RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/REG109/M/4 
16 November 2005 
 (05-5366) 
Committee on Regional Trade Agreements 
Fortieth Session  
 
 
 
EXAMINATION OF THE FREE TRADE AGREEMENT 
BETWEEN THE EC AND MEXICO 
 
Note on the Meeting of 28 July 2005  
 
Chairman:  Mr. A. Egger (Switzerland) 
  
1. The meeting was convened in document WTO/AIR/2624. 
2. Under Agenda Item C.IX of its Fortieth Session, the Committee on Regional Trade 
Agreements (hereinafter CRTA or the Committee)  took up the third round of examination of the 
Free Trade Agreement (FTA) between the European Communities (EC) and Mexico.   
3. The Chairman
 said that the proceedings of the firs t and second rounds, whic h had taken place 
in the Committee's 30th and 31st Sessions in September 2001 and Fe bruary 2002, could be found in 
documents WT/REG109/M/1-2.  Since then, the Par ties had provided replies to questions put by 
delegations, which had been circ ulated in document WT/REG109/5/Rev.1.  Additional replies to 
questions on trade in services had recently been ci rculated in document WT/REG109/5/Rev.2.  The 
Chairman recalled that following informal cons ultations, the Committee had agreed during its 
36th Session that the factual examination of services agreements without defined specific 
commitments would be put on hold until the CRTA ha d been informed by the parties that such 
specific commitments had been agreed upon.  Given that the Parties had not yet drawn up their 
schedules of commitments, the examination of the services aspects of this Agreement had been put on 
hold.  He suggested that the Parties could upda te the Committee on the status of negotiations on 
specific commitments in the cour se of the Committee's discussions. 
4. The representative of th e European Communities  said that the Parties would reply orally on a 
number of outstanding questions in document WT/REG109/5/Rev.2.  Written replies to these 
questions would be provided, if requested.  He c ontinued by saying that three issues were currently 
being reviewed in the Agreement.  The first w as that the Parties were currently discussing the 
coverage of agricultural and processed agricultura l goods under the review clause and it was their 
ambition to make significant amendments to the Agreement, which he assured the Committee would 
be notified in line with obligations.  Second, as fa r as services and investment were concerned, he said 
that the Parties were currently engaged in the pr eparatory phase which meant that they had met to 
discuss the level of ambition and the different methods of making commitments.  The EC was 
currently discussing, on the basis of Commission  proposals, what type of mandate would be 
applicable for the negotiations on services and inv estment.  Both would be reviewed and amended 
accordingly.  Third, he had some information on agriculture, particularly on how liberalization 
commitments would be expanded by the Parties in  accordance with the re view clause under the 
Agreement.  WT/REG109/M/4 
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 5. The representative of the United States
 said she looked forward to responses to the questions 
which remained open from the previous round of exam ination and she restated her standard request 
that the Parties provide tariff-line data on the Agreement's coverage. 
6. The representative of Australia  said that her delegation tende d to focus on the first round of 
examination of an agreement and this Agreemen t had last been discussed three and half years 
previously.  She asked the Parties to provide the tim etable for complete duty-free trade and to indicate 
what exemptions would remain.  She acknowledged that her question on further liberalization which 
she was going to ask had been partially answered by  the representative of the European Communities, 
but she wondered if any further reviews had occurred and if all EC duties on industrial products had 
been eliminated as scheduled on 1 January 2003.   
7. The representative of Korea  enquired about the political content of the Agreement.  He had 
noticed some consistency in the EC's three agr eements which were under examination in the day's 
meeting.  All included three political elements:  the declaration of democratic principles and the 
observance of human life;  the institutionalization of political dialogue;  and the institutional framework to facilitate political dialogue or other tr ade negotiations.  He aske d the Parties to explain 
the rationale and importance behind including political content in the Agreement.  He asked if his 
understanding was correct, that if the political and democratic principles such as basic human rights 
protection were not adhered to, th e partners could refuse to implement the trade aspects of the 
Agreement.  He wondered if the EC might have had to make additional concessions in the trade area, 
if there were objections from the EC's partners.  He also asked why the EC consistently pursued 
political content in its agreements and if it inte nded to follow this policy with its major trading 
partners in the future.  His final question was addr essed to the representative of Mexico:  given that 
the trade provisions of the Agreement were done by the decision of the Joint Council, did such 
decisions take effect without further process in Me xico, such as ratification?  The representative of 
Mexico
 replied that decisions taken by the Joint C ouncil administering the Agreement would have to 
be ratified by the Mexican Congress before entry into force. 
8. In response to the questions by the representa tive of Australia, the representative of the 
European Communities  acknowledged that there was indeed a backlog in the CRTA which led at 
times to questions being raised more than once.  This was one of the issues that the Negotiating Group 
