1. 1 The Mexican chemical and plastics industry under the Mexico – EU FTA July 2003

2. 2 The Mexico-EU FTA è The Mexico-EU FTA is part of a broader Global Agreement (Economic Partnership, Political Coordination and Cooperation Agreement). è The trade aspects of the Global Agreement were adopted through two decision of the EU-Mexico Joint Council: The Decision 2/2000 known as the FTA in goods effective since July 1, 2000, and The Decision 2/2001 called the FTA in Services effective since March 1, 2001.

3. 3 The Mexico-EU FTA: Decision 2/2000 è The Mexico-EU FTA provides that by 2007, around 96 per cent of bilateral trade will be duty free. è The bulk of tariff dismantling for industrial products will be completed by January 1, 2007. è Specific packages were agreed for products considered sensitive.

4. 4 The chemical and plastics sector under the Mexico-EU FTA the Mexico-EU FTA  By 2007 Mexican-EU trade in chemicals and plastics will be duty free.  The Mexico – EU FTA tariff elimination schedule acknowledges differences in levels of development: Mexico received asymmetric treatment. While the EU completely eliminated its import duties to Mexican exports in 2003, Mexico will not have to completely liberalize until 2007. All prohibitions and quantitative restrictions (e.g. import or export permits) were eliminated but the Parties keep the right to adopt measures to protect the life and health of humans, animals, and plants.

5. 5 Duty Phase-Out Weighed average duty in the sector  Under the Mexico – EU FTA, Mexico will eliminate the duties for the EU’s chemical and plastics products as follows: Source: ME Percentage

6. 6 Rules of Origin  The MEUFTA provides specific rules of origin for the chemicals and plastics sector.  The rules of origin comply with the objective of: increasing exports of those products that include inputs and originating materials from the region; avoiding that the agreed rules turn into trade barriers; guaranteeing that the benefits of the agreement remain within the region.

7. 7 Rules of Origin The agreed rules of origin:  Guarantee that regional products will benefit from the preferential treatment (Decision 2/2000) upon submission of either: (a) a movement certificate EUR.1; or (b) an invoice declaration, given by the exporter which describes the products concerned in sufficient detail to enable them to be identified

8. 8 Rules of Origin for pigments and plastics  Paint and colorants from HS codes 3203 to 3206: for coloring matters of vegetable, animal, synthetic organic and lacquer, Mexico obtained a flexible percentage of national content; for feeding pigments based in flowers, chili and lacquer, Mexico obtained recognition of the transformation from non-originating raw materials.  In the case of the plastic sector, it is allowed the import of basic inputs (chapters 27 to 29) for the fabrication of primary plastics.

9. 9 Rules of Origin for Chemical products  Mexico obtained a flexible rule of origin for certain products that allows the use of non-originating raw material not produced in Mexico: for di-acetone alcohol, methyl isobutyl acetone and the mistily oxide, acetone can be imported from outside the region until June 2003; it is possible to import non-originating anhydride acetic until June 2003.  The Joint Committee can review the need to extend beyond 30 June 2003 the application of the flexible rule if the economic conditions which formed the basis for establishing the rule continue.

10. 10 Commercial development of Mexico’s chemicals and plastics industry under the Mexico-EU FTA

11. 11 During the 1990s, Mexico’s exports of chemicals and plastics more than doubled  Between 1993 and 2002, Mexican exports in this sector increased 163 per cent. Billion dollars * Includes products form chapters 15, 27 –40, 55, 87 and 94- 96 of the HS. Source: ME 12.9 15.6 17.8 21.8 26.0 27.7 30.8 37.3 36.2 37.8

12. 12 In 2002, Mexico’s top ten chemical and plastics exports accounted for 40% of the total exports of the sector ProductTotalUSEURest Parts and accessories of motor vehicles1,050.3997.321.531.5 Other medicaments673.348.893.1531.4 Other articles of plastics504.8481.23.719.9 Boxes, cases, crates and similar articles of plastics386.8376.10.510.2 Other parts for the industrial assembly of vehicles345.2341.14.00.1 Security modules for air-bags303.4301.50.21.7 Waste, paring and scrap of plastics190.0188.10.21.7 Washing and cleaning preps. put up for retale sale162.573.11.288.2 Terephthalic acid and its salts159.53.280.575.8 Coloring preps. containing 80% of titanium dioxide157.912.10.0145.8 Source: ME Top ten chemical and plastics industry products exported by Mexico in 2002, million of US $

13. 13  In 2002, bilateral trade in this sector represented almost 15% of total Mexico – EU trade, Mexico-EU Trade Chemical products and plastics, 2002 (md) Mexico – EU trade in the chemical and plastics sector 1,372 1,606 1,843 1,893 2,057 2,417 2,550 2,888 3,3303,566 Mexican imports Mexican exports Includes products form chapters 15, 27 –40, 55, 87 and 94- 96 of the HS. ** Estimated data for 2002 Source: ME with data form EUROSTAT

14. 14 Mexico has improved its position as an EU supplier * Estimated data Source: ME with data from EUROSTAT Participation in Extra-EU imports Main suppliers of chemical and plastic products (2002*)  In 2002 Mexico was the EU’s 22nd supplier, up from 26th in 2001.

