WORLD TRADE WT/TPR/M/29
16December 1997
ORGANIZATION(97-5510)
Trade Policy Review Body
7-8October 1997
TRADE POLICY REVIEW
MEXICO
MINUTES OFMEETING
Chairperson: H.E. Mr.Munir Akram (Pakistan)
Page
I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON 2
II. OPENING STATEMENT BYTHE REPRESENTATIVE OFMEXICO 3
III. STATEMENT BYTHE FIRST DISCUSSANT 8
IV. STATEMENT BYTHE SECOND DISCUSSANT 10
V. STATEMENTS BYMEMBERS 12
VI. REPLIES BYTHE REPRESENTATIVE OFMEXICO
AND ADDITIONAL COMMENTS 21
VII. CONCLUDING REMARKS BYTHE CHAIRPERSON 37WT/TPR/M/29
Page2
I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON
1. Thesecond Trade Policy Review ofMexico washeldon7and8October 1997.
2. TheChairperson welcomed thedelegation ofMexico, ledbyH.E. Mr.Jaime Zabludovsky,
Vice-Minister ofTrade andIndustrial Promotion, andthediscussants, H.E.Mr.Werner Corrales Leal
ofthedelegation ofVenezuela andMr.IanWilkinson ofthedelegation oftheEuropean Union. As
usual, bothdiscussants would actintheirpersonal capacities. Asummary ofthemain points tobe
raised bythediscussants hadbeencirculated indocument WT/TPR/D/14.
3. TheChairperson recalled thepurpose oftheTrade Policy Reviews andthemain elements of
theprocedures forthemeeting. Thereport bytheGovernment ofMexico wascontained indocument
WT/TPR/G/29andthatoftheWTOSecretariatindocumentWT/TPR/S/29.Copiesofwrittenquestions
submitted bytendelegations (Australia; Canada; Brazil; European Union; Hong Kong, China;
Japan; Korea; NewZealand; Thailand; andVenezuela) hadbeentransmitted tothedelegation of
Mexico.WT/TPR/M/29
Page3
II. OPENING STATEMENT BYTHE REPRESENTATIVE OFMEXICO
4. Therepresentative ofMexico saidthatveryimportant events hadtaken place inMexico since
theprevious review in1993. Thesharpest economic crisis inMexico 'srecent history hadbroken in
late1994. However, thecountry hadgotten backontothepathofstable andsustained economic growth
more rapidly thanhadseemed possible twoyears before. Thiswasbecause Mexico hadmaintained
aregime open toforeign competition andpersevered instructural change andmodernization ofits
economy.
5. TheMexican representative noted thatvarious factors accounted forthecrisis inlate1994.
Theovervaluation oftherealexchange rateandtheriseininternational interest rateshadmade the
impact ofthecrisis evenworse, butthere hadbeenalsoother factors: financing thecurrent account
deficit byhighly volatile capital flows; anexcessive increase inshort-term foreign currency debt;
themaintenance ofarigidexchange policy, eveninthefaceofthechanges inworld conditions and
theoverwhelming events anduncertainty of1994; andthedecline indomestic savings.
6. Inview oftheemergency situation, economic policy hadbeendesigned tocopewithtwo
immediate challenges. First, anorderly remedy wasneeded tocorrect themacroeconomic imbalances
tiedinwiththehighcurrent account deficit andtheinflationary pressures caused bythedevaluation.
Second, ithadbeennecessary tocopewiththeproblem ofthematurity ofshort-term government debt,
aswellastheover-indebtedness oftheprivate sector anditsimplications forthefinancial system.
7. Inorder toremedy themacroeconomic imbalances, fiscal policy hadbeendirected atincreasing
revenues byraising indirect taxes, increasing prices andpublic sector tariffs, andcutting down budget
expenditure. Monetary policy wasinkeeping withtheobjective ofcontaining theinflationary effects
ofthedevaluation. With support frominternational financial institutions andMexico 'smain trading
partners, theliquidity problem caused bythematurity oftheshort-term dollar debthadbeenresolved
in1995.
8. Inview ofthedifficulties faced bythefinancial system, schemes hadbeenworked outto
strengthen Mexican banks. Aprogramme hadbeen introduced inSeptember 1995 toreduce the
short-term impact onsmall andmedium-size debtors oftheriseininterest rates. Other programmes
hadbeeninitiated in1996 tosupport persons withhousing loans andtoassist theagricultural sector.
9. Oneofthemost important causes oftheeconomic crisis inlate1994 hadbeenthelowrate
ofdomestic savings. Accordingly, Mexico hadembarked onanambitious reform ofthepensions system
which, overthemedium tolongterm, would make itpossible toincrease thesupply ofdomestic
resources tofinance economic growth. Thenewsystem, based onascheme ofindividual capitalization
accounts foreachworker, managed bynewprivate financial institutions, tookoverfrom thejoint
revolving fundoftheprevious pension system. Asaresult ofthisnewmechanism, domestic savings
were expected torisefrom 20.4percentofGDP in1996 to22.2percentbytheyear2000.
10. Inaddition tothesemacroeconomic measures, thestructural changes totheMexican economy
hadbeenspeeded upin1995 and1996 byliberalization oftheforeign investment regime, economic
deregulation, privatization ofpublic enterprises andtrade liberalization. Accordingly, unlike 1982,
when Mexico hadadopted protectionist measures tocopewiththebalance-of-payments crisis thatyear,
in1995 economic modernization hadbeen pushed through faster andMexico hadreaffirmed its
commitment tothemultilateral disciplines ofamarket economy.
11. Asaresult ofathorough programme andtheefforts ofmore thanadecade, thecrisis hadbeen
overcome within acomparatively shortperiod andgrowth hadmoved ahead onasound basis. WhereasWT/TPR/M/29
Page4
GDPin1995hadshrunk by6.2percent,theeconomy hadturned round in1996, witha5.1increase.
Inthefirsthalfof1997, GDP growth hadreached 7percent. Mexico 'seconomy wasforecast to
maintain agrowth rateofatleast5percentannually untiltheyear2000. Along withrenewed economic
growth, inflation hadtaken adownturn, from52percentin1995to27.7percentin1996. In1997,
itwasexpected tobearound 15percent, continuing tofallinsubsequent years.
12. Therepresentative saidthatveryimportant changes hadoccurred inMexico 'sforeign trade
overthepastfouryears, withitseconomic andexport growth being linked totheavailability ofinputs
under competitive conditions andincreasing access forMexican products toforeign markets. Exports
hadbeenverydynamic from 1992 to1996, rising from US$46.2 billion toUS$96 billion lastyear,
anannual average growth rateof20percent. Infact,thanks toeconomic liberalization andstructural
change, exports hadhelped tooffset thecrisis andledtoareturn togrowth. Without thegrowth in
exports, itwasestimated thatthereduction inGDP in1995 would havebeenclose to9.5percent
instead of6.2percent. According tothefigures inthelatest WTO Annual Report, in1996 Mexico
wasintenth place among theexporting andtheimporting economies; thisreflected theincreasing
integration ofMexico intotheworld economy. Whereas totaltrade asaproportion ofGDP had
accounted for29.1percentin1993, ithadreached 55.4percentin1996, withanabsolute value of
US$186.2 billion.
13. Concerning implementation oftrade policy, therepresentative noted thatasaresult oftariff
reductions under thefree-trade agreements (FTAs) signed byMexico andofunilateral liberalization
measures, theweighted average tariff hadfallen from 7.8percentin1993 to2.7percentin1997.
Since unilateral liberalization measures, which covered more than1,200 products, hadbenefited all
ofitstrading partners, Mexico hoped thattheyinturnwould adopt similar measures. Furthermore,
asithaddoneintheUruguay Round, Mexico wasready tocontinue tobinditstariffs atincreasingly
lower levels, through rounds ofnegotiations tobecarried outintheyears ahead.
14. Inkeeping withtheUruguay Round commitments, inJanuary 1995, priorimport licences had
beenreplaced bytariffs for67agricultural products andtariff quotas hadbeenestablished toensure
access totheMexican market. Asaresult oftariffication, out-of-quota tariffs were highonsome
products; however, inMexico 'scase, anumber ofagricultural imports subject toquotas hadbeen
imported atlower rates.
15. Oninternational tradenegotiations policy, therepresentative saidthat,inaddition totheWTO
multilateral agreements, Mexico hadfostered greater openness through negotiations onFTAs, which
wereabasic component oftrade policy. Mexico wasaparty tothefollowing trade agreements: the
Economic Complementarity Agreement withChile (since 1992); theNorth American FreeTrade
Agreement (NAFTA) withtheUnited States andCanada (1994); theGroup ofThree (G-3) FreeTrade
Agreement withColombia andVenezuela (1995); andthefree-trade agreements withBolivia and
Costa Rica(1995). These agreements, someofthemdating backtobefore theconclusion oftheUruguay
Round, werealmost universal incoverage interms ofgoods andservices andincorporated disciplines
connected withtechnical barriers totrade, government procurement, investment, intellectual property,
anddispute settlement. Mexico hadextended toallWTO Members thebenefits ofthose agreements
inareas suchasinvestment, customs procedures andintellectual property.
16. Thecompatibility between thedisciplines ofthedifferent agreements simplified theirapplication
byavoiding aheavy administrative burden fortheauthorities andfortheprivate sector engaged in
trade andinvestment activities under theagreements. Inaddition, theagreements wereinstruments
which enabled Mexico toexpand anddiversify itsmarkets andprovide theprivate sector withareliable
medium andlong-term planning horizon.WT/TPR/M/29
Page5
17. Apart from theagreements inforce, Mexico hadcompleted thenegotiations onaFTAwith
Nicaragua some weeks previously. Negotiations werealsounder waytoexpand theagreement with
Chile, andFTAs werebeing negotiated withGuatemala, Honduras andElSalvador (oneagreement),
aswellaswithPanama, Ecuador andPeru. Aninterim agreement wasbeing sought withMERCOSUR
toreplace theexisting individual agreements under theLatin American Integration Association, which
would beusedasthebasis forbroader negotiations inthefuture.
18. Mexico alsoparticipated asanobserver inCARICOM, aregional integration process covering
14Caribbean economies, anditwasactively collaborating withtheother 24member countries ofthe
Association ofCaribbean States (ACS) intrade, transport andtourism, among other matters. Finally,
itwasparticipating inthenegotiations fortheFreeTrade areaoftheAmericas, which would be
completed by2005.
19. NegotiationshadbeenconcludedinJulywiththeEuropeanUniononanAgreementonEconomic
Association, Political Concertation andCooperation. TheAgreement would mean that,in1998,
negotiations would begin inorder toachieve liberalization oftrade ingoods andservices, payments
andcapital movements andgovernment procurement; itwould alsoestablish disciplines incompetition,
intellectual property anddispute settlement. In1993, Mexico hadalsoentered theAsiaPacific Economic
Cooperation (APEC) mechanism, which hadsettheobjective ofafreetrade andinvestment regime
intheareafortheyear2010 inthecaseofdeveloped economies andfortheyear2020 inthecase
ofdeveloping economies.
20. Mexico tooktheviewthatregional agreements established important precedents insome areas
thatcould beincluded infuture multilateral negotiations, suchasservices andinvestment, andthey
hadcreated incentives forgreater regional andmultilateral liberalization. Mexico would continue to
negotiate regional trade agreements, inamanner compatible withtheWTO rules. Itconsidered that
openness wasachieved more rapidly withagreements ofthiskind, which significantly complemented
multilateral liberalization endeavours. Indeed, Mexico hadactively participated intheWTO andwas
clearly interested incontinuing trade liberalization atthemultilateral level. ItwasfortheMembers
oftheWTO todecide howfarandhowrapidly freetrade wastobereached worldwide.
21. Therepresentative thendiscussed other measures taken byhisGovernment tocontinue the
programme ofeconomic reforms, including theliberalization oftheforeign direct investment (FDI)
regime, protection ofintellectual property rights, economic deregulation, promotion ofeconomic
competition, andlegislation onstandardization. Onthefirstpoint, henoted thattheForeign Investment
Law, enacted in1993, hadconsolidated andpushed ahead withtheliberalization begun in1989, and
ithadextended, onaMFN basis, theliberalization agreed onunder theNAFTA. Under thisLaw,
therestrictions onforeign investment inmost economic activities hadbeeneliminated.
22. In1995, theinvestment regime hadbeenliberalized inrailways, satellite communications and
natural gasstorage, andtransport anddistribution, activities thathadbeenpreviously reserved forthe
State. Asaresult ofthese measures, outofthe704activities included intheMexican Activities and
Products Classification (CMAP) 606hadbeenopened up100percenttoFDI, 37accepted upto
100percent, afterafavourable ruling bytheNational Foreign Investments Commission (CNIE),
35permitted aminority interest, 16werereserved forMexicans; andtenwerereserved fortheState.
Asaresult, andowing tothefavourable medium- andlong-term yieldprospects thatMexico offered,
thecountry hadreceived US$32 billion inFDIfrom 1994 to1996, theequivalent of10percentof
allFDIchannelled tothedeveloping world. By1997 thecountry wasexpected toreceive afurther
US$11 billion.WT/TPR/M/29
Page6
23. Therepresentative stated thatafundamental aspect oftradepolicy wasprotection ofintellectual
property rights. Withthepublication oftheIndustrial Property Lawin1991, oneofthemostadvanced
legislation intheworld, Mexico hadbegun toreform itsregulatory framework andsignificantly enhance
thelevelofprotection. Thisprocess hadbeenstepped upwiththe1994amendments totheIndustrial
Property Law, theenactment in1996ofanewFederal Copyright Lawandchanges tothePenal Code,
alsoinmatters pertaining tocopyright. These instruments hadledtotheestablishment of,respectively,
theMexican Industrial Property Institute andtheNational Copyright Institute, monitoring bodies which
wereresponsibleforguaranteeingprotectionofintellectualproperty.Thenewlegislationalsoestablished
efficient administrative andjudicial procedures andconsiderably increased penalties forbreaches.
24. In1995, Mexico hadsigned theInternational Convention fortheProtection ofNewVarieties
ofPlants andtheFederal LawontheProtection ofPlant Varieties hadbeenenacted inOctober 1996.
In1997, Mexico hadbeenconfirmed asamember ofUPOV.
25. Therepresentativenotedthateconomicderegulationhelpedpromoteinvestment,sincetransparent,
straightforward rulesmade forlegalcertainty andreduced financing costsforexisting enterprises and
start-up costs fornewenterprises. Anexcessive regulatory burden wasespecially harmful tosmall
enterprises,inwhichtheentrepreneurhimselfwasresponsibleforcompletingtheformalities.Toachieve
economic deregulation, theEconomic Deregulation Council, consisting ofrepresentatives ofthepublic
sector, industry, labour andtheacademic community, hadbeensetupin1995. TheCouncil hadworked
infourareas: elimination orsimplification ofcurrent federal procedures; revision andimprovement
ofnewdraftregulations; formulation ofproposals forlegislative andadministrative reforms toimprove
thelegal framework forbusiness activity; andsupport forFederal States intheirowneconomic
deregulation programmes.
