WT/REG308/2  
17 June 2014  
(14-3504)  Page: 1/7  
Committee on Regional Trade Agreements  Original: English/Spanish  
 
  FREE TRADE AGREEMENT BETWEEN PERU AND MEXICO 
(GOODS AND SERVICES) 
QUESTIONS AND REPLIES 
 The following communication, dated 11 June 2014, is being circulated at the request 
of the delegations of Peru and Mexico.  
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   This document reproduces the questi ons addressed to the Parties and the 
responses submitted. 
 Questions from the delegation of Colombia 
 Rules of origin 
Customs-related procedures 
 1.1.  Does Peru grant tariff preferences for pr oducts from Mexico's free trade zone? 
If so, and in view of the MFN principle, we  would like to ask the Peruvian Government 
why it has not granted preferences for goods from Colombia's free trade zone. 
The Peru-Mexico Trade Integration Agreement contains no provisions on free zones, so there 
is no difference whatsoever in preferential tari ff treatment granted to products originating from 
that country. 
 
Liberalization schedule 
Safeguard mechanisms 
Table 3.2 Peru: Tariff elimination un der the Agreement, by HS section 
 
1.2.  If the average MFN tariff applied in Peru for the oilseeds agricultural sector 
was 2.3% in 2013, how can Peru continue applying a 29% safeguard on fats from 
Colombia? Moreover, the safeguard is of a te mporary nature and Peru has been applying 
it to Colombia since 2005. Why has the measure not been dismantled? 
 In accordance with the Transparency Mechanism for Regional Trade Agreements, the written 
questions and comments of Members shall relate to the RTA under consideration. 
  However, the question raised by Colombia bears no relation to the Peru-Mexico 
Trade Integration Agreement, since it refers to a safeguard procedure that was developed under 
the Andean Community legislation; therefore, Peru  does not consider it relevant to respond to 
the question put by Colombia in the framew ork of the Transparency Mechanism for RTAs. 
 
 Without prejudice to the foregoing, it should  be mentioned that Peru provided a response 
to the same question in the context of the Fo u r t h  T r a d e  P o l i c y  R e v i e w  o f  P e r u ,  a s  s e t  o u t  
in document WT/TPR/M/289/Add.1. 
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  Rules of origin 
1.3.  Which are the countries referred to in th e last sentence of paragraph 3.31 on 
extended cumulation of origin? Looking at pa ragraph 2 of Article 4.8 of the Agreement, 
we would also like to know whether other conditions have been established for the 
implementation of extended cumulation. 
Under the Mexico-Peru Trade Integration Agreement, the third countries that could be 
covered by extended cumulation are those common trading partners with which Mexico and Peru 
already have a trade agreement, provided that they  are able to provide reciprocity on inputs from 
the region. However, this extended cumulation has not yet been implemented, and so to date 
there are no third countries participating in this mechanism. The parties have not yet developed the necessary conditions for the application of this provision. 
 
 With a view to avoiding any confusion, Mexico and Peru point out that no reference should be made in paragraph 3.31 of the factual presentation to products from third countries that may 
benefit from extended cumulation  (please revise the last line of the paragraph and footnote 20). 
 Subsidies and state aid 
Subsidies 
 1.4.  How is the payment of drawback controlled so that the amounts refunded do not 
exceed those actually due? Considering the effects of Peruvian exports to Colombia, 
especially in the paper and plastics sector s, could this incentive be regarded as 
an export subsidy? What mechanisms have  been agreed to counter this effect? 
In accordance with the Transparency Mechanism for Regional Trade Agreements, the written 
questions of Members shall relate to the RTA under consideration. 
  However, the question posed by Colombia bears no relation to the Peru-Mexico Trade 
Integration Agreement, since it refers to the cu stoms regime for the refund of customs duties 
applied by Peru; therefore, Peru considers that it is not relevant to reply to the question asked by 
Colombia in the context of the Transparency Mechanism for RTAs.  
 Without prejudice to the foregoing, it should be mentioned that Peru provided a response to 
the same question in the context of the Fourth Trade Policy Review of Peru, as set out in document WT/TPR/M/289/Add.1. 
 
Institutional framework 
 
1.5.  Regarding paragraphs 5.12 and 5.14, Colombia would be interested to know 
whether the Parties have already adopted or  at least prepared drafts of the rules 
and procedures of the Administrative Commi ssion and the regulations of the Committee 
on Short Supply. 
To date, no rules of procedure have been adopted for the Administrative Commission 
for the Agreement. However, the Administrative Commission operates in conformity with the provisions of Chapter XVII (Administration of the Agreement). That Chapter establishes 
the functions and powers of the Administrative Commission. 
  The Committee on Short Supply has not yet started discussions on defining its regulations. 
 
Questions from the delegation of the European Union 
 National and MFN treatment 
 1.6.  Paragraph 4.20: The report mentions und er lit. a.ii that "all non-conforming 
measures applied at local or municipal le vel are exempted from the scope of the 
agreement" and that "non-conforming measures  at state or regional levels have been 
listed by 2013 as for Mexico". WT/REG308/2 
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  a. Could Mexico elaborate about the num ber of non-conforming measures 
reserved at state and regional level an d their impact on foreign investors? 
 In total Mexico listed 49 federal reservations and 102 state reservations. Some of those 
reservations contain non-conforming measures with respect to one or several of the principles 
in the Investment Chapter. The impact of those non-conforming measures on the foreign investors 
is difficult to assess, since there is a multiplicity of factors affecting the investment decision of investors, besides a particular measure. 
 
b. Are there more measures concerning investors (e.g. concerning licences) 
at regional/governmental level or at local/municipal level? 
 The local measures incorporated in the Free  Trade Agreement between Peru and Mexico are 
the last measures known by the Federal Gove rnment at that moment. It might be that 
the municipalities create new measures that the Federal level will take time to notice.  
c. What remedies exist against non-conf orming measures at local/municipal 
level? 
The remedies against non-conforming measures depend on each local/municipal legislation. 
The most common remedies provided by local legislations are the juicio de nulidad , 
used for purposes of the annulment of a measure issued or carried out by an authority (e.g. the refusal of a licence or permission) and the juicio de amparo , which is submitted before 
a federal court for violations incurred by local authorities regarding individual rights established 
in the Federal Constitution; this is the last remedy against a measure. 
 
In addition to the above two remedies, other local legislations provide other remedies, 
such as the recurso de revisión administrativa , in which the interested party affected by acts 
and decisions of an administrative authority (e.g. in the case of licences and permissions) may submit a review before that same authority that carried out or issued the measure which 
is resolved by its superior authority. Against the decision to resolve the recurso de revisión 
administrativa , the interested party has the juicio de nulidad  and, where appropriate, 
the juicio de amparo . 
 
Sector-specific provisions on trade in services 
Financial services 
 1.7.  Could the Parties clarify what is the time-frame envisaged for negotiations 
on financial services? 
 At present, no time-frame is envisaged in  the framework of this Economic Integration 
Agreement for entering into negotiations with a view to the gradual liberalization 
of non-conforming measures. Nor is a time-frame envisaged for additional work in relation to the disciplines applicable to market access and quantitative restrictions. Nevertheless, it should be noted that both countries have negotiated financial services under the Pacific Alliance and are 
currently negotiating financial services under the Trans-Pacific Partnership Agreement (TPP). 
 Performance requirements 
 1.8.  The report mentions that paragraph 2 of Article 11.7 of the FTA makes clear that 
the mandatory use of technology for comply ing with health, security or environment 
requirements is not prohibited. The report does not mention that paragraph 6 
of Article 11.7 foresees that the subparagr aphs 1(b), (c) and 3(a) and (b) are not 
applied for measures concerning the enviro nmental nature (specified in 6(a)-(c)). 
The EU notes that, different to the Peru-Costa Rica FTA (that will also be discussed 
at the 73
rd meeting of the CRTA), the mention of paragraph 1(f) only occurs once 
in paragraph 2 and not in paragraph 6 of Article 11.7. 
 What is the explanation of that differe nce in the approaches? Could Peru give 
some explanations? 
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   The differences in approaches are an outcome of the negotiations; it should, however, 
be mentioned that an analysis of this issue must be based on a comprehensive assessment of other elements of the Agreement, for exampl e the general exceptions and their application 
to the various chapters of this Agreement.  
 
