Talks begin on new deal to revive EU trade with Mexico

Date: 29/10/1998

By Simon Taylor

EU OFFICIALS are hoping that a new free trade agreement with Mexico could boost trade between the two sides by almost one-quarter.

With negotiations on a new pact due to be launched in Mexico City early next month, officials are relying on the deal to help the Union recover its share of trade with Mexico, which has slumped since the launch of the North American Free Trade Agreement (NAFTA) in 1994.

Senior European Commission officials say the EU is looking for an agreement with Mexico "at least as generous as the NAFTA deal".

Trade with the Union used to account for almost 20% of Mexico's overall trade balance, but has fallen to 6% since the NAFTA agreement between Mexico, Canada and the US entered into force.

EU officials say that reaching a deal with Mexico should be easier than securing a trade agreement with the Mercosur countries (Brazil, Argentina, Uruguay and Paraguay) because Mexico is not a major agricultural exporter.

Talks on an accord with Mercosur ran into the sand last year after fears were raised about the effect of massive exports of farm goods into the EU. But agricultural products only account for 9% of EU-Mexican trade, compared to a country like Argentina where sensitive products such as beef and grain account for 50% of exports to the Union. Mexico's farm exports are in areas in which the EU is in deficit such as avocados, where Mexico is the Union's second-biggest supplier after Israel.

In fact, said one official, the EU had a "more offensive position" on one agricultural product because milk powder made up one of its main exports to Mexico.

Mexican lime exports may pose a problem for the EU, given the sensitivity of southern citrus producers to outside competition, but overall, according to the official, the Union "has a lot to gain and only a little to give".

Commission trade experts point out that the type of agreement the EU is pursing with the Mexicans would be more comprehensive than other pacts with trading partners, covering a range of issues such as services, public procurement, investment capital, intellectual property rights and competition.

Previously, the EU has only negotiated such extensive deals with the countries of central and eastern Europe who have applied to join the Union.

Trade with Mexico, which currently stands at 11 billion ecu, could increase by 23% if the EU achieves its aim of restoring the share of business lost since the establishment of NAFTA.

Union exports to Mexico are currently worth around 7 billion ecu annually while imports from Mexico total some 4 billion ecu. The EU is Mexico's second-largest trade partner and the second-biggest provider of long-term investment in the country.

Despite the current instability on world financial markets, Commission sources are adamant that Mexico wants to push ahead with a deal.

"Getting an agreement is their top foreign policy objective," said one, pointing out that Mexico had appointed its former chief negotiator to NAFTA Jaime Zabludovsky as its ambassador to the EU. "This is an important signal of the measure of importance they attach to the agreement," he added.

Union officials believe that Mexico is keen to diversify its trade away from reliance on the US and Canada, especially as a possible downturn in the States could hit growing Mexican exports.

Negotiations in some areas will nevertheless be difficult, with officials predicting that agreeing rules on the origin of products will be a challenge given the large quantity of goods assembled in Mexico from components imported from the US and Canada.

Getting a deal on common standards for goods will also be far from easy.

Both sides have agreed a timetable for the negotiations, which are set to run until at least June next year. But Commission officials stress the importance of making as much progress as possible before the end of 1998. "We could get held up by all the other negotiations the EU has to do, like accession and Agenda 2000," warned one.