Mexico Free Trade Agreements (FTAs): A Comprehensive List
November 07, 2019
With more Free Trade Agreements (FTAs) than any other country, Mexico serves as a strong trade and export platform to its U.S. neighbor and the world. Mexico is a trading partner with more than 50 countries, with agreements reaching into Europe, South America, and Africa. These agreements reduce barriers to trade, including tariffs and import quotas, to build strong cooperation with other countries through the exchange of goods and services.
Each agreement lays out unique terms to bring specific benefits to the countries involved. Below, we provide an overview of Mexico's 14 Free Trade Agreements, detail the countries involved, and what regulations to expect in trading under these provisions.
NAFTA (and USMCA)
When the North American Free Trade Agreement went into effect on January 1, 1994, it began a phase-out of most tariffs on trade between Mexico, Canada, and the United States. NAFTA sets rules that allow for tariff-free trade of goods in which 60 percent of the manufacturing content originates in North America. It This Mexico free trade agreement also streamlined border processing and reduced other barriers to conducting business with the United States and Canada across the border, and established regulations around environmental issues, labor concerns, and intellectual property rights.
The trade agreement oversaw an increase in trade in agriculture, manufactured goods, oil and gas, and other commodities from approximately $290 billion in 1993 to over $1.1. trillion by 2016. NAFT has significantly boosted the GDP rates of the three countries involved since 1994.
However, pending U.S. ratification, NAFTA will be replaced by the U.S.-Mexico-Canada Agreement (USMCA), which is touted as bringing NAFTA into the 21st century. The updated agreement, which Mexico ratified in June 2019, will bring many changes to the trade regulations. Among them, the updated regional trade agreement increases the amount of content for automobiles that must originate in North America to 75 percent. It also lays out new labor regulations and sets rules for digital trade.
Treaty of Transpacific Association
The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) establishes an FTA between Mexico and Australia, Brunei Darussalam, Canada, Chile, Japan, New Zealand, Malaysia, Peru, Singapore and Vietnam. The foreign trade partnership builds upon the Trans-Pacific Partnership Treaty, from which the United States withdrew in January 2017.
The CPTPP was signed in March 2018 and ratified by Mexico by December 2018. Once ratified by all countries involved, the CPTPP will represent a trading block covering 495 million consumers and 13.5 percent of global GDP. The CPTPP comprehensively eliminates trades tariffs across all sectors. Once all member countries have ratified the agreement, 99 percent of tariff lines among CPTPP participants will be duty-free.
The CPTPP includes all the elements that were negotiated as part of the original TPP, except for certain areas around intellectual property that were suspended by member consensus.
EU-Mexico Trade Agreement
In 2018, Mexico and the European Union reached an "agreement in principle" to update their trade agreement, replacing the EU-Mexico Economic Partnership that dated to 2000. The new deal allows EU firms to sell more services to Mexico and makes commitments to protect workers' rights and the environment.
Under the updated agreement, 99 percent of products eventually will be traded between the two sides duty-free. For that remaining 1 percent, which includes dairy and meat exports on both sides, customs duties may be eliminated over time. The agreement also renegotiates automotive industry rules of origin to a 45 percent maximum for non-originating material.
The agreement also makes it easier for EU firms to do business in Mexico by simplifying customs procedures to streamline industrial trade, and laying out a clause on the free flow of data and protection of investments.
A Commission Impact Assessment indicates that the updated agreement could generate an increase in EU GDP of 0.01 percent annually by 2028. That is pending final negotiations and ratification by all EU member states.
EFTA Free Trade Agreement
The European Free Trade Association (EFTA) States, made up of Iceland, Liechtenstein, Norway, and Switzerland, signed a Free Trade Agreement with Mexico in November 2000. The agreement became enforceable in July 2001.
The Mexico FTA covers trade in industrial products as well as fish and marine products. Among the goals set by the agreement is the progressive removal of tariffs. In addition to covering trade in goods, it also includes within its scope trade in services, investment, and public procurement.
Mexico-Central America Free Trade Agreement
The Mexico-Central American FTA brought together earlier separate agreements between Mexico, Costa Rica, and Nicaragua and the Northern Triangle made up of El Salvador, Guatemala, and Honduras. The result was a multilateral agreement made official in November 2011 and ratified in 2013. The FTA expanded trade and investment flows between the parties and laid the groundwork for improving customs procedures and trade.
This partnership recognizes an “extended economic zone” that works to reduce tariffs and provides preferential treatment to local markets in the production of goods and services for export to Mexico. In 2017, two agreements were added to update rules of origin and customs procedures, requiring producers and exporters to issue certificates of origin for goods to be exported.
Chile-Mexico Free Trade Agreement
Mexico’s first FTA was signed in 1998 in Santiago, Chile, and came into effect in 1999. The agreement removed virtually all tariffs on merchandise trade between the two countries and set terms for tariff reduction of those remaining products. For automotive products specifically, the agreement lays out rules of origin terms and sets quotas on duty-free imports.
The Mexico-Chile FTA also includes provisions on national treatment and market access for goods and services; safeguards; standards; agriculture; sanitary and phytosanitary measures; investment; air transportation; telecommunications; temporary entry for business people; intellectual property rights; and dispute resolution, among other provisions.
Mexico-Colombia Free Trade Agreement
Mexico and Columbia’s FTA dates to 1994, although the agreement has been adapted and expanded in the years since. Its most recent version includes provisions related to market access and rules of origin.