Relationship with other agreements concluded by the Parties 
 
1.9.  Paragraph 5.22: Mexico and Peru are Part ies to the Pacific Alliance. At present 
it has not yet entered into force. 
a. Could the Parties clarify whether th e Peru-Mexico Agreement will remain 
in force once the Pacific Alliance protocol  will be ratified by both Parties? 
The Peru-Mexico Trade Integration Agreement will remain fully valid alongside the Additional 
Protocol to the Pacific Alliance Framework Agreement and will not be replaced or amended by the Additional Protocol, pursuant to Article 8 of the Pacific Alliance Framework Agreement 
on Relationship with other agreements. That is to say, the two agreements will coexist 
and commercial operators (exporters/importers) w ill be able to choose between the Peru-Mexico 
Trade Integration Agreement and the Additional Protocol, once the latter enters into force. 
 
b. Could the Parties clarify whether there ar e any areas better covered by bilateral 
FTAs than by the Pacific Alliance Agreement? 
 The Pacific Alliance was constituted as an area of regional integration which seeks, inter alia , 
to move towards the free movement of goods, services, capital and persons. Therefore, in addition 
to trade provisions, it provides for disciplines such as migration cooperation, movement of persons, etc. Nevertheless, bilateral agreemen ts nowadays form the basis of bilateral trade 
amongst members of the Pacific Alliance, given th at the latter has not yet entered into force. 
  It should be noted that, unlike the Pacific Alliance Agreement (Additional Protocol to 
the Pacific Alliance Framework Agreement), the Peru-Mexico Trade Integration Agreement covers 
the following areas:  
 Recognition and protection of appellations of or igin. With regard to intellectual property, 
in the bilateral agreement Mexico and Peru established specific joint cooperation 
activities between intellectual property offi ces, with the aim of sharing experiences, 
enhancing cooperation and communication links between these offices, and making 
better use of the intellectual property system to the benefit of the users thereof. 
 
 Unfair international trade practices and safeguard clauses. Mexico and Peru adopted 
chapters on unfair practices and safeguard clauses in the bilateral agreement, which 
include WTO-plus provisions in respect of anti-dumping duties, countervailing duties and global safeguard measures. 
 
 Temporary entry and stay for business persons. Mexico and Peru adopted a chapter on 
this issue in the bilateral agreement. It should, however, be noted that Pacific Alliance countries have agreed to eliminate visas for businessmen. 
Questions from the delegation of Thailand 
 
1.10.  Paragraph 3.7: The Article also specifies that duty may be increased (i) if it 
had been unilaterally reduced, and up to levels not higher than those specified 
under the TEP; and (ii) if authorized  following a WTO dispute. Further, 
nothing in the Agreement prohib its Peru from maintaining the specific duties resulting 
from the application of its price-band  system for certain basic foodstuffs 
(see paragraph 3.17. below). 
Paragraph 3.7  stated that there is an Article which specifies that duty 
may be increased (i) if it had been unilaterally reduced, and up  to levels not higher than 
those specified under the TEP; and (ii) if authorized following a WTO dispute. 
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  Please kindly provide more informatio n whether the unilateral tariff reduction 
in this case include MFN tariff rate whic h WTO Members could enjoy tariff reduction. 
 
