Canada joins the US in claiming Mexico’s energy policies

(Reuters) – The United States and Canada on Wednesday requested consultations on dispute settlement with Mexico under the North American trade agreement over the Latin American nation’s energy policies that they consider discriminatory and that they say “harm” international companies and cross-border supplies.

The request, announced in the first instance by the Office of the United States Trade Representative (USTR, for its acronym in English), represents the most serious dispute between Washington and Mexico City since the Treaty between Mexico, the United States and Mexico entered into force. Canada (known as T-MEC or USMCA). If not resolved, it could lead to punitive tariffs from the United States.

Canada’s Commerce Ministry later told Reuters it would launch its own energy consultations with Mexico and that it “stands with the United States in its challenge.”

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

Mexico’s economy ministry said in a statement late Wednesday that it had received the Canadian request, which had some similarities to the US request.

The ministry also said it would seek to coordinate with both governments to discuss the scope of their requests, and that the Mexican government was willing to reach a “mutually satisfactory solution” to the energy dispute.

The USTR explained that the consultations requested refer to measures that, according to its arguments, harm US companies in favor of the Mexican state Federal Electricity Commission (CFE) and Petróleos Mexicanos (Pemex).

Mexican President Andrés Manuel López Obrador has promised to reactivate Pemex and CFE.

The United States now argues that its efforts to strengthen state-owned companies seem to contravene Mexico’s commitments in the T-MEC.

“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,” said US Trade Representative Katherine Tai.

The US measure is a blow to Mexico and comes just a week after López Obrador met with his counterpart from the neighboring country, Joe Biden, in Washington, and announced that US companies planned to invest billions of dollars in the sector. Mexican energy.

Later, López Obrador assured that there were no problems since his country was acting in accordance with the law.

“We are going to receive the proposal, it is going to be analyzed (…) and we are going to respond promptly,” said the Mexican president. “There is no violation of the treaty (T-MEC). There is no problem at all, everything we are doing in energy matters is in accordance with the constitution, with our laws.”

“Unfair treatment”

Tai, the US trade representative, argued that the policy changes undertaken by Mexico are affecting the economic interests of the United States in multiple sectors and “disincentivize investment” by renewable energy providers and companies seeking to buy clean energy and reliable.

In April, Mexico’s Supreme Court upheld controversial electricity legislation passed in 2021, which establishes that the CFE must take precedence over private power providers in dispatch, or when plants come online.

López Obrador argues that his measures will benefit consumers and make Mexico more self-sufficient. The opposition claims they will increase electricity costs, undermine investor confidence and violate Mexico’s clean energy commitments.

The USTR explained that it was challenging amendments to Mexican law that prioritize the distribution of power generated by the CFE over cleaner power sources provided by private sector providers, such as wind and solar.

The USTR noted that Mexico has also been “delaying, denying or failing to act” on permit applications for renewable energy facilities and to store, transship or sell fuels, making it difficult for private firms to participate, echoing complaints of Mexican business lobbyists.

“We have tried to work constructively with the Mexican government to address these concerns, but unfortunately, US companies continue to face unfair treatment in Mexico,” Tai said.

However, the Ministry of Economy, the agency in charge of coordinating the defense of the Mexican State, said in a statement that it hopes that the dispute will come to fruition.

“The Mexican government expresses its willingness to reach a mutually satisfactory solution during the consultation stage,” he said in a statement.

In June, Ken Salazar, US ambassador to Mexico, said that the energy policies of the Latin American country had put some 30 billion dollars in US investment projects at risk.

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