By Gabriele Welcker-Clemens und Simon Fleischmann
After two years of negotiations, the European Union and Mexico have reached an agreement in principle to modernize the free trade agreement (FTA) that has existed since 2002. Based on this new agreement, the EU and Mexico will conclude negotiations on all remaining technical details, hopefully during the next month - but no later than the end of the year.
In the previous free trade agreement, only machines and machine tools with a production of at least 70 per cent sourced in the EU or in Mexico could benefit from customs exceptions. The new FTA foresees further bilateral liberalization of trade. Machines and machine tools with a third country added-value of up to 45 to 50 per cent will become duty-free. This will particularly benefit highly specialised SMEs who use materials supplied from all over the world.
According to the European Commission Fact Sheet from April 21, 2018, Mexico will also respect results regarding product safety from EU-based test laboratories and take into account international standards such as ISO/IEC in all further technical regulation. This will make it easier for companies in the EU to prove that they comply with Mexican standards and regulations.
The modernized FTA also includes the new EU approach regarding investment protection and the settlement of investment. The old investor-state dispute settlement system (ISDS) will be replaced by the new investment jurisdiction, which ensures transparency and the right of states to become active regulators acting in the public interest. This approach replicates the EU's most recent agreements with Canada (CETA), Singapore and Vietnam.
When negotiations on the remaining technical details have been concluded, the European Commission will undertake a legal scrutiny of the agreement's wording and translate it into all EU official languages. The agreement will then be submitted for approval by the European Parliament, the European Council and the Mexican authorities, and will come fully into force at the beginning of next year. Throughout the negotiations, VDMA has supported the European Commission with information from industry and, in particular, information on rules of origin and technical barriers to trade.