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EU executive approves

ambitious Mexico

trade pact

BRUSSELS: The European Union's executive body approved a free trade agreement with Mexico on Tuesday which it said was the most far-reaching it had ever negotiated.

The EU hopes the agreement will put European companies on a more equal footing in the Mexican market with U.S. and Canadian rivals which have strengthened their position there since the 1994 North American Free Trade Agreement (NAFTA).

The European Commission, meeting in Strasbourg, France, formally approved the agreement hammered out in November after a year of negotiation. The accord must still be approved by the 15 EU member governments.

EU officials said the agreement could be signed in March and take effect in July.

European Trade Commissioner Pascal Lamy described the deal in a statement as "a win-win agreement: good for both the EU and Mexico..."

Lamy's spokesman Anthony Gooch said that in terms of coverage it was "the most ambitious free trade agreement the Commission has ever negotiated".

Details of the pact were released for the first time on Tuesday. When fully implemented, the agreement will cover 100 percent of EU-Mexico trade in industrial products, 99.5 percent of trade in the fisheries sector and 62 percent of trade in agricultural products, the EU said.

By 2003, more than half of EU industrial exports to Mexico will enter duty free and remaining tariffs will be reduced from as high as 35 percent to a maximum of five percent. All duties will disappear at the latest by 2007.

Mexican exports to the EU will enter duty free in 2003.

On agriculture, products sensitive to the EU such as meat, dairy products and cereals were left out of the agreement. But the EU said it would obtain "full and rapid" access to the Mexican market for goods such as wines, spirits and olive oil.

The EU and Mexico have also committed themselves to starting negotiations on a wine agreement soon, it said.

The package includes partial liberalisation for agricultural products of interest to Mexico such as concentrated orange juice, avocados and cut flowers.

In the vehicle sector, a priority for Europe, EU negotiators have achieved similar benefits to those conferred by NAFTA, according to Gooch. Several European car makers have stepped up investments in Mexico in anticipation of tariff cuts.

When the agreement takes effect, Mexican tariffs on European cars will fall from 20 percent to 3.3 percent and then to zero by 2003. These tariff cuts were within a quota covering 14 percent of the Mexican vehicle market, Gooch said.

On services, the agreement will give EU firms "as good, if not better, market access than the U.S. and Canada," Gooch said.

The services agreement covers financial services, telecommunications, distribution, energy, tourism and environment but excludes audiovisual services and air transport.

In the financial services sector, EU banks and insurance companies will be authorised to operate and set up businesses in Mexico, like their U.S. and Canadian counterparts.

The agreement will also give European firms access to the Mexican government procurement market. Key EU priorities such as petrochemicals, electricity and construction are "very substantially covered," an EU document said.

The EU exported goods worth 9.3 billion euros ($9.39 billion) to Mexico in 1998, the latest full year for which figures are available, while imports from Mexico were 4.0 billion euros, according to EU data.-Reuters