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Many Japanese corporations operating in Mexico have been established by taking advantage of Maquiradora system introduced by Mexican government as one of the initiatives for inviting foreign capitals in form of direct investments into Mexico. However the advantages enjoyed by manufacturers under Maquiradora system will become invalid from January 2001 according to NAFTA arrangement for the re-exporting goods for NAFTA area.
As duty-free importation of the parts and components for re-exporting manufactured goods is coming to an end, many Japanese manufacturing corporations will be positioned less advantageous and less stable in the competitive market than those countries concluded FTA with Mexico.
Unfavorable business circumstances for Japanese corporations may force them to retreat from Mexico in the worst case, though it, of course, fully depends on how seriously their products and market will be negatively affected.
The Mexican government started taking rescue measures temporarily for Maquiradora corporations by introducing Sectorial Promotion Programs (SPP) in order to lessen the burdens of import duty for specific goods, parts, and products.
However, goods and products out of this scope are all subjected to import tariffs which results in inflating the cost of products leading them not so competitive.
In addition, above measures are only enjoyable by manufactures, but not eligible for such industries and corporations as engaged in services and trades, accordingly our members are put completely out of the scope.
Furthermore reportedly Mexico is currently talking or negotiating FTAs with MERCOSUR, EFTA countries, Singapore and so on.
(Actually Mexico signed up the FTAs with EFTA countries in early November)
As the number of Mexican trade partners through FTA grows, we cannot expect prolonged and/or lasted treatment of these temporal rescue measures.
FTA can solve all the problems arising from trade and investment with immediate and straight effects.
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| (2) |
Mexico signed FTA with the E.U. in March this year which has been enacted from July 1st, giving us a strong impact.
The E.U. member countries have more or less similar economic and industrial structures and thoughts as Japan does, this means Japanese industries have been thrown into critically inferior position compared with the E.U. industries in the market in Mexico and its vicinities.
In this regard, for Japanese industries, securing a play ground in Mexico governed by similar rules commonly shared with the E.U. is definitely indispensable.
The disadvantages coming from non-existence of FTA will surely become more and more critical for Japan in comparison with the E.U.
For example, instantly from July, Mexican import duty (10%§`15%) has been nullified for automotive engines and turbine generators of the E.U. origin.
Likewise import tariffs for the E.U. origin of steels, plastics, cables (including optical fiber) and other sizable industrial products have been reduced by 10%§`29% from July and the tariffs are scheduled to be completely eliminated on January 1st, 2007 at latest after process of gradual reductions for 6 years.
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| (3) |
Steady workings and talks for establishing FTAA (Free Trade Area of the Americas) frame work is being pushed through involving whole American continent and Caribbean countries, to create a free trade area, the biggest ever, aiming the completion of negotiations by 2005.
In order to secure access to this enormous economic area, invaluable for Japan is to take an immediate step to negotiate, conclude, and equip with FTA with one of key countries of the area, say Mexico.
Mexico, situated in the center of American continent geographically and having successfully concluded FTA with 28 countries, has rich experiences accumulated through the negotiations on FTA with a variety of countries, and we strongly believe Mexico will sit at the negotiation table with a great flexibility and with full understanding and consideration for the specific problems unique to the negotiating country, namely Japan.
Mr. Vicente Fox Quesada, president-elect, visited Japan when he was the Governor of the State of Guanajuato, appealing for closer economic relationship between Japan and his State as well as Mexico by increased trade and investment, continued dialogue and human contact.
Judging from the performances of Mr. Fox in the past years, we believe the eagerness of Mexico for the negotiation of FTA with Japan and its trade policy will remain unchanged also under the new Mexican administration.
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| (4) |
Mexican interest and purpose in FTA, we believe, is existing in fulfillment of closer and more enhanced economic and social relationship with Japan, expanded direct investment from Japan, especially in the sector of supporting industries, which will contribute much to reinforcement of competitiveness of SME's and job creations, human resources development.
The adjustment of Mexican trade structure which depends today as high as 80% on the U.S. is, we also believe, one of the reasons behind FTA with Japan.
It seems for us that Mexico is not much expecting an increased export to Japan but expecting it as discreet and indirect effect of FTA.
Accordingly, negative effect on Japanese economy and industries which may come from the FTA, if any, will be limited to marginal one.
On the contrary, we dare to say Japan may fully and one-sidedly enjoy various favorable effects offered by FTA with Mexico.
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| (5) |
So-called sensitive industrial areas exist in both country needless to say. For Japan they should be industrial sectors such as agriculture, fishery, dairy farming, whereas for Mexico they should be energy sectors centered on oil industry.
We believe that both governments can manage to solve possible issues arising from these sectors, consistent to WTO rules.
For example, Mexican pork meat, which holds the biggest shares of Japanese sensitive industrial sectors, is only 2.8% (19 billion yen in 1999) of Japanese-Mexican total trade amount (690billion yen in 1999), or 6.5% of Japanese total pork meat import.
We understand meat may be waived from immediate negotiation by putting it temporally on a waiting list for negotiation.
A recent surge in pork meat import from Mexico, we understand, is attributable to the change of circumstances in the supplying countries surrounding Japan.
We also believe handling sensitive areas as the areas for waiting negotiation, seemingly as seen in the other FTA negotiation cases, will be recognized as GATT Article 24. consistent.
With respect to Mexican sensitive area, it will possibly be the capital liberalization of Mexican oil industries, however presently the interest of Japanese capital in Mexican oil industries seems not so high as Americans and Europeans.
On the other hand, Japanese import of Mexican oil and its products shares only 3% of total trade amount of both countries.
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