In Response To Trump’s Protectionism, EU And Mexico Reach Agreement On New Free Trade Deal

Under the new deal, the European Commission says, all trade in goods with Mexico will be duty-free.

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Under the new deal, the European Commission says, all trade in goods with Mexico will be duty-free.

The European Union and Mexico reached an agreement on a new free trade deal, Reuters reported today. Both Mexico and the EU used to cultivate healthy free trade relationships with the United States, but Trump’s election victory seems to have frozen these trade alliances.

From the European Union’s perspective, the new Mexico deal follows a deal struck last year with Japan, and precedes impending deals with Uruguay, Paraguay, Argentina, and Brazil. Trump, both as candidate and as president, has consistently bashed NAFTA, the North American Free Trade Agreement, which Mexico is dependent on; the country exports 80 percent of its goods to the United States. This has forced Mexico to seek out and establish other free trade alliances. They have managed to officially begin one with most of Europe.

According to Reuters, Mexico and the EU will update a trade deal they agreed on 21 years ago. The old trade deal covers industrial goods, but the new one adds more services, farm products, provisions on labor and environmental standards, investment, and more. Under the new deal, the European Commission said, all trade in goods with Mexico will be duty-free. The deal will accomplish potentially monumental things for the Mexican economy, including lower tariffs for goods and services exchanged with Europe. Perhaps more significantly, the new deal will allow Mexican companies to bid for government contracts in EU member countries, and vice versa.

Mexican Economy Minister Ildefonso Guajardo had the following to say.

“It needed to be more ambitious in the agricultural sector, it needed to be more ambitious in services, it needed to be more ambitious in many of the elements that in the end we managed to agree on after two years of work.”

European businesses will benefit from so-called “geographical indications,” which this deal recognizes. This was one of EU’s key demands, because geographical indications dictate, for example, that the term “champagne” can only be used for sparkling wine from northern France.

The deal is practically done, and a final text can be expected by the end of 2018.

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  Pablo Martinez Monsivais / AP Images

“Trade wars are good and easy to win,” the POTUS proclaimed in a tweet. Bloomberg‘s Andrew Mayeda and Bryce Baschuk criticized the president at the time, arguing that ally countries might retaliate, and adding that there are no winners in trade wars.

“When President George W. Bush raised steel tariffs in 2002, U.S. gross domestic product declined by $30.4 million,” the two wrote, arguing that the protectionist Smooth-Hawley act passed by Congress in 1930 is “often blamed for deepening the Great Depression.”

“While a deal with Europe has heavily political significance, Trump’s renegotiation of NAFTA has far greater economic consequences for Mexico,” Politico noted.

Mexico, a country that exported only $34.4 billion worth of goods and services to the EU but $340 billion worth to the U.S. in 2017, “delivered a defiant political riposte to U.S. President Donald Trump,” Politico‘s Hans Von Der Burchard and Christian Oliver wrote.