PULSE NEWS MEXICO

The administration of U.S. President Joe Biden is getting ready to send Mexico an ultimatum in the coming weeks, in an effort to break a deadlock in a mounting energy trade dispute, according to U.S. sources familiar with the negotiations.

In recent weeks, bipartisan calls for the United States to toughen its position on Mexico’s energy policies have intensified as a war of words has taken shape between the two governments.

An ultimatum would represent a significant escalation in the already-tense relationship between Biden and his Mexican counterpart, Andrés Manuel López Obrador (AMLO), who has mocked the U.S. State Department and tried to discredit U.S. claims that cartels now control large swathes of Mexican territory.

López Obrador’s decision to backtrack on reforms aimed at opening Mexico’s electricity and oil markets to external competitors sparked the trade dispute, and he has implemented laws that favor Mexican state-owned energy providers (which use mostly fossil-based fuel) over private-sector providers.

The Office of U.S. Trade Representative Katherine Tai is expected to make what has been described as “one final offer” to Mexico’s negotiators to open up the country’s markets and agree to more supervision, three people familiar with the talks said.

Otherwise, Washington will request an independent dispute settlement panel under the United States-Mexico-Canada Agreement (USMCA), the sources said.

Both the United States and Canada requested dispute settlement talks with Mexico in July, more than 250 days ago.

Under USMCA rules, after 75 days without a resolution, they are free to request a dispute resolution panel, in which a third party decides on the case.

If the panel rules against Mexico and Mexico does not take corrective action, Washington and Ottawa could ultimately impose billions of dollars in retaliatory tariffs on Mexican products.

The White House had hoped to avoid escalating trade tensions with Mexico while seeking help on immigration and drug trafficking, but months of talks have borne little fruit, and the U.S. government has run out of less-belligerent options, the sources said.

Raising the stakes in the dispute carries significant risk for Biden, who is expected to launch his re-election campaign in the coming weeks and will face strong Republican criticism over his handling of immigration and drug trafficking.

But U.S. officials have acknowledged growing frustration over the lack of progress in the talks, and said that Mexico has left them no other alternative.