Proposal for a Council Decision on the Community position within the EC-Mexico Joint Council on the implementation of the Articles 3, 4, 5, 6 and 12 of the Interim Agreement
Date: 2000-01-18
Institutions: European Commission
Subjects: Mexico, competitiveness, customs duties, interim agreement (EU), preferential agreement

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 22.2.2000
COM(2000) 9 final/4

2000/0024 (CNS)

CORRIGENDUM
Suppression de l'article 2 de la Proposition
CONCERNE UNIQUEMENT : FR/DE/EN
Changement du nom de la Décision dans le
titre et au dernier § de l'exposé des motifs
CONCERNE UNIQUEMENT : DA/DE/NL

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE
EUROPEAN PARLIAMENT

ACCOMPANYING THE FINAL TEXT OF THE DRAFT DECISIONS
BY THE EC-MEXICO JOINT COUNCIL

Proposal for a

COUNCIL DECISION

on the Community position within the EC-Mexico Joint Council
on the implementation of Articles 3, 4, 5, 6 and 12 of the Interim Agreement

(presented by the Commission)

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE
EUROPEAN PARLIAMENT

ACCOMPANYING THE FINAL TEXT OF THE DRAFT DECISIONS
BY THE EC-MEXICO JOINT COUNCIL

SUMMARY

The attached draft Decisions by the EC-Mexico Joint Council cover all the trade aspects of
the Economic Partnership, Political Co-ordination and Co-operation Agreement signed with
Mexico on 8th December 1997.

This Global Agreement which is based on democratic principles and the respect for human
rights institutionalizes a regular political dialogue and extends the bilateral co-operation. It
definitively marks a new phase in the EU’s relations with Mexico.

The attached texts contain the results of the trade negotiations conducted by the Commission
on the basis of the negotiating directives approved by the Council on 25th May 1998. These
results are comprehensive in scope and will foster trade and investment flows between the EC
and Mexico.

In terms of coverage, this package will provide EC operators with more rapid preferential
treatment than Mexico has ever before granted to any of its preferential partners and will
place them in a much better position to compete on the Mexican market which is strategically
important and has a significant growth potential. All industrial goods will be free of tariffs by
2007.In trade volume, 52% of EC exports will enter the Mexican market duty free by 2003
and for the remaining 48% a maximum duty of 5% will be applied by 2003. Whilst preserving
EC sensitivities for agriculture and fishery products, the package negotiated for these
products will grant quick and full market access for the EC’s most important export products.
For services EC operators will be granted better access than that currently enjoyed by
Mexico’s other preferential partners and in particular the USA and Canada. This package will
be completed by a commitment to liberalise investment and related payments. Substantial
access to the Mexican procurement market, similar to NAFTA, will also be secured. Finally,
the package will include substantive disciplines for competition matters, the protection of
intellectual property and an effective dispute settlement mechanism.

Substantially all trade in goods will be covered, with a total coverage amounting to 95% of
total current trade, and elimination of substantially all discrimination in trade in services. The
Commission is therefore of the opinion that the agreement is compatible with the relevant
WTO provisions and, in particular, Article XXIV of GATT and Article V of GATS.

1.

FREE TRADE AREA IN GOODS

Mexico is traditionally one of the EC’s most important trading partners in Latin America and
a strategically important market for its exports, with significant growth potential. The EC is
Mexico’s second trading partner after the USA. Bilateral trade in goods amounts to
11.2bn

€

2

(EC exports amounting to
3,9bn leaving the EC with a trade surplus of

€

3,6bn)1.

7.6bn, whereas Mexico’s exports to the EC only represent

€

€

1.1

Industrial goods

The balance found within the industrial package aims at ensuring effective market access,
both in terms of tariffs and rules of origin. It will allow EC products to compete on the
Mexican market on an equal footing with the USA and Canada on the basis of rules of origin
for which most of all EC harmonised rules will apply.

1.1.1. Industrial tariffs

For industrial products, which amount to 92,8% of total bilateral trade in goods, the main
objective has been to restore the competitiveness of EC exports to Mexico and secure
equivalent access to that market, in particular with respect to that enjoyed by products
originating from the NAFTA countries.