26. Alistofformalities forbusiness firms hadbeencompleted inDecember 1996 andhadbeen
validated byFederal offices. Itwasavailable, among other means, ontheInternet. Asacompilation
ofinformation onFederal business formalities inoneplace, thislistafforded greater legalcertainty
forenterprises. SECOFI andtheMinisters ofForeign Affairs, Health, Labour andSocial Welfare,
andtheDepartment oftheFederal District, hadsubmitted totheEconomic Deregulation Council their
commitments toeliminate andsimplify administrative formalities. More thantwothirds ofthese
commitments hadalready beenfulfilled andmatters outstanding were expected tobecompleted by
theendof1997.
27. Therepresentative saidthatanother important component ofstructural change inMexico was
competition policy. Promotion ofeconomic competition under theLawenacted in1993 andthrough
theestablishment oftheFederal Competition Commission inthesame yearhadbolstered thetrade
liberalizationprocessinMexicointhepastfouryears.Competitionpolicyhadbeencrucialinpreventing
possible market concentration insome sectors from impairing economic efficiency, including access
forimports totheMexican market. Inthisrespect, Mexico attached fundamental importance tothe
WTO Working Group onTrade andCompetition Policy, where anexamination would havetobemade,
among other things, oftherelationship between competition policy andother tradepolicy instruments,
including anti-dumping.
28. Regarding standards, henoted thatthechanges tothelegislation onstandardization thathad
entered intoforce inAugust 1997, hadencouraged theprivate sector toparticipate intheelaboration,
certification andverification ofstandards. Atthesametime,thegoalwastoachieve greater deregulation
andtransparency insuchactivities, aswellasmutual recognition withother countries ofthetechnical
infrastructure. These reforms guaranteed thattechnical regulations andstandards would notconstitute
unwarranted trade barriers.WT/TPR/M/29
Page7
29. Therepresentative concluded bysaying thatMexico, aswellascoping withtheeconomic
emergency inlate1994and1995bymeans ofamacroeconomic stabilization programme, hadcontinued
andspeeded upitsprogramme ofstructural change. TheMexican economy wasexperiencing economic
growth inwhich foreign trade played anincreasingly important role. Accordingly, Mexico was
committed toliberalization efforts atthemultilateral levelandfirmly supported theforthcoming start
ofanewround ofnegotiations intheWTO.WT/TPR/M/29
Page8
III. STATEMENT BYTHE FIRST DISCUSSANT
30. Thefirstdiscussant (Ambassador Werner Corrales Leal) saidthat,given hisowncountry 's
experience onreforms andeconomic development, hewould focus ontwoareas: theshort and
medium-term macroeconomic outlook, andmedium-term economic development andthesustainable
ofreforms. Henoted thatsince itsprevious Trade Policy Review, Mexico hadundergone andrapidly
surmounted aserious crisis without backtracking onmacroeconomic ortradereforms, orrelaxing fiscal
discipline.
31. GDP hadfallen 6.2percentin1995 butrebounded by5.1percentin1996; similar growth
wasexpected for1997. Theconsumer price index hadpeaked at35percentin1995and1996, fallen
toanequivalent annual rateof24.7percentduring thefirstquarter of1997, andwasexpected tofall
to15percentbyend-1997. Foreign exchange reserves hadfallen from US$24.5 billion to
US$6.1 billion in1994andthebanking system hadrequired assistance fortheequivalent of8.4percent
ofGDP. Without making useofcapital orexchange controls, Mexico 'scurrent account hadrecovered,
andthecountry hadrenewed itsparticipation ininternational capital markets andrebuilt itsforeign
exchange reserves. Overthelastfouryears, Mexico 'seconomic structure hadalsoundergone important
changes including increased industrial productivity andagrowing ratioofmanufactured exports to
GDP.
32. Mexico deserved recognition formaintaining thereforms during thecrisis, andthesuccessful
macroeconomic programme which, withinternational aid,hadre-established macroeconomic equilibria
andgrowth. Theprogramme hadbeenbased onachieving afiscal surplus andalargeinitial exchange
adjustment ("overshooting" interms ofpurchasing power parity), which hadmade possible agradual
appreciation during almost twoyears, andaninitially highly restrictive monetary policy tocounteract
inflationary pressures when thedevaluation made these strongest.
33. Some questions weresuggested bytherecent trends incertain indicators, andthenewpolitical
environment inwhich certain decisions tomaintain thereform programme would havetobemade.
There appeared tobesigns ofacurrent account deficit inrecent months, andaweakening oftheexport
growthinitiallydrivenbythecurrencydepreciationofDecember1994.Theappreciationoftheexchange
ratedhadcontributed toslowing down domestic inflation, butalsomayhaveundermined theexporting
advantageunderlyingthefastrecoveryin1996.Thiswasalsolinkedtopossibledeficitfinancingthrough
financial capital inflows attracted byhighrealinterest rates. These factors could create volatility in
thebalance ofpayments andreserves, andundermine private export competitiveness. Heasked: What
didMexico thinkoftheshort-term outlook forthebalance ofpayments, including therecent composition
ofimports andlikely evolution ofexport-related production andinvestment? How would exchange
andmonetary policies evolve, andwhatwere theirlinks toexport andbalance ofpayments trends?
34. Another macroeconomic question related tofiscal policy, aschanges werelikely orhadaffected
theenvironment within which government decisions were made. Thesuccess ofMexico 's
macroeconomic programme depended largely ongreater efficiency onfundraising bytheTreasury
andmaintaining fiscal discipline, which hadpermitted balancing thepublic accounts during 1995and
1996. These achievements werealsolinked toexogenous factors, namely, highpetroleum prices and
lowinterest ratesproducing highfiscal revenues fromPEMEX andamanageable levelofforeign debt
repayments, which were animportant partoftheMexican budget. What wasMexico 'scapacity to
maintain afiscal balance infuture years inview ofpossible initiatives inCongress toincrease
expenditures orreduce indirect taxes, orifpetroleum prices fellin1998? Thepossibility ofpolitical
pressures toincrease expenditures were, asinalladjustment programmes, related tothesharp fallin
private consumption andlower percapita income, which hadaffected particularly low-income groups
andproduced significant political vindications.WT/TPR/M/29
Page9
35. Trade liberalization andmacroeconomic equilibrium werenecessary butmight notbesufficient
toensure medium-term equilibrium inthebalance ofpayments andproduction growth. Moreover,
economic growth made sense onlyifitbenefited anexpanding proportion ofthepopulation which,
asshown bytheLatin American experience inthe1990s, didnotfollow automatically from trade
liberalization ormacroeconomic adjustment. Anambitious reform programme likeMexico 'swasonly
feasible withpolitical support; thisoccurred onlyifthepopulation enjoyed itsbenefits atanearly
stage.
36. Theevaluation oftradepolicies indeveloping countries wasincomplete ifitincluded onlytrade
andmacroeconomicconsiderations.Policymakingmustincludeotherareas,suchasfosteringinvestment
inexport activities aswellastheirvertical integration andinsertion intherestoftheeconomy; mastering
technology inexport activities andthose supporting them, likecapital goods production; compensatory
mechanisms tomaintain within tolerable margins theimpact ofreduced employment andincome that
result fromtheliberalization andmodernizations ofcertain sectors; andinducing thesustainable national
reinvestmentofprofitstolinkmorecloselygrowthtonationalprivatesavings.TheMexicanGovernment
hadofficially acknowledged theinseparability oftheseissues initsIndustrial Policy andForeign Trade
Programme.
37. Onspecific policies andthecompatibility ofdevelopment andtradeliberalization, thediscussant
highlighted Mexico 'sstrategy afteritsaccession totheWTO, which based liberalization andtrade
concessions onreciprocity. Thishadbeenthebasisofseveral regional initiatives including theNAFTA,
G-3, andFTAs withBolivia andCosta Rica. Itraised twoquestions. How andwhen didthe
Government foresee otherregional initiatives taking placetohelpMexico diversify itshighdependency
onNorth America, andwhich hadbeenaccentuated bytheNAFTA? Inwhich areas andtowhatextent
would Mexico extend NAFTA preferences toother WTO Members?
38. OnFDI,Mexico hadliberalized itspromotion andprotection regimes, included FDIinitsrecent
trade agreements, andbrought intoforce anew, more liberal law. Thediscussant asked about the
strategies andpolicy instruments usedtoencourage technology transfer through FDIinthemainexport
chains, aswellastheircompatibility withMexico 'sWTO engagements.
39. Insome sectors considered crucial fortrade, Mexico applied various trademeasures thatcertain
WTO Members considered WTO-incompatible, while others could undermine freetrade. Examples
included theautomotive andtextile-clothing industries. Anti-dumping measures werefrequent insome
ofthese andother industries; thiscould seriously limitcompetition andbe,thus,spurious bothfrom
thetradeanddevelopmental perspectives. What wastherationale forsuchmeasures andwhen would
theybeeliminated? Onanti-dumping, would theGovernment consider giving independence tothe
agency charged withinvestigations andapplying thelegislation?
40. Themodernization andliberalization ofsectors suchasagriculture andmaquiladoras raised
concerns foremployment. Agriculture contributed 7percentofGDP butemployed 25percentof
thework force; three-quarters ofthepopulation living inextreme poverty were intheruralsector.
Themaquiladoraindustrysupported900,000jobs,or25percentofthemanufacturingtotal;productivity
increases inmanufacturing between 1993and1996hadreduced thattotalby10percent. Thediscussant
asked about therolesplayed bymanufacturing andagriculture inthemodernization andliberalization
oftheeconomy, stepstoreduce dualism andstrengthen backward linkages inthemaquiladora industry,
andNAFTA 'sroleineliminating possibly WTO-inconsistent incentives inthisindustry. Howadvanced
wastrade reform inagriculture? How would compensatory andpreferential measures bemade
WTO-compatible?WT/TPR/M/29
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IV. STATEMENT BYTHE SECOND DISCUSSANT
41. Thesecond discussant (Mr. IanWilkinson) noted thatMexico wasarelative newcomer to
GATT/WTO. Accession hadbeenpreceded bythedebtcrisis oftheearly 1980s andfollowed bya
second financial crisis andeconomic recession in1994-95. Theeffects ofthecrisis werestillhaving
impact, buttheMexican response tothe1994-95 crisis hadbeencourageous. Ithadpursued bold
policies ofliberalization, de-regulation andprogressive, ifincomplete, openness toforeign direct
investment.Ithadalsoparticipatedinmajorinternationalnegotiations,NAFTAandtheUruguayRound.
Thediscussant stressed thatthese reforms hadbeenundertaken inacountry which 51percentofthe
population in1992 lived inpoverty and16percentlived inextreme poverty.
42. ThediscussantnotedthatNAFTAwasthemostimportantfactordeterminingMexicaneconomic
andtrade policy making. TheUStookover80percentofMexico 'sexports andaccounted for
75percentofitsimports. While thediscussant applauded thesuccess sofarandthecommitment
tofurther liberalization, henoted thattherewereseveral outstanding questions. Heasked theMexican
delegation under whatconditions thebenefits ofNAFTA liberalizations would beextended toallWTO
members. Asanexample, hepointed outthatunder NAFTA, Mexico would phase outseveral measures
tosupport exports, including themaquiladora regime, andliberalize government procurement. The
GovernmentofMexicoviewedthemultilateralliberalizationapproachasslowandMexicowas,therefore,
exploring theregional approach toliberalization. Herequested information regarding theGovernment 's
policy inthisarea, inparticular ontheuseofreciprocity asafundamental guiding principle intrade
policy. Wasthisbased onpolitical oreconomic considerations?
43. Thediscussant noted thatanimportant aspect ofthe1994-95 crisis wasthegeneration ofthe
right conditions forincreased foreign direct investment. Heasked theMexican delegation for
reconciliation oftheamount offoreign direct investment reported bythedelegation (US$31.5 billion
between 1994 and1996) andthefigures intheSecretariat report.1Hewasalsointerested inhearing
iftherewereanyplans toincrease thelimits onforeign ownership which applied inanumber ofsectors.
44. Thediscussant noted thatcompetition policy anditsenforcement werenecessary elements in
ensuring efficiency andsecuring thebenefits oftrade liberalization. Thus, thePPICE (Programa de
política industrial ycomercio exterior )wasbeing implemented under theNational Development Plan
1995-2000. TheFederal Economic Competition Lawhadcome intoforce in1993 andanewlawon
investment hadbeenadopted atend-1993. Moreover, healsopointed outthatMexico hadshown a
strong interest intheinternational dimension ofcompetition policy. Hesaidthatitwould beinteresting
tolearn more about theexperience oftheFederal Competition Commission. WastheCommission
strong enough politically? Didithavethenecessary powers ofinvestigation andenforcement? Were
thereplans toreinforce itsauthority? InwhatwaydidtheCommission cooperate withitscounterparts
inother countries?
45. Thediscussant found itsurprising thattheGovernment ofMexico wasreluctant toexpose public
procurementtothefullrigorsofcompetition.Indeed,itseemedthatonlynationalsuppliersanddomestic
goods could participate innational public tenders. Thisreflected theIndustrial Policy andForeign
Trade Programme, which supported greater participation ofthenational industry ingovernment
procurement. Thediscussant asked ifMexico accepted theeconomic caseforopening upgovernment
procurement toforeign competition, andasked about theGovernment 'sreform agenda inthisarea.
1According thereport bytheSecretariat, foreign direct investment between 1994 andJune 1996 was
US$18.7 billion.WT/TPR/M/29
Page11
46. While aprocess offederal public divestiture hadtaken place overthepast17years, the
SecretariatReportforthepreviousreviewindicatedthateightstate-tradingcompaniesoperatedinMexico,
ofwhichCONASUPO(NationalSustenanceCompany)wasthemostimportant.CONASUPOremained
active, buttheGovernment ofMexico hadtaken theposition thattherewerenostate-trading enterprises
inMexico. Thediscussant requested clarification onwhether thiswasaresult ofthedivestiture
programme, achange inWTO notification requirements, oriftherehadbeenachange inCONASUPO 's
status.
47. While theoverall tradeandwider economy policies wereremarkably consistent, thediscussant
raised concerns about inconsistencies insome areas. Itwasnotclear tohimhowthemaquiladora
regime could beconsistent withwider competition policy objectives. Wasitequitable thatonecategory
ofmanufacturers hadmore favourable operating conditions thanothers. Wasthere notaninevitable
distortion ofcompetition? Thediscussant sought clarification onhowthemaquiladora regime would
bephasedoutunderNAFTA,and,specifically,ifitwouldbephasedoutvis-à-visnon-NAFTAcountries.
48. Heobserved thatthemotor vehicles sector waslargely composed offoreign-owned companies
andconstituted oneofthelargest manufacturing activities inMexico; itproduced 1.2million units
in1996 ofwhich 80percentwere exported. Mexico wasalsoasignificant exporter ofautomotive
parts, inparticular totheUnited States. Theindustry had,however, notbeen subject totrade
liberalization andhadgrown through strong tariff protection, taxincentives andlocal content
requirements. Restrictions onforeign investment hadbeenusedtopromote thedomestic industry.
Thediscussant asked thedelegation foradescription ofhowthesector would beliberalized vis-à-vis
non-NAFTA WTO Members.
49. Finally, thediscussant noted thatMexico hadseven government owned development banks
tofinance andpromote priority sectors. Hesought clarification onhowthethreelargest banks obtained
funding fortheirlending programmes andwhether theyoffered finance atpreferential ratesofinterest.
Remarking thatBANCOMEXT offered itscustomers "competitive" interest rates, heasked whatthis
meant.WT/TPR/M/29
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V. STATEMENTS BYMEMBERS
50. Therepresentative ofHong Kong, China commended Mexico foropening upitstraderegime.
Hong Kong, China, hadenjoyed anexcellent working relationship withMexico intheWTO andthe
APEC. Mexico 'suseoftradeinstruments seemed tobegenerally consistent withanincreasingly open
trade regime. However, since theprevious Trade Policy Review, Mexico hadmade increasing use
ofcontingency measures, mostly intheformofanti-dumping actions ofwhich some 90measures were
currently inforce. Hewasconcerned thatanti-dumping measures hadbecome apotential barrier to
trade.
51. Therepresentative noted thatMexico hadimposed special origin certification requirements
onspecified textiles, apparel andfootwear toprevent specific products subject toanti-dumping (AD)
orcountervailing (CV) actions fromevading thepunitive duties. TheCertificate ofCountry ofOrigin
(CCO) wasanonerous burden fortraders/producers andwasnotconducive totrade.
52. Therepresentative ofNew Zealand commended Mexico fortheeconomic reforms ithad
undertaken despite thedifficult circumstances ithadfaced inrecent years. Continued reform and
restructuring hadbeencrucial inassisting Mexico 'srecovery fromthe1995recession. NewZealand
waspleased toseethatMexico 'seconomic position wasmuch improved; however, some sectors,
suchastheagricultural sector, remained lessproductive thanothers andreforms wereneeded. Such
reforms needed togohandinhandwithanopeninternational trading regime thatwasmultilateral as
wellasregimes initsfocus.
53. NewZealand alsocommended Mexico fortheprogress ithadmade innegotiating free-trade
agreementswithitsneighbours.However,thegaphadwidenedbetweentreatmentofpreferentialtrading
partners andthose accorded MFN status. NewZealand 'sexperience wasthatFTAs could aidtrade
liberalization anddomestic economic efficiency when applied inanon-trade diversionary manner;
initsCloser Economic Relations (CER) agreement withAustralia, NewZealand 'smove toduty-free
treatment forAustralian imports camealongside comprehensive unilateral tariffreductions foralltrading
partners. NewZealand 'sunilateral tariffreduction programme hadnotonlyencouraged competitiveness
inthedomestic economy buthadalsominimized anytrade diversion effects oftheCER agreement.
InlightofNewZealand 'sexperience, therepresentative encouraged Mexico tocontinue topursue
andexpand multilaterally based trade policies.
54. Finally,hisdelegationhadsubmittedseveralquestionsinwritingandlookedforwardtoreceiving
responses.
55. Therepresentative oftheEuropean Union stated thatithadbeenastrong supporter ofMexico 's
liberalizationandglobalizationplans.TheEuropeanUnionwasMexico'ssecondlargesttradingpartner,
although itsshare ofMexico 'strade haddecreased inrecent years.
56. Therepresentative saidthatsincetheprevious review, therehadbeentwomainevents affecting
Mexico 'seconomy andtrade. Thefirstwasthefinancial crisis oflate1994 andtheensuing severe
economic recession andrecovery. Heemphasized theimportant contribution played bythereform
programme initiated inthemid-80s infacilitating arapid recovery; thereform programme included,
interalia,efforts torationalize andfacilitate trade andinvestment flows through apolicy ofgradual
liberalization (e.g., some tariff reductions, investment), streamlining ofcustoms procedures and
improvementoftheregulatoryframework(e.g.,IPR,investment).ThesecondmajoreventwasNAFTA.
57. However, while progress hadbeenaccomplished insome areas, thepolicies inother sectors
rancounter tothethrust ofthereforms. Examples included: (i)sector-specific support schemes, asWT/TPR/M/29
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inthecaseoftheautomobile industry, andtariff increases fortextiles, footwear andleather products;
(ii)increased useoftechnical regulations andlabelling requirements (e.g., standards andSPS); and
(iii)Mexico 'srecent active useoftrade defence instruments.
58. Therepresentative pointed outthatMexico 'smembership ofNAFTA hadmajor implications
foritstrade policy. Ithadbrought significant economic benefits, butthese seemed toonlyflow
northwards. Thegapbetween applied andpreferential tariffs hadincreased, including through the
increaseofMFNratesforcertainproducts.Moreover,useofunnecessarilystringentoriginrequirements
andtheapplication ofdifferent valuation basisforNAFTA andnon-NAFTA partners remained amatter
ofconcern.
59. Finally, therepresentative commented thatNAFTA andother preferential trade agreements
werenotsurprising. However, inthelongrunastable andsound trade policy needed tobeanchored
inthemultilateralapproach.WhiletheEuropeanUnionwelcomedMexico'scommitmenttotheongoing
liberalization intheservices areaanditsactive participation inthenegotiations onfinancial services,
Mexico should alsoundertake more extensive multilateral commitments inother areas oftheWTO.
60. Therepresentative ofThailand welcomed therecent revision oftheFederal Metrology and
Standardization Law. However, hewasperplexed bythelabyrinthine system under theamended law:
itcomprised ofsixprivate national standardization bodies andnineministries, allimplementing the
Official Mexican Norms (NOMs) andtheVoluntary Mexican Norms (NMXs).
61. Therepresentative ofThailand saidthatin1993 Mexico hadintroduced aprohibition onrice
imports fromsome countries, including Thailand. Theprohibition wasbased onanassertion thatthe
importedricewasinfectedbythefungusTilletiaBarclayana.Followingnumerousbilateralconsultations
andtechnicalstudies(includingaverificationbyvisitingMexicanexperts)showingtherewasnoevidence
ofthesaidfungus among theexported Thaimilled rice,theGovernment ofMexico hadannounced
inSeptember 1996 itsintention toreplace theprohibition withanewimport regulation. However,
theproposed regulation, which would require Phytosanitary Requisites Certification, hadnotbeen
published andimportation ofricefromThailand wasstillnotpossible. Hesought clarification onthe
status ofimplementation oftheMexican regulation. Healsorequested information onthescientific
background fortheinclusion ofnumerous additional diseases inthisnewregulation.
62. Therepresentative ofVenezuela noted thetraditional friendship linksbetween hiscountry and
Mexico, andtheirparticipation withColombia intheG-3. ThisTrade Policy Review wasofparticular
interest because Mexico hadpioneered inthe1980s deepandsuccessful economic deregulation and
trade liberalization programmes, which remain intact despite thesevere financial crisis of1994-95.
Mexico hadalsosuccessfully implemented theNAFTA, demonstrating thatadeveloping country need
notfailinaccepting thechallenge ofinternational productivity andcompetition. Mexico hadshown
courage anddetermination facing various crises, firstrelated totheforeign debtintheearly 1980s
andmore recently in1995; overcoming thelatter hadconsolidated Mexico 'sclearleadership among
developing countries.
63. Main features ofMexico 'strade policies included asignificant realannual economic growth
ofsome 3.8percentbetween 1980 and1996 (excluding theGDP fallin1995); diversification of
manufacturing production; growth inmanufactured exports, which hadovertaken petroleum exports;
strong import growth, which proved Mexico 'scloser integration intheworld economy; balance in
thepublic accounts, accompanied bythemodernization ofthelegalandinstitutional framework; and
improved productivity indicators inmanufacturing. Remaining challenges included theneedtodiversify
import andexport markets, tomaintain acompetitive exchange rate,toincrease internal savings, to
integrate themaquiladora industry totherestoftheeconomy, andtoavoid using anti-dumping forWT/TPR/M/29
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objectives other thandefense against unfair competition. Many ofthesame remarks could bemade
about numerous developing countries that,likeVenezuela, hadpressed onwithsignificant trade and
financial liberalization programmes. Deepening suchprogrammes required aconducive international
context inareaslikemarket access, financing andtechnology availability. Venezuela hoped thatMexico
would persevere withitspolicies, infullcompliance withWTO engagements, taking noteofthe
comments made inthisTrade Policy Review. Venezuela looked forward toanswers toitsquestions
onMexico 'sautomotive policy, foreign participation intheMexican financial system andthetreatment
offinancial services under theNAFTA.
64. Therepresentative ofAustralia commended Mexico 'sgeneral record ofeconomic reform,
including itsongoing efforts intheareaofregulatory reform (liberalization ofitsforeign investment
regime andtheenactment oftheFederal Economic Competition Law) anditscomprehensive trade
reforms. Shepointed outthatMexico hadmade important contributions across awiderange ofWTO
activities, suchastheservices negotiations. Australia believed thatitwasessential thatplayers outside
theQuad nations continue toengage actively intheWTO processes. Australia encouraged Mexico
todevote energy intokeeping themultilateral system adynamic andvitalengine fortradeliberalization.
65. Therepresentativenoted,however,Mexico'sincreasingnumberofpreferentialtradeagreements
andthegrowing gapbetween theMFN andthepreferential tariff rates. Australia hadsubmitted a
number ofwritten questions onregional agreements andmarket access opportunities forFTA and
non-FTA suppliers, including inrelation totariff quotas. Shewould liketohearMexico 'sviewon
therelationship between itsregional preferential network anditsefforts towards further multilateral
tradeliberalization. OntheMexico-EU Agreement, sheasked ifthenegotiations would cover alltrade,
including agriculture.
66. Therepresentative oftheRepublic ofKorea saidthatMexico hadrequested acertain number
ofcountries, including theRepublic ofKorea, tosubmit special certificates oforigin fortextiles, clothing
andfootwear. Hepointed outthatthese certificates might becontrary toArticle IXofGATT 1947,
which prohibits discrimination among countries. Furthermore, thecertificates might becontrary to
theAgreement onRules ofOrigin (Article 9,clause 1(d)), which prohibited rules oforigin having
restrictive, distorting ordisruptive effects oninternational trade. Thedelegation oftheRepublic of
Korea requested theGovernment ofMexico toreconsider thenecessity ofthese requirements.
67. TheGovernment ofMexico hadtaken restrictive import measures inorder topromote domestic
automotive industry; toimport vehicles, motor vehicle products hadtohaveproduction facilities in
Mexico. TheRepublic ofKorea urged theGovernment ofMexico toopen upthecarmarket after
theyear2000.
68. Therepresentative concluded byrecognizing afterthecontribution ofthemaquiladora (in-bond)
industry totheeconomic development ofMexico. Herequested information onthemeasures the
Government ofMexico hadinmindtoprotect thecompanies thathadalready invested under theregime.
69. Therepresentative ofJapan noted thattheMexican economy hadsuccessfully recovered from
thefinancial crisis in1994. Therecover, hadbeen facilitated notonlybythemacro-economic
stabilization policy, butalsotheincreased openness oftheeconomy andthestructural reforms
implemented since themid-1980s. Therepresentative emphasized theimportance ofcontinuing the
reform programme inthefinancial andexchange-rate markets. Healsohoped thatPRONAFIDE would
becarried outsuccessfully.
70. Therepresentative ofJapan observed thattheGovernment ofMexico hadsigned, orwas
intheprocess ofnegotiating, regional andbilateral agreements withnumerous countries. InformationWT/TPR/M/29
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wasrequested tothecriteria usedtoselect these countries. Healsoasked forinformation onthe
relationship between thebilateral ortheregional agreements withLatin American countries andthe
LAIA agreements, andwhether Mexico intended toapply thereduced tariff oftheabove-mentioned
agreements toother APEC countries.
71. OntheNAFTA,therepresentativeaskedifMexicohadprovidedanexplanationonthephase-out
periods which exceeded 10years. Forexample, inthecaseoffootwear products totheCouncil for
Trade inGoods following Article 3oftheUnderstanding ontheInterpretation ofArticle XXIV ofthe
GATT 1994. Healsorequested information onthereview ofNAFTA 'sspecific rules oforigin for
textiles andclothing andthespecial origin certification requirements introduced inSeptember 1994.
72. Undermodificationstothemaquiladora regime,scheduledfor1January2001,dutyconcessions
onexports toCanada ortheUnited States would beavailable onlyoninputs imported intoMexico
fromnon-NAFTA countries, ifthefinalproduct wassubject toimport duties inthose twocountries.
Therepresentative requested anexplanation ofthismodification inlightofArticle XXIV:5(b) ofGATT
1947 which stated that"theduties andother regulations ....shallnotbehigher ormore restrictive".
Heasked theMexican delegation whether therewereanyplansunder consideration toreplace thecurrent
maquiladora scheme. Therepresentative alsoexpressed concerns about theimport tariff levied on
components which could beprocured inMexico. TheJapanese delegation asked theGovernment of
Mexico totake"soft-landing" measures insuchcases. Healsoreferred tohiswritten questions on
certain trade-related measures including IPRs, TBTs andimport prohibitions.
73. Therepresentative asked about theprospects forareduction intheincidence ofwhether Mexico
intended toaccede totheInformation Technology Agreement.
74. Therepresentative pointed outthatMexico 'slegal framework, which promoted greater
participation ofthenational industry ingovernment procurement, didnotfully meet the
non-discrimination concept oftheAgreement onGovernment Procurement. Some countries maintained
similar schemes byapplying theminconsistency withtheAgreement. Heasked whyMexico hadnot
requested observer status totheCommittee onGovernment Procurement.
75. Finally, therepresentative ofJapan welcomed Mexico 'spolicy tore-enforce national savings
through pension reform, thereby relying lessonshort-term foreign inflows. Hehoped theMexican
Governmentwouldplayanactiveroleinthenegotiationsonfinancialservices.Herequestedinformation
onthereforms undertaken inSeptember 1993tocover thesubsidiaries offoreign financial institutions;
healsoasked foranexplanation oftheregulation thatrestricted foreign institutions tooffering the
same services inMexico thattheyprovided intheirhome country. Japan hadsubmitted anumber
ofwritten questions related tomaritime transport, roadtransport andtelecommunications; hehoped
theMexican delegation would beinaposition toanswer these during thereview.
76. Therepresentative ofCanada saidthatMexico 'strade andinvestment liberalization proved
tobefundamental inassisting therecovery ofthe1994 financial crisis. Thestrong contribution of
tradetoGDPandtherapid increase inforeign direct investment overthelastfewyears provided clear
evidence oftheirimportance inimproving economic fundamentals. Canada waspleased tonotethat
theGovernment ofMexico remained dedicated toliberalization.
77. NAFTA hadbeenadriving force inenhancing trade andtheeconomic relationship between
Mexico andCanada; theinstitutional aspects ofNAFTA hadalsobeenveryimportant infacilitating
contacts andexchanging information. Asstated inthereport bytheMexican authorities, theregional
initiatives hadgenerated incentives forgreater multilateral liberalization, andCanada shared thisview.WT/TPR/M/29
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78. Therepresentative noted thatintheareaofagriculture, Mexico 'simplementation ofitsWTO
commitments gaverisetocertain preoccupation. Forinstance, greater transparency should havebeen
provided ontheoperation ofCONASUPO. Pricing policy forcertain cereals alsorequired further
information. Canada hadsubmitted anumber ofwritten questions totheMexican delegation inthis
area.
79. Reforms undertaken intheareaoftechnical barriers totrade hadincreased transparency on
thesetting ofstandards. However, Canada would liketoknow more about thefactors underlying the
elaboration ofthemandatory technical regulations thatdeviated frominternational standards andwhether
mandatory standards were being usedtopromote national industry.
80. Therepresentative observed thatthestrong recovery inexports, facilitated bythereal
depreciation, hadbeenaccompanied byproductivity gains, butthesegainsseemed tobemainly confined
tothemanufacturing sector while theservices sector appeared tobelagging behind. Heasked for
further information ontheliberalization policy andactions tobetaken intheareasoffinancial services,
transport andtelecommunications.
81. Therepresentative ofBrazil saidthattheTrade Policy Review Mechanism wasoneofthemost
important exercises carried outintheWTO. TheMechanism enabled Members tohavethewideranging
debates necessary tounderstand theirmacroeconomic policies; oftenquestions wentbeyond tradepolicy
inorder toprovide aclearunderstanding ofpolicy directions incountries under review. Hestressed
theexcellent cooperation between Brazil andMexico attheWTO. Although Mexico wasarelative
newcomer totheOrganization, ithadbecome amajor participant inallWTO fora.
82. Therepresentative focused onareas notcovered byother participants butmentioned inthe
Secretariat report. Onphytosanitary measures, hesaidthatBrazil wasdisadvantaged byMexico 's
notapplying thecriteria provided forintheWTO ondisease-free areas, particularly concerning
foot-and-mouth disease. Restrictions applied toBrazil wereincontrast withthemeasures adopted within
NAFTA, where theconcept ofareasfreeofsanitary problems wasrecognized. Heasked forcomments
from Mexico onthispoint. Hestressed Brazil 'sconcern about thefrequent useofanti-dumping
measures: Brazil, theUnited States andChina were thecountries most affected bysuchmeasures.
Details wererequested ontheexpected amendments tobring Mexico 'santi-dumping legislation into
linewithWTO obligations, aswellasonitsnewFDIregulations.
83. Many ofthecriteria established byMexico forrules oforigin, technical specifications and
phytosanitary rulesrepresented aformofprotectionism andoftenprovided indirect benefits toNAFTA
partners. TheNAFTA provided special benefits inareas likegovernment procurement, foreign
investment andliberalization ofthebanking sector. Would suchbenefits beextended toother countries
onaMFN basis? Would theNAFTA advantages beextended orcompensation beoffered toALADI
countries based onArticle 54oftheMontevideo Treaty? Therepresentative highlighted Brazil 'swritten
question onchanges tothemaquiladora regime afterJanuary 2001, asrequired bytheNAFTA.
84. Therepresentative ofCuba noted thatthefinancial crisis of1994, andsubsequent recession
andrecovery hadbeenthemajor developments since theprevious Trade Policy Review ofMexico;
theyhadcoincided withtheendoftheUruguay Round andestablishment oftheWTO. Hecongratulated
Mexico forhaving overcome thecrisis, andfortheratesofgrowth ithadandwasforecasted toachieve:
growth hadreached 5.1percentin1996andwasexpected toaverage some 5percentduring 1997-2000.
Asitwastraditional, trade relations between thetwocountries hadevolved positively; trade had
expanded continuously during thelastdecade andMexico wasamong Cuba'smain trading partners
intheregion. Thetwocountries haddeveloped mechanisms todiscuss andsettle bilateral issues.
Partial scope agreements under LAIA would beshortly considered totrytowiden anddeepen theirWT/TPR/M/29
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trade relations; thepoints ofmain interest were improved market access, especially tariffs, offered
byMexico anditsunderstanding ofCuba'sdifficult economic situation arising fromwellknown external
pressures.
85. Therepresentative ofSwitzerland pointed outthattheTrade Policy Review tookplace ina
context ofeconomic recovery, three years afterMexico hadfaced aserious financial crisis. The
macroeconomic indicators hadimproved substantially: GDP continued togrow, albeit ataslower
pace, inflation hadbeen brought under control, several thousand jobshadbeen created andthe
consolidation ofthepesohadprovided strong support toimports.
86. Therepresentative noted thatMexico participated inseveral international foraandregional
groups; Mexico 'saccession totheOECD waswelcomed. Theinterim European Union-Mexico
agreement andtheimplementation oftheNAFTA werebeing followed upwithgreat interest. This
wasalsothecaseforMexico 'sFTAs withBolivia, Costa Rica, andColombia andVenezuela; the
representative requested thatafullnotification ofthese FTAs bemade totherelevant WTO forum.
87. Switzerland took satisfaction from Mexico 'simplementation ofnumerous WTO-related
liberalization measures affecting goods andservices. Inparticular, foreign products weresubject to
nodiscrimination ontheapplication oftheVAT andother internal taxes. Newinvestment legislation
showed theliberalization efforts infavour offoreign capital. Therepresentative welcomed certain
regional integration programmes, including theNAFTA, thatcould alsoincrease trade withthird
countries. Ontheother hand, thegapbetween MFN andpreferential tariffs hadwidened. Since the
previous Trade Policy Review, tariffs oncertain sensitive products (food products andtextiles) had
increased, while theuseofnon-tariff barriers hadbecome more frequent. Examples included the
introduction inSeptember 1994 ofspecial certificates oforigin forsimilar products subject to
anti-dumping orcountervailing measures. Switzerland, likeother WTO Members, considered that
suchrequirements hindered tradeflows. Would Mexico maintain suchrequirements inthelongterm?
88. TheNAFTA rulesoforigin wererestrictive andcomplex; certain ruleslacked transparency
andappeared tobeanon-negligible administrative import barrier. These problems affected textiles
inparticularly. Further information wasrequested onthereference intheSecretariat report tothose
rules being reviewed in1998. In1996, thenewprocedures hadbeendiscussed under Article XXII
oftheGATT within theCommittee onCustoms Valuation, andintheframework oftheNAFTA review.
Switzerland believed thattheuseofaf.o.b. method forNAFTA originating goods andac.i.f.method
forotherproducts increased tariffs onthelatteranddisadvantaged thirdcountries. Thiswasinconsistent
withWTO rules, particularly during thetransition period before intra-regional tradebecame duty-free.
Thisdifferential treatment seemed tobealsoapplied within theframework ofother FTAs inwhich
Mexico participated; fullinformation onthisissue wasrequested.
89. Onintellectual property, notewastaken ofMexico 'scommitment toimplementing anumber
oflawsandamendments recently adopted. TheSwiss authorities hadbeeninformed oftheestablishment
oftwoinstitutions toimplement TRIPS provisions. However, some problems hadarisen inconnection
withthenewimplementing regulation under theHealth Law; thiswasdesigned tofacilitate theimport
ofpharmaceutical products butalsocontained newrulesongeneric drugs thatsought tomake mandatory
theuseofgeneric names bytheprescribing physician. Thiscould hinder theuseoftrade marks, and
wasclearly contrary toArticle 20oftheTRIPS Agreement. Contacts hadbeenestablished inrecent
monthstotrytoresolvethisproblem,whichgreatlydisadvantagedtheSwissindustry.Therepresentative
requested further details onthenewprovisions.
90. Switzerland welcomed Mexico 'sintention tosubmit animproved offerintheongoing financial
services negotiations. Ongovernment procurement, thelegislation suggested that,inpractice, onlyWT/TPR/M/29
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national firms could participate innational bids. Thereciprocity clause wasapplied toanyinternational
bidders inthecontext ofinternational bids. Mexico wasnotamember oftheGovernment Procurement
Agreement, buttheSecretariat report mentioned thattheauthorities wereready tojoinanewagreement
inthearea. Would itbepossible tohaveadditional information? TheEuropean Union andMexico
hadinitialled on23July1997 aninterim agreement ontrade andtrade-related matters aswellasa
global agreement oneconomic partnership. Additional information wasrequested ontheinterim
agreement, which setupanegotiating structure including adefined scheduled andmodalities fortrade
liberalization.
91. TherepresentativeofNorwayexpressedappreciationforthegradualliberalizationoftheMexican
economy. However, certain sectors were stillreserved fortheMexican state(e.g., oilexploration,
petrochemical industry, energy production anddistribution) orMexican nationals (e.g., roadtransport,
petrol stations, television andradio services); heasked about anyplans tochange these restrictions.
92. Referring toMexico 'slevel ofeconomic development andmembership intheOECD, the
representative asked iftheGovernment ofMexico envisaged signing theAgreement onPublic
Procurement.
93. Therepresentative noted thatMexico hadestablished azone-100kilometres fromtheborder
and50kilometres from thecoastline -where foreign ownership wasprohibited. These restrictions
hadledtodisadvantages foraNorwegian exporter offertilizers which hadtobetransported outof
thezoneifhewished toprocess them further; thisincreased hisoperating costs. Heasked ifthe
Government ofMexico wasconsidering tomodify these regulations.
94. Healsoasked whether Mexican standardization bodies metinternational requirements and
guidelines. Henoted thattheGovernment ofMexico andtheEUwereintheprocess ofestablishing
amutualrecognitionagreement(MRA)andaskedwhenthepartiesexpectedtoconcludethenegotiations.
Newlabelling regulations, introduced in1996, hadcaused some problems forNorwegian exporters:
allexports toMexico hadtobemarked withdateandplace ofimportation aswellascertificate of
origin number, butthisinformation wasnotalways available atthetimeofproduction andpackaging.
95. Therepresentative ofNorway expressed concerns regarding Mexico 'sapplication ofaf.o.b.
customs valuation baseforNAFTA countries andc.i.f. forother partners; thissystem seemed tobe
discriminatory. Heasked: DidMexico usef.o.b. valuation forallimports priorto30December 1993?
Ifso,whatwasthelegalprovision thatestablished thenewsystem? What wasthepercentage oftrade
withNAFTA partners thatqualified forNAFTA origin? Whywasthenewsystem introduced? Did
Mexico recognise thatc.i.f. provided ahigher basisforvaluation ofcustoms duties thanf.o.b. basis?
DidtheGovernment ofMexico haveanyintention ofreintroducing ahomogenous system ofcustoms
valuation?
96. Other Norwegian concerns were thelarge difference between applied tariffs andscheduled
tariff commitments, which created uncertainty about possible unilateral changes oftheapplied rates.
Already, thesteep increase inthetariffforbacalao (dried cod)hadmore orlesseliminated Norwegian
bacalao from theMexican market.
97. Heconcluded byasking theMexican delegation ifitsimproved labour standards werearesult
ofeconomicdevelopmentorifbetterlabourstandardsthemselvesprovidedasounderbasisforeconomic
growth.
98. TherepresentativeoftheUnitedStatescomplimentedtheGovernmentofMexicoforitsprogress
inbringing itstrade andinvestment regime incompliance withWTO commitments; evenduring theWT/TPR/M/29
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1994-95 crisis theauthorities hadrefrained fromraising tariffs beyond bandlevels. Thefinancial sector
hadrecovered morequickly thanpredicted, partly because oftheliberalization oftheinvestment regime
andthebankingandservicessectors.HealsocommendedMexicoforimprovedlabourlaws;inspections
forverifying compliance withMexico 'schild labour lawhadincreased, andtheoccupational safety
andhealth regulations hadbeenrevised in1997.
99. Therepresentative looked forward receiving answers toanumber ofwritten questions on
anti-dumping, investment measures andintellectually property rights.
100. Therepresentative asked when Mexico intended tosigntheG-3Agreement, andwhen the
bilateral agreements withBolivia andCosta Ricawould bereviewed under Article XXIV ofGATT
1947 andGATS Article V.Healsorequested information onthestatus ofMexico 'saccession tothe
Multilateral Investment Guarantee Agency (MIGA).
101. AccordingtotheSecretariatReport,Mexico'scustomslawrequiredallimporterstoberegistered
intheregister ofimports, andforavariety ofimports theimporter alsohadtoregister witha
sector-specific registers. Therepresentative asked forfurther details ontheregistration procedures.
On26February 1997, Mexico hadpublished alistofproducts (cigars, cigarettes, pigfat,bicycle tires,
andusedtires) whose entry would berestricted tocertain Mexican ports. Given that95-98 percent
oftheproducts subject tothenotice already entered through theselected ports, whyhadtherestrictions
beenimposed. Wasadvance notice provided tothetrading community? Intheabsence ofevidence
thatthedeclared import price wasbased onacommercial transaction, Mexico required thedeposit
ofaguarantee,basedonestimatedprices.TherepresentativeaskedaboutcompliancewiththeAgreement
onCustoms Valuation andwhether therequirement could bewaived andinwhatcircumstances.
102. Noting thatprior import permits were required fortheimportation ofavariety ofgoods,
including automobiles andpharmaceuticals, therepresentative asked about thenecessity forthepermits,
howtheywere obtained, andwhether thesystem wasadefacto import licensing requirement. He
alsoasked forclarification ontheprocedures related to"sanitary authorization" permits forshipment
ofgrain,andwhethertheserequirementsconformedtointernationally-acceptedstandardsanddefinitions.
Heasked when theauthorities intended tonotify CONASUPO asastatetrading enterprise.
103. Therepresentative expressed theconcern oftheUnites States about theamendments of
23October 1996 tothemaquiladora decree; Articles 5,7and30oftherevised decree allowed the
Government ofMexico toshutdown maquiladoras ordenyregistration ofnewmaquiladoras which
might "negatively" affect thenon-maquiladora industry. How could foreign companies beassured
thatSECOFI intended toenforce these provisions onlywhen aMexican lawhadbeenviolated.
104. HesaidthatthreeMexican States (Sonora, Sinaloa, andBajaCalifornia) hadtheirownstandards
whichessentiallyprecludedimportsofbeefandcattleintotheseStates.Theseparatelawsandregulations
didnotrecognize USDA grade standards ortheinternationally recognized highquality beefdefinition.
What wasthepurpose ofthese measures?
105. Therepresentative alsoasked ifMexico intended toupdate itsGATS Schedule toreflect that
there wasnolimitonforeign investment invalue-added services. Healsoasked forfurther details
onhowairport privatization willbeundertaken.
106. Finally therepresentative waspleased thattheNorth American Agreement onLabour
Co-operation (NAALC) hadbrought positive results; institutions forexchange ofideasandco-operation
hadbeencreated, transparency regarding labour lawanditsenforcement hadimproved, andresources
devoted tocorelabour standard issues hadincreased. TheILOCommittee ofExperts 1997hadmadeWT/TPR/M/29
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reference toamending certain Mexican legislation tobring itintoconformity withtheConvention 87
onFreedom ofAssociation, andheasked howtheGovernment ofMexico hadresponded.
107. Therepresentative ofBolivia highlighted theimportance ofthestructural reforms Mexico was
undertaking totrytorectify macroeconomic disequilibrium, andthetrade policy measures taken to
increase itsparticipation inworld trade. Asstated intheSecretariat report, Mexico wasapositive
paradigm oftrade liberalization. Thisprocess involved several FTAs intheLatin American region.
However, Mexico 'stradewithin theregion hadfallen from6.9percentto6.5percentwhile theshare
oftheUnited States hadincreased from75to84percent. Could Mexico describe thecriteria behind
itsexport policy outside theLatin American region, andexplain government priorities inthisarea?
