Making friends and trading partners

Date: 16/04/1998

Mexico's ambassador to the EU Manuel Armendáriz E charts the growing links between the Union and Latin America, symbolised by the signature of a partnership agreement with Mexico last year

WHEN the EU adopted its new Common Foreign and Security Policy in November 1993 after the Maastricht Treaty came into force, it defined its highest priorities: a common strategy towards central and eastern European countries and towards the Mediterranean region, its closest neighbours.

Moreover, it structured a new and ambitious Transatlantic Dialogue with its main security and political counterpart, the US. These were important achievements.

It is therefore highly significant that shortly after an initiative was taken to negotiate a partnership agreement with Mexico, a country which did not belong to the EU's closest sphere of influence.

As early as September 1993, the then European Commission President Jacques Delors foresaw the possibility that "a neat young man, Mexico, pursued the affection of an old and tired lady, Europe", in much the same way as young Poseidon, saved from the flood, would earn the affection and hospitality of Athena.

The signature of the partnership agreement between Mexico, EU member states and the European Commission on 8 December 1997 marked an historic turning point. A conceptually unique and avant-garde offspring of the agreement, the joint council, was empowered as a key instrument of the new relationship.

The accord envisages a solid partnership through enhanced political cooperation as defined under the terms of Article 238 of the Maastricht Treaty.

Linkages are defined in 30 sectors, some of them strategic such as science and technology, education and training, social development and the environment. And in a rather clever way - because it is probably the only agreement of its kind - it stipulates the construction of a free trade area.

The joint council will enable participants to "take decisions" regarding "bilateral and preferential trade liberalisation, in conformity with the rules of the World Trade Organisation".

This mechanism allows Mexico to diversify its international presence by intensifying its trade, economic and other links with the EU, laying the groundwork for the construction of a strategic relationship with Europe.

Looking to the future, Mexico's policy towards the Union as a whole will increasingly intertwine with that towards individual member states. Over the past few years, we have built up a bilateral framework for dialogue, cooperation and for furthering our economic and investment interests supplementary to that at EU level.

Furthermore, there is a growing mutual understanding of the crucial issues on today's international agenda: disarmament, the fight against drugs and organised crime, the environment, human rights, opposition to attempts to enforce national legislation extra-territorially, the strengthening of international law and the reinforcement of measures favouring peace and international security.

Frequent political consultations and cooperation between both parties on these issues will doubtless generate a more fruitful relationship. In fact, even as the agreement goes through the ratification process, we should be preparing joint actions which may enter into force with the agreement.

The EU's accord with Mexico is part of its broader strategy towards Latin America.

Up until 1994, the EU had a common view on the region as a whole. At the Corfu and Essen summits, EU leaders laid down a new policy at sub-regional and country level. It proposed a different approach towards Mercosur, Mexico and Chile, and confirmed a preferential treatment for the Andean Community and Central America.

Politically, this new vision intends to enhance dialogue via the Rio Group and sub-regional mechanisms of cooperation and trade liberalisation.

The EU is Latin America's second-largest trading partner after the US. Trade between both regions grew steadily throughout the Nineties, amounting to more than 79.6 billion ecu ($86 billion) in 1996.

The main features of the trade relationship are a strong and continuous expansion of Latin American imports, slow growth of the region's exports to the EU and thus, a progressive worsening of Latin America's trade balance.

This deficit is explained by the unilateral opening up of trade and economic reforms in most Latin American countries during the Nineties, as well as by market access problems in the Union.

Latin America has, in recent years, become the most dynamic market for European exporters, while the EU market has become the slowest growing destination for Latin American exports. These are predominantly made up of primary goods and traditional manufacturers; the Union's are mostly high-value added industrial goods.

In terms of investment, the EU has benefited most from privatisation and foreign investment reforms in Latin America, thus promoting growing flows of foreign direct investment from Europe.

In recent months, the possible impact of the single European currency on the economic and financial relations between the two regions has attracted a great deal of attention.

The euro's impact will depend on its capacity to spur growth in the Union, on its strength with respect to the US dollar, its potential use as a reserve currency and its effect on the structure of interest rate differentials.

BETWEEN 1995-96, Mercosur and Chile negotiated and signed framework cooperation agreements with the EU with the ultimate aim of preparing a political and economic association accord.

This stresses - as was the case with Mexico - the commitment towards a reciprocal and progressive liberalisation of trade, compatible with WTO rules and taking into account the sensitivity of certain products.

It also envisages reinforced political dialogue at the highest possible level.

After the 'lost decade' of the Eighties, Latin America changed course, substituting a domestic-led model of development with an open-market led growth strategy, and the region became fully integrated into the world economy.

That process has picked up speed. In 1994, the North America Free Trade Association (NAFTA) linked Mexico to its two north American partners.

In 1995, Mercosur consolidated itself as a project of sub-regional integration in the southern cone of the continent. Central America, in turn, is reaping the fruits of peace in El Salvador and Guatemala which laid the foundations for the region's common market.

In 1996, the Andean Pact became the Andean Community, thereby strengthening economic integration and institutional reform in this group.

For its part, Mexico successfully negotiated six further free trade areas in addition to NAFTA: with Chile, Costa Rica, Bolivia, Venezuela, Colombia and Nicaragua. It is in the process of concluding six more.

As can be seen, a new Latin American concept has taken shape, that of "open regionalism". From this standpoint, new negotiating strategies are being sought with Latin America's new partners: with the US through the Free Trade Area of the Americas (FTAA), and with the Union through fourth-generation agreements and the first Latin American and Caribbean (LAC)-EU summit next year.

In its new Latin America strategy, the EU highlighted the consolidation of democracy, respect for human rights and the rule of law; the fight against poverty and exclusion; support for regional integration; and closer business ties as key issues.

But although bi-regional relations have qualitatively improved, problems persist, mainly in trade.

Political dialogue has been consolidated at ministerial level through the Rio Group-EU annual meetings. This has allowed for a rapprochement of positions in topics such as reform of the United Nations, the fight against drugs and terrorism, protection of the environment and opposition to national laws intended for enforcement extra-territorially.

It seems evident that our future requires a new impetus to resolve remaining differences at the highest level.

The EU-LAC summit in the first half of 1999 in Rio de Janeiro is seen by ministers from both sides as "a precious opportunity to strengthen our friendship and partnership as well as enhance political dialogue between the two regions in order to guide our relationship towards a new association".

The summit will give new breadth to both our economic and political relationship and will provide a very timely occasion to pinpoint the concept of "strategic association" first mentioned in 1994.

The summit agenda contemplates three rather ambitious objectives: political affairs, economic and trade issues, and education, culture and human relations.

A preparatory committee has been set up under the leadership of the Rio Group's troika and the host country. The co-chairmen of the summit will be Brazil and Mexico.

In short, the summit provides a unique opportunity coherently to define our bi-regional relations, with all the countries of the region concurring at the highest level.

Article by Mexico's Ambassador to the EU looks at the growing links between the EU and Latin America.