PRESS/TPRB/64
8October 1997
TRADE POLICY REVIEW BODY
REVIEW OFMEXICO
TPRB 'SEVALUATION
TheTrade Policy Review Body oftheWorld Trade Organization (WTO) concluded itssecond
review ofMexico 'stradepolicies on7and8October 1997. ThetextoftheChairperson 'sconcluding
remarks isattached asasummary ofthesalient points which emerged during thediscussion.
Thereview enables theTPRB toconduct acollective examination ofthefullrange oftrade
policies andpractices ofeachWTO member country atregular periodic intervals tomonitor significant
trends anddevelopments which mayhaveanimpact ontheglobal trading system.
Thereview isbased ontworeports which areprepared respectively bytheWTO Secretariat
andthegovernment under review andwhich cover allaspects ofthecountry 'stradepolicies, including:
itsdomestic lawsandregulations; theinstitutional framework; bilateral, regional andother preferential
agreements; thewider economic needs andtheexternal environment.
Arecord ofthediscussions andtheChairperson 'ssumming-up, together withthesetworeports,
willbepublished induecourse asthecomplete trade policy review ofMexico andwillbeavailable
from theWTO Secretariat, Centre William Rappard, 154ruedeLausanne, 1211 Geneva 21.
Since December 1989, thefollowing reports havebeencompleted: Argentina (1992), Australia
(1989 &1994), Austria (1992), Bangladesh (1992), Benin (1997), Bolivia (1993), Brazil (1992 &1996),
Cameroon (1995), Canada (1990, 1992, 1994&1996), Chile (1991 &1997), Colombia (1990 &1996),
Costa Rica(1995), Côted'Ivoire (1995), theCzech Republic (1996), Cyprus (1997), theDominican
Republic (1996), Egypt (1992), ElSalvador (1996), theEuropean Communities (1991, 1993&1995),
Fiji(1997), Finland (1992), Ghana (1992), Hong Kong (1990 &1994), Hungary (1991), Iceland (1994),
India (1993), Indonesia (1991 and1994), Israel (1994), Japan (1990, 1992 &1995), Kenya (1993),
Korea, Rep.of(1992 &1996), Macau (1994), Malaysia (1993), Mauritius (1995), Mexico (1993 &
1997), Morocco (1989 &1996), NewZealand (1990 &1996), Nigeria (1991), Norway (1991 &1996),
Pakistan (1995), Paraguay (1997), Peru(1994), thePhilippines (1993), Poland (1993), Romania (1992),
Senegal (1994), Singapore (1992 &1996), Slovak Republic (1995), South Africa (1993), SriLanka
(1995), Sweden (1990 &1994), Switzerland (1991 &1996), Thailand (1991 &1995), Tunisia (1994),
Turkey (1994), theUnited States (1989, 1992, 1994 &1996), Uganda (1995), Uruguay (1992),
Venezuela (1996), Zambia (1996) andZimbabwe (1994).
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TRADE POLICY REVIEW BODY
Review ofMexico
CONCLUDING REMARKS BYTHE CHAIRPERSON
ThesecondTradePolicyReviewofMexicowasconductedon7-8October1997.Theseremarks,
prepared onmyownresponsibility, areintended tosummarize thediscussion andnottobeafullreport:
thiswillbecontained intheminutes ofthemeeting.
Thediscussion developed under fourmain themes:
Economic anddevelopmental policies
Members commended Mexico onthepositive macroeconomic developments since thedeep
recession of1995; economic growth hadresumed, inflation fallen, capital inflows risen andpublic
finances improved. They praised theMexican authorities fortheircourageous response tothe1994
financial crisis, particularly forhaving avoided protectionist measures. Members alsonoted thefall
inpercapita income following ofthe1995 crisis, andthepersistence ofpoverty, especially inrural
areas. Itwasnoted thatrecently some economic indicators, including thecurrent account balance,
hadagain deteriorated. Some Members stressed theneedtomaintain theexchange rateatacompetitive
level.
Inreply, therepresentative ofMexico saidthattheresponse ofhisGovernment tothefinancial
crisis of1994 hadbeen todeepen thereforms, andaccelerate structural change andeconomic
liberalization, committing itselftothedisciplines ofthemarket. Hegavedetails offiscal policy aimed
atimproving therevenue-expenditure balance andreducing public debt. Pension reforms wereexpected
toincrease savings andhelpfinance future investments. Monetary policy, acting through interest rates,
hadrecently beenusedtoprevent realexchange rateappreciation resulting fromshort-term financial
inflows. Asaresult, exports hadgrown strongly. TheMexican Government wasconscious ofthe
effects ofthecrisis onthestandard ofliving andwasfocusing onsustained medium-term growth to
create employment asthebestmeans ofaddressing theproblem; increasing public resources were
being devoted tosocial concerns. Theprospects forgrowth inthenextfewyears werepositive; not
lessthan6percentthisyearand5.5percentin1999 and2000, withexports continuing toplayan
important role.
