First Citizen ConsultationOn the Mexico-European Union Agreement

25 February, 2000

Preliminary Analysis of the Free Trade Agreement between Mexico and the European Union (FTA EU-MEX)

Technical Analysis Team of Mexican Citizens On the Free Trade Agreement with the European Union

INTRODUCTION

This is a preliminary and synthesised analysis of the content of what was negotiated by the Mexican executive branch of government with the European Union and it is based on the only text which has been made available to date, one which is not the final and official text of the Agreement.

In the interests of brevity and clarity, we will focus on substantial aspects without entering into technical details of what was negotiated. For more technical examination, a series of documents with more detailed analysis (although still preliminary) of the principle chapters of the EU-Mexico FTA available in RMALC [Mexican Action Network on Free Trade]. Included in these documents are analyses of themes such as intellectual property rights, the agricultural sector, and others that are not included in this synthesis document because there was insufficient time to integrate them.

In both cases, the analysis is preliminary and carried out over a short period of time because the federal executive branch is attempting to gain Senate approval during the first week of the next session without having turned over the official text of the agreement. The next Senate session begins on March 15 and the government’s hope is that the agreement will come into effect on July 1, 2000.

We hope that this document will be useful to begin discussion, deepen understanding of the agreement’s content and enable the development of positions in the face of the attempt to ratify the agreement without citizen consultation.

1. FTA EU-MEX and Democracy

A)Absence of consultation during the negotiation. The Senate must provide widespread information and promote discussion of its content.

As is the custom in our country, the negotiations between Mexico and the European Union were carried out by the Mexican government without providing sufficient quality information to citizens about the concrete content on the terms of what was being negotiated. Not even the Senate of the Republic was informed in

depth or in a timely manner. The only ones who were consulted were the members of a small group of leaders of big business who were not representative. Nobody -- not even other business leaders -- gave them such power of representation. Much less were ordinary people consulted -- the ones who will live in their flesh the consequences of whatever agreements were reached.

Now the federal executive is attempting to have the Senate of the Republic ratify the agreements that were reached with the European Union and thereby turn them into laws that will hold the same legal status as the Constitution. It is pressing for a rapid ratification because President Zedillo will travel to Europe in the latter part of March and wants to have a large publicity event announcing that the Mexican end of the FTA can enter into effect, pressuring in this way some countries such as Italy where there are strong debates about ratification.

We consider that it is indispensable that the Senate open a lengthy period for Senators to come to know the agreement, to carry out discussion amongst themselves, and for consultation among various sectors of the population on the results of the negotiations before moving to vote on and ratify the EU-Mexico FTA.

The negotiations ended on 24 November, 1999, but the definitive and legal text of the agreement is still not known. SECOFI [Mexico’s Secretariat of Commerce and Industrial Promotion] has given limited circulation to an unofficial text of the agreement and has begun discussions with some Senators to give the appearance that there was sufficient time for analysis and discussion, thereby achieving a ratification during the first week of the next sessions of the Congress of the Union, beginning 15 March. Nevertheless, as with any law, form is content, and the analysis by the legislative branch cannot begin until it has the legal text. In a law, each word matters and a preliminary text cannot be debated.

This is not simply an issue of procedure. We must avoid what happened in the NAFTA process in which a draft was circulated and turned over to the Senate. This is what the Senators supposedly analysed and ratified. Later, the official text was made known and significant changes were found to have been made to the content, breadth and depth of the agreement.

We seek that the Senate give itself sufficient time to analyse what was negotiated by the Executive branch and this can only begin once the final and official text of the agreement is received. Moreover, this analysis must be carried out in consultation with various sectors of society. This Forum should only be the beginning of a broad process of consultation and analysis throughout the whole country.

B)Discussion of the content of the Free Trade Agreement and the European Union begins by stating that there is not one single form of globalisation. To criticise the concrete content of the agreement between Mexico and the European Union does not signify “globaphobia”.

If by globalisation we mean the growing inter-relationship between national economies, it is to a certain extent inevitable. It is at least a dominating trend that tends to accelerate because of the possibilities offered by present-day science and technology. If things were only so inoffensive as that, it would be unlikely that anyone would try to do something to avoid it. The inter-relation between human beings and nations on the planetary scale is not in and of itself something bad. What is an enormous challenge is to direct globalisation towards the

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interests of the majorities. The polemic debate is over the orientation and characteristics of globalisation.

The dominant neoliberal ideology attempts to avoid the debate by pretending that the present form of globalisation in the free trade mode is the only one possible. The argument of the inevitability of globalisation as a tendency towards the inter-relationship of economies at the global level describes the present dominant form, which is not the only one and we would argue not the best, although it makes itself seem as if it is unique and inevitable. Anyone who dares to oppose the neoliberal form of globalisation is accused of being globaphobic and reactionary in the original sense of the word -- that is to say trying to turn back or stop history. In short, the first step to advance this discussion is not to confuse globalisation in its generic sense with the neoliberal form. It’s good that development, human rights and solidarity be globalised, but not uniformity and the loss of differences. It’s good that national economies become inter-related, but not that everything be left to the whims of the market -- the law of the jungle in which the large devour the small.