The full FTA includes measures related to market access, tariff-rate quotas, anti-dumping and countervailing duties, rules of origin, customs procedures, dispute resolution, government procurement, intellectual property rights protection, investment, safeguard measures, sanitary and phytosanitary provisions, technical regulations, and technical barriers to trade.
The updated treaty opens up the Mexican market for certain Colombian food and agricultural products. Mexico also agreed to allow Colombia to export limited quantities of dairy and beef products.
The Pacific Alliance
This trade bloc was formed by Mexico, Chile, Colombia, and Peru in 2011, and includes 55 observer states. It covers a combined population of 225 million and accounts for 38 percent of the region's foreign direct investment.
With the signing of the Lima Declaration that launched the alliance, the four countries involved agreed to a shared commitment to promoting a better quality of life for their citizens and fostering integration, with a vision of inclusive development. In action, that amounts to an end to more than nine-tenths of tariffs on goods and services traded between its members and work toward standard harmonization.
The alliance also integrates the four national stock markets, removes restrictions on inter-alliance visas, and opens joint international trade missions. The alliance prioritizes private sector cooperation as it promotes free trade that contributes to generating greater competitiveness and development.
Mexico-Panama Free Trade Agreement
Mexico and Panama entered into an FTA in July 2015 to strengthen bilateral relations, diversify exports, encourage mutual trade, and ultimately support the economic growth and the prosperity of both nations. The agreement also set the stage for Panama to eventually join the Pacific Alliance—which includes Mexico, Colombia, Chile and Peru—as all members must have free trade agreements with one other.
In addition to market access measures, the FTA lays out provisions around rules of origin, intellectual property rights, dispute resolution, sanitary and phytosanitary measures, e-commerce, financial services, travel rules, and investment. The FTA covers approximately 4,000 tariffs and lays the foundation for a major commercial corridor in the continent.
Mexico-Uruguay Free Trade Agreement
Mexico and Uruguay began enforcing their FTA in July 2004, deepening a pre-existing agreement. In addition to opening the markets for trade, the FTA includes provisions around services, investment, intellectual property rights, dispute resolution procedures, government procurement, rules of origin, and customs procedures, among other areas.
Upon ratification, the FTA eliminated nearly all tariffs on manufactured goods, with a few industry exceptions. Wool products, for example, remain subject to tariff-rate quotas while certain agricultural items receive lowered limits on tariffs. Automotive goods are covered by a separate economic complementation agreement.
Japan-Mexico Economic Partnership Agreement
In September 2004, Japan and Mexico formalized their economic partnership. The agreement lays out terms for opening trade and investment between the two nations, as well as freer flow of people for business purposes. Through the agreement, Japan gained expanded access to the Mexican market and entry into the North and South American markets via Mexico and its extensive network of FTAs.
The agreement also aims to promote a comprehensive economic partnership, which includes competition policy, improvement of the business environment and cooperation in areas including vocational education and training, and support for small and medium enterprises. The agreement comprehensively eliminated or reduced custom duties, including on industrial products. It also specifically prohibits performance requirements, such as any requirement for local content as a condition for investment.
However, the agreement does lay out a non-custom-duties quota on automobiles, equivalent to 5 percent of the number of cars, buses, and trucks sold in Mexico in the previous year, excluding large buses. Under an updated agreement in 2011, Mexico agreed to speed the removal of import tariffs on auto parts from 2012 to 2014.
The Mexico-Israel Free Trade Agreement
In March 2000, Mexico and Israel signed an FTA to increase bilateral trade by tens of millions of dollars. The agreement helps Israeli exporters compete with American products in Mexico and advance joint projects in communications, agriculture, infrastructure, and planning services. The FTA covers trade in goods, government purchases, safeguards and dispute resolution, and strengthened cooperation between the two countries.
The two countries reevaluated the agreement in 2010, recognizing that since 1999 bilateral trade between the two countries had increased by 133 percent. At that time, the countries agreed to “redouble efforts to take full advantage of its benefits,” focusing on areas such as biotechnologies and support for small and medium enterprises. Both countries also agreed to increase trade and generate new investment opportunities in sectors such as water treatment and irrigation systems, agrotechnology, and information technologies.
Mexico-Peru Trade Integration Agreement
The Mexico-Peru Trade Integration Agreement was formally signed in April 2011 and became effective the following February. The FTA expands a 1987 agreement to cover 12,017 products around which tariffs would be phased out over the next 10 years.
The agreement includes provisions around the trade of goods and services, as well as investment, dispute resolution procedures, rules of origin, antidumping and countervailing duties, and temporary entry of business people, among other industry areas.
Mexico-Bolivia Economic Complementation Agreement
In June 2010, Mexico and Bolivia replaced their existing FTA with a new Economic Complementation Agreement (ACE 66). The agreement allowed for continued free trade in goods without modifying the preferential tariff treatment agreed upon in the previous FTA.
The ECA promotes fair competition in trade between the two countries without touching on terms related to investment, services trade, intellectual property rights, or government procurement.
Mexico's Free Trade Agreements Simplify Global Trade
Mexico’s numerous negotiated trade agreements are simply one of the many ways in which the government seeks to simplify trade for global businesses. By reducing complexity and bureaucratic costs around the exchange of goods and services, Mexico makes it easier than ever to export to a multinational audience. To better understand all of the advantages of locating your manufacturing operation in Mexico, contact us today.