Headded thattheIndustrial andTrade Policy Programme (PPICE) recognized theneedfor
sustaineddevelopment,employmentcreationandimprovedstandardsofliving.Policysoughttoalleviate
market imperfections andimprove industrial competitiveness. Therepresentative elaborated onvarious
aspects oftheprogramme aiming atproviding better information forbusiness, promoting economies
ofscale, assisting thegrouping ofsmall enterprises andencouraging transfer oftechnology and
development oflabour.
Regional/multilateral trade
MemberspraisedMexico'sactiveandpositiveroleintheWTO.TheyalsotooknoteofMexico's
growing participation inregional trade agreements, highlighting inparticular NAFTA 'smajor role
inMexico 'stradepolicy reforms. Areas ofconcern included thecontinued andconsiderable dependency
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ofMexico ontheU.S.market, thewidening gapbetween preferential andMFN tariff rates, andthe
impact onthirdparties ofNAFTA rulesoncustoms valuation andrulesoforigin. Members thussought
Mexico 'sviews onthelinkbetween regional andmultilateral liberalization andthepossibility oftrade
distortion, aswellastheuseofreciprocity asaguiding principle oftrade policy. They asked under
what conditions Mexico would extend thebenefits ofNAFTA liberalization toallWTO members.
Members were alsointerested inMexico 'sagenda forfuture regional integration.
Mexico wasencouraged tonotify totheWTO theG-3Agreement, anditsagreements with
Bolivia andCosta Rica. Details were alsosought ontheWTO justification fortheexistence inthe
NAFTA ofsome phasing outperiods exceeding tenyears.
Inreply, therepresentative ofMexico saidthatparticipation intheWTO, including thedispute
settlement mechanism wasfundamental toMexico 'strade policies. Itwasalsoakeyelement inhow
Mexico hadaddressed thefinancial crisis, having apositive effect ontheexpectation ofthebusiness
andfinancial community andincreasing confidence inMexico 'sfuture. Mexico 'srelationship with
theUnited States wasintense andcomplex; NAFTA created apermanent legalbasisforNorth American
cooperation, thatwentbeyond Uruguay Round commitments. Given theslowspeed ofimprovements
inthemultilateral system, Mexico wascontinuing toexplore theregional pathasameans togreater
liberalization. Hementioned theEU,Israel andAPEC asnewareas forsuchcooperation. However,
Mexico supported theopening ofanewround ofmultilateral negotiations thatwould leadtofurther
bindings andliberalization.
Therepresentative pointed outthatmany ofthebenefits ofNAFTA wereavailable onanMFN
basistoother WTO members, especially inservices other thanfinancial services. Mexico hadrecently
alsoeliminated MFN tariffs onsome 1200 tariff linesofinputs andmachinery. Since 1995, imports
from nonFTApartners hadshown great dynamism, growing veryrapidly inthefirsthalfof1997.
Inpractice, Mexico alsoconsidered important theprinciples ofMFN andnational treatment infederal
government procurement; reservations fornational suppliers were clearly specified inMexico 's
international treaties. Therepresentative concluded thatMexico 'sregional agreements complemented
themultilateral system. Most, including NAFTA, LAIA andtheG-3agreement, hadbeennotified
andothers would benotified shortly.
Implementation ofcommercial policies, including sectoral policies
Members appreciated Mexico 'sautonomous tariffreductions andthedecline inotherrestrictions
since the1980s. However, concerns were expressed about thegapbetween "ceiling" bound tariffs
andapplied levels; thisissuewashighlighted byincreases intariffs fortextiles, clothing, andfootwear
in1995. Some Members asked about therationale forsuchincreases inview oftheearlier strong
devaluation oftheMexican currency.
SeveralMembersexpressedconcernregardingMexico'sapplicationofaFOBcustomsvaluation
baseforNAFTA andCIFforother partners. Some Members sought information ontheoperation
ofregistration requirements, including onasector-specific basis. Information wasalsorequested on
restrictions ontheentry ofvarious products through specific Mexican ports.