No country can or should remain isolated from the dynamic of the global economy, but this does not mean that the theoretical orientation of free trade be the only (much less the best) form to insert an economy into globalisation. The dynamic of the economy and of global trade is a reality to be taken into account in any effort that is intended to elaborate a national project in which viable and sustainable programs are desired. But we do oppose permitting the global market to define, with the assent of our governments, the future of our country and our people. The place to which we have been assigned in the globalised economic system is not acceptable. We must build democratically a national project of sustainable development and from there insert ourselves into the dynamic of the world economy.

The dominant process of globalisation is guided by the Theory of Free Trade. Free Trade is much more than the free circulation of merchandise across borders. Free Trade is a theory that makes the market absolute as the great regulator of the economy. According to this theory, the global market in and of itself assigns and develops the best possibilities for each country. The theory makes concrete the mercantilist concept of the 19th century that put forth the idea that the market distributed resources and wealth in the best way possible. To insert ourselves into the global economy guided by this theory of free trade is to renounce being the active subjects of our future and to allow the market to decide for us. According to this position, it is not necessary to think about what country we wish for or about what we could be. Simply, we have to eliminate anything which blocks the global economy and the market itself will take charge of offering us the best from all countries.

The differences between the dominant position and the alternative vision that we have proposed1 are not between opening trade or not opening trade, or between State and Market. The fundamental differences are twofold: 1) Having a national plan, and from that searching and struggling for our place in the global economy as opposed to not having one and leaving to the market the definition of a national

1 This proposal may be found in the Collective: "Alternatives for the Americas – Building a People’s Hemispheric Agreement." Multiple Editions in four languages: English by The Canadian Centre for Policy Alternatives and Common Frontiers, Montreal, Canada 1999; English by the Alliance for Responsible Trade, Washington USA 1998; Spanish by Red Mexicana de Acción Frente al Libre Comercio, Mexico December 1998 French: by the Réseau québécois sur l’Intégration continentale, Québec Canada 1998 Portuguese by the Secretariat for International Relations of the Conféderation française démocratique du travail (France) and the Secretariat of International Relations of the Central Única dos Trabalhadores (Brasil) Brazil February 1999. (Other editions will continue to appear; see web site: www.web.net/~comfront )

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project, and 2) We think of an economy that is regulated nationally and internationally in such a way as to assure peace, democracy, sustainable development and economic stability with social well-being. Globalisation must be guided by the people, by the great interests of humanity and not by maximum profit for a few. To abandon all to they dynamic of the market is to suppress the destiny of humanity and of the planet to the logic of the profits of a few super-billionaires.

We do not oppose the existence of rules for trade or for regional and international investment. Our criticism of the dominant and imposed form of globalisation does not mean we propose a return to the past, closing and protecting our economies and fighting for trade isolationism. We want to be part of the world, but we want to participate in the definition of the world we want. We want our country to insert itself into the global economy from its national project of a fair, sustainable development that is achieved by democratic consensus. We do not wish that the definition of the future of our country be left only to free market forces. Rather, we want to define the country we want and can be, and from that point fight for our place in the world. We do not wish to do this in the way that is presented in the current agreement with Europe, which negotiated rules or rather deregulated them so that it becomes the market that defines things. We are not globaphobes. We seek a different kind of globalisation and we have proposals to achieve it.

C) Priority to social development

We consider that the rules that were agreed upon in the pact with Europe do not help to overcome, or even to reduce, the problems of our economy, much less reduce the way this country lags behind on social issues. We have proposed alternative rules to regulate the global economy and in our hemisphere that are based on a different economic logic: trade and investment must not be ends in themselves, but rather instruments for just and sustainable development. Our proposal gives the priority to a social logic, and for this reason we include matters such as migration, human rights, gender equality, the environment, and minorities, all of which represent themes and groups that were excluded from the negotiations.

The pact with Europe does not even include agreements on labour and environmental matters, much less on issues such as labour migration. NAFTA, while very limited and with few possibilities for making them effective, includes side agreements on labour and environmental matters. The pact with Europe steps backwards by excluding these themes.

Our government has stated in various international forums that these matters ought not to be included because they result in protectionism. The reality is that it considers that respect for labour rights, social security and the environment takes away from our competitive advantage. It believes that our country competes to the extent that it can maintain the conditions of life of its inhabitants in a deteriorated state. It believes that if workers are paid fairly and if environmental costs are added to the cost of production, our exports will not be very competitive. It clearly manifested this position in the negotiations, even though it denies it in the media, that the living conditions of its people are not important. What our government is interested in is to open markets for the large corporations that operate in our country.

It is true that the agreement with Europe includes the so-called democratic clause, but as we stated from the beginning of the negotiations and in lobbying efforts in the European Parliament, this clause should be made operative within the

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treaty. The way in which it remains today makes it no more than a declaration of good intentions, given that there are no juridical mechanisms to make it effective.

By excluding social and environmental themes, our government turns out to be even more neoliberal than the governments of developed countries. Even President Clinton recognises that civil society ought to be heard, that globalisation must be achieved with a human face and that its benefits must reach the people, the micro-economy. This was his response to the huge social demonstrations carried out in Seattle during the WTO meeting; the same phenomenon was repeated in Davos, Switzerland. This was also the message of the recent UNCTAD meeting. When the world is discussing ways to achieve a globalisation that benefits people, here our government maintains a discourse that states that globalisation is inevitable and refuses to hear its society and to struggle to redirect globalisation to benefit millions of people.

Social benefit cannot be a chapter that is annexed or complementary to economic and financial accords: it ought to be the objective that guides such accords. Social policy cannot be a palliative for the victims of either national economic policies or the large international economic accords. National and international economic policies must achieve positive social effects. This principle is that which gives structure to all of our proposals and to the critique of what was negotiated with Europe.

D)Free Trade Agreements without social consensus are a lock on the democratisation of the country.

FTAs are a form of globalisation that implies removing national legislation and internal political decisions from economic strategy. If this supra-national legislation were approved democratically, there would be no problem. Nevertheless this is not the case with the FTAs that our country has signed and ratified.

In Mexico the neoliberal model is implemented without governments having proposed it in their political campaigns during elections. The citizens never approved it. The model was consolidated during the presidency of Carlos Salinas de Gortari who took power as a consequence of electoral fraud.

Once in power, the neoliberal technocrats went about changing laws, taking advantage of their status as the ruling power to convert their particular economic strategy into laws so as to make it less subject to the risks of democracy should the opposition gain power. These changes converted that economic model into law and even gave it constitutional status by eroding principles enshrined in the 1917 constitution that gave the state the mandated to regulate and guarantee social justice. Nevertheless, this legal framework could be modified once again in an eventual democratic change of the élite who hold power. For this reason, Salinas opted to sign and achieve the ratification of NAFTA as a legal framework that is supra-national and this way provide a safeguard against internal democratic changes.

The FTAs are the juridical expression of an economic strategy commanded by the major economic powers that operate on a global scale. Neoliberal globalisation is institutionalised in legal frameworks and supra-national institutions that to the extent that they are not achieved through democratic consensus become insurance against internal democracy. These actions leave opposition parties that may eventually gain power through elections a reduced space for operating in the area of orientation of the economy.

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For élites in power and their national and international beneficiaries, the present FTAs are a guarantee of continuity (or locks that are difficult to open) against the eventuality that the opposition gains power. The major aspects of this economic strategy convert themselves into international commitments and thereby exclude, or remove to a great extent, internal political decisions. For this reason, we state that approval of FTAs without consultation and consensus is a type of insurance against democratic change.

It would be different if this supra-national legislation were approved by the population, as was the case with the treaty that created the European Union which went through a referendum process in each of the countries that are now part of the union.

2. A PRELIMINARY, SYNTHESISED ANALYSIS OF THE CONTENT OF THE MEXICO-EUROPEAN UNION AGREEMENT.

Available on request as a complement to this part of the document is a series of detailed (although preliminary) analyses of the major chapters of the Free Trade Agreement between Mexico and the European Union. Here, we will refer only in a synthesised form to the central and most delicate aspects of the agreement.

A) The same principles as NAFTA: Globalisation without regulation or a national project: National Treatment, Rules of Origin without national content. Attraction of foreign investment without either regulation or mechanisms for stability. Privatisation publicly-owned businesses. Non recognition of asymmetries.

B) Unfinished negotiations and the assumption of anti-constitutional powers for future negotiations.

A first reaction to reading the preliminary text of the Free Trade Agreement with the European Union is that it describes a negotiation process that leave many unfinished points and that there will have to be new negotiations to deepen the trade liberalisation later. What is dangerous is that various articles state that the Joint Council (the body made up of representatives of both sides that is the maximum authority to administer the Free Trade Agreement) will agree on procedures. That is to say that they will continue negotiating, in some cases with time limits imposed, but in no place is there a statement to the effect that the results of new negotiations will be submitted for ratification and conversion into law by the Senate of the Republic as mandated by our Constitution. This is a smugglers’ attempt to give faculties to our representatives on the Joint Council of the Mexico-European Union Agreement to make modifications and to deepen the agreement. This we consider to be anti-constitutional.

International treaties are laws and as with any law they cannot be modified or added to except by the body that gave approval.

In our country, international treaties have the same legal status as our Constitution. They are supreme law, above any other federal or state law. Article 133 of the Constitution states:

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"This Constitution, the laws of the Congress of the Union which emanate therefrom, and all treaties made, or which shall be made in accordance therewith by the President of the Republic, with the approval of the Senate, shall be the Supreme Law throughout the Union The judges of every State shall be bound to the said Constitution, the laws, and treaties, notwithstanding any contradictory provisions that may appear in the constitution or laws of the States.”