on Rules (NGR) was seeking to address.  He suggest ed that the representative of Australia provide 
written questions based on her reading of the Standard  Format, the questions and replies contained in 
document WT/REG109/5/Rev.2, and the oral responses which the Parties would provide in the day's 
meeting.  As regards the questions from the repr esentative of Korea on the political content of the 
Agreement, he said that this was an issue which had been discussed extensively during the EC's Trade 
Policy Review.  He said that the question could actually be put on its head:  why did the EC include a trade chapter in an Agreement which aimed to st rengthen political relations between two countries?  
He explained that the EC did not conclude agreem ents which were simply a vehicle for commerce, 
but rather, agreements which reflected proximity of  political relations or the will of the parties to 
become closer politically.  Co-operation was as im portant as political dialogue.  Co-operation, usually 
in the form of aid, was an integral means of ensu ring that the trade chapte r functioned properly and 
that the priorities of the EC's partner countries, whether it was environment, employment or industrial policy, were fully taken into account.  So it was a partnership that went far beyond just simply 
dismantling borders.  That was a general response, but he had the impression that the representative of 
Korea was seeking more.  The Agreement contained a human rights clause.  If his recollection was 
correct, this was an internal decision by the EC that  such clauses should be inserted in all agreements 
as of 1996 and would remain as long as the Council, i.e. the EC Member states, upheld this policy.  As for whether the EC's partners had asked for fu rther concessions in exchange, he did not consider 
that this was the case, but this w as his assessment and he stood ready to  be corrected by them.  For the 
EC, this was just a repetition of the core principl es that were enshrined in its obligations under the 
United Nations Human Rights Charter, and it was quite logical to stress those, and express the fact  WT/REG109/M/4 
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 that certain values (e.g., the respect of human rights)  were shared.  As for the institutionalization of a 
political dialogue, he said that this was in recognition of the fact that for the EC and most of its partner countries, the interactions they had went  far beyond trade.  Thus, these agreements were a 
means of enshrining this partnership and recognizing a number of shared interests, as well as some interests that might be contradictory in other or ganizations like the UN.  If this Agreement was a 
reflection of a true partnership, it should includ e the possibility of discussion between the Parties as 
mature nations, and strategies to resolve difficulties and pursue common interests.   
9.  The representative of Australia
 reiterated that in several cases document WT/REG109/Rev.1 
contained "no reply received" in response to certain  questions.  She asked the Parties to provide the 
timetable for complete duty-free trade, the list of  exemptions, and to indicate if there had been any 
further liberalization, and if all EC duties on indus trialized products had been eliminated.  She said 
she was willing to put these questions in writing if required. 
10. The representative of the European Communities  acknowledged that it would be difficult for 
capitals to anticipate the responses that he was ready to  provide to outstanding issues.  He said that the 
transition period, as stated in Section I.2, Type of Agreement, was a maximum of ten years.  As far as 
exemptions were concerned, his standard reply was that nothing was excluded from the Agreement, 
but that did not mean that all duties were liberalized or fully eliminated, but nothing was a priori  
excluded.  If the focus of the ques tion was the elimination of duties versus partial liberalization, then 
he asked that it be provided in writing so that a written response could be prepared.  As far as further liberalization was concerned, there we re two aspects.  First, as he had stated in his initial response, the 
review of the Agreement had not yet been finalized ;  so, no definitive reply could be given at this 
point.  Once the review had been terminated, fu ll details would be provided to the Committee.  
Second, more generally, the question of further liber alization was related to the systemic problem of 
the Committee's backlog where questions and re plies became completely merged with the 
requirement to notify significant changes to agreem ents.  That was in itself a problem, because it 
meant that the question and reply process could conti nue indefinitely, given that agreements evolved, 
especially the EC's agreements containing review clauses.  The most important thing was that the 
Committee had the information either in the form  of a questions-and-replies document or as an 
additional notification.  He suggested that Members might want to discuss in the NGR how to streamline the procedure.  The representative of Australia
 concurred that there was a need to raise the 
issue of the backlog in the NGR.  
11. The representative of Mexico  said that replies to the ques tions by the representatives of 
Australia and the United States on tariff-line coverage  in the Agreement would be provided orally in 
the meeting and in written form.     
12. The representative of Korea  asked if any of the EC's partners had resisted the inclusion of 
political content in an agreement and whether it had resulted in difficulty for the EC in negotiating or 
concluding an agreement, given that the principl es of democracy and the protection of human life 
were consistently included in their agreements.     
