RESTRICTEDWORLD TRADE
ORGANIZATIONWT/REG109/M/1
19 December 2001
(01-6391)
Committee on Regional Trade Agreements
Thirtieth Session
EXAMINATION OF THE FREE TRADE AGREEMENT
BETWEEN THE EUROPEAN COMMUNITIES AND MEXICO
Note on the Meeting of 26 September 2001
Chairman:  Mr. A.J. Dumont (Argentina)
1. The meeting was convened in document WTO/AIR/1618.
2. Under Agenda Item B.VI of its Thirtieth Session, the Committee on Regional Trade
Agreements (CRTA) took up the examination of the Free Trade Agreement (FTA) between the
European Communities (EC) and Mexico.  The following topics were discussed:
A. General Remarks
B. Section I – Background Information on the Agreement
C. Section II – Trade Provisions
3. The Chairman noted that this was the first round of examination of the Free Trade Agreement
between the EC and Mexico.  The notification of the Agreement had been distributed in
document WT/REG109/N/1, and the text of the Agreement in document WT/REG109/1 and its
Addendum.  He proposed to organize the examination by first asking the Parties and other Members
for general comments and then turn to the specif ics of the Agreement, using the Standard Format
(WT/REG109/3) to guide the debate.  He recalled the terms of reference for the examination, adoptedon 16 October 2000 by the Council for Trade in Good s as contained in document WT/REG109/2:  "to
examine, in light of the relevant provisions of the GATT 1994, the Free Trade Agreement between the
European Communities and Mexico and to submit a report to the Council for Trade in Goods."  These
terms of reference applied in conjunction with the fo llowing Understanding:  "It is understood that the
Understanding read out by the Chairman of the Council for Trade in Goods under item 7 of the
Agenda of the meeting of the Council for Trade in Goods on 20 February 1995, as contained in
document WT/REG3/1, will apply mutatis mutandis to the examination of the agreements.  It was also
understood that, during the examination, due account would be taken of the intrinsic differences
between customs unions and free-trade areas."
A. G
ENERAL REMARKS
4. The representative of Mexico said that the objective of the trade instrument implemented by
Mexico and the European Union on 1 July 2000 was to give dynamics to a relationship which had
been characterized by relatively modest trade flows and which did not reflect the Parties' participation
in world trade.  To achieve this objective, the Parties had drafted an unprecedented agreement which
provided for:  a fast schedule for the elimination of customs levies for trade in goods; rules for theapplication of standards and sanitary and phytosanitary measures;  access to public procurement; a
legal framework for the liberalization of services;  disciplines to protect investments and intellectual
property; detailed procedures for the rapid and impartial resolution of trade disputes; and anWT/REG109/M/1
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institutional framework to manage the operationalization of the commitments established by the
Agreement.  He noted that the Agreement was wide-ranging, covering all the sectors and all the areas
which a trade inciting agreement should contain.  He acknowledged that a year was a short period of
time to seriously assess the impact of the Agreement on trade.  However, the results of the first twelve
months showed that the Agreement was indeed achieving its objectives and that it was promotingtrade with third parties.  During the first year of operation, bilateral trade grew by 25 per cent.
European imports from Mexico grew by 39 per cent, while Mexican imports from the European
Union grew by 20 per cent.  The increase in tr ade and investment flows between the Parties was
acting to the benefit of their respective populations.  He noted that the export sector was the most
dynamic of the Mexican economy and that it was generating new and better paid employment.  Half
of the new posts created over the past five years – three and a half millions jobs - were export related.
In the year 2000 export companies exporting 80 per cent of their total sales paid wages which were62 per cent above the level paid in the remaining sectors.  Industries which exported more than
60 per cent of their production paid wages which were 37 per cent higher than those paid in the rest of
the industry.  It was for that reason, he said, that Mexico and the EC were committed to free trade
whether that would be bilateral or multilateral.  Having obtained the required domestic consensus to
conclude free trade initiatives with its major trading partners Mexico had strengthened its position as apromoter of the liberalization process at the multilateral level.  He concluded by saying that the FTA
with the EC was consistent with the spirit and the letter of WTO's provisions, particularly with Article
XXIV of the GATT 1994 and Article V of the GATS.
5. Recalling the institutional context in which the Agreement had been developed, the
representative of the European Communities indicate d that the negotiations leading to the FTA were
launched following the conclusion of the Interim Agreement on Trade and Trade-Related Matters
between the EC and Mexico.  This Interim Agreement had been signed on 8 December 1997, and was
in force between 1 July 1998 and 1 October 2000, when it was superseded by the Economic
Partnership, Political Co-ordination and Co-operation Agreement between the European Community
and its Member States, on the one part, and Mexico, on the other.  The Economic PartnershipAgreement – which for greater simplicity, was referred to as the "Global Agreement" – had been
concluded at the same time as the Interim Agreement in December 1997, but its entry into force was
conditional on the completion of ratification procedures by all the Parties, including the 15 EU
Member States.  The Global Agreement was based on democratic principles and respect for human
rights and institutionalised a regular political dialogue and extended bilateral co-operation between
the Parties.  Effectively, therefore, it marked a new phase in the development of political as well as
commercial and economic relations between the Partie s.  Within that framework, the EC and Mexico
undertook negotiations to establish a free-trade area covering trade in both goods and services.  These
negotiations were conducted in parallel during the period 1998-2000, but as a result of the different
approval and ratification procedures involved within the EC, the results of the negotiations were put
in place in two stages.  Firstly, Decision 2/2000 entered into force on 1 July 2000, and dealt
particularly with trade in goods and other matters within the sole competence of the EuropeanCommunity.  Secondly, Decision 2/2001, of 27 February 2001, entered into force on 1 March, and
established an economic integration agreement in the area of trade in services.  This latest Decision
also brought into effect other provisions designed to deepen the bilateral trade relationship between
the Parties – for example in the area of investment and intellectual property.  These different elements
were all components of the FTA between the two Par ties.  Of course, in WTO terms, they had to be
addressed and considered under two distinct headings – Article XXIV of the GATT for those
elements relating to the FTA in goods and Article V of the GATS for those relating to the FTA in
services.  He recalled that the Committee was on that day considering the FTA in relation to the
provisions relating to trade in goods.
6. Turning to the key elements of the EC-Mexico FTA in the area of trade in goods, the
representative of the European Communities said that Decision 2/2000 established a FTA over a
transitional period lasting a maximum of ten years from the date of entry into force, which wasWT/REG109/M/1
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1 July 2000.  The Decision gave effect to a number of the objectives set our in the Interim Agreement
of 1997 such as the gradual and reciprocal liberalisation of trade in goods;  the opening of respective
government procurement markets;  establishment of co-operation mechanisms for competition matters
and for intellectual property;  and creation of a dispute settlement mechanism.  The Decision covered
products in all chapters of the Harmonised System.  In general, quantitative restrictions on importsand exports, and measures having equivalent effect, were abolished from the date of entry into force
of the Decision.  The only exceptions foreseen were that Mexico might maintain certain measures or
restrictions on imports of certain petrochemical products, used computers, used clothes and used
vehicles.  Mexico also had the possibility to maintain restrictions on imports of certain motor vehicles
within a transitional period ending on 31 December 2003.  Customs duties on exports and measures
having equivalent effect were also eliminated from entry into force.  With regards to import tariffs, all
charges on imports other than customs duties were eliminated on entry into force of the Decision.Customs duties on imports of industrial products wo uld be eliminated by the end of a transitional
period of two and a half years (for imports into the EC) or of six and a half years (for imports into
Mexico).  Most liberalization was "front loaded": the EC had eliminated duties on 82 per cent of tariff
lines at entry into force and would eliminate the remaining 18 per cent by 1 January 2003.  Mexico
had eliminated duties on 47 per cent of industrial items on entry into force.  An additional 5 per centof items would be fully liberalized by 1 January 2003, while the remaining 48 per cent would be
liberalized by either 2005 or 2007.  For items that were not fully liberalized on entry into force of the
Decision, the tariff elimination schedule on both sides was progressive.  By 1 January 2007, therefore,
100 per cent of trade in industrial products would be duty-free.
7. The representative of the European Communities then turned to import tariffs on agricultural
and fisheries products and said that the Decision provided for the staged elimination of duties within a
transitional period of ten years.  The liberalization concerned 58.6 per cent of bilateral trade in
agriculture and 99.4 per cent of bilateral trade in fisheries (using 1996-98 trade figures for reference).
For a number of products, tariffs were eliminated already on entry into force; for others, liberalization
would be achieved on a staged basis.  However, no liberalization timetable ran for a period goingbeyond 1 July 2010, the tenth anniversary of entry into force of the Decision.  Details of the different
timetables used were set out in the Standard Format.  By the end of the transitional period, based on
1996-98 figures, 80.7 per cent of Mexican agricultural exports to the EC and 42.6 per cent of the EC's
exports to Mexico would receive duty-free treatment.  The same would be true for 100 per cent of
Mexico's exports of fisheries products to the EC and for 88.7 per cent of the EC's exports to Mexico.
For the remaining agricultural and fisheries products, complete tariff elimination was not immediately
foreseen.  However, the Decision provided for a revi ew to be held within three years of entry into
force to consider further steps in the process of liberalization of trade between the Parties.  Taking
trade in industrial agricultural and fisheries products together, 97 per cent of bilateral trade would
receive duty-free treatment by the end of the transitional period.  Furthermore, no major sector of
trade was excluded from the scope of the Decision.  The Parties therefore had no doubt that the FTA
met the requirement of GATT Article XXIV:8(b) that duties and other restrictive regulations ofcommerce be eliminated on substantially all trade between them.  Similarly, as there was nothing in
the Decision that required the Parties to raise the level of duties or other regulations of commerce
applicable to the trade of other Members of the WTO, the Parties also considered that the Decision
met the requirements of Article XXIV:5(b) of the GATT 1994.  The Decision was not limited to the
elimination of duties and non-tariff restrictions on bilateral trade, important though that was.  It alsoprovided the basis for increased bilateral co-operation in the field of technical regulations, standards
and conformity assessment as well as in the area of sanitary and phytosanitary measures.  The
Decision also put in place a consultation mechanism on intellectual property rights and co-operation
mechanism between the Parties' respective competition authorities.  It provided for reciprocal access
to the government procurement markets of the Parties.  Additional provisions on intellectual propertyrights had also entered into force earlier that year as part of the package covered by Decision 2/2001.WT/REG109/M/1
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8. Finally, the representative of the European Communities said that the period since entry into
force had seen a continuing growth in the volume of  bilateral trade, equivalent to nearly 30 per cent
on an annual basis.  He acknowledged that it was di fficult to draw any definitive conclusions from
such a short period and that the growth in trade and investment flows betw een the two Parties, as
indicated in the Standard Format, had been on the increase since the mid-1990s.  He noted, however,that the trend seemed to have accelerated as a result of the entry into force of the FTA.
9. The representative of Hungary welcomed this first transatlantic agreement and noted that the
Agreement between the EC and Mexico went far beyond the parameters of normal FTAs, and that
gave additional importance to its examination.  He emphasized that the Parties, by creating the FTA,
had not increased barriers vis-à-vis  third parties;  rather, they would be creating additional trade
opportunities for third parties. He considered that the Agreement met the general and specific
requirements of GATT Article XXIV and that it represented a building block rather than a stumbling-block of the multilateral trading system.
10. The representative of Norway expressed interest and welcomed the trade figures mentioned
by both Parties, and especially those by the representative of Mexico which he regarded as
impressive.  Stressing the importance that his delegation attached to the multilateral trading system
and the WTO, he said that RTAs entered to by his country were designed to complement themultilateral framework.  In that context, he was of the opinion that the Agreement contradicted those
who held that bilateral and regional agreements might create trade blocks and was glad that Norway,
as part of EFTA, was also able to conclude a very similar agreement with Mexico.  He had no doubt
that the Agreement under review fulfilled the "substantially all the trade" criterion of GATT Article
XXIV and referred to the Standard Format figure of 97 per cent of total trade which would be coveredby the end of the transitional period.  He also remarked with interest the broad nature of the
Agreement and the new areas covered.
