The Economist | October 18, 2003 U.S. Edition
HAVING cut its own North American Free-Trade Agreement with the United States and Canada a decade ago, Mexico has been content to play a back-seat role in the Americas trade talks. Its energies have long been devoted to arranging the kind of bilateral deals the Bush administration now favours. As well as NAFTA, Mexico has some 30 other trade agreements, with the European Union, a number of Latin American countries--and soon, it hopes, Japan.
Vicente Fox, Mexico's president, visited Japan's prime minister, Junichiro Koizumi, this week. They had hoped to sign a trade deal. But after a year of increasingly frantic negotiations, the two sides are still separated by some tricky details.
The agreement matters for both countries, but for different reasons. Mexico's trade deals have turned it into one of the world's most open trading nations. But it is also struggling to revive a sluggish economy, which is suffering from increasing competition from China. One way of doing so is to get more access to the Japanese market, in which Mexico already has exports worth $1.6 billion a year.
For Japan, by contrast, this treaty would be only its second free-trade agreement, after one with Singapore, and the first to include agriculture. Especially since the setback to the WTO talks at Cancun, Japanese officials worry that they will be at a relative disadvantage without more such deals. But Japan has a habit of protecting its farmers.
Not surprisingly, farm products, especially pork, are the main obstacle in the talks with Mexico. Pork already accounts for 10% of Mexico's exports to Japan. Remove the tariffs, and some say the Japanese would gobble down six times as much Mexican pork. Japanese officials wince for their pig farmers--and complain, in turn, at Mexico's reluctance to lower its tariffs on steel.
Jaime Serra, Mexico's chief NAFTA negotiator and now an independent economic consultant, points out that last year Mexico's trade with countries with which it has agreements showed a surplus of $23.2 billion, while it registered a trade deficit of $31.3 billion with other countries (mainly China). Some hard bargaining with Japan remains, but this will spur its negotiators on.The Economist:
