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Mon 25 October 2021

The EU-Mexico Agreement has thrown a spanner in the works, reports David Hencke

A £5 billion EU continuity trade deal with Mexico, hailed by Whitehall as an “Aztec Brexit Boost”, has become obsolete – after the EU signed a more generous and comprehensive deal between its 27 members states and Mexico.

The UK’s trade deal, which was meant to replicate the existing EU deal with Mexico, will now face stiff competition from EU countries, which have negotiated better terms to sell their manufactured goods and other products to Mexico. The enhanced EU-Mexico Agreement will remove many of the remaining customs duties, increase regulatory co-operation and lower non-tariff barriers for EU companies.

According to a new report from the House of Lords’ International Agreements Committee, the UK could now have to wait another three years to catch-up with the EU even if talks on a new agreement begin this year.  

At the time of its signing last December, International Trade Minister Ranil Jayawardena said: “This deal is great news for businesses on both sides. It provides certainty for the thousands of British firms who already export to Mexico – and is a firm foundation for negotiating a new, more ambitious agreement next year. Together with our friends and allies in Mexico, we can now look forward to deepening and strengthening our trading partnership, boosting our businesses and creating better jobs in both countries.”

The House of Lords committee, which scrutinised the deal, has found a number of flaws with it. There is evidence, for instance, that British fruit and vegetables and Commonwealth banana growers could lose out to competition from Mexico.

The Society of Motor Manufacturers and Traders also told peers that it was worried about the enhanced EU deal: “In the absence of agreeing favourable trading terms which match or improve upon the terms of the upgraded EU-Mexico Agreement, EU-based competitors are likely to benefit from a significant competitive advantage.”

The UK trade deal allowed Mexico to continue to export fruit, vegetables and nearly £1 billion of precious stones and metals to the UK at advantageous rates. The UK exports cars, machinery, whisky, gin, tea and vinegar to Mexico. But, while Mexico got immediate tariff concessions, the UK will have to wait until all domestic regulations are agreed in Mexico to receive the same. In the meantime, Scotch whisky and cars face a 20% up-front tariff which is then refunded.

The report also states that the UK made a huge concession to Mexico to import bananas – raising the quota from 2,100 tonnes to 12,000 tonnes. The UK argued that, as bananas aren’t grown in the UK, it would not affect farmers and would be popular as it would decrease prices. But the House of Lords report states that the UK did not consider the effect on “other banana-exporting countries – including on price – and, in particular, Commonwealth members that are classed as low-income countries or are particularly dependent on banana exports”.

The UK decided not to implement an additional tariff, which had existed in the old EU agreement, which protects domestic fruit-growers during the summer and autumn from cheap imports from Mexico. 

Peers have questioned how the Government will monitor the agreement which states that it will be suspended if there is evidence of human rights violations among suppliers of goods.

“Civil society organisations have raised concerns about alleged human rights violations and unsanitary working conditions for Mexican farm-workers that have worsened under the COVID-19 pandemic,” they said. “Alleged human rights violations include claims of torture, abuses against migrants, extra-judicial killings and attacks on journalists and human rights activists.”

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