WORLD TRADE  
ORGANIZATION  WT/REG206/M/1 
22 December 2010 
 (10-6860) 
Committee on Regional Trade Agreements 
Fifty-ninth Session  
 
 
 
CONSIDERATION OF THE FREE TRADE AGREEMENT BETWEEN  
MEXICO AND NICARAGUA, GOODS  
 
Note on the Meeting of 29 and 30 November 2010  
 
Chairman:  Mr A. Suescum (Panama) 
 
 1. The meeting was convened in document WT O/AIR/3643/Rev.1, dated 19 November 2010. 
2. Under Agenda Item D.II of its 59
th Session, the Committee on Regional Trade Agreements 
(hereinafter CRTA or the Committee) considered the Free Trade Agreement between the Mexico and 
Nicaragua (hereinafter the 'Agreement'), goods.  
3. The Chairman  said that the Agreement had entered into force on 1 July 1998 and had been 
notified by the Parties to the WTO on 17 October 2005 under Article XXIV:7(a) of the GATT 1994 and the Understanding on the Interpretation of Article XXIV of GATT 1994 as an Agreement 
establishing a free trade area (document WT/REG206/N/1) .  The text of the Agreement was available, 
together with its Annexes, on the Parties' offici al websites.  The Factual Presentation on the goods 
aspects (document WT/REG206/3, da ted 10 August 2010) had been prepared by the Secretariat on its 
own responsibility in full consultation with the Part ies, in accordance with paragraph 7(b) of the 
Transparency Mechanism (TM) fo r Regional Trade Agreements (document WT/L/671).  No written 
questions on the Agreement had been received from Members to date.  He proposed to organize the 
consideration of the Agreement by first asking the Parties and then other Members for general 
comments.  The Committee would then turn to th e specifics of the Agreement using the Factual 
Presentation to guide the debate.  He proposed to go through the Factual Presentation section by 
section, and then look at the questions and replies document.  
4. The representative of Nicaragua
 welcomed the opportunity to introduce the Agreement, 
whose objective was to strengthen trade relations  between the Parties and to obtain economic 
complementarity, which could give rise to greater tr ade flows and a better standard of living for their 
populations.  His delegation thanked the Secretariat for the technical support in preparing the Factual 
Presentation.  The Agreement, that had entered into force on 1 July 1998, was of particular 
importance for Nicaragua since it was its first trade agreement, and was part of its national strategy to 
integrate the economy into international trade.  It  was based on the agreements signed in 1991 within 
the framework of the Forum on Economic and Politi cal Cooperation between Mexico and the Central 
American countries of Panama and Belize, called "T uxtla Gutiérrez", with th e aim of creating a free 
trade area to encourage trade, investment and the movement of business persons .  In this context, 
Mexico recognized the necessity of giving prefer ential asymmetric access to other countries in the 
region given their level of economic  development compared to Mexico.  The disciplines contained in 
the Agreement were compatible with Article XXIV of the GATT and Article V of the GATS and 
were based on the fundamental principles of the WTO, like national treatment, MFN treatment and transparency.  As a result of the implementation of  the Agreement, Mexico had become an important 
trading partner for Nicaragua representing, at pr esent, its fourth source of imports and exports WT/REG206/M/1 
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  destination.  Twelve years after the entry into for ce of the Agreement, Nicaragua's exports to Mexico 
had passed from US$13.2 million in 1997 to US$82 m illion at the end of 2008, which represented a 
growth of 521.2%.  In 2009, bilateral trade had d eclined with respect to 2008 figures.  The decline in 
exports was due to the reduction of exports of peanuts ( maní ), the principal product exported by 
Nicaragua.  Mexico was one of the most important  sources of imports for Nicaragua.  Imports had 
substantially increased up to 2007, passing from US$83 million in 1997 to US$464.7 million at the 
end of 2007.  Imports from Mexico declined in  2008 (US$ 408.2 million)  and 2009 (US$243.6 
million) due to the global economic cr isis and the replacement of the market of origin for importation 
of crude oil.  The main imported goods were:  medici nes;  preparations for children's food;  mobile 
telephones;  electrical conductors;  and receivers, among others.  Under the Agreement, Mexico had 
immediately liberalized 73% of its tariffs and, on  1 July 2002, it had liberalized a further 14% of 
tariffs, reaching 87% of its total tariffs in that pe riod.  At present, tariff elimination had reached 100% 
of tariff lines.  In comparison, Nicaragua had a longer transition period for goods because of the 
sensitivity of its products and for its st atus as a lesser developed country.   
5. As regards services and investment, the Agreem ent had created a legal framework with clear 
principles that facilitated these activities, especially  in areas such as telecommunications, financial 
services, temporary entry of business persons, professi onal services, tourism, agro-industry, mining, 
fisheries, etc..  Each Party had reserved the right to regulate its monetary a nd exchange rate policies 
and to apply prudential measures to ensure the stab ility of its financial sector .  In general, national 
legislations still applied in the Parties without di scriminating between nationa l and foreign suppliers.  
With regard to investment, the main  areas of interest of Mexican inv estors were:  tourism;  banking;  
finance;  and agro-industry.  The Agreement was al so expected to create business partnerships and co-
investments in domestic enterprises so as to im prove their competitiveness and eventually help 
develop the sector.  In the first semester of 20 10, Mexican investments in Nicaragua had reached 
US$616 million, of which US$533 was destined fo r telecommunications which had had a major 
increase since 2007.  Under the Agreement, Nicaragua  had also benefited from tariff rate quotas for 
bovine meat, powder milk, beans and cheese, which were  important for Nicaragua's exports structure.  
With respect to technical barriers to trade, sp ecific provisions had been established on rights and 
obligations, harmonization, evaluation of risks,  and conformity assessment, among others.  On 
sanitary and phytosanitary measures, a harmonizat ion system had been established for developing 
samples, diagnostics, inspection and certification and to recognize, upon objective demonstration, 
pest-free or disease-free areas.  Similarly, in the tr ansition period, it was possi ble to apply bilateral 
and global safeguards, with the obligation of co mpensation.  On subsidies, the WTO rules would 
apply and Nicaragua had been given special treatment since it could maintain subsidies on agricultural 
products of up to 7% of the FOB value;  these s ubsidies would be eliminated when customs duties on 
the goods concerned reached zero, and no later than  2007.  The Agreement also contained provisions 
to liberalize and ensure mutual access to the pub lic procurement markets, in accordance with the 
principles of non-discrimination and transparency in  tendering procedures.  The Agreement's rules of 
origin had been negotiated product by product in or der to protect national industry, by establishing 
specific rules of origin for each of the products exporte d on the basis of clearly established criteria.  In 
conclusion, he believed that the Agreement had a llowed each Party to promote and increase trade on 
the basis of solid institutions and clear and transp arent rules that had facilitated and promoted trade 
and investment.  He thanked the Chairman for the opportunity to address the Committee and hoped to 
answer any further questions by Members.  
6. The representative of Mexico  thanked the Chairman for the opportunity to present the 
Agreement, the Secretariat for the Factual Presen tation and last, but not least, the delegation of 
Nicaragua for its full willingness to work together  to present the Agreement.  The Agreement had 
been signed on 18 December 1997 and had entered in to force on 1 July 1998.  It was the second 
agreement signed by Mexico with a Central Amer ica country and represented the continuation of 
Mexico's efforts to create links within the region.   The Agreement contained commitments on trade in 
goods, as well as disciplines on market access for indus trial and agricultural products, sanitary and  WT/REG206/M/1 
 Page 3 
 
 
  phytosanitary measures, rules of or igin, customs procedures, safeguard s, technical barriers to trade, 
and cross-border trade in services and investment .  It further contained provisions on small and 
medium enterprises, public procurement, intellect ual property protection and a dispute settlement 
mechanism that offered legal certainty to bilateral trade flows.  He considered the Agreement as a 
complete one, which had allowed the Parties better  opportunities to export, the availability of inputs 
and services for domestic industries, the attraction of  investment and creation of strategic alliances 
within businesses, and had thus strengthene d economic growth, better competitiveness and 
productivity, industrial and regional development and the creation of better and more jobs.  The 
Administrative Commission of the Agreement had a dopted 14 decisions to date, which had greatly 
benefited bilateral trade.  Among these:  the establishment of a Sub Administrative Commission, 
responsible for making the review process of the Agreement more fluid;  the establishment of a 
Committee on Trade in Goods, responsible for monitoring the correct implementation and 
administration of the Chapter on Trade in Goods;  and the modification of some rules of origin.  Furthermore, the Parties had developed provisio ns to liberalize trade in services, based on 
transparency, national and MFN treatment, as well as  the right to provide services without requiring 
local presence.  The Agreement also foresaw fu ture negotiations on the lists of non-conforming 
measures for services and the elimination of barriers to land transport.  As regards investment, the Agreement established a clear and transparent reci procal scheme which allowed legal certainty to 
investors from both countries that attract bilateral investments.  The investment chapter contained 
disciplines on national and MFN treatment, expropria tion, double taxation and a specific mechanism 
for the settlement of investor-State disputes.  In  August 2010, Mexican investments, as reported by 
the Mexican Embassy in Nicaragua, were close to  US$600 million and were concentrated mostly in 
the telecommunication sector.  He affirmed that Me xico was completely committed to the multilateral 
system and that the Agreement had built upon WTO disciplines, to promote economic growth, more 
efficient production and its integration into the multilateral trading system.  He informed the 
Committee that Mexico and Nicaragua were currently engaged in negotiations to create a single trade 
agreement involving all countries in Central America.   He was ready to address any issue of interest 
for Members. 
7. The representative of the United States
 expressed appreciation for the work of the Parties and 
the Secretariat and for the presentation of the Agr eement.  She commended Mexico and Nicaragua for 
the high overall level of tariff elimination in the Agre ement.  This appeared beneficial for the Parties 
and the development of their economies, as well as for the multilateral trad ing system.  She made 
reference to pages 11-12 of the Factual Presentatio n, paragraphs 29-30, as well as to Annex Tables 
AI.1 and AI.2, according to which, at the end of th e implementation period, 99.8% of Mexico's tariffs 
were scheduled to be duty-free to imports from Ni caragua, corresponding to 100% of prior trade.  
Mexico had agreed to eliminate tariffs on 100% of non-agricultural goods and 97.5% of agricultural 
goods.  In comparison, 99.6% of Nicaragua's tariffs were scheduled to be duty-free to Mexico, 
corresponding to 99.8% of trade.  Nicaragua had agreed to eliminate tariffs on 100% of non-
agricultural goods and 97.1% of agricultural goods.  However, as indicated in Annex Tables AI.3.A 
and AI.3.B, pages 43-44 of the Factual Presenta tion, a number of key Nicaraguan exports – non-
decaffeinated coffee, cane sugar and bananas – were  excluded from preferential market access into the 
Mexican market.  In her delegation's view, this appear ed to stunt the full potential of growth of trade 
under the Agreement.  She then remarked that Ta ble V.1, on page 40 of the Factual Presentation, 
listed a number of RTAs that had not been notified by the Parties.  Several of these RTAs preceded 
the decade, but several others had been concluded in the last ten years.  She asked the Parties, for each 
non-notified agreement, to explain whether the agreem ent was still in force and when they intended to 
