Boost for the U.S. and the Trans-Pacific Partnership

The G-20 meetings in Mexico over the weekend might actually have accomplished something.

Mexico was today invited to join the nine countries, including the U.S., currently negotiating the Trans-Pacific Partnership (TPP), an investment and trade agreement. If nurtured properly, this development has the potential to improve the global trading system.

First, caution is required. The terms of the TPP accord to this point have been closely guarded, most likely to spare the Obama Administration from attacks by protectionists. So what the TPP will actually accomplish is an open question.

What it could accomplish with Mexican participation, though, is heartening. Since the inception of the global trading system, the American market has been an irresistible lure to countries that pin their development hopes on exports. While the system is hardly perfect, it has enabled multi-sided liberalization in the form of countries making deals to ensure the best possible access to the U.S.

Mexico, of course, is part of the North American Free Trade Agreement (NAFTA). Nonetheless, a key reason Mexico wants to join is because TPP might improve on NAFTA in certain respects. Mexico is concerned that the evolving TPP framework could give countries such as Vietnam, a current party to the talks, a bit of an edge in winning U.S. business.

Now the fun part. If Mexico does sign a vibrant, effective TPP, which admittedly doesn’t exist yet, the world will sit up and take notice. There are a lot of countries that see Mexico as serious competition. Some of these countries can be seen as outright trade predators, others as obstacles to progress at the World Trade Organization (WTO).

A TPP with Mexico could very well prompt these countries to meet challenging requirements to join TPP or to be “flexible” in discussing more powerful liberalization under the WTO. It doesn’t stop there. One major economy responding to Mexico will get the attention of others.

Japan is an obvious domino: Tokyo does not seem capable of acting decisively, despite its obvious need for reform. A critical mass of countries in the TPP may be the best hope to spur Japan on. And if Japan were somehow able to join the TPP, it would in turn be a tremendous gain for the initiative.

First and foremost, TPP has to be a good agreement. If it does turn out to be one, Mexico joining just changed the game for the better.

Source material can be found at this site.

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