108. Therepresentative ofColombia noted thatsince thefirstTrade Policy Review ofMexico the
twocountries hadstrengthened their trade links andflows bysigning, in1994, aFTA including
Venezuela. TheAgreement offered abroad coverage, including trade ingoods andservices, public
procurement, investment andintellectual property. Mexico wasamong thedeveloping countries that
hadembarked inaprocess ofunilateral trade liberalization inthe1980s. Asaresult, MFN tariffs
averaged 13.6percentandnon-tariff measures hadbeenprogressively eliminated. Despite thecrisis
of1994, Mexico hadmaintained itsliberalization policy andavoided undermining itbyadopting the
appropriate macroeconomic measures required toaddress thecrisis. Thishadalsomade possible a
quick recovery, especially relative tothecrisis ofthe1980s. Therateofgrowth of5.1percentin
1996washigherthanbeforethecrisis.Mexicowascongratulatedforitsorthodoxeconomicmanagement
since thefinancial crisis anditscommitment tothemultilateral trade system andeconomic openness.
109. TherepresentativeofIndiacommendedMexicoformaintaininganopenandprogressiveapproach
initstraderelations despite thetrauma oftwofinancial crises inarelatively shorttime-frame. Reforms
inother areas, suchastheprivatization programme, hadalsocontinued. However, henoted that
Mexico 'sincreasing tendency towards regional andbilateral trading arrangements made itdifficult
toensure thattradedistortions didnotoccur. Theadvisability ofover-dependence onalimited numbers
oftrading partners mayperhaps bekeptinmind.
110. Therepresentative alsoreiterated hisdelegation 'sviewthatWTO wasnotanappropriate fora
toraisetheissue ofcorelabour standards. Mexico wasnotobliged toanswer suchquestions.
111. Therepresentative ofHungary highly appreciated thepositive response byMexico tothe
economic crisis in1995. Helooked forward hearing Mexico 'sviews ontheinteraction between the
regional andmultilateral approaches, aswellasonissues related tostate-trading activities, particularly
inagriculture. Hehoped thatMexico would contribute positively tothesuccess oftheongoing negations
onfinancial services tobeconcluded inDecember 1997.
112. Therepresentative ofUruguay noted thatMexico wasoneofhiscountry 'smaintrading partners
intheregion; Uruguay gave great importance totrade relations between Mexico andMercosur.
Significant tradeflows hadbeenmaintained andthiswould beenhanced bythearrangements finalized
on3October 1997forUruguayan meattoenter theMexican market. Ontheother hand, Uruguayan
ricecontinued toencounter problems inMexico, andtherepresentative requested details ontheregime
applied tosuchimports.
113. Therepresentative ofEgypt complimented Mexico foritsgoodeconomic performance. With
reference totheSingapore Ministerial Declaration onlabour standards, Egypt pointed outthatMexico
wasnotobliged toreply toquestions inthisarea.WT/TPR/M/29
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VI. REPLIES BYTHEREPRESENTATIVE OFMEXICO AND ADDITIONAL COMMENTS
114. Thereplies bytherepresentative ofMexico weredivided intofourthemes: (i)economic and
developmental policies, (ii)regional andmultilateral trade, (iii)implementation ofcommercial policies,
including sectoral policies, and(iv)specific questions. Inturn,answers under theme (iii)weredivided
inthree sections. Therepresentative saidthatanswers totechnical orspecific questions would be
complemented through anadditional document tobesubmitted atalatter stage.
(i) Economic anddevelopmental policies
115. Therepresentative began bythanking delegates fortheirstatements insupport ofMexico 's
handling ofthefinancial crisis ofend-1994/1995. Instead ofmaking recourse toprotectionist measures,
Mexico haddeepened andaccelerated itsrestructuring andliberalization programme, while reaffirming
itscommitment tothemultilateral disciplines ofamarket economy. Thisprogramme, maintained over
adecade, hadpermitted Mexico toovercome thecrisis inarelatively shortperiod, withgrowth having
restarted inavigorous andsustainable form.
116. Fiscal policy sought tomaintain asound public financial position, promote macroeconomic
stability, strengthen public domestic savings andencourage productive investment. TheGovernment 's
economic programme forecast apublic deficit rising, asaproportion ofGDP, from 0.5percentin
1997 to1.3percentin1998, falling to0.3percentby2000. These estimates included thecostof
socialsecurityreforms,relieffordebtors,andthereorganizationoffinancialinstitutions;italsoassumed
lower world petroleum prices. Non-petroleum fiscal revenue would increase, asashare ofGDP, from
7.5percentin1996 to9.1percentin2000 byexpanding thetaxbaseandreducing fiscal evasion.
Expenditures would bereduced innon-priority areas, reducing netexpenditures from 23percentof
GDP in1996, to22.7percentin2000. Theexpected performance ofpublic finances would permit
refinancing thepublic debttosecure lower costs andabetter structure. Thegross totalpublic debt
asashare ofGDP wasexpected tofallfrom 35.6percentin1997 to31.3percentin2000, which
would lower interest payments, reduce thedebttosustainable levels andchannel more resources to
social expenditures.
117. Themajor reform ofthesocial security system undertaken on1July1997 wasexpected to
havefarreaching repercussions onincome distribution anddomestic savings. Thenewretirement
system wasexpected todraw about 3percentofGDP intoindividual accounts by2000; thiswould
strengthen financial intermediation andhelpchannel resources intoinvestment.
118. Another pillar ofMexico 'seconomic programme wasthemodernization ofthefinancial system.
Inthisregard, aregulatory andoperative framework aimed tofoster confidence, decrease transaction
costsandencourage efficiency inintermediation hadbeenestablished toencourage long-term savings,
which wereessential toachieve sustainable growth. Savings asashare ofGDPwereexpected toincrease
from acurrent 20.9percent, to25.4percentby2000. Internal savings would finance most ofthe
future investment: alesson fromthe1994crisis wasthatgrowth could notdepend onexternal savings,
which were expected toamount toonly3.2percentofGDP by2000.
119. Since the1994crisis, Mexico hadmaintained afloating exchange ratesystem. Monetary policy
hadbeenusedforthefirsttimeinSeptember 1997toinduce lower interest ratesandavoid short-term
capital inflows leading toanappreciation oftherealexchange rate.Monetary andexchange ratepolicies,
together withstructural change, hadallowed rapid, sustained export growth; thiswasexpected to
continue overthenextyears.WT/TPR/M/29
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120. The1994crisis hadserious effects ofgrowth andliving standards; solving thecrisis hadthus
consisted ofestablishing thebasisforsustained growth raising those standards. Intheshort-term, this
involved amedium-term growth strategy requiring continuing structural reforms. TheGovernment,
acknowledging thatnosimple solutions existed tolower thesocial costofthecrisis, sought toconsolidate
economic growth togenerate employment; thiswasprobably themost important policy option to
redistributeincomeandincreaselivingstandards.Theopenunemploymentratehadreached7.6percent
inAugust 1995, butfellto3.4percentinJune1997, aratecomparable tothepre-crisis level.
121. Nosocial policy wassustainable without economic growth, which would allow absorbing the
labour force expansion overthenextyears. TheGovernment wastargeting ahigher proportion of
public expenditure towards health, education, social security, housing andprogrammes toalleviate
extreme poverty. Agrowing economy would allow increasing social expenditures andprovide for
basicservices forthemostdisadvantaged sectors ofthepopulation. Suchexpenditures already accounted
for56percentofthebudget, ashare thathaddoubled intenyears.
122. Theoutlook foreconomic growth infuture years wasverypositive. In1996, GDPhadincreased
5.1percent,afterafallof6.2percentin1995; during thefirstquarter of1997, GDP hadrisenby
7percentrelative tothesame period in1996. Theauthorities hadrecently raisetheirforecasts: GDP
wasexpected toincrease byatleast6percentin1997and1998andby5.5percentin1999and2000.
Exports would continue toplayanimportant roleinsuchgrowth.
123. TheIndustrial Policy andForeign Trade Programme acknowledged thatachieving sustainable
economic growth, well-paid jobsandhigher living standards required more thanalimited number of
competitive production factors, isolated efforts byfirms orindustry, ormarket forces alone; ina
globalized world, industrial policies wererequired tocorrect market failures, coordinate sectors and
encourage industrial competitiveness. Firms, particularly small enterprises, faced problems accessing
information, hightransaction costs, difficulties inachieving economies ofscaleandspecialization and
inadopting newtechnologies. Toaddress these problems, theGovernment wasdeveloping public
databases toidentify andestablish linksbetween thesupply anddemand ofproducts, inputs andservices,
aswellaslinks withofficial industry andtrade support programmes.
124. TheMexican Managerial Information (SIEM) wasofparticular interest; ithadbegun operating
inJanuary 1997offering avirtual business centre withmore than200,000 registered firms. Supplier
andexport promotion programmes hadalsobeensetuptoencourage greater integration indomestic
production chains, andinvolve smaller firms indirect andindirect exports. Economies ofscaleand
specialization, especially among small firms, were being sought through programmes topromote
"integrating" firms tonegotiate asagroup forthepurchase ofinputs, forsales ofoutputs andin
technology development. TheFederal andState governments were alsocontinuing theprogramme
ofindustrial groupings tobenefit from theconcentration ofsimilar producers inthesame area;
fivesectors in14Federal states hadbeenidentified andfeasibility studies were under way.
125. Asthecostofdeveloping newprocessing andmarketing methods, andspecialized advisory
services, were prohibitive formicro, small andmedium-size enterprises, theGovernment was
implementing programmes tofacilitate theaccess tosuchservices andpromote research, technology
transferandtraining.TheNationalNetworkofManagerialCompetitivenessRegionalCentres(CRECES)
hadbegunoperatinginSeptember1996toprovideadviceonadministration,accountingandengineering.
There were 21centres inoperation, covering two-thirds ofthecountry; byOctober 1997, onewas
expected tobeoperating ineachFederal state. TheTechnology Services Information System (SISTEC)
providedinformationonmorethan400institutionsundertakingresearchanddevelopment,andproviding
consulting services. Thesecond stageoftheIntegral Promotion Programme fortheUseofInformationWT/TPR/M/29
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Technology inMicro, Small andMedium-Size Enterprises hadallowed 2,000 firms toacquire computer
equipment; 31,000 training courses hadbenefited 364,000 workers andentrepreneurs.
126. Thefirstdiscussant expressed hisappreciation forthecomprehensive information provided
bytherepresentative ofMexico. Thediscussant thenfocused oncertain aspects ofMexico 'sindustrial
policy aswellasitsefforts toreduce thecostofdoing business andallow firms, particularly small-
andmedium-sizeenterprises,toachievescaleeconomies;theseprogrammesprovidedexcellentexamples
foralloftheAmericas. InforasuchastheWTO, questions sometimes arose about theobjectives
ofpolicies usedbydeveloping countries, suchasMexico andVenezuela, todevelop certain sectors,
industrial linksorthetransfer oftechnology. Thisapplied totheautomotive industry inMexico, and
South America; Mexico hadshown thatmultilateral trade commitments could bemade compatible
withdirecteffortstoencouragethetransferoftechnologyandscaleeconomies,andtoprovideinvestment
incentives tocreate thenecessary links. What wereMexico 'sviews onthese issues? Thediscussant
concluded bysaying thatMexico 'snewpolitical context could compound theimplementation offiscal
policies; heexpressed thehopethatthestrategy inplace would succeed.
127. Therepresentative ofMexico responded bynoting that,untilrecently, theMexican automotive
industry hadenjoyed afairamount ofprotection; theindustry wasoneofthelastsectors where
protection wasbeing eliminated. Plants inMexico hadacaptive market; theindustry hadtriedto
produce anexcessively broad range ofproducts. Liberalization andthedismantling ofprotection had
onlybeengradual. Nevertheless, thishadalready leadtoamajor transformation oftheindustry, which
hadbecome verycompetitive, exporting morethanonemillion automobiles peryear. While component
manufacturers wereinsome cases foreign, national suppliers were alsoactive intheexport market.
Arecent programme, COMPITE, sought todevelop reliable localfirms thatcould continue tosupply
assemblers formany years. Thisvoluntary programme provided forautomobile assemblers toidentify
thecomparative costs ofnational suppliers, andhelpthem improve theirposition andlower costs.
There wasstillconsiderable scope toreduce operational costssothatsmall- andmedium-size enterprises
would bemore closely involved intheprocess ofinternationalization oftheMexican economy. This
wasoneofthemajor challenges faced byMexico 'sforeign tradeandindustrial policy. Mexico wished
tocontinue down thispathandtoshare experiences withother countries withsimilar programmes.
(ii) Regional andmultilateral trade
128. Regarding regional andmultilateral trade, therepresentative ofMexico noted thathiscountry
hadbeenamong thefirsttohighlight theneedtotransform theGATT intoapermanent organization
withaneffective dispute settlement mechanism. After twoyears ofoperation, hiscountry, having
become amajor usereither asinterested partyorcomplainant, could attesttothevalue ofthemechanism,
including tofightunilateral measures.
129. Mexico 'sparticipation intheWTO played acrucial roleinthewaythe1995 crisis hadbeen
addressed. InJanuary 1995, inthemidst ofthemostsevere crisis inthecountry 'srecent history, Mexico
implemented itsWTO commitments, including thetariffication ofagricultural products; thiswasin
sharp contrast withthehandling ofthe1982 crisis when Mexico hadintroduced prior-licensing
requirements andincreased tariffs onallproducts, aswellashaving imposed foreign exchange controls.
Confirming itsWTO commitments hadapositive influence ontheexpectations ofthebusiness and
thefinancial community andhadcontributed toaspeedier economic stabilization.
130. TheMexican-U.S.traderelationshipwasintenseandcomplex;suchrelationshiphadtraditionally
accounted forbetween 75and80percentofMexico 'stotaltrade evenbefore theentry inforce of
theNAFTA. Thestrengthening ofeconomic linksinNorth America hadreceived amajor boost from
theestablishment ofapermanent legalframework togovern therelationships between Canada, MexicoWT/TPR/M/29
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andtheUnited States, including theliberalization ofallproducts, disciplines beyond those achieved
intheUruguay Round andadispute settlement mechanism. Important, yetnotobvious, benefits of
theNAFTA wereMexico 'sincreased participation inother regional andmultilateral fora,which the
NAFTA hadpromoted bymaking Mexico more competitive andhelping itsetmore ambitions goals
bothinregional agreements andtheWTO.
131. Unfortunately, progress inthemultilateral trading system hadbeenslower thanunder regional
agreements; thusMexico, likemany other countries, would continue seeking greater reciprocal market
liberalization through regional agreements. Besides negotiations intheWestern Hemisphere, Mexico
wastobegin negotiations withtheEuropean Union andIsrael, while seeking deeper integration inthe
Asia-Pacific region through APEC. Nevertheless, Mexico waswilling tolower itsWTO tariffbindings
through future negotiations. Mexico considered thatitwasuptoWTO Members todecide thescope
andpaceofworld trade liberalization.
132. Mexico'sFTAshadalsobenefitedthirdparties,especiallyinserviceswhere,exceptforfinancial
services, preferential liberalization hadbeenunilaterally extended onaMFN basis. Infinancial services,
subsidiaries from thirdparties established incountries withwhich Mexico hadFTAs benefited from
theliberalization granted under those agreements. Recently, Mexico hadunilaterally eliminated on
anMFN basisinvestment restrictions inimportant sectors suchas:telecommunications; airtransport;
storage, transport anddistribution ofnatural gas; railroads; financial services; andairports. On
thesamebasis, Mexico hadliberalized, fromanaverage of13percent,over1,200 tarifflinescovering
inputs andmachinery; thesereductions hadbenefited inparticular Asian andEuropean Union suppliers.
