Skip to content

President’s tough speech masks Mexico’s concern over energy dispute with US

Last week, the U.S. Trade Representative called for dispute settlement talks with Mexico, arguing that Lopez Obrador’s drive to tighten state control over the energy market is unfair to his companies and likely in violation of a regional trade agreement.

With enthusiastic calls for national sovereignty, Lopez Obrador said he would state Mexico’s position on the issue at a military parade on Independence Day on September 16, though he sought to play down any possibility of conflict with the United States.

“Nothing is going to happen, nothing, because we both need each other,” he said last week.

In reality, Lopez Obrador is annoyed, concerned and frustrated by the falling out, and he has tried to avoid conflict by personally negotiating deals with companies unhappy with his policies, said a person familiar with the president’s thinking.

Separately, two Mexican officials said the trade disagreement was causing concern within the government and a third noted that the president was “seriously analyzing” the issue.

A day after the US request became official, the president addressed it, saying he had reached agreements in June with 17 of the 19 US energy companies, without naming them.

The office of Lopez Obrador, a leftist who in this conflict and others has sought to energize his electoral base by arguing that corrupt domestic adversaries are behind opposition to his policies, did not respond to a request of comment.

Business groups say Mexico’s efforts to bolster state oil company Petroleos Mexicanos and national power company Comision Federal de Electricidad at the expense of private investors are discriminatory and violate the US-Mexico trade deal -Canada (USMCA).

Lopez Obrador denies these facts and says his policies are aimed at restoring balance to a market he says has been rigged by previous governments in favor of private capital.

But the agreements he announced with the energy companies did not prevent the USTR from filing his request. Canada quickly followed suit.

Mexico’s economy minister pledged to seek a “mutually satisfactory” solution through “open and frank” dialogue during a 75-day consultation period.

If no resolution is found, the USTR may request the establishment of a dispute resolution panel.

“It is very serious, and must be treated with great care,” said Alfredo Femat, head of the foreign relations committee of the lower house of Congress, and legislator of the Labor Party (PT), an ally of the coalition. of Lopez Obrador’s ruling MORENA party.

Negotiating a deal would be out of Mexico’s hands once the issue reached a panel, Femat said.

If the panel’s decision went against Mexico, trade experts say the country could face billions of dollars in retaliatory duties.

CORRECTIONS

Mexican officials expressed surprise to business leaders that the USTR request was submitted just a week after Lopez Obrador returned from his talks with US President Joe Biden Washington, a second said. source familiar with the matter.

Officials said Mexico has no plans to change its laws, but is open to exploring other solutions, the source added. There are also concerns that SUVs and pickups made in Mexico will be hit with tariffs, the source added.

Mexico would argue with Washington that a dispute with one of its major trading partners could hurt the US economy at a sensitive time, with the US midterm elections looming in November, a Mexican official said.

Last week, Lopez Obrador claimed that the cost of an American automobile would increase by $10,000 without help from the Mexican auto industry. On Thursday, he dismissed the possