Automobile Industry Trade between Mexico and Brazil under ACE 55 and Possible Effects of the Pending Tans-Pacific Partnership
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AUTOMOBILE INDUSTRY TRADE BETWEEN MEXICO
AND BRAZIL UNDER ACE 55 AND POSSIBLE EFFECTS
OF THE PENDING TRANS-PACIFIC PARTNERSHIP
By Jose Alberto Campos Vargas
BRAZI!L AN D MEXICO AS KEY
PLAYERS AND COMPETITORS IN
TrHE AUT OMOTIVE ]IN DUSTRKY
Brazil is the leading manufacturer of motor vehicles in South
America and the entire Latin American region and one of
the main suppliers of motor vehicles in South America.
Automobile production in Brazil has historically supplied
the Brazilian and Argentine markets. However, the recent
economic situation in Argentina has lowered its demand for
Brazilian vehicles and, thus, diminished Brazil's position as
an exporter of motor vehicles. Brazil's position has also been
diminished by rising labor costs, utilities costs, and import
duties, which are higher than those in other countries.
Mexico is one of Brazil's competitors in this arena. It is cur-
rently the second largest producer of motor vehicles in Latin
America and fourth worldwide, as well as one of the largest
manufacturers of auto parts and components worldwide. Car
manufacturers with Mexican operations include BMW, Mer-
cedes, Nissan, Infinity, Audi, Toyota, General Motors, Ford,
Chrysler, and soon, Kia. Most vehicles manufactured in Mex-
ico are exported to countries like the United States, Brazil,
Canada, and Colombia, as well as the Middle East and Asia.
Mexico's position in the automotive industry can be
attributed to several factors, including the country's com-
petitiveness as a manufacturing platform with appealing
cost structures, the existence of a highly skilled workforce,
experienced and skilled auto parts suppliers, trends toward
economic recovery in the North American markets, and for-
eign trade and customs programs enacted in Mexico.
Notably, Mexico's remarkable position in this area is also
attributable to its preferential access to markets in over 40
countries worldwide arising from its free trade agreements
and commercial agreements with other countries. Mexico
has entered into possibly four times the number of agree-
ments that Brazil has and double the number entered into by
the United States. As a result, Mexico has established a pref-
erential position for tariff advantages with its exports. This
INTERNATIONAL LAW NEWS r,'i
is not only true of automotive and related goods, but also
of exported goods in general. Many of these free trade and
commercial agreements have been entered into with South
American countries, and although some of them have been
recently revoked or suspended (e.g., Venezuela and Bolivia),
the vast majority of Latin American jurisdictions have existing
agreements with Mexico, either on a bilateral or multilateral
basis or through international organizations such as the Aso-
ciacion Latinoamericana de Integraction (ALADI).
AUTOMOBILE INDUSTRY TRADE BETWEEN
MEXICO AND BRAZIL UNDER ACE 55
Among the most relevant free trade agreements for the auto-
motive industry in Latin America is a multilateral agreement
to which both Mexico and Brazil are parties: the Economic
Complementation Agreement No. 55 (ACE 55), negotiated
in 2002 between Mercosur countries (Argentina, Brazil,
Paraguay, and Uruguay) and Mexico based on ALADI rules.
ACE 55s purpose was to reduce duties, tariffs, and restric-
tions on vehicles and auto parts to expand trade and increase
the market for these products between the participating
countries. ACE 55 entered into force in January 2003, and
trade between the involved parties has increased exponen-
tially since that time.
Because Mexico has better cost structures for manufac-
turers, the vehicles and auto parts manufactured in Mexico
have been far more competitive than those manufactured in
Brazil. This advantage has had a serious impact on Brazil,
especially because it affected the country's already-reduced
trade with Argentina, its main market. In 2012, the Brazilian
government reacted to the situation, requesting a quota and
restrictions imposed on Mexican automotive goods exports
SPRING 2015](ViewImageLocal?handle=hein.journals/inrnlwnw44&div=26&collection=&method=preview&ext=.png&size=3)
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Automobile Industry Trade between Mexico and Brazil under ACE 55 and Possible Effects of the Pending Tans-Pacific Partnership
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