RESTRICTED
WORLD TRADE WT/TPR/G/29
2September 1997
ORGANIZATION(97-3458)
Original: Spanish
TRADE POLICY REVIEW
MEXICO
Report bytheGovernment
Pursuant totheAgreement Establishing theTrade Policy Review Mechanism (Annex 3ofthe
Marrakesh Agreement Establishing theWorld Trade Organization), theMexican Government 'spolicy
statement isattached.
Note:Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body onMexico.Mexico WT/TPR/G/29
Page iii
CONTENTS
Page
INTRODUCTION ......................................... 1
I. THE 1994 CRISIS AND RENEWED ECONOMIC GROWTH ........... 1
II. UNILATERAL LIBERALIZATION ........................... 2
(1) Tariffs andnon-tariff barriers ........................... 2
(2) Investment ....................................... 2
(3) Customs procedures ................................. 3
(4) Standards ....................................... 3
(5) Competition policy ................................. 4
(6) Intellectual property ................................. 4
(7) Deregulation ..................................... 5
(8) Implementation oftheresults oftheUruguay Round ............ 5
III. REGIONAL AGREEMENTS ................................ 6
CONCLUSIONS ......................................... 8Mexico WT/TPR/G/29
Page 1
INTRODUCTION
Theintensification ofstructural change, andinparticular theopening upoftrade, hasbeen
adefining feature ofMexico 'seconomic policy overthepastfouryears. Thishasbeencarried out
bothunilaterally andthrough regional andmultilateral negotiations, inkeeping withthecommitments
entered intointheWorld Trade Organization (WTO). Anoteworthy aspect ofthisopenness inrecent
years isthatithascontinued despite theeconomic crisis oflate1994.
Thefollowing presentation isdivided intofoursections. Thefirstdeals withtheeconomic
context ofliberalization. Thesecond describes some ofthemore important trade policy measures,
while thethirddealswithMexico 'stradenegotiation agenda atregional level. Thefinalsection contains
conclusions.
I. THE 1994 CRISIS AND RENEWED ECONOMIC GROWTH
ForMexico, theentry intoforce oftheUruguay Round commitments in1995 coincided with
theworst economic crisis inthecountry 'srecent history. Thesudden interruption offoreign capital
flows toMexico inlate1994 ledtoasharp devaluation ofthepesoandimposed theneedforasevere
adjustment programme. Despite thecrisis, theGovernment didnotadopt protectionist measures, as
hadoccurred inthe1982crisis. Infact,itevenproceeded tointensify theeconomic reforms undertaken
inrecent years, particularly withrespect totheliberalization oftradeandinvestment, while atthesame
timepursuing afar-reaching agenda ofinternational trade negotiations.
Bymaintaining andpushing onwithreforms, particularly inthetrade area, Mexico laidthe
foundations forrenewed economic growth afteronly20months, whereas ithadtaken several years
toovercome the1982 crisis.
During 1995, economic activity shrank verysignificantly, witha6.9percentdecline inthe
value ofGDP compared withgrowth of2.0percentand4.4percentin1993 and1994 respectively.
Nevertheless, theeconomy turned around andgrew by5.1percentin1996, andisforecast toexpand
atabout 5percentannually untiltheyear2000.
Over thelasttwoyears, exports havemade afundamental contribution toGDP growth, and
today account forabout aquarter oftheproduct. Between 1993and1996, theaverage annual growth
rateoftotalexports was20percent, andin1995 alone theyincreased by30.6percent. In1996,
thevalue ofMexican exports totalled 96billion dollars.
Manufacturing exports grew atanaverage annual rateof22.7 percentovertheperiod
1993-1996, reaching 80.3billion dollars in1996. Astriking feature hasbeenthe27.0percentannual
average growth rateofmanufacturing exports excluding themaquiladora (in-bond processing) sector
during thisperiod, foravalue of43.4billion dollars in1996.
Along withrenewed economic growth, inflation hasfollowed adownward trend sincethe1994
crisis. Inflation climbed from7.1percentin1994 to52percentin1995, butin1996 almost halved
to27.7 percent while theeconomy picked upstrongly. This trend iscontinuing, and
June1996-June 1997 inflation stood at20.4percent. Therateforthisyearisexpected tobe15per
cent, withacontinuing downward trend forsubsequent years.WT/TPR/G/29
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Theweakness ofeconomic activity in1995 wasreflected inthelabour market. Theopen
unemployment raterosefrom3.9percentinNovember 1994to7.6percentinAugust 1996, thehighest
levelsince thecrisis. Ithassteadily declined since then, reaching 3.4percentinJune1997, alevel
comparable tothatbefore thecrisis.
Lastly, Mexico 'seconomic crises overthelast20years havebeencharacterized byalowlevel
ofdomestic saving andhighdependence onexternal saving. Themeasures setinplace between 1995
and1996toboost domestic saving succeeded inraising itconsiderably, from15.0percentto20.4per
centofGDP. Atthesame timeother measures havebeenintroduced tobolster private saving inthe
coming years, suchasanewpension system, thepromotion ofpopular saving andataxpolicy aimed
atencouraging saving andinvestment. Thegoalistomake domestic saving themainsource offinancing
foreconomic growth, onlysupplemented byexternal saving.
II. UNILATERAL LIBERALIZATION
Onjoining theGeneral Agreement onTariffs andTrade (GATT) in1986, Mexico began to
speed upthestructural change andunilateral liberalization launched three years earlier. Opening up
theeconomy hasincreased itsefficiency andenabled Mexico tocompete more aggressively onworld
markets, withtheensuing impact oneconomic growth, exports andjobcreation. Italsolaidthe
foundations fornegotiating free-trade agreements (seesection III)andforMexico 'sparticipation in
theUruguay Round ofmultilateral negotiations. Some ofthemeasures taken byMexico overthelast
fouryears aredescribed below.
(1) Tariffs andnon-tariff barriers
Between 1993and1997, Mexico unilaterally eliminated most-favoured-nation tariffs onover
1,200 products; thenumber ofduty-free products increased from414in1993to1,658 in1997. This
tariffelimination primarily concerned inputs andmachinery usedintheagricultural, chemical, electrical,
electronic, textile andpublishing sectors.
Although thesimple average tariff hasremained atabout 13percentoverthelastfouryears,
theweighted average tariff1hasfallen significantly, down from 7.8percentin1993 to2.9percent
in1996 and2.7percentin1997.
Inconnection withtheelimination ofpriorimport licences, itissignificant thattheyhavebeen
replaced bytariffs for67agricultural products, inaccordance withtheUruguay Round tariffication
commitment. Mexico hasalsoestablished tariff quotas toensure entry ofspecific quantities of
agricultural products totheMexican market.
(2) Investment
Inorder toattract ahigher inflow offoreign capital, inDecember 1993theGovernment issued
theForeign Investment Law, subsequently amended inDecember 1996. ThisLaw, together withthe
North American FreeTrade Agreement, intensified thepolicy shiftonforeign direct investment towards
greater liberalization.
1Calculated onthebasis ofthetariff rateapplicable atthetimeofimportation.Mexico WT/TPR/G/29
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Over thelastfouryears theforeign investment regime hasbeenliberalized insectors thatare
fundamental forthecountry 'sdevelopment, suchasports, telecommunications, airtransport, natural
gasstorage, transportation anddistribution, railways, financial services andairports. Asaconsequence,
Mexico hasbecome oneofthemost opencountries intheworld forcompetition byforeign service
suppliers.
Inaddition, Mexico hasincluded disciplines oninvestment inthevarious freetradeagreements
ithassigned, thusproviding investors withgreater legal certainty. Sofar,reciprocal investment
promotion andprotection agreements (APPRI) havebeenconcluded withSpain (1995), Switzerland
(1995) andArgentina (1996), andsimilar onesarebeing negotiated withtheNetherlands, Germany,
France, theUnited Kingdom, ItalyandAustria.
Mexico hasalsobeen anactive participant invarious international forums dealing with
investment, suchastheWTO, theOrganization forEconomic Cooperation andDevelopment (OECD),
inwhichtheMultilateralInvestmentAgreement(MIA)isbeingnegotiated,andtheAsia-PacificEconomic
Cooperation mechanism (APEC).
Asaresult interaliaoftheliberalization ofitsforeign investment regime, Mexico received
31.5billion dollars inforeign direct investment from1994to1996, andwasthesecond biggest recipient
among developing countries, afterChina. For1997itexpects toreceive atleastafurther 8,750 million
dollars.
(3) Customs procedures
Customs procedures havebeenprogressively simplified andautomated overthelastfouryears,
making customs operations more streamlined andefficient. These changes arereflected inthenew
Customs Lawthatcame intoforce in1996.
Fourofthechanges made areparticularly important. Firstly, goods cannowbeloaded and
unloaded inseaport customs offices infacilities runbytheprivate sector. Secondly, togiveusers
greater legalsecurity, consultations concerning tariff classification canbemade inadvance andthe
responsibilitiesofcustomsagentsandimportersinforeigntradeoperationshavebeendelimited.Thirdly,
unnecessary redtapehasbeeneliminated toallow inland customs todealprimarily withtheclearance
ofintermediate andcapital goods, andtoenable eventual exporters tousebankaccount deposits for
import taxes; inaddition, regulations wereestablished forvirtual exportation ofgoods. Finally, in
accordance withinternational commitments thecomputed value method wasintroduced asthedutiable
basis forimports inaccordance withtheWTO Customs Valuation Code.
(4) Standards
Standards inMexico aremandatory orvoluntary. Mandatory standards aretermed Mexican
OfficialStandards(NOM)andareaimedatestablishingspecificationsforgoodsandservicesorprocesses
inorder toguarantee safety, protection ofhuman, animal orplant lifeorhealth ortheenvironment,
andprevention ofmisleading orfraudulent practices. Voluntary standards, known asMexican standards
(NMX), areusedasguides forconsumers andproducers andalsoasmeans ofguaranteeing quality.
ThelegalbasisoftheMexican standardization andconformity assessment system istheFederal
Metrology andStandardization Law. Aconsiderable amount ofwork hasbeencarried outonthe
elaboration ofstandards sincetheLawentered intoforcein1992. Inorder toadjust thelegalframeworkWT/TPR/G/29
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tonewinternational circumstances, theLawwasamended on20May1997: thechiefrevisions focus
onthefollowing aspects.
Firstly, private sector participation hasbeenencouraged intheelaboration, certification and
verification ofstandards, andgreater transparency hasbeensought inthese activities. Secondly, the
process ofelaboration ofstandards hasbeenderegulated, andinparticular cost-benefit analysis has
beenreplaced bytherequirement ofdemonstration ofregulatory impact. Thirdly, procedures for
verification ofcompliance withMexican Official Standards havebeensimplified, thusstrengthening
theinspection andchecking processes, andfairer parameters havebeenestablished forimposition of
penalties. Finally, another objective hasbeentoobtain recognition abroad ofMexico 'stechnical
infrastructure (testing andcalibration laboratories, accreditation andcertification bodies etc.)aswell
asrecognition inMexico ofsuchinfrastructure inothercountries: thisprovides thebasisforconcluding
mutual recognition agreements.
(5) Competition policy
Promotion ofeconomic competition hasunderpinned thetradeliberalization process inMexico
overthelastfouryears. TheFederal Economic Competition Lawthatcame intoforcein1993isaimed
atprotecting economic competition andunrestricted participation inmarkets byprohibiting monopolies,
anti-competitive practices andother restrictions thataffect theefficient operation ofmarkets forgoods
andservices. TheLawestablished theFederal Competition Commission astheindependent body
responsibleforitsimplementation.Besidesinvestigatingtheexistenceofprohibitedmonopolies,practices
andconcentrations, theCommission cangiveitsopinion onprogrammes, lawsandregulations that
mayhaveanimpact oneconomic competition.
Implementation ofaneffective competition policy hasbeenfundamental inorder toensure
thatpossible market concentration insome sectors oftheMexican economy doesnotimpair economic
efficiency.
Competition policy isamajor instrument fortheMexican Government tomaintain freeaccess
tointernational markets. Thus, Mexico hassought toimprove communication withthecompetition
authorities ofourmaintrading partners tocombat monopolistic practices generated abroad. Ourcountry
alsoparticipates actively ininternational forums working inthisareaandmaintains active contacts
withitscounterparts abroad.
IntheWTO Working Group onTrade andCompetition Policy, Mexico hasproposed a
comprehensive approach thatanalyses therelationship between allcompetition measures andtrade.
Inparticular, ourcountry isconcerned thatthebenefits oftheliberalization achieved sofarshould
notberestricted bytheuseofanti-dumping measures forprotectionist purposes.
(6) Intellectual property
Aspartofthedrive towards trade liberalization inrecent years, Mexico hasmodernized its
systemofprotectionofintellectualpropertyrightsinordertoincreasesubstantiallythelevelofprotection
ofsuchrights. Thishasbeenachieved bychanges intheregulatory framework andbystrengthening
theinstitutions responsible forenforcing these rights.
TheIndustrial Property Promotion andProtection Law, considered oneofthemostadvanced
intheworld, wasenacted in1991. Itwasupdated in1994 andretitled theIndustrial Property Law.Mexico WT/TPR/G/29
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Inaddition, anewCopyright Lawwasenacted inDecember 1996, replacing thelawof1984. With
respect tothebodies responsible forenforcing intellectual property rights, twonewindependent
institutions weresetup:theMexican Industrial Property Institute in1993, andtheNational Copyright
Institute in1997.
Pursuant totheWTO provisions, theabove-mentioned lawsinclude more efficient procedures
forensuring compliance andalsoincrease penalties inthecaseoftrademark forgery andcopyright
piracy. Aspecific lawconcerning plant varieties wasenacted inOctober 1996.
Finally, despite having atransition period totheyear2000toimplement itscommitments under
theWTO Agreement onTrade-Related Aspects ofIntellectual Property Rights, Mexico hasalready
made large strides inthisregard.
(7) Deregulation
Since 1989, oneofthemainaspects ofstructural reform inMexico hasbeentheimprovement
oftheregulatory framework governing economic activity. Forthispurpose, various legalprovisions
relating todifferent economic sectors havebeenupdated andsimplified. Thesectors concerned include
tourism, railways, airtransport, ports, landtransport, petrochemicals, electricity, telecommunications,
satellites, customs, foreign exchange, water supply, financial institutions, mining andfishing. Asa
consequence, theefficiency oftheMexican economy hasincreased significantly.
Furthermore,asfromNovember1995theFederalGovernmentbegantoimplementtheBusiness
Activity Deregulation Agreement, which isaprogramme forimproving administrative procedures and
cutting down onredtapeaffecting theestablishment andoperation ofbusinesses. Theprogramme
iscoordinated bytheMinistry ofTrade andIndustrial Development (SECOFI) withthecollaboration
oftheEconomic Deregulation Council (consisting ofrepresentatives ofthepublic sector, industry,
labour andtheacademic community). Itspurpose istoreview alltheformalities required forsetting
upandoperating businesses, aswellastherelevant legislation, inorder toreduce theadministrative
burden oncompanies. Thecountry 'sStategovernments havealladopted asimilar approach attheir
level.
(8) Implementation oftheresults oftheUruguay Round
Themeasures described above areinkeeping withMexico 'scommitments under theUruguay
Round.
Inaccordance withtheMexican Constitution, international treaties signed bythePresident
andratified bytheSenate, which isthecaseoftheUruguay Round Agreements, havethestatus of
supreme lawandtherefore donotrequire anyfurther legislative actfortheirapplication. Thechanges
andreforms introduced inMexican legislation havebeenprompted bytheneedtoharmonize domestic
trade rules withtheinternational rules soastofacilitate theirapplication.
Mexico considers implementation oftheUruguay Round commitments anddisciplines byall
WTO Members tobefundamental forstrengthening themultilateral trading system. Mexico hasfully
complied withallthese commitments, including thenotification ones. With respect toservices, itis
important tostress thatMexico 'sinitial commitments under theGeneral Agreement onTrade inServices
(GATS) cover 68sectors and329activities, which bears witness toMexico 'sdesire tocontribute to
opening upthissector onamost-favoured-nation basis. Ourcountry hasalsoplayed anactive partWT/TPR/G/29
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intheworking groups onservices thatarose outoftheUruguay Round: financial services, standards,
professional services andbasic telecommunications. Inthislastsector, Mexico granted considerable
liberalization asaresult ofthenegotiations concluded lastFebruary.
MexicohasparticipatedandwillcontinuetoparticipateactivelyinallWTOforumsandinitiatives
formultilateral liberalization, including thenewdispute settlement mechanism when itsinterests are
affected.
III. REGIONAL AGREEMENTS
Freetradeagreements areafundamental component ofMexico 'strade policy inrecent years.
TheybegantobenegotiatedbeforetheconclusionoftheUruguayRoundinordertoenhancetheMexican
economy 'scompetitiveness andopenupnewexport markets.
Mexico hassigned thefollowing freetradeagreements: Economic Complementarity Agreement
withChile (1992); North American FreeTrade Agreement withtheUnited States andCanada (1994);
Group ofThree FreeTrade Agreement withColombia andVenezuela (1995); andfreetradeagreements
withBolivia andCosta Rica(1995).
Theagreements include disciplines andcommitments inthefollowing areas: trade ingoods,
including agriculture; technical barriers totrade; government procurement; investment; trade in
services; intellectual property; andinstitutional provisions, including dispute settlement.
Thedisciplines andtypes ofcommitment inthedifferent agreements aremutually compatible.
Thissimplifies theirapplication byavoiding aheavy administrative burden fortheauthorities andfor
theprivate sector engaged intrade andinvestment activities under theagreements. Inaddition, they
enable theprivate sector tohaveareliable medium andlong-term planning horizon.
TheNorth American FreeTrade Agreement isveryimportant forMexico, notonlyowing
totheparticipation ofitsbiggest trading partner andasthemostcomprehensive agreement negotiated
sofar,butalsobecause itgenerated anincentive andinterest among othertrading partners fornegotiating
similar agreements. Mexico hascontinued totrytobroaden anddiversify itsmarkets, particularly
withcountries oftheAmerican continent andtheEuropean Union.
OntheAmerican continent, Mexico isnegotiating afreetrade agreement withGuatemala,
Honduras andElSalvador. Bilateral negotiations arealsounder wayforother agreements with
Nicaragua, Panama, Ecuador andPeru, aswellasforexpanding theagreement withChile. Inaddition,
negotiations arecontinuing withMercosur (Argentina, Brazil, Paraguay andUruguay) foratransitional
agreement toreplace theexisting agreements under theLatin American Integration Association (LAIA),
which willthenserve asabasis forbroader negotiations. Finally, together with33other countries
Mexico isparticipating innegotiations fortheprogressive elimination oftradeandinvestment barriers
andcreation ofaFreeTrade AreaoftheAmericas; these negotiations aretobecompleted by2005.
Likewise, Mexico completed thefirststage ofnegotiation ofanewbilateral agreement with
theEuropean Union. Thetextsofanagreement oneconomic association, political concertation and
cooperation, aninterim agreement andajointdeclaration wereconcluded inJuly1997. Asfarastrade
isconcerned, theparties haveundertaken tobegin negotiations toachieve bilateral andpreferential,
progressive andreciprocal liberalization oftradeingoods andservices, including payments andcapital
movements andgovernment procurement, aswellastheestablishment ofdisciplines concerningMexico WT/TPR/G/29
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competition, intellectual property anddispute settlement. Thetrade liberalization negotiations are
expected tobegin inearly 1998.
Inaddition, Mexico hassigned other kinds ofcooperation agreements relating totrade and
investment withvarious countries, including theRepublic ofKorea, Australia andNewZealand, and
hassetupadhocgroups, committees andbinational commissions toadminister traderelations. Mexico
alsoparticipates inother regional initiatives suchasAPEC, which hassetthegoalofachieving afree
trade andinvestment regime bytheyear2020.
Theregional agreements towhich Mexico belongs establish important precedents insome areas
thatcould beincluded infuture multilateral negotiations. Theregional agreements havegenerated
incentives forgreater regional andmultilateral liberalization. Accordingly, together withother WTO
Members Mexico favours theholding ofanewround ofnegotiations forindustrial goods, inaddition
tothenegotiations scheduled inother areas suchasservices andagriculture. Mexico willcontinue
tonegotiate regional trade agreements insofarastheygobeyond multilateral liberalization.
Mexico 'sinternational trade negotiations havefundamentally strengthened itstrade policy.WT/TPR/G/29
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CONCLUSIONS
Since itsaccession totheGATT in1986, Mexico hasbeenoneofthecountries where thepace
ofliberalization hasbeenswiftest. Thisliberalization wasnotchecked bythe1994 economic crisis;
onthecontrary, itwaspursued andintensified, which played animportant partintherapid recovery
ofeconomic growth.
Mexico hasimplemented important measures ofstructural change andliberalization inrecent
years, withthefundamental goalofenhancing itseconomic competitiveness. These measures concern
inparticular tariffs, non-tariff barriers, investment, customs procedures, standards, competition policy,
intellectual property andeconomic deregulation, andtheyarecompatible with Mexico 'sWTO
commitments.
These unilateral measures havebeenaccompanied byanambitious policy ofinternational trade
negotiations. Thatisprecisely whatthefreetrade agreements haveachieved: greater openness and
greater access tointernational markets. Mexico willcontinue toseekagreements ofthiskindasa
complement tomultilateral liberalization under theWTO.