New agreement between the EU and Mexico

By August 28, 2018 Trade News

On April 21st, a draft trade agreement was signed between the EU and Mexico as part of a modernized Global Agreement. The aim of this agreement was to update and broaden the coverage of the existing legal framework, as well as to strengthen the ties between these two economies and promote trade between the two regions.

The trade relations between the EU and Mexico were intensified in 1997 with the Global Agreement, which resulted in the Free Trade Agreement (FTA) in 2000. One might wonder: what does that mean? FTA is a preferential agreement that liberalizes trade in all industrial goods and most agricultural goods, improving market access conditions for Mexican and European exporters. According to data from the Mexican Ministry of Economy, the annual average flow of investment from the EU to Mexico has increased by 148%, going from 20.8 billion dollars to 61.7 billion dollars per year since the agreement was signed. This has made the European Union the second trading partner of Mexico worldwide after the United States. In the industrial goods sector (chemicals, plastics, cosmetics, textiles, and clothing), full liberalization had been agreed on in the existing agreement. This is perhaps not surprising, as the EU is very competitive in all these sectors (1). This legal framework has now been completed and expanded after the negotiation of a new trade agreement. In the next paragraphs, we will comment on its commercial aspects.

As for agriculture products, the new agreement ensures liberalization of more than 85% of sectors that had not been liberalized until now. Yet, the new agreement excludes products that have been kept to the strict minimum and it only refers to the sugar sector. For the remaining items, increased market access has been negotiated, including partial liberalization and Tariff Rate Quotas (TRQs), illustrated by the following table:

The new agreement is very wide and covers not only trade issues, but also includes an integral chapter of trade and sustainable development, establishing high standards of protection for labor, security, environment, and the consumer. It also strengthens the actions of the EU and Mexico to support sustainable development and climate change, in particular the obligations assumed by both parties under the Paris Agreement on climate change.

However, this is just one more step towards the final text. Both sides continue to work on resolving the pending technical issues and finish the expected legal text.

Dos Aguas Consulting

Leave a Reply