IntroducTIOn

1.                   The objectives of Mexican trade policy over the last four years have been to open up the economy yet further, guarantee access to new markets and create a favourable environment for investment.  Bilateral free-trade agreements and Mexico's participation in a range of regional and multilateral trade fora, in particular the World Trade Organization (WTO), have played a major role in achieving these objectives.

2.                   This presentation is divided into six sections.  The first deals with Mexico's economic environment;  the second explains how trade liberalization has become one of the pivots of the country's development;  the third is concerned with the importance of the multilateral trading system for Mexico;  the fourth describes the most important elements of its trade policy;  the fifth covers the trade agreements to which Mexico is party, and the sixth presents the conclusions.

I.                   econOmic ENVIRONMENT

3.                   Economic activity recovered extremely rapidly from the 1995 crisis.  The gross domestic product grew 5.1 per cent in 1996 and 6.8 per cent in 1997 and maintained a strong rate over the following years:  4.9 per cent in 1998, 3.8 per cent in 1999 and 6.9 per cent in 2000.

4.                   The Mexican economy performed significantly worse in 2001, a trend shared by virtually all countries the world over, as a result of the downturn in the world economy and that of the United States in particular, international oil price volatility and the uncertainty sparked off by the September terrorist attacks.  No economic growth was recorded over the last year.  Slight growth is expected in the first half of 2002, with a major rebound towards the end of the year, bringing annual GDP growth to 1.7 per cent.

5.                   Foreign trade plays an increasingly important role in Mexico's economic development;  it accounted for 60.7 per cent of GDP in 1997, climbing to 72.3 per cent in 2000.  Exports as a proportion of GDP increased from 30.3 to 34.9 per cent in this period, with an average annual growth rate of 14.6 per cent, and totalled US$158.5 billion in 2001. 

6.                   Given the adverse conditions which affected the international economy in 2001, and in line with the lack of growth in world trade, total Mexican exports for the year shrank by 4.8 per cent, whilst non-oil exports declined 2.9 per cent. 

7.                   Macroeconomic policy has managed to bring about a sharp fall in inflation over the last few years, from 15.7 per cent in 1997 to 8.9 per cent in 2000 and 4.4 per cent in 2001.  Projected inflation for 2002 is 4.5 per cent.

8.                   The export sector and foreign direct investment (FDI) have been the main sources of new jobs.  The best jobs are those related to export activities:  sectors which export 60 per cent or more pay wages 39 per cent higher than the rest of the economy and maquiladora (in-bond assembly) plants pay 3.5 times the Mexican minimum wage.

9.                   Mexico's sound financial and monetary position means that it is well placed to achieve economic recovery. The downturn in its economy did not trigger off a loss of purchasing power.  Likewise, the headway made with structural reform stems from the effective implementation of public policies, combined with strong new business momentum, and will enable the country to achieve its goal of competitiveness whilst providing major benefits for its population.

II.                AN OPEN TRADE POLICY AS ONE OF THE CENTRAL ELEMENTS OF MEXICO'S DEVELOPMENT STRATEGY

10.               Mexico embarked upon the process of economic liberalization more than 15 years ago, with its accession to the General Agreement on Tariffs and Trade (GATT) in 1986, and has been increasing its presence on international markets ever since.

11.               The trade and investment liberalization strategy has had a significant impact on the country's economic growth, which has been strengthened by permanent and reliable access to foreign markets and improvements to the regulatory framework of the national economy.

12.               International trade negotiations are a key element of this strategy, since they provide greater security of access to the most important world markets for Mexican products, generate long-term investment, promote national productivity and the use of new technologies, and boost export volume by further diversifying the target markets for Mexican products.

13.               The real significance of Mexico's trade liberalization lies in the fact that it is a catalyst for national development, given that it helps to bring new regions and firms into the fold of international trade.  It will thus continue to encourage the creation of more and better jobs and balanced regional development.

14.               Mexico is intent on involving more firms in export activities, since experience shows that this is a successful way to boost sales, create better-paid employment and modernize domestic industry.  It also opens up possibilities of accessing new markets and quality inputs and creating strategic alliances which promote access to new technologies for the production industry.  The 21,477 exporters in Mexico in 1993 had increased by 70 per cent to 36,422 by 2000.  However, if the goals of diversifying and boosting the country’s penetration in international markets are to be achieved, this figure must reach 70,000 by the end of this term of government.

