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The EU and Mexico have agreed a long-delayed trade deal as they seek to reduce their reliance on the US days ahead of Donald Trump’s return to the White House.
After nine years of negotiations, the two sides said on Friday that they would modernize their existing agreement. The announcement comes just weeks after Trump threatened them with tariffs and follows a similar trade deal between the EU and the South American trading bloc Mercosur in December.
“This landmark agreement proves that open, rules-based trade can help our prosperity and economic security, as well as climate action and sustainable development,” said Ursula von der Leyen, President of the European Commission.
Trade in goods between the EU and Mexico will reach €82 billion in 2023, while two-way trade in services will reach €22 billion in 2022.
Mexico will lift tariffs of up to 100 percent on EU exports, including cheese, poultry, pork, pasta and jams and marmalades, as well as chocolate and wine. Mexican producers will not be able to use the trademarked names of more than 500 products, including champagne, Parma ham and Rioja wine.
The agreement will allow Mexico to export duty-free electric vehicles to the EU if they contain at least 60 percent of components produced in Mexico or in the EU by value.
This will make it difficult for China to try to use Mexico as a manufacturing base for electric vehicles for the EU, as they will pay a standard 10 percent tariff if they use Chinese batteries. “Companies will be much better off if they procure in Europe. . . but from China,” said the EU official.
The EU will increase low tariff quotas for Mexican exports such as beef, poultry and ethanol.
The two sides reached a preliminary agreement in 2020 to extend the 20-year-old deal, but the decision has been delayed in part because of Mexico’s reluctance to open its energy market to EU companies. President Claudio Sheinbaum’s left-wing nationalist party Moreno reversed the wider opening of the market, causing new private investment in the sector to collapse. She has now said she will unveil long-awaited new rules for energy investment in February.
EU companies will receive the same treatment as Mexico’s other preferential trading partners, including the US and South Korea, the official added.
Mexico is one of the most threatened countries in the world Trump’s threats of tariffssending more than 80 percent of its exports to the United States. The deal could help provide options for exporters if the new president implements the 25 percent tariffs he promised, but it’s also an important signal.
“It is very positive. . . it will give certainty to investors because it will include protection mechanisms,” said Carlos Serrano, chief economist of BBVA Mexico. “It’s a vote of confidence in Mexico and it also shows that Mexico wants to align with the US and Europe.”
Dmitry Grozoubinski, of consultancy ExplainTrade, said “turbulent times” had forced the two sides to resolve the last outstanding issues.
“As the Trump administration and its attendant uncertainties loom, those determined to show stability, like Mexico and the EU, are suddenly finding compromises to dry the ink on their deals before he starts turning the global tables.”
The EU said the deal, which includes provisions on investment, will help boost the bloc’s exports of services in key areas, such as financial services, transport, e-commerce and telecommunications, and more effectively protect intellectual property rights.
It also includes legally binding obligations on labor rights, environmental protection, climate change and responsible business conduct, which is regulated by the dispute resolution process.
The agreement still needs to be signed and then approved by EU and Mexican lawmakers. European farmers have protested against the Mercosur deal and are likely to put pressure on governments to resist ratification of the deal with Mexico.
