The EU Free Trade Agreement with Mexico: What You Need to Know
The European Union (EU) and Mexico signed a comprehensive free trade agreement in 2020, which opens up new opportunities for businesses on both sides of the Atlantic. The agreement, known as the EU-Mexico Global Agreement, will eliminate tariffs on almost all goods and services traded between the two regions and improve investment protection for companies.
What does this mean for businesses?
For businesses in the EU, the agreement provides a significant opportunity to tap into the Mexican market, which has a population of over 120 million people and a growing economy. Mexico is the EU`s second-largest trading partner in Latin America, and the trade relationship between the two regions has been growing steadily over the years.
By eliminating tariffs on goods and services, the agreement will make it easier and cheaper for EU businesses to export to Mexico. This will benefit a wide range of industries, including automotive, chemicals, pharmaceuticals, and food and drink. It will also reduce the cost of imported goods from Mexico, including avocados, tequila, and electronic products.
In addition, the agreement will provide greater legal certainty for EU investors in Mexico by ensuring they are protected from discriminatory practices and expropriation. This is particularly important for small and medium-sized businesses (SMEs), which may have limited resources to deal with legal disputes.
What are the benefits for Mexican businesses?
Mexican businesses will also benefit from the agreement, as it will give them access to the large and lucrative EU market. The EU is Mexico`s third-largest trading partner, and the agreement will make it easier for Mexican companies to export to the region.
In addition, the agreement will increase investment flows between the two regions, as EU companies are likely to invest more in Mexico in sectors such as renewable energy, infrastructure, and telecommunications. This will help to create jobs and promote economic growth in Mexico.
Moreover, the agreement will provide greater protection for Mexican investors in the EU by ensuring they are treated fairly and have access to dispute settlement mechanisms. This will be particularly important for Mexican SMEs, which may have limited resources to deal with legal disputes.
What are the potential challenges?
Despite the benefits of the agreement, there are also some potential challenges that businesses may face. For example, the elimination of tariffs could lead to increased competition from Mexican companies in the EU market, which could put pressure on some EU businesses.
In addition, the agreement may not be fully implemented until several years after its signing, as it needs to be ratified by the European Parliament and the Mexican Senate. This could lead to delays in reaping the benefits of the agreement.
Furthermore, there are concerns over human rights abuses in Mexico, which could affect the perception of the country as a trade partner. This could result in pressure from civil society groups and political scrutiny.
Conclusion
Overall, the EU-Mexico Global Agreement is a significant milestone in the trade relationship between the EU and Mexico. It offers a wide range of benefits for businesses on both sides of the Atlantic, including increased market access, investment protection, and reduced trade barriers.
However, businesses should also be aware of the potential challenges that the agreement may bring, including increased competition and delays in implementation. By staying informed and adapting to the changing trade environment, businesses can take advantage of the opportunities presented by the agreement and ensure their long-term success.