In this regard, the tariff package finally agreed can be considered satisfactory. Mexico will
liberalise all industrial products, with the tariffs on 52% of goods being eliminated by 1st
January 2003 (47% at entry into force and 5% by 2003). For the remaining 48% to be
liberalised by 2005 or 2007, a specific tariff dismantling schedule was agreed in which a
maximum tariff level of 5% will apply by 2003, thereby ensuring conditions of access that
will allow EC products to compete effectively with US and Canadian products. In exchange,
the EC will liberalise all industrial products by 1st January 2003, with 82% at entry into force
and the remaining 18% by 1st January 2003.

On both sides the starting point for tariff dismantling will be the effectively applied duty. For
Mexico this means a commitment to eliminate from the date of entry into force the tariff hikes
of 1st January 1999. In addition, Mexico will eliminate the tariff hikes applied since 1995 to
footwear and certain textile products (rollback to a 15% or 20% level of the duties currently at
25% or 35%). For the EC, the tariff dismantling will start from the applied GSP levels, or,
where not applicable, from the applied MFN rates.

A specific package was agreed for the automotive sector which includes a commitment by
Mexico to eliminate its automotive decree by 1st January 2004, as well as improved market
access for EC originating cars. EC cars will enter the Mexican market under the same, and in
certain cases better conditions than NAFTA cars. Tariffs will be reduced from 20% to 3.3% at
entry into force and will be eliminated by 2003. Unlike in NAFTA, EC vehicles imported by
companies which are not established in Mexico will also benefit from these preferential
conditions. These conditions will apply within a preferential tariff quota of 15% of the
Mexican market (for comparison, current imports from the EC represent around 2% of the
Mexican market) and this quantitative limitation is to be lifted by 1 January 2007. In addition
very favourable access will be assured to main car-parts and components.

1.1.2. Rules of origin

As requested in the negotiating directives,
the rules of origin agreed with Mexico are
“inspired by the model proposed for the harmonisation process of preferential rules of origin
applicable to third countries”. The general structure and provisions of the EC standard

1

Average figures of total bilateral trade 1996-1998.

3

protocols have been maintained for the Annex concerning the definition of the concept of
originating products and the methods for administrative co-operation.

As far as the specific rules are concerned, EC harmonised rules of origin will apply to most of
all industrial products (well over 90% of the rules). In a few areas, compromise solutions
were however necessary to cater for both Parties’ specific concerns and agree on a
satisfactory market access package. For that purpose, different avenues were followed. In
certain sectors (e.g. for vehicles and complex car-parts such as engines and chassis and for
garments), a transitional relaxation of EC rules was agreed in order to give time to the
Mexican industry to adapt to European standards. Some other rules were re-drafted in a spirit
of simplification, whilst avoiding simple assembly (e.g. for certain automotive parts and
electromechanical appliances). In most of the cases in which origin rules have been adapted,
account has been taken of the lack of raw materials or components in Mexico (e.g. for some
chemicals, car parts and machinery). Finally, the tightening of rules in some cases (some
textiles, shoes) has been accompanied by ad hoc solutions to accommodate for effective
continued market access under preferential tariff treatment (see Mexican quotas granted for
Community cotton and man-made fabrics and for footwear). This limited number of
concessions in rules of origin were successfully used to obtain a considerably larger market
access package.

1.2

Agricultural and fisheries products

€

Of agricultural products, amounting to 7% of total bilateral trade in goods (around
0,8bn
average figures 1996-1998), 62% will be fully liberalised. The EC will obtain full and rapid
access for a number of its key export priorities such as wines, spirits and olive oil. In addition,
in a Joint Statement both sides have committed themselves to start negotiations on a wine
agreement shortly. In exchange for these concessions, whilst fully taking into account the
particular sensitivities of certain EC products, the package includes partial liberalisation for
certain products of interest to Mexico such as concentrated orange juice, avocados, and cut-
flowers. This tariff package will be complemented by provisions on sanitary and
phytosanitary measures (SPS), with the establishment of a special committee to address and
solve possible problems in this area. In this regard Mexico has also committed itself to
promptly resolve an outstanding SPS issue related to pig meat products from the EC.

On fisheries, a satisfactory package was agreed that will assure liberalisation of over 99% of
74 million in average 1996-1998 figures), whilst taking account of
current trade volume (
particular EC sensitivities.

€

EC rules of origin will apply to all agricultural products which are currently included in tariff
concessions, as well as to all fisheries’ products.

2.

TRADE IN SERVICES

The negotiated trade package includes an economic integration agreement in services which is
of key offensive interest
to the EC. As provided for in the negotiating directives, the
agreement will “progressively liberalise trade in services between the parties over and above
commitments made under the GATS, within a time frame of, in principle, not more than ten
years”. It will cover all sectors - including inter alia financial services, telecom, distribution,
energy, tourism and environment - with the exception of audio-visual services, maritime
cabotage and air transport. From the entry into force, through a standstill provision, the
agreement will secure services operators from the EC with an access to the Mexican market
which will be equivalent if not superior to that currently enjoyed by operators from Mexico’s

4

other preferential partners, in particular the USA and Canada. In the financial services sector,
EC banks and insurance companies will be authorised to operate and establish directly on the
Mexican territory, like their US and Canadian counterparts. Finally, the outlined agreement
contains mechanisms that will allow the parties to go beyond this already ambitious level of
liberalisation within a maximum timeframe of 10 years.

3.

INVESTMENT AND RELATED PAYMENTS

The package for investment and related payments foresees that liberalisation of investments
will start
in three years, whereas the progressive liberalisation of payments related to
investments will take place from the entry into force. This package is based on a Presidency
compromise which was agreed between all Member States.

4.

PROCUREMENT

The agreement will provide for access to the Mexican procurement market which is basically
equivalent to NAFTA. Key EC priorities such as petrochemicals (PEMEX), electricity (CFE)
and construction are very substantially covered. In exchange, the EC will grant access similar
to that it offers to its partners in the framework of the WTO Government Procurement
Agreement. For the time being, the sub-central levels are not included in the agreement. As
for statistical information, both sides agreed inter alia to exchange information with regard to
an indicative list of utilities. The procurement chapter will enter into force once that
information has been exchanged.

5.

INTELLECTUAL PROPERTY, COMPETITION & DISPUTE SETTLEMENT

The protection of intellectual property rights e.g. patents, trademarks and copyright is set at
the highest international standards. In addition a special Committee will be established in
order to address questions relating to the effective enforcement of these rights.

As for competition matters, the agreed package will include co-operation mechanisms to
ensure and facilitate the enforcement of the parties’ respective competition laws.

Finally, the agreed package will include an effective dispute settlement mechanisms in order
to guarantee the enforcement of the provisions of the agreement, without prejudice to the
respective rights the parties have in the WTO framework.

6. WTO COMPATIBILITY

The compatibility of any regional trade agreement with the relevant WTO provisions can only
be definitively confirmed when the agreement has been notified and examined under the
relevant WTO provisions. However, on the basis of existing practice and jurisprudence, the
the negotiated trade package should be considered
Commission is of the opinion that
compatible with the relevant WTO provisions.

6.1

Trade in Goods

In respect of trade in goods, full liberalisation under the agreement will cover 100% of trade
in industrial products, 62% of trade in agricultural products2 and 99.5% of trade in the
fisheries sector². This amounts to a total trade coverage of 95% of current bilateral trade.

2

Average trade figures 1996-1998.

5

Article XXIV:8(b) of the GATT 1994 requires that duties and other restrictive regulations of
commerce are eliminated on ‘substantially all trade’ between the parties. Although the exact
definition of the latter term is still open, the established internal EC benchmark for this
purpose is that full liberalisation must cover at least 90% of trade. As the agreement meets
this benchmark, and furthermore as no major sector of trade is excluded, the Commission
considers that these requirements are met.

Liberalisation will be on a balanced basis and will be completed within a transitional period
of a maximum duration of ten years which is the maximum permitted under the requirements
of Article XXIV:5 and Paragraph 3 of the Understanding on Article XXIV of the GATT
1994. Furthermore, nothing in the agreement requires the parties to raise the level of duties
applicable to the trade of third Party Members of WTO. This is consistent with the
requirements of Article XXIV:5(b) of the GATT 1994.

6.2

Trade in Services

As far as trade in services is concerned, the Commission considers that the agreement is an
economic integration agreement which meets the relevant tests of GATS Article V. Although
certain services sub-sectors i.e. audio-visual and air transport (with the exception of aircraft
repair, selling and marketing and CRS services), as well as maritime cabotage, are explicitly
excluded from the coverage of the agreement, it should still be considered to have “substantial
sectoral coverage” in the sense of GATS Article V:1(a). Furthermore, no mode of supply is a
priori excluded from coverage. The agreement will prohibit the introduction of any new
discrimination between or among the parties in the covered sectors, and will provide for the
elimination of substantially all existing discrimination in the covered sectors within a time
frame of no more than ten years. Although there is no consensus in WTO on the maximum
length of the “reasonable time-frame” foreseen for the elimination of substantially all
discrimination under GATS Article V:1, the EC has defended the position that a ten-year
maximum is indeed reasonable in this context.

