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World Trade Organization
Throughout 2008, the global economic environment was undoubtedly impacted by the contraction of international markets. The growth of the commercial flow of chemical products was seriously impacted, mainly concerning Mexican exports to Mexico's major commercial partners, resulting in a slowdown of the chemical industry trade.
Facing this economic contraction, ANIQ played a fundamental role in establishing negotiation strategies to lay the foundations to protect domestic production while fostering its development.
Therefore, as a result of the negotiations held with the Ministry of the Economy with respect to the tariff reduction bill proposed by President Calderón, ANIQ reached a series of agreements for the implementation of mechanisms to promote the competitiveness of the industry and to reduce the impact of this bill on domestic production, extending implementation terms and eliminating exception mechanisms in the payment of import duties as of 2012.
The aforementioned agreements support their feasibility on the establishment and operation of instruments such as: the implementation of a competitiveness program, a permanent monitoring of imports of sensitive products, timely follow-up of unfair trade, and the establishment of safeguards.
Competitiveness Program
A competitive price policy of chemical precursors and energy inputs was agreed to be defined and applied. Furthermore, demands for a sufficient and efficient supply of chemical precursors reserved for the State and for offering legal and operational safety in contracts with PEMEX were submitted.
Imports monitoring
Chemical Industry import monitoring procedures were agreed to be developed and implemented.
Unfair Trade
The efficiency and timeliness in the operation of the International Trade Practices Unit was agreed to be ensured.
The Ministry of the Economy will impose the application of countervailing duties whenever an unfair trade practice is determined after the pertaining investigation.
Safeguards
The Ministry of the Economy agreed to immediately change the tariffs until they reach the levels in force in December 2008, if as a result of the reduction of tariffs domestic production of any chemical product could be threatened by an increase in imports.
The bill was published in December 24, thus complying with the agreements reached. Furthermore, a comprehensive work agenda on trade and competitiveness matters was established, while the industry maintained adequate tariff protection levels.
International negotiations
Simultaneously, a series of international trade negotiations started with the intention to place Mexican chemical products in different regions under preferential conditions. Key negotiations were:
Asia Pacific Economic Cooperation Mechanism (APEC)
Throughout 2008 the Chemical Dialog Agenda at APEC focused its efforts on facilitating regional trade and reducing the impact of non-tariff barriers for the global trade of the chemical industry, achieving major agreements in the following topics:
GHS (Globally Harmonized System of Classification and Labeling of
Chemicals)
Concurrently with the efforts in trade facilitating matters, the progress reached in GHS matters were analyzed. The progress achieved in Mexico, Thailand and Japan concerning this system implementation was remarkable.
However, the progress of the GHS implementation in Mexico is still moderate. It has been focused on the work of the inter-ministerial group where the regulatory amendments required have been defined for their later implementation at all levels.
In like manner, through the Chemical Dialog, ANIQ insisted on the importance of the implementation of this initiative in the United States aiming at achieving a simultaneous application in the region thus decreasing the possibility of diluting its benefits in the trade with the US.
Model Measures - Homologation of Rules of Origin in the Chemical
Industry
With the purpose of facilitating trade among the countries of the region, the Mexican Government submitted a proposal to the Chemical Dialog: the establishment and leadership of a new Model Measure focused on the homologation of the Rules of Origin for the region.
Deriving from the above, ANIQ suggested a position document to enable such homologation and thus, take advantage of the benefits deriving from the Free Trade Agreements currently under negotiation in Asia-Pacific.
Generally, the proposal suggests the use of rules of origin based on the change of tariff item classification for the chemical sector, similar to those negotiated for the North American Free Trade Agreement, with the purpose of giving greater flexibility to the compliance and application of the rules, thus fostering an increase in trade of the member economies.
This proposal was distributed to all the economies prior to the formal meeting of the Chemical Dialog. A comprehensive discussion and negotiation ensued and the specific concerns expressed by the United States and Australia are still pending solution.
