Partial Scope Agreement between Mexico and Paraguay (GOODS)

Note on the meeting of 28 JUNE 2021

Chairman: H.E. Dr. Muhammad Mujtaba Piracha (Pakistan)

1.  The 14^th Dedicated Session on Regional Trade Agreements (RTAs) of the Committee on Trade and Development (CTD) was convened in document WTO/AIR/COMTD/RTA/9/Rev.1 of 18 June 2021. Under item D (I) of the agenda, the Committee considered the Partial Scope Agreement between Mexico and Paraguay (Goods) (WT/COMTD/RTA4/N/1, WT/COMTD/RTA4/1, WT/COMTD/RTA4/2). This agreement was concluded in the context of the Latin American Integration Association (LAIA) as "Partial Scope Historical Heritage Renegotiation Agreement No. 38" (AAP.R 38). The present document contains the minutes relating to the consideration of this agreement.^[1]

2.  The Chairman said that the Partial Scope Agreement between Mexico and Paraguay was notified under paragraph 4(a) of the Enabling Clause by Mexico on 23 July 2019 in document WT/COMTD/RTA4/N/1. The factual presentation on the agreement – document WT/COMTD/RTA4/1 dated 12 March 2021 – had been prepared by the Secretariat on its own responsibility, and in full consultation with the parties. Written questions from Brazil, as well as the replies from the parties, were circulated in document WT/COMTD/RTA4/2.

3.  The representative of Mexico expressed appreciation to the Secretariat for having prepared the factual presentation on the agreement, and to the delegation of Paraguay for the coordination between the parties and the joint efforts. Historically, relations with Latin America and the Caribbean had been fundamental to the development of Mexico's trade policy strategy, which sought to increasingly strengthen trade and investment ties in order to foster the development of the region. The objectives of the agreement included promoting and diversifying trade between the two countries through the reduction or elimination of levies and other restrictions applicable to the importation of products. Since its conclusion and until the adoption of a Transposition Protocol in 1993, three additional protocols were signed – in 1983, 1986 and 1988. The 1993 Transposition Protocol aligned the concessions with the LAIA tariff nomenclature, while also consolidating the text and annexes of the liberalization programme. The agreement foresaw the expiration of the preferences on 30 June 1994, and additional protocols were therefore signed annually to extend the validity of the preferences. Finally, the Tenth Additional Protocol of December 2001 extended the preferences from 1 January 2002 until the entry into force of a preferential agreement between Mexico and the Southern Common Market (MERCOSUR). As of December 2020, no such agreement had been signed. Preferential treatment under the Mexico-Paraguay agreement was granted through margins of preference (MOPs) on the most-favoured-nation (MFN) duty. The originating products being granted preferential treatment and the corresponding MOPs were specified in Annexes I and II to the agreement. The MOPs granted under the agreement were between 6% and 100%. The figures for 2020 showed that the value of Mexico's exports to Paraguay amounted to USD 75 million, and imports to USD 73 million. Despite the pandemic, the value of trade remained close to that of the previous year, with the positive performance of the automotive sector – and specifically motor vehicles – particularly standing out. The main imports from Paraguay included rice, oil seeds and oleaginous fruits. Thanks to the agreement, economic operators in both countries had a comprehensive trade instrument in force that provided them with certainty in their trade strategies. In the current context, the agreement continued to be the most important bilateral instrument for regulating trade between the two countries. The agreement also provided key mechanisms for fostering improvements and updates, with a view to extending the benefits of the bilateral trading relationship. The parties were presently negotiating a broader legal framework for trade, aimed at modernizing the agreement and including more items in order to boost trade opportunities. In closing, he expressed willingness to expand on any particular points of interest.

4.  The representative of Paraguay thanked the Secretariat for having prepared the factual presentation on the agreement, as well as the delegation of Mexico for the coordination between the parties and the joint efforts. She also thanked the delegation of Brazil for its interest and its written questions, to which responses had been provided. She went on to say that the agreement laid down the basis for trade relations between Mexico and Paraguay. With respect to bilateral trade, it was to be noted that there was a potential gap to be explored in order to improve the market integration of a number of products. For example, her delegation believed that the products with the greatest export potential from Paraguay to Mexico were currently soya beans, solid residue from soya bean oil, and ignition wiring sets for means of transport. Solid residue from soya bean oil showed the highest gap between potential and current exports, which suggested the possibility of additional exports worth USD 7.1 million. Paraguay therefore recognized the importance of continuing to promote trade with Mexico, in order to maximize the existing market potential for the benefit of both countries, and particularly in the context of post-pandemic economic recovery. On this point, she expressed her delegation's appreciation to the Government of Mexico for its solidarity at this critical time, and for having donated 150,000 doses of vaccines through the Community of Latin American and Caribbean States (CELAC). Paraguay joined Mexico in all multilateral forums to combat the pandemic. Her delegation also understood that trade could drive economic recovery in the Latin American region in the post-pandemic era, especially by including products enjoying preferences for the benefit of micro, small and medium-sized enterprises (MSMEs) and women in trade. In this connection, Paraguay wished to reiterate its interest to explore the possibility of moving in the near future towards an Economic Complementarity Agreement with Mexico within the LAIA framework. She also indicated willingness to expand on any particular points of interest.

5.  The representative of the United States thanked Mexico and Paraguay for participating in the transparency exercise.

6.  The representative of the European Union expressed her delegation's appreciation to the parties for the transparency provided.

7.  The Chairman said that oral discussion of the Partial Scope Agreement between Mexico and Paraguay could be concluded in accordance with paragraph 11 of the Transparency Mechanism for RTAs (RTA TM). Follow-up questions by Members would need to be submitted in writing to the Secretariat within one week, by 5 July 2021. The parties would then be given two weeks to submit written replies, by no later than 19 July 2021. In accordance with paragraph 13 of the RTA TM, all written submissions as well as the minutes of the present meeting would be circulated promptly in all WTO official languages, and would be made available on the WTO website.

8.  The Committee took note of all interventions.

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