The Agreement will not lead to the raising of overall levels of barriers to the trade in services
of non-parties Members of the WTO in the covered sectors and sub-sectors. Furthermore,
equality of treatment of the service suppliers of other WTO Members established within the
territory of any of the parties to the Agreement will not be affected. In these respects,
therefore, the Agreement can be considered compatible with the obligations of GATS Articles
V:4 and V:6.

7.

IMPLEMENTATION OF THE NEGOTIATING RESULTS

These results will be implemented via two decisions of the Joint Councils established
respectively by the Interim Agreement on Trade and Trade-related matters and the Economic
Partnership, Political Co-ordination and Co-operation Agreement.

A proposal for a common position of the Community is attached to this communication in
order to allow the Joint Council established by the Interim Agreement to take all the decisions
foreseen in that agreement with respect to trade in goods, procurement, competition and the
establishment of a consultation mechanism for intellectual property matters. Upon the entry
into force of the Economic Partnership, Political Co-ordination and Co-operation Agreement,

6

the Interim Agreement will cease to exist and this Decision shall be deemed to have been
adopted by the Joint Council of the former Agreement.3

The Decision covering services, investment and the aspects of intellectual property which are
not covered by the Interim Agreement can only be taken once the relevant procedures
required for the entry into force of the Economic Partnership, Political Co-ordination and Co-
operation Agreement are fully completed and the Joint Council provided for therein is
established. Once these prerequisites will be completed, the Commission will present a
proposal for a common position of the Community with a view to permit the adoption of these
latter decisions.

CONCLUSION

The Commission requests the Council:

• To approve the results of the trade negotiations between the EC and its member States, on
the one part, and Mexico, on the other part, as set out in the attached draft decisions by the
Joint Council EC-Mexico established by the Interim Agreement on Trade and Trade-
related matters and by the Joint Council EU-Mexico established by the Economic
Partnership, Political Co-ordination and Co-operation Agreement, as well as in the
attached Joint Statement concerning the negotiation of an agreement between Mexico and
the EC on trade in wine.

• To adopt the proposal for a Council Decision attached to this communication establishing
the position of the Community within Joint Council EC-Mexico established by the Interim
Agreement on Trade and Trade-related matters

3

Art 16 of Interim Agreement & Art 60 of Global Agreement.

7

2000/0024 (CNS)

Proposal for a

COUNCIL DECISION

on the Community position within the EC-Mexico Joint Council
on the implementation of Articles 3, 4, 5, 6 and 12 of the Interim Agreement

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular to
Articles 47 (2), last sentence, 55 and 133, in conjunction with the first subparagraph of
Article 300 (3) thereof,

Having regard to the proposal from the Commission4,

Having regard to the opinion of the European Parliament5,

Whereas:

(1)

(2)

(3)

(4)

(5)

(6)

The Interim Agreement on trade and trade related matters between the European
Community and the United Mexican States entered into force on 1st July 1998.

Article 3 of the Interim Agreement provides that the Joint Council shall decide on the
arrangements and timetable for a progressive and reciprocal liberalisation of trade in
goods.

Article 4 of the Interim Agreement provides that the Joint Council shall decide on the
appropriate arrangements and timetable for the gradual and mutual opening of agreed
government procurement markets on a reciprocal basis.

Article 5 (1) of the Interim Agreement provides that the Joint Council shall establish
mechanisms of co-operation and co-ordination among their authorities with
responsibility for the implementation of competition rules.

Article 6 (2) of the Interim Agreement provides that the Joint Council shall decide on
a consultation mechanism with a view to reaching mutually satisfactory solutions in
the event of difficulties in the protection of intellectual property.

Article 12 of that Agreement provides that the Joint Council shall decide on the
establishment of a specific trade or trade related dispute settlement procedure
compatible with the relevant WTO provisions in this field.

4

5

OJ C
OJ C

8

HAS DECIDED AS FOLLOWS:

Article 1

The position to be taken by the Community within the Joint Council established by the
Interim Agreement on trade and trade related matters between the European Community and
the United Mexican States on the implementation of Articles 3, 4, 5, 6 and 12 of that
Agreement is that set out in the attached draft decision of the Joint Council.

Done at Brussels,

For the Council
The President

9