Jockeying amid US-China trade tensions, Mexico eyes Asian investors

As the coronavirus pandemic continues and United States-China trade relations stall, Mexico has been busy luring Asian investors.

Mexico is the host nation for the upcoming annual meeting of countries in the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) trade pact. 

The meeting on Wednesday will include trade ministers and high-level officials from the 11 member countries of CPTPP: Mexico, Canada, Australia, Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam. 

The summit gives Mexican officials the opportunity to approach Asian countries — such as Japan — about investing in Mexico, said Graciela Márquez, Mexico’s economy minister. 

“Japan is a reliable partner; it is a partner that we have had for a long time in Mexico, and I believe that it can offer us great export and investment opportunities,” Márquez said during a press conference on Friday. “Japanese investors are long-term investors, as we call them: Once they invest in a country, they stay in that country for a long time then.”

The CPTPP is a free trade agreement that aims to reduce tariffs and trade barriers among its 11 member countries, a trade bloc connecting 500 million people and economies with a combined GDP of more than $10 trillion.

The CPTPP was formed in March 2018 after President Donald Trump pulled the U.S. out of the Trans-Pacific Partnership (TPP) in January 2017. 

Other topics expected to be discussed at the CPTPP meeting are Japan’s push to expand the trade pact to include Thailand, Taiwan, Indonesia and the Philippines.

In July, Márquez told Reuters that she has been speaking with Asian companies, particularly steelmakers, about investing and locating operations in Mexico. She pointed out that the new United States-Mexico-Canada-Agreement (USMCA) makes Mexico a favorable location for supply chains.

“We want to show these companies the opportunities that open up with this increase in regional content requirements,” Márquez said.

Márquez also said the Mexican government wants to speak with Apple and other U.S. firms about relocating their supply chains to Mexico.

Even before the USMCA was implemented on July 1, Mexico announced three Chinese companies, including Holley Technology, Kuka Home and Sunon, investing a combined $160 million in new three facilities in the Mexican state of Nuevo Leon, creating 1,850 jobs. 

Kuka Home and Sunon manufacture sofas and office furniture for export to the U.S. Holley Technology develops, manufactures, and distributes energy meters. Shacman Trucks, a Chinese medium- and heavy duty-truck maker, also recently announced it plans to build a new manufacturing plant in Mexico. 

It is “a smart move to throw that out there,” one trade analyst said of Márquez’s push to lure more foreign investors.

“With the continuing decrease and deterioration in the U.S.-Sino relations in general, especially on trade, coupled with 24 months of constant U.S. tariff action countermeasures from China, I’m not surprised once finally inking USMCA that someone like a Mexican official would come out and say, ‘Hey, you know what, we’re a pretty solid Plan B here for you,” said Ashley Craig, an attorney and co-chairman of Venable LLP’s international trade group in Washington.

Craig said some caveats for Asian countries offshoring in Mexico could be that there are still some parts of the USMCA that need clarification, but more industry supply chains moving to Mexico could be an attractive option.

“It’s not limited to any particular sector as well: those industries that have built up supply chain sourcing operations over the past, arguably 20 years that are predicated on a China platform. Theoretically, everything’s in play,” Craig said.

Click for more FreightWaves articles by Noi Mahoney.

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