Some Members noted Mexico 'sintensive useofanti-dumping measures, which theyfeltwas
increasing uncertainty foreconomic operators, while undermining Mexico 'sreforms. Information
wasrequested onproposed changes tocurrent anti-dumping legislation, andontheindependence of
itsanti-dumping authority; itwasalsonoted thatMexico imposed special origin certification
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requirements forcertain products subject toanti-dumping measures; intheopinion ofsome Members,
these requirements imposed excessive demands ontraders from thirdcountries.
Potential problem alsoincluded theincreased useoftechnical andlabelling requirements that
didnotseem toconform tointernational standards, including brand regulations introduced in1996.
Mexico wasasked about thescientific justification formeasures affecting riceimports.
MembersnotedthatMexicowasnotamemberoftheWTOGovernmentProcurementAgreement,
andrestrictednationalpublictenderstodomesticsuppliers.Mexicowasaskedwhetheritwouldconsider
acceding toanewagreement ongovernment procurement orparticipate intheongoing discussions
ontransparency.
Several Members asked when Mexico would notify CONASUPO asaStatetrading enterprise.
Members requested information onthecurrent status ofpolicy reforms affecting agriculture,
including theuseoftariff quotas anddirect payments under PROCAMPO. Some Members thought
thatthere wasaneedforfurther trade liberalization onanMFN basis.
Members recognized theconsiderable economic importance ofthemaquiladora industry, but
some stressed theneedtoencourage itscloser integration inthedomestic economy. Several Members
sought details onthephasing outoftheregime by2001, asprovided under theNAFTA, andtheregime
thatwould thenprevail withrespect tothirdcountries.
Mexico 'spolicies topromote theautomotive sector wereseenascontradicting thecountry 's
general thrust towards amore liberal trade regime. Some members asked howcurrent restrictions
would beliberalized forsuppliers notcurrently producing inMexico. Mexico wasrequested toopen
theautomotive market aftertheyear2000, asprovided bytheWTO TRIMs Agreement.
Members asked about plans forfurther liberalization oftrade andinvestment conditions in
services andwelcomed Mexico 'sactive participation incurrent negotiations. Details wererequested
onMexico 'spolicy towards financial services. Information wasalsorequested onhowMexico 's
development banks obtained funding andsetinterest rates.
Inreply, therepresentative ofMexico pointed outthatMexico 'stradeliberalization, including
recent tariff eliminations, waslargely theresult ofautonomous actions, benefiting allpartners. The
gapbetweenappliedandboundrateswasduetothisliberalizationaswellastotarifficationinagriculture.
Mexico stood ready tonegotiate onbound levels inanewmultilateral round. Henoted thatrecent
tariffincreases ontextiles, clothing andleather goods werewithin bound levels. Thedifference between
customs valuation onaFOBbasisofNAFTA tradeandCIFbasisforother tradewould beinsignificant
andtemporary, given thegeographical proximity, andthelargeshare ofduty-free trade, which would
eventually encompass allNAFTA trade. Therepresentative noted thatinitiation ofanti-dumping
procedures depended onrequests. Thenewdraftlaw,stilltobeapproved byCongress, wasintended
toharmonize domestic textswiththeWTO rules, which hadthestatus ofSupreme LawinMexico.
Origin certificates were intended tocounter circumvention incases where finalanti-dumping duties
hadbeenimposed.
Therepresentative saidthatthere wasnorequirement fordomestic standards tobeinstrict
agreement withinternational standards, although inMexico thelatter often served onthebasis for
domestic norms andthiswasconsidered important forpromoting Mexico 'seconomic development
andinternational competitiveness. Hegavedetails oftheoperation oftheNational Standardization
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Commission, procedures fortheestablishment ofMexican standards andcertification, which wereopen,
transparent andequitable, andontheuseofISO9000 and14000 procedures. NAFTA provisions
inthisregard werecompatible withWTO rulesanditsCode ofGood Practice. Healsogavedetails
ofMexico-EU cooperation. Theoperation oftheMexican labelling system wasexplained. TheNational
Commission forAnimal andPlantHealth, anautonomous body, established, regulated andcoordinated
sanitary andphytosanitary rules.
Hesaidthat,asnoted earlier, Mexico hadatransparent andnon-discriminatory regime for
government procurement, andmostfederal procurement wasonaninternational basis. Reciprocity
rules reflected international realities. Mexico hadfought forthissubject tobeincluded inFTA
agreements andsupported thework oftheWTO working party ontransparency ingovernment
procurement.Atpresent,however,theGPAwaslimitedinmembershipanddidnotguaranteereciprocal
treatment.
