Free-Trade Agreement Mexico Pushes to Update E.U. Trade Pact

On a visit to Germany this week, Mexican President Enrique Peña Nieto is aiming to revamp his country's 15-year-old trade pact with the European Union.
Mexico's President Enrique Pena Nieto and his wife Angelica Rivera are welcomed by German President Joachim Gauck (R) at the Bellevue presidential palace in Berlin, Germany, April 11, 2016.

Mexican President Enrique Peña Nieto is expected to push for a renegotiation of Mexico's free-trade agreement with the European Union during his visit to Germany this week, which began today. In particular, he wants to secure better access for agricultural products on the collective market.

“Our quotas are minimal and the treaty doesn't have a broad enough reach,” Mexican Economy Minister Ildefonso Guajardo, who is joining Mr. Nieto on the visit that begins today, told Handelsblatt.

Mexico hopes that talks, which have already been postponed several times, can begin as soon as late May.

Mr. Guajardo said the 15-year-old treaty is no longer suited to the times.

“We were Latin American pioneers in free trade with Europe, but today we're in a worse position than countries which signed trade agreements later on,” he said.

Today, the European Union imports more bananas from countries like Colombia and Costa Rica than from Mexico, he said. He also criticized the small quotas of avocados and tuna fish.

Mexico is far and away the most important Latin American destination for German exporters. Johannes Hauser, Director general, German-Mexican chamber of commerce

Modernizing the trade agreement is also in the European Union's interest, because access to the Mexican market for certain service sectors is extremely limited.

“We simply have to modernize the treaty,” said Mr. Guajardo.

He also said he regretted that Mexico was not involved in the negotiations on the transatlantic trade and investment partnership known as TTIP. But Mexico hopes that after a modernization of the E.U.-Mexico trade agreement and the signing of the TTIP there could be a regional integration of the two treaties.

No country in the world has sealed as many free-trade pacts as Mexico, Latin America's second-largest economy. But it hasn't made full use of these 46 agreements. Trade with its northern neighbor still dominates, accounting for 78 percent of Mexico's export sector.

After the United States and China, Europe is Mexico's third most important economic partner. But despite a respectable 230 percent growth in trade with Europe since the signing of the treaty, it accounts for just 8 percent of the E.U.'s total, amounting to $62 billion in 2015.

Yet bilateral relations between Mexico and Germany are “outstanding,” according to Mr. Guajardo.

European Trade with Mexico-01

More than 1,000 German enterprises operate in Mexico, accounting for around 8 percent of Mexican GDP. The main industries are automobile manufacturing, pharmaceuticals, chemistry and logistics. Mexico has become a lucrative destination for German exporters.

“Mexico is far and away the most important Latin American destination for German exporters,” said Johannes Hauser, director general of the German-Mexican chamber of commerce. From 2014 to 2015, exports grew by 24 percent to $11.09 billion, and lie almost on par with Brazil or India.

The close economic relationship has been nurtured by a boom in the automotive sector. Three German manufacturers, Audi, BMW and Daimler, are planning short and middle-term production ventures in Mexico. This year, Volkswagen subsidiary Audi will begin production of the Q5 SUV model for the North American market at its factory in the city of Puebla. Volkswagen itself has already been producing cars for decades in Mexico, where it runs one of its largest assembly plants in the world.

Many manufacturers are attracted to Mexico's proximity to the United States, the world's biggest car market. Mexico is also unique in the number of countries it can export to for low or zero customs duty. That gives the country stand-alone potential for automotive production.

 

Klaus Ehringfeld is a correspondent for Handelsblatt in Mexico, the Caribbean and Colombia. To reach the author: [email protected]