: falling oil prices, volatility in financial markets, trade conflict between China and the United States, and pandemic derived from COVID-19.

The T-MEC mission looks titanic, but not impossible, because in the past and immediate present, the trade agreement has shown effectiveness with tangible results. For the T-MEC comes the novel objective of consolidating North America as the most competitive region in the world, and there are several elements to reinforce that vision of competition on a global scale.

 

North American macro factors Size of the market. First, the market made up of Mexico, the United States and Canada represents a population of almost 500 million potential consumers. In addition, the three economies are complementary and each country contributes different things to the region, from Canada's vast resources, through the purchasing power of the United States to the qualified human capital and labor force of Mexico. Global competitiveness.

Presenting the North American region as a common front to the world gives us many advantages in the geopolitical, economic and commercial aspects, since the North American block can be planted together against other regions such as Europe, the countries of the Asia Pacific or the same China. Opportunities for Mexico at the T-MEC. The effect of the "Black Swan" on the international economy can generate a rearrangement in supply chains, and although it is true that the situation is complicated for everyone, windows of opportunity can be opened for Mexico and, therefore, for three countries in North America. As Asia is the origin of the pandemic, there is the possibility that many companies with global product development will change their production lines, and there is the ideal opportunity to offer the manufacturing platform of Mexico and the entire regional block to attract new investments. Final thoughts.

It is important to point out that fortunately, our country already has a free trade agreement that offers advantages and benefits for all three countries, and I refer to NAFTA. In this sense, the new T-MEC is an excellent initiative to reaffirm and relaunch the region, especially in a context of uncertainty, but it is just as important to fully comply with the technical guidelines, such as the uniform rules or the own rules of origin. Without a doubt, we must maintain a strategic vision in the face of the enormous challenges that lie ahead, since Mexico and North America still have excellent conditions for world competition.