Sustainability Impact Assessment in Support of the Negotiations for the Modernization of the Trade Pillar of the Global Agreement with Mexico

Final CSD meeting, Brussels, 4 July 2019

Introduction

Objectives of the SIA:

To develop the analysis of expected economic, social, humanrights and environmental impacts of the modernization of theEU-Mexico Global Agreement. This has been done bycomplementing the existing EU-Mexico GA impact assessment,incorporating:

• Quantitative and qualitative analysis

• Stakeholder consultation contributions

Overview of SIA Tasks

Task 4: Policy Recommendations

• Recommendations to mitigate negative effects of the modernization of the EU-Mexico GA

• Economic elements

• Social elements

• Environmental Elements

• Human Rights

• Sectoral Elements

• Draw on Stakeholder Recommendations

Task 3: Stakeholder Consultation Process

• Active engagement of relevant stakeholders in negotiations of the modernization of the EU-Mexico GA

• Electronic Communications

• Online Public Consultation

• Roundtables

• Civil Society Dialogue

• Partner Country Workshop

Task 2: Detailed Analysis of Specific Sectors

• Sectoral SIA for the modernization of the trade pillar of the EU-Mexico GA

• Preliminary Sector Selection

• General Approach

• Impact on SMEs

• Impact on LDCs

• Impact on Consumers

Task 1: Overall Analysis of Sustainability Impacts

• Overall SIA arising from the negotiations of the modernization of EU-Mexico GA

• Economic Analysis

• Social Analysis

• Environmental Analysis

• Human Rights• Cross cutting

issues• LDCs

• SMEs

• Consumers

• Impact on outermost regions

Results in a Nutshell

Economic Analysis

Social Analysis

Human Rights Analysis

Environmental Analysis

Sectoral Analysis• SMEs

• Manfacturing

• Agriculture

• Services

Stakeholder Consultation Process

Policy Recommendations

Economic Analysis: Overview of Estimated Effects

GDP

Both Mexico and the EU will benefit from the modernisation exercise. Mexico gains are

significant, whereas the benefits for the EU are comparatively smaller in terms of GDP growth.

Investment

By locking in policy

changes with impact on

legal certainty, investor

trust, and greater IPR

protection, the

Modernised GA is

likely to have positive

consequences for

investment

Total bilateral trade

in goods and services

between the EU and Mexico

increases by 17.0% in the

conservative scenario and by

75.1% in the ambitious

scenario. For EU imports

from Mexico, total trade

over all sectors increases

by 9.3% in the conservative

scenario, and by 32.5% in the

ambitious scenario.

Outermost Regions

They are almost unaffected by the

Modernised GA.

Trade diversion

Some minor diversion is expected

with regards to NAFTA partners and

Mercosur, but in absolute effects,

results are so small that they imply no

negative effect on growth.

Social Analysis - Results

Employment

The EU is expected to

create about 20,000

unskilled labour jobs and

10,000 skilled-labour

jobs.

Mexico is expected to

reap greater employment

benefits, adding 75,000

unskilled jobs and

15,000 skilled jobs.

Informalemployment

Unlikely to be significant.

Wages, inequality and poverty

The Modernised GA will have limited effects on wages, and therefore, on inequality and poverty. The analysis shows that domestic reforms play a much more significant role in poverty and inequality reduction than trade. The extent to which trade liberalisation might produce winners and losers will depend on the implementation of social policies aimed at mitigating labour adjustment costs and addressing regional disparities. While changes in inequality are negligible, Mexico sees among the most visible change – an increase in wage inequality. The EU may witness a slight decline in inequality.

Corruption

The report concludes that the

language to be included in the

Modernised GA will

strengthen the legal

framework in the Parties to

combat corruption and

money-laundering.

Domestic reforms continue to

be instrumental for Mexico.

Human Rights Analysis - Results

A Modernised GA with Mexico is

unlikely to have direct effects on the

already high ability to protect,

respect, and remedy human rights

in the EU. This is different in

Mexico, as the results of the

analysis led the team to conclude

that the Modernised GA could

have positive effects on the

Mexican government’s

willingness to respect specific

human rights and citizens’ ability

to demand their rights under

domestic and international law.

Nevertheless, the EU could help

further with assistance for capacity

building.

2005 2010 2011 2012 2013 2014 2015

Right to Health Index 88,60 88,07 88,21 88,35 88,55 88,74 88,79

Right to Work Index 82,16 83,41 83,41 95,20 85,22 84,28 84,28

Right to Education Index 84,03 79,85 79,92 86,94 88,56 89,02 89,02

0,00

25,00

50,00

75,00

100,00

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México’s Respect for Social and Economic Rights, 2005 – 2015

Environmental Analysis - Results

GHG emissions stemming from

agriculture

According to the IA (2015) most agricultural sectors

are expected to experience a contraction in both

Mexico and the EU.

International transport

Small effects.

Expected increase in land

transport in Mexico

is likely to have limited effects on air pollution

in Mexico given the commitment to introduce

higher emission standards for new heavy-duty

vehicles - equivalent to those applied in the EU.

Power generation

Dominates emissions in the EU (37% of totalemissions) and Mexico (39%). However, theanalysis of the environmental impact of themodernisation of the GA indicates onlylimited concerns about the potentialimpact on GHG emissions since theModernised GA is likely to favour a relocationtowards less energy and carbon intensivesectors.

Trade in environmental goodsand services

Increase with beneficial effects for theenvironment.

Sectoral Analysis: Agriculture; Manufacturing; Services

Sector Justification

Fruits & Vegetables (including

bananas)

Fruits and vegetables represent a key sector in agricultural trade between the EU and Mexico, with a specific emphasis on bananas for its high

export value as well as its significance in OMRs. In agreement with DG Trade, this study will not conduct an in depth analysis of sugar recognizing

that negotiations will not be considering an ambitious offer of trade in sugar. Additionally, Mexico is not a key international player in trade in

sugar.

Other Meats The EU holds a defensive position in respect to beef, where Mexican interest in the sector is not high enough for it to become a concern in

negotiations.

Other beverages Beverages including coffee, orange juice, and spirits represent high value export goods for Mexico, where it is specifically interested in the

protection of appellations of origin regarding spirits. Wine and beer will not be included in the analysis as trade in such goods is already

liberalized.

Honey Trade in honey produces a value over €60 million annually, representing 6% of all of Mexico’s agricultural exports.

Energy Commodities Energy commodities represent an important sector for trade flows between Mexico and the EU countries.

Chemicals Impacts on trade in chemicals, including pharmaceuticals, will be assessed in depth as stakeholders have voiced concerns over the sector’s

regulatory framework and issues surrounding intellectual property

Machinery (Electrical + Other) When taken combined, the motor vehicle and other machinery industries account for almost 30% of Mexican manufactured exports to the EU.

Motor Vehicles In upcoming years, Mexico is expected to become an even bigger competitor within the automotive industry on a global scale.

Metal Parts Metal parts represent an important sector in trade flows between the EU and Mexico, but in particular, an important sector in the employment of

unskilled workers.

Business Services The study will conduct an in depth assessment of the agreement’s impacts on business services recognizing that trade in services between the EU

and Mexico is dominated by travel and transport services as well as telecommunications.

Financial Services Although trade in the services sectors is much smaller, bilateral trade flows in were shown to have increased significantly since the original FTA.

Selected Sectors

Sectoral Impacts

SMEs

The modernisation of the EU-Mexico GA would

primarily increase the comparative advantage of

EU SMEs operating in sectors that already show

high export-intensity levels, i.e. SMEs operating

in manufacturing and business services sectors.

The elimination of NTBs and barriers to

investment would positively contribute to EU

SMEs’ added-value and job creation.

Agricultural sector

The agreement is not expected to have significant

impacts. The effects on consumers are expected

to be minimal as a result of a low share of

agricultural trade with Mexico and the small share

that food represents in their total consumption.

Business & professional services

Spill-over effects, benefitting corporations in a

wider range of industries beyond those of the

service sector. Overall, EU and Mexican SMEs,

without in-house services, would also benefit from

a greater variety of available business services.

Manufacturing Sector

By improving the regulatory environment,

the Modernised GA will facilitate bilateral

trade in the manufacturing sector.

