Mexico and the European Union trade renegotiation of 2020: A deep integration agreement Version 2.0?

Abstract

After more than 20 years of trade integration, Mexico and the European Union (EU) started renegotiating the accord in 2016 and concluded in 2020. The treaty signed in 2000 corresponds to a series of deep integration agreements that seek to go further than the liberalization of goods, services, and investments and aspire to be more of an understanding of cooperation in several policy areas. Mexico joined the agreement to achieve more diversified exports to offset Mexico's dependence on the US market and to include other spheres besides trade. The EU found in Mexico a trade partner with a strategic geographical location to access the US and Canadian markets. Likewise, the EU would benefit from the liberalized Mexican financial market with potential profits in the financial and telecommunication sectors. This work reviews the agreement in 2020 from the deep integration agreement framework lens. We examine to what extent these provisions provide the conditions for a deep integration that benefits both regions. We also analyze whether the renegotiation of 2020 can be seen as an attempt to further this cooperation process and the economic implications for Mexico. We argue in this paper that the former Free Trade Agreement between the European Union and Mexico (FTA-EU-MX) consolidated a trade pattern that existed before the agreement with EU multinationals concentrated in critical industrial sectors, without significant trade creation for medium and small businesses. This result confirms that there have been advances in shallow integration but no substantial changes in cooperation or deep integration. After analyzing the 2020 renegotiation text, we conclude that Mexico could achieve significant gains in areas of cooperation as the 2020 text has more enforceable policies, which was not the case with the 2000 treaty.

 Keywords: deep integration, Mexico, European Union, international cooperation

JEL: F10, F15, F50