15.               In the early 1980s, Mexican exports depended almost exclusively on petroleum. Hydrocarbons, the foreign sales of which represented the main source of government revenue, were Mexico's main export product and accounted for 70 per cent of the country's total exports in 1982.  The pattern of exports has, however, radically changed.  In 2001, 89 per cent of Mexican exports were manufactured goods.  Nevertheless, our exports must continue to encompass new products and sectors.

16.               Higher domestic value added per unit exported needs to be incorporated if the benefits of the penetration of Mexican products on international markets are to be maximized.  The supply of inputs to export firms is one way of promoting the international integration of domestic firms. 

III.             MExico AND THE multilateral TRADING SYSTEM

17.               Mexico considers the WTO the main mechanism for both trade liberalization and the establishment of a framework based on world trading rules. Mexico's trade liberalization and participation in the multilateral trading system have played a very important role in boosting its exports, spurring the economy and stimulating employment.

18.               Mexico's accession to the GATT was motivated by the desire to create an environment conducive to economic activity by taking advantage of, firstly, the opening up of world markets with the lowering of trade barriers;  secondly, the certainty which stems from foreign trade operations governed by the clear and transparent rules and disciplines of the multilateral trading system;  thirdly, the fact that the rules and disciplines established by the WTO prevent the adoption of unilateral trade measures; and finally, the possibility of having recourse to a trade dispute settlement mechanism.  The conclusion of the Uruguay Round and establishment of the WTO made the benefits of participating in the multilateral trading system even more obvious.

19.               In this context, with a view to furthering its economic opening, creating greater opportunities for developing countries and strengthening the multilateral trading system, Mexico supported further trade liberalization in the form of the launch of a new round of multilateral negotiations at the Fourth WTO Ministerial Conference in Doha, Qatar, in November 2001.  The agenda of this Round is sufficiently wide-ranging to cover the interests of all participants, in particular developing countries.  It is against this backdrop that Mexico will host the Fifth WTO Ministerial Conference in 2003.

IV.              TRADE POLICY

(a)                Tariffs

20.               The period 1997-2001 saw Mexico continuing to open up its economy both unilaterally and by way of regional agreements (see Section V).  These regional agreements have also helped to open markets to Mexican exports.

21.               Sectoral Promotion Programmes (PROSECs) have been implemented unilaterally as from 2001, with a view to making production inputs available for industrial production at globally competitive prices and stimulating productivity and technological change within enterprises. These programmes enable Mexican firms to import inputs for manufacturing products for both the export and the domestic market at minimum tariff rates.  The approximately 3,600 tariff headings are grouped into 22 sectors.[1]  These programmes have also helped Mexican firms to retain a competitive edge in the light of the changes experienced by the maquiladora (in-bond) industry regime as from 2001.

22.               The economic opening of recent years has resulted in the weighted average tariff[2], which includes the tariff-cutting commitments made under bilateral treaties, falling to 3.0 per cent in the year 2000.  Similarly, the tariff rate applied for imports from countries with which Mexico does not have a free trade agreement, weighted by imports from those countries, stood at 7.3 per cent in the same year.

23.               Furthermore, under the regional agreements entered into by Mexico, 94 per cent of its total exports will enter global markets at duty-free rates as from 2003, which will have a positive effect on export performance, investment and economic growth.

(b)                Customs procedures

24.               A far-reaching process of trade liberalization involving a range of trade agreements has been under way in Mexico over the last few years and led to the implementation of a series of reforms to facilitate foreign trade, which has been increasing steadily in terms of both volume and number of operations.

25.               A customs modernization programme, involving both investment in infrastructure and the automation of customs procedures, has been implemented and, in spite of an increase in the number and volume of transactions, has resulted in a considerable reduction in clearance times.

26.               Customs operations and administration processes in particular have been completely redefined.  A control procedure with intelligent parameters making use of new computer and technological equipment has been established to reinforce verification of compliance with customs provisions.

(c)                Standards

27.               Technical regulations and standards underwent major changes during the period under review.

28.               May 1997 saw a major reform of the Federal Law on Metrology and Standardization (LFMN), touching on issues such as the harmonization and updating of standards and conformity assessment. The most pertinent aspects of the reform were:  (a) the obligation to use international standards as the basis for developing national standards, (b) the obligation to review standards every five years, (c) the requirement that, to be able to register, national standardization bodies must accept the WTO Code of Good Practice, (d) the introduction in Mexican legislation of the internationally accepted term "conformity assessment", (e) public consultation on conformity assessment procedures, (f) the transfer of the function of accreditation to private bodies (put into practice in January 1999 with the creation of the Mexican Accreditation Entity) and (g) the legal establishment of mutual recognition agreements.