133. During the1995-96 economic recovery period, Mexico 'snon-NAFTA imports grewatarate
ofover17percent, exceeding the11percentincreased inworld imports. During thefirstquarter
of1997, non-NAFTA imports grew 29.6percentrelative tothesame period in1996, while NAFTA
imports increased 19.5percent.
134. Mexico believed thatnational andMFN treatment must apply togovernment procurement.
Eventhough Mexico hadnotsigned theplurilateral Agreement onGovernment Procurement, inpractice
theFederal Government 'spublic procurement regime wastransparent andnon-discriminatory.
Acquisitions reserved tonational suppliers wereclearly defined intherelevant international agreements
signed byMexico, suchastheNAFTA, withtenders announced sufficiently inadvance.
135. Mexico considered thatregional agreements complemented andstrengthened themultilateral
trading system. Regional agreements made possible thecomplete elimination oftariff barriers and
thecreation ofdisciplines inareasnotyetsatisfactorily covered bytheWTO system, suchasinvestment,
government procurement, customs procedures andrulesoforigin. Regional agreements created strong
incentives tocontinue negotiations inother areas byallowing greater competitiveness andthesearch
fornewmarkets; thisdomino effect would leadtocloser integration ofworld markets andtofuture
rounds ofnegotiations intheWTO.
136. Mexico hadnotified thefollowing regional agreements: theNAFTA and,through LAIA, the
agreements withBolivia, Chile, andColombia andVenezuela (G-3). Mexico intended tonotify shortly
itsagreements withCosta Ricaand,oncefinalized, withNicaragua. Mexico wasnegotiating agreements
withpractically allother countries intheWestern Hemisphere, aswellasparticipating actively inthe
FTAA. Inthenearfuture, Mexico would startnegotiations withtheEuropean Union andIsrael, while
continue itsparticipation inAPEC. Mexico hadalsorepeatedly proposed theinitiation ofanew
multilateral round ofnegotiations intheWTO.WT/TPR/M/29
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137. Thesecond discussant tooknoteofMexico 'sstatement thatmultilateral negotiations weretoo
slow. Nevertheless, there were stillmultilateral obligations andcommitments thatMexico hadnot
accepted. There wereabundant possibilities forMexico tobinditstariffs atlower levels; notewas
alsotaken ofMexico 'sintention tocontinue lowering itsbound rates. TheWTO system wasnotlimited
totariffs:thediscussantreiteratedasuggestionthatMexicoacceptsassoonaspossiblestricterdisciplines
andobligation ongovernment procurement, notwithstanding Mexico 'sstatement thatitssystem was
transparent.
(iii) Implementation ofcommercial policies, including sectoral policies
(a) Tariffs, anti-dumping, origin certificates
138. Inresponsetovariousquestionsontariffs,therepresentativeofMexicostressedthathiscountry's
liberalization hadnotresulted fromtrade negotiations butfromdevelopmental needs. Liberalization
would continue onunilateral orcontractual bases depending onthewillingness oftrading partners to
grant greater market access toMexican products. Autonomous liberalization hadbeenundertaken
onanMFN basis, thusbenefiting alltrading partners.
139. Thewidened gapbetween applied andbound tariff rateshadresulted from reductions made
unilaterally orinthecontext ofFTAs, andincreases inbound ratesresulting fromtheUruguay Round
tariffication process. Unilateral reductions benefited everyone, while FTAs werecompatible withWTO
rules. Thus, theonlywaytoclose thegapwastolower bound tariffs ortosetupamechanism to
takeproper account ofunilateral measures. Mexico waswilling tolower bound tariffs through
multilateral negotiations, asithaddoneintheUruguay Round, where Mexico hadsuggested ways
togivecredit forunilateral liberalization. Unfortunately, littlehadsofarbeenachieved inthisrespect.
Apart from legalcommitments suchasbindings, orsimple averages thatdonotreflected realtrade
flows, anddespite the1994 crisis, Mexico hadoneofthemostopeneconomies asdemonstrated by
thefallintheweighed average tariff from 7.8percentin1993 to2.7percentin1997.
140. Responding tocomments onMexico 'stariffincreases affecting footwear, clothing andleather
products, therepresentative noted thattheincreases didnotbreak binding levels andhadthusnotcalled
fortheuseoftheexception measures provided bytheGATT. Thenumber ofproducts affected by
theincreases hadbeensmall, especially relative totheproducts subject tounilateral tariff reductions.
Themainconsideration wasthatdespite theneedoftheMexican industry tomodernize andthusface
foreign competition, Mexico hadnotonlycontinued complying withitsGATT commitments buthad
maintained thegeneral thrust oftrade liberalization.
141. Therepresentative noted thattheuseofc.i.f. orf.o.b. bases forcustoms valuation hadbeen
extensively discussed intheCustoms Valuation andtheRegional Agreements Committees; ithadalso
beenthesubjectofformalconsultationsunderthedisputesettlementmechanism,whichwereconfidential.
Nevertheless, itwasworth recalling thattheAgreement onCustoms Valuation allowed equally the
useofthec.i.f.orf.o.b. systems; mostofMexico 'strading partners, particularly developed countries,
usedthefirst,which wasthusclearly beyond criticism. Mexico 'sc.i.f.system applied indiscriminately
toallWTO Members, including Canada andtheUnited States. However, NAFTA-originating goods
werenotconsidered tocome fromthose twocountries butfromNorth America; theywerethussubject
tothef.o.b. system. Theuseofthec.i.f. orf.o.b. systems wasunimportant forNAFTA-originating
products, asthechange inthetaxable value would benegligible duetotheparties 'proximity andthe
duty-free treatment granted tomostproducts, andtemporary, since attheendofthetransition period
theuseofeither system would make nodifference. Thec.i.f. system hadnoprotectionist or
trade-diversion aims: Mexico could haveachieved thefirstbyincreasing MFN tariffs using theexistingWT/TPR/M/29
Page26
gapbetween applied andbound tariffs; tofulfil thesecond, nothing would haveprevented Mexico
from speeding uptariff reductions scheduled under theNAFTA.
142. OnMexico'sactiveuseofanti-dumpingmeasuresandpossiblecorrectivesteps,therepresentative
saidthatanti-dumping investigations depended onrequests presented, which ifproperly filedthe
authorities wererequired topursue. TheGovernment hadnodeliberate policy toencourage orreduce
theuseofanti-dumping. Thesystem could notbeevaluated onthenumber ofinvestigations; the
important factor wasthatinvestigations followed theagreed disciplines. Thenumber ofinvestigations
wasnotsurprising inaneconomy asopen asMexico 's;astheimportance ofinternational trade
increased, sodidtheprobability ofrequests foranti-dumping investigations. Moreover, initiations
could refertoinitial requests orrevisions. Between 1994 and1996, 33initiations and17revisions
hadtaken place; 22requests hadbeenrejected. Thegreater number ofapplied measures since 1994
wasduetotheconclusion ofpreviously initiated investigations, andnottoasystematic increase in
these.
143. Concerning reforms tothedomestic legislation, thedelegate noted thatMexico hadhadno
problems reconciling itslegislation withtheWTO Anti-dumping Agreement as,unlike inother WTO
Members, international agreements hadthestatus ofSupreme Law; thusincompatibility between
domestic andWTO ruleswasmerely theoretical. Reforms tothedomestic legislation arose fromthe
convenience ofharmonizing internal andinternational rulesandthuswould facilitate theirapplication.
There wasnoprecise datefortheentry-in-force ofthose reforms, which would occur aftertheywere
approved bytheMexican Congress.
144. Mexico'sorigincertificationsystem(CPO)wasaresponsetothemassiveevasionofanti-dumping
orcountervailing duties through transhipment viathirdcountries. Thesystem hadbeenadopted after
theMexican authorities hadvisited andsought theviews ofseveral WTO Members; totakethose
views intoaccount, implementation hadbeenpostponed several months, notwithstanding theurgency
oftheproblem. TheCPOdidnotrepresent animproper oronerous requirement asforeign governments
themselves designated thecertifying authority, whose registration withtheMexican Government was
undertaken onlyonce. Confirmation ofaCPObyaMexican Embassy wasrequired onlyfornon-WTO
Members.
145. Notrequiring aCPOforproducts originating incountries withwhich Mexico hadaFTAwas
notadiscriminatory measure contrary toGATT; suchrequirement would beneedless asorigin would
havebeenalready defined inthecertificate oforigin required toobtain preferential treatment. ACPO
wasanadministrative requirement needed toensure compliance withexisting trade defence statutes
notincompatible withtheGATT.
146. Thefirstdiscussant noted inrespect toanti-dumping that,asforother disciplines, itwas
important thatthereview oftrade policies made aclear distinction between questions related to
commitments made bycountries, andissues related todesirable objectives notnecessarily related to
commitments. Although Mexico 'scomments onanti-dumping were quite satisfactory, theissue of
transparency remained extremely important. Aspreviously requested, itwould bedesirable tohave
Mexico 'sviews onthepossibility ofgiving greater independence totheanti-dumping authority, atleast
inrespect totheinformation-gathering stage. InMexico thiswasundertaken bySECOFI, while in
other countries there wasanindependent body. Litigants appear tothink thatthelatter arrangement
provided agreater guaranteed oftransparency.
147. Therepresentative oftheUnited States re-stated hiscustoms valuation question, namely the
useofadeposit ofguarantees ontransactions involving related parties.WT/TPR/M/29
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148. Therepresentative ofNewZealand asked whether answers inwriting would beprovided for
hisearlier question onrulesoforigin. Henoted thatthere wereWTO Members withopeneconomies
butveryfewanti-dumping investigations. Given this,would therepresentative ofMexico elaborate
onhisstatement thatthenumber ofrequests foranti-dumping investigations wasafunction ofthe
openness ofaneconomy?
149. Therepresentative ofBrazil again pointed outhiscountry 'sposition asaprimary target of
Mexico 'santi-dumping measures, particular inthesteelsector. Thishadbeenespecially truein1995.
Thisconcentration ofcases wassurprising asBrazil didnotseem tohaveparticular anti-dumping
problems inthesteelsector withanyother trading partner. Could therepresentative ofMexico explain
theinvestigation methods andthereasons forthediscouragingly highnumber ofcases affecting steel?
150. Therepresentative oftheEuropean Union asked howlongMexico would maintain thehigh
tariffs introduced in1995, especially inviewofthestrong economic recovery taking place. Oncustoms
valuation, heasked whyitwasnecessary tomake adistinction between NAFTA originating goods
andother products asifstated byMexico thedifferences were minimal.
151. Therepresentative ofMexico responded tothefirstdiscussant bypointing outthatuntilrecently
Mexico hadmaintained aclosed economy, notevenparticipating inthemultilateral trading system.
Inrecentyears,Mexico'santi-dumpingmechanismhadevolvedinaveryseriousandresponsiblemanner;
ahighly professional institution hadalsobeencreated. Bothadministrative andlegalefforts hadbeen
made toincrease transparency inprocedures andbroaden theparticipation ofallparties concerned;
public hearings werepossible, amechanism wasavailable toreview decisions andprofessional training
wasundertaken onacontinuous basis. Overall, theauthorities werequitesatisfied withthefunctioning
ofthesystem. TheNAFTA contained amechanism toreview decisions, which could betaken to
international panels; reforms hadbeenintroduced torelated Mexican legislation, andextended on
anMFN basis. Regarding theindependence oftheanti-dumping authority, international experience
inthisregard wasnotconclusive onthemerits ofonesystem overanother. Theimportant consideration
wasthatMexico applied therelevant legislation inatransparent, neutral andfairmanner.
152. Concerning thecomments byNewZealand, therepresentative ofMexico clarified thathehad
notwanted toimply thatmore openeconomies would have, forthismere fact,agreater number of
anti-dumping investigations. Hehadmeant tosaythatnolongagothere hadbeenaveryimportant
transition inMexico; in1982, allimports were subject toprior import licences andtheimported
component ofaggregate supply wasverylow. Thetransition from aclosed economy protected by
veryhightariff andnon-tariff barriers toanopen economy withmore intense trade helped explain
theincrease inanti-dumping cases initiated inMexico. Thegrowing number ofcases inrecent years
resulted from requests made before 1993 andwhich hadslowly beenresolved.
153. Therepresentative pointed outthatthequestion bytheUnited States wasofaspecific, technical
nature, andreiterated hiscommitment togiving written answers tosuchquestions. OnBrazil 'sconcerns
about thehighrateofanti-dumping cases affecting steelexports, therepresentative commented that
thesteelsector wasoften subject tothistypeofmeasures attheinternational level. Steel wasa
commodity subject toasupply surplus inrecent years; thiswasprobably themostimportant element
explaining theincreased number ofcases. TheMexican authorities hadonlyreacted tothegrowing
number ofrequests from users oftheunfair trade practices regime. Concerning thequestions from
theEuropean Union, although thetariffs introduced in1995onafewproducts wereconstantly under
review, forthetimebeing there wasnointention tomodify theregime inplace. Asregards the
distinction between c.i.f. orf.o.b. valuation, thedifference wasindeed minor yetsignificant forend
users inMexico; asindicated before, consultations withEuropean trading partners wereinprogress
todealwiththisissue intheappropriate forum.WT/TPR/M/29
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(b) Technical barriers, government procurement, CONASUPO
154. Ontechnical barriers totrade, therepresentative ofMexico noted theconsistency between the
reports fromtheSecretariat andhisGovernment. TheAgreement onTechnical Barriers toTrade (TBT)
didnotrequire thatallnational standards beinstrict concordance withinternational standards; the
latter weretobeusedonlyasabasis andtotheextent considered appropriate fornational standards.
Asallowed bytheAgreement, Mexico hadfound itinappropriate foritstechnological development
touseinternationalstandardsinareassuchaselectricalortelephonicequipment.Nevertheless,Mexico's
1995-2000 Development Planacknowledged theneedtomodernize industry while improving quality
mainly through theuseofinternationally recognized standards.
155. TheNational Standardization Commission wasanational organization withparticipation from
various sectors (academic, industrial, commercial, consumers), public agencies involved withstandards
andtechnical regulations, aswellasprivate standardization firms registered withSECOFI according
tointernational conventions. Main regulations andstandards were established through committees
withparticipation fromdomestic andforeign interested parties. Bothvoluntary andmandatory standards
hadtobepublished intheOfficial Journal; thelawprovided fora60-day period toaccept comments.
156. TheIndustrial Policy andForeign Trade Programme ensured thatstandards were usedonly
when needed, thuscontributing toderegulation inthisarea. TheProgramme aimed toencourage the
establishment ofcost-effective, generally accepted voluntary standards asaself-regulating mechanism
fortheprivate sector.
157. Under Mexico 'slegislation, certification wastheresponsibility oftheauthorities andaccredited
Mexicanorganizations,butanycountrycouldrequestapprovalforcertification.Concerningthequestion
oncertificationunderISO9000,thereweresome500firmscertified,120-125byMexicanorganizations;
noorganization inMexico wasaccredited tocertify theISO14000 standard, butsome 15firms had
obtained such certification from foreign agencies. Adjustments were being made toMexico 's
environmental legislation, including consideration ofthepossible roleofISO14000.
