The historic free trade agreement signed by the President of Mexico, Mr Ernesto Zedillo, with the European Union at the Lisbon summit gives Mexican exporters potential access to 370 million consumers in an area which has a combined annual gross domestic product of $8 trillion (€8.22 trillion). For members of the European Union, the accord opens up a fresh market of 100 million people and puts investors on the same legal footing as their US and Canadian competitors, with back-door access to North America.

"What we are looking for is to generate more employment opportunities in Mexico," said Mr Jaime Zabludovsky, Mexico's ambassador to the EU. "This will be the crucial test for the accord."

The pact was negotiated over the past five years, suffering delays due to Mexico's poor human rights record, which resulted in the inclusion of a clause which binds the future of the accord to democratisation and respect for human rights.

The EU-Mexico trade accord will be phased in between July next and 2007, by which time all existing trade barriers will have been removed with the exception of each partner's agricultural sector, which will enjoy tariff-free import and export benefits to a limit of 62 per cent.

Last year, EU exports to Mexico exceeded $9 billion while Mexico earned almost $4 billion from its export trade with Europe.

Mexican authorities hope the accord will become a second NAFTA, after the trade agreement with the US and Canada, signed in 1993, which has brought $70 billion worth of foreign investment into Mexico over the past six years.

Critics of the NAFTA accord claim that, while exports have boomed, domestic industry has collapsed and small farmers have gone bankrupt, unable to compete with superior US production rates.

Behind the EU-Mexico pact lies Mexico's desire to diversify its exports. The US currently takes 80 per cent of Mexican exports.