Mexico ponders TPP benefits of investing in Vietnam textiles

On August 23, at a business forum in Hanoi, a representative from a national organization representing the clothing and textiles industry in Mexico unveiled that a large number of Mexican companies are evaluating the prospect of entering the Vietnam market.

Mexico’s geographic location between North and South America, makes it a strategically important export market, said the representative.

Mexico, he said, is the seventh largest export market in the world and the most important export market in Latin America. The International Monetary Fund lists the economy of Mexico as the 15th largest in the world.

The Trans Pacific Partnership (TPP) involving a free trade agreement among the 12 countries of the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru, would create many lucrative opportunities for Mexican companies in the textile industry in Vietnam.

It wouldn’t create opportunities necessarily for Mexico in terms of reduced tariffs as the Central American country already has free trade agreements with countries such as the US and other major economies of the 12 TPP members.

However, it would create opportunities for Mexican companies in terms of the supply chain due to the TPP’s ‘yarn forward’ rules of origin, which requires companies operating in Vietnam to use a TPP member-produced yarn in textiles in order for them to receive duty-free access to other member markets.

Currently, most domestic clothing and textile companies use raw materials from China and the Republic of Korea, neither of whom are members of the TPP, which nullifies any benefit to them of benefits from the reduced tariffs of the trade deal.