U.S. and Canada demand talks on trade dispute over Mexican energy policies

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WASHINGTON/MEXICO CITY, July 20 (Reuters) – The United States and Canada on Wednesday demanded dispute settlement talks with Mexico under a North American trade deal, accusing Mexico’s energy policies of being discrimination and to “undermine” international business and cross-border sourcing.

The request, first announced by the office of the U.S. Trade Representative, marks the most serious trade battle between Washington and Mexico since the U.S.-Mexico-Canada trade deal took effect there. two years ago. If left unresolved, it could ultimately lead to punitive US tariffs.

Canada’s Commerce Department later told Reuters it was launching its own energy consultations with Mexico and “supported the United States in its challenge”.

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“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 a mailed statement. electronic.

Mexico’s economy ministry said in a brief statement that it was willing to reach a “mutually satisfactory solution” to the energy dispute.

The USTR said the requested consultations related to Mexican measures it said disadvantaged U.S. companies in favor of Mexico’s state-owned utility Comision Federal de Electricidad (CFE) and oil producer Petroleos Mexicanos. (Pemex)

Mexican President Andres Manuel Lopez Obrador, a left-wing energy nationalist, has pledged to revive Pemex and CFE, which he says his predecessors deliberately “destroyed” to cede Mexico’s energy market to foreigners.

“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,” U.S. Trade Representative Katherine Tai said in the statement. announcement.

The U.S. decision is a blow to Mexico and comes just a week after Lopez Obrador met with U.S. President Joe Biden in Washington and announced that U.S. companies planned to pump billions into Mexico’s energy sector.

During a regular press conference, Lopez Obrador said “there is no problem” with the United States on energy and that his government will analyze the American complaint. He added that his government was acting in accordance with Mexican laws. Read more

RISK INVESTMENTS

The USTR said it is challenging amendments to Mexican law that prioritize the distribution of electricity produced by the CFE over cleaner energy sources provided by private sector suppliers, such as l wind and solar – measures that he says “discourage” US investment in clean energy.

In April, Mexico’s Supreme Court upheld controversial 2021 electricity legislation. Read more

The USTR is also protesting a 2019 rule that only gives Pemex extra time to comply with stricter environmental limits on the sulfur content of on-road diesel fuel. And he said Mexico had “delayed, refused or failed to act” on permit applications for renewable energy facilities and to store, transship or sell fuels, making it difficult for private companies to participate.

Lopez Obrador says his measures will benefit consumers and make Mexico more self-sufficient. Opponents say the moves will raise electricity costs, undermine investor confidence and violate Mexico’s clean energy commitments. Read more

At stake in this dispute are tens of billions of dollars of US and Canadian investment in Mexico’s energy infrastructure. Ken Salazar, the US ambassador to Mexico, puts the US figure at $30 billion, including planned projects. Read more

Canada’s Department of Commerce puts Canadian business investment at C$13 billion ($10.1 billion), including more than C$5 billion ($3.9 billion) in renewable energy .

The U.S. Chamber of Commerce hailed the USTR’s decision, saying Mexico’s policies “have unfairly disadvantaged U.S. businesses and are at odds with our shared goals of reliable power generation, sustainable growth, and sustainable economic recovery. “.

DISPUTES ARE ACCUMULATING

A USTR official told reporters that punitive tariffs were “a possibility” if the dispute could not be resolved through negotiations, which he hoped would lead to the market reopening to US companies.

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

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

Mexico and Canada dispute the US interpretation of stricter regional auto rules, arguing that a more flexible approach is needed. Read more

And the United States has requested a second panel to settle a long-running dispute with Canada over its allocation of milk quotas. Read more

($1 = 1.2889 Canadian dollars)

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Reporting by David Lawder, Dave Graham, Steve Scherer and Anthony Esposito; Editing by Chizu Nomiyama and Paul Simao

Our standards: The Thomson Reuters Trust Principles.

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