Agreement between Japan and the United Mexican States for the Strengthening of the Economic Partnership
(Overview)

September 2004

The leaders of Japan and Mexico agreed to start the negotiations on an economic partnership agreement at the Summit Meeting held in October 2002. In March 2004, the ministers concerned of both Japan and Mexico confirmed that both sides reached agreements in substance on major elements of the Agreement. On September 17, 2004, Prime Minister Junichiro Koizumi and President Vicente Fox Quesada of Mexico signed the Agreement in Mexico City.

1. Purposes and effects of the Agreement

The purposes of the Agreement are to promote a liberalization of trade and investments as well as a freer flow of persons for business purposes between Japan and Mexico. The Agreement also aims to promote a comprehensive economic partnership, which includes competition policy, improvement of business environment and bilateral cooperation in such fields as vocational education and training, and support for small and medium enterprises. The Agreement contributes to making the most of the economic complementarity between Japan and Mexico and thus to strengthening the bilateral economic relations.

2. Significance of the Agreement for Japan

(1) Expanded access to the Mexican market

• Through the conclusion of the Agreement, Japan will gain expanded access to the Mexican market, which is growing dynamically, with a population of approximately 100 million and an economic scale placed in the tenth position in the world (equivalent to the combined economic scale of ten ASEAN countries).

(2) Securing a gateway to the South and North American markets

• The Agreement will enable entry in to the North and South American markets via Mexico (Mexico has already concluded free trade agreements with 42 countries, including the United States (US), Canada, 25 countries in the European Union (EU) and countries in Latin America).

(3) Eliminating competitive disadvantages for Japan

• The Agreement will allow Japanese companies to enjoy equal treatment with companies of the US, Canada and EU, in areas such as custom duties, services, investment and government procurement.

3. Main points of the Agreement

(1) Trade in goods

As for trade between the two countries, custom duties will be comprehensively eliminated or reduced, including agricultural and industrial products. (See Annex)

(2) Investment

With some exceptions, both countries committed to provide national treatment and most-favored-nation treatment. Performance requirements such as requirement for local content as a condition for investment shall be prohibited.

(3) Cross-border trade in services

With some exceptions, both countries committed to provide national treatment and most-favored nation treatment.

(4) Government procurement

For the procurement of services and goods by government organizations or government-related companies, both countries committed to provide national treatment.

(5) Competition policy

Both countries shall cooperate in the areas of regulation for on anticompetitive activities.

(6) Improvement of the business environment

A Committee for the Improvement of the Business Environment shall be established, allowing the participation of representatives from the private sector of both countries.

(7) Bilateral cooperation

Both countries shall cooperate in nine areas: trade and investment promotion, supporting industries, small and medium enterprises, science and technology, technical and vocational education and training, intellectual property, agriculture, tourism, and the environment.

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ANNEX

Overview of the Elimination or Reduction in Custom Duties for the Trade in Goods Under the Agreement between Japan and the United Mexican States for the Strengthening of the Economic Partnership
(Major Products)

I. Agricultural Products

1. Overview

Both countries agreed to eliminate or reduce custom duties of products in the area of agriculture, forestry and fisheries, which cover almost all imports from Mexico in such area.

2. Five Agricultural Products

3. Other products

Classified according to the treatment of custom duties in such groups as;

• Immediate elimination of custom duties,
• Gradual elimination of custom duties from 3 to 10 years,
• Establishment of a non-taxable quota,
• Reduction of custom duties,
• Consultation, or
• Exclusion form the regulation of the Agreement

II. Products in mining and manufacturing industry

1. Overview

Both countries agreed to realize liberalization (elimination of custom duties) in compliance with the international standards in a manner responsive to the interests of both sides. It was also agreed that custom duties will be eliminated on almost all products within ten years.

2. Commitment by Mexican side to liberalize the steel sector

Without exception, custom duties will be eliminated on all steel products within ten years. Among them, the custom duties on products used in specified industries (see note 1) will be immediately eliminated.

3. Commitment by Mexican side to liberalize the automobile sector

With the entry into force of the Agreement, a new non-custom-duties quota, which is equivalent to 5% of the number of units sold in Mexico in the previous year, and will be established for automobiles and buses and trucks, excluding large buses and tracks complete liberalization will be achieved in the seventh year after the entry into force of the Agreement (see note 2).

(note 1) Four sectors: electronics, home appliances, capital goods, automobiles.

(note 2) The existing non-custom-duties quota for companies having a production base in Mexico will be maintained.

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