Stakeholder Consultation Process

Electronic Communications

Raising awareness and facilitating stakeholder engagement through

1. Dedicated Website:

2. Email Address

3. Dedicated Twitter Account

4. Dedicated Facebook Page

Online Public Consultation

Commencing in March 2018, the 12 week consultation aimed to

1. Generate Ideas Through Stakeholder and Target Country Engagement

2. Identify Groups Impacted by GA

3. Validate Findings through External Input

Roundtables

1. Four Roundtables in Brussels, Belgium for thematic and sectoral analysis discussions

2. Interviews

3. Face-to-face meetings

Civil Society Dialogue

Stakeholders invited to contribute during implementation phase through

1. Month 3 CSD Presentation for Preparation of Inception Report

2. Month 6 CSD Presentation for Preparation of Interim Report

3. Month 22 CSD Presentation for Preparation of Final Report

Partner Country Workshop

1. One Day Workshop in Mexico City

2. 50 Participants from Mexico

3. Joint Opening Plenary

4. Parallel Events on Specific Sectoral and Specific Thematic Issues

Economic and Sectoral Policy Recommendations

Economic Analysis

• 1: Dealing with Non-Tariff Measures (NTMs) is key

• 2: Increase participation by SMEs

Manufacturing sector

• 1: Increase cooperation to anticipate changes in investment and production structures

• 2: Increase cooperation to promote competitive infrastructure in the automotive industry

• 3: Provision of sufficient and timely information for civil society to monitor evolution of the GA

Agricultural Sector

• 1: Establish and effectively operate consultation mechanisms between the EU and Mexico

Service Sector

• 1: Achieve greater access to Mexico’s public procurement markets

Thematic Policy Recommendations

Social Analysis

• 1: Continue to pursue Conditional Cash Transfers (CCT) policies as well as provide targeted labour

adjustment assistance

• 2: Invest strongly in education and training programs in Mexico

• 3: Implement systematic monitoring processes allowing for greater input from civil society actors

Human Rights

• 1: Human Rights Recommendation: EU to provide capacity building assistance, training for data

protection officials, and support outreach to the public

Environmental Analysis

• 1: Promote cooperation in the development and transfer of green tech by increasing trade in

environmental goods and services

• 2: Increase trade liberalisation to improve energy management and boost the renewable energy

sector

• 3: Define more specific objectives for bilateral cooperation on trade-environmental linkages

considering relevant provisions in the TSD Chapter

• 4: Strengthen civil society participation and input under monitoring mechanisms

Thank you for your attention!

Website: www.siaeumexico.com

Twitter: @SIA_EUMexico

Facebook: SIA EU-Mexico

Email: lsee.sia-mexico2018@lse.ac.uk

LSE Consulting Contact: Daniela Baeza Breinbauer

d.f.baeza-breinbauer@lse.ac.uk

Appendix – Further detailed slides

Economic Analysis - approach

• Complementing and developing the results from the CGE model (GTAPv9) run by the Commission for the first impact assessment (IA) of the EU-Mexico Global Agreement conducted in 2015.

• The simulation which is based on a neoclassical closure and assumes perfect market clearing, includes the following indicators:

• Changes in consumer welfare

• GDP

• Bilateral trade flows

• Sectoral output change

• Consumer prices

• Wages (for unskilled and skilled labour)

• Reallocation of jobs

• Changes in CO2 emissions

Economic Analysis: Overview of Estimated GDP Effects

The results of the CGE model employed by the European Commission when conducting its impact assessmentbefore the beginning of these negotiations suggest that in a long-term (2028) comparison of GDP under theModernised GA and the original GA, both Mexico and the EU will benefit from the modernisation exercise. Whilethe modernisation is strategically advantageous for both negotiating parties, Mexico gains are significant, whereasthe benefits for the EU are comparatively smaller in terms of GDP yearly increases.

By locking in policy changes withimpact on legal certainty, investortrust, and greater IPR protection, theModernised GA is likely to havepositive consequences forinvestment - increasing the incentiveof research and knowledge intensiveEU companies to invest in Mexico.

Economic Analysis: Overview of Estimated Macroeconomic effects in 2028 setting for Comprehensive Modernisation Scenarios

According to the estimatesobtained by the CGEsimulation, total bilateral tradein goods and services betweenthe EU and Mexico increasesby 17.0% in the conservativescenario and by 75.1% in theambitious scenario. For EUimports from Mexico, totaltrade over all sectors increasesby 9.3% in the conservativescenario, and by 32.5% in theambitious scenario.