29.               In 1997, the General Directorate of Standards (DGN) of the Ministry of the Economy created a Web page giving information on the standardization and conformity assessment system in Mexico and access to the Mexican Standards Catalogue containing all of the mandatory standards (Official Mexican Standards or NOMs) and voluntary standards (Mexican Standards or NMXs) in force in the country.  This Catalogue, in addition to furnishing the full text of the standards in Spanish, lists the voluntary standards issued by the national standardization bodies.

30.               The Regulations for the Federal Law on Metrology and Standardization were published on 14 January 1999 and cover, inter alia, the contents of and process for developing both official and voluntary Mexican standards, harmonization with international standards, mutual recognition agreements, the standards catalogue, regulations governing official marks (quality marks) and international standardization bodies.

31.               In 2001, with a view to enhancing transparency, the General Directorate of Standards established a legal framework for the creation and operations of National Consultative Committees for Standardization (responsible for developing official Mexican standards) and National Technical Committees for Standardization (responsible for developing voluntary Mexican standards) and the involvement of Mexican committees in international organizations.

(d)                Investment

32.               The Foreign Investment Law (LIE) establishes that activities not expressly mentioned therein are fully deregulated and FDI may therefore be up to 100 per cent.  This Law has been amended on several occasions between 1997 and 2001 to reduce the number of restricted activities and thereby achieve further liberalization.

33.               As from 1 January 1999, foreign investors will be able to hold up to 100 per cent of the capital stock of Mexican enterprises involved in the manufacture and assembly of parts for the automobile industry and in the construction and installation of public works without having to obtain prior authorization from the Foreign Investment Commission. Likewise, as from 1999, foreign investors are allowed to own up to 100 per cent of the capital of holding companies that control financial groups, multi-banking institutions, securities firms and specialist stock-market firms.

34.               Reforms of the Stock Market Law and Investment Company Law in 2001 eliminated both the requirement for a minority foreign investment share in portfolio management companies and the 49 per cent limit on the share of foreign direct investment in the fixed capital of investment firms and companies operating investment firms.

35.               As from 1 January 2001, up to 51 per cent foreign ownership is allowed in the share capital of international land transport of passengers, tourists and cargo between points within Mexico and administrative services for passenger bus stations and auxiliary services, thereby eliminating the exclusion-of-foreigners clause.

36.               Furthermore, between 1997 and 2001, Mexico signed several free trade agreements containing a chapter on investment: with Nicaragua (1997), Chile (1998), the European Union (2000), the "Northern Triangle" with Guatemala, Honduras and El Salvador (2000) and the European Free Trade Association - EFTA (2000).

37.               A number of Reciprocal Investment Promotion and Protection Agreements (APPRIs) were also negotiated between 1997 and 2001: with Germany (1998), Austria (1998), the Netherlands (1998), the Belgian-Luxembourg Economic Union (1998), France (1998), Finland (1999), Uruguay (1999), Portugal (1999), Italy (1999), Denmark (2000), Sweden (2000), Greece (2000), Korea (2000) and Cuba (2001).

38.               Both free-trade and investment agreements are an efficient way to promote and attract FDI to Mexico, as well as to protect Mexican investors operating abroad by means of legal guarantees and, in general, an increasingly transparent and pro-investment environment.

(e)                Intellectual property

39.               Great strides have been made over the last four years for the protection of intellectual property rights. The Industrial Property Law was reformed in 1997 to cover protection of layout‑designs of integrated circuits and the Federal Code of Criminal Procedure was amended in May 1999 to include new and harsher penalties for offences.

40.               The Federal Law on Copyright was reformed in 1997 to grant the Mexican Industrial Property Institute the authority to punish trade-related copyright infringements.

41.               At multilateral level, in 2001 Mexico acceded to six industrial property treaties administered by the World Intellectual Property Organization (WIPO).[3]  Similarly, within the framework of the WTO, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) entered into full force in Mexico on 1 January 2000.

42.               At bilateral level, Mexico and the European Union signed an Agreement on the Mutual Recognition and Protection of Designations for Spirit Drinks on 27 May 1997 in Brussels, Belgium. All of the free trade agreements signed by Mexico over the last four years include a chapter on intellectual property.

(f)                 Competition policy

43.               Mexico's competition policy complements both its trade liberalization and regulatory reform, a prime example being the telecommunications sector.

44.               In the period January 1997 to December 2000, the Federal Competition Commission (CFC) accepted 1,994 documents on mergers, acquisitions, privatizations, monopolistic practices and other restrictions on competition and consultations.

