The European Commission has released an 18-page document on the EU-Mexico free trade deal that was concluded over the weekend. Here are the distilled contents of the modernisation exercise, with yours truly’s knee-jerk reactions and annotations.
Negotiators will work over the coming months on a final pact ready to be formally signed. The accord is an upgrade of an almost 20-year-old trade agreement that focused mainly on industrial goods trade.
This is how the negotiators broke the eggs to be able to announce the omelette – or deal. All in all, “more than 85% of agriculture tariff lines will be fully liberalised”, the commission says.
EU concessions on sensitive products :
The EU offered a 10,000-tonne tariff-rate quota for beef, and beef offal, respectively, to Mexico, with a 7.5% duty phased in over five years – Mercosur should hold no hopes of big generosity from the EU on beef.
Poultry: EU liberalises in full except chicken breast (TRQ “with preferential duty” of 10,000 tonnes) and egg yolks (5,000 tonnes egg equivalent).
Pork: Full liberalisation except frozen ham (TRQ 10,000 tonnes carcass weight equivalent).
Honey: Full liberalisation in seven years.
Bananas: Import price aligned with the other Central and South Americans to €75 a tonne.
Ethanol: 25,000 tonnes phased in over five 5 years.
Raw sugar for refining only: The EU opened a 30 000-tonne quota at €49 per tonne phased in over three years.
It’s going to be hard for Mercosur to obtain a lower price from the EU on raw sugar (currently at €98t).
Mexican concessions on sensitive products:
20,000-tonne TRQ in five years for mature cheeses.
5,000-tonne TRQ in five years for fresh cheeses.
50,000-tonne TRQ in five years for skimmed milk powder.
13,000-tonne TRQ for dairy preparations.
Infant formula tariff down to 50% for the MFN rate in five years (Boy, it must be expensive to feed your baby in Mexico!)
Pork: Fully liberalised except loins – 10,000-tonne TRQ.
Apples: Full liberalisation in 10 years. Poland will need to be patient.
Tin peaches: Liberalisation in seven years.
The Mexican TRQs are duty-free.
It’s obviously been a tough round of bazaar-style haggling.
Tariffs on industrial goods are fully liberalised.
There’s an annex on trade facilitation in wine and spirits, and the standard EU FTA annex on motor vehicles (UNECE standard recognition). On pharmaceuticals, the two sides agreed to start working on on a Mutual Recognition Agreement on Good Manufacturing Practices.
Rules of origin
There seem to be a few remaining grey areas. There were two very important decisions, however. The EU allows duty drawback and Mexico accepts the double transformation principle of EU-style rules of origin in textiles. Tough choices for both sides here. Rules on chemicals are “similar to those agreed in the EU-Japan FTA”, writes the EU.
On autos it’s been a hard bargain. The general agreement is a maximum 45% non-originating material, with phase-in periods for various auto parts of three to six years.
That’s going to set another precedent for the EU-Mercosur negotiations, which are ongoing this week, and where auto rules of origin are one of the toughest nuts to crack.
Sanitary and phytosanitary issues
The parties upgraded the text of the earlier agreement to a “fully fledged chapter on SPS”, with a lot of detail on transparency, information exchange, certification and import checks, streamlined approval procedures, etc.
There was “progress on treating the EU as a single entity” when it comes to accepting veterinary certificates, the commission writes. Mexico also agreed to reduce approval times to maximum six months.
The two sides agreed to cut the number of mutual sanitary audits. Don’t say that too loudly to Mr. Macron!
Technical barriers to trade
The chapter appears to be a standard EU-style FTA chapter focusing on commitments to work on the basis of international standards for standard-setting and conformity-assessment procedures.
Energy and raw materials
The language on these topics is about transparency and non-discrimination in licensing authorisation processes for hydrocarbons and electricity, and for access to energy networks and to “important raw materials”.
Remember when the EU wanted the US to sign up to such language in TTIP? Here, also something Mercosur and countries such as Indonesia should take note of.
Services and investment liberalisation
The EU obtained from Mexico a commitment to open up to international maritime services.
That’s again a little wink to the US’s Jones Act, and a warning to Mercosur countries.
Other areas included in the services chapters are telecommunications, financial services and temporary movement of personnel, including the right of spouses and children of company personnel to follow.
On investment, the deal prohibits performance and local-content requirements.
The EU gave up on concrete market openings for European companies at sub-national level. Did it cave in to political expediency? That’s a big step back from earlier FTA practice.
“Mexico has … committed to enter into negotiations with the Mexican states to offer access for EU bidders to procurement of some Mexican states by the signature of the agreement,” the commission text reads.
This new precedent with Mexico might reassure Mercosur, for which the matter, also under negotiation, is sensitive.
There’s a whole new chapter on animal welfare and antimicrobiobial resistance. The EU is breaking new ground on these topics. The focus is on cooperation and exchange of information. The chapter is not subject to the deal’s dispute settlement mechanism.
We can presume something similar could end up landing in the EU-Mercosur agreement – if the negotiators make it this year.
The EU and Mexico agreed on a new chapter on fighting corruption – focusing on implementing international conventions.
The trade and sustainable development chapters focus on applying international conventions (ILO conventions, CITES and climate) and is not subject to potential commercial sanctions.
The investment protection chapter includes an EU-style investment court.