Mexico trade talks with EU back on track

Date: 20/03/1997

By Mark Turner

THE LONG-running deadlock over the shape of an EU-Mexico trade agreement may at last have been broken, after a year of protracted debate and intra-Union conflict.

If all goes according to plan, substantive negotiations should begin in April or May.

With a formula seen by one Union diplomat as “Byzantine in its complexity”, experts think they have cracked the paradox of how to negotiate a two-part trade deal under one global process, satisfying both EU protectionists and Mexico's demand for a one-stop-shop deal.

Most importantly, they believe they have found a way to do this without a new mandate from Union trade ministers which, said the diplomat, “would have taken forever”.

A trade deal with Mexico is seen as one of the most important elements of the Union's Latin America strategy.

In a race with the United States, western Europe has been pushing concertedly over recent years to take advantage of the rapid economic expansion and middle incomes in the Spanish-speaking bloc as a way of compensating for its failure to capitalise on Asian growth.

Spain and the UK, in particular, have strongly advocated closer ties with the country in the face of growing competition from the rest of the world - especially the North American Free Trade Agreement (NAFTA) and Pacific basin trade group APEC - and sliding exports.

A trade deal is also important for Mexico City, keen to escape from its over-reliance on the United States, with which it does 80&percent; of its business.

The country faces substantial obstacles in exporting its major products to Europe - manufactured goods such as motor parts and shoes - because of competition, under beneficial conditions, from central and eastern Europe, the southern Mediterranean and favoured developing countries.

But Mexico's growing strength, and a new-found confidence as it emerges leaner from financial restructuring, has made it unwilling to allow the Union to dictate terms when it comes to free trade.

Last summer, EU foreign ministers decided that any deal with Mexico would have to be negotiated in two steps.

A first stage would set up a cooperative framework enhancing current arrangements in place since 1991. Only then would the two sides consider a phased liberalisation of trade in goods and services.

The decision reflected Paris' growing reluctance to enter into free trade agreements, and particular fears that a deal could open the door to cheap Mexican agricultural produce.

Adding to the complexity of the mandate, ministers ruled that agreements on goods and services would have to be handled in parallel - but separately - within the Union, since the former required majority approval and the latter unanimity.

While making sense to Europe, all of this left the Mexicans rather confused when the EU presented its position last October. As far as they were concerned, they were promised a free trade deal and ended up with a bureaucratic monstrosity.

Mexico City consequently tabled a counter-proposal to the Union in November, accepting a two-part deal, but insisting that a firm timetable and mechanism for talks should be laid down in the first stage.

Mexico's Ambassador to the EU Manuel Armendariz stressed that his country would not accept any quick fix, saying “this is too important an issue to be urgent”.

Since then, EU experts and lawyers have been debating whether a first stage commitment was possible under the terms of their ministerial mandate.

In a decision taken last week, they decided it was - although one official acknowledged that they had “extended the limits of the mandate to their very furthest”.

The EU is now set to offer the Mexicans either an interim agreement focusing on trade in goods or an exchange of letters in which both sides would agree a timetable for further talks on a global package including trade in services and high-level political ties.

Mexico has reacted favourably to the proposals, welcoming the fact that “flexibility has been shown on both sides”, according to the country's mission to the EU.

However, one Mexican diplomat reiterated his country's position that “nothing will enter into force until the whole package has been signed” - that is, there will be no trade in goods until a deal on trade in services has also been agreed.