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U.S., Canada say Mexico energy moves break trade deal

July 20, 2022 Updated Wed., July 20, 2022 at 10:08 a.m.

A wind turbine stands near a road in the town of Dzilam de Bravo near Merida, Yucatan, Mexico, on May 19, 2018.  (Bloomberg )
A wind turbine stands near a road in the town of Dzilam de Bravo near Merida, Yucatan, Mexico, on May 19, 2018. (Bloomberg )
By Max de Haldevang and Nacha Cattan Bloomberg

The U.S. and Canada said Mexico’s nationalist energy policies violate North America’s free-trade deal, with Washington requesting dispute-settlement talks under the agreement and Ottawa saying it will do the same.

Mexico’s moves to prioritize energy from its state utility over private renewables companies, as well as denials and revocations of U.S. firms’ abilities to operate in the country’s energy sector, are among the issues the US is concerned about, the Office of the U.S. Trade Representative said in a statement Wednesday.

“We have repeatedly expressed serious concerns about a series of changes in Mexico’s energy policies and their consistency with Mexico’s commitments” under the USMCA trade deal, Trade Representative Katherine Tai said.

“We have tried to work constructively with the Mexican government to address these concerns, but, unfortunately, U.S. companies continue to face unfair treatment in Mexico.”

Canada said it agrees with the U.S. that Mexico’s policies are inconsistent with its trade-deal obligations, according to a statement from the office of Trade Minister Mary Ng, adding it will launch its own consultations and support the US in its challenge.

Mexican President Andres Manuel Lopez Obrador defended his policies at a daily press conference, saying they were protecting the country against “voracious companies.”

By starting the dispute, the Biden administration risked looking like it was supporting “corrupt” firms, he said.

Bloomberg News in late June reported that the U.S. was poised to raise the USMCA dispute.

Under the accord’s rules, such a request would give Mexico up to 30 days to agree to schedule consultations.

If after 75 days no agreement is reached, the U.S. could request that a formal panel hear arguments from the two nations.

While that process focuses on getting Mexico to agree to corrective actions, dragged-out conflicts can ultimately lead to the U.S. imposing punitive tariffs on imports from Mexico on the two-year-old trade pact.

U.S.-Mexico relations have turned increasingly frosty in recent months.

President Andres Manuel Lopez Obrador declined to attend the Summit of the Americas in Los Angeles after Venezuela and Cuba weren’t invited.

He visited the White House last week and treated President Joe Biden to a half-hour monologue, boasting that gasoline is cheaper on Mexico’s side of the border thanks to his subsidies.

Mexico’s government has received the statement and “extended its willingness to meet a mutually satisfactory solution,” the Economy Ministry said in a statement earlier Wednesday.

Lopez Obrador has worked to return the country to energy independence by supporting state-owned oil and gas producer Petroleos Mexicanos, known as Pemex, and state power company CFE.

The government has refused to hand out permits to several all-but-finished foreign energy projects.

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