Obstacles remain to EU-Mexico trade deal

Date: 07/10/1999

By Gareth Harding

THE EU and Mexico are hoping to wrap up talks on establishing a free-trade area between the two blocs during the latest round of negotiations, which began this week.

However, negotiators will have their work cut out to meet the end-of-year deadline set by Union leaders in June. The EU's ambassador to Mexico Manuel Lopez Blanco warned recently that "we are not near an agreement", adding: "There are important matters that require deeper studies."

Among the outstanding issues the two sides will grapple with during the talks which began today (7 October) are rules of origin for industrial products, liberalising trade in the agricultural sector and lowering duties on industrial goods. "Seventy per cent of the business is finished, but now we are on to the nitty-gritty," said one Mexican diplomat.

One area which is certain to cause problems is the scale and pace of market-opening. The EU is proposing to scrap tariffs on 82% of its industrial products once the agreement enters into force, with the remaining 18% to be abolished in 2003. But Mexico wants to stagger its market-opening over seven years to protect its industries from the rigours of free trade.

Despite the Union's demand for parity with the North American Free Trade Association, Mexico is unlikely to improve its offer substantially during this round of talks. However, the EU is banking on the central American republic agreeing to reduce tariffs on non-liberalised products to 10% or lower by 2005.

One of Mexico's priorities in the talks will be gaining greater access to the Union's car market. Mexican negotiators will ask their European counterparts to reduce from 70% to 50% the percentage of locally produced components that must go into cars exported to the Union. At present, Mexican-made cars entering the EU are subject to a 7% tariff-duty, but this would be scrapped under the free-trade deal currently being discussed.

Another sensitive area is the liberalisation of the service sector, which the Union has been keen to promote despite Mexican suspicions. The Commission has proposed a novel method of opening up trade between the two which appears acceptable to the isthmus state. Instead of offering to draw up a list of services it wants to liberalise, the European Commission has come up with a 'negative' list of services it wants exempted from any free-trade agreement.