It is true that article 89 section 10a of the Constitution, in defining the faculties and obligations of the President, give him the monopoly over international negotiations. There exists as well, however, another constitutional provision that must be taken into consideration so as to guarantee the correct interpretation of the legislative process that are subject to international treaties. This is article 72 section F, which states:

"In the interpretation, amendment, or repeal of laws or decrees, the same procedure shall be followed as that established for their enactment.”

That is to say that even when the head of the Executive brand, and with him his representatives on the Joint Council, are given constitutional faculties to hold any kind of international conventions or treaties, these must be submitted for ratification to the Senate of the Republic in order to make them law. And as to change them, as we have just seen in article 72 section F, any modification must also be submitted again to the Senate.

When asked specifically by Senator Jorge Calderón, the under-secretary of Secofi [the trade secretariat] said that it was implied that it must be approved again by the Senate. However, in a law, implications must be avoided. Moreover, NAFTA was modified between its approval by the Mexican Senate and its ratification in the U.S. Congress, and the Mexican Senate was not even officially informed. Since then, the rhythm of tariff reductions has accelerated and these changes were not submitted to the Senate either.

When the Senate received the Interim Agreement, which is the general framework for the technical negotiation that developed the Free Trade Agreement between the European Union and Mexico that we are now analysing, the Federal Executive branch sought a blank cheque to be able to negotiate on the basis of the principles that were accepted there, without having to again submit to the Senate whatever agreement was reached. This was avoided because of an amendment proposed by Senator Calderón of the PRD.

We believe that in law-making, one cannot hold to a declaration by an under-secretary to the effect that further ratification is implied. For this reason, we propose that it be made explicit in the text of the agreement, as a Mexican Reservation or in a Declaration that forms part of the agreement, that the representatives of the Mexican government cannot negotiate extensions, modifications or deepening of what was agreed to, except that to make them come into effect, they must be submitted again to the Senate o the Republic.

There are many matters that are given over to the Joint Council to extend the agreements. Here we offer some relevant examples.

1. Article 38 on Procurement by Public Enterprises in its first paragraph states:

“The Joint Council may adopt necessary measures to improve the conditions for effective access to purchases covered by either Part, or if such is the case,

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adjust the coverage of one Part so that effective access is maintained on an equitable basis.”

2. Article 10 of Annex XV linked to 39 on Competition is even more serious.

The theme of “Competition” is one of the central aspects of NAFTA, and in our view one of the most serious. This is to say that the accords ensure the supremacy of the rules of the marketplace even for public enterprises: these are to ensure behaviour only according to the criteria of price and quality. In the case of our relationship with the European Union, the negotiations did not deal in depth with this matter. The theme of public enterprises and the logic of competition that is covered in section d) and e) of article 5 of the Interim Agreement is not made concrete in the EU-Mexico FTA. The only matter where agreement was reached has to do with government procurement, described in article 4 of the Interim Agreement. With regards to “competition,” the only agreement had to do with a mechanism for cooperation so that each country makes its own legislation effective. This mechanism for cooperation is dealt with in Annex XV.

Nevertheless, this article 10 of Annex X affirms: “The Joint committee may modify this annex”. Note that it says Committee and not Joint Council, which is much less in the hierarchy. Further, the clarification in article 50 states, “The annexes of this Decision, including the appendices of those annexes, constitute an integral part of the same”. Once again, we have a reach for extra-constitutional faculties.

In dealing with a theme that we have seen in other Treaties such as NAFTA that is central and already agreed to, in our opinion in negative terms for Mexico, and it is evident that the negotiation left it unfinished, simply to leave it so that a committee can modify it without specifying the extent of such modifications and without clarifying that the result of such a modification must be ratified according to the procedures established by the laws in each country is to seek plenipotentiary powers and as such is unconstitutional.

3. The matter of Intellectual Property.In this them, the agreement was only to create a mechanism for cooperation on

the matter and adhere to a series of international accords to which both sides subscribe. Nevertheless, in an unconstitutional manner, the commitment is made to adhere to another three. Moreover, paragraph 4 of article 36 of the second decision commits the next legislature to ratify an international treaty.

This paragraph states the following:“Within the three years following the entry into effect of this Decision, Mexico and the Member States of the Community will have adhered to the Treaty of Budapest on the International Recognition of the deposit of micro-organisms for the purpose of procedure with regards to patents (1977 modified in 1980)”

The Executive branch can only commit itself to submit to the Senate its intention to sign and ratify such treaties, but cannot commit itself to adhesion or ratification as such.

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4. The extension of various category lists for the schedule for tariff reductions, especially with regards to agriculture and fisheries: affirmation that this will be done by agreement of the Joint Council.

