The conditional invitations for Mexico and Canada that were first extended during the G-20 Summit in Los Cabos, Mexico, this past June, have now become permanent. Both North American governments announced yesterday that they had joined the now-11-strong Trans-Pacific Partnership (TPP), a cross-oceanic trade zone, in a move that was widely expected.
Public hearings for Canada and Mexico conducted by other TPP members were necessary prior to full invitation, according to TPP guidelines. Specifically, the U.S. Congress just completed a 90-day consultation that allowed the accession process to move forward.
Canada and Mexico now join the United States, Chile, Peru, New Zealand, Australia, Singapore, Malaysia, Brunei, and Vietnam in a trade alliance that encompasses 658 million people and a combined GDP of $20.5 trillion—or 26 percent of global GDP.
Mexico and Canada will join their nine allies in Auckland, New Zealand, for the next round of TPP talks from December 3-12.
On October 8, Mexico is set to become a full partner in the Trans-Pacific Partnership (TPP) negotiations. As Mexican Ambassador to the United States Arturo Sarukhan is fond of saying, with TPP Mexico and the U.S. are playing chess, not checkers. Indeed, Mexico’s participation in the high-standards pact represents a unique opportunity to consolidate our strategic bilateral partnership and deepen our economic integration in the context of like-minded countries along the Pacific Rim.
Yet even as we celebrate cooperation at the level of geopolitics and multilateral negotiations, we cannot ignore the more prosaic frictions that inevitably arise in such a broad and dynamic relationship. Recently, these have included spats over chickens and washing machines, while the latest issue revolves around tomatoes.
Tomato disputes have a long history. With the advantages of ideal soil and climate conditions and low labor costs, Mexico became a major player in the U.S. market following the embargo placed on Cuba in 1962. After decades of tomato trade wars, the signing of the North American Free Trade Agreement (NAFTA) in 1992 eliminated tariffs on Mexican tomatoes over a ten-year transition period, despite the opposition of Florida agricultural producers. In 1996, at the behest of Florida’s tomato industry, the U.S. Commerce Department initiated an anti-dumping investigation to determine whether tomato imports from Mexico were being sold at less than fair market value. To suspend the investigation, Mexican producers agreed to a minimum price for imports. This so-called “suspension agreement” has been honored for 16 years, with two renewals as well as adjustments of the reference price.
Fast forward to the electoral year of 2012, and Florida tomato growers have requested that the Commerce Department end the suspension agreement so they can initiate a new anti-dumping investigation against Mexican tomatoes. They argue that the agreement is outdated and fails to protect them against the Mexican competition; their critics accuse them of a transparent attempt to use a swing state’s political clout on behalf of protectionist interests.
Today in Los Cabos, Mexico, at the G-20 summit, U.S. Trade Representative Ron Kirk welcomed Mexico into the Trans-Pacific Partnership (TPP), an agreement currently under negotiation by nine Pacific nations. Mexico is an obvious and logical country for participation, particularly given the NAFTA relationship with the United States and Canada, and expressed interest in joining last November at the Asia-Pacific Economic Cooperation (APEC) meeting in Hawaii. Canada also expressed interest in the TPP at the same time, and will presumably be welcomed in the short term once last minute kinks in the pre-negotiation process are worked out.
Until today, Mexico and Canada were the two remaining APEC nations in the Western Hemisphere outside the TPP negotiations. Having them on board will strengthen the negotiations by bringing significant added economic heft, support increased hemispheric economic integration, and begin to build out a more strategic approach to hemispheric trade relations. In addition, there is no particular reason to believe at this point that the negotiations will be slowed appreciably by Mexico’s participation.
Making the announcement on Mexico today was an important step, given President Felipe Calderón’s hosting of the G-20 as well as the imminent elections in Mexico on July 1. At the same time, it is a signal to other prospective TPP participants that the process is open and welcoming to those nations willing and able to sign on to the high-standards, commercially-meaningful approach that has been set out by the original parties to the discussions. That is a critical incentive to encourage potential TPP nations to make the reforms that will position them to participate in the agreement.
Of course, this is only relevant for nations that would be allowed into the agreement in the first place even if they take such steps. At this point, only current APEC member nations are eligible to join the TPP negotiations. This unnecessarily binds U.S. policy in the Western Hemisphere, because it means that countries like Colombia, which otherwise would appear to be excellent candidates, have little additional incentive to prepare themselves politically or economically to participate in the TPP. That in turn causes nations to seek other partners in order to achieve the same goals. Indeed, we are seeing exactly that phenomenon across Latin America.
