MEXICO EXPORTA

1
The Mexican chemical and plastics industry under
the Mexico EU FTA
July 2003
2
The Mexico-EU FTA

• The Mexico-EU FTA is part of a broader Global
  Agreement (Economic Partnership, Political
  Coordination and Cooperation Agreement).
• 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
The Mexico-EU FTA Decision 2/2000

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

4
The chemical and plastics sector under 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
Duty Phase-Out

• Under the Mexico EU FTA, Mexico will eliminate
  the duties for the EUs chemical and plastics
  products as follows

Weighed average duty in the sector
Percentage
Source ME
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
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
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
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
Commercial development of Mexicos chemicals and
plastics industry under the Mexico-EU FTA
11
During the 1990s, Mexicos exports of chemicals
and plastics more than doubled

• Between 1993 and 2002, Mexican exports in this
  sector increased 163 per cent.

37.8
37.3
36.2
30.8
27.7
26.0
21.8
17.8
15.6
12.9
Billion dollars
Includes products form chapters 15, 27 40, 55,
87 and 94- 96 of the HS. Source ME
12
In 2002, Mexicos top ten chemical and plastics
exports accounted for 40 of the total exports of
the sector
Top ten chemical and plastics industry
products exported by Mexico in 2002, million of
US
Product Total US EU Rest
Parts and accessories of motor vehicles 1,050.3 997.3 21.5 31.5
Other medicaments 673.3 48.8 93.1 531.4
Other articles of plastics 504.8 481.2 3.7 19.9
Boxes, cases, crates and similar articles of plastics 386.8 376.1 0.5 10.2
Other parts for the industrial assembly of vehicles 345.2 341.1 4.0 0.1
Security modules for air-bags 303.4 301.5 0.2 1.7
Waste, paring and scrap of plastics 190.0 188.1 0.2 1.7
Washing and cleaning preps. put up for retale sale 162.5 73.1 1.2 88.2
Terephthalic acid and its salts 159.5 3.2 80.5 75.8
Coloring preps. containing 80 of titanium dioxide 157.9 12.1 0.0 145.8
Source ME
13
Mexico EU trade in the chemical and plastics
sector

• In 2002, bilateral trade in this sector
  represented almost 15 of total Mexico EU
  trade,

Mexico-EU Trade Chemical products and plastics,
2002 (md)
3,330
3,566
2,888
2,550
2,417
2,057
Mexican imports
1,893
1,843
1,606
1,372
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
Mexico has improved its position as an EU supplier

• In 2002 Mexico was the EUs 22nd supplier, up
  from 26th in 2001.

Participation in Extra-EU imports Main suppliers
of chemical and plastic products (2002)
Estimated data Source ME with data from
EUROSTAT
15
Mexican chemical and plastic products compete
successfully in the EU and US markets
EU Supplier
US Supplier
EU supplier
Product
US supplier
Product
Part
Part
Part
Part
Position
Position
Position
Position


29.4 22.5 11.9 2.9 48.3 23.8 12.6 28.8 21.9 21.
1 1.7
New pneumatic tires Parts and accessories
for cars Antibiotics
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
32.5 13.6 12.5 1.1 24.2 20.5 13.6 28.9 28.3
10.7 0.03
19.8 15.4 11.3 0.02 23 16.4 11.6 2 57.5 23.0
9.4 0.07
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 1US 2 China 3 Switzerland (28)
Mexico 1 US 2 Japan 3 Switzerland (24) Mexico
1 Canada 2 Japan 3 Korea (8) Mexico 1
Canada 2 Mexico 3 Japan 1 UK 2 France 3
Japan (27) Mexico



69.6 21.42.0 0.05 23.3 22.3 11.2 0.22 82.1 10
.7 2.2 0.03
Medicaments Plastic manufactures
Diagnostic reagents
Estimated data Source ME, with data from
EUROSTAT and USDOC
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
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 Mexicos chemical and plastics
  industry
• Between 1999 and 2002, Mexico received US3.2
  billion in foreign direct investment (FDI), which
  accounted for 16 of total FDI in Mexicos
  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).

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The chemical and plastics industry plays an
important role in the Mexican economy

• In 2002, this sector
• represented 2.7 of Mexicos total GDP
• represented 14 of Mexicos manufacturing GDP
• employed more than 800,000 people
• attracted US553.4 million in Foreign Direct
  Investment (FDI).

19
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
Challenges ahead

• Mexicos 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.

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• To obtain further information visit
• www.economia.gob.mx
• www.economia-bruselas.gob.mx
• bruselas_at_economia.gob.mx
• Mexicos Mission to the EUMexican Ministry of
  the Economy94, Av. Franklin Roosevelt1050
  Brussels, Belgium