Japanese Prime Minister Shinzo Abe ad Mexican President Pena Nieto have agreed to work together to help secure a twelve-nation agreement on the Trans-Pacific Partnership (TPP), as La Prensa reported last month. The TPP is an ambitious proposed treaty that would solidify trade ties between nations across the Asia-Pacific region – from North America, South East Asia, Latin America and North East Asia. Apparently, the negotiation also included issues related to members of the Pacific Alliance like Colombia, Chile and Peru, an economic block that Mexico joined to promote common investments through cooperation mechanisms.
As was reported by Fox News, the accord has “hit a snag…due in large part to the Japanese government’s desire to maintain its barriers to farm imports”. Peña Nieto’s administration, [however], has expressed confidence that the ambitious trade agreement will be signed before year’s end.
But this complex treaty was not all that was on the agenda when Abe visited Pena in Mexico at the end of last month. No, the leaders of Japan and Mexico signed 14 cooperation agreements covering oil, education, health, agriculture, renewable energy and environmental protection.
Both leaders also agreed to revisit and strengthen the bilateral economic association agreement the two countries signed ten years ago.
The Japan-Mexico economic relationship
Japan is Mexico’s fourth-largest trading partner. Among Asian countries, Japan is Mexico’s second largest trading partner behind China. Nearly 1,000 Japanese companies operate In Japan – with 20% of them having only just recently arrived in Mexico. As Fox News reported: “Peña Nieto noted that bilateral trade has risen by 64 percent since then and totaled nearly $20 billion last year.”
Fox News reported President Nieto as having said of the future of Japan-Mexico trade ties: “’There will be more academic exchanges, greater access to the Japanese market for small and medium-sized enterprises, a greater push for renewable energy and the development of sustainable agricultural models.’” Reporting further that Prime Minister Abe referred to a “’shared commitment to spur collaboration and investment promotion in the oil and shale gas area.’”
While no mention of Japanese investment to auto industry was made, Mexico is becoming a strategic hub for these Japanese auto firms, which had a combined 32% market share in the US during 2013. From official reports of Q1-2014, 122 Japanese auto firms invested $4,3 Bn representing 12.7% of total auto investment in Mexico.
While the trade ties between Japan and Mexico are envisioned to be broad based, one of the most important reasons Prime Minister Abe visited Mexico was the 2013 energy market liberalization, which ended Petroleos Mexicano’s (the government’s oil company) monopoly. The liberalization allows private companies to develop crude reserves for the first time since 1938.
During the Abe visit, an agreement between Mexico’s state oil firm Pemex and Japan’s development bank, and another between Pemex and the Japan Oil, Gas and Metals National Corporation. These agreements will see Japan able to import energy from Mexico at a time when it is in much need of these resources.
The 2011 Tohoku earthquake in Tsunami has placed strain on Japan’s domestic nuclear energy resources as the tragedy hastened the closing of many of the countries power plants.
In particular, Japan has a particular interest in Mexico shale gas, but no specific plans have been made to import that gas yet, Yahoo news reported. Underpinning this interest is the ease with which that gas can be imported versus more challenging import routes. “The American gas Japan currently buys comes from the eastern United States, and must be shipped through the busy Panama Canal.”