THE MEXICO — EUROPEAN UNION ACCORD: WHAT WAS PRESENTED AS A NEW KIND OF AGREEMENT TURNS OUT TO BE A REPEAT OF NAFTA

Andrés Peñaloza Méndez y Jorge A. Calderón Salazar

Recently, the European Union asked for a postponement until Oct. 11 of the beginning of the eighth round of trade negotiations between Mexico and the European Union that had been set to begin Sept. 27. The European objective was to continue internal consultations with various productive sectors so as to fix positions with regards to the negotiations. In this regard, it seems questionable that the Secretariat of Trade and Industrial (Secofi) maintains its position of not informing the Senate of the Republic in a sufficient and timely manner of the negotiated texts and, in practice, has refused to promote a genuine public consultation with national productive sectors.

To date, the negotiations have been characterised by being exclusive and responding principally to the interests of large corporations. We are concerned by the government’s attempt to conclude the negotiations without building necessary national consensus and its pressure on the Senate to approve the agreement within this year. Today we shall strive for sensitivity and patriotism and to avoid a rushed and thoughtless approval of a Free Trade Agreement with the EU (FTA-EU).

The negotiation with the EU awakened great expectations to the extent that it was presented as a step towards obtaining trade diversification and making trade a means of national development and not than just an end in itself.

This perception is based on the fact that the EU has constituted itself as the world’s largest trade bloc and has met, not without difficulties and uncompleted tasks, the interests of both the large economies and the concerns of smaller and poorer countries. It locates the legitimacy of its process of economic integration in the achievement of social well-being and in the constraint and even reduction of asymmetries among the 15 European nations.

In the same way, we are attentive to the potential of efforts to renew the relationship with the EU so that it can become an external factor of support for the principles of Mexican foreign policy and contribute to widen the margin for autonomy and negotiating capacity with other powers, especially the United States. For these reasons we have followed the course of negotiations in great detail.

This day-to-day following of the negotiations with the EU has permitted us an appreciation of the federal government of Mexico, along with the élite of political and economic power in Europe, have worked to restrict our focus only to the fields of trade and investment. This is the corporate agenda of those with large quantities of capital, the agenda which maintains the democracy clause and the chapters on co-operation and political dialogue as phrases that are empty of juridical mechanisms, representing instruments that are related to the neoliberal effort of economic opening and deregulation.

We reject the closed and exclusive forms in which these negotiations have been conducted. Given the preliminary information that we have obtained from various sources, we question the terms agreed upon with the EU with regards to tariffs, investment and other aspects, especially given that drafts include the substance and most retrograde clauses from NAFTA, from the Multilateral Agreement on Investments, the Code of Investment and Multinational Businesses of the OECD, and the Accords on Reciprocal Protection of Investment. As a consequence, we speak for the defence of the national interest and legal order of Mexico.

The agreement to subject the regulation of investment and measures that support the balance of payments to the supervision of the International Monetary Fund (IMF) is also questionable, as we stated this past Aug. 24 and was confirmed eight days by Luis de la Calle, sub-secretary of International Trade Negotiations of Secofi.

With the chapter on capital flows and the payments that Mexico negotiates with the EU, we foresee the obligation that our country will have to submit to the consideration of the IMF a series of macroeconomic adjustment policies, in those cases when the country must resort to measures that establish exchange rate controls and restrict capital flows. Aside from the damage to our sovereignty, it is clear that this measure does not attempt to establish cooperation as much as it attempts to forecast a way to face a balance of payments crisis and to prevent the crisis from affecting the Europe side.

The FTA-EU attempts to authorise full freedom for the flows of speculative investment and foreign investments (impeding the establishment of norms that would oblige commitment to national development), and accepts the European demand to authorise full guarantees and rights. Many large European investors have carried out their pretensions of taking over strategic national areas related to activities in the petroleum, electricity, telecommunications and financial sectors, among others. In the process, they wrongfully violate the sovereignty of Mexico; in a direct way they pressure our country to accelerate privatisations. And all of this has occurred as Mexican negotiators have yielded.

The federal government has committed itself not to establish regulations, controls, obligations and codes of conduct on foreign capital. What is being established this way, in effect, is a Code of Liberalisation of Capital Flows that means cancelling national capacity to control speculative capital flows such as the ones that have done so much damage to Mexico and other countries.

