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The EU and Mexico agreed to a long-delayed trade deal as they sought to reduce their reliance on the US days before Donald Trump's return to the White House.
After nine years of negotiations, the two sides on Friday said they will improve the existing agreement. The announcement comes just weeks after Trump threatened tariffs and followed a similar trade deal between the EU and the South American trading bloc. Mercosur in December.
“This important agreement proves that open, rules-based trade can deliver our prosperity and economic security, as well as climate action and sustainable development,” said Ursula von der Leyen, president of the European Commission.
EU-Mexico trade in goods reached 82bn in 2023, while two-way trade in services reached 22bn in 2022.
Mexico will remove 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 protected names for more than 500 products including champagne, Parma ham, and Rioja wine.
The agreement will allow Mexico to export electric vehicles without duty to the EU if they have at least 60 percent of Mexican or EU made value.
That will make it difficult for China to try to use Mexico as a base for the production of electric vehicles bound to the EU, as they will pay a standard duty of 10 percent if they use Chinese batteries. “Companies will be much better off buying from Europe. . . than China,” said an EU official.
The EU will increase the low tariff quota for Mexican exports such as beef, poultry and ethanol.
The two sides reached an initial agreement in 2020 to extend the 20-year-old deal but the decision was delayed in part by Mexico's reluctance to open its energy market to EU companies. The party of President Claudia Sheinbaum who left the Nationalist Morena restored the wide opening of the market, causing the collapse of new private investment in the sector. He said he will now unveil the much-anticipated new energy investment rules in February.
EU companies will be given the same treatment as Mexico's other special trading partners, including the US and South Korea, the official added.
Mexico is one of the most vulnerable countries in the world Trump's tax threatsit sends more than 80 percent of its shipments to the United States. The deal may help provide options for exporters if the new president implements the 25 percent tariffs he promised, but it's also an important sign.
“It's very encouraging. . . it will give certainty to investors because it will include safeguards, said Carlos Serrano, economist at BBVA Mexico. “It's a vote of confidence in Mexico and it also shows that Mexico wants to join the US and Europe.”
Dmitry Grozoubinski, of the ExplainTrade consultancy, said that “difficult times” pushed the two sides to resolve the last remaining issues.
“As the Trump administration and the uncertainty that accompanies it, those who are willing to show stability, like Mexico and the EU, suddenly find a compromise so that the ink dries on their agreements before he starts to turn the world's tables.”
The EU said the agreement, which includes investment provisions, will help boost the bloc's services exports in key areas, such as financial services, transport, e-commerce, and communications, and effectively protect intellectual property rights.
It also includes legally binding commitments on labor rights, environmental protection, climate change and responsible business conduct, backed by a dispute resolution system.
The agreement still needs to be signed and then approved by the EU and Mexican lawmakers. European farmers have protested against the Mercosur deal and are likely to put pressure on governments to oppose the deal with Mexico.