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US says Mexico energy policy violates trade deal; opens dispute

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Bloomberg | 19 July 2022

US says Mexico energy policy violates trade deal; opens dispute

By Max De Haldevang and Nacha Cattan

The US said Mexico’s nationalist energy policies violate North America’s free-trade deal and has requested dispute-settlement talks under the agreement, according to people with knowledge of the matter who also showed a government statement to Bloomberg News.

Mexico’s moves to prioritize energy from its state utility over private renewables companies, as well as denials and revocations of US firms’ abilities to operate in the country’s energy sector, are among the issues raised, according to the statement.

“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 trade deal, Katherine Tai, the Biden administration’s trade chief, said in the government statement. “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.”

News of the USTR dispute circulated widely Tuesday on social media chats, was tweeted by energy experts and reported in Mexican media. The White House declined to comment on the matter.

Under USMCA rules, such a request would give Mexico up to 30 days to agree to schedule consultations. If after 75 days no agreement is reached, the US could request that a formal panel hear arguments from the two nations. While that process focuses on getting Mexico to agree to corrective actions, dragged-out conflicts can ultimately lead to the US imposing punitive tariffs on imports from Mexico on the two-year-old trade pact.

US-Mexico relations have turned increasingly frosty in recent months. President Andres Manuel Lopez Obrador declined to attend the Summit of the Americas in Los Angeles after Venezuela and Cuba weren’t invited. He visited the White House last week and treated President Joe Biden to a half-hour monologue, boasting that gasoline is cheaper on Mexico’s side of the border thanks to his subsidies.

Lopez Obrador has worked to return the country to energy independence by supporting state-owned oil and gas producer Petroleos Mexicanos, known as Pemex, and state power company CFE. The government has refused to hand out permits to several all-but-finished foreign energy projects.

A spokesman for Lopez Obrador didn’t immediately respond to a request for comment.

— With assistance by Jennifer Jacobs, and John Harney

 source: Bloomberg