In articles 8 and 0 of Section 3 – Agricultural and fisheries products, from Title II – Free Circulation of goods, Chapter I – Elimination of Customs Tariffs, from File I of the EU-Mexico FTA establishes in various paragraphs that:

“The Joint Council may decide upon:a) The extension of the list of processed agricultural goods in category “7” of

annex I and II (Schedule for Tariff Removal of the Community and Mexico, respectively); and

b) The reduction of tariffs on the importation of processed agricultural products and volume limitsThis reduction of customs tariffs can become effective when, in trade between Mexico and the Community, tariffs applied on basic products be reduced, or in response to reductions that result from mutual concessions related to processed agricultural products ”

In Summary. The Joint Council, created by article 7 of the Interim Agreement and described in article 8 of the same agreement, shall be made up of members of the Government of Mexico and members of the Council of the European Union and of the European Commission. As well, article 3 of the Interim Agreement describes the areas of competence for the Joint Council in the following terms:

“... it shall decide the measures and schedule for bilateral, progressive and reciprocal liberalisation of tariff and non-tariff barriers to trade in goods, in conformity with pertinent norms of the WTO, in particular article XXIV of the General Agreement on Tariffs and Trade (GATT) and taking into account sensitivity with regards to determined products”

This should not give rise to the erroneous interpretation that the Joint Council will have plenipotentiary faculties. It must not be forgotten that when the Senate of the Republic approved the Interim Agreement, it obliged the Executive branch to submit for its consideration what was negotiated.

From analysis of the text of the EU-Mexico FTA, we can see that there are themes that were mandated for negotiation in the Interim Agreement and that were either not dealt with or were dealt with for the moment by limited agreements, leaving their extension until later negotiations. In many cases, the EU-Mexico FTA affirms that these themes will be dealt with by the Joint Council or even by the Joint Committee. Our demand is that the Mexican government apply its legislation and establish that its representatives on the Joint Council or Joint Committee may negotiate, and that the results of such negotiation may only become effective once they are ratified by the Senate of the Republic.

In effect, the entire EU-Mexico FTA is a decision by the Joint Council and it will be submitted to the Chamber of Senators; in the same way, any other decision by the Joint Council must be submitted for ratification by that body.

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C) Opening of the market at Europe’s convenience, non-recognition of asymmetries, and the principle of differentiated, special or preferential treatment for developing countries as recognised by the WTO.

In the Analysis drawn from the preliminary document prepared by Andrés Peñaloza and Senator Jorge Calderón that is available through RMALC upon request and entitled, “Access to Markets: Analysis and impacts on our production,” it is concluded that the EU-Mexico FTA does not reflect reciprocal, balanced and fair treatment in benefit of the people of Mexico, its workers, its business, under social and environmental norms that are in the interest of the nation.

The European Union obtained parity with the North American Free Trade Agreement, known as Nafta-Parity. Moreover, the EU obtained preferential treatment and faster access to the Mexican market, in superior conditions to those offered to date by Mexico to other countries with which it has signed trade agreements. As a consequence, the EU-Mexico FTA does not reflect treatment that recognises the asymmetries with Mexico as a developing country. On the contrary, Mexico yielded more than the EU.

An analysis of the application of national treatment, which is the heart of the EU-Mexico FTA, helps us see that behind the objective of guaranteeing “competitive conditions of equality” is the imposition of severe restrictions to deploy industrial policies and economic development measures. This is aggravated, moreover, by the fact that national treatment has been extended, since the NAFTA years and now with the EU-Mexico FTA, to services, investment and intellectual property.

Mexico must have opted for alternative criteria to those permitted in the WTO, such as equivalent access, and special, differentiated and special treatment so as to take asymmetries into account. Our recognised condition as a developing country, which Mexico has renounced once again, could have permitted not only a gradual opening in certain areas but also the creation of compensatory funds to confront the negative impacts and prevailing structural inequalities, just as within the EU such conditions are recognised among the 15 countries that make it up.

Preferential and special treatment, a key aspect for the recognition of asymmetries, was excluded from the discussions of the EU-Mexico FTA. This occurred in spite of the IX Iberoamerican Summit (16 November 1999), with heads of state and government present, among them those of Mexico, Spain and Portugal, took on the commitment to promote these criteria, included within GATT since 1964 in Part IV dispositions relative to “Trade and Development”. Once again, in the Declaration and Plan of Action for the Tenth period of sessions of United Nations Conference on Trade and Development (UNCTAD), held 12-19 Feb. of this year in Bangkok, Thailand, a section was dedicated to special and differentiated treatment.

In this respect, it is worthwhile to cite point 60 of the Bangkok Action Plan:“The basic principles of special and differential treatment (SDT) for developing countries are fully established and recognised in the various decisions of the United Nations General Assembly, UNCTAD and WTO. Modernisation and operationalisation of special and differential treatment, in particular in terms of maintaining and expanding export opportunities for developing countries, may be needed to adapt it to changing international trading conditions and to make special and differential

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treatment a better instrument for development.... Developing countries should be enabled to make full use of the SDT provisions.”

And in direct allusion to regional and multilateral agreements, the following recommendations were developed so that “new trade opportunities created to improve access to the markets of developed countries” achieve their goal:

“... should be complementary through operational programs, technical assistance activities, and financial resources for development….”

