Mexico’s Secretary of Economy, Ildefonso Guajardo, visited Brussels on Monday (30 May) to launch a process to upgrade the 16-year-old EU-Mexico trade agreement. In an interview with EurActiv.com, the Mexican economist eyes 2018 as the year to conclude an “ambitious” deal.
You seem positive about Mexico’s ability to conclude trade talks with the EU, despite Europe’s recent experience with the US and Canada. Where is your optimism coming from?
There are very good reasons for this optimism. Firstly, we are not starting from zero. The EU and Mexico signed a trade agreement 16 years ago, the first deal reached with an American country. That was not the case with Canada or the US.
But we need to modernise this deal. Areas such as regulatory coherence, trade facilitation, SMEs participation electronic products were not as important as they are today. On top of that, our market access was quite limited in areas of interest to the EU, like energy. I have reasons to believe the agreement could move forward in a speedy way, in contrast with the very complex negotiation the EU is having with the US, and the long process needed to conclude the agreement with Canada.
Will there be a chapter on energy?
I do not know if there will be an entire chapter, but certainly this sector will be open and part of the ambition for this trade deal.
What time frame do you have in mind?
It is always very challenging to bind yourself to a time frame. You always have to give priority to substance over time goals. At the same time, we recognise that we are in a very good position to move fast-forward. But I cannot say whether it would be one year an a half or two years and a half…
But what is your personal opinion?
It is very difficult. There is an interest in both parties to conclude this agreement during the time span of our respective mandates. That would mean getting results by the European elections in 2019 and before the Mexican Senate dissolves in September 2018. We will do our best to reach an agreement within this time frame.
What are the ‘red lines’ for Mexico?
We should not start a negotiation setting red lines. We agreed with the European Commission that this should be a very ambitious agreement. Obviously, there are some complexities and vulnerabilities in some sectors, like the dairy sector for Mexico. We also understand that the cultural industry for France is extremely sensitive.
What other tough areas do you foresee?
They will come up once we explore the negotiation areas. We will start the negotiations on 13 and 14 June. Then we will define the working groups in different areas. As we proceed we will find the areas which represent a higher degree of complexity.
Once this agreement and the Transatlantic Trade and Investment Partnership (TTIP) with the US are completed, how they will interact with the other existing agreements, such as the North American Free Trade Agreement, and the EU-Canada Comprehensive Economic and Trade Agreement (CETA)?
Mexico has already declared that once we modernise the EU-Mexico agreement, and the EU and the US complete TTIP, we should work towards convergence, as this is for the best interest of all parties involved: the North American countries and Europe.
There are a lot of European interests already established in the North American region. But convergence could be reached on rules of origin [which are used to determine the country of origin of a product]. This will facilitate how we produce in the whole value chain, improving the efficiency of how all our economies integrate.
But this is not a substitute for an efficient multilateral trade system. We have to keep on pushing the commitments of Doha and really make the World Trade Organisation work .
In 2014, it was the twentieth anniversary of NAFTA. Which lessons did Mexico learn from NAFTA that will be included in the agreement with the EU?
NAFTA and the other eleven trade agreements we signed afterwards have radically transformed our economy. Before NAFTA, 65% of our exports were minerals and 34% manufactured products. Today minerals are only 7% and manufactured products represent 89% of exports.
Geographically speaking, the country has changed by creating economic clusters. It was a success story in Mexico, creating very dynamic economic sectors such as air space, medical devices, IT and electronics or the automotive industry.
But it had a limitation. We did not fully exploit the benefits as 20 years ago we were not capable of reforming the economy to improve our competitiveness. We had a close energy sector, very inefficient and highly expensive, and our anti-trust laws were extremely weak. Our labour laws were very rigid. The economic reforms implemented by the President Enrique Peña Nieto are already producing benefits, for example in terms of the energy prices paid by the small and medium sized companies. A better inclusion of SMEs in new trade deals could help increase the value created.
In fact, a European Council on Foreign Relations report published in 2014 concluded that the direct effect of NAFTA on US-Mexico trade was “fairly small”, and the Mexican economy grew at a slower pace compared to Brazil, Chile and Perú…
Exactly. Financial stability, good macroeconomic fundamentals and free trade were not sufficient to guarantee a sustainable high growth rate. But that is different of saying NAFTA had limited impact.
As I said, the agreement transformed the economy of Mexico. But we did not see higher growth rates because we were not able to make our homework by liberalising our economy to complement this process. That is why the agreement did not have an impact on our productivity. We did not allow smaller players of some regions of the country to be part of this transformation.
When left-wing parties say that the so-called ‘Washington consensus’ and this free trade model is wrong, I respond that this model is not wrong, but that we applied it in the wrong way.
Is this a warning for the EU, given the growing pressure to implement structural reforms in some member states and to complete a truly European market in fields such as digital or energy?
Europe has an advantage, namely the traditional good integration of SMEs in the national economy, in particular in countries like Britain, Germany, Italy or Spain.
Are you concerned that current public anger against TTIP could affect the EU-Mexico talks?
The fact that we have had an agreement for the last 16 years helps a lot. These negotiations will not be so controversial and challenging from the standpoint of Europe’s negotiating interests.
The EU wants to include an anti-corruption clause. What would be the practical impact of this clause?
This is not new for us. it was included in the Trans-Pacific Partnership (TPP) to guarantee that public procurement is really open. Anti-corruption commitments are very important to guarantee real access. In the case of Mexico, the legislators are currently discussing anti-corruption rules.
This article appeared first on Euractiv.com. For further insights into the technical aspects of the EU Mexico upgrade, read this Borderlex article. Further details on progress in the negotiations will be made available to our Borderlex PRO subscribers.