Prof Claudio Dordi - Professor of International Law at Bocconi University (Milan), and MUTRAP III Team Leader
Mr Federico Lupo Pasini - Lawyer and consultant specialized in international economic law and policy. Based in Hanoi.
The literature on the assessment of the economic and trade performances of the FTAs concluded by the EU is quite comprehensive: however, most of the researches are conducted before the agreement is negotiated and is entered into force, as they are intended to support the negotiators to understand the magnitude of the effects of each agreement. Few analytical studies have been published to analyze the impact on trade and on the economies of the FTAs members after the agreement entered into force. In this research we select, among the countries which participated to a FTA agreement with the EU, only those agreements which might represent a reasonable example for Viet Nam. For this reason we excluded all the agreements with EU members’ candidates or with countries that are geographically close to the EU as well as the agreements with countries which are not comparable to that of Vietnam and we selected some agreements which already entered into force for a minimum number of years, allowing the possibility of an effective assessment of their impact on the members’ economies.

The Main Features of Mexico

	Mexico
Surface	1964400 sq km
Population	107,6 millions
GDP	627,3 bn. Euro
GDP per capita	5832,2 Euro
Export/GDP	25,6%
Import/GDP	28,5%
Trade/GDP	54,1%

The EU- Mexico Free Trade Agreement

	Mexico
Signed	8.12.1997
Entered into force	1.10.2000

Trade performances

Since the entry into force of the FTA, the 1 July 2000, trade flows between EU and Mexico has been particularly dynamic. Bilateral trade grew from 18.4 bn. USD in 1999 to 56.5 bn. in 2008 (+207%). Exports climbed from 5.2 bn. in 1999 to 17.2 bn. in 2008 (+228%), while imports increate by 196% in the same period, reaching a value of 39.3 bn. USD in 2008.

Table 1: Bilateral Trade Mexico-EU

	1999	2008	Growth
Export	5.2	17.2	228%
Import	13.2	39.3	196%
Total trade	18.4	46.5	207%
Trade balance	-8	-22.1	176%

Graphic 1: Export, Import and Trade Balance

The important impact of the agreement on bilateral trade is testified by the trade growth rate Mexico-EU and Mexico world in the period 1999-2007 (graphic 2).

Graphic 2: Growth rate of trade with EU (blue) and world (red)

The trade relationships between Mexico and EU, in the period 1999-2007, have been more dynamic than that to the US (Import from EU, 12,7%, from US 4,1%; export to EU 14.1%, US 8.6%). Regarding the export, only China (+37.3%) growth rate has been higher than that with the EU (on import China and Japan performed better, respectively +41.4% and +17%). As a consequence, the EU substantially increased the presence on the Mexican import, amounting to the 12% of total Mexican import, while EU import from Mexico the 1.1% of total imports.

Table 2: rank in the bilateral trade EU-Mexico

		1999		2007
	Rank	Market rate	rank	Market rate
Import to Mexico from EU	2	9.1%	2	12.0%
Import to eu from Mexico*	30	0.7%	25	1.1%

As already highlighted, the bilateral trade deficit with the EU substantially increased; indeed, a number of EU enterprises relocated their production in Mexico to export into the US, benefiting indirectly from the NAFTA agreement.
The most important imports from the EU are machinery (29.45% of the total), Oil (22%), electronics (14.87%) and Vehicles (13.48%).

Table 3: Most imported products from EU

Products Exported	2008	%
All products	39250965
Machinery	8042020	29.45
Mineral fuels, oils, etc	6015834	22.03
Electrical, electronic equipment	4060701	14.87
Vehicles	3680223	13.48
Pharmaceutical products	2033693	7.45
Iron and steel	1835109	6.72
Optical, photo, technical, medical, etc	1490541	5.46
Organic chemicals	1404695	5.14
Plastics	1134468	4.15
Articles of iron or steel	872567	3.20

As a confirmation of the fact that Mexico is considered a platform for exporting into the US, most of the imports from EU are inputs and not consumers goods. This allowed the Mexican enterprises to benefit even from the necessary transfer of technology which has been useful to compete in the world trade.
Table 4 illustrates the most dynamic imported products:
Table 4: growth rate of the 10 most imported products

Products	2001	2008	2001-2008
All products	16716164	39250965	13.0
Machinery	4458923	8042020	8.8
Vehicles	2249146	3680223	7.3
Electronics	2606475	4060701	6.5
Mineral fuels, oils	117065	6015834	75.6
Pharmaceutical products	562343	2033693	20.2
Optical, photo, technical, medical etc.	536750	1490541	15.7
Organic chemicals	981316	1404695	5.3
Iron and steel	427596	1835109	23.1
Plastics and articles thereof	487858	1134468	12.8
Articles of iron or steel	314217	872567	15.7

The increase of import in Mexico is mainly due to the huge tariff reductions applied by the Central American country since the entry into force of the agreement. Table 5 illustrates clearly the magnitude of the tariffs decrease.