National treatment is justified in theory as a guarantee of non-discriminatory treatment and most favoured nation treatment. But when an economic relationship exists between unequals, as was the case of Mexico with the United States and Canada and is now the case with the European Union, where equality is the exception, it is iniquitous to speak of discrimination. Mexico ought to have opted for criteria of equivalent access and for special, differential and preferential treatment so as to take into account the asymmetries. Our condition as a developing country, recognised by the GATT-WTO and which Mexico inexplicably renounced in both NAFTA and the EU-Mexico FTA, would have permitted us not only a gradual opening of certain areas but even the creation of compensatory funds to confront negative impact and the prevailing structural inequalities.

Since NAFTA, and now with the EU-Mexico FTA, the Mexican government has given much for almost nothing. Our country needs to adhere to the demands of other developing countries to adopt a rational strategy that results in concessions from the North towards the South. This is more urgent when the will to apply special and differentiated treatment is absent and the themes and sectors of interest to less developed countries are absent.

The negotiation with the EU ought to have demanded that the community members, congruent with the social commitment adopted by industrialised countries in multilateral for a, reflect special and differentiated treatment consistent with "conceding a great priority to the reduction and suppression of obstacles that oppose trade (...) including customs duties and other restrictions that result in an unreasonable differentiation between those products in a primary state and once they are processed (...) abstaining from establishing or increasing customs duties or non-tariff barriers to importation (...) actively considering the adoption of other measures whose goal is to augment the possibility of increasing imports coming from contracting parties that are less developed". These "other measures" could as well include "concrete dispositions that tend to promote modifications to internal structures, stimulus to the consumption of determined products, or establishment of measures for trade promotion” -- aspects referring to products whose exportation offers or could offer a special interest to less developed countries.

Nor does the EU-Mexico FTA express the commitment by industrialised countries, among them those of the EU, to promote that their businesses and institutions confer incentives intended to foment and favour the transfer of technology to less developed countries, with the goal that they could establish a solid and viable technological base, as well as offering "the appropriate flexibility to permit less developed countries to open fewer sectors, liberalise fewer types of transactions, progressively increase access to their markets without fear of risking their development".

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And if these commitments do not have a contractual nature, in the sense that there cannot be reprisals for failure to fulfil such obligations, this does not mean that they do not have to be applied. With the EU-Mexico FTA, the opportunity was lost to move from declarations to norms with relation to the application of special and preferential treatment.

A) Europe and the United States: De-nationalised and protectionist rules of origin

“Rules of origin” refers to the requirements that a product must fulfil in order to be considered as originating in the free trade region and as such cross borders with the agreed-upon preferential tariffs.

As with NAFTA, and with the European Union now, the agreement on rules of origin demands a percentage of components from the region: that is to say, any of the countries of the European Union or Mexico. Specific Mexican content is not demanded.

These de-nationalised rules of origin have made more acute one of the most serious structural problems of Mexico’s system of production: the lack of connections between chains of productions. Under these rules, exports from Mexico increase spectacularly but Mexicans always end up with less. In 1982, manufacturing exports (apart from the maquiladora assembly plants) had 91% Mexican content. By 1996, this was only 37%. This means that export growth involves only a few large companies that do not bring along with them the rest of the productive capacity because they are not buying components in Mexico. And this is the explanation for the fact that in spite of an explosion of exports, we continue to have a trade deficit that results from the high import content of our exports. Mexico tends more and more towards being an assembly plant country than an export power.

It is especially serious that the agreement with the European Union includes these kinds of rules of origin, given that during the NAFTA years the U.S. content of Mexican exports has increase. This means that many Mexican products that could potentially be exported to Europe may not be because they cannot fulfil the high Europe-Mexico content demanded by this new agreement. At the same time, Europe has a well-integrated industrial system within its own community and may easily export to Mexico without having to purchase significant quantities of Mexican components.

These rule of origin do not benefit Mexico, and turn out to be protectionist for Europe against the United States. It would be difficult for U.S. businesses with installations in Mexico to export to Europe under the EU-Mexico FTA preferences because of the high content of U.S. components.

Rules of origin by sector are analysed by Andrés Peñaloza in the preliminary document previously cited [and available in Spanish through RMALC].

E) Public Works and Procurement to International Tender and Transnational Purchases: the De-naturalisation of public enterprises.

These matters are agreed upon in title III and IV articles 25 through 39 and annexes VI through XV. In substance, they propose the following main theses. A more detailed analysis can be found in the document available [in Spanish] through RMALC.

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1. The substance of the commitments are those which were conceded in NAFTA. In some aspects, the text is the same or even states that the agreement incorporates certain articles from NAFTA. Such is the case of annex XII in which Mexico’s tender procedure is described as that which is agreed upon in articles 1002 and 1007 through 1016 and that of the European Union is that of the WTO dispositions. (It affirms that they are equivalent and this needs to be verified.) Five years of negative experience of the effects of NAFTA are ignored and NAFTA continues to be the parameter for our country’s negotiations.

