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US, Canada ask to negotiate trade dispute over Mexico’s energy policy According to Reuters



© Reuters. FILE PHOTO: Excess natural gas is burned, or flared, from Mexico’s state-owned Pemex’s Tula refinery, located adjacent to the Tula power plant belonging to the national electricity company Comision Federal de Electricidad , or CFE, in Tula de Allende, northern Mex

By David Lawder, Dave Graham and Steve Scherer

WASHINGTON/MEXICO CITY (Reuters) – The United States and Canada on Wednesday asked to negotiate a dispute settlement with Mexico under a North American trade deal, arguing that Mexico’s energy policies are discriminatory and “undermining” international companies and cross-border sourcing.

The request, first announced by the US Trade Representative’s office, marks the most serious trade war between Washington and Mexico City since the two-year US-Mexico-Canada Agreement on Trade. before. If left unaddressed, it could eventually lead to punitive US tariffs.

Canada’s Commerce Department later told Reuters it was conducting its own energy consultations with Mexico and “supporting the US in its challenge.”

“We agree with the United States that these policies are inconsistent with Mexico’s (USMCA) obligations,” Department of International Trade spokeswoman Alice Hansen said in an emailed statement.

Mexico’s Economy Ministry said in a brief statement that it was ready to reach a “satisfactory solution for both parties” to the energy dispute.

The USTR said consultations were requested regarding the Mexican measures, which it said were detrimental to US companies that support Mexican state electricity company Comision Federal de Electricidad (CFE) and its power producer. Petroleos Mexicanos oil. (Pemex)

Mexican President Andres Manuel Lopez Obrador, a left-wing energy nationalist, has pledged to revive Pemex and the CFE, which he says his predecessors deliberately “destroyed” to make way for the energy market. amount of Mexico for foreigners.

“We have repeatedly expressed serious concern about a range of changes in Mexico’s energy policy and its consistency with Mexico’s commitments under the USMCA,” U.S. Trade Representative Katherine Tai said in a statement. notification.

The US move is a blow to Mexico, and comes just a week after Lopez Obrador met US President Joe Biden in Washington, and announced that US companies are planning to invest billions of dollars in the country. Mexican energy sector.

During a regular news conference, Lopez Obrador said there was “no problem” with the US on energy and that his government would analyze the US complaint. He added that his government was acting in accordance with Mexican law.

INVEST WITH RISK

USTR says it is challenging amendments to Mexican law that prioritize the distribution of electricity generated by CFE over cleaner energy sources provided by private sector suppliers, such as wind and power solar – a move they say “disincentivizes” US investment in clean energy.

Mexico’s Supreme Court in April approved the controversial 2021 electricity law.

The USTR is also opposing a 2019 regulation that only gives Pemex more time to comply with harsher environmental limits on sulfur content in highway diesel fuel. And it says Mexico has “delayed, refused or failed to act” in obtaining permits for renewable energy facilities and storing, transferring or selling fuel, making it difficult for private companies to participate. family.

Lopez Obrador thinks his measures will benefit consumers and make Mexico more self-sufficient. His opponents say the moves will increase electricity costs, undermine investor confidence and violate Mexico’s clean energy commitments.

At stake in the dispute are investments worth tens of billions of dollars by the United States and Canada in Mexico’s energy infrastructure. Ken Salazar, the US ambassador to Mexico, puts the US figure at $30 billion, including planned projects.

Commerce Canada puts the investment figure for Canadian companies at C$13 billion ($10.1 billion), including more than C$5 billion ($3.9 billion) in renewable energy. create.

The U.S. Chamber of Commerce welcomed the USTR’s move, saying that Mexico’s policies “unfairly disadvantaged U.S. companies and are contrary to our shared goals of generating sustainable energy.” reliability, sustainable growth and long-term economic recovery.”

DISPUTES UP UP

A USTR official told reporters that punitive tariffs are “likely” if the dispute cannot be resolved through negotiations, which will hopefully lead to a reopening of the market for traders. American company.

Under USMCA rules, if a complaint is not resolved within 75 days, the USTR may ask the dispute panel to review the complaint.

Such disputes are piling up under the USMCA, which was negotiated under the administration of former President Donald Trump to replace the 1994 North American Free Trade Agreement.

Mexico and Canada are challenging the United States’ interpretation of stricter auto rules in the region, arguing that a more flexible approach is needed.

And the United States has requested a second dispute panel to resolve a longstanding dispute with Canada over the allocation of its dairy quota.

(1 dollar = 1.2889 Canadian dollars)



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