Economic Analysis: Estimated effects on Total trade; EU28, Mexico and third countries as % change, Ambitious Scenario

While agricultural production in theOutermost Regions and thirdcountries (sugar cane, rum, bananas,etc.) is in direct competition with theagricultural sector in Mexico(especially because they havecomparable climates), they arealmost unaffected by theModernised GA, with only very littletrade diversion seen in the CGEmodel. Some minor diversion isexpected with regards to NAFTApartners and Mercosur, but inabsolute effects, results are so smallthat they imply no negative effect ongrowth.

Policy Recommendations – actionable sub-recommendations for Economic Analysis

Economic Analysis Recommendation 1: Dealing with Non-Tariff Measures (NTMs) is key

• Work together to support the further deelopment of the Mexican National Quality Infrastructure

• Increase EU-Mexican regulatory cooperation regarding Technical Barriers to Trade (TBT) and

Sanitary and Phytosanitary Measures (SPS).

• Ensure transparency and strict limitations to state subsidies to enterprises

• Invest in measures to simplify customs procedures

Economic Analysis Recommendation 2: Increase participation by SMEs

• Further develop the necessary infrastructure and lower existing barriers in order to unlock the trade

potential of SMEs

• Provide European SMEs with easy access to export promotion tools and investment guarantees in

Mexico

• Improve and expand existing information tools in the EU and Mexico

Social Analysis

Aims • Assessing the impact of the modernization of the EU-Mexico GA;

• Analysing different institutional mechanisms to foster cooperation on social protection and labour standards and encourage the diffusion of best practices

MethodologyQuantitative

• CGE model results to assess employment and wage effects in different sectors (including results from sectoral analysis);

• Gini coefficient developed from CGE model results to analyse change in inequality;

Qualitative

• Desk research and academic literature, esp. relevant studies on EU and Mexico relations, as well as analyses of Mexico’s experience under NAFTA and other trade agreements;

• Stakeholder consultation in Europe and Mexico.

Social Analysis - Indicators

Social Analysis Results - Employment

As for employment, theEU is expected tocreate about 20,000unskilled labour jobsand 10,000 skilled-labour jobs, with mostemployment gainsconcentrated in milk anddairy, petrochemicalsand chemicals, foodproducts, motor vehiclesand construction.Meanwhile, weanticipate potential joblosses in sectors likeother electricalmachines, othermachinery, and othermanufacturing.

Mexico is expected toreap greateremployment benefits,adding 75,000unskilled jobs and15,000 skilled jobsconcentrated in sectorssuch as motor vehicle,other services, and to alesser extent,agriculture, beverages,transport and almost allservices. Potentiallosses are expected tobe concentrated in dairy,chemicals, othermachinery, energy,electrical machine andmetals.

Informal Employment by Mexican States

Social Analysis Results - Wages

With respect to wage, inequality and poverty: ouranalysis predicts that the Modernised GA willhave limited effects on wages, and therefore,on inequality and poverty. The analysis showsthat domestic reforms play a much moresignificant role in poverty and inequalityreduction than trade. The extent to which tradeliberalisation might produce winners and loserswill depend on the implementation of socialpolicies aimed at mitigating labour adjustmentcosts and addressing regional disparities. Whilechanges in inequality are negligible, Mexico seesamong the most visible change – an increase inwage inequality. The EU may witness a slightdecline in inequality.

Estimated Gini coefficient before and after the modernized GA

Social Analysis: Effects on Informal Employment

Results from the CGE modelling predict marginal labour marketadjustments in the manufacturing sector. However, here informalemployment is comparatively lower than it is in agriculture or theservices industry, which means the aggregate impact on informalemployment is unlikely to be significant. The effects of tradeliberalisation on Mexican informal employment are hard topredict given the mixed evidence: while labour adjustment costsmight lead to an increase in informal employment in certain sectors,Mexican states in the north that are more open to trade andinvestment are likely to fare better than more isolated states in thesouth.

Here again trends driven by domestic reforms, andmore specifically, the current process of labourformalisation, are likely to prime over the morelimited effects of trade liberalisation under aModernised GA.

Social Analysis Results – Corruption

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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Trading across Borders - DTF Enforcing Contracts -DTF

Quality of Governance Related to Enforcing Contracts and Trading Across BordersThe report concludes that thelanguage to be included in theModernised GA will strengthen thelegal framework in the Parties tocombat corruption and money-laundering. While domestic reformscontinue to be instrumental forMexico to reduce inequality andpoverty, bilateral cooperation with theEU could also contribute, providedthat the Trade and SustainableDevelopment (TSD) mechanisms arestrengthened. This is particularlyrelevant to the implementation andenforcement of labour standards andthe protection of human rights.

