To the delight of business leaders in Mexico and the European Union, on Saturday 21st April 2018, the two regions finally agreed on the principles of a modernisation of the existing free trade agreement between the two blocs.
The previously-signed deal from 2000 mostly covered industrial goods, but last weekend’s agreements take that a step further, according to the European Commission, as with this new accord, “practically all bilateral trade in goods will now be duty-free, including in the agricultural sector.” As well as physical goods, the deal will streamline customs, increase the flow of services, investment and government procurement going in both directions, including at state-level, and contains provisions aiming to fight corruption and strengthen the Paris Agreement on climate change.
The agreement between Mexico and the EU was reached after two years of negotiations, with details on the regulation surrounding agricultural products a particular point of contention. However, eventually, representatives from both Mexico and the EU delegations are very pleased with reaching what they have described as a mutually beneficial agreement, with a deal that virtually eliminates tariffs between the two blocs – leading to a wider range of products at a lower cost for both sets of consumers.
According to Ildefonso Guajardo, Mexico’s Economy Minister, the deal will grant his country better exporting opportunities for products including orange juice, tuna, asparagus, honey, egg white albumin, as well as “equitable access” for meat products. Conversely, it guarantees Mexico cheaper access to EU agricultural goods including cheeses, milk powder, pork and chocolate. The deal will, for example, cut Mexican tariffs of up to 20% on cheeses such as gorgonzola and increase EU pork exports, the Commission said.
With certain technical specificities still to be established, and the final legal text to be drawn up, Brussels expects the new agreement to come into force towards the end of 2018. Based on a similar framework to the deal between Canada and the EU, the deal will need to be approved by the EU’s member states and the European parliament in the coming months.
For Mexico, Latin America’s second largest economy, a deal with the EU forms part of a strategy to reduce its reliance on the United States, the destination of 80 percent of its exports. This has become more urgent given Trump’s push to rewrite the North American Free Trade Agreement, which the US leader has described as a “cash-cow” for Mexico. Elsewhere, promisingly, since the free trade pact was first signed in 2000, trade between the EU and Mexico has risen at a yearly rate of around 8% per year, resulting in an overall increase of 148% over that period, according to the European Commission. With last weekend’s deal, these figures will only become more impressive.
Here at BritCham we are delighted with the reaching of this agreement and look forward to supporting British companies who will be looking to take advantage of the commercial opportunities that it will present.