Mexico and Japan plan free trade deal

Mexican-Japanese trade flows have dwindled

Mexico and Japan plan to seal a free trade agreement (FTA) within a year to reinvigorate their declining economic ties.

Japanese Prime Minister Junichiro Koizumi and Mexican President Vicente Fox announced the move in a joint statement at the Asia Pacific Economic Cooperation (APEC) summit in Los Cabos, Mexico.

Mexican farm products will not become a threat to Japan

Vicente Fox
Mexican President

"In order that Japan and Mexico will benefit, without delay, from the strengthening of the bilateral economic partnership, the two leaders shared the view that the two governments should start official negotiations for the agreement in November 2002 in Tokyo," they said.

Mexico exports goods - mostly crude oil, pork and machines - worth about $2bn to Japan each year, while it imports Japanese machinery, auto and electronic parts worth $4bn.

But since Mexico entered the North American Free Trade Agreement (NAFTA) with the US and Canada in 1994, trade between the two has declined.

A free trade agreement with Japan would give Mexico access to the world's second-largest economy and provide Japan with a back door to the US market.

Backdoor deal

Mexico has been aggressive in negotiating FTAs around the world, signing 32 to date, including one with the European Union in 2000.

Exports by US and European companies to Mexico are tariff free, while Japanese products face average duties of 16%.

Japan's share of Mexico's imports has fallen to 4.8% from 6% since Nafta was launched, while Mexico now accounts for just 0.3% of Japan's imports, down from 1.6%.

Mexican economy minister Luis Ernesto Derbez said a deal with Japan would open a lucrative new market to Mexican farm goods, while attracting new industry and technology from Japan.

But Mr Fox downplayed farmers concerns that their industry would be threatened.

"Agriculture is also sensitive for Mexico," he said.

"Mexican farm products will not become a threat to Japan."

An FTA with Mexico would only be Japan's second after signing a deal with Singapore in January.