Mexico News Daily | 28 March 2023

Reuters: US ultimatum to Mexico over energy dispute imminent

The United States intends to issue an ultimatum to Mexico in the coming weeks as it seeks to make progress in a dispute over the latter’s nationalistic energy policies, according to a Reuters report.

The U.S. and Canadian governments requested dispute settlement consultations with their Mexican counterpart under the USMCA (US-Mexico-Canda) free trade pact last July.

They claim that American and Canadian energy companies that operate in Mexico are being treated unfairly by the Mexican government, which has implemented policies that favor the state oil company Pemex and the Federal Electricity Commission (CFE).

More than seven months after the U.S. and Canada filed their requests, the disagreement remains unresolved.

Citing unnamed people familiar with discussions within the U.S. government, Reuters reported Monday that the Biden administration “plans to send Mexico an ‘act now or else’ message in an attempt to break a stalemate” in the dispute.

Three sources told the news agency that the Office of the United State Trade Representative (USTR) was expected to make what they described as a “final offer” to the Mexican government to open its markets to U.S. companies and agree to some additional oversight.

If Mexico refuses to budge, the U.S. government will request that an independent panel settle the dispute under USMCA, the sources said.

The United States and Canada could impose hefty punitive tariffs on Mexican imports if an independent panel rules in their favor and Mexico doesn’t alter the policies in question.

Under USMCA rules, the U.S. could have requested the establishment of a panel just 75 days after it submitted its request for talks, but the White House, Reuters reported, “has hoped to avoid escalating trade tensions with Mexico as it sought help on immigration and drug trafficking.”

The news agency’s sources said that the U.S. government has run out of less-combative options as there has been little progress toward resolving the dispute despite months of talks.

“We want to see clear progress on this issue and address the concerns that have been raised by our negotiating teams,” a U.S. government official told Reuters.

The news agency said that a USTR spokesperson declined to comment on the talks with Mexico, but noted that the trade representative herself, Ambassador Katherine Tai, hinted last Thursday at a possible escalation of the dispute.

“We are engaging with Mexico on specific and concrete steps that Mexico must take to address the concerns set out in our consultations request. This is still very much a live issue,” Tai said at a U.S. Senate Finance Committee hearing.

“… We know that all the tools in the USMCA are there for a reason,” she added.

President López Obrador, a fierce critic of the 2014 reform that opened up Mexico’s energy sector to foreign and private companies, appears reluctant to change the government’s nationalistic policies.

During a speech at a March 18 event to mark the 85th anniversary of the nationalization of Mexico’s oil industry, he alluded to his belief that the government has done nothing wrong in implementing policies that favor Pemex and the CFE.

A section of the USMCA, López Obrador noted, states that “the United States and Canada recognize that Mexico reserves its sovereign right to reform its constitution and its domestic legislation.”

With reports from Reuters