EU, Mexico agree new free trade pact

Mexico wants to cut reliance on US, faces NAFTA threat

BRUSSELS, April 22, (RTRS): The European Union and Mexico reached an agreement on Saturday on a new free trade deal, a coup for both parties in the face of increased protectionism from the United States under President Donald Trump.

Since its plans for a trade alliance with the United States were frozen after Trump’s election victory, the EU has focused instead on trying to champion open markets and seal accords with other like-minded countries.

The agreement in principle with Mexico follows a deal struck last year with Japan and comes ahead of talks next week with the Mercosur bloc of Argentina, Brazil, Paraguay and Uruguay.

“With this agreement, Mexico joins Canada, Japan and Singapore in the growing list of partners willing to work with the EU in defending open, fair and rules-based trade,” said European Commission President Jean-Claude Juncker.

For Mexico, a deal with the EU is part of a strategy to reduce its reliance on the United States, the destination of 80 percent of its exports. That has become more urgent, given Trump’s push to rewrite the North American Free Trade Agreement.

The EU and Mexico wanted to update a trade deal agreed 21 years ago that largely covers industrial goods. The new deal adds farm products, more services, investment and government procurement, and include provisions on labour and environmental standards and fighting corruption.

The European Commission said that, under the deal struck on Saturday, practically all trade in goods with Mexico will be duty-free, including for farm products such as Mexican chicken and asparagus and European dairy produce.

The deal will for example cut Mexican tariffs of up to 20 percent on cheeses such as gorgonzola and increase EU pork exports, the Commission said.

It will also allow Mexican companies to bid for government contracts in

But some fear this minor ailment will develop into something more serious if any of a number of looming risks, ranging from a trade war between the United States and China to a widening of the Syrian conflict, comes to pass. ECB President Mario Draghi is expected to underscore these concerns when he speaks on Thursday after a policy meeting which is forecast to leave unchanged the ECB’s plans for a gradual exit from its aggressive monetary stimulus.

“The soft patch should only strengthen the case for gradualism which ECB officials have been building since the start of the year,” said Frederik Ducrozet, an economist at Pictet Wealth Management.

The ECB is expected to wind down its 2.55 trillion euro bond-buying programme by the end of the year but some economists have been pushing out their expectations for a rate hike to the second half of 2019 after the recent soft data.

The odds on a rate hike by the Bank of England in May have also lengthened after a sharper-than-expected slowdown in inflation in the first three months of 2018.

Ironically, one of the few prices that Draghi and his peers at major central banks might like to stay low — that of oil — has risen to a 3-1/2 year high this week as producer nations continue to drain inventories. This makes fuel prices more expensive for importing countries, eating into consumers’ and companies’ spending power.

US President Donald Trump was quick to react to the surge in the price of crude, saying on Friday the oil output reductions would not be tolerated.

It was the latest in a series of threats and protectionist moves by the US administration — primarily aimed at China — that have kept entrepreneurs, investors and consumers on edge for the past year.

Trump’s administration has imposed tariffs on imports of steel and aluminium and most recently banned US companies from selling parts to Chinese telecom equipment maker ZTE for seven years.

China announced hefty anti-dumping tariffs on imports of US sorghum and measures on synthetic rubber imports from the United States, European Union and Singapore.

“When investors do not know under what terms they will be trading, when they don’t know how to organise their supply chain, they are reluctant to invest,” Christine Lagarde, the head of the International Monetary Fund, said on Thursday.

Consumer spending is also showing early signs of faltering, with Taiwan Semiconductor Manufacturing citing softer demand for smartphones when cutting its revenue forecasts.

Investors will be looking for further evidence that the economic cycle is turning down when Facebook, Amazon and Google’s Alphabet report their earnings in the week.

This file photo taken on April 10, 2018 shows Gold bars at the Exhibition ‘Gold, Treasures at the Deutsche Bundesbank’ at the German Money Museum of the Deutsche Bundesbank in Frankfurt am Main, Germany. All that glitters is most definitely gold in a new exhibition at Germany’s central bank that lifts the veil on the nation’s massive gold

reserves, partly to reassure sceptics that the precious ingots are really there. (AFP)

Europe and EU companies for those in Mexico, including at state level.

Mexican Economy Minister Ildefonso Guajardo said both sides had achieved a major update of their original accord.

“It needed to be more ambitious in the agricultural sector, it needed to be more ambitious in services, it needed to be more ambitious in many of the elements that in the end we managed to agree on after two years of work,” he said.

Guajardo said the deal would grant his country better access for products including orange juice, tuna, asparagus, honey, egg white albumin, as well as “equitable access” for meat products.

It is also set to recognise “geographical indications” for certain food and drink, a key EU demand.

Such indications protect agricultural produce — for example, dictating that the term “champagne” can only be used for sparkling wine from northern France.