45.               At international level, the CFC has been involved in the work of the WTO, OECD, UNCTAD and APEC.  It recently joined the International Competition Network (ICN) with a view to promoting competition policies worldwide.  It has also signed bilateral cooperation agreements with the United States and Canada and is set to begin negotiations with Korea and Brazil.

(g)                Regulatory improvement

46.               Regulatory improvement has been an integral part of the modernization and structural reform of the Mexican economy since 1989 and has reinforced its process of economic opening.

47.               In 2000, Congress approved a set of reforms to the Federal Administrative Procedures Law (LFPA).  The main reforms are as follows:

· Extension of the scope of application of regulatory improvement to concessions, acquisitions and public works, social security, agrarian reform, official Mexican standards and decentralized bodies. 

· Creation of the Federal Regulatory Improvement Commission (COFEMER), a body with technical and operational autonomy and responsible for the regulatory improvement policy. 

· The obligation for preliminary draft regulations and their regulatory impact statements to be submitted to COFEMER for review prior to issue. In the period 2000-2001, COFEMER reviewed and improved more than 600 preliminary draft regulations.

· Legislative underpinning for the Federal Register of Formalities and Services, which currently lists federal business formalities and which, by May 2003, will also include federal formalities to be observed by citizens.

48.               In 2001, 16 per cent of formalities were eliminated and the necessary measures for simplifying the most common federal formalities identified. This initiative culminated in the implementation of the Rapid Business Creation System (SARE), which will enable low-risk ventures to be established in a single working day. To ensure that state regulations are compatible with the SARE, COFEMER signed agreements with five state governments in 2001.

(h)                Government procurement

49.               Eight of the free trade agreements signed by Mexico have chapters on government procurement;  these agreements cover 27 countries, 22 of which are party to the WTO Plurilateral Agreement on Government Procurement.

50.               Significant progress has been made over the last few years in developing and improving the electronic government procurement system COMPRANET, with a view to making it easier for firms to participate in government procurement processes and to provide a transparent mechanism for informing the public about government procurement processes. This system provides public information concerning federal government demand for goods, services, leasing and public works.

V.                 bilateral AND regional AGREEMENTs

51.               Bilateral and regional agreements have been a mainstay of Mexican trade policy in recent years. They complement and promote greater multilateral liberalization and are all consistent with the country’s WTO commitments.

52.               Mexico has 11 free trade agreements which afford it preferential access to more than 850 million consumers in 32 countries, representing 61 per cent of world GDP.  Thanks to these agreements, Mexico now ranks as the eighth largest exporter in the world and the largest in Latin America and the Caribbean, and is one of the main developing country recipients of foreign direct investment, with all attendant benefits that this brings for economic growth, job creation and wages.

53.               Up until 1996, Mexico had five free-trade agreements:  with Chile (1992);  the United States and Canada (1994);  the Group of Three (G-3) with Colombia and Venezuela (1995);  Bolivia (1995) and Costa Rica (1995).

54.               Mexico concluded seven more FTAs in the period 1997-2001:  with Nicaragua (1998);  Chile (1998);  Israel (2000);  the European Union (2000);  the "Northern Triangle" with Guatemala, Honduras and El Salvador (2001);  the European Free Trade Association (EFTA) with Iceland, Norway, Liechtenstein and Switzerland (2001) and the Economic Complementarity Agreement with Uruguay (2001).

55.               The trade agreements negotiated by Mexico have opened up markets for its exports and made the country more attractive to foreign investment. 

56.               Mexico is involved in other regional initiatives, such as the Asia-Pacific Economic Cooperation (APEC) mechanism, the goal of which is to achieve a free-trade and investment regime by 2020 at the latest.  Mexico chairs and will host the APEC Summit this year.  Our country is also participating in the negotiations on the Free Trade Area of the Americas (FTAA), which are to be completed by 2005 and aim to bring over 800 million consumers and 34 countries together in what would be the largest free-trade area in the world. Furthermore, Mexico has been a member of the Organization for Economic Cooperation and Development (OECD) since 1994, in which capacity it is taking part in discussions to define an international trade agenda.

CONCLUSIONS

57.               Over the last four years, Mexico's trade and international trade negotiations policies have consolidated the opening up of the national economy, which, in turn, has had a very positive impact on trade and economic growth, job creation and wages.  In the context of the slowdown in world economic activity, this economic opening will prove particularly significant as regards a rapid return to growth.

58.               Mexico is firmly committed to the multilateral trading system, which is the most important instrument for global trade liberalization.  For this very reason, our country supported the launch of a new round of negotiations at the Fourth WTO Ministerial Conference and will be hosting the Fifth Conference.

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