On February 1, 2021, the government of the United Kingdom (UK) formally requested in a letter to New Zealand, the treaty’s depositary, its accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Yesterday, Wednesday, June 2, 2021, during the fourth ministerial meeting of the CPTPP Commission, ministers and officials from the countries of the free trade area, gave the green light to the start of accession negotiations with the United Kingdom.
It was therefore agreed that a working group would be set up to negotiate the terms of the UK’s accession to the Treaty.
CPTPP is a free trade agreement signed by 11 countries, however it only applies – for the moment – between Mexico, Japan, Canada, Australia, New Zealand, Singapore and Vietnam; while Chile, Peru and Brunei have not yet completed the process of adopting the treaty.
The CPTPP allows tariffs between member countries to be reduced by up to 95%, and with the admission of the UK, the nominal GDP of the area covered by the Treaty would be almost at the same level as that of the EU.
In this regard, UK International Trade Secretary Liz Truss said:
The UK government will publish its outline approach, scoping assessment and consultation response before negotiations start in the coming weeks.
Source: Noticias Bancarias, Reuters, El Universal, GOV.UK, Aristegui Noticias.
Following up with UK news, let’s not forget that Mexico and the UK signed the Trade Continuity Agreement and the Agreement relating to Article 12 of the Trade Continuity Agreement In December 2020.
The purpose of this agreement is to maintain preferential tariff preferences between both countries after the UK’s exit from the European Union.
As mentioned in our Legal Alert of April 30, both agreements had to be published in the Official Gazette of the Federation (DOF) in order to become legally binding in Mexico so that goods from the UK can benefit from tariff preferences.
Yesterday, Tuesday June 1, 2021, both Agreements were finally published in the DOF, as well as several instruments necessary to guarantee the preferential access of products between Mexico and the UK, including a mechanism to return tariffs paid on UK products as of January 1st. For more information, please see our Legal Alert of June 2, 2021.
This week, Index held the “third labor forum” event in which the Mexican ambassador to Canada participated. According to the media, the Ambassador said that the government of Mexico and Canada are planning to establish a working table to avoid conflicts that could trigger a USMCA dispute settlement mechanism.
More information: Milenio.
With the United Kingdom´s (UK) withdrawal from the European Union (EU), a new trade agreement was necessary between Mexico and the UK to maintain preferential tariffs and market access.
For this reason, in December 2020, the Trade Continuity Agreement between Mexico and the UK was signed, as well as the Agreement related to Article 12 of the Trade Continuity Agreement between Mexico and the UK. Both agreements are aimed at maintaining and expanding preferential market access between the two countries.
As mentioned in our Legal Alert of April 30, the Trade Continuity Agreement had to be published in the Official Gazette of the Federation (DOF) to become legally binding in Mexico.
Today, Tuesday, June 1, 2021, the Trade Continuity Agreement was finally published, entering into force on such date. The following decrees were published in the DOF:
In addition, the Mexican Ministry of Treasury also issued the Resolution that establishes the General Rules related to the application of the customs provisions of the Continuity of Trade Agreement between Mexico and the UK.
In this regard, Rules 2.2.2 and 2.2.3. provide the mechanism for the refund or compensation of duties paid by importers of goods that qualified as originating in the UK and were imported into Mexico as of January 1, 2021; as noted, this is the date that the UK’s exit from the European Union became effective, and prior to the entry into force of the Trade Continuity Agreement in Mexico.
In addition to the publication of the aforementioned decrees, the following five instruments necessary to guarantee preferential access for products between Mexico and the UK were published in the DOF:
The purpose of these instruments is to provide the necessary information to economic operators in Mexico regarding the requirements to access the preferential quotas provided in the Continuity Agreement.
The Trade Continuity Agreement establishes that Mexico and the UK will begin negotiations for an ambitious, modern and comprehensive free trade agreement as soon as there is an opportunity and within one year of the entry into force of this Agreement. In other words, before June 1, 2022, both countries commit to start negotiations for a free trade agreement that will seek to strengthen and expand preferential access between both markets.
Finally, both countries commit to make every effort to conclude the negotiations of the free trade agreement within a period of three years from the entry into force of this Agreement, that is, before June 1, 2024.
With the United Kingdom´s (UK) withdrawal from the European Union (EU), the need to sign a new transitional trade agreement between Mexico and the UK arises so that the rights and obligations, which established preferential trade conditions as well as a platform to promote greater trade liberalization between the parties, are maintained between the two countries.
On the one hand, the 1997 Economic Partnership, Political Coordination and Cooperation Agreement between Mexico and the European Community and its Member States (hereinafter referred to as the EU-Mexico FTA) ceased to govern trade relations between Mexico and the UK. On the other hand, the Withdrawal Agreement signed between the UK and the European Community, which extended the period in which the UK would be treated as a member state of the EU, ended on December 31, 2021.
Therefore, taking into account that the UK is Mexico’s sixteenth trading partner, the Ministry of Economy (SE) signed the Trade Continuity Agreement with the UK and Northern Ireland in December 2020 with the aim of maintaining and improving preferential trade conditions while these countries negotiate a new trade agreement, i.e., this agreement governs the relationship on a transitional basis.
The Senate of the Republic approved the Trade Continuity Agreement between Mexico and the United Kingdom, as well as the Agreement related to Article 12 of such agreement, which was published in the DOF on April 23, 2021.
However, both agreements have not yet entered into force in Mexico because the text has not been published in the DOF.
Agreement relating to Article 12 of the Continuity of Trade Agreement between Mexico and the United Kingdom.
The Agreement relating to Article 12 establishes that the United Kingdom will apply the provisions of the Continuity Agreement as of January 1, 2021. In other words, imports from Mexico into the United Kingdom enjoyed uninterrupted preferential access.
In Mexico, the situation for products from the United Kingdom is different. Per Mexican Law, the Continuity Agreement and the Agreement relating to Article 12 not only has to be approved by the Senate, but their text has to be published in the Official Gazette in order to produce legal effects.
Although the text of the agreement has not yet been published, the Trade Continuity Agreement at the time they are published in Mexico will have retroactive effects until January 1, 2021. In other words, during the period between January 1, 2021 and until the publication of the trade agreements in the DOF, imports originating in the United Kingdom have to pay the General Import Tax (IG).
That said, a Mexican importer will be able to benefit from the retroactive application of the Continuity Agreement in Mexico through a system for the refund of duties paid on goods that qualified as originating from the UK and that were imported into Mexico as of January 1, 2021. Such mechanism was announced by the Ministry of Economy (explanation in webinar) and will be subject to the provisions determined by the Ministry of Finance and Public Credit (SHCP) in conjunction with the Tax Administration System (SAT).
The Continuity Agreement establishes that the trade-related provisions of the EU-Mexico FTA will be incorporated into and be a part of this Continuity Agreement, with some changes. Therefore, its ratification and application in Mexico does not entail the modification of laws or regulations that are currently in force.
However, for the proper implementation of the Continuity Agreement, the publication of the following in the DOF is required:
Furthermore, as a result of the implementation of this agreement, it will be feasible for Mexican producers to expand preferential access for agricultural products such as bananas, asparagus, honey, molasses, among others.
Likewise, preferential access will offer a benefit to exports from the south-southeast of Mexico in states such as Tabasco, Chiapas, Veracruz and Yucatan.