- British goods remain eligible for reduced or zero tariffs to Mexico after UK secures extension to ‘rules of origin’ provisions
- Automotive and food and drink sectors expected to benefit after extension secures certainty for manufacturers and keeps goods competitive in Mexican market
- UK also in talks with Mexico on a new, modern trade deal to boost our £6.2 billion trade relationship
The UK has secured an extension to arrangements that were due to expire, helping British manufacturers access lower or zero tariffs when selling their products to Mexico.
The arrangement will come into effect from 1 January 2024 and will remain in place until a new UK-Mexico Free Trade Agreement enters into force.
The deal will provide welcome certainty for UK businesses, helping them to continue avoiding high tariffs imposed by Mexico and maintain their competitive edge in the market. The announcement is particularly welcome news for the automotive and food and drink sectors, with road vehicles accounting for almost £300 million in exports to Mexico, almost 20% of all goods exported.
Mexico is the 14th largest economy in the world and second largest in Latin America, and its demand for imports is forecast to grow by 42% between 2021 and 2035 as its economy continues to grow. With a population of over 130 million people, its market is larger than France and Italy combined.
When the UK negotiated its current trade agreement with Mexico, rolled over from our membership of the EU, time-restricted provisions were agreed to allow for the use of EU inputs in UK products in meeting the UK-Mexico rules of origin. The extension will apply until the entry into force of new, permanent rules as part of a new, enhanced free trade agreement with Mexico.
Protecting our integrated supply chains with longstanding trade partners like Mexico is vital for both British and Mexican businesses as we continue to see supply chain disruption impact the global economy. This extension will therefore benefit businesses in both countries.
The UK and Mexico launched negotiations on the new deal in May 2022. The deal is intended to replace our existing, outdated trade deal which was agreed over 20 years ago and boost our £6.2 billion trading relationship.
Reacting to news, William Bain, BCC Head of Trade Policy, said: “The BCC has been urging the UK Government to reach bridging arrangements with Mexico and Canada for some time on extended cumulation within the rules of origin.
“This will allow for EU content in UK exports to continue to form part of longstanding supply and sourcing chains without tariffs being applied.
“Today’s welcome news permits the continuation of the current arrangements until the conclusion of the negotiations with Mexico, due to recommence in January.
“This avoids a key cliff edge for manufacturing exporters, who would otherwise have been facing a significant increase in costs.
“Now we need similar clarity on EU material in UK exports to Canada. A deadline is looming next April, and we would urge both sides to quickly reach a similar agreement to remove uncertainty for manufacturing exporters on both sides of the Atlantic.”