Weekly Report - 16 March 2004

TRADE | FTA with Japan `in the bag'. In the middle of last week in Tokyo, Japanese authorities announced that an agreement had been reached on the highly sensitive industrial chapter of the free-trade negotiations they had been pursuing with Mexico for the past year-and-a-half. The officials did not release details, but the newspaper Yomiuri reported that Mexico had agreed to eliminate tariffs on Japanese steel within 10 years, and on Japanese cars within seven.

The two sides have not yet announced agreement on agricultural products, which is the core component for Mexico. The news agency Kyodo, however, cites unnamed official sources as saying that differences had been ironed out on the five products that had been blocking agreement in this chapter (oranges, orange juice, beef, chicken and pork) - with Japan making greater tariff concessions. Kyodo also said that full agreement at ministerial level was expected by the end of March.

Mexicans are not yet celebrating. The memory is still too fresh of President Vicente Fox having to return from Japan last October without the FTA agreement everyone had expected him to sign during his visit. Japan is a newcomer to the bilateral FTA business. So far it has signed only one, with Singapore. The Mexican deal would be the first occasion on which Japan opened its doors to foreign agricultural products. Japan is currently negotiating FTAs with South Korea, Malaysia, Thailand and the Philippines.

COMPETITIVENESS | Warning from up North. The US ambassador to Mexico, Tony Garza, last week warned, in an address to the local American Chamber of Commerce, that if Mexico was unable to raise its competitiveness at the same pace as other countries that are opening their markets, foreign investment would go elsewhere. Among the `competitiveness challenges' he sees Mexico facing are the need for fiscal, energy and labour reforms - the package that `the markets' have been pushing but congress has been resisting - plus a transparent judiciary and respect for the rule of law.