Impact of the Trans-Pacific Partnership (TPP) agreement in the Mexican TMT sector

February 2016 | EXPERT BRIEFING | SECTOR ANALYSIS

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On 5 October 2015, an announcement was made indicating that the negotiations of the TPP had concluded and that the signatory countries would start their internal ratification processes for the validation and entry into force of the TPP. Mexico, through its Ministry of Economy, assures that the approval and ratification of the TPP by the signing countries will result in substantial economic growth for the country, as well as generating employment opportunities, improving innovation, productivity and competitiveness, enhancing quality of life, reducing poverty levels, stimulating transparency and good governance practices, and protecting the environment.

The TPP is considered to be the most relevant and ambitious multilateral commercial agreement on an international scale, based not only on its product coverage, but also on the matters that it addresses. The relevance of the TPP can also be visualised based on what the 12 signing countries represent globally, which according to the Ministry of Economy, amount to 36 percent of global GDP, 25 percent of global commerce and 28 percent of all foreign direct investment. Also, the TPP would represent 11 percent of the world’s population, or 800 million people, which represents approximately $9.623 trillion of global commerce.

The member countries of the TPP – Australia, Brunei, Canada, Chile, Malaysia, Mexico, Japan, New Zealand, Peru, Singapore, the US and Vietnam – have interesting cultural and economic diversity. Such geographical, cultural and economic diversity will represent a challenge for the TPP. However, it will modernise the rules of global commerce in order to generate new business, employment and investment opportunities within the region.

The TPP can be considered as an ordinary international trade agreement which addresses matters of market access and tariffs. However, it also includes several new generation aspects, some of which are relevant to the TMT sector.

Mexico’s role

Mexico is probably the country within the group that has signed more international free trade agreements than any other nation. Such treaties give Mexico access to 58 percent of the world’s GDP, 53 percent of global commerce, and 1.15 billion potential consumers. Our country is already well connected in most industries, however the TPP will allow the consolidation of commercial preferences with our free trade partners and will grant access to new markets.

The TPP in the TMT industry

The provisions of the TPP that address telecommunications, e-commerce and intellectual property matters are the ones that represent some of the most important key points to the development of the TMT industry not only in Mexico, but throughout the region in general.

Although the TPP will revolutionise the international trade of the signing countries, on TMT, Mexico has the advantage that it has gone through various structural reforms carried out in the recent past. That means that Mexico arrives with windows of opportunities and therefore fewer legislative changes will be needed.

Telecommunications

This chapter of the TPP entails new generation aspects for the regulation of the telecommunications sector within the signing countries. Roughly, it regulates telecommunications under two aspects. Firstly, the guarantee of access to telecommunications services that the telecommunications providers of the signing countries must provide under non-discriminatory and technological neutrality terms and conditions. Secondly, the transparent and objective regulation applicable to the sector, specifically regarding the distribution procedures and usage of scarce telecommunications resources, including frequencies, numbering and rights-of-way. One important matter that is addressed is with respect to the actions that can be performed to promote competition for the provision of international mobile roaming services and to facilitate alternatives to roaming.

Mexico has taken big steps in this sector, and already has advanced regulation in place. This was achieved when constitutional reform took place in 2013, and with the entry into force of the new Federal Law on Telecommunications and Broadcasting of 2014. As a result, Mexico already complies with and meets several TMT-related criteria required for the signing countries of the TPP. It is important to point out that when the rest of the countries achieve uniform regulation, the region will allow an even field in telecommunications for every player to compete globally.

E-commerce

The TPP acknowledges the relevance of e-commerce to the democratic, social and economic development of each of the signing countries. The TPP establishes rules to facilitate free data flow which will be subject to public policy objectives and which will ensure the confidentiality of and offer protection to personal information. It establishes rules of non-discrimination of digital products and the prohibition of tariff payments when such digital products are electronically transferred. Regarding consumer protection, it establishes that the signing countries shall implement laws against deceptive and fraudulent online activities and laws ensuring consumer’s privacy.

Additionally, the TPP promotes the cooperation between the signing countries regarding the enactment of policies related to cyber security. On this matter, Mexico has already enacted laws that protect consumers and users; however, other topics will have to be improved in Mexico, specifically in regard to cyber security. It is important to mention that the National Digital Strategy, promoted by the current administration, is in line with the principles of the TPP. Therefore, the TPP is expected to help boost the development of a secure and inclusive digital economy within the country.

Intellectual property

Regarding the TMT sector, this chapter contains special considerations for internet services providers (ISPs), as well as the regulation of internet user’s rights regarding information access, freedom of expression and respect of privacy. The considerations made to ISPs refer to the creation of safe harbours which will limit the responsibility of the ISPs on content in their networks that potentially infringe intellectual property rights. The adoption of safe harbours by the ISPs will be voluntary, and, if adopted, will have to implement ‘notice and takedown’ procedures. These notice and takedown procedures shall comply with the constitutional rights of due process according to the Mexican constitution, and may work as an additional mechanism to those already included in the national legislation against piracy. Mexico will have to provide legal mechanisms to comply with such procedures for the ISPs who may adopt them.

Opportunities

Mexico is the third most populous of the TPP countries, behind the US and Japan. However, the digital divide in Mexico is greater than that of the US and Japan. Nevertheless, Mexico has been implementing a series of amendments to boost competence and minimise the digital divide for the TMT sector, which are already in place and are coherent with those provided under the TPP. Considering the foregoing and the impact that the TPP will have in the TPP countries, Mexico represents a great opportunity for TMT players to invest and expand their businesses.

Let’s hope the internal ratification process of the signing countries will be successful and that the TPP becomes a reality.

Jorge León Orantes is a partner at Santamarina y Steta SC. He can be contacted on +52 55 5279 5452 or by email: jleon@s-s.mx.

Jorge León Orantes

Santamarina y Steta SC