Under pressure from Brasilia, Mexico agreed last month to limit its automotive exports to Brazil, prompting Argentina to threaten to revoke its own trade agreement with Mexico in an effort to gain further concessions. In an email interview, Barbara Kotschwar, a research associate at the Peterson Institute for International Economics, discussed the Economic Complementation Agreement 55 (ACE 55), the 2002 automotive trade deal between Mexico and Mercosur, the trade bloc comprised of Argentina, Brazil, Paraguay and Uruguay.
World Politics Review (WPR): What is the current state of trade between Mexico and Mercosur, particularly Brazil and Argentina, and what is the ACE 55 agreement meant to accomplish?
Barbara Kotschwar: The current state of trade between Mexico and Mercosur is volatile, marked by the recent renegotiation of the Mexico-Brazil ACE 55 and Argentina’s rhetoric threatening to pull out of its ACE 55 with Mexico. ACE 55 is part of a greater framework agreement initiative between Mexico and the Mercosur countries (ACE 54) that aims to enhance trade and economic ties between the two sides. From Mexico’s perspective, this was a step toward increasing economic relations with its main Latin American market.
Since ACE 55 went into effect in January 2003, trade between Mexico and Mercosur has more than doubled. Auto trade (Harmonized System code 87) has also doubled, but the dynamics of trade in this sector have changed—and have driven the dynamic of overall trade. In addition to autos, the bulk of Mexico-Mercosur trade is made up of HS categories 85, 84 and 29, which include machinery, electronics and organic chemicals. . . .
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