ICC Mexico discuss opportunities for a Free Trade Agreement between Mexico and the United Kingdom
2021 is a very important year for the commercial relationship between Mexico and the United Kingdom, thanks to the beginning of the negotiation of a Free Trade Agreement (FTA) between both countries, that is expected to conclude by the end of 2022 and will allow the consolidation and deepening of a new bilateral relationship, in accordance with the challenges, opportunities and the realignment of the global economy.
After the United Kingdom left the European Union, the commercial relationship with Mexico has been governed by a Trade Continuity Agreement that was signed in December 2020, valid for the next three years, in which the preferential regime currently in force under the Free Trade Agreement between Mexico and the European Union (TLCUEM) is maintained, at the same time as negotiations are carried out for a broad, modern and comprehensive bilateral agreement.
The areas included in this commercial extension of great interest to both countries are the automotive, pharmaceutical, textile, agricultural, food and beverage sectors, as well as other manufacturing industries. Thanks to this agreement, additional tariff charges that would be imposed under the terms of the Most Favored Nation principle in accordance with the criteria of the World Trade Organization, are avoided.
This instrument has allowed maintaining market access preferences in both countries, without introducing tariffs or new fees, and perhaps what is most relevant is that it has enabled outlining changes for mutual benefit. In the case of Mexico, it fostered a greater participation of new actors and national regions, for the sake of the agricultural sector of some of the states in the south-southeast region such as Tabasco, Chiapas, Veracruz and Yucatan, which require a great boost to leave behind their underdevelopment in comparison with other states in central and northern Mexico.
The United Kingdom is currently Mexico’s sixteenth commercial partner on a global scale and when it was a part of the European Union it ranked fifth among the countries that carried out the largest commercial exchanges with Mexico amid the members of that regional alliance.
Additionally, the United Kingdom is an important investor in Mexico since direct foreign investment from that country accumulated 15.65 billion USD between 1999 and September 2020.
The commercial participation of the United Kingdom in Mexico is carried out through more than 3,700 companies in various sectors such as engineering and advanced manufacturing, automotive, food and beverages, agriculture, retail sales, education, healthcare and health sciences, security and defense, infrastructure, financial services, and the creative industry that includes music, design, advertising, fashion and video games, among others.
The United Kingdom is looking for far-reaching commercial alliances to maintain its global economic relevance after withdrawing from the European Union and in this context Mexico is a partner with great potential: it is a large economy of almost 128 million inhabitants and with a workforce of 55 million people, and the average age of 29. Mexico is the second largest economy in Latin America and ranks 11th in the world among the largest exporters.
North America is a great option for the United Kingdom, whom is negotiating separate free trade agreements with Mexico and Canada and is expected to do the same with the United States.
In the future there is great potential to deepen the bilateral trade relationship between Mexico and the United Kingdom. The negotiations for the Free Trade Agreement are on the right track and although there are sensitive sectors such as agriculture, there are areas of mutual interest that can be developed.
A preferential relationship with the United Kingdom represents a window of opportunity to reduce dependence on the United States market, which currently accounts for 77% of all Mexican exports. This strategy had already been defined before the pandemic and in the near future it will become more relevant, therefore the new chapter in the commercial history with the United Kingdom will help Mexico advance that goal. ¬