CPTPP, UK WTO & 3rd countries

FTA upgrade: What the UK and Mexico will be negotiating about

The United Kingdom has fired the starting pistol on FTA negotiations with Mexico, with the aim of concluding talks by the end of 2023. Formal talks are due to begin in July, with services trade the focus of the negotiations.

London is aiming at a “modern, enhanced agreement” to further boost a bilateral UK-Mexico trade relationship which is already valued at almost £4 billion annually.

The negotiations were officially announced on Friday (20 May) at a meeting in London between UK international trade secretary Anne-Marie Trevelyan and her Mexican counterpart, Tatiana Clouthier.

‘Pre-programmed’ review of existing rollover deal

The UK currently trades with Mexico on essentially the same basis as the EU, having ‘rolled over’ the EU-Mexico FTA, which dates from 2000, back in December 2020.

But a review of this agreement is pre-programmed into the UK-Mexico rollover deal, with a commitment to get this done by the end of 2023.

As a member of the Comprehensive and Progressive Agreement on Trans-Pacific Partnership, the UK must also agree revised terms of market access with Mexico, as part of its own CPTPP accession bid.

A renegotiation of the UK’s FTA deal with Canada was initiated in March of this year, based on a very similar rationale.

DIT has published a 36-page ‘strategy’ document setting out its aims for the Mexico renegotiation, based on a stakeholder consultation conducted in the summer of 2021.

These are mostly uncontroversial, and largely non-specific in terms of outcomes – although both sides have made clear that they want to agree a ‘modern’ FTA which includes elements such as digital trade, gender equality, and the environment and climate.

In the area of goods, the scope for headline-catching tariff reductions is limited, given that 97% of product lines exported from UK to Mexico are already eligible to be exported duty-free, along with 91% of Mexican exports to the UK.

Preference utilisation rates are low, prompting DIT to seek to put an emphasis on more liberal rules of origin, and better terms of access to the agreement for SMEs.

The UK is also targeting individual products for which Mexican tariffs on UK exports remain high, such as dairy products (45%) and alcohol (20%).

Improving services trade commitments

But bigger gains are seen to be available for services, which are barely addressed by the existing FTA. Scoping analysis conducted by DIT suggests that UK exports of insurance and financial services could both be given a considerable boost by a new liberalising agreement in this area.

The UK has also pledged to push for the deal to “reaffirm commitments to international labour standards”, and to ensure that “parties will not waive from or fail to enforce their domestic labour protections in ways that create an artificial competitive advantage”.

This will be a high-profile aspect of the negotiations, especially in light of recent disputes in this area between Mexico and the US in the framework of the USMCA agreement.

“We have instructed our teams to hold the first official round of negotiations in Mexico City this July, and a second round in the autumn,” the UK and Mexican governments said in a statement.

“This will allow us to make significant progress towards our ambition to conclude negotiations for a new Free Trade Agreement within two years, as agreed in the UK-Mexico Trade Continuity Agreement.”

EU-Mexico Global Agreement benchmark

A baseline against which the UK’s eventual deal with Mexico will inevitably be judged is the EU’s own modernised deal with Mexico, which was agreed in essence in 2018 – but which has still not been signed.

The EU and Mexico are trying to decide whether to divide up their agreement into a political agreement on the one hand and a strictly ‘trade’-focused agreement on the other – or whether to ratify the agreement as a whole.

This issue, which stems from EU concerns over the difficulties of getting ‘political’ agreements ratified by all relevant national and regional parliaments, will not be a problem for the UK – although the British government is facing its own internal controversy at present over domestic FTA ratification processes.

Once the talks are up and running, Mexico will be the fourth partner with whom the UK is conducting ongoing FTA negotiations, along with India, Canada and the CPTPP.

In addition, preparatory discussions are also underway to launch further UK FTA negotiations with Israel, Switzerland and the Gulf Cooperation Council.

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