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Is Mexico overlooking the EU ?

Carlos Rivera

In areas where the EC potentially serves as a model, the relationship between presence and actorness is important. Regional economic cooperation has undoubtedly proven an attractive response to economic globalization- as is evident from the creation of ASEAN, NAFTA and numerous other groupings in the imminent global trend towards economic integration. At the same time, the EU has actively promoted the development of RTAs with other countries/groupings; the arrangement between the EU and MERCOSUR strongly supports the development of a regional economic integration in Latin America to “produce” a future economic partner.

The EU’s and Mexico’s relations are based on historical ties that date back to the beginning of colonization; Spain’s conquest was the birth of a close relationship, which declined over the years; until now. This demur was due to several factors; among them, the important role in world trade of the United States, closeness to it, and the changing priorities of the EU; recently for example with its new member states (2004 Adhesion).

Since the 1980s, Mexico has turned its aim towards an open market; rejecting fault choices as import substitution, Mexico strived to be a member in the previously called GATT (in 1986) later the WTO (in 1994). In its challenge for a parallel strategy of regional trade liberalization: in 1993 México signed the North American Free Trade Agreement (NAFTA), becoming the third member with the US and Canada. As regional trade agreements are normally a component of a larger political effort to deepen economic relations with partner countries (World Bank, 2005), but the NAFTA contained no political provisions, being entirely concerned with the economic aspects of trade, ensuring a decreasing border protection and an increasing trade among the Member States.

Taking the lead with America’s affairs, as historically done; Spain firstly broad Latin-American related issues into the attention of other EU countries; the outcome was a document named: ‘The European Union and Latin America: the present situation and prospects for closer partnership, 1996-2000. Brussels: European Commission’ (Commission, 1995). This document expressed that because ‘of its political and economic liberalization, Latin America is on the way to radical change: it hopes to become one of those forces on the world stage with which the European Union has to seek closer political, trading and cooperation partnership’ (Commission, 1995).

And indeed the Commission was right; the political and economic changes that occurred in Latin America were enough to start a movement of investments and treaties.

Because of this, and as part of Mexico’s diversification strategy, to lessen its economic dependence with the US, and considering their common cultural heritage and the strong historical framework of international relations (FTA EU - Mexico, 2000) Mexico and the European Union signed the first comprehensive and reciprocal trade pact concluded between the EU and a western hemisphere country in 1999 called ‘Economic Partnership, Political Coordination and Cooperation Agreement between the European community and its Member States, and the United Mexican States’ named also the ‘Global Agreement’ which entered into force on July 1, 2000.

Nowadays seems a lack of proper information of the treaty has segregated a few ‘advantageous people ’ from the rest, and because of this only a minority take benefit of the agreement. To handle this necessity of lack of usage and information of the ‘Global agreement’; programs from the EU and Mexico like the one for the facilitation of the EU-Mexico Free Trade Agreement, have been created; with a EU contribution of €8 million and another €8 million by Mexico (Facilitation of EU-Mexico FTA, 2003).

But even then there is still a lack of schooling in the handling of benefits of international treaties by Mexican companies, especially from the small and medium size enterprises.

Another factor is the case of lack of interest because of the already satisfied export activity with the US, It seems that Mexico doesn’t realize (or at least not completely) the potential that Europe represents for Mexico’s economy. The serious issue is that the fault of interest, preparation and understanding towards the ‘Global Agreement’ could affect directly in competition and by an overtaking by Europe’s enterprises of the Mexican market, at the same time setting a high bar for local Mexican enterprises, whom now compete directly with Europe’s enterprises.

Again Mexico has manufactured along with another economic block; a tool of commerce, but in such better level than what it did the first time, with NAFTA, which essentially is a business contract (Szymanski,Smith 2005); to my view, I say better, because of the political and co-operation issues stated and integrated in the ‘Global Agreement’.

So far we can state that Europe has been gaining more from trade creation and diversion effects; in contrast, Mexico has improved its position as a location for foreign investment, as Europe enterprises see Mexico as an entry point to its many treaties (32 treaties by 2001), we can say with confidence that both are gaining much from this pact.