World Trade Organization (WTO)
Last year the Chemical Dialog maintained close communications with the World Trade Organization through the position documents submitted to the Technical Barriers to Trade Committee (TBT).
Reference was made in these documents to the impact on trade of chemical products deriving from the implementation of the REACH regulations, the new regulations approved by the European Parliament (Registration, Evaluation and Authorization of Chemical Products).
APEC economies expressed their concerns to the European Parliament and to the European Commission with respect to the implementation of these regulations, the resulting costs for exporting companies and the potential market loss in member countries.
As a result of the work carried out at the various meetings of the Chemical Dialog, a document was prepared expressing a consensus with respect to major concerns of the chemical industry in the Asia-Pacific region, concerning the implementation of REACH, in such a way that this document may be implemented as a work plan for the meetings of the Chemical Dialog with the European Parliament.
The meeting was held on October 25, 2008 in Brussels, Belgium, where the individuals in charge of the REACH implementation in the European Union undertook to carefully review the concerns of APEC members, and to offer all training required by the countries of the region for their companies and governments to be able to comply with such legislation.
At the same time, the 21 economies that are members of this forum and represent 68% of international trade, looked for ways of promoting a solution for the WTO initiatives that are still pending.
Regional Economic Integration Initiative
Among the member economies of APEC no consensus has been achieved with respect to the creation of a free trade area in the region. However, some countries have insisted on the need to go forward with an industry agreement for tariff reduction.
The purpose of this initiative is to create a free trade area in the region, as suggested by the United States and other countries. ANIQ expressed its concern about starting a discussion on market access in view of the fact that the Dialog's mandate is solely to negotiate trade facilitation.
Over the next meetings, the Chemical Dialog will be analyzing which are the activities to be carried out to comply with the purposes stated at the creation of the Dialog. Mexico shall insist on keeping a trade facilitation approach and will reject trade liberalization and regional tariff reduction instruments.
Agreement between Mexico and China on Trade Remediation Measures
Finally, on December 11, 2007, the reservation negotiated by Mexico in China's Protocol Adhesion to the WTO culminated. ANIQ insisted on not starting an ex-officio investigation for such countervailing duties, since similar proceedings were completed in 2005 eliminating duties for a major number of tariff items, and keeping duties for such products that were able to prove unfair practices.
Notwithstanding the above, the International Trade Practices Unit of the Ministry of the Economy published in the Federal Official Gazette, the beginning of the ex-officio revision of countervailing duties for organic chemicals and fibers imposed on Chinese products.
ANIQ insisted on expanding this strategy with China, and thus the Ministry of the economy formalized a group of negotiation with the Asian Government. This negotiation group worked in parallel with the development of investigations published by the Ministry of the Economy.
Among the various agreements reached by this negotiation group is the immediate elimination of countervailing duties for non-manufactured o non-sensitive products, and the development of instruments whereby the countervailing duties for sensitive products will remain for a longer term.
As a result of the aforementioned process, the Mexican Government submitted for Senate approval a Trade Agreement eliminating all countervailing duties imposed on Chinese products included in the China adhesion protocol to the World Trade Organization.
The agreement reached by Mexico and China on Trade Remediation Measures was published in the Federal Official Gazette on October 8. The treaty included all sensitive products of the chemical industry in such a way that the countervailing duties imposed became tariff instruments only applied for such country and that will be gradually phased out pursuant to a 4 stage schedule previously agreed upon.
Mexico - Peru
ANIQ has promoted the signing of a Free Trade Agreement with Peru that includes the tariff universe for chemical products with reciprocal immediate tariff relief and sets forth rules of origin similar to those applied by the North American Free Trade Agreement (NAFTA). This action ensures that the benefits resulting from this treaty remain in the region.
The chemical sector negotiations made great strides since most products have already been included in the Agreement, although the negotiations of rules of origin and tariff relief for some of them are still pending.
