International events such as "Brexit," the United States' potential withdrawal from the Trans Pacific Partnership Agreement (TPP) or the possibility of renegotiating the North American Free Trade Agreement (NAFTA) are all extremely relevant for Mexico's economy – which has the fourth-largest gross domestic product (GDP) in the Americas and the 15th-largest GDP in the world¹. The Mexican economy rests heavily on its exports, making 2017 a particularly challenging year for Mexico's international trade agenda during this last year of the current administration. In 2018, Mexico will hold federal elections to designate a new president and Congress.

The Mexican international trade agenda will be most likely occupied by existing negotiations – such as the modernization of the European Union (EU)-Mexico Global Agreement² – as well as with current trade issues such as China's steel overcapacity³ and the sugar export restrictions imposed on Mexican exports to the U.S.⁴, but there are certain likely events that deserve a close examination:

• likely formalization of the United Kingdom's exit from the EU – widely known as "Brexit" – a formal invocation of Article 50 of the Lisbon Treaty that may have an impact in the current free trade agreement (FTA) negotiations with the EU and also may require bilateral negotiations with the UK
• renegotiation of NAFTA or a possible U.S. withdrawal⁵
• formal U.S. withdrawal from the TPP⁶ and/or possible revival of the initiative in a different format – with or without the U.S.
• surge of trade protectionist measures, not only through the adoption of additional unilateral measures allowed under international trade agreements, either by Mexico or against Mexican exports, such as antidumping and countervailing duties, but also through more aggressive unilateral actions (customs duties increases, safeguards investigations, tax or export restrictions, etc.), all of which may result in additional dispute settlement proceedings under the World Trade Organization (WTO) or bilateral FTAs – such as NAFTA Chapter XIX­– and investment treaties
• increase activism by Mexico to diversify its export destinations and foreign direct investment sources, particularly with China, Korea and Japan, to expand and increase trade flows. (Mexico already has an FTA with Japan, has explored the possibility of an FTA with Korea and has not formally expressed yet any interest to negotiate with China⁷)
• increased pressure by China to obtain recognition from Mexico as a market economy, which could have a serious impact on new antidumping investigations and on the 27 existing antidumping duty orders against Chinese products (out of the current 52 products that are subject to antidumping orders in Mexico)⁸; China recently filed for consultations with the EU and the U.S. under the WTO to address this matter⁹

On its own, 2017 will be a busy, uncertain year for Mexico's trade agenda. The uncertainty over Mexico's relationship with the U.S. will add additional stress to the system. While the debate will continue to rage in the U.S. as to whether NAFTA was a good trade deal for the U.S., NAFTA brought benefits to Mexico that created a more stable neighbor for the U.S.  

Holland & Knight's offices in Mexico, the U.S. and abroad continue to monitor international trade and investment issues to inform clients of how potential regulatory and policy changes could affect their interests.
   

Notes

¹   See World Bank Open Data GDP 2015.

²   See EU report on the second round of negotiations. Other existing trade negotiations by Mexico are taking place with Jordan, Turkey, European Free Trade Association (EFTA) countries and WTO's General Agreement on Trade in Services.

³   See Joint action can cut steel overcapacity, China Daily.

⁴   See Mexico's Antidumping and Countervailing Suspension Agreements.

⁵   See Holland & Knight alert: What Might Be Next for U.S.-Mexico Bilateral Trade After the Election?

⁶   See Holland & Knight alert: Is the Trans-Pacific Partnership Still Possible Without the United States?

⁷   Other Latin American countries have already signed trade deals with China (Chile, Costa Rica and Peru) or are currently exploring such a possibility (Colombia), and three countries are already trading partners of Mexico under the "Pacific Alliance" treaty (Chile, Colombia and Peru).

⁸   See Mexico's investigation authority publication: Goods subject to countervailing duties.

⁹   See China launches WTO complaint against U.S., EU over dumping rules, Reuters.