Volume 6, Number 15, Page 5

Mexico & European Union Expand Free Trade Negotiations

Mexico’s industrial market to gradually open in accordance to its free trade agreement with the European Union

In accordance with its recent free trade agreement with the European Union (EU), Mexico proposed the gradually opening of its industrial markets to European products. In 1998, the EU and Mexico began a series of negotiations in Brussels, Belgium with the objective of creating a free trade zone for goods and services. May 21, 1999 marked the fifth round of negotiations between these countries; who reached a commercial agreement which will include at least 670 million potential consumers.

For the 15 countries that form the EU, the reduction of tariffs on foreign products entering Mexico was of principal concern in the negotiations. For Mexico, the democratic clause (that every country singing an agreement with the EU must fulfil) and the issue of human rights were the most important themes. For this agreement to be signed, the EU is demanding that the Mexican Executive lower its commercial taxes from 9 percent to 3 percent, an increase that took place last January. Once signed, this agreement will be the first to include a Latin American country.

The agreement’s objectives are to:

(i) reinforce and engage political dialogue;

(ii) intensify commercial relations through a progressive deregulation of the marketing of goods and services;

(iii) expand commercial exchanges in industrial properties, fishing, agriculture, and environment through political reform to make imports and exports from these sectors substantially more flexible; &

(iv) promote cultural agreements and encourage co-operation in matters dealing with intellectual property.

During the negotiations, it was stated that close to 47 percent of industrial exchanges are to be tariff-free immediately, 53 percent by 2003, 60 percent by 2005, and the remainder by 2007. The European Union seeks to reach a tariff-free industrial exchange rate of 60 percent at the beginning of 2003 in order that the agreements be similar to those maintained with Canada and the U.S. In the agrarian sector, Mexico intends for certain products (milk, cereals, and meat) to remain excluded from the free trade agreement. Primarily, Mexico hopes to expand its exports of citrus fruits and vegetables, frozen fruits, and flowers to the EU. Since NAFTA came into effect, the EU’s quota for Mexican commercial exchanges has notably diminished from 11.4 percent to 6.1 percent in 1996.

The Ministry of Economic Development (SECOFI) rejected European allegations that Mexico’s terms for lowering duties were in accordance to the needs of the U.S. It stated that Mexico only hopes to increase exports and generate more employment. With the aim of establishing closer relations, Mexican negotiators presented motions to lower duties; proposing a complete opening of its market by 2007, instead of 2009 as was the original proposal. However, they did insist that its “sensitive products” are not to be included by 2007, but thereafter.

On May 6, the Global Agreement between Mexico and the EU was approved in Strasbourg with 290 votes in favor, 95 against, and 3 absent As of this writing, Finland, Sweden, Spain, Portugal, Holland, Belgium, as well as Austria’s lower chamber and the Senates of Italy and France have ratified the agreement. Germany, Denmark, the United Kingdom, Ireland, Luxembourg, and Greece have yet to ratify the Agreement.