Volume 6, Number 6, Page 3

Free Trade Negotiations Continue Between Mexico and the European Union

By Peter M. Bostock-Ruiz

The decrease in bilateral trade between the European Union (EU) and Mexico, (a consequence of NAFTA among other reasons) led the two parties to sign a Mutual Solemn Declaration on May 2, 1995. At this time, they agreed on the importance of reaching an Accord that would include favorable conditions for the development of trade in merchandise, services and investment.

After several meetings, the negotiation was finalized in the middle of 1997. On December 8 the following documents were executed:

• Accord of Economic Association, Political Agreement and Cooperation between the European Union and its Member States and Mexico ("AEAPAC") (Acuerdo de Asociación Económica, Concertación Política y Cooperación entre la Comunidad Europea y sus Estados Miembros y Mexico).

• Interim Accord regarding Commerce and Commerce Related Issues ("IACCRI") (Acuerdo Interino sobre Comercio y Cuestiones Relacionadas con el Comercio); and

• Mutual Declaration (MD) (Declaracion Conjunta).

• The AEAPAC mainly addresses three general issues;

  (i) political dialogue, directed at opening new forms of cooperation;

  (ii) industrial cooperation, drug enforcement and consumer protection; and

  (iii) commercial.

The commercial portion establishes the objectives and the subject matter for negotiations. The fundamental objective is to establish a free trade zone. The liberalization is to be bilateral and preferential, progressive and reciprocal. The negotiations will include trade in goods and services, capital flows (including direct investment), government purchases, competition policy, intellectual property, and dispute settlement. All of these issues are covered in all the other free trade agreements entered into by Mexico with other countries, including NAFTA.

The AEAPAC requires ratification by the European Parliament and by the Mexican Senate. To avoid waiting for the AEAPAC to be ratified before starting the commercial negotiations. the IACCRI and MD were executed. The IACCRI was approved by the Mexican Senate and the European Parliament.

The IACCRI creates a Combined Council that at the ministerial level will be in charge of the negotiations. Three negotiation groups were established:

(i) market access;

(ii) services and capital flows; and

(iii) government purchases, competition, intellectual property, dispute settlement, general exceptions and unfair practices.

The applicability of the AEAPAC will be postponed until the trade negotiations are finalized. The IACCRI is the basis for commercial negotiation of issues that are common to EU states such as preferential and progressive liberalization of trade in goods, including reduction in tariffs and non-tariff barriers, trade practices, safeguards and exceptions, rules of origin, government purchases, cooperation to prevent trade competition issues from affecting commerce between parties, some aspects of intellectual property, and dispute settlement.

The MD, which is not required to be sent to the European or national parliaments, allows the negotiation of issues that are the exclusive domain of each of the EU member states, such as liberalization of trade in services, free flow of capital and payments, and some aspects of intellectual property.

The first round of negotiations took place in Mexico in November of 1998, the second and third rounds of negotiations will be in Brussels starting in January of 1999, and the parties have agreed to get together every six weeks to negotiate. Although there is no fixed termination date for the negotiations, they are expected to finish around the beginning of the year 2000.

With this new free trade agreement the Mexican government intends to expand its market options for Mexican products. Currently Mexico' s number one trading partner is the U.S., and the main trading partners of the U.S. are Canada, Mexico and Japan in that order. Mexico will try to achieve trade relations that are less centered on the U.S. and diversify its trading partners.

Peter M. Bostock-Ruiz is an attorney with Baker and McKenzie in Mexico City