EU, Mexico say progress made after trade talks, deal not yet finalized

MEXICO CITY, Feb 20 (Reuters) - European Union and Mexican negotiators wrapped up a ninth round of talks on Tuesday aimed at modernizing their two-decade-old free trade deal, saying they had agreed five new chapters and made important progress on others.

A new EU deal is key for Mexico as it looks to reduce its reliance on the United States, its top trade partner. U.S. President Donald Trump has threatened to scrap the North American Free Trade Agreement, a lynchpin of the Mexican economy.

The EU and Mexico intend to update the trade deal agreed 21 years ago, which largely covers industrial goods. They want to add farm products, more services, investment and government procurement, and include provisions on labor standards and environmental protection.

Negotiators meeting in Mexico City agreed chapters on technical barriers to trade, state-owned enterprises, subsidies, anti-corruption, and trade in services, Mexico's economy secretary said in a statement.

Mexican officials had hoped for a deal by the end of February, but that is looking unlikely, as the next round of talks to update NAFTA will take precedence when they begin on Sunday.

"Consensus still needs to be reached on specific issues in the chapters on trade in goods, rules of origin and intellectual property," the ministry said.

The key challenges are how far to open each other's markets to food and drink - such as tequila, chicken and asparagus from Mexico and dairy products from Europe - and the EU's demand to recognize geographical indications.

"The modernization of the free trade agreement is a priority in the Mexican trade agenda," the ministry said. (Reporting by Anthony Esposito, Editing by Rosalba O'Brien)