UK and Mexico avoid rules of origin 'cliff-edge' with new rollover deal

Fri 10 Nov 2023
Posted by: Richard Cree
Trade News

The UK and Mexico have struck an agreement to extend “rules of origin” provisions originally secured in an EU rollover deal that came into force in January 2021.

That deal was due to expire on 1 January 2024, but will now remain in force until a new bilateral trade deal between the two countries is agreed.

Agreement extended

The extension of the existing arrangement is seen as good news for the automotive, pharmaceutical and food and drink sectors, with UK goods remaining eligible for reduced or zero tariffs to Mexico.

UK minister for industry and economic security, Nusrat Ghani, said of the extension:

“Ensuring UK goods avoid higher tariffs is essential for British businesses to stay competitive in this huge and dynamic market.

This extension will provide UK businesses exporting to Mexico with certainty as they plan for next year and beyond, while the UK and Mexico negotiate an exciting new trade deal covering the 21st century economy.”

Automotive

The deal is particularly significant for the automotive sector, with road vehicles accounting for almost £300m in exports to Mexico, which represents almost 20% of all goods exported.

CEO of the Society of Motor Manufacturers and Traders, Mike Hawes, said:

“We welcome this pragmatic decision as it avoids duty liabilities from January 2024 which, given the long standing and productive relationship between the UK and Mexican automotive industries, would have undermined our mutual trade.

“Mexico is among the top 10 global markets for UK car exports and we now look forward to the swift agreement of a modernised trade deal as this would deliver even more benefits for both sides.”

‘Great news for business’

Marco Forgione, director general of the Institute of Export & International Trade (IOE&IT), also welcomed the agreement

“This extension is great news for businesses trading with Mexico. It offers then the clarity and certainty that they need and the confidence to know they can keep trading on the same terms after January next year.

“Mexico is an incredibly dynamic and progressive economy with a highly skilled, developing labour force, particularly in high-value manufacturing. It is a significant, growing economy and by 2050 is expected to be fifth-largest economy in the world.” 

“We look forward to seeing more progress on a modern, long-term trade between the two countries.”

Ana Sofia German, trade agreement specialist at IOE&IT, said it is was still necessary to continue to renegotiate the bilateral agreement, particularly to make sure that UK businesses can gain access to the Mexican market.

German said: “Renegotiating these terms will give businesses more certainty when exporting and importing from one of Latin America’s largest markets. The current agreement does not have chapters on services and digital trade which the UK aims to include in its most modern agreements, these are some of the topics that could be expected to be negotiated for a future trade deal.”

New talks

The UK and Mexico launched negotiations on a new deal in May 2022. There are some reports that negotiations have slowed recently, with the next round of negotiations not due to start until early next year.

According to the Department for Business and Trade’s most recent factsheet on UK-Mexico trade, total trade in goods and services (exports plus imports) between the UK and Mexico was £4.9bn in the four quarters to the end of Q1 2023, an increase of 20.7% or £833m in current prices from the four quarters to the end of Q1 2022.

This makes Mexico the UK’s 47th largest trading partner.