Human Rights Analysis

Aim

• Assessing the impact of the modernization of the EU-Mexico GA;

• Analysing different institutional mechanisms to foster cooperation on social protection and labour standards and encourage the diffusion of best practices

Methodology

• Baseline: Description of Mexico’s domestic and international human and labour rights commitments and contemporary challenges to human rights protection

• Analysis: screening (broad selection of HR), scoping (data collection) and detailed assessment of potential impact of modernized GA (incl. text proposals)

• Policy recommendations

• Cross-linkages, esp. with social analysis

For each step, our analysis draws from the results of our stakeholder consultation in the EU and Mexico.

Human Rights Analysis - Indicators

Human Rights Analysis

Human Rights Analysis - Results

A Modernised GA with Mexico is unlikelyto have direct effects on the already highability to protect, respect, and remedyhuman rights in the EU. This is differentin Mexico, as the results of the analysisled the team to conclude that theModernised GA could have positiveeffects on the Mexican government’swillingness to respect specifichuman rights and citizens’ ability todemand their rights under domesticand international law. Nevertheless, theEU could help further with assistance forcapacity building.

2005 2010 2011 2012 2013 2014 2015

Right to Health Index 88,60 88,07 88,21 88,35 88,55 88,74 88,79

Right to Work Index 82,16 83,41 83,41 95,20 85,22 84,28 84,28

Right to Education Index 84,03 79,85 79,92 86,94 88,56 89,02 89,02

0,00

25,00

50,00

75,00

100,00

SE

RF

In

dex V

alu

e

México’s Respect for Social and Economic Rights, 2005 – 2015

Environmental Analysis

AimThe analysis focuses on GHG emissions and climate change; energy use; land use; resource use and efficiency; waste production; ecosystems and biodiversity; forestry and trade in environmental goods and services

MethodologyBaseline

• Benchmark of Mexico’s current environmental performance against that of the EU’s using indicators of environmental quality (i.e. Environmental Performance Index), and overview of current regulations and obligations.

Quantitative Analysis

• Based on the existing results of the CGE modelling, the study analyses the effects (scope, products, technology etc.) in terms of both welfare and GHG emissions

• Results are explained using a Log Mean Divisia Index (LMDI) to differentiate different sectoral effects

Qualitative Analysis

• Analysis of text proposals and experience under GA and NAFTA

• Results of the stakeholder consultation

Environmental Analysis: Indicators

Environmental Analysis: Results

Net Exports of CO2 Emissions

Co2 Emissions by sector in Mexico and the EU

There do not seem to be grounds for major concernsregarding GHG emissions stemming from agriculture sinceaccording to the IA (2015) most agricultural sectors are expectedto experience a contraction in both Mexico and the EU. This alsoputs into perspective any concerns in terms of intensification ofagriculture, deforestation, and the preservation of waterresources and aquatic ecosystems.

The expansion of international transport is expected to be smalland the expected increase in land transport in Mexico islikely to have limited effects on air pollution in Mexicogiven the commitment to introduce higher emission standards fornew heavy-duty vehicles - equivalent to those applied in the EU.

Environmental Analysis: Results

The power generation sector dominates emissionsin the EU (37% of total emissions) and Mexico(39%). However, the analysis of the environmentalimpact of the modernisation of the GA indicatesonly limited concerns about the potentialimpact on GHG emissions since the ModernisedGA is likely to favour a relocation towards lessenergy and carbon intensive sectors.

The Modernised GA may contribute toincreased trade in environmental goodsand services with beneficial effects forthe environment. Because the EU andMexico have so far specialised in thedevelopment of green technology in distinctpollution and climate change-related areas,it is hoped both Parties will benefit fromincreased access to each other’s market andtechnology.

Sectoral Analysis: Agriculture; Manufacturing; Services

Sector Justification

Fruits & Vegetables (including

bananas)

Fruits and vegetables represent a key sector in agricultural trade between the EU and Mexico, with a specific emphasis on bananas for its high

export value as well as its significance in OMRs. In agreement with DG Trade, this study will not conduct an in depth analysis of sugar recognizing

that negotiations will not be considering an ambitious offer of trade in sugar. Additionally, Mexico is not a key international player in trade in

sugar.

