A Mexico-EU Free Trade Agreement – trade or politics?
Submitted by University College of Dublin on Fri, 12/23/2016 - 13:45
The world economy's gravitational center has moved to the Pacific. To diversify its economy, the European Union negotiated several free trade agreements with global partners, and the most notable one is the Transatlantic Trade and Investment Partnership (TTIP) with the United States. However, the United States have free trade agreements with Canada and Mexico, which required the European Union to negotiate agreements with these countries as well. While the Canada-EU agreement has been signed last October, the Mexico-EU agreement is being renegotiated.
By Paula Lamoso González, PhD researcher at Universidad Autónoma de Madrid
The world economy's gravitational center has moved to the Pacific. The turning point took place in 2008 after Barack Obama won the Presidential elections. Since then, the priorities of US Foreign Policy were shifted from west to east. The main purpose of that re-orientation was to take account of the prominence of the Chinese economy.
Thus, the first step taken in that sense was the agreement that the US signed with countries of the pacific, the Trans-Pacific Partnership (TPP). The European Union was also aware of this change and it started to diversify its economy through the signature of different free trade agreements. Among them, the most controversial one was the free trade agreement that the US and the European Union started to negotiate in 2003, the Transatlantic Trade and Investment Partnership (TTIP). Taking into account recent electoral events in the United States there are certainly reasonable doubts as to the likelihood of these trade agreements, but if the TTIP is finally signed, it would link the two largest western economies, with the potential to play a leading role in global trade. The signature of the TTIP would create a truly transatlantic market.
The controversial part of the TTIP is that it is being negotiated as a bilateral agreement, only the US and the European Union are involved in the negotiations. Nevertheless, the US is also part of a Free Trade Agreement (FTA) with Mexico and Canada, the North American Trade Agreement (NAFTA).
The controversial part of the TTIP is that it is being negotiated as a bilateral agreement, only the US and the European Union are involved in the negotiations. Nevertheless, the US is also part of a Free Trade Agreement (FTA) with Mexico and Canada, the North American Trade Agreement (NAFTA). That is why some analysts have been discussing what would be the role that these two countries should play in the TTIP negotiations. Thus, it could be argued that both Mexico and Canada will be dramatically harmed from this agreement due to the narrow trade relationships that exist among the North American economies. On this respect, the European Union decided to sign separate FTAs with Canada and Mexico. The FTA Canada-European Union called Comprehensive Economic and Trade Agreement (CETA) was signed last October after some controversies in Europe.
The interest about economic relations between Mexico and the European Union is mainly concentrated in a few member states, and the same happens when it comes to the general relations between the European Union and Mexico.
At the same time, the negotiations for signing a new FTA between Mexico and the European Union started during the summit celebrated between these two political areas last June in Brussels. In 2015, it was the 15th anniversary of the Economic Partnership, Political Coordination and Cooperation Agreement - better known as “Global Agreement” - between Mexico and the European Union. At that time the European Union was composed of 15 member states. Nowadays the number of European Union member states has risen to 28, almost doubling in size, and the economic transactions have been dramatically increased. However, there is still a great margin of improvement. The interest about economic relations between Mexico and the European Union is mainly concentrated in a few member states, and the same happens when it comes to the general relations between the European Union and Mexico. Nevertheless, the international context has changed dramatically, which makes a new impulse on this relationship needed.
Jean-Claude Juncker (President of the European Commission), Pena Nieto (President of Mexico) and Donald Tusk (President of the European Council). Brussels, 11 June (© EurActiv 2015)
Cecilia Malmström - European Commissioner for trade - highlighted that the EU-Mexico agreement signed in 2000 has to be extended in order to eliminate trade barriers and to open the markets in a more effective way. The agreement should be signed before September 2018 since the Mexican Congress will be dissolved before new elections and European Parliament elections are due in 2019. This new FTA should be understood as an opportunity for Mexico and the European Union for the following reasons: In the case of Mexico, to not be marginalized by its NAFTA partners following their agreements with the European Union. The European Union is the third trade partner of Mexico, thus, this agreement is also a tool for reducing its dependence from the US and China, its first and second trade partners.
At the same time reaching an agreement with Mexico is also very important for the European Union for two principal reasons: the scale of Mexico's economic relations with the US, and the size of the Mexican economy, the second largest in Latin America. In addition, this agreement is also a strategic movement in order to counterbalance the power of China in Latin America. Nowadays China is one of the most important partners for Latina America in terms of raw materials. However, even more relevant for the European Union is the alternative that Mexico can offer in terms of energy. The European Union is completely dependent on external energy sources, which are to date concentrated in Russia. Taking into account the difficulties in the EU – Russia relationship, it is extremely relevant for the European Union to find alternative strategic partners.
the European Union is very interested in taking advantage of the opportunities that Mexico can bring to telecommunications and financial services, and, as we had already highlighted, energy.
All in all, the main aim of the agreement is to secure better rules for both areas and also to ensure the highest possible level of liberalization. Among the areas of interest, the most relevant are services and public tendering. Regarding services, the European Union is very interested in taking advantage of the opportunities that Mexico can bring to telecommunications and financial services, and, as we had already highlighted, energy. In addition, several member states have identified as their priorities towards this agreement rules of origin, agriculture and market access. The first round of negotiations took place last June. During that meeting the parties already talked about their first thoughts on the content of the agreement. Currently, they are preparing the second round of negotiations which is expected to take place next autumn in Mexico City.
Finally, what we have to keep in mind is that the current trade agreements are more about politics than trade. The purpose of the partners is mainly focused on improving their geopolitical power and to homogenize the legislation and regulatory barriers so as to reduce or to eliminate tariffs. In this specific case, the goal is clear, to rebalance international trade in the face of a rising China.