Free Trade Generates Competitive BlocsWed, 05/08/2019 - 13:08
Q: What are the chamber’s priorities in Mexico?
A: ICC Mexico follows ICC’s international agenda, which is developed based on global needs. However, we have specific priorities in each country that are set up by local experts that analyze the country’s reality and generate a work plan with objectives for the year. For Mexico, we have established five key issues that need to be implemented to increase the country’s competitiveness: grow work productivity, promote economic digitalization, internationalize SMEs, increase R&D investment and keep up the fight against corruption while improving rule of law.
Q: How does ICC help Mexico foster international trade?
A: Our goal is to improve Mexico’s business environment, which is why we are constantly generating recommendations for different sectors. At first, we focused on generating rules for international trade, such as the International Commerce Terms (INCOTERMS) and the regulation for letters of credit, as well as many recommendations regarding best practices for different areas, such as the fight against corruption. In fact, in the 1970s, we were the first international organization to point out the need to have strong corporate governance. ICC also publishes compendiums of good practices related to corporate ethics, business integrity, the digital economy, marketing and publicity, economic competition and intellectual property, among others. We provide these guidelines and the needed training for free so companies can implement them.
Another ICC goal is to reconcile the public and private sectors. For instance, regarding economic digitalization, many governments have a problem understanding how everything should be managed and there is a great debate between governments, businesses and users on how to design regulations. We take an active mediation role to help governments set the correct regulation rather than over-regulate and possibly sabotage the market’s potential.
Q: The EU and China have pledged to reform the WTO. What should these reforms include to adapt to the reality of this century?
A: We are convinced about the need to modernize the WTO. ICC has a global agenda for international trade and we think the WTO continues to be fairly relevant in the modern trade ecosystem. We are against voices that call for its disappearance.
We recognize that we have not been that efficient and effective in communicating what the WTO really does to improve the lives of billions all over the world. Groups against free trade do not understand that the WTO is responsible for setting clear rules for every country, regardless of its size, which allows smaller countries to fairly compete with larger economies. However, the WTO’s internal mechanisms have been very slow and have failed to adapt to current economic conditions. The ICC needs better external communication and needs to be more agile and quicker in accordance with the times we are living. We have advanced in many areas, such as trade facilitation, but there are still many countries that have inefficient processes that prevent trade agility.
Despite the necessary changes, we also fully support the existence of panels for dispute settlement or antidumping panels at the WTO. The role of this organization is extremely important, especially now, given the geopolitical changes resulting from the 2008-2009 financial crisis and the subsequent social crisis. We believe these generated the social unrest that has led to a less open and more protectionist world.
Q: What opportunities do you see for Mexico to achieve real and effective trade diversification?
A: Mexico has an international calling; it is among the world’s most open economies. With free-trade agreements with 46 countries, Mexico can reach many markets. However, around 80 percent of our exports are destined to the US. Due to our location, it was logical for Mexico to send all its products to the US but this led us into a comfort zone. The treaties we had with the rest of the world suggest we are an open country that favors trade but the truth is that we never had strategies nor implemented clear actions to diversify our exports to other markets. Today, we have a significant opportunity with the TPP11 that will allow us to reach 500 million consumers in countries where we do not have active commerce. It represents an important opportunity for the agricultural, pharmaceutical and electronics sectors.
Regardless of what President Trump says, NAFTA is a perfect example of a positive commercial agreement. Moreover, it anticipated the moment we are living right now, in which countries are coming together in blocs to compete effectively, such as the European Union bloc. North America is already an integrated region; production chains in the region are so articulated that even without the treaty, it would have been impossible to disentangle the economic relationship between Mexico, Canada and the US. Asia is another bloc that is developing strongly, so we need to continue looking for ways to grow as a region.
Q: How does ICC Mexico collaborate with the Mexican government?
A: We provide recommendations based on the experience we have had in different countries. We have already delivered documents to President López Obrador’s administration outlining how international trade, investment and globalization can contribute to inclusive growth and how the UN’s sustainable development objectives go hand in hand with his agenda. We are convinced that we can achieve sustainable growth with the participation of the private sector and that an open economy will allow us to generate better opportunities for all Mexicans.
Q: What are ICC’s expectations in terms of free trade for the coming years?
A: We will see moderate growth while the commercial tension between China and the US lingers. Interest rates are increasing, which will restrict access to finance for developing countries that had been growing at a moderate rate and commodity-focused exporting countries will be impacted as a result.
Reforms must also continue to make Mexico a more efficient economy. We cannot allow another 20 years to go by to have a new series of reforms like those that were implemented in Enrique Peña Nieto’s administration. These do not need to be sweeping reforms. Simple regulatory changes will suffice but they must be constant so we can continue being efficient and not lose our place in the world economy.