Other Meats The EU holds a defensive position in respect to beef, where Mexican interest in the sector is not high enough for it to become a concern in

negotiations.

Other beverages Beverages including coffee, orange juice, and spirits represent high value export goods for Mexico, where it is specifically interested in the

protection of appellations of origin regarding spirits. Wine and beer will not be included in the analysis as trade in such goods is already

liberalized.

Honey Trade in honey produces a value over €60 million annually, representing 6% of all of Mexico’s agricultural exports.

Energy Commodities Energy commodities represent an important sector for trade flows between Mexico and the EU countries.

Chemicals Impacts on trade in chemicals, including pharmaceuticals, will be assessed in depth as stakeholders have voiced concerns over the sector’s

regulatory framework and issues surrounding intellectual property

Machinery (Electrical + Other) When taken combined, the motor vehicle and other machinery industries account for almost 30% of Mexican manufactured exports to the EU.

Motor Vehicles In upcoming years, Mexico is expected to become an even bigger competitor within the automotive industry on a global scale.

Metal Parts Metal parts represent an important sector in trade flows between the EU and Mexico, but in particular, an important sector in the employment of

unskilled workers.

Business Services The study will conduct an in depth assessment of the agreement’s impacts on business services recognizing that trade in services between the EU

and Mexico is dominated by travel and transport services as well as telecommunications.

Financial Services Although trade in the services sectors is much smaller, bilateral trade flows in were shown to have increased significantly since the original FTA.

Selected Sectors

Sectoral Impacts on SMEs

A publicly available registry of technical product regulations in forceincluding relevant conformity assessment procedures would also bebeneficial to SMEs, particularly smaller SMEs with limited and less-specialised administrative capacities.

The modernisation of the EU-Mexico GA would primarilyincrease the comparative advantage of EU SMEs operating insectors that already show high export-intensity levels, i.e.SMEs operating in manufacturing and business services sectors. Theelimination of NTBs and barriers to investment would positivelycontribute to EU SMEs’ added-value and job creation.

EU SME exporters in manufacturing, logistics, andcourier services would primarily benefit from

1) more transparent rules of origin;2) more aligned customs procedures; and3) lower customs clearance charges.

Sectoral Analysis: Agriculture, overview

0

1

2

3

4

5

6

7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

EU imports from Mexico EU exports to Mexico

Mexico exports to EU Mexico imports from EU

Share of EU and Mexico in agriculture trade (2000-2016) (in %)

0 5 10 15 20 25 30 35

OTHER AGRICULTURAL PRODUCTS

24 TOBACCO AND MANUFACTURED…

23 RESIDUES AND WASTE FROM THE…

22 BEVERAGES, SPIRITS AND VINEGAR

21 MISCELLANEOUS EDIBLE PREPARATIONS

20 PREPARATIONS OF VEGETABLES,…

19 PREPARATIONS OF CEREALS, FLOUR,…

18 COCOA AND COCOA PREPARATIONS

17 SUGARS AND SUGAR CONFECTIONERY

16 PREPARATIONS OF MEAT, OF FISH OR…

15 ANIMAL OR VEGETABLE FATS AND OILS…

14 VEGETABLE PLAITING MATERIALS;…

13 LAC; GUMS, RESINS AND OTHER…

12 OIL SEEDS AND OLEAGINOUS FRUITS;…

11 PRODUCTS OF THE MILLING INDUSTRY;…

10 CEREALS

09 COFFEE, TEA, MATÉ AND SPICES

08 EDIBLE FRUIT AND NUTS; PEEL OF…

07 EDIBLE VEGETABLES AND CERTAIN…

06 LIVE TREES AND OTHER PLANTS;…

05 PRODUCTS OF ANIMAL ORIGIN, NOT…

04 DAIRY PRODUCE; BIRDS' EGGS;…

02 MEAT AND EDIBLE MEAT OFFAL

01 LIVE ANIMALS

Export Import

Structure of EU-Mexico agricultural trade (average 2011-16)

0

5

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15

2010201120122013201420152016

% of Employment in the Agricultural Sector

EU Mexico

Beverages constitute the mostimportant product tradedbetween the EU and Mexico,but NTBs unaddressed by theoriginal GA includedcumbersome procedures, highcompliance costs, arbitrarymeasures, and labelling.