11. The representative of Turkey noted that whilst RTAs examined in the CRTA were generally
established within identified regions, the Agreement under consideration was a significant example of
a FTA which was intercontinental. As such, he said, RTAs were contributing to the multilateraltrading system. He added that since the EU had concluded a FTA with Mexico, Turkey was in due
time going to sign a similar agreement with that country.
B. S
ECTION I - B ACKGROUND INFORMATION ON THE AGREEMENT
12. The representative of Australia recalled that one of the Committee's primary concerns was the
tendency for many RTAs to largely or completely exclude agriculture.  That seemed in his opinion to
run counter to the requirements under GATT Article XXIV that RTAs cover substantially all the trade
between the parties.  Against that background, he acknowledged that the Agreement between the EC
and Mexico appeared to cover in a comprehensive way all trade between the Parties, as well as taking
a negative list approach to agriculture.  He noted, however, that the number of tariff lines falling
within Category 5, where the only commitment was to  review the applied tariffs no later than three
years after entry into force, was quite large.  Acco rdingly, he asked the Parties for information on the
amount of bilateral trade falling under Category 5 tariff lines.  The representative of the European
Communities reiterated that the Parties to the Agr eement had made substantial efforts to ensure a
significant liberalization of agricultural trade by the end of the transitional period and that by then
62 per cent of it would be free of duties.  Thus, in his opinion they were discussing aspects of the
Agreement which were essentially marginal in terms of the key question for the Committee of the
Agreement's coverage of substantially all the trade.  Nonetheless he took note of the question andwould answer to it in writing.
13. The representative of Canada wished to thank the Parties for their very detailed introductory
statements and wondered whether copies of the st atements could be handed out, as they containedWT/REG109/M/1
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statistics which would most certainly prove useful for the examination of the Agreement.  In terms of
the tables she wondered whether or not the Parties could provide tables similar to those provided for
the EFTA-FYROM Agreement which included on a chapter by chapter basis trade statistics broken
down by duty free, those were concessions would be given and those without concessions.  That
would give delegations a better idea of the extent of the coverage as well as facilitate their analysis ofthe document.  The representative of the European Communities feared that such a request would lead
them down an avenue familiar to the Committee from previous examinations, which was to considerwhether or not for the purposes of Article XXIV, information was required on different preferential
treatments.  His view on the matter was that once it ha d been shown that the vast majority of trade (in
the case of the Agreement, 97 per cent of trade) would be fully liberalized, additional statistical data
became essentially mute.  Nonetheless, he took note of the point;  the EC and Mexico would consider
what information they could provide in response.
C. S
ECTION II - T RADE PROVISIONS
14. With respect to Article 8.2(a) in Section II of the Agreement, the representative of Canada
sought clarification from the Parties on whether the product in brackets, canned tuna, was the only
product for which customs duties were reduced within the limits of a tariff quota.  The representative
of Mexico confirmed that canned tuna was the only product. He added that regulations on tuna lines
were currently being discussed.
15. The Chairman noted that the first round of examination of the FTA between the European
Communities and Mexico had allowed the Committee to clarify a number of questions, although
others were still pending. He invited those delegati ons wishing to ask additional questions to forward
them to the Secretariat by 12 October, at the latest , and the Parties to submit their replies in writing as
soon as possible and no later than 30 November.
16. In his concluding remarks, the representative of the European Communities stressed that the
Agreement had been negotiated on the basis of the disciplines on RTAs stipulated in Article XXIV
agreed to during the Uruguay Round.  Compatibility of the Agreement with WTO requirements was
indeed an important consideration during the course of the negotiations. In that context, he expressed
satisfaction to the 97 per cent product coverage of the Agreement which he regarded to be compatible
with WTO requirements.  He added that the Agreement belonged to a new generation of RTAs whose
scope went beyond tariff reduction to include many other trade-related provisions.  He asked
Members of the Committee to bear those factors in mind when asking additional questions on the
coverage of the Agreement.
17. The Committee took note of the comments made.
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