Therepresentative emphasized that,following theUruguay Round, CONASUPO wasnolonger
thesolechannel fortheimport ofmilkpowder. Others could import atthein-quota tariff with
appropriate certification, orotherwise attheout-of-quota rate. Theissue oflicences to"traditional"
importers (inthisevent, CONASUPO) forin-quota imports should notbeconfused withstate-trading
operations.
Therepresentative alsogavedetails oftheoperation ofvarious sectoral policies. Hesaidthat
thein-bond (maquiladora) industry regime would bechanged from1January 2001asaresult ofNAFTA
commitments, toequalize tariff treatment oninputs asbetween goods soldondomestic markets and
exports tootherNAFTA partners. MFN duties would continue tobepaidonimports fromnon-NAFTA
partners.
Inagriculture, theroleandcoverage ofPROCAMPO wasexplained; imports could exceed
WTO access commitments ifrequired toensure supplies; price controls werelimited totortillas and
tocornflour. Heexplained thestatus ofautomotive policy, which aimed toexpose thesector
progressivelytoexternalcompetition;TRIMSprovisionshadbeennotifiedandNAFTAaspectsdiscussed
intheWTO Committee onRegional Trade Agreements; henoted thatthetransitional period allowed
under theTRIMS agreement could beextended bytheCouncil onTrade inGoods.
Therepresentative noted thatmarket opening andderegulation hadimproved thesupply in,
andcompetitiveness of,theservices sector inrecent years. Mexico 'scommitments intheWTO were
extensive andambitious. Thesoleexceptions toMFN treatment related tocross-border landtransport
withtheU.S.; Mexico wasreviewing itscommitments withaviewtoremoving asmany barriers as
possible onanMFN basis. Heprovided details oncertain limits toforeign investment andthe
circumstances inwhich thelimits could beexceeded. Healsoreviewed developments, bindings and
conditionsforforeigndirectinvestmentintelecommunications,maritimeandlandtransport,andfinancial
services.
Specific questions
Memberssoughtinformationonrecentforeigninvestmentflows,andonpoliciesandregulations
todiversify thesources ofnewinvestment. They asked about theelimination ofremaining restrictions
onprivate andforeign participation inanumber ofsectors.
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Mexico wasasked about itsrecent experience withtheFederal Competition Commission, on
planstostrengthen theCommission, andoncooperation programmes withothercountries incompetition
policy.
Several members expressed appreciation fortheintroduction ofimproved legislation on
intellectual property, butraised various questions onplant protection, copyright andenforcement.
OneMember requested information onanewHealth Lawaffecting generic drugs.
Inreply,therepresentativeofMexicosaidthattheForeignInvestmentLawof1996hadextended
onanMFN basis thetreatment negotiated under NAFTA. Hecited examples oftheliberalization
andsimplification oftheinvestment regime. Other regional tradeagreements alsoincluded disciplines
oninvestment. Bilateral agreements fortheprotection ofinvestment hadbeensigned withanumber
ofcountriesandMexicowasparticipatingactivelyintheOECDnegotiationsforaMultilateralAgreement
onInvestment.
Hesaidthatderegulation andprivatization complemented economic liberalization, especially
inservices, fisheries andmining. TheCouncil onEconomic Deregulation wasworking mainly on
simplifying administrative procedures andeliminating inefficiencies, andhegaveexamples oflegislative
reform inthearea. Healsoprovided information ontheoperations oftheFederal Competition
Commission, anautonomous bodycharged withinvestigating andcombatting monopolies, monopolistic
practicesandanti-competitivemergers,fosteringderegulationandpromotingacompetitiveenvironment.
Hegavedetails ofinternational cooperation inthisarea.
Hedrew attention tothefactthat,while Mexico wasusing theextended period afforded to
developing countries toimplement theTRIPS agreement, Mexico nowhadmodern legislation inthis
area,covering industrial property, authors 'rights andplantprotection. Work wasalsobeing undertaken
todraftalawfortheprotection ofintegrated semi-conductor circuits. Hegavedetails ofpenalties
forinfringement andconfirmed thatcustoms could seize infringing goods.
*******
Overall, Members commended Mexico foritscontinued programme oftrade liberalization
andeconomic reform, despite thedifficult circumstances faced inrecent years. Mexico 'sopenpolicy
hadassisted recovery fromthe1995 recession. However, concerns about certain areaswereexpressed
inthediscussion, including: thebalance between regionalism andmultilateralism; theuseof
anti-dumping measures; government procurement policies; application ofstandards; andsectoral
policy aspects inagriculture, manufacturing andservices. Members encouraged Mexico tocontinue
itspositive participation intheWTO.
END