Global entrepreneurship: trends, challenges, and opportunities

Global Business

Mexico, Japan to Sign Free Trade Agreement

Who are the members of the trade block you have identified?

The members of the trade block identified were the nations of Japan and Mexico who after very difficult negotiations reached a new free trade accord. "Mexico and Japan sign a free trade agreement on Friday that is expected to open a new market for Mexican fruits and vegetables and prompt Japanese factories to move here." (Unknown, 2004) The accord was signed in June of 2004 and will commence in January 2005.

Mexico has several free trade agreements in place world wide and was thought to be out of the trade agreement market. "Mexico, which has 11 free trade agreements with 42 countries, said last year it was taking a break from seeking new accords, saying it wanted to make use of the agreements it has." (Unknown, 2004) Japan on the other hand does not bestow free trade accords such as this easily. Mexico became only the second nation, the other being Singapore, that has been able to open Japan's door to filtered tariff controls and unrestricted trade.

What type of arrangements do the members of the block have to trade amongst themselves?

The two nations negotiated heavily on the impact of the agricultural markets for Mexico and the steel and automobile markets for Japan. This agreement has basically raised Mexico's hopes to become a principal source for the agricultural goods that are exported to Japan which as a nation imports over sixty percent of its food. Through this agreement, Mexico's farmers will have the advantage of preferential tariffs on the exports of beef, pork and orange juice which are significant capitol producing products.

Some estimates coming from the Mexican ministers calculate approximately that these agricultural exports could increase up to ten percent annually which in turn would mean hundreds of thousands of new jobs throughout Mexico's struggling agricultural areas. Additional perks for Mexico include Japan's promise of direct investment in the form of new manufacturing infrastructure of over twelve billion dollars over the course of the next ten years which entails even more new jobs in the manufacturing and construction sectors.

But Japan will not make out badly. "He is hoping the accord will lead Japanese companies to open factories here, reviving a once-thriving assembly for export industry that was hit hard by China's rise and the global economic downturn." (Unknown, 2004) With Mexico's other Free Trade Agreements such as NAFTA, the Japanese will be able to produce goods and services in the Mexican locality and use the Mexican distribution channels into the open markets of the United States, Canada and the other forty two other contracted nations at greatly reduced tariffs. In other words, this agreement will be able to save billions of dollars in direct tariffs imposed on Japan directly.