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Energy Spat Between Mexico And The U.S. Escalates

Mexico hopes the talks initiated by the U.S. under the United States-Mexico-Canada Agreement (USMCA) about Mexico’s prioritization of state energy firms over private U.S. companies would reach a “mutually satisfactory solution,” Mexican Deputy Economy Minister Luz Maria de la Mora told Reuters in an interview published on Friday. 

“We want to take advantage of this consultation phase ... to see how we can reach a mutually satisfactory solution through an open, frank and constructive dialogue, which will allow us to overcome these differences,” the Mexican official told Reuters.   

The United States requested on Wednesday formal consultations with Mexico under the USMCA over Mexico’s recent energy policies, which the U.S. argues prioritize Mexican state energy firms at the expense of American companies. 

“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,” United States Trade Representative Katherine Tai said.

Since Mexican President Andrés Manuel López Obrador took office at the end of 2018, he has passed many laws favoring state oil giant Pemex and the national power company, Comisión Federal de Electricidad (CFE), as the leftist president has sought a greater role for its state-held energy firms and has tried to overturn some of the energy reforms of his predecessor, Enrique Peña Nieto.  

The U.S. has expressed concerns over the priority status for Mexico’s state energy firms under López Obrador, which gives those companies an unfair advantage over U.S. producers and U.S.-produced energy under the United States-Mexico-Canada Agreement. 

Related: What Is Shell Doing On TikTok?

The dispute has since escalated to a request for dispute settlement consultations, and under USMCA rules, the U.S. and Mexico should start those consultations within 30 days of the request unless they decide otherwise. 

The American Petroleum Institute (API) and the American Clean Power Association (ACP) welcomed the U.S. request for consultations with Mexico. 

“The Mexican government’s escalating pursuit of discriminatory policies that favor state-run energy companies and hinder private sector investment directly threatens the prosperity of U.S. companies and their workers. We applaud Ambassador Tai for making this request and reinforcing the mutual benefits of continued international trade and energy investments can deliver for both Mexico and the United States,” API President and CEO Mike Sommers and ACP CEO Heather Zichal said in a joint statement. 

By Michael Kern for Oilprice.com 

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