Assembled in the White House Rose Garden for a joint press conference on Monday, the “three amigos” of North America projected an image of trilateral comity in keeping with the depth of their countries’ relationships. Yet Mexican President Felipe Calderón and Canadian Prime Minister Stephen Harper departed the one-day North American Leaders’ Summit without a firm commitment from U.S. President Barack Obama on their request to join the Trans-Pacific Partnership (TPP). Buried in the penultimate line of the lengthy joint statement was a coy response: “The United States welcomes Canada’s and Mexico’s interest in joining the TPP as ambitious partners.”
As President Obama acknowledged in the Rose Garden, TPP’s high-standards approach “could be a real model for the world.” Indeed, the goal of the original four TPP members—Brunei, Chile, New Zealand, and Singapore—was to create a uniquely comprehensive agreement to which like-minded countries on both sides of the Pacific could accede, thus linking Asia and the Americas. Similarly, the U.S. decision to join TPP made more sense for the bloc’s potential to grow than for the market-access gains to be found in the members’ relatively small economies. For Washington, TPP carries significant strategic weight as long as it continues to expand.
To its credit, the Obama administration recognizes the geopolitical benefits of TPP in the context of increased U.S. engagement with the Asia-Pacific. Its reluctance to advocate for expanded participation from the Western Hemisphere, however, risks a gross strategic oversight. As Harper candidly remarked to an audience at the Woodrow Wilson Center on Monday, while “most of the members of the Trans-Pacific Partnership would like to see Canada join, I think there’s some debate, particularly within the (Obama) administration, about the merits of that."
Assuming the U.S. government will be operational past the March 18 funding deadline, President Obama will make his first trip to Central and South America from March 19-23. Obama had previously visited Mexico before heading to the Caribbean in April 2009, where he represented the United States at the Summit of the Americas held in Port-of-Spain, Trinidad and Tobago.
President Obama will begin his Latin America tour in Brazil, where he will visit Brasília on March 19 and hold bilateral talks with his counterpart, President Dilma Rousseff, who was inaugurated on January 1. The central discussion points are expected to be infrastructure financing and energy cooperation, with energy an especially critical area for sustaining Brazil’s economic boom and future development. Obama will continue to Rio de Janeiro the following day, where he is expected to hold a CEO roundtable and visit select sites with his family.
Obama will arrive in Santiago, Chile on the afternoon of March 21 and be greeted by Chilean President Sebastián Piñera. The two leaders will have a working meeting and sign a joint declaration, followed later that evening by a state dinner at the Palacio de la Moneda. Piñera and Obama will discuss innovation and the Trans-Pacific Partnership (TPP) negotiations, the latest round of which concluded last month in Chile. President Piñera has expressed a desire to have the negotiating countries (Australia, Malaysia, Peru, United States, and Vietnam) join the existing TPP signatories (Brunei, Chile, New Zealand, and Singapore) before the next Asia-Pacific Economic Cooperation (APEC) summit in Honolulu, Hawaii, in November 2011.
On the morning of March 22, President Obama will deliver a speech to all Latin Americans from Santiago. The specific location is still being finalized; the Natural History Museum is a likely venue with the National History Museum and the UN Economic Commission for Latin America and the Caribbean (ECLAC) headquarters as alternative choices.
After his speech, Obama will fly to El Salvador for his final stop. He will be the fourth U.S. president to visit the Central American country while holding office, after Lyndon Johnson, Bill Clinton and George W. Bush. Obama will meet with his El Salvadoran counterpart, Mauricio Funes, and discuss a range of bilateral issues including U.S. immigration policy and the recently-announced $200 million pledge from the State Department to renew Central America Regional Security Initiative (CARSI) funding. The two heads of state will also discuss the success of CAFTA-DR. El Salvador was the first Central American signatory. The United States and El Salvador celebrated five years of free trade relations on March 1, 2011.
Follow AQ Online for daily developments leading up to President Obama’s Latin America trip.
Some good news for Colombia on the trade front: Canada’s House of Commons passed the pending free trade agreement with Colombia on June 14, by a better than 2-1 margin. The Senate will now vote on the accord for final approval. Nonetheless, this is an important step for both countries, and a signal of support—both from Prime Minister Harper’s governing Conservatives and the opposition Liberals—for the priority effort to build Canada’s ties with the hemisphere.
Two-way trade between the countries is already over $1.25 billion each year; expect that to expand, especially in agricultural products, now that Canada has a privileged position in Colombia’s economy vis-à-vis other trade partners, including the United States. Expect the United States to continue to lose market share in Colombia, a market we have traditionally dominated, even as the White House calls for a doubling of U.S. exports over a five-year period.
Many observers have complained that there is no trade agenda in the hemisphere. In fact, that’s incorrect. There is a huge trade agenda in the hemisphere. It’s just that, for the first time in history, the United States is sitting on the sidelines. Not only are we not leading the effort, we’re not even playing. It’s difficult to win at anything, in fact, if you’re not in the game, which is where we are right now with U.S. trade policy in the Americas.