Table 5: Tariffs applied by Mexico to EU imports

Year	Simple Average	Weighted Average
1999	17.42	13.78
2008	11.78	10.38

As regard to exports, they increased, from 1999 to 2007, with an average of over 14%; all the sectors benefited from the entry into force of the agreement. Differently from the import side, the export side is relatively concentrated in few products. Oils, Vehicles, electronics and machinery account for more than 70% of the export to the EU.

Table 6: the most exported products from Mexico to EU

Product label	2008	%
All products	17162498
Mineral fuels, oils, etc	4306933	25.1
Vehicles	3838472	22.4
Electrical, electronic equipment	2659597	15.5
Machinery, nuclear reactors, boilers, etc	1334172	7.8
Optical, photo, technical, medical, etc	603653	3.5
Pearls, precious stones, etc	582015	3.4
Iron and steel	558304	3.3
Organic chemicals	393270	2.3
Ores, slag and ash	256866	1.5
Plastics and articles thereof	246888	1.4
Beverages, spirits and vinegar	194234	1.1

Table 7 illustrates the most dynamic products exported from Mexico to the EU. It should be taken into consideration that, besides oils, Mexico exports include even inputs for the EU productions. The annual growth rate of export of some products (electronics, vehicles, chemicals) is stunning.

Table 7: the dynamism of Mexico export to the EU

Product label	2001	2008	Annual  growth
All products	5641923	17162498	17.2
Electrical, electronic equipment	469801	2659597	28.1
Mineral fuels, oils, etc	1221603	4306933	19.7
Vehicles other than railway, tramway	864589	3838472	23.7
Machinery	1293061	1334172	0.4
Optical, photo, technical, medical, etc	148455	603653	22.2
Organic chemicals	360949	393270	1.2
Pearls, precious stones, etc	98043	582015	29.0
Plastics and articles thereof	88709	246888	15.7
Beverages, spirits and vinegar	115638	194234	7.7
Tanning, dyeing extracts, etc	70713	111666	6.7
Zinc and articles thereof	119	130557	171.8
Iron and steel	72310	558304	33.9
Cereals	10	96840	271.1
Ores, slag and ash	17139	256866	47.2
Rubber and articles thereof	32514	128248	21.7
Coffee, tea, mate and spices	37144	85740	12.7
Articles of iron or steel	20601	156690	33.6

The reduction of tariffs applied by the EU to Mexico following to the entering into force of the agreement is not as relevant as the inverse case. Indeed, in 1999 Mexico benefited from the GSP and the tariffs applied by the EU were already quite low. However, it is interesting to note the lower standard deviation and the lower maximum rate applied in 2008 compared to 1999: this is the evidence that EU tariffs vs. Mexico are more stable, with less tariff peaks. This, of course, had an important influence on Mexican exports.

Table 8: EU tariffs applied to Mexico

Tariff Year	Simple Average	Weighted Average	Standard Deviation	Minimum Rate	Maximum Rate
1999	5.1	3.85	11.92	0	284.67
2008	4.24	3.03	4.85	0	74.9

Investment
The EU is the second source of FDIs in Mexico, after US. The stock of FDIs from 1999 to 2008 amounted to 67.7 bn. USD, the 34% of total FDIs in Mexico (US FDIs represent the 55.8%). Since the entry into force of the agreement, the EU increased from 26% to 34% its share of FDIs in Mexico. The FDIs are concentrated in the industrial and manufacturing sector as well as in the financial sector (they represent more than 80% of the total FDIs in Mexico). EU enterprises have been particularly active in the manufacturing sector: in most of the case they use Mexico as a platform to export the final products into the US.
Conclusions
All the statistics proof that the EU-Mexico FTAs promoted a huge development of bilateral trade relations. Exports and imports increased substantially. The compositon of Mexican imports from the EU, based mainly on inputs, later transformed in Mexico to be exported or distributed in the local market, promoted employment and transfer of technology. On the other side, trade balance with the EU degraded, showing a structural problem of the Mexican economy, i.e. a very low value of the products is added in the Mexican territory.

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