Brussels to tear down the trade wall with Mexico as opposed to Trump’s “walls”

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Cecilia Malmstrom, EU Commissioner responsible for Trade at World Economic Forum 2017 in Davis. Date: 19/01/2017 Reference: P-033407/00-63 Location: Davos. © European Union , 2017 / Source: EC – Audiovisual Service / Photo: Johanna Leguerre.

The European Union and Mexico have officially decided last week to accelerate negotiations on a new trade agreement and have set two additional rounds of trade talks in the first half of 2017. The European bloc and the Northern American country have long standing economic relations, but they are facing a very delicate moment, amidst political uncertainty and unprecedented calls for global protectionism.

The move indeed can be seen as a first, direct response to Donald Trump’s threats against Mexico and loud calls for stricter borders between the two countries.

The Background

The trade relations between the EU and Mexico are currently regulated by the Economic Partnership, Political Coordination and Cooperation Agreement (the “Global Agreement”), which entered into force in 1997. The agreement included trade provisions that were later developed in a comprehensive Free Trade Agreement that entered into force in October 2000.

On 25 May 2016, the EU and Mexico launched new negotiations to modernize the Global Agreement, and last week, on the first day of February, EU Trade Commissioner Cecilia Malmström and Mexican Economy Minister Ildefonso Guajardo met in Brussels with the official objective to accelerate trade talks.

Road map to the deal

The two parties officially announced last Wednesday that the EU and Mexico have agreed on two rounds of negotiations to be held this year, 3-7 April and 26-29 June. The top trade representatives also declared that additional meetings in Mexico City will be held between the two rounds to “to take stock and push negotiators for further progress”, as described in an official statement.

“We will take our trade relations fully into the 21st Century”, Commissioner Malmström and Minister of Economy Guajardo said. “We will be able to boost growth, making our firms more competitive and widening choices for consumers while creating jobs”, they declared in the official European Commission statement.

Global threats

There was also space in the statement to mention the particular situation that the American Country, and perhaps the whole world, is facing. “Together, we are witnessing the worrying rise of protectionism around the world”, said the document, with a clear mention to US President Donald Trump’s monolithic protectionist approach. Mexico indeed is going through a tough moment in its relations with the United States, after having become a repeated target of President Trump’s “America first” campaign.

The American tycoon has indeed repeatedly vowed to build a border wall between US and Mexico – which he wants to be paid by the latter – and ultimately to renegotiate the NAFTA, the agreement signed by Canada, Mexico, and US, which created a trilateral trade bloc in North America.

A European concern

The EU has naturally an important role to play in this delicate matter. Top EU officials have recently expressed concern that the policies of the new US administration will also worsen relations between Brussels and Washington. European Commission Vice-President Maroš Šefčovič last week said the EU is following “with growing anxiety” how the recent, and the announced steps, “would affect the strategic trans-Atlantic relationship”.

Commissioner Šefčovič also said that the EU has “never been so overwhelmed by calls from around the world” to show leadership on free and open trade, climate talks and development aid, as reported by the New York Times.

The Brussels’ plan

Indeed, after the recent move, it looks like the European Union is determined to “fill the gap” that Trump’s administration is leaving behind. Reuters reported last week that European leaders have said Brussels should take advantage of a more protectionist US leader, who has already withdrawn from the Trans-Pacific Partnership (TPP) trade deal, to step up negotiations with would-be partners. Last week’s joint EU-Mexico statement was already quite clear on such plans.

“Side by side, as like-minded partners, we must now stand up for the idea of global, open cooperation”, said the document, underlining the message of a clearer plan of tighter cooperation ahead. “We are already well underway in our joint efforts to deepen openness to trade on both sides. Now, we will accelerate the pace of these talks in order to reap the benefits sooner”, the statement also said.

A prosperous exchange

Reinforcing the existing ties with Mexico seems already a very promising business for Brussels, which has already a prosperous economic relation with Mexico City. The European Union is Mexico’s third largest trading partner after the United States and China. A study by the European Commission revealed that, between 2005 and 2015, the yearly trade flow of goods between the two partners more than doubled (from €26 billion to €53 billion), against the backdrop of the existing Free Trade Agreement.

Now the EU has said that a new deal would seek to include public tenders, trade in energy products and raw materials, broader protection of intellectual property, more flexible rules on what products can benefit from lower customs tariffs as well greater benefits for smaller companies.

The Sting will be following closely the walls that the EU’s trade executive arm will attempt to tear down with the rest of the world in response to Trump’s narrowest “wall building” tactics.

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