WHERE IS THE CONTROVERSY?
Tensions over Mexico’s nationalist policies culminated in a formal dispute in July when Washington and Ottawa filed a lawsuit against Mexico under the United States-Mexico-Canada Trade Agreement (USMCA).
The complaint alleged that Mexican President Andres Manuel Lopez Obrador’s efforts to change the market to favor state oil company Petroleos Mexicanos (Pemex) and national power company Comision Federal de Electricidad (CFE) had been discriminatory against American and Canadian companies .
Businesses have also complained of bureaucratic delays hampering their business.
Dispute settlement talks have begun, and while progress has been uncertain, the US and Canada agreed last year to extend the process beyond an initial 75-day window.
Under the USMCA, if the dispute is not resolved during the consultations, a panel of disputes may be called to adjudicate.
WHAT IS MEXICO’S DEFENSE?
Lopez Obrador was optimistic, saying that Mexico has not broken any laws and that “nothing will happen”.
This comes after it overhauled the electricity market in the name of national sovereignty, giving CFE priority over private companies to connect power plants to the grid.
Often presenting his opposition to foreign, private participation in the energy sector as part of his drive to stamp out corruption, he argues that previous governments have skewed the market in favor of private capital.
He also claims that energy is a national affair and refers to an article he had placed in the USMCA that provided for “undefinable” ownership of Mexico’s oil and gas. Critics say the article does not cover the treatment of foreign companies.
CAN MEXICO RESOLVE THE DISPUTE?
Most analysts expect Mexico to lose if a panel is appointed to resolve the dispute. This could be very costly for Mexico, raising the prospect of punitive US tariffs.
The two countries have previously stressed they want to resolve the disagreement before it goes to a panel.
Talks stalled after Mexico’s economy minister resigned in October and his successor ousted several experienced trade negotiators, leaving an inexperienced team in charge.
The new team says it has presented proposals that could address two of the four areas of consultation and is also addressing other US concerns. But there have been few clear indications of significant progress.
The resolution appears to depend on whether the energy nationalists within the Mexican administration, who have taken their cue from Lopez Obrador, are willing to compromise.
WHAT ARE MEXICO’S MEANS OF TRADING?
Lopez Obrador has made energy policy a cornerstone of his presidency, which makes it difficult for him to back down.
His administration is also aware that Mexican aid in the fight against illegal immigration tends to carry more weight with Washington because of its importance in US domestic politics, giving the government unspoken, if unstated, leverage.
Furthermore, Mexican industry is so tightly integrated into the US economy that a trade dispute could be painful for both countries at a time when the region is trying to reduce its reliance on Asia and bring down runaway inflation in the US. economy.
However, the algarade has damaged investor confidence in Mexico and Lopez Obrador is seeking US help to finance solar power generation in northern Mexico and attract investment in greener manufacturing, particularly in automotive manufacturing. a key sector.
