Economy

EU and Mexico agree new free trade pact

Agreement comes in response to increasing US protectionism

The EU and Mexico have updated a trade deal agreed 21 years ago. Photograph: Bloomberg

Sun Apr 22 2018 - 07:41

The EU and Mexico have agreed substantial upgrade in their trade agreement, signed nearly 20 years ago, to allow 99 per cent of goods to be traded between them on a tariff-free basis. The deal has to be ratified by the European Parliament and the Mexican Senate.

It also sees a further opening up of the services sector and the €20 billion public procurement market to EU businesses and will save them up to €100 million a year in customs duties.

Pork and poultry products, now facing tariffs of up to 45 and 100 per cent respectively, will see duty reduced to zero, as will pasta (currently subject to tariffs of up to 20 per cent), chocolate and confectionary (with tariffs exceeding 20 per cent), blue cheeses (up to 20 per cent), apples and canned peaches (up to 20 per cent).

Commissioner for Agriculture, Phil Hogan welcomed the deal: “This agreement proves yet again the value of the EU leading from the front globally in promoting open and rules-based trade..... This deal is very positive for our agri-food sector, creating new export opportunities for our high-quality food and drink products, which in turn will create support more jobs and growth, particularly in rural areas.”

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Permanent US exemptions

The agreement comes just months after major EU trade agreements with Canada, Singapore and Japan, and as talks with Mercosur (Brazil, Uruguay, Argentina and Paraguay) appear close to agreement. It sends a strong signal to Washington that the threatened trade war over steel and aluminium is if anything prompting US allies to step up their attempts to open rather than close markets which US exporters see as crucial.

The EU is pressing the US for permanent exemptions from the tariffs President Trump unilaterally imposed on steel and aluminium.

The EU is Mexico’s third biggest trading partner, and Mexico, with 128 million people, is the EU’s second biggest trading partner in Latin America after Brazil.

Total EU-Mexico trade amounts to €62 billion for goods (2017) and €15 billion for services (2016). The EU exports of goods to Mexico are worth €38 billion (2017), with further €10 billion-worth of exports in services (2016). 400,000 jobs in the EU are currently linked in one way or the other to EU exports to Mexico.

The agreement fully implements the EU’s new approach to controversial investment protection and investment dispute resolution by replacing the old-style ISDS (Investor-to-State Dispute Settlement) system with the new investment court system. These will be based on open hearings and the agreement explicitly allows both sides to retain the right to keep public services public and to deregulate or bring back to the public sector any privately provided services.

The agreement also includes measures to prevent and combat corruption, by making bribery a criminal offence for government officials.

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