2. Inclusion of National Treatment (article 26) in the same terms as NAFTA and performance requirements are prevented (article 28). Here, the Mexican government is impeded from using resources extracted from the Mexican people for the benefit of Mexicans and as a tool for national development. This reinforces article 27 on rules of origin that do not include national content (only the collection of the parts) and article 28 that prohibits special conditions such as national content, technology transfer or any other special requirement.

This means not only that public sector purchases cannot be used as a tool for the promotion and development of national industry, but also that the government cannot even make demands of transnational companies from which the state make purchases or contracts services. Included here is construction, which once purchased components in the country that were needed.

Why do the resources of Mexicans that are managed by the state have to be submitted to international tender competitions while the large multinational corporations (private resources) may make their purchases or contracts guided only by their own interests without even have to submit them to tender? Public purchases and contracts are submitted to tender while the large corporations freely decide their purchases and contracts without the possibility that Mexican business can compete.

3. Asymmetries not taken into account in the negotiation. (annex XI on exceptions)

The Mexican government negotiators do not think of the country or of Mexicans. It is incredible that the less developed countries within the European Union receive special treatment in this regard and conserve that right with respect to Mexico and our negotiators did not take advantage of this reality to demand fair treatment for our country as well given the asymmetry and not free trade treatment. The Mexican government says that it did recognise asymmetries, but this is reduced to a short period of gradual transition. In part B of annex XI privileges are recognised for Austria (paragraph 6), and Finland and Sweden (paragraphs 7 and 8). Here, their reserves with regards to national treatment are recognised. And the most interesting is that in the case of Sweden and Finland, the document states: “When a purchase specifies important national policy objectives of the governments of Finland or Sweden respectively, they may consider it necessary to suspend the national treatment in this title for a particular purchase” (Annex XI part B, paragraph 8).

Moreover, Europe gave exceptions to obligations under this title for purchases associated with basic social policies such as the purchase of agricultural products that make up part of social subsidies.

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4. Article 39 on Competition, or preventing non-competitive practices: examined earlier with regard to anti-constitutional faculties given to the Council. Certainly in the EU-Mexico FTA there is nothing like chapter XV in NAFTA on

government-owned enterprises and policies of competition. There, these were submitted to anti-monopoly law when in the Mexican Constitution these are explicitly not so considered.

Where public enterprises are define only by their ownership and not by their function or the meaning they have for national development (1505)

Where public enterprises are de-naturalised by submitting them only to the criteria of price and quality (1502 paragraph 3)

There is not the obligation to change our laws to impede non-competitive practices (1501) In reality these were already changed because of NAFTA. What exists in article 39 and annex 15 of the EU-Mexico FTA is a commitment to make those laws effective and a long annex which promotes cooperation and consultation to achieve the goal that each country apply its own laws to favour competition and to avoid non-competitive practices.

We believe that these themes are not dealt with explicitly in the text of the EU-Mexico FTA because they were very polemical during NAFTA and now they are hidden. But their spirit is present in the Codes of Liberalisation of the OECD which are not referred to under the themes of government procurement or competition, but are referred to throughout other parts of the text.

B) Foreign Investment: opportunities in exchange for nothing 1. The lack of precision on legal rigour in the text seems to us to be

reprehensible. It consigns matters to other international instruments where substantial parts of what is agreed to, without precise and specific references. This appears to us as legal slovenliness with dangerous consequences, for example in the event of a conflict, each time the prevalence of one instrument over another is not defined. Nor are Mexican reservations to adherence to those international covenants regarding the Mexican legal framework on investment and related payments.

2. Article 35 of the agreement obliges us to revise all of our legislation with respect to investment within three years to make it compatible with the international agreements on investment without specifying which agreements are referred to. Here, our Constitution is not complied with, in that it states that International Agreements must be coherent with our Constitution and not that our legislation should change to adapt itself to international commitments.

3. The agreement includes the substantial and most retrograde lines and clauses of chapter 11 of NAFTA, the Codes of Liberalisation of the Movement of Capital and of Liberalisation of the Invisible Current Operations and National Treatment Instrument of the OECD, as well as the Multilateral Agreement on Investment and it clones: the Agreements on the Promotion and Reciprocal Protection of Investments.

Of course, just as in NAFTA, the agreement deregulates both direct and speculative investment. Performance requirements cannot be demanded. National treatment must be granted and the agreement makes it impossible to orient or regulate investment so that it plays a role in national development.

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The attempt is made to authorise maximum protection for foreign interests, which means full freedom for foreign investment flows, among them those of a speculative nature, without taking on any commitment to national development while full guarantees and rights are demanded. The terms agreed to in the accord on the theme of capital movements will aggravate various problems, translating themselves into greater instability of economic growth, financial and exchange vulnerability, the widening of regional, sectoral and productive inequalities, the concentration of wealth and income, deterioration of the environment and of life and working conditions of the population.

It is particularly serious that with regards to investment, the EU-Mexico FTA is rooted in other reciprocal protection agreements that have already been signed or are about to be signed. This is because these agreements, even after a democratic change of government in Mexico, will remain in effect for between 20 and 25 years after a decision to break with them. This is a clear example of what we have stated about international agreements such as NAFTA and now the EU-Mexico FTA as locks on democracy.

