Mexico resists EU pressure to approve trade deal after legal changes

Mexico is resisting pressure from the EU to sign off on a trade deal that was agreed four years ago, arguing legal changes recently proposed by Brussels will slow down the approval process.

EU trade commissioner Valdis Dombrovskis said Mexican officials “are taking their time” after Brussels made some amendments that mirror a structure used in an accord between the EU and Chile finalised last month. Brussels hopes the tweaks should smooth the deal’s ratification, but Mexico City fears they could mean the treaty requires separate stages of approval.

“In recent weeks we proposed a possible solution on the legal architecture of this modernised global agreement to Mexico,” Dombrovskis said.

“We think it’s a good solution, which also takes into account some of Mexico’s concerns,” he added. “We are currently waiting for Mexico’s final response on this. We’re ready to move forward with the agreement as soon as we get that reply.”

Mexico is seen as a potentially leading exporter of machinery, appliances and mineral products to the EU as Brussels seeks to reduce its reliance on China.

Héctor Vasconcelos, president of Mexico’s Senate foreign relations committee and a close adviser to populist leftwing president Andrés Manuel López Obrador, denied Mexico was holding up the trade agreement, saying: “We are ready to ratify this at any moment because we consider this matter [the trade deal] closed.”

“Mexico’s position is that it is not necessary to separate the agreement into parts. It must be approved as [initially] agreed upon by the commissions negotiating the agreement,” he said, adding that the changes could lead to a renegotiation of the deal being required.

Mexico wants provisions on issues such as labour rights, environmental safeguards and modernised investment protection to apply as soon as the trade deal to cut tariffs takes effect, but the EU favours delaying them. This is because national parliaments must vote in favour of them as well as the European parliament. National governments can approve trade-only deals.

The EU has struggled to complete full trade accords since its Comprehensive Economic and Trade Agreement (Ceta) with Canada in 2016. That deal still awaits ratification by 10 of the 27 member states who oppose investment protection chapters giving companies the right to seek redress from governments, although part of the accord is being applied provisionally. So Brussels has pushed for “split” deals so tariffs can be cut even if national parliaments oppose the wider provisions.

Brussels still hopes it can sign a single agreement with Mexico City and allow the trade part to apply while the more complicated chapters await ratification by national parliaments — as used in the Chile model. The Chile deal could be signed by this autumn, Dombrovskis said last month.

The EU was Mexico’s biggest export market after the US in 2021. It imported €23.4bn of goods from Mexico, with exports totalling €37.7bn. In 2020 EU companies had investment worth €176bn worth in the country.

Mexico is also poised to benefit from “nearshoring” as companies shift production from China to the Americas. A report last year from the Inter-American Development Bank estimated that exports could rise by $78bn a year from Latin America and the Caribbean due to the relocation of operations over the near and medium term.

Dombrovskis said the EU wanted to diversify trade and use deals to avoid “strategic dependencies” on countries such as it did with gas from Russia.

“Following Russia’s aggression against Ukraine and China’s ambiguous stance in this regard there is clearly some reassessment of our China policy,” he said, adding that Brussels would “continue to engage with China but without naivety and [by] properly managing the risks”.

The former Latvian prime minister, among the most liberal European commissioners, also backed greater scrutiny of Chinese investment in new green technologies in Europe such as vehicle battery plants. “It requires assessment,” he said adding: “There are reasons why we have an FDI screening mechanism in place.”