Peru insists on the opening of the agricultural and cattle-raising sector. However, Mexico is unable to make any progress in this respect because this is a sensitive sector for the country.
Over the first semester of 2009 the Ministry of the Economy has programmed the last rounds of negotiations to culminate in the signing of the Free Trade Agreement.
Mexico - Brazil
ANIQ was able to establish a negotiation process with its counterpart in Brazil, ABIQUIM, to deepen and expand the universe of chemical products included in the 53th Economic Complementation Agreement signed by both countries within the framework of the Latin American Integration Association (ALADI).
During this integration process an exchange of offers was made between both associations and Brazil applied for a universe of 40 tariff items, while Mexico applied for 345.
Both associations are still evaluating the applications submitted expecting to reach a negotiation by the end of the first half of 2009.
At the same time, the governments of both countries were able to establish the High Level Survey Group (GEAN, acronym in Spanish) made up by representatives of the public and private sector of both countries. In this Group, ANIQ is a key element in the negotiations of the chemical chapter.
By the third quarter of 2008, the negotiations between both associations were impacted by the bill submitted by the Mexican Government to unilaterally reduce tariff items, so ANIQ was not able to respond to the access interest expressed by ABIQUIM.
Over the first three months of 2009 the negotiation process between both associations is expected to be resumed, and the agreement could be ratified by the Governments becoming effective in 2010.
Mexico - Colombia
In view that Venezuela left the G-3, Colombia and Mexico started talks to renegotiate products that were not previously included and that represent an interest for both countries. ANIQ requested to include tariff item 3903 pertaining to polystyrene and ABS with immediate relief.
During the inclusion negotiations, Colombia accepted immediate tariff relief for almost everything in this tariff item. However, at the same time Colombia ratified the need to give longer periods to eliminate the duties on some polystyrenes.
After a series of consultations, ANIQ reached the consensus required, so it is expected that the Ministry of the Economy will communicate to Colombia the position of this negotiation to culminate with the inclusion of these products to the treaty.
Oversight and Customs Control Program
A series of strategies focused on the facilitation of trade and customs clearance were developed. Their purpose is to protect at all times the domestic market from unfair and illegal trade practices such as smuggling, dumping and tax exemptions.
A close follow-up to the Oversight and Customs Control Program was implemented through different mechanisms with an active participation of the industry. The goals of this program are: to identify illegal trade practices, prevent the forging of documents, prevent the alteration of information and avoid incorrect tariff item classification.
This Program is supported on statistics information resulting from the search of customs declarations in the Customs Archive trying to collect the data to support any claim submitted to the authorities.
The task focused on the analysis of statistical information to detect transactions made under an incorrect tariff item classification thus avoiding the paying of duties. Throughout 2008, 700 import transactions were reviewed every month. As a result, permanent revisions were set up for various companies and customs agencies, for imports through all customs in the country. These actions ended by setting up 9 foreign trade and domestic taxes audits that resulted in tax obligations for an amount exceeding 50 million pesos.
The chemical sector has 20 certified observers in all customs offices of the country to carry out oversight tasks at the time of clearing sensitive goods. These actions achieved a decrease of incidents and unfair trade practices.
Pre-validation Program
All along 2008, a strategy to market the Pre-validation Program was developed aiming at reaching the highest number of companies.
The strategy implied visiting member companies in various states of Mexico, and to send a comparative analysis of the savings for companies resulting from validation with ANIQ.
These visits helped the companies to have a better understanding of this service and of the multiple benefits resulting such as oversight of customs agents and greater transaction control, among many others. This derived in an increase of the transactions made by the companies with ANIQ's Pre-Validation Program.
A 15% increase in the number of companies using ANIQ's Pre-validation Program was posted in 2008. This is in addition to Customs Agencies that have decided to use the services because they have confirmed that the Pre-validation Program meets their requirements.
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