Background:

The creation of the Transatlantic Trade and Investment Partnership (TTIP), that the United States (US) and the European Union (EU) are currently negotiating, will have a major impact on world trade, especially in third-country economies with greater dependence on any of the signatoring countries, as it is the case of Mexico.

Methods:

This paper analyses the effects of this trade agreement on the exports of the Mexican manufacturing sectors through the application of a model of multiple gravity equations in two possible scenarios (ambitious and limited TTIP).

Results:

Findings show significant drops of Mexican manufacturing exports and a weakening of its role in the global value chains, especially in those sectors where the EU has significant competitive advantages in its trade with the US. Furthermore, the estimated impacts show that the trade diversion effects would be particularly relevant in those industries with high dependence on exports to the US market, such as machinery and transport equipments.

Conclusions:

The update of the trade agreements between Mexico and the US and the EU could mitigate the potential negative effects of TTIP, provided that this update leads to an approximation to the standards set for European exports in this new agreement.