The signing of the Trans-Pacific Partnership (TPP) on October 5 was largely well received on the American continent.
US President Barack Obama welcomed the deal in a statement: “When more than 95% of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy. We should write those rules, opening new markets to American products while setting high standards for protecting workers and preserving our environment.”
Obama managed to secure the so-called “fast-track” legislation earlier this year, meaning that Congress will not be able to make any changes to the text of the agreement before either accepting it or rejecting it. However, concerns remain over the president’s ability to push TPP ratification by the opposition-led Congress before the end of his tenure as president.
“It’s probably going to pass because normally in this type of situation, countries do what’s best for them economically, and because the US has put that much effort and a lot of pressure on the legislative to go ahead and make this thing go through,” IHS’ John Raines tells GTR.
“That being said, the likelihood of rejection is increasing and will continue to increase as more information is released to the public. Specifically we’ve seen tobacco manufacturers, biotech companies and auto manufacturers opposing this. With all of this the agreement is going to lose the support of certain Republicans, on top of the ones that already opposed Obama’s trade agenda in its initial form. That being combined with overwhelming democratic opposition means that the likelihood of this thing going down is going to increase over time, especially as the presidential election cycle begins to heat up,” Raines adds
Mexican President Enrique Peña Nieto tweeted: “The Trans-Pacific Partnership will translate into greater opportunities for investment and well-paid jobs for Mexicans.”
Mexico opposed the agreement in July, when the US and Japan reportedly suggested a 32.5% local content requirement for auto parts, meaning Japan would be able to source parts in Asian countries that are not part of the TPP, assemble the cars within its own borders and sell them to the US under the TPP tariff agreement.
Though details are yet to be released, it would appear Mexico was able to use its broad experience with free-trade agreements to negotiate the lifting of the rule of origin quota to 45% in the final text – lower than the 60% it scored for NAFTA, but an deemed satisfactory.
Additionally, the removal of tariffs for Japanese cars sold into the US (currently 2.5%) will take place at a much slower pace than for other sectors – up to 30 years according to some reports.
The TPP was on everybody’s lips at the GTR Mexico Trade and Export Finance conference, where the quota increase was seen as a victory for the country, and a testament to its negotiating power.
Luis de la Calle, a consultant and former NAFTA negotiator, added that the lower percentage compared to the 1994 agreement would also mean Mexico could source more of its auto parts from non-TPP member, particularly in South America, where the country already has many free-trade agreements in place.
Chile and Peru, the other two Latin American countries included in the negotiations, also hailed the agreement, whose accumulation of origin clause will improve integration throughout the region and give them increased access to the US market, as well as Pacific countries.
Canadian Prime Minister Stephen Harper said the deal was “without any doubt whatsoever, in the best interest of the Canadian economy”. One of the most beneficial aspects of the TPP for Canada is the lowering of tariffs for beef exports to Japan, from the current 38% to 9% in 15 years. Canada’s initial concerns were also around the auto parts rule of origin ration, as well as increased competition in the dairy sector.