In September, the Agreement between Japan and the United Mexican States for the Strengthening of the Economic Partnership was signed, bringing a new level of opportunity for commerce for Mexico.

    The maquiladora industry has much potentially to gain. This summary provides a basic understanding of the most important aspects of the agreement,  scheduled to come into force in April. The agreement has annexes that are more than 700 pages long, so it is not possible to discuss every product and tariff. If you have any questions in regards to any aspect of the agreement, contact me at the email address listed below.

    The purpose of the Agreement between Japan and the United Mexican States for the Strengthening of the Economic Partnership is to promote the liberalization of trade and investments between the two nations. The agreement aims to promote the free movement of goods, people, services, and capital. Additionally, the EPA objectives include:

    •Increase investment opportunities and protect investments.

    •Enhance government procurement opportunities.

    •Effective enforcement of competition laws.

    •Establish a framework for further bilateral cooperation.

    The EPA includes nine principal agreements, and several minor ones. The nine principal agreements deal with merchandise trade, Customs procedures, cross-border services trade, investment, government procurement, competition policy, business environment, bilateral cooperation, and dispute settlement. 

Agreement on Merchandise Trade

    The agreement on merchandise trade is an across-the-board abolition or reduction of tariffs including those on agricultural and industrial products. The EPA provides that each party will provide national treatment to the goods of the other party (i.e. treat the other countries products no different than domestic products).  The classification of goods in trade is in conformity with the Harmonized Tariff System, which is the same one used by the United States. Under the EPA, neither party can impose any duties on goods exported from a party to the other party.  Additionally, each party shall not institute or maintain any prohibition or restriction other than Customs duties on the importation of any good of the other party.  Japanese import tariffs on most Mexican produce will be lowered over three to seven years.  In the case of bananas, the tariffs will be lowered over 10 years.  Excluded from the agreement for at least three years are pineapples and pineapple juice, candy, wheat and pastas.  The five major agricultural products regulated by the EPA are pork, orange juice, beef, chicken, and oranges. 

    In regards to steel and industrial items, the EPA aims to liberalize production and to eliminate almost all tariffs within 10 years.  Mexico agreed to abolish all tariffs on steel items within 10 years except for steel used in electronics, household electric items, plant machinery, and autos which was eliminated immediately.  The automobile sector will also be liberalized with Mexico granting Japan a new tariff-free framework of 5 percent of the previous year’s sales for buses, trucks and passenger vehicles.  The market will be completely liberalized in seven years.

    The elimination of Customs duties is detailed in Article 5(1) of the EPA. Article 5 establishes that each party shall “eliminate or reduce its Customs Duties on originating goods designated for such purposes in its Schedule in Annex 1, accordance with the terms and conditions set out therein.”

Customs Procedures for Trade Facilitation

    The EPA will regulate the certificate of origin as well as import and export obligations. Upon the date of entry into force of the EPA, both countries will establish a format for the certification of origin.  Each country shall require an importer claiming preferential tariff treatment to make a written declaration based on a valid certificate of origin that the good qualifies as an originating good. Each party shall also ensure that an exporter has completed and signed a certificate of origin. Both countries will cooperate to enable prompt customs processing

Cross-Border Services Trade

    In regards to cross-border services trade, the EPA will afford national and Most Favored Nation (MFN) treatment by principal to service providers from the partner nation. 

Investment

    The EPA will also regulate investment by giving investors, both national and MFN treatment, to liberalize and protect investments.  Japan will enjoy the same treatment given to companies of the United States, Canada and the other nations with whom Mexico has free trade agreements (e.g. NAFTA).

Government Procurement

    Through this agreement Japanese firms will be able to bid to provide services including construction and financial services for the Mexican government and government enterprises. 

Competition Policy

    Both nations will provide notification of enforcement activities and engage in enforcement cooperation and coordination, and cooperate in regulating anti-competitive activities.  This will enable the creation of a structure conducive to promoting economic activity based on fair and free competition. 

Business Environment

    The EPA provides for future discussions for the creation of a Business Environment Establishment Committee.  This committee would help create a business environment that promotes trade and investment between Japan and Mexico.  Private sector representatives would be able to participate in the committee. 

Bilateral Cooperation

    The EPA will facilitate bilateral cooperation in the areas of trade and investment promotion, supporting industries, small and medium enterprises, science and technology, technical and vocational education and training, intellectual property, agriculture, tourism, and the environment. 

Dispute Settlement

    The EPA provides for arbitration procedures to resolve any dispute that may arise from interpretation or application of the agreement.

    The EPA also regulates some additional agreements relating to rules of origin, bilateral safeguard measures, financial services, and the entry and temporary stay of nationals for business purposes.  The rules of origin determine what products are eligible for coverage under the EPA.

    The agreement is expected to boost Japan’s exports to Mexico by 30 percent and its imports from Mexico by 11 percent, according to a study carried out by the Japanese government.