13. The representative of th e European Communities  replied that in his experience third parties 
had not, in general, had a problem in signing up for the political content of an agreement, given that 
the EC did not generally contemplate negotiations with countries which did not live up to the basic 
principles of the United Nations.  While he considered  that this was an appropriate standard for all 
countries, it was up to each democracy to make its c hoice   He drew delegations' attention to the fact 
that the EC had recently included a clause on terrorism  in its agreements which had resulted in some 
concern and discussion with third parties.  Once su ch an agreement was notified and examined, he 
would be happy to reply to questions on the terrorism clause, if required. WT/REG109/M/4 
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 14. The representative of Australia
 said that her understanding was that agriculture accounted for 
only 6 per cent of bilateral trade on the entry into fo rce of the Agreement.  She wondered if this had 
improved since then, and what the coverage of agri cultural trade was in terms of the elimination of 
tariffs.  During the examination in 2001, Australia  had noted the large number of tariff lines falling 
into Category 5, where the only commitment was to review applied tariffs no later than three years 
after entry into force, i.e. July 2003.  She wondere d if this review had occurred and what its outcome 
was.  Also, she requested information on the amount  of bilateral trade falling under Category 5 tariff 
lines.  As regards the agricultural and fisheries review clause in Artic le 10, she had noted that Mexico 
and the EC had been exchanging and analysing releva nt information and wondered if the Parties could 
provide further details on what products were lik ely to be included and what the timeframe for 
liberalization would be.  Finally she repeated her question on safeguards, which appeared in document 
WT/REG109/5/Rev.1 but had "no reply received" ne xt to it:  had any safeguard measures been 
invoked under the Agreement, and how did the safegua rd provisions of the Agreement  differ from the 
WTO Safeguards Agreement? 
15. The representative of the United States  said she had one question and might follow up with 
other written ones.  Annex I set forth the arrangement s and tariff elimination schedule of the EC.  In 
Section B, the EC set forth its commitments to eliminate ad valorem  MFN or GSP duties, but 
"m[ight] apply" the MFN or GSP specific duties on th e listed products.  She asked whether the EC in 
practice actually applied the specific duty and wh ether there was any intention to refrain from 
applying this specific duty.  
16. The representative of the European Communities  clarified that the Parties would provide an 
oral response to the questions which had not b een answered in document WT/REG109/5/Rev.2 and 
delegations which still had unanswere d questions should provide them in writing.  In response to the 
question in Section I.3.3, Scope, on which produc ts had been excluded from coverage, he had 
responded in part to this question in his initial statem ent, but he agreed that the Parties would provide 
further information on the tariff-line coverage of the Agreement.  He stressed that no products were 
excluded from the coverage of the FTA, but not a ll products were subject to full liberalization or 
elimination of duties.  As for th e review, he acknowledged that this was of importance in this respect, 
and there were some specific questions on the scope  of Category 5 that the Parties would respond to 
in writing.  In response to question I.3.4 on what ch anges, if any, had been made in Mexico’s applied 
rates at the time the Agreement was under negotiati on, he replied that the Agreement contained no 
provision which required any increase in applied du ties.  Mexico had changed many applied rates 
during the period in question including reduction of NAFTA-applied rates every year and changes to 
its MFN rates.  The EC's applied rates had not incr eased as a result of the Agr eement.  In response to 
question 9 in Section II.1, Import Restrictions, on how the EC price entry system operated, which 
products were regulated by this system and if the Parties could provide trade statistics on these products between the EC and Mexico, he said that according to the EC entry price system, products 
imported at or above an establis hed enterprise were subject to ad valorem duty only.  If products were 
imported below the established enterprise, the tariff equivalent had to be paid in addition to the 
ad valorem duty.  Both enterprises and the tariff equivale nts were fixed in the EC schedule.  The 
products and the periods covered by enterprises could be found also in the EC schedule.  As for the 
amount of trade affected, he pointed out that trad e in agricultural products accounted for only 4.7 per 
cent of trade between the Parties.  Within that  4.7 per cent, only grapes and peaches were imported 
below the established enterprise.  Those products re presented about 5.2 and 0.1 per cent, respectively, 
of the EC's agricultural imports from Mexico.  In  response to question 10 on any non-tariff import 
measures (including charges and quantitative restricti ons) that were applied to third countries and not 
to intra-FTA trade, he replied that this question ha d been discussed by the Parties extensively, but the 
scope and the purpose of the question was unclear to  them.  He said that information concerning 
non-tariff measures applied by the EC and Mexico was regularly submitted to the WTO and discussed 
in the TPRM.  In response to question 11 on why pr oducts listed in Category 5 of Annex I, as well as 
Category “O” of Annex I (for the EC), were not gr anted tariff concessions under this Agreement, he  WT/REG109/M/4 
 Page 5 
 
 
 replied that the exclusion of certain products fro m duty-free treatment reflected the result of the 
negotiation between the Parties.   In particular, Category 5 referred  to products on the list to be 
reviewed by July 2003, by which date the Pa rties had expected that the WTO Round would be 
concluded.  That not being the case, the review ha d not gone at the speed that had been initially 
anticipated.  As to Category "O", he said that th e EC had found it necessary not to include in the 
Agreement certain products that were protected as geographical indications (GIs) unless its partner 
did not have exactly the same protection of those GIs in its territory.  For example, Mexico could 
export soft cheese to the EC, but it could not export  mozzarella, because mozzarella could not come 
from Mexico.  Given that a separate list of GIs had no t been included in the Agreement, the best way 
of solving this issue was to have a category applying to protected products which were not subject to 
duty elimination, given that these products were viewed as being only produced in the EC.  In 
response to question 13 on whether "bilateral cumu lation" was foreseen and whether it would amount 
to the extension of the pan-European cumulation system, he said that bilateral cumulation was 
provided for under Article 3 of Annex III, and that Mexico did not participate in the Pan-European 
system of cumulation of rules of origin.   
17. In response to question 14 on how the rules of or igin in this Agreement interfaced with other 
preferential agreements to which his count ry was party, the representative of Mexico  said that the 
rules of origin in the Agreement were not related to the rules of origin in other preferential agreements 
of the Parties.  Products which originated in th e United States or Canada for the purposes of the 
NAFTA, for example, were not treated as if they we re of Mexican origin for the purposes of receiving 
preferential treatment when they were imported into the EC under the FTA.   
18. In response to question 15, the repres entative of the European Communities said that the 
Parties had had difficulty interpreting this question, given that the EC was one of the Parties and did 
not have agreements with itself.  He asked if th e question could be clarified and the Parties would 
come back to it.  He added that the Agreemen t did not include provisions regarding mutual 
recognition agreements (MRAs) and there was no MRA on conformity assessment.  In response to 
question 17, on whether the Agreement provided for any special conditions or preferential treatment 
between the Parties in the application of  global safeguard measures, he said that the Agreement was 
fully in line with the safeguard provisions under the WTO, but provided for special procedural rules 
concerning bilateral safeguard measures.  With regard to question 18 on the implementation of 
safeguard measures during the life of the Agreement,  he said that no safegua rd measures had been 
implemented to date.  In response to question 19, on  the margin of preference vis-à-vis third countries 
when the safeguard provisions were invoked and th e observance of the provisions of Article XIX in 
the application of safeguard measures that involved third country trade, he said that the erga omnes 
proceedings in accordance with the WTO Agreement would guarantee that no modification be 
imposed on the preferential treatment given to the other Party (the pr eferential margin would therefore 
always be respected).  The rules concerning safeguard measures among the Parties under the 
Agreement would apply without prejudice to the provisions of Article XIX of the GATT 1994 or 
other obligations of the Parties with third parties.  In response to question 22, on the basis for extension of the trade liberalization provided for in the Agreement at the three-year point of 
evaluation to other agricultural products currently ex cluded, he said that this would  be negotiated 
between the Parties in a manner consistent with the Agreement's objectives, such as the progressive 
and reciprocal liberalization of trade.  He adde d that the Parties would provide details of any 
developments as soon as they were ag reed.  He concluded by saying th at he would provide all of these 
answers in written form.     
19. In response to question 24 on whether the Part ies had developed any lists or schedules of 
types of procurement that would be subject to speci al contract award procedures, the representative of 
Mexico
 said that Section 3 of the Agreement on Government Procurement did not establish any 
special procedure for the special contract award pr ocedures.  With regard to question 25 about which 
public monopolies were subject to the provisions of the Agreement, and if all of these state WT/REG109/M/4 
Page 6  
 
 monopolies had been notified as required by the WTO requirements, he sought clarification of the 
question and its relevance.  He said that the FTA  between the EC and Mexico did not distinguish 
between trade carried out by sate trading enterp rises under Article XVII of GATT, and trade carried 
out by any other body or entity.  The FTA cont ained a cooperation mechanism in the area of 
competition policy which could be found in Annex XV.   This Annex applied to all enterprises, not 
just state enterprises.  The EC had submitted no tifications on state trading enterprises in the 
appropriate forum.  His country did not have any state trading enterprises as per the meaning of 
Article XVII of GATT.   
20. The Chairman
 said that the third round of examination of the EC-Mexico Free Trade 
Agreement had allowed the Committee to clarify a numb er of questions, but othe rs remained pending.  
He invited delegations wishing to submit questions to forward them in writing to the Secretariat by 
23 September and for the Parties to provide writte n responses by 31 October.   The Committee could 
consider the factual examination as complete.  Once the replies had been circulated to Members, any 
request for additional information could be dealt with without holding another round of formal 
examination and the Secretariat could begin drafti ng the examination report for this Agreement.  
21. The Committee took note  of the comments made. 
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