The unilateral customs tariff reduction refers to the customs tariff as defined in Article 2.1 
("General Definitions") of the Agreement itself. 
 1.11.  Paragraph 3.15c: finally, two categories ("EXCL" and "PROH") involve products 
excluded from liberalization and for which imports are prohibited. 
a. Please clarify which goods are included  in categories "EXCL" and "PROH"? 
b. And please provide the rationale/criteria  on how to classify products under 
"EXCL"/ "PROH" categories. 
Prohibited products ("PROH") are products such as drugs (opium, marijuana and its 
derivatives), organic chemicals, among others, and the main purpose of this is to protect human, animal or plant life or health, in accordance with Article XX of the GATT. Excluded products 
("EXCL") are those for which both parties agreed not to grant tariff benefits. 
 1.12.  Paragraph 3.22: The vast majo rity of products remaining 
dutiable at the completion of the transition period
 (see Table 3.3)  are agricultural 
products - 240 out of 274 . With the exception of vehicles  (Section XVII), the highest 
peaks are found for agricultural products. Products excluded from  liberalization include 
e.g. poultry meat, pig fat, dairy prod ucts, sugar, potatoes, coffee and used  automotive 
products (which face a 50% MFN rate). 
 For Mexico, according to Table 3.3, th ere are 82 out of 333 tariff lines (24.62% ) 
under HS Section I, 80 out of 468 tariff lines (17.09%)  under HS Section II and 76 out 
of 341 tariff lines (22.29%)  under HS Section IV which re main dutiable, and the final 
average tariffs on those dutiable tariff lines  are 61.2%, 35.1% an d 47.7% respectively. 
In addition, by the end of the transition pe riod, Mexico only eliminates 79.6% of total 
agricultural tariff lines and the average final tariff for the remaining dutiable tariff lines 
for agricultural products is 44.7% . What are Mexico's justifications for the considerable 
amount of remaining dutiable tariff lines and the relatively high rate of final dutiable 
tariffs on agricultural products, noting that Article 24(8)(b) of the GATT requires Members of  an FTA to eliminate duties and other restrictive regulations of commerce 
on "substantially all the trade" between Members? 
  Mexico and Peru have granted each other preferential tariff treatment (tariff reduction 
categories) on 100% of trade in the industrial sector. As regards the agri-food sector, 
98% of Peruvian exports to Mexico have been made  subject to at least some preferential tariff 
treatment (categories of tariff relief, quotas, fixed percentage preferences, etc.), while 93% of Mexican exports to Peru will be subject to at least some preferential tariff treatment 
(categories of relief, quotas, fixed percentage preferences, etc.). 
 1.13.  Paragraph 3.31: Bilateral cumulation  applies between the two Parties 
(Article 4.7). Article 4.8 deals with diag onal cumulation ("extended cumulation 
of origin"); it provides for diagonal cumu lation in cases where both Parties have 
a "preferential trade agreement"  with another country and wh en the input is originating 
in the context of the Mexico-Peru RTA.
20 In addition, equivalent clauses shall also apply 
in the context of these preferential agreem ents with third parties; other conditions 
may also be agreed between the Parties in order to implement diagonal cumulation. 
The following countries are able to benefit from extended cumulation. 
Please specify the third parties and clarify the condition that Mexico and Peru have 
implemented the diagonal cumulation.  
                                               
20 Diagonal cumulation could take place with pr oducts from the United States, Canada, Chile, 
Japan, EFTA and the European Union; these are ho wever not specifically named in the Agreement. WT/REG308/2 
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  In the context of the Mexico-Peru Trade Integr ation Agreement, the third parties that could 
be covered by extended cumulation are those common trading partners with which Mexico and Peru already have a trade agreement, provided th at they can provide reciprocity on inputs from 
the region. However, this extended cumulation has not yet been implemented, and so to date 
there are no third countries participating in this mechanism. The parties have not yet developed 
the necessary conditions for the application of this provision.  
With a view to avoiding any confusion, Mexico and Peru point out that no reference should 
be made in paragraph 3.31 of the factual presentation to products from third countries that may benefit from extended cumulation  (please revise the last line of the paragraph and footnote 20). 
 
