The T-MEC is a free trade agreement signed between countries with protectionist temptations. That is why it is valid to ask ourselves: will protectionism or free trade win?
Free trade between the three countries is worth 1 trillion 263,000 million dollars annually and generates millions of jobs, in addition to offering competitiveness against other regions, such as the European Union and Asia. It also produces conflicts that are difficult to resolve, largely because they have to do with an uncomfortable question for the three friends: What part of the pie should remain in each country?
Speaking of disagreements, this week is rich in evidence: on Monday, Mexico presented a formal request to form a panel to resolve the controversy related to the interpretation that the United States is making of regional content; On Wednesday, the United States announces that it will not allow Mexican vessels to fish in its territory, alleging that the Mexican government has not done its job to prevent illegal fishing. On Thursday, in the context of a meeting between senior trade officials, the United States complained to Mexico for the measures it is taking in the energy sector: electrical counter-reform, hydrocarbon law and rule changes in import and export permits for derivatives. of oil.
How will these differences be resolved plus those that accumulate… will they be resolved? Formally, the T-MEC has dispute resolution mechanisms. These include dialogue between governments, the corresponding courts in each country and the installation of arbitration panels accepted by the three countries. It is worth noting that the panel’s first ruling in 2022 was against the Canadian government’s measures to protect its dairy sector. Free trade 1 – protectionism 0.
These mechanisms are necessary, but not sufficient, due to the complexity of the issues and the context of the disputes: we are living in times where protectionism is back, in the three countries, and we are also going through a period of metamorphosis that we could well define as change of that season. Last but not least, there are the de facto powers and the irruption of issues from other areas on the economic agenda. In the illegal fishing that bothers the United States, we can sense the presence of organized crime. In 2019, we saw how Donald Trump threatened to impose tariffs on Mexico if it did not meet its migrant reduction goals.
Milk, cheese, pumpkins, tomatoes, motor transport, fishing, trade union democracy… The list of issues in dispute is long and will continue to grow, among other things because we have a trinational trade that is worth more than 3,400 million dollars a day and grew 32% in the last decade. There are many issues, but between Mexico and the United States, two issues stand out, far above the others: the automotive industry and the energy sector.
The United States wants to take advantage of the technological reconfiguration of the automotive industry to relocate a greater part of this industry to its territory and/or under its control, which is the most emblematic case of successful integration in the North American region. His ambition to green Detroit’s glory with the new era of electric cars means reducing the share of the EV pie that will be left to Mexico and Canada. It is a desire that is openly protectionist. If the US vision comes to fruition, Mexico will lose many jobs. It will give a lot of work to the Ministry of Economy and, perhaps, to firefighter Ebrard.
If the United States twists the interpretation of the T-MEC to reinforce its plans in the automotive industry, Mexico does the same in the case of the energy sector. The plans to strengthen Pemex and CFE go against a chapter of the treaty in which the signatory countries accept that they cannot favor government companies. Energy nationalism implies discriminatory treatment of foreign companies and the possibility of expropriating infrastructure as provided for in the Hydrocarbons Law is on the verge of violating what is related to investment protection.
The T-MEC is a free trade agreement that was born and lives in protectionist times. Will free trade or protectionism win? What would a tie look like?
lmgonzalez@eleconomista.com.mx
General Editorial Director of El Economista
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Degree in Economics from the University of Guadalajara. He studied the Master of Journalism in El País, at the Autonomous University of Madrid in 1994, and a specialization in economic journalism at Columbia University in New York. He has been a reporter, business editor and editorial director of the Guadalajara newspaper PÚBLICO, and has worked for the newspapers Siglo 21 and Milenio.
He has specialized in economic journalism and investigative journalism, and has carried out professional stays at Cinco Días in Madrid and San Antonio Express News, in San Antonio, Texas.
