US, Canada Seek Consultations with Mexico over Energy Policies

U.S. Trade Representative Katherine Tai. Photo: Google

By MARK LORENZANA                                                                                         

U.S. Trade Representative Katherine Tai, on Wednesday, July 20, announced that the United States has requested dispute-settlement consultations with the Mexican government under the United States-Mexico-Canada Agreement (USMCA).

The consultations relate to certain measures by the government of Mexican President Andrés Manuel López Obrador (AMLO), specifically discriminatory energy policies that have violated provisions in the USMCA. According to Tai, these measures undermine American companies and U.S.-produced energy in favor of Mexico’s state-owned electrical utility, the Federal Electricity Commission (CFE), and state-owned oil and gas company, Petróleos Mexicanos (Pemex).

“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,” Tai said in a statement.  “These policy changes impact U.S. economic interests in multiple sectors and disincentivize investment by clean-energy suppliers and by companies that seek to purchase clean, reliable energy.  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. We will seek to work with the Mexican government through these consultations to resolve these concerns to advance North American competitiveness.”

The draft of the announcement, which has been made available online by the Office of the United States Trade Representative (USTR), details the alleged breach of commitments by the López Obrador government under the USMCA.

“In March 2021, Mexico amended its Electric Power Industry Law to require its grid operator Centro Nacional de Control de Energía (Cenace) to prioritize in various ways electricity produced by CFE over private competitors in dispatching electricity into Mexico’s grid,” read the announcement.

The announcement also said that Mexico is “engaging, or has engaged, in action or inaction which hinders the ability of private companies to operate in Mexico’s energy sector. These measures include: delaying, denying or failing to act on applications for new permits or permit modifications and suspending or revoking existing permits.”

In addition, a letter by Mexico’s Secretary of Energy Rocío Nahle in June of this year instructing Mexico’s Energy Regulatory Commission (CRE) and the National Gas Control Center (Cenagas) to modify regulations and transport contracts for natural gas — which would unfairly favor the CFE and Pemex — was also mentioned in the USTR draft announcement.

In July 12, Mexican federal judges put a stop to Nahle’s order through five amparo (habeas corpus) injunctions filed by several private energy companies operating in Mexico. Mexico’s Energy Secretariat (Sener) said it plans to file a motion for review and will appeal the resolution, calling the injunction “illegal.”

López Obrador, in his daily morning press conference on Wednesday, dismissed the news of the U.S. action.

“Nothing is going to happen,” AMLO said. “I sent a text message to (Mexican trade negotiator) Jesús Seade, who was the one who represented us in the negotiation (of the USMCA), and now I have the answer — there is no violation of the USMCA treaty.”

According to a Wall Street Journal report, after the United States’ official request for consultation with the Mexican government, the two countries must begin consultations within 30 days. If the consultations don’t lead to a resolution, the United States could request the establishment of a panel of experts. Still, if an agreement isn’t reached there, the United States could impose import tariffs on Mexican products to offset the damage suffered by U.S. companies.

Meanwhile, shortly after the USTR announcement, Canada said that it will launch its own consultations with Mexico over energy policies, “while supporting the United States in its challenge.”

“We agree with the United States that these policies are inconsistent with Mexico’s USMCA obligations,” Alice Hansen, spokeswoman for Canada’s International Trade Minister Mary Ng, said in a statement.