G) Dispute resolution without the participation of those who are affected. (Decision 1 Title VI, Annex XVI; Decision 2 Title V and Annex III and in both cases Appendix I).

The mechanism seems simple and balanced. The goal is to achieve mutually acceptable agreements within the Joint Committee or, failing that, by means of the three-person arbitration panel (one from each side and a mutually-agreed-upon chair, or a lottery among three nominees from each side). The process will be slow and could last more than one year. A serious deficiency derives from the fact that there is no clarification of the participation of the involved sectors. There are consultations and efforts for consensus, with or without arbitrators, among the representatives of government within the Joint Council. It amounts to an assumption that governments represent the common good.

The mechanism implies a long process. First the parties will try to reach agreement. If one is not reached, an arbitration panel is named that will submit a preliminary report to which the parties can make observations. Later there will be a final report from the panel, whose resolution will be obligatory.

To determine the measures to be taken after a resolution, first there will be an attempt to find consensus between the parties. If this is not successful, the arbitration panel will determine the measures. If these are not fulfilled within a reasonable time period, compensation may be demanded or even equivalent benefits suspended in the sector of the dispute, or even in other sectors. For such a suspension of benefits or compensation, again the procedure is to reach a consensus and if one is not reached the winning side determines a solution and this is ratifd by the arbitration panel.

The panel must adhere to the rules of international public law in the interpretation of the dispositions and the relevant legal instruments involved (The General Agreement, the Interim Agreement, and the Decisions of the Joint Council of the EY-Mexico FTA).

The side that affirms that the other is violating some term of this treaty has the burden of proof; the side that affirms that an issue involves a previously-seen exception has the burden of proof.

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The basic principle of the code of conduct for the arbitrators assures their independence and honesty. Candidates for the role must be knowledgeable about the issues to be dealt with and reveal any interests they or people near them (partners, clients, etc.) may have that could be used to impair their independence or give the appearance of dishonesty. This disclosure must be in writing to the Joint Committee. Candidates must also maintain confidentiality about information that is dealt with and not use it to their own benefit.

Behind this apparently friendly mechanism to resolve disputes are various themes of greater depth:

a) It is a top-level process without the democratic participation of affected sectors or of society. It is a process among government representatives in the heart of the Joint Council. For Mexico this is serious in that there are no real and democratic mechanisms for business or social interests, and it would be a lot to suppose that the federal executive branch represents the national interest.

b) There are a series of imprecisions and legal gaps.Nowhere does it state who can initiate or participate in the procedure. NAFTA

does include these, although we believe it does not have adequate mechanisms.Nor does it state whether affected sectors may intervene in the naming of the

Mexican arbitrator and in the proposals for a chair of the arbitration panel.Nor does it state who has the right to make observations about the reports of

the arbitrators. There is no mechanism established so that those who are affected or the society in general can offer their opinions. Events may result in the sacrifice of a sector without its having mechanisms defined for its defence.

Nor does it state who covers the costs of the procedure.These matters could be resolved with internal laws that legislate the faculties of

the government representatives to the Joint Council, as well as on the mechanisms for naming arbitrators, the participation of sectors of society in manners that could limit or mandate government representatives in the Joint Council.

c) The measures to be taken after the resolution by the arbitration panel may affect and entire sector or even other sectors. For this reason it is unfair that the punishment is meted out to a country and not to a particular company that does not fulfil the agreement, especially given that the society involved was not necessarily consulted before the agreement was made.

d) The resolutions of the final report of the arbitration panel are obligatory without an evaluation of the intervention by the national authority of the losing side. This is aggravated by the fact that, as we have stated, mechanisms are not established for the direct defence of the accused party. As such, the process denies a fundamental legal principle that is that the accused party have mechanisms for a legitimate defence. In practice, the right to legal protection that is guaranteed in our Constitution is denied.

e) A fourth aspect does not have to do with the procedure itself but rather with the content of potential disputes. How can arbitrated resolutions be imposed to force compliance with commitments that Mexico made without consulting diverse sectors of the society in general that may suffer consequences? Arbitration is correct when all

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the parties have truly committed themselves to follow certain lines and economic, financial and trade commitments. But how can an arbitration panel impose decisions on matters in which those who are affected were not consulted in making the agreement? And more: when the Senate of the Republic attempts to ratify the agreement without consulting the citizens and when they themselves have no possibility of knowing the legal text until just a few days before the vote.

3. BY WAY OF CONCLUSION

Mexico must diversify its markets and integrate itself into the global economy without such great concentration in the area of the United States. For this reason, it is negotiating agreements with the European Union and with other regions. This preliminary analysis must continue to be deepened, based on the official and legal text if the EU-Mexico FTA that is still not available. Nevertheless, this analysis already gives sufficient elements to demand that the Senate not ratify it and that it be returned to the Executive branch to renegotiate substantial aspects.

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