Business groups representing American oil producers, renewable electricity and manufacturers urged the Biden administration to use “every tool available” to push Mexico to address complaints about its nationalist energy policy that the US says violates their free-trade agreement.Mexico hasn’t engaged constructively in consultations that started in August, nor taken meaningful steps to address the issues raised by the US, the American Petroleum Institute, American Clean Power Association and National Association of Manufacturers wrote in a letter Friday to US Trade Representative Katherine Tai.
If the US decided to escalate, the next step under the US-Mexico-Canada Agreement on trade would be to call for a dispute-resolution panel like the one on cars last year. The two sides in October agreed to continue consultations past an initial 75-day mandatory period.
“It appears that the administration of Mexican President Andres Manuel Lopez Obrador will not change the course of his country’s energy policy without continued, direct and forceful pressure from the US government,” the groups wrote.
Lopez Obrador’s policy privileges Mexican state-owned oil producer Petroleos Mexicanos and the electricity provider known as CFE. The US says this violates the USMCA deal, which went into force in 2020 to replace the two-decade-old Nafta pact. Canada filed a similar request for talks over Mexico’s electricity policy.
Mexico’s energy policy adds costs for manufacturers that rely on existing contracts with energy suppliers and make it harder for them to meet long-term sustainability goals in Mexico, while also slowing the deployment of renewable energy in Mexico, the groups said.
Lopez Obrador denies that his policies violate the pact, saying that the US must respect Mexico’s sovereignty.
Tai said in an interview last week that her office is working with Mexico to address US concerns. She said in October said she wouldn’t rule out requesting the formation of a panel to resolve the conflict, and that the US will only remain in talks “for as long as those consultations are meaningful.”
Tai said last year that the dispute puts at risk more than $10 billion in American investment based on the arbitrary treatment of firms, especially in renewables.
If a panel were to rule against Mexico, it might have to pay tariffs on as much as $30 billion in exports, former officials who negotiated the agreement told Bloomberg News around the time that the US and Canada first lodged the complaint in July.
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