EU, Mexico Reach “Agreement in Principle” to Update Trade Accord

26 April 2018

The EU and Mexico have finalised an “agreement in principle” to update their 18-year-old trade deal, with the revisions due to increase agricultural market access substantially, along with integrating an investment court system and opening up greater levels of access for bidding on government contracts. 

The new accord, which officials say still requires more “technical” work to be finalised, modifies the EU-Mexico Global Agreement, an accord that features economic and political cooperation provisions and was adopted in 1997. While the agreement’s terms on goods trade entered into force in 2000, the provisions on services trade took effect the following year. 

“We have updated an old agreement and made it in record time – only two years of negotiation. It’s a modern, up-to-date agreement that will benefit our consumers, our companies, small and big, and also boost the relationship between our countries,” said EU Trade Commissioner Cecilia Malmström.

“This is a sign that we are not only creating economic possibilities, but we are also sending a signal to the world that Mexico and the European Union are open for business, that we believe in open, fair, and sustainable trade, and that we can make win-win trade agreements that are good for our respective citizens,” she added.

The revised deal covers goods and services trade, rules of origin, customs and trade facilitation, sanitary and phytosanitary (SPS) measures, animal welfare and anti-microbial resistance, energy and raw materials, technical barriers to trade (TBT), investment, public procurement, competition, intellectual property rights, sustainable development, transparency, good regulatory practices, small and medium-sized enterprises (SMEs), anti-corruption, and dispute settlement.

Officials say that they hope to resolve technical matters by December, meaning that other processes such as signature and ratification would begin in 2019 at the earliest. Brussels and Mexico City began formal negotiations in 2016, with the first round taking place in June of that year.

Officials at the time said that updating the accord was essential to bring its terms in line with changing trade realities, including in terms of sustainability objectives such as climate action that have a trade dimension. (See Bridges Weekly, 23 June 2016)

Outcomes on public procurement, agriculture, GIs

While the agreement covers nearly 20 overarching topics, officials have highlighted a few select areas as being among the key advances in the wider negotiating process, particularly when compared to the 2000/2001 version.

Among these is agricultural market access, where the two sides have agreed to slash tariffs on a host of products, such as European pasta and chocolates, as well as some cheeses, pork, and poultry products, along with Mexican orange juice, tuna, agave syrup, and various types of produce. Various other goods will be facing the introduction of tariff-rate quotas (TRQs), where an agreed tonnage of the product can be imported at zero tariffs, or at least significantly reduced duties.

Among the agricultural goods subject to these tariff-rate quotas are Mexican beef, bananas, eggs, ethanol, and raw sugar meant for refining, as well as European fresh cheese, milk powder, pork, and some poultry products.

EU officials have lauded the gains seen in public procurement, with Mexico committing to reach deals with state entities to take bids for contracts from European companies. Mexico, whose public procurement market is worth an estimated €30 billion, had previously limited access for any foreign bidders to only federal-level contracts.

The two sides have also agreed to protect several hundreds of geographical indications, covering a series of wines, beers, and various food items. Geographical indications are a type of intellectual property protection, which use place names to denote certain reputational characteristics, such as quality. Common examples are Mexican tequila or French champagne.

The text of the agreement in principle, published by the European Commission, did not clarify whether manchego cheese was included in these 340 protected geographical indications, despite this product having been particularly contentious in the negotiations. (See Bridges Weekly, 8 March 2018)

In the area of services, a statement from Mexico’s Economy Secretariat highlighted the increased market access agreed in areas such as telecommunications or temporary movement of workers with digital-related skills.

Other provisions in the deal include references to the UN’s Paris Agreement on climate change and joint work across different environmental policy areas that relate to climate action, along with the protection of labour rights and the affirmation of existing international environmental commitments under multilateral environmental agreements (MEAs).

Interlocking web of trade accords

Both the EU and Mexico have been engaged in a series of other trade negotiating processes, meant to deepen their commercial ties with key partners, advance sustainability objectives, and help engender a greater push towards trade rulemaking that is fit for 21st century needs.

Just last week, the EU’s executive arm submitted two trade deals with major partners in the Asia-Pacific region to the European Council. These two accords involve Japan and Singapore, respectively. The EU-Japan agreement has been touted as the most ambitious commercial accord that Brussels has ever crafted with a major trading partner, with negotiations wrapping up last year. (See Bridges Weekly, 6 July 2017)

Meanwhile, the Singapore deal is a key point of entry into the Southeast Asian market, particularly as Brussels continues its work to deepen trade ties and ink accords with other members of the 10-country Association of Southeast Asian Nations (ASEAN) and thus pave the way for a region-to-region agreement.

EU Commission officials say they hope that the Japan agreement can be signed by leaders as early as this summer during a high-level summit due to be held in the Belgian capital city, allowing for both sides to begin the necessary steps for domestic ratification. This deal would not cover investment protections and disputes, which are the subject of another negotiating process that is still ongoing.

Mexico’s trade agenda also includes forays into the Asia-Pacific marketplace, not least with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an 11-country accord that is now at the ratification stage.  Mexico’s Senate ratified the deal this week, making it the first CPTPP member to do so.

As a member of the Pacific Alliance, Mexico and its partners Colombia, Chile, and Peru are all looking to clinch trade deals with new “associate member” countries, negotiating this arrangement with Australia, Canada, New Zealand, and Singapore.

Mexico is also negotiating an update to the North America Free Trade Agreement (NAFTA) with the United States and Canada, with meetings on that front continuing at ministerial levels this week. (For more on the NAFTA talks, see related story, this edition)

Given this trading landscape, leaders from both the EU and Mexico have said that cementing their economic partnership further will have strategic benefits that go beyond pure market access gains.

“The modernisation of this (EU-Mexico) instrument will make our markets grow, and consolidate us as primary partners of one of the most relevant economic blocs in the world,” said Mexican President Enrique Peña Nieto in a post on social media site Twitter.

ICTSD reporting.

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