The FTA-EU would authorise faculties so that the foreign investor can challenge and sue the Mexican government as an investment-receiving state in international tribunals. As such, the agreement would annul substantial faculties of the Supreme Court of Justice. This measure cancels the juridical order of the country, and worse, it devolves power to the benefit of foreign investors.

With regards to the issue of access to market, enormous asymmetries are not considered. With the EU, we have accumulated an enormous trade deficit that in the last nine years — that is, 1990-1998 — represents U.S.$41.2 million, or 77.61 per cent of the total accumulated deficit. This should be enough to maintain a firm position so as to achieve preferential access. In the agreement between the EU and Israel, there is an explicit disposition to counteract the trade deficit through preferential access for Israeli goods and services. Moreover, it can be considered that Mexico has undertaken a unilateral dismantling of tariffs. For this reason it is fair to call for reciprocity.

As such, it is not enough to achieve an easing of tariffs faster than our trade counterparts. In order to have an effective recognition of asymmetries, Mexican tariff levels need to be taken into consideration because they are much higher than those that prevail in the EU. At present, the average tariff in Mexico for European products is 12.6 per cent while the EU generally maintains an average trade tariff of 2.3 per cent. Mexican negotiators must demand that the starting tariff basis be the lowest: that is, the one established for those goods that are subject to the Generalised Preferences System. Besides seeking the consolidation of the universe of products that are now subject to that system, these should not be part of an immediate offer to remove tariff barriers.

We demand that Mexican authorities make public their offer of tariff reduction. We call on them as well to convoke an open consultation so that our national productive sectors can offer their opinions freely on the schedule for tariff reduction, as well as on other themes in the chapter on access to markets, and to be able to do so without coercion. The authorities are obliged to commit themselves to negotiate according to the terms that are determined by each sector’s consensus. That is what is stipulated in the Interim Accord: a bilateral trade opening must be progressive, preferential and reciprocal.

We reject that our country should be converted into the stage for trade disputes between transnational corporations, such as those that have occurred in the automotive sector between General Motors, Ford and Daimler-Chrysler, AG, against Volkswagen. We are opposed to the pressures exercised by these transnationals in the negotiations with the EU, where they seek to conserve and extend the privileges they obtained in NAFTA.
 

We wish to insist, once again and on the eve of the eighth round of negotiations:

That the negotiations be rooted in a genuine national consultation so as to avoid a rushed and thoughtless approval of agreements that are damaging to national sovereignty. Complete texts that are being negotiated must be shared with the Senate and published before they are signed so that public consultations can take place on a solid basis.

Agree that the FTA-EU include impact studies in various areas: regional, industrial, environmental, labour and financial-economic. It must incorporate a Social Agenda, a Code of Conduct, and regulation of foreign investment so that the agreement is subordinated to the national juridical order and the interests of the people of Mexico. It must include a plan that recognises asymmetries and establishes legal reserves that are necessary to protect national sovereignty and independence. We demand that the right of Mexico to impose performance requirements not be cancelled. This is important because performance requirements are necessary to orient foreign investment to the needs of the country and permit guarantees of positive results in terms of employment, environmental protection, regional development, labour training, technology transfers and the healthy management of finances. And what is fundamental: control over speculative capital.

The Interim Accord must be seen as part of a broader process that is inclusive and democratic, in the framework of the Global Agreement (the "Agreement on Economic Association, Political Harmonisation and Comercial Cooperation between the EU and Mexico"). The priority here should be the interests of the people ahead of that of large, private capital. The agreement must not be taken in a wrongful, narrow way, as was done with NAFTA.

Congruent with the so-called democracy clause contained within the Global Agreement as well as the Interim Agreement, which states:

Respect for democratic principles and fundamental human rights, such as those articulated in the Universal Declaration of Human Rights, inspires the internal and international policies of both Parts and constitutes an essential element of the Present Agreement, We urge both Parts to establish the necessary links for effective observance; this is so that the clause be given form, instruments and normativity, so that full inclusion can be guaranteed of human rights, cooperation for development and political dialogue, and cooperation in labour and environmental issues, and the themes of promoting peace and security in the world.
 

Laboris ˙