notify it to the WTO.  
8. The representative of the European Union  had a specific question on the section on 
"Relationship with other agreements  concluded by the Parties".  In  particular, Table V.1 listed the 
RTAs to which Mexico and Nicaragua were parti es, as of August 2010, and a number of these RTAs 
had not been notified to the WTO.  She asked the Pa rties to indicate when they planned to notify these WT/REG206/M/1 
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  agreements and the reasons for such a delay.  In pa rticular, she referred to seven RTAs in the case of 
Mexico – namely, Bolivia, MERCOSUR, Uruguay, Br azil, G3, Panama and Argentina– and four 
RTAs in the case of Nicaragua – namely, Panama , Dominican Republic, the CACM (services), and 
Venezuela. 
9. The representative of Mexico
 confirmed that there were seven non-notified RTAs.  With 
respect to the RTA with Bolivia, Bolivia had withdrawn from the Agreement on 7 December 2009 
and the agreement was no longer in force since 7 June 2010.  With respect to the G3 (Mexico, 
Colombia and Venezuela), Venezuela had wit hdrawn from the Agreement on 23 May 2006 and the 
agreement was no longer in force for Venezuel a since 19 November 2006.  The agreement with 
Colombia had been notified to the WTO on 13 September 2010 (WT/REG/289/N/1).  The remaining 
RTAs had been negotiated in the framework of LAIA and were included in the biannual report 
submitted to the WTO on 8 November 2010 (WT/CO MTD/72).  The Agreement with Uruguay would 
be notified to the WTO soon. 
10. The representative of Nicaragua  said that of the four non-notified RTAs, the agreement with 
Panama was a recent one, signed two years ago, and the process of notification to the WTO was 
underway.  The agreement with the Dominican Rep ublic was concluded in the framework of CAFTA, 
which had not been notified to the WTO yet, and the two agreements would be dealt in a single 
notification, the one for CAFTA.  The agreement wi th Venezuela was a "partial scope agreement" of 
1980 which mainly dealt with coope ration rather than trade liberalization and, as such, was not 
relevant.  In the case of CACM, services, its no tification was on hold due to the ongoing process of 
creating a customs union in Central America.   
11. The representative of the United States  thanked the Parties for the information.  However, in 
her delegation's view, it was not cl ear which RTAs were in force a nd which were not.  She recognized 
the Parties' good will and intention to notify all in fo rce RTAs, but she suggested that they clarified to 
the Secretariat the status of such RTAs and, possibly,  correct the Factual Presentation.  For instance, if 
an agreement did not provide for tariff elim ination it was important to know that.   
12. The representative of the European Union  also urged the Parties to communicate to the 
Secretariat which RTAs were in force and whic h were not, which contained only provisions on 
cooperation without tariff preferences, in order to  have a complete and up-to-date list of in force 
RTAs.  She reiterated the necessity of notifying  partial scope agreements, as recalled by the 
Secretariat on several occasions in the CRTA and also  by her delegation.  Therefore, she encouraged 
the Parties to collaborate with the Secretariat to clarif y the status of their notifications and to provide a 
clear and up-to-date overview of the RTAs in force.  
13. The Chairman  invited the Parties to collaborate with th e Secretariat to bring such information 
up to date, to the extent possible.  
14. The Chairman  said that the consideration of the goods aspects of the Free Trade Agreement 
between the Mexico and Nicaragua had allowed th e Committee to clarify a number of questions and 
oral discussion of the Agreement could be conc luded in accordance with paragraph 11 of the 
Transparency Mechanism.  If any delegations wished  to ask follow-up questions they were invited to 
forward submissions in writing to the Secretariat by 7 December 2010  and the Parties were asked to 
submit replies  in writing by no later than 21 December 2010.  In accordance with paragraph 13 of the 
Transparency Mechanism all written submissions , as well as minutes of this meeting would be 
circulated promptly, in all WTO official la nguages, and would be made available on the 
WTO website. 
15. The Committee took note  of the comments made. 
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