EU and Mexico reach new trade agreement

The European Union and Mexico reached a new agreement on trade, as part of a broader, modernized EU-Mexico Global Agreement. Practically all trade in goods between the EU and Mexico will now be duty-free, including in the agricultural sector.

In 1997, Mexico was the first country in Latin America to sign a Global Agreement with the EU. This came into force in 2000 and will be replaced by the new agreement once it is ratified. The negotiations for the new agreement with Mexico started in May 2016 based on negotiating directives from the European Council. The trade pillar is part of a broader Global Agreement, which sets the framework for the EU's relationship with Mexico and covers issues of broader shared interest that go beyond trade, including political issues, climate change, and human rights.

The timing of the EU-Mexico trade deal appears to be a response to President Trump's renegotiation of the North American Free Trade Agreement (NAFTA), sending a message that some of the United States’ closest trading partners are moving ahead by striking deals of their own. Although NAFTA negotiators from the United States, Mexico, and Canada are nearing a finalized deal, it still faces an uncertain future in Congress. In a thinly veiled shot at President Trump, EU Trade Commissioner Cecilia Malmström stated that the EU-Mexico agreement “sends a strong message to other partners that it is possible to modernize existing trade relations when both partners share a clear belief in the merits of openness, and of free and fair trade.”

Under the new agreement, simpler customs procedures will further benefit the EU’s industry, including in sectors like pharmaceuticals, machinery, and transport equipment. The agreement also lays down progressive rules on sustainable development. Among other things, the EU and Mexico have committed to effectively implement their obligations under the Paris Agreement on climate change. It will also be the first EU trade agreement to tackle corruption in the private and public sectors.

“With this agreement, Mexico joins Canada, Japan, and Singapore in the growing list of partners willing to work with the EU in defending open, fair and rules-based trade,” Commission President Jean-Claude Juncker said.

The agreement—once finalized and approved—will benefit both companies and consumers across Europe and advance the EU's values-based trade policy agenda. The agreement in principle, struck on April 21, brings the EU's trade relationship with Mexico into the modern era, tearing down most of the remaining barriers to trade.

Since the previous EU-Mexico trade agreement came into force in 2000, trade between the EU and Mexico has risen at a rate of around 8 percent per year, resulting in an overall increase of 148 percent in trade in goods over the period. Despite these positive results, a wide margin remained for improving the trade relationship that the new agreement is addressing, by making virtually all trade in goods duty-free. Agricultural exports from the EU—such as poultry, cheese, chocolate, pasta, and pork—are set to benefit the most. Concerning customs procedures, the new agreement will bring in new rules to simplify and speed up paperwork and physical checks at Mexican customs.

Other key components of the agreement on trade include:

Trade and sustainable development chapter. A comprehensive trade and sustainable development chapter sets the highest standards of labor, safety, environmental and consumer protection; introduces a new dialogue with civil society in all areas of the agreement; strengthens the EU and Mexico’s actions on sustainable development and climate change, notably the obligations both sides undertook under the Paris Agreement on climate change; and maintains and fully safeguards member states’ right to organize public services the way they choose. The agreement also includes an explicit reference to the precautionary principle that, already enshrined in the EU treaties, allows the EU to keep products out of its market as long as there is no scientific certainty that they are safe, the European Commission stated.New provisions to fight corruption. It will also be the first EU trade agreement to include provisions to fight corruption, with measures to act against bribery and money laundering. The broader Global Agreement, of which the trade agreement is an integral part, also covers the protection of human rights, as well as chapters on political and development cooperation.

Mutual access to government contracts. The agreement is a step forward in giving companies mutual access to government contracts in both the EU and Mexico public procurement markets. EU and Mexican companies will be placed on an equal footing, irrespective of whether they present a bid in Mexico or in the EU. Mexico has also committed itself to enter into negotiations with the Mexican States to allow EU firms to tender for contracts at State level by the time the agreement is signed.

The new agreement opens trade in services—such as financial services, transport, e-commerce, and telecommunications. “The agreement will also help develop a favorable environment for a knowledge-based economy, with a new chapter on digital trade,” the European Commission stated. “This will remove unnecessary barriers to online trade, like charging customs duties when downloading an app, and will put in place clear rules to protect consumers online.”

Next steps

Technical details still need to be ironed out in some chapters. Negotiators from both sides will continue their work to resolve these remaining technical issues and finalize the full legal text by the end of the year, at which time the Commission will proceed with the legal verification and translation of the agreement into all official EU languages, and will subsequently submit it for approval by the European Parliament and Council of the European Union.