1.14.  Paragraph 3.32: A flexible provision al so applies to certain elastomeric yarns 
(HS 5402.44) from the United States and Brazil used in the production of certain textiles 
and apparel, as follows: 
Please specify the reason and rationale behind the flexible provision applied 
to yarns from the US and Brazil.  
 As part of the balance in the textile and apparel sector, such flexibility was granted but only 
for elastomers made in the United States or Br azil and for the production of specific goods. 
 1.15.  Paragraph 3.51: Global safegu ards (Articles 6.2 and 6.3)
 are to be applied 
in accordance with the rights and  obligations of the WTO Agreement on Safeguards 
and Article XIX of the GATT 1994.  They may  only be imposed on originating products 
of the other Party if such imports: 
 In relation to the application of global  safeguards, the FTA states that imports 
from the other Party may be included in th e imposition of global safeguard measures 
only if such imports are "substantial" to the importing Party and contribute 
"importantly" to the serious injury or the threat thereof. 
 
a. Does it mean that imports from the FTA partner will be included 
in the determination of whether "ser ious injury or threat thereof" 
exists, and then excluded from the app lication of global safeguards if such 
imports are not "substantial" to th e importing Party and contribute 
"importantly" to the serious injury or the threat thereof? 
The global safeguard provisions of the Peru -Mexico Trade Integration Agreement will be 
applied in accordance with Article XIX of  the GATT and the Agreement on Safeguards, 
as interpreted by the jurisprudence of the Appellate Body. Accordingly, taking into account 
the jurisprudence relating to the principle or requir ement of "parallelism", it should be noted that 
the possibility of excluding regional imports from the application of safeguard measures, 
as envisaged in the agreement in question, would also imply the exclusion of such imports from the determination of an increase in imports and serious injury (or threat thereof). 
 
Peru and Mexico observe, however, that, in acco rdance with the ruling of the Appellate Body 
in US – Steel Safeguards  (paragraphs 446-474), the right exists to exclude from the application of 
a safeguard measure imports from a party to a regional agreement, without excluding such 
imports from the determination of an increase in imports and serious injury. This would only be admissible if the competent authorities explicitly  establish, through a reasoned and adequate 
explanation, that imports from sources outside the free trade area created by the Peru-Mexico 
Trade Integration Agreement, satisfy, alone, the conditions for the imposition of a safeguard measure, in accordance with Article 2.1 of the Agreement on Safeguards, as further developed in Article 4.2 of the same agreement. 
 
 It should be noted that, under the Peru-Mexico Trade Integration Agreement, when a party decides to adopt a global safeguard measure, it may only apply the measure to goods originating 
in the other party when it determines that imports of such goods represent a substantial 
proportion of total imports and contribute significantly to the increase in the imports which caused the serious injury or threat of serious injury. It shall be considered that imports of goods from the 
other party are substantial if, during the three years immediately preceding the initiation 
of an investigation, they are included in the imports of the five main countries supplying that good WT/REG308/2 
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  to the importing party. The imports of goods from the other party shall not, for their part, be 
considered to contribute significantly to the increase in imports which caused the serious injury or threat of serious injury, if their share of the ab solute increase in the volume of imports during 
the period in which the increase in imports took place is substantially lower than the share of the 
other supplying countries during that period. 
 
b. If the answer is yes, how can such se lective application of global safeguard 
measures be reconciled with Article 2.2 of the Agreement on Safeguards, 
which requires safeguard measures to be applied to an imported 
product "irrespective of its source"? Noting also that the Appellate Body 
in Argentina - Footwear (EC) , US - Wheat Gluten  and US - Line Pipe  has stated 
that if imports from all sources are included in the determination of serious 
injury or the threat thereof, the sa feguard measures must, correspondingly, 
be applied to imports from all sources . 
 In the hypothetical event that a party to th e Peru-Mexico Trade Integration Agreement were 
to exclude imports from the other party, without excluding them from the determination relating to the increase in imports and serious injury, the party concerned would have to observe 
the conditions set out in the second paragraph of the reply to the last question. 
 
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