As of January 1, 2021, EU trade agreements no longer apply to the UK. Last year, anticipating that UK businesses would lose access to these deals, the UK Government sought to agree with foreign trade partners that the same terms should continue to apply after the UK left the European Union, by concluding a number of "trade continuity agreements".The UK and Mexico signed their trade continuity agreement on December 15, 2020. While both countries have yet to complete their domestic ratification procedures necessary to bring the deal into effect, the terms of the agreement are being applied provisionally.
During the current provisional period, the UK has committed to applying preferential tariff rates on goods imported into the UK from Mexico as from January 1, 2021, and, in return, Mexico has committed to implement a tariff rebate scheme.
Specifically, Mexico has agreed that, as soon as the Trade Continuity Agreement enters into force in Mexico — expected in early 2021 — a business that has paid tariffs on goods that would attract a preference under the agreement, between 1 January and the agreement coming into force, will be able to get a refund.
In a statement released upon signing the TCA, the two sides said the TCA would "deliver vital coverage for the automotive, pharmaceutical, textiles, agriculture, food and drink, and other manufacturing industries." The statement said the deal would "prevent the additional duty burden that would be levied under World Trade Organization most favoured nation terms."
For instance, tariffs on UK car exports and UK beverage exports under the deal remain at 0%, compared with 20% under WTO terms.
Some areas are not covered by the TCA. While these areas include investment and intellectual property, there is a pre-existing Bilateral Investment Treaty between the UK and Mexico, which will remain unaffected, and the UK Government has stated that most forms of intellectual property will not change, so UK businesses will still benefit from intellectual property protection in Mexico and will be able to apply for new protections as before.
Services are also not covered by the TCA, and while the situation currently remains the same for UK businesses providing services in Mexico, this may be subject to change in the future, so such businesses should continue to follow local regulations and keep up with any developments in Mexican legislation. If in doubt, UK businesses this applies to are advised to consult the relevant regulatory body, chamber of commerce, or an English-speaking lawyer.
The two sides said the TCA should be "transitional in nature," with both countries having agreed to launch talks on a new free trade agreement this year. The joint statement said that "a future deal should be at least as liberalizing as the recently agreed EU-Mexico Modernized Agreement, but with an ambition to go further in areas of mutual interest."
The UK and Mexico said they hope to conclude the new agreement within three years.