What’s behind the energy spat between Canada, Mexico and the US? | International Trade News

Mexican President Andres Manuel Lopez Obrador said Mexico has ‘inalienable’ ownership of its energy resources.

The leaders of Canada, Mexico and the United States will hold a summit next week where there are many important disagreements. could be a dispute focused on whether Mexico violated the trade pact by tightening state control over its energy market.

Where does the dispute stand?

Tensions over Mexico’s nationalist policies flared up into a formal dispute in July, when governments in Washington, DC and Ottawa filed a complaint against Mexico under a joint trade agreement between the nations. : US-Mexico-Canada Agreement (USMCA).

The complaint argues that the efforts of the President of Mexico Andres Manuel López Obrador Discrimination against US and Canadian companies, by altering the market in favor of Mexico’s state oil company, Petroleos Mexicanos (Pemex) and the national electricity company Comision Federal de Electricidad ( CFE).

Companies also complain that bureaucratic delays are hindering their operations.

Negotiations to resolve the dispute have begun, and although progress is stalled, Canada and the United States agreed last year to extend the process beyond the original 75-day deadline.

Under the USMCA, if a dispute is not resolved during consultations, a dispute panel may be convened for arbitration.

What is Mexico’s defense?

Lopez Obrador took an upbeat stance, saying Mexico did not break any laws and “nothing will happen”.

It comes after he overhauled the electricity market in the name of national sovereignty, prioritizing CFEs over private companies in connecting power plants to the grid.

Often expressing his opposition to private and foreign participation in the energy sector as part of efforts to eradicate corruption, he argues that previous governments have skewed the market to favoring private capital.

He also said energy was a domestic issue and pointed to a provision he included in the USMCA that stipulates “non-transferable” Mexican oil and gas ownership. Critics say the article does not justify Lopez Obrador’s policies towards foreign firm.

Can Mexico settle the dispute?

Most analysts predict Mexico will lose if a panel is required to settle the dispute. That could be very costly for Mexico, raising the prospect of punitive US tariffs.

Both countries have previously emphasized that they want to resolve their differences before presenting a council.

Negotiations slowed down after Mexico Economy minister resigns in October. Her successor removed a number of experienced trade negotiators, leaving an inexperienced team in charge.

The new group said it had made proposals that could address two of the four areas of consultation, and that it was also addressing other US concerns. But there are few clear signs of meaningful progress.

The resolution seems to hinge on whether the energy nationalists in the Mexican government, who have taken cues from Lopez Obrador, are willing to compromise.

What is the Mexican bargain chip?

Lopez Obrador made it foundational energy policy his presidency, making it hard for him to back down.

His administration also noted that Mexican support about solving illegal immigration tends to have more weight in Washington, D.C. due to its prominence in domestic U.S. politics, giving the government an implicit, if unspoken, leverage.

Mexican industry is also so closely integrated with the US economy that a trade conflict could be painful for both countries at a time when the region is trying to reduce its dependence on Asia and reduce rising inflation. leap.

However, the controversy has hit investor confidence in Mexico. Lopez Obrador is seeking U.S. help to finance solar power generation in northern Mexico and attract investment in greener manufacturing, particularly in auto manufacturing, a key industry.

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