23 | JUL | 2019
Can Mexico and other emerging countries compensate the loss of the European market for the UK?
Anti-Brexit demonstrators wave EU and Union flags outside the Houses of Parliament in London, Britain - Photo:Toby Melville/REUTERS

Can Mexico and other emerging countries compensate the loss of the European market for the UK?

28/09/2018
17:51
Gabriel Moyssen
Mexico City
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Since the Vote Leave campaign in 2015, the British public has been told that the eventual loss of unrestricted access to the European market can be compensated by new free trade deals with emerging economies

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Since the Vote Leave campaign in 2015, the British public has been told that the eventual loss of unrestricted access to the European market can be compensated by new free trade deals with emerging economies.

Is that possible? According to experts, the answer is probably no, at least in the case of Mexico and other countries.

Once a major external political and economic power in Mexico—its presence and investments were crucial in the development of the railroad and oil industries—, nowadays there is much ground to recover for Britain.

It is Mexico’s fifth largest trading partner in the European Union and ranks 15th worldwide, with a trade of USD $5.36 billion in 2016.

The United Kingdom is also Mexico’s fifth largest investor among the EU members and eighth in the world, with cumulative investment between 1999 and 2017 of USD $10.927 billion, reported Mexico's Ministry of Foreign Affairs (SRE).

While Mexican President Enrique Peña Nieto made a State visit to the UK in 2015 highlighting the Dual Year between both nations, SRE head Luis Videgaray stressed Mexico’s interest in signing a bilateral commercial agreement regardless of whether Britain remains in the EU or not, during a speech in Chatham House as part of his visit to London last year.

However, “Mexico has little room to maneuver to supply the British market’s needs. India and China could do it, they could meet the requirements from certain productive sectors, yet it is true that the services and high-end technology goods from these markets lack the level demanded by British consumers,” said Javier Urbano Reyes, professor and researcher at the Universidad Iberoamericana (UIA) in Mexico City.

He expressed to investigative reporter Karen Ávila from EL UNIVERSAL that the redirection of trade flows would mean for Mexico undertake complex changes in its infrastructure and regulations to comply with UK standards, among other difficulties.

In the same vein, David J. Sarquís, a specialist at the Mexican Association of International Studies (AMEI), recalled that the two countries have been trying to diversify their trade since the 70s, yet it is not so easy to overcome the geographic barriers, the established commercial links and the lack of market knowledge.
 

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Negotiating blocs

Sarquís added that a United Kingdom-Mexico deal is desirable as a trade alternative, “yet it would encourage the idea of separate talks and the return of the protectionist and isolationist policies that can damage our free market model, so it would be better the advancement of bloc-to-bloc negotiations.”

After his tour of South America this year, then-Foreign Minister Boris Johnson declared that “realms of gold” await the UK and Latin America in the post-Brexit era.

Nevertheless, proponents of the Global Britain strategy announced by Downing Street in January 2017 tend more commonly to mention Asian nations —particularly China and India—as the country’s future partners, rather than those in Latin America, said a study from the British Foreign Policy Group (BFPG).

The report questioned Britain’s ability—or willingness—to negotiate its withdrawal from the EU and simultaneously establish new bilateral relations with European countries and emerging markets, when the Foreign Office revealed plans to reallocate resources from Asia, Africa, and the Americas to create 50 extra staff for European embassies, in a backdrop of cuts of nearly 40% in overall funding for diplomacy.

Johnson’s recent trip, as well as the forthcoming visit of Prime Minister Theresa May to Argentina for the G-20 Summit in November, “suggests Latin America is at least registering on the government’s radar,” said the BFPG.

Last week, the analysis group hosted an event in London with Anglo American plc and British Expertise to evaluate the success to date of the Canning Agenda, launched in 2010 by authorities to increase trade with the region.

Endorsed by Johnson and other leading conservative figures of the Vote Leave campaign, the report titled "Plan A+: Creating a prosperous post-Brexit UK" by the Institute of Economic Affairs (IEA), for its part, recommends seeking global trade deals now to force Brussels to give Britain a better accord after leaving the EU next March.

By opening talks now, it underscored, the UK could accelerate the signing of trade deals which could be worth as much as 7% on its gross domestic product by the middle of the 2030s.

Bilateral negotiations could be opened primarily with the United Statesand possibly India and China.”

The 140-page plan added that Britain would seek early access to the existing Trans-Pacific Partnership—formed by Mexico and ten other countries—in the new strategy, while at the same time could unilaterally drop tariffs on some goods that the UK does not produce.
 

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Editing by Sofía Danis
More by Gabriel Moyssen

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