Mexico, European Union Reach Agreement to Expedite Elimination of Some Tariffs

SourceMex Economic News & Analysis on Mexico, May 15, 2002 | Go to article overview

Mexico, European Union Reach Agreement to Expedite Elimination of Some Tariffs


Mexico and the European Union (EU) have reached an agreement to expedite the elimination of tariffs on certain products traded between them.

The decision was reached during scheduled consultations between EU and Mexican officials in Brussels in mid-May. The Mexican delegation was led by Economy Secretary Luis Ernesto Derbez and Foreign Relations Secretary Jorge Castaneda. The EU delegation was led by Spain's Foreign Affairs Minister Josep Pique. Also in attendance were EU Foreign Affairs Minister Christopher Patten and EU trade representative Pascal Lamy.

The meeting preceded President Vicente Fox's tour of several EU countries in mid-May to strengthen economic cooperation and political dialogue.

Under the tariff agreement, which becomes effective on May 20, 2002, the EU will immediately eliminate import tariffs of 3.5% on some automobiles, chemicals, bicycles, and rifles. The tariff originally had been set to remain in effect until Jan. 1, 2003.

In exchange, Mexico agreed to immediately eliminate tariffs of 8% for imports of auto parts, batteries, pharmaceuticals, and certain chemical products from the EU. These tariffs were due to be phased out by 2007.

Derbez said the move is expected to boost trade between the two regions by US$1.7 billion, including an increase of US$1 billion in Mexican exports to the EU. "This agreement significantly benefits both parties," Derbez told reporters.

EU-Mexico accord boosts trade by 29%

The EU and Mexico completed their free-trade agreement in November 1999 and enacted the accord in July 2000 (see SourceMex, 1999-12-01). Mexican government sources said the accord helped increase trade between the two regions by almost 29% in its first 18 months of existence. Mexican exports to the EU between July 2000 and December 2001 increased by 44%, while EU exports to Mexico during the same period grew by 23%.

The agreement is part of Mexico's effort to diversify its trade partnerships and reduce its reliance on its counterparts in the North American Free Trade Agreement (NAFTA), particularly the US.

But the increase in trade with EU countries has done little to reverse the trend. The EU still supplies a mere 3.3% of Mexico's imports, compared with 89% for the US. The US is the destination of 85% of Mexican exports, with exports to the EU still minimal in terms of percentage.

In addition to the proximity of the NAFTA market, other obstacles for Mexico to boost exports to the EU include a lack of credit, a lack of government support for exporters, and an overvalued Mexican peso, said Manuel Martinez, president of the Asociacion Nacional de Importadores y Exportadores de la Republica Mexicana (ANIERM).

Derbez said the EU and Mexico discussed some strategies to help boost trade, such as simplifying customs paperwork. …

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