US to Formalize Complaint against Mexico’s Energy Sector

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After years of contention between the neighboring United States and Mexico over the latter’s energy sector, according to a report by U.S. news´service Bloomberg, the office of U.S. Trade Representative Katherine Tai is working to amp up its complaints against Mexico surrounding its violations of the United States-Mexico-Canada Agreement (USMCA) and is expected to submit a request for formal consultations in the near future.

Despite Mexican President Andrés Manuel López Obrador’s (AMLO) acceptance of the USMCA – though the treaty was initially negotiated under the preceding presidential administration – upon his assumption of office, his energy policies have altogether gone against the North American agreement.

AMLO’s attempted prioritization of Mexico’s state-owned energy businesses, like the Federal Electricity Commission (CFE) and Petróleos Mexicanos (Pemex), has come under international criticism for its dismissal of foreign and private investment in the sector, as well as for giving priority to dirty energies over clean ones.

Tai previously sent a warning letter to Mexico’s Secretary of the Economy Tatiana Clouthier expressing concerns about the potential USMCA violations and the $10 billion of U.S. investment into the country, including in renewable energies.

According to Mexico’s chief technical negotiator of the USMCA from 2018, Kenneth Smith Ramos, the anticipated formal consultation could add additional stress to the relationship between the two countries, and if the United States wins negotiations and Mexico refuses to revamp its energy sector, the United States could retaliate through export tariffs and other economic pressures that would affect the Mexican economy and multiple billions of dollars worth of trade activity.

“This could be extremely detrimental to Mexican exports,” said Smith Ramos. “Getting involved with the United States in a major trade dispute would definitely be negative for the Mexican economy.”

Mexico’s former Undersecretary of Foreign Trade Juan Carlos Baker echoed Smith Ramos’ sentiments, saying the United States’ potential economic strategies against Mexico if it does not adapt its energy sector could have undue effects on the economy as a whole.

“If this were the situation, products in which we are successful would be affected, such as automobiles, auto parts, beer, tequila, tomatoes, in short, any product that has a substantial market share in U.S. imports,” said Baker.


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