15. 15 Mexican chemical and plastic products compete successfully in the EU and US markets *Estimated data Source: ME, with data from EUROSTAT and USDOC 1° Japan 2° Korea 3° Poland (40) Mexico 1° Czech Rep. 2° US 3° Japan (11) Mexico 1° Switzerland 2° US 3° Japan (16) Mexico 1° Canada 2° Japan 3° Korea (8) Mexico 1° Canada 2° Mexico 3 ° Japan 1° UK 2° France 3° Japan (27) Mexico 19.8 15.4 11.3 0.02 23 16.4 11.6 2 57.5 23.0 9.4 0.07 Medicaments Plastic manufactures Diagnostic reagents Product EU Supplier 1° Ireland 2° UK 3° Germany (12) Mexico 1° Canada 2° China 3° Mexico 1° Japan 2° UK 3° Germany (28) Mexico 1° US 2° Switzerland 3° Japan (17) Mexico 1°US 2° China 3° Switzerland (28) Mexico 1° US 2° Japan 3° Switzerland (24) Mexico New pneumatic tires Parts and accessories for cars Antibiotics US Supplier Part % 69.6 21.4 2.0 0.05 23.3 22.3 11.2 0.22 82.1 10.7 2.2 0.03 Position Part % Position EU supplier Part % Position Part % Product US supplier Position 29.4 22.5 11.9 2.9 48.3 23.8 12.6 28.8 21.9 21.1 1.7 32.5 13.6 12.5 1.1 24.2 20.5 13.6 28.9 28.3 10.7 0.03

16. 16 The Mexican chemical and plastics industry has attracted FDI that has helped it modernize production Source: ME Excludes re-investment of utilities and intra –firms accounts * Includes products form chapters 15, 27 –40, 55, 87 and 94- 96 of the HS. **Data for January-March 2003

17. 17 Foreign Direct Investment has transformed the Mexican chemical and plastics industry into a competitive worldwide producer  In 2002, 1,269 enterprises with foreign capital operated in Mexico’s chemical and plastics industry: Between 1999 and 2002, Mexico received US$3.2 billion in foreign direct investment (FDI), which accounted for 16% of total FDI in Mexico’s manufacturing sector; The main investors in the sector are the US (89.2%), the Netherlands (5.3%), Canada (3.5%), Ireland (3.3%) and the Bahamas (2.0%); This FDI concentrates mainly on production of perfumes and cosmetics (18.3%), chemical fibers (14.0%), plastic products (10.7%), and soaps (10.4%).

18. 18 The chemical and plastics industry plays an important role in the Mexican economy  In 2002, this sector: represented 2.7% of Mexico’s total GDP; represented 14% of Mexico’s manufacturing GDP; employed more than 800,000 people; attracted US$553.4 million in Foreign Direct Investment (FDI).

19. 19 Mexico has developed specialized production centres for production of chemicals and plastics Mexico has developed specialized production centres for production of chemicals and plastics Coatzacoalcos-Minatitlan: is the home of the main petrochemical complex that propitiates the establishment of private investments, representing one of the biggest sources of regional employment and income. Altamira-Tampico-Madero: has developed as the main hub for private development for the chemical and petrochemical industry. Mexico City-State of Mexico: this region concentrates the biggest activity of the Mexican chemical industry. There are more than 200 firms that operate and supply inputs for the rest of the industry. Nuevo Leon: the increasing industrial activity in this Mexican state provides a healthy market for chemical and plastics products used in the production of final goods.

20. 20 Challenges ahead  Mexico´s National Development Plan 2001-2006, establishes, as one of the priorities, to increase and extent competitiveness in the country. Therefore the Ministry of the Economy has produced “Competitiveness Programs”.  For the moment, Mexico has developed specific programs for the textile-garment sector, the electronic sector and the software sector. The chemical and plastics sector competitiveness program is on the verge of being concluded.

21. 21 To obtain further information visit: www.economia.gob.mx www.economia-bruselas.gob.mx bruselas@economia.gob.mx Mexico’s Mission to the EU Mexican Ministry of the Economy 94, Av. Franklin Roosevelt 1050 Brussels, Belgium