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Mexico, EU to deepen FTA in services, farm, investment

International Trade Reporter, March 14, 2005

Mexico, European Union Exchange Proposals To Deepen FTA in Services, Farm, Investment

By Michael O’Boyle

MEXICO CITY—Mexico and the European Commission are evaluating proposals to deepen their free trade agreement in the areas of services, investment, and agriculture.

Luz Maria de la Mora, head of the Mexico Economy Ministry’s international negotiations office, told BNA March 11 that Mexican and European officials exchanged proposals during meetings in Brussels held Feb. 28 to March 3, and plan to meet again in two months after the proposals have been reviewed.

"On both sides there has been a lot of advancement in liberalization," de la Mora said. "Now, we want to deepen our commitments under the treaty."

The negotiations were mandated under the European Union-Mexico FTA to take place three years after the services and investment agreements took effect in 2001, but the talks were put off in the hopes that progress would be made under the World Trade Organization’s Doha Round, de la Mora said.

The Doha talks are operating under the "single undertaking" principle, meaning that negotiations in any one sector cannot be formally concluded until negotiations in all sectors are completed, de la Mora said.

MRAs, Services

In services, Mexico wants to establish a mutual recognition agreement for professions and achieve greater access in architecture, construction, tourism, and information technology, de la Mora said.

Europe has interest in deepening agreements in telecommunications, financial services—especially insurance—tourism, environmental services, and energy, de la Mora said.

De la Mora said the mandate for investment negotiations was limited to only a review of statistics and the existing legal framework, but that Mexico and the European Commission decided to take advantage of talks to elaborate a comprehensive treaty on manufacturing investment that would be valid for all members of the EU.

Currently Mexico has bilateral investment treaties with 15 of the 25 EU members.

"To have a wider BIT would be very positive for both parties and it would allow us to cover general disciplines for the 25 countries instead of having to negotiate separately with the countries that we lack [agreements]," de la Mora said.

Mexico’s Investment Proposals

"Mexico’s proposal is very similar to what is has developed as investment chapters in its other treaties since [the North American Free Trade Agreement]," she said. "It is new for EU in that it goes a little further than the trade policy responsibility that the constitution gives the European Commission. We don’t know how far the Commission can go, but we believe it is a good exercise that will allow us to have a better regulatory framework for both parties."

De la Mora said Europe has become the second biggest source of foreign direct investment to Mexico, behind the United States, with more than $19 billion flowing into Mexico from Europe since 2000.

Accelerated Ag Tariff Cuts

The Agricultural negotiations focus on accelerating tariff reductions on a list of products originally scheduled to be phased out within 10 years, as well as introducing talks on products excluded from the treaty, such as meat, grains, milk, sugar, and bananas, de la Mora said.

Mexico is most interested in reaching agreements on sugar and bananas, while Europe is interested reducing tariffs on meat, milk, and grains, she said.

"These products are very sensitive since they receive export subsidies," de la Mora said. "For that reason those products couldn’t be included during negotiations in 1998. There hasn’t been much change since then, but we still have to do the analysis of the proposals."

While trade with Europe is still dwarfed by Mexico’s trade with the United States, which is the destination for more than 85 percent of Mexican exports, de la Mora said trade with EU members had significantly increased since the FTA took effect.

Trade between Mexico and the EU totaled $28.5 billion in 2004, a 53 percent increase compared with 1999, the year before the FTA on goods took effect, according to data from Economy Ministry.

Since 2003, EU tariffs on all Mexican industrial goods that meet rules of origin have been phased out. After January 2007, all Mexican tariffs on European industrial goods will be eliminated.

© 2005, The Bureau of National Affairs, Inc.