EU leaders were joined for lunch by Mexico's President, Mr Ernesto Zedillo, with whom they signed a major trade declaration.

It pledges both sides to a far-reaching reduction of mutual tariffs as a prelude to an eventual free-trade zone.

Mexico is Ireland's largest trading partner in Latin America with Irish exports last year double our imports at £80 million (#101 million). Currently 90 per cent of Mexico's exports are destined for the United States and Canada. Trade between the EU and Mexico has fallen off as a result of the 1994 North American Free Trade Agreement (NAFTA).

Under NAFTA, average duty on US industrial exports to Mexico is set at 1.8 per cent.

The EU trade deal was the subject of contentious debate in the Mexican Senate with the left warning that the new pact would cause some Mexican industries to fail "as happened with NAFTA".

Under the new accord with the EU, Mexico will lift tariffs on 47 per cent of industrial products from Europe by 2003.

The other 53 per cent will be taxed at a maximum rate of 5 per cent from 2003 to 2007.

The EU will eliminate all taxes on Mexican industrial products by 2003, with 82 per cent of the taxes lifted when the treaty takes effect and the remaining 18 per cent lifted by January 2003.

The pact also calls for liberalisation of trade in agricultural and fishing products, which together represent 7 per cent of trade between the EU and Mexico.

Taxes will be lifted on services, excluding the audiovisual, maritime and air transportation sectors.