Sectoral Analysis: Agriculture, EU-Mexico Bilateral Trade

The modernised agreement may imply an overall reduction of the costs of production and trade in agricultural products forall EU exporters. It is likely that this will particularly benefit SMEs: whilst large exporters may find it costly but possible tomeet existing NTBs, for SMEs these often represent very high prohibitive barriers. The modernisation of the GA may alsoreinforce the competitive position of certain products protected by GIs and denomination of origin.

Sectoral Analysis: Agriculture, output

Performance of key agricultural products between 2000/02 and 2014/16 in Mexico (% growth change)

With respect to the agricultural sector the agreement is notexpected to have significant impacts. The effects on consumersare expected to be minimal as a result of a low share ofagricultural trade with Mexico and the small share that foodrepresents in their total consumption.

Distribution of employment and agricultural output in the EU in 2013 by farm size

Sectoral Analysis: Manufacturing, overview

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10

20

30

OtherMachinery

TransportEquipement

Chemicals

Top 3 Exports EU Mexico

% of Trade

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20

30

Fuels &Mining

Products

TransportEquipement

OtherMachinery

Top 3 Exports Mexico EU

% of Trade

0

10

20

30

2010 2011 2012 2013 2014 2015 2016

% of Employment in the Industrial Sector

EU Mexico

While crude oil constitutes the single largest exports from Mexico to theEU, at 32% of merchandise exports, a few other key exports includeother machine equipment (17%), electronics (14%), motor vehicles(15%), and chemicals, rubber and plastics (8%). EU exports to Mexicolargely constitute other machine equipment at 31% of EU-Mexicoexports along with chemicals, rubber, and plastics, motor vehicles,petroleum products, metal products, and other transport equipment.

Sectoral Analysis: Manufacturing, Estimated Ad Valorem Equivalents of NTMs in Baseline and Modernisationscenarios

Based on the challenges posed by NTMs, the GA modernisation focuses on fostering regulatory coherence between theEU and Mexico, improving domestic efforts to institute efficient, transparent, and inclusive regulatory measures. Byimproving the regulatory environment, the Modernised GA will facilitate bilateral trade in the manufacturingsector.

Sectoral Analysis: Services, overview

50

60

70

80

2010 2011 2012 2013 2014 2015

% of Employment in the Services Sector

EU Mexico

0

5

10

2013 2014 2015

EU Mexico Trade in Services (€ bn)

EU imports EU exports Balance

EU Imports from Mexico

EU Exports to Mexico

Travel services Transport services

Transport services Telecommunications, computer & info systems

Top EU – Mexico Traded Services

Trade in services between the EU and Mexico is much smaller in volume.EU imports in services from Mexico consist mainly of travel services andtransport services, while EU exports in services to Mexico are dominatedby transport services alongside telecommunications, computer &information services.

Source: Worldbank Data

Sectoral Analysis: Services, Estimated Ad Valorem Equivalents of NTMs in Baseline and Modernisation scenarios

The liberalisation of business and professional services in the Modernised GA would present spill-over effects,benefitting corporations in a wider range of industries beyond those of the service sector. Overall, EU andMexican SMEs, which often lack in-house services, would also benefit from a greater variety of availablebusiness services. In addition, many EU SMEs that are strong exporters in transportation and storage services, wholesaleand retail trade, as well as professional and scientific services are most likely to benefit from liberalisation.

Stakeholder Consultation Process

Electronic Communications

Raising awareness and facilitating stakeholder engagement through

1. Dedicated Website:

2. Email Address

3. Dedicated Twitter Account

4. Dedicated Facebook Page

Online Public Consultation

Commencing in March 2018, the 12 week consultation aimed to

1. Generate Ideas Through Stakeholder and Target Country Engagement

2. Identify Groups Impacted by GA

3. Validate Findings through External Input

Roundtables

1. Four Roundtables in Brussels, Belgium for thematic and sectoral analysis discussions

2. Interviews

3. Face-to-face meetings

Civil Society Dialogue

Stakeholders invited to contribute during implementation phase through

1. Month 3 CSD Presentation for Preparation of Inception Report

2. Month 6 CSD Presentation for Preparation of Interim Report

3. Month 22 CSD Presentation for Preparation of Final Report

Partner Country Workshop

1. One Day Workshop in Mexico City

2. 50 Participants from Mexico

3. Joint Opening Plenary

4. Parallel Events on Specific Sectoral and Specific Thematic Issues