The Government will negotiate to avoid free trade in automobiles with Mexico

FEBRUARY 22, 2021
The government will negotiate the continuity of the quotas

In the midst of an almost festive atmosphere, where joint development projects will prevail, the Government will try to negotiate with Mexico that there will be no free automotive trade as of March 19, 2022 -as has already been signed- and that the current quota system will continue in order to avoid a greater deficit and that investments will be based in the Aztec country.

Sources from the Casa Rosada revealed to BAE Negocios that one of the main objectives of the trip of President Alberto Fernández and part of the Cabinet is "to avoid having free automotive trade from next year and to propose the best negotiation".

In this sense, the sources stated that the healthiest thing for the trade relationship and the national automotive industry is "the continuity of the quota system" that have been extended since 2015.

The sixth additional protocol of the Economic Complementation Agreement 55 (ACE 55), sealed in 2019, establishes that between both countries vehicles may be sold duty-free for a value of USD701 million during 2019; USD737 million in 2020, and USD 774 million in 2021. This was supposed to represent an increase over previous quotas of 10% in 2019 and an additional 5% in 2020 and 2021, although imports were below, among other causes due to the recession and the pandemic.

Businessmen, waiting

"They (the Mexican terminals) wanted to bring forward free trade to this year and the Argentine government spoke of respecting the terms of the agreement; we will have to wait until next year to see if it will be renegotiated and the best thing is to leave it as it is without accelerating anything", said the Argentine-based automakers.

Sources from the AFAC auto parts chamber stated: "In order to move forward in the liberalization of the automotive and auto parts trade with Mexico, our country must move forward with a firm agenda to improve competitiveness. It is impossible to compete on equal terms with a country like Mexico, which is the sixth largest producer in the world with more than 4 million units produced per year. In the meantime, we must compete with a cascade of Gross Income, export withholdings and refunds that do not compensate the totality of taxes in the productive chain".

In 2019, the understanding reached by negotiators from both countries (at the end of former President Mauricio Macri's administration) was that free trade in cars would be accompanied by an improvement in the conditions of access to the Mexican market for Argentine products, which would be achieved within the framework of the ongoing negotiations for the broadening and deepening of ACE 6, expected to culminate before the end of the year.

"The Government's expectation is that, as a result of this negotiation, we have established the basis for an ambitious renegotiation of ACE 6, which will match the market access conditions for Argentine products with high export potential to Mexico, with those already enjoyed by imports from this country into Argentina", stated an official source.

Dollars at stake

The Government's bet is to increase the current quota of ACE 6, which reaches 773 million dollars and includes exports of agro-industrial products.

In January 2020, as the most relevant result of the tour to Mexico, Foreign Minister Felipe Solá agreed to negotiate the extension and deepening of the Economic Complementation Agreement 6 (ACE 6), through which tariff preferences were to be granted for a wide universe of products.

The plan to renegotiate ACE 6 materialized after a summit meeting between Solá and his Mexican counterpart, the Secretary of Foreign Affairs, Marcelo Ebrard Casaubon, as a new impulse to several issues of the bilateral political-economic agenda.

During the meeting, both agreed on the need to relaunch the bilateral link -which they considered strategic- from the government administration in Argentina, as well as to deepen the coincidences in regional and global issues.

Source: BAE Negocios

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