158. TheNAFTA hadaprovision similar toArticle 2.5oftheTBTAgreement andArticle Fof
theCode ofGood Conduct, thatguided cooperation onstandards between NAFTA members, including
within theCommittee onFood Labelling. Thisensured thatMexico 'sinitiatives within theNAFTA
werecompatible withitscommitments under theTBTAgreement. Thethirdstage ofthecooperation
programme onstandards andcertification between Mexico andtheEuropean Union hadbeenfinalized
inJune1997.Theprogrammecoveredtechnicalcooperation,trainingandinformationexchangebetween
Mexican andEuropean certification agencies. InJuly1997, Mexico hadrequested anextension of
theprogramme anditwashoped thatthiswould allow setting upaframework toestablish mutual
recognition agreements.
159. Mexico hadmodernized itsstandards andlabelling legislation; itsrequirements inthisarea
were laxcompared withthose ofother countries. Insome countries, these requirements varied at
sub-federal levelorinvolved theuseofmore thanonelanguage; inalldeveloped countries, Mexican
exporters hadtocomply withsuchrequirements. NOM-050-SCFI-1991 onlabelling requirements
forfoodandnon-alcoholic beverages didnotrequire displaying thenutritional content ofeachproduct,
except ifclaims were made about theproduct 'snutritional properties.
160. TheviewthatMexico hadadopted threetechnical regulations notconsistent withinternational
standards waswrong: NOM-050 wasbased onISO14,37and41,while NOM-051 onfoodand
beverage labelling wasonagreement withCODEX STAN 1-1985, 107-1981, CAC/GL 1-1979,
CAC/GL2-1985 andothers. Nointernational standards existed relevant toNOM-004 ontextiles andWT/TPR/M/29
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clothing labelling. Theregulations of24February 1997onverification ofimporters complying with
NOMs 050and051didnotrelate totechnical rules, buttoalternatives forlabelling inMexico created
bySECOFI tofacilitate compliance withthetwoNOMs.
161. TheNationalAgriculturalSanitaryCommissionhadbeenestablishedbytheInteriorRegulations
oftheMinistry ofAgriculture of12April 1996; itwasthesoleagency charged withregulating sanitary
andphytosanitary (SPS) measures, aswellasinspections atairports andborders. Unlike previous
arrangements, theCommission hadfinancial andadministrative autonomy, charging forsome ofits
services tostrengthen itscapacity toprovide them. Thisfacilitated thesanitary evaluation ofproducts
andidentification ofdisease-free areas inother countries, ortheestablishment ofprotocols toexpedite
agricultural trade.
162. Mexico hadstrived tohavegovernment procurement rules included inallofitsFTAs. As
explained before, Mexico believed thatnational andMFN treatment should apply togovernment
procurement;itsregimewasalreadytransparentandnon-discriminatory,andtendersreservedtonational
suppliers wereclearly defined. About 80percentofprocurement bytheFederal Government involved
international tenders offering national andMFN treatment.
163. Although inpractice Mexico excluded nocountry frominternational tenders, ithadreserved
itsrighttodosointheLawonPublic Procurement andWorks. Under it,countries nothaving aFTA
withMexico ornotgranting itreciprocity could beexclude frominternational tenders; thisreflected
bothamarket reality andthemaintenance bymany other countries ofregimes withlesstransparency
andopportunities.
164. Mexico supported theWTO working group ontransparency ingovernment procurement,
considering thatithadgreatglobal importance; italsosupported taking intoaccount national policies
aslongasthiswasmade inatransparent manner. Backing thatworkoffered apathtowards anauthentic
multilateral government procurement agreement. Mexico considered theWTO Agreement on
Government Procurement toolimited, excluding asitdidthevastmajority ofcountries; membership
didnotensure reciprocity withnon-members.
165. Intheprevious Trade Policy Review, CONASUPO hadbeendescribed asastate-trading
enterprise because itwastheonlyentity allowed toimport powdered milk. Asaresult ofMexico 's
modernization programme andtheUruguay Round negotiations thiswasnolonger thecase. Powdered
milkcould beimported duty-free within atariff-quota byholders oftherespective import certificates,
orbyother parties afterpayment ofimport duties. Thissituation wasnotentirely satisfactory forsome
WTO Members, butthisdidnotmean thattheimport liberalization agreed intheUruguay Round had
notoccurred, orthatthenewarrangement waslessfavourable thantheprevious one.
166. Theassignment ofcertificates forin-quota imports wasnotastate-trading enterprise issue:
thefirstwasbeing examined bytheAgricultural Committee, while thesecond related toexclusive
privileges granted toenterprises. Assignment onahistorical basiswasnotanexclusive privilege under
GATT 1994, butacommon administrative practice usedbymany WTO Members invarious sectors.
Besides legal considerations, Mexico hadnointerest inusing tariff-quotas forpowdered milkfor
protectionist reasons. Mexico 'simports ofthatproduct weretheworld 'slargest, exceeding thetariff-
quota; allimports hadbeenduty-free. CONASUPO always sought toobtain through brokers themost
favourable conditions intheworld market. Domestically, salestoindustrial users weremade through
bidswiththebaseprice related toworld prices plustransport andadministrative costs. Participants
obtain thelowest price offered.WT/TPR/M/29
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167. Therepresentative ofThailand requested further details ontheissueofMexico 'sriceimports
from hiscountry, inparticular concerning theenactment ofnewregulation inthisarea. The
representative ofNewZealand asked howaprivate sector importer ofpowder milkmaintained the
appropriate certification toimport within thetariff-quota, andrequested details inwriting onhowsuch
certification wassecured.
168. OnTBTs, therepresentative oftheEuropean Union pointed outthatcertain EUexporters and
MexicanimporterswereexperiencingsignificantdifficultieswithMexico'snewregulations,mostnotably
regarding NOMs 050and051. These hadresulted intwonotifications totheMexican Government
bytheWTO TBTinquiry points butnoresponses hadbeenreceived yet.Heasked when might such
information beprovided? TheEuropean Union wasalsolooking forward toreceiving answers toits
written questions, especially withrespect topublic procurement.
169. AlsoonTBTs, therepresentative ofJapan noted thatalthough mostMexican standards were
generally consistent withinternational standards, theirnumber hadincreased substantially inrecent
years.ComplaintshadalsoarisenfromJapanesecompaniesconcerningsomestandardsbeingexcessively
strict. Therepresentative expressed particular concerns about NOM-050 andrequested Mexico torevise
thescheme. Onimport procedures, there wasaneedforgreater clarity assome imports appeared
tobedelayed forlongperiods.
170. Therepresentative ofColombia noted thatseveral issues ofinterest tohiscountry hadalready
been covered byother delegations, including thequestion bytheEuropean Union onNOM-004
concerning textiles andclothing. Notewastaken ofMexico 'sassertion thatnointernational standard
existed tobasesuchnorm. Nevertheless, Colombian exporters wereconcerned thattheNOM created
unnecessary barriers totrade flows; theyhadadvised theColombian authorities thatsome Mexican
customs offices wererequiring datanotexplicitly required bytheNOM. Theinformation provided
intheTrade Policy Review would besenttotheauthorities inBogota, butfurther written dataonthis
issue would bewelcomed.
171. Therepresentative ofBrazil again raised theissueofSPSbarriers: according totheSecretariat
report, within theNAFTA acommittee hadbeenestablished toharmonize theregulations andfacilitate
cooperation andconsultations, while theconcept ofzones freefromsanitary problems hadalsobeen
introduced. Therepresentative reiterated hisquestion onwhyMexico didnotapply thesame concept
toBrazil, especially withrespect tofoot-and-mouth disease, recognizing thatinsuchalarge country
there weredisease-free areas from which meatexports could bederestricted. Which criteria guided
theworkofthecommittee, andwhatcould bedonetoexpedite thesolution oftheissueandthusincrease
thetrade flows between thetwocountries?
172. Therepresentative ofMexico reiterated hisengagement toprovide specific written answers
withinthefollowingdays,includingtoquestionsbyColombia,theEuropeanUnion,JapanandThailand.
Concerning thelatter, headded thatthefollowing weekMexican experts would attend aSPSCommittee
meeting; theywould beasked todiscuss withthedelegations ofThailand andUruguay theirconcerns
concerning rice. Ontheadditional information issueraised byColombia, herequested further details
tobeabletofollow itupwiththeMexican customs authorities.
173. Therepresentative stressed thatCONASUPO nolonger enjoyed soleimporter privileges:
powdered milkhadbeendulytariffied andatariff-quota made available. Infact,allpowdered milk
imports weredutyfree; Mexico wasnotinterested inmaking suchaproduct more expensive, asmost
ofitwasusedforsocial purposes. Theadministration anddistribution ofimport certificates didnot
fallunder Article XVII oftheGATT onstatetrading. Concerning NewZealand 'squestion, import
certificates were allocated onahistorical basis; forpowdered milk thehistorical importer wasWT/TPR/M/29
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CONASUPO.Allocationonahistoricalbasiswasusedbyseveralcountriesandinpracticallyallsectors;
ithadnothingtodowiththeissueofstatetradingenterprises.AlthoughCONASUPOhadbeendescribed
asastatetrading enterprise intheprevious Trade Policy Review, thiswasnolonger thecase: Mexico 's
notification onstatetrading wascorrect. CONASUPO operated inthedomestic market asabuyer;
itoperated through international brokers, having noinfluence onworld prices. Inthedomestic market
itsoldpowderedmilk,notimportcertificates.Suchsalesweremadethroughasystemwherethewinning
bidwasthatclosest toCONASUPO 'sacquisition price, i.e.,thelowest bid.
174. OnBrazil 'squestion regarding disease-free zones, Mexico hadeffectively agreed torecognize
suchzones withsome trading partners. Itwasunclear whether Brazil hadformally requested asimilar
arrangement, butifthiswere notthecaseMexico would welcome aninitiative tobegin discussions
withBrazil onproducts ofparticular interest toit.
175. Therepresentative ofColombia agreed toprovide further details onproblems faced byhis
country 'sexporters. Anadditional problem arose inrelation tothegeneral andsector-specific registries
ofimporters,mentionedbytheUnitedStates:Colombianfirmsinthegeneralregistrywereexperiencing
delays ofuptothree months togainregistration inthesector-specific registries.
176. Therepresentative ofMexico tooknoteoftheconcern andpromised toprovide awritten answer
addressing it.
(c) Maquiladoras ,agriculture, automobiles, services
177. Therepresentative confirmed thaton1January 2001 modifications would bemade tothe
application ofthemaquiladora regime tointra-NAFTA trade. From thatdate, Mexico could refund
orreduce import taxes forthelesser ofthetariffs thatwould bepaidoninputs, ortotalduties paid
toother NAFTA members ontheexported good. Alltaxrefund orreduction schemes intheworld
sought toavoid double taxation oninputs. Forduty-free goods within aFTA, theexporting country
should notrefund orreduce import taxes, orelseexports would befavoured overdomestic sales.
Thishadbeenprecisely theaimofchanging themaquiladora regime. These NAFTA-related changes
innowayaffected MFN tariffs onnon-regional inputs. Thechanges could notviolate multilateral
disciplines, astheWTO imposed noobligations onthegranting oftariff refunds orreductions. As
themaquiladora industry generated overonemillion jobsandwasanimportant source offoreign
exchange, theMexican authorities andtheindustry wereconsidering changes toitsspecial regime to
ensure thatitscompetitiveness wasmaintained.
178. Onrequests fordetails onMexico 'sprogramme ofdirect payments forfarmers, PROCAMPO,
therepresentative saidthatadecree of25July1994 hadestablished it;operational rules hadbeen
published intheOfficial Journal on23April 1997. PROCAMPO 'smain features included: fixed
payments perhectare, de-linked fromproduction volumes, productivity orsowing needs; tobeeligible,
farmlandmusthavebeenusedatonetimeduring thethree years before August 1993 togrow corn,
beans, wheat, sorghum, rice,soyabeans, safflower, cotton orbarley; andfarmlandcould nowbe
usedforcrops, cattle, forestry orenvironmental protection.
179. Mexico hadfulfilled allitsUruguay Round market access commitments setinitsschedules,
including forsugar. When domestic demand sorequired, imports oftariffied products could exceed
theminimum access levels intheschedules. Theonlyagricultural products subject toofficial prices
were tortillas andcornflour inbulkformaking tortillas.
180. Concerning theautomotive sector, theMexican Government haddecided that,afteryears of
excessiveprotection,thesectorhadtomodernizetoreflectMexico'snewcircumstancesinanincreasinglyWT/TPR/M/29
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globalizedandcompetitiveworld.TheDecreefortheDevelopmentandModernizationoftheAutomotive
Industry (theAutomotive Decree) aimed toopenthesector gradually toforeign competition through
thetransformationofplantsandprocessesandtheintegrationofproductionchains.TheDecreeprovided
forthegradual elimination ofrestrictions onproduction, theestablishment ofnewassembly plants,
andlocal content requirements. Thismechanism hadproved tobeaneffective industrial policy
instrument,creatingafavourableenvironmentforthesector'sdevelopment.Comparedwiththesituation
adecade earlier, thesector wasmore modern andcompetitive and,asshown byitsperformance, had
amore solid anddynamic export base.
181. Inordertoensurecompletetransparency,theAutomotiveDecreehadbeennotifiedtotheTRIMs
Committee. Thenotification provided alltheinformation multilaterally agreed, andthetextofthe
relevantlegislation.DoubtsexpressedconcerningtheNAFTAhadbeendispelledduringtheexamination
oftheAgreement intherelevant committee. Ashadbeenindicated then, itwasnotyetpossible to
indicate when theAutomotive Decree would endinthecontext oftheWTO. TheTRIMs didnot
establish aperemptory deadline, astheCouncil forTrade inGoods could extend thetransition period.
Theeventual fateoftheAgreement, concerning theWTO, would depend onMexico 'sfinancial,
commercial anddevelopmental needs, aswellasitsWTO rights andobligations atthetimeofmaking
adecision andnotbefore.
182. Onservices, therepresentative saidthatalthough thereport bytheSecretariat mentioned
persistent inefficiencies inareassuchastransport, telecommunications andfinancial services, thesame
document highlighted thatsuchviewwaserroneous. Liberalization andmarket-opening during recent
years hadhelped increase supply andimprove competitiveness. While certain deficiencies existed in
some areas, increasing efforts werebeing made toovercome them. Asexplained inthereport 'ssections
ontransport, telecommunications andfinancial services, thelegalframework hadbeenreviewed, and
various support andmodernization programmes implemented. Thispolicy hadencouraged investment
andtransparent competition, resulting inmore modern andefficient services thatsupported the
competitiveness andefficiency ofother activities.
183. Mexico 'sonlytwoMFN GATS exceptions related toanagreement onlandtransport tofacilitate
access toU.S.tourists. Thiswasduetotheparticular operation oftheU.S.-Mexico border, which
made itinfeasible toextent thistreatment toother countries. Nevertheless, inreviewing itslistof
engagements Mexico would consider eliminating asmany barriers aspossible onaMFN basis.
184. Mexico 'sWTO engagements onservices hadoneofthebroadest andmostambitious coverages.
Although inmostareastherewerenolimits toforeign investment, some sub-sectors listed inMexico 's
GATS schedule allowed foreign participation inexcess of49percentonlyafterapproval from the
Foreign Investment Commission; such approval wasbased onclear, objective criteria such as
employment andtraining impacts, technological contribution, compliance withrelevant environmental
provisions and,ingeneral, contribution tothecountry 'scompetitiveness. None ofthesewasaTRIM.
Between January 1995 andSeptember 1997, 193requests hadbeensubmitted totheCommission;
allhadbeenapproved.
185. TheMexican telecommunications sectors wasoneoftheworld 'smost open andadvanced.
Mexico hadbound theliberalization during thenegotiations concluded inFebruary onthebasisofthe
legislation inforce. Thus, there werenoplans atthepresent timetoundertake further liberalization.
ThetelecommunicationsagreementswiththeUnitedStatesrelatedtotheNAFTA;thus,noconsideration
wasbeing given toextending theirprovisions onaMFN basisasprovided inArticle V:7(a) ofGATS.
186. Maritime transport inMexico wasamong themostopenintheworld. Norestrictions applied
toforeign-flagged ships intransport onthehighseas. FDIwasallowed upto100percentwithpriorWT/TPR/M/29
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approval fromtheForeign Investment Commission. Mexico wasoneofthefewcountries thatallowed
foreign ships incabotage activities, made possible through temporary permits granted when domestic
capacity didnotmeetdemand.
187. Foreign participation infreight landtransport wasgrowing; thelimitonFDIwasraising from
thecurrent 49percentto51percentin2001 andto100percentin2004.
188. Onfinancial services, Mexico hadengaged togrant national treatment initsFTAs covering
suchservices. Other countries hadalsobenefited assubsidiaries established inareas covered byFTAs
received similar treatment. Within theOECD, Mexico hadaccepted toexamine in1998thepossibility
ofextending NAFTA benefits toOECD members; thereview wasalready under way.
189. InMexicoforeignfinancialinstitutionscouldengageinthesametypeofactivitiestheyundertook
intheircountry oforigin. They received national treatment astheycould undertake thesameactivities
asMexican firms, subject toofficial authorization. Theauthorities expected financial institutions to
haveexperience intheservices theysought toprovide inMexico. Subsidiaries received national
treatment; theyhadbeeninitially required tohavea99percentforeign participation, butthisshare
hadbeenreduce in1995 to51percenttoallow co-investments. Neither thechairman/president nor
board members were required tohaveMexican citizenship, although thechairman/president anda
majority oftheboard hadtobeMexican residents. Thegreater opening ofandconfidence intheMexican
financial sector wasdemonstrated byFDIflows ofUS$3.6 billion between 1994andSeptember 1997
(notincluding profit reinvestment orintra-firm transactions).
190. Therepresentative ofKorea requested further clarification onMexico 'suseofspecial certificates
oforigin, which hesaidformed discrimination prohibited under theGATT, astheywereapplied only
tocertain countries.
191. Therepresentative oftheUnited States sought clarification ontheanswer given regarding
PROCAMPO: wereproducers eligible toreceive payments required toproduce certain crops ordedicate
thelandtospecific activities?
192. Therepresentative ofAustralia tooknotethatMexico would import sugar above thetariff-quota
subject todomestic demand, andasked whether preferential tariffs would beincluded within theMFN
tariff quota.
193. Therepresentative ofJapan requested additional information onandexpressed concern about
themaquiladora regime tobeimplemented in2001. Thisregime appeared nottobeinfullconformity
withArticle XXIV:5(b) oftheGATT.
194. Therepresentative ofMexico responded toKorea 'squestions bystressing thatthecertificates
oforigin didnotconstitute special rules oforigin; Mexico hadconducted consultations withKorea
andother countries onthisissue. Mexico wasconvinced thatsuchcertificates were consistent with
itsmultilateral obligations. Onrestrictions affecting theimportation ofassembled motor vehicles, these
andtheAutomotive Decree hadbeennotified asprovided byWTO rules. TheDecree included phasing
outprovisions which when adopted would result inamore liberal regime.
195. Concerning thequestion fromtheUnited States, PROCAMPO didnotrequire theproduction
ofanyparticular cropandlandcould beusedforanycrop, livestock, forestry orenvironmental
protection. OnAustralia 'squestion concerning sugar, therepresentative saidthatanypreferential quotas
under regional agreements were inaddition toquotas granted toWTO Members onaMFN basis.WT/TPR/M/29
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196. Onthemaquiladora questions raised byJapan, thefirstissues seemed toconcern apossible
violation ofArticle XXIV oftheGATT bythenewregime tobeadopted in2001inasmuch asitwould
involve lower tariff reimbursement thancurrently available. Mexico didnotviewthisasaviolation
ofArticle XXIV, which dealtwithMFN tariffs; these would notbeincreased bythenewregime.
Onpossible measures currently under discussion withthemaquiladora industry, those measures had
yettobedefined. Details werethusnotavailable, butconsultations withfirms established inMexico
wereintensive reflecting thehighpriority given tothemaquiladora industry; future measures would
seektoensure thatitscompetitiveness wasmaintained.
(iv) Specific questions
197. Therepresentative ofMexico saidthattheNAFTA negotiations hadgiven important impetus
totheliberalization ofFDIinitiated in1989. Liberalization under theNAFTA hadbeenextended
onanMFN basis bytheForeign Investment Law(LIE), which hadeliminated investment limits in
almost allactivities. Only16ofthe704activities included intheMexican Classification ofActivities
andProducts wasreserved toMexicans, and10totheState. Theliberalization in1995 ofsatellite
communications; railroads; andthestorage, transport anddistribution ofnatural gas,activities
previously reserved totheState, hadrequired changes totheConstitution.
198. TheMexican Congress hadreformed theLIEinDecember 1996togiveinvestors greater legal
certainty. Thereforms hadsought toestablish timelimits afterwhich approvals became automatic,
toencourage investment inactivities where onlyminority foreign investment wasallowed, toimprove
FDIstatistics, tomake theLIEself-contained byadding toitprevious changes toother statutes and
tosimplify administrative procedures inSECOFI andtheMinistry ofForeign Affairs.
199. Mexico 'scurrent FTAs included disciplines oninvestment, andmechanisms tosettle
investor-State disputes; thesame would betrueoffuture FTAs. Mexico alsohadbilateral treaties
oninvestment protection withSwitzerland, Spain andArgentina; theprevious dayithadsigned an
agreement withGermany andwasnegotiating others withvarious European countries. Mexico was
participating actively inthenegotiation oftheOECD Multilateral Investment Agreement.
200. Variations intheFDIdataintheSecretariat andGovernment Reports, mentioned bythesecond
discussant, wereduetomethodological differences. Consistent withtheIMF'sBalance-of-Payments
Manual, theofficial definition ofFDIincluded: investment notified toSECOFI 'sForeign Investment
Registry byforeign firms andindividuals when established inMexico, share capital innewfirms or
increases inestablished companies, andflows intorealstatetrusts; machinery andequipment imported
temporarily bymaquiladora firms; profits reinvested infirms withFDI; anddebt-related transactions
between associated firms. TheSecretariat report included onlythefirstinvestment category. Onthe
basisoftheappropriate methodology, FDIinMexico between 1994and1996reached US$31.5 billion.
201. Economic deregulation hadbeeninitially undertaken aspartofeconomic liberalization and
privatization intraditionally regulated sectors suchastelecommunications, transport, tourism, railroads,
ports, electricity, fisheries andmining. Deregulation through theEconomic Deregulation Council had
focused onadministrative streamlining toreduce theinefficiencies associated withanexcessive number
ofregulationsandpaperworkincommercialandinvestmenttransactions.TheCouncilhadrepresentatives
from thepublic, business, labour andacademic sectors. Ithadundertaken abroad-ranging review
oftheFederal regulatory framework; coordination hadalsobeensought withFederal states, which
werealsoundertaking deregulation. Various legislative reforms hadfollowed, including totheLaw
ofAdministrative Procedures, LawonMetrology andStandardization, Mining Law, LIE; reforms
tocommercial andcivilstatutes hadreduced by50,000 thecases inFederal District tribunals, with
savings ofabout onebillion pesos.WT/TPR/M/29
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202. TheFederal Competition Commission (CFC) hadtechnical andadministrative autonomy to
apply competition policies, especially onprevention, investigation andcombatting monopolies,
monopolistic practices, anti-competitive concentrations, andsanction determination andapplication.
TheCommission 'scredibility hadincrease aseconomic operators gradually changed theirattitudes;
thiswasshown bythe42percentincreased inthenumber ofcases between 1994and1996. TheCFC
hadalsoparticipated inderegulation andprivatization, andintheelaboration ofvarious statutes, thus
promoting competition invarious sector including telecommunications, railroads, aviation, ports and
airports. TheCFCcould demand anyinformation required toinvestigate anti-competitive practices,
anddefine coordination mechanisms toprevent andfightsuchpractices.
203. TheCFCparticipated actively invarious international competition-related fora,including within
APEC, FTAA, OECD, LAES, UNCTAD andWTO. Mexico followed OECD recommendations on
cooperation onanti-competitive practices affecting trade. Italsoparticipated intheworking groups
established intheG-3andNAFTA; thelatter included work ontradeandcompetition, andcomparative
analyses ofcompetition lawsinthethree members. TheNAFTA established cooperation principles
through consultations, mutual legal assistance, notifications andinformation exchanges. TheCFC
hadpromoted close communications withthecompetition agencies ofCanada, United States, Spain,
France, theEuropean Union andvarious other countries. Italsoparticipated intechnical cooperation
anddissemination programmes.
204. Onintellectual property, therepresentative noted thatMexico hadusedthetransition period
provided fordeveloping countries inArticle 65oftheTRIPS, although itslegislation wasmodern and
offered adequate andefficient protection toallintellectual property rights. Mexico hadlegislation on
industrial property (enacted in1991, reformed in1994), copyrights (1996, reformed in1977) andplant
varieties (1996).
205. Industrial property legislation covered patents, utility models, industrial designs, secrets, brands
andappellations oforigin. The1994reforms hadestablished theMexican Institute ofIndustrial Property
(IMPI),whichwastherelevantadministrativeauthoritychargedwiththeprocessing,granting,registering
orcancelling ofpatents, aswellasundertaking investigations onpossible infractions andadopting any
relevant measures orsanctions. Thelawprovided forcompulsory licences when apatent hadnotbeen
worked without avalid reason andthepatent holder wasnotabletodoso;licences weretemporary
andsubject toroyalty payments tothepatent holder. TheIMPI could impose administrative sanctions
intheform offinesofupto20,000 times theminimum daily wage plus500minimum salary days
foreachdaythattheinfraction remained, theclosure ofestablishments oradministrative arrest for
upto36hours; penal sanctions bythejudicial authorities were alsopossible, withfines ofupto
10,000 times theminimum daily salary andprison terms oftwotosixyears.
206. AnewCopyright Lawhadcreated theNational Copyright Institute (INDA) astherelevant
administrative authority. TheInstitute 'sresponsibilities included fostering andprotecting copyrights
andneighbouring rights byinvestigating possible violations andimposing administrative sanctions when
required. TheINDA wasalsoresponsible forfighting piracy through administrative procedures and
finesofupto10,000 times theminimum daily salary, plus500minimum salary daysforeachday
thattheinfraction remained. ThePenal Code alsodealtwithpiracy andrelated crimes, which were
sanctioned withuptosixyears injail.Regulations under thenewlawwereexpected tobefinalized
shortly.
207. TheFederal Plant Variety Lawenacted inOctober 1996 protected therights ofcreators of
newvegetable varieties, giving them theexclusive righttoexploit them. Regulations under thelaw
were tobepublished shortly. On9August 1997, Mexico hadbecome UPOV 's34thmember.WT/TPR/M/29
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208. TheCustoms Lawprovided procedures tostopattheborder goods inbreach ofintellectual
property rights, asrequested bytheIMPI ortheAttorney-General 'sOffice. TheMexican authorities
weretosendsoontoCongress adraftbillfortheprotection oflayout designs ofintegrated circuits.WT/TPR/M/29
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VII. CONCLUDING REMARKS BYTHE CHAIRPERSON
209. ThesecondTradePolicyReviewofMexicowasconductedon7-8October1997.Theseremarks,
prepared onmyownresponsibility, areintended tosummarize thediscussion andnottobeafullreport:
thiswillbecontained intheminutes ofthemeeting.
210. Thediscussion developed under fourmain themes:
(i) Economic anddevelopmental policies
211. 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.
212. 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.
213. 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.
(ii) Regional/multilateral trade
214. MemberspraisedMexico'sactiveandpositiveroleintheWTO.TheyalsotooknoteofMexico's
growing participation inregional trade agreements, highlighting inparticular NAFTA 'smajor role
inMexico 'stradepolicy reforms. Areas ofconcern included thecontinued andconsiderable dependency
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.WT/TPR/M/29
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215. Mexico wasencouraged tonotify totheWTO theG-3Agreement, anditsagreements with
Bolivia andCosta Rica. Details were alsosought ontheWTO justification fortheexistence inthe
NAFTA ofsome phasing outperiods exceeding tenyears.
216. 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.
217. 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.
(iii) Implementation ofcommercial policies, including sectoral policies
218. 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.
219. SeveralMembersexpressedconcernregardingMexico'sapplicationofaf.o.b.customsvaluation
baseforNAFTA andc.i.f. forother partners. Some Members sought information ontheoperation
ofregistration requirements, including onasector-specific basis. Information wasalsorequested on
restrictions ontheentry ofvarious products through specific Mexican ports.
220. 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
requirements forcertain products subject toanti-dumping measures; intheopinion ofsome Members,
these requirements imposed excessive demands ontraders from thirdcountries.
221. 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.
222. MembersnotedthatMexicowasnotamemberoftheWTOGovernmentProcurementAgreement,
andrestrictednationalpublictenderstodomesticsuppliers.MexicowasaskedwhetheritwouldconsiderWT/TPR/M/29
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acceding toanewagreement ongovernment procurement orparticipate intheongoing discussions
ontransparency.
223. Several Members asked when Mexico would notify CONASUPO asaStatetrading enterprise.
224. 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.
225. 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.
226. 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.
227. 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.
228. 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 onaf.o.b. basisofNAFTA tradeandc.i.f.basisforothertradewould 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.
229. 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
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.
230. Hesaidthat,asnoted earlier, Mexico hadatransparent andnon-discriminatory regime for
government procurement, andmostfederal procurement wasonaninternational basis. Reciprocity
rules reflected international realities. Mexico hadfought forthissubject tobeincluded inFTAWT/TPR/M/29
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agreements andsupported thework oftheWTO working party ontransparency ingovernment
procurement.Atpresent,however,theGPAwaslimitedinmembershipanddidnotguaranteereciprocal
treatment.
231. 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.
232. 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.
233. 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.
234. 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.
(iv) Specific questions
235. Memberssoughtinformationonrecentforeigninvestmentflows,andonpoliciesandregulations
todiversify thesources ofnewinvestment. They asked about theelimination ofremaining restrictions
onprivate andforeign participation inanumber ofsectors.
236. Mexico wasasked about itsrecent experience withtheFederal Competition Commission, on
planstostrengthen theCommission, andoncooperation programmes withothercountries incompetition
policy.
237. Several members expressed appreciation fortheintroduction ofimproved legislation on
intellectual property, butraised various questions onplant protection, copyright andenforcement.
OneMember requested information onanewHealth Lawaffecting generic drugs.
238. 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 withanumberWT/TPR/M/29
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ofcountriesandMexicowasparticipatingactivelyintheOECDnegotiationsforaMultilateralAgreement
onInvestment.
239. 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.
240. 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.
*
* *
241. 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 areas wereexpressed
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.