Ken Smith heads the Trade and NAFTA Office at the Mexican Embassy in Washington, D.C., and last Wednesday he was one of four speakers at the GBD "China Mirrors" event, which looked at the trade and investment relationships between the NAFTA countries - Mexico, Canada, and the United States - and the People's Republic of China. 



Mr. Smith began his presentation with a comment on just how important trade is to Mexico.  Very.  Trade accounts for roughly 63 percent of Mexico's GDP.  Although most of that trade is with the United States and Canada, China is now Mexico's second largest trading partner.  That is "up from 6th place in the year 2000, which is an increase of 23 percent over the last 15 years," Mr. Smith said. 



Yes, Mr. Smith dealt with some of the well-known irritants in China's relationships globally, including China's tremendous overcapacity in steel.  That came near the end of his remarks.  We are putting it up front simply to get it out of the way, for as we listened to Mr. Smith, the things that really stood out were the elements of promise he saw in the Mexico-China relationship.  And, even though China was not a participant in the TPP or Trans-Pacific Partnership negotiations, Mr. Smith convincingly connected the dots between TPP and China, while stressing the importance of TPP to all three NAFTA countries.  More on that in a moment.



Steel. First, here is a bit of what he said about steel:



We assume much of that 72 percent is from China, which, although it has the second largest economy in the world, is not a member of the OECD.  The work Mr. Smith highlighted to address the steel glut included a strong statement from the recent North American Leaders' Summit and the effort in the OECD to develop guidelines for reducing global overcapacity. 



Trade and Investment. Looking at trade and investment between China and Mexico more broadly, Mr. Smith was upbeat even when he was addressing challenges.  2013 seems to have been a turning point.  As Mr. Smith put it:



Trade.  On trade in goods, Mr. Smith highlighted two areas in particular: automotive and agriculture.  "Last year," he said, "we exported $1.4 billion in vehicles and auto parts to China, which is an increase of 124 percent over the last five years, alone."



As for agriculture, while Mexico has faced regulatory challenges in China, but China is a growing market for a range of Mexican product, such as tequila, strawberries, dairy products, and frozen beef, with work being done on protocols for the export to China of Mexico's blueberries, bananas, and avocados.



Investment.  Here the bad news was followed quickly by the good.  The bad news: China's current investment is not that large, only about $420 million, which is only one tenth of one percent of the FDI in Mexico.  "There's not enough Chinese foreign direct investment entering Mexico," Mr. Smith said.  In response, Mexico has put together a group focused on making their country more attractive to Chinese investors, with a particular emphasis on energy, infrastructure, and manufacturing.



And things are changing.  Almost immediately after expressing his concern about the relatively small amount of FDI from China, Mr. Smith mentioned that Huawei, China's giant electronics company, will be investing $1.5 billion in new facilities in the Mexican State of Querétaro.  Also, he said, the Chinese television set maker Hisense will be investing in production in Mexico.

Moreover, those are not the only electronics companies from the Asia Pacific putting their eggs in Mexican baskets.  Departing only slightly from the focus on China, Mr. Smith noted that:



TPP.  Included in Mr. Smith's comments on the Mexico-China relationship was a strong argument for the Trans-Pacific Partnership Agreement.  "We're working actively on our front in Mexico to try to get it approved this year."



In talking about the importance of TPP, he took note of the 1.5 billion middle class consumers that that are expected to be added in the Asia Pacific region in the next 25 years, a clear reference to the market access provisions of the agreement and the opportunities they represent.  He also talked about TPP as "a positive blueprint for world trade rules."



Finally, TPP wasn't the only trade liberalizing project Mr. Smith discussed.  The Pacific Alliance was another.  Describing the Alliance, Mr. Smith said:

As usual, when the focus is on a presentation from a GBD event, you will want to listen to the full presentation.  The above are but a few highlights.



Almost anyone who comments on China and TPP notes that, at some point, China may wish to join.  Mr. Smith was no exception.  "China and other countries could eventually join," he said, "but the key here is that by establishing clear rules and high standards, any country that wants to enter has to play by those rules"



True enough, but there is a broader and more immediate point - more immediate, that is, if TPP is approved sooner rather than later.  This is that, whether or not China itself joins, China's investments in TPP countries are growing steadily.  So if there is a TPP, China will be part of it from the outset.

Audio from China Mirrors is a link to the MP3 recording from this GBD event on September 28.  This - or rather our transcript from it - was the source for today's featured quote.



From the Leaders' Summit is a fact sheet from the North American Leaders' Summit, held in Ottawa this past June and referenced by Mr. Smith.  This link includes a statement on dealing with overcapacity in both steel and aluminum. 

 

Huawei Investment is an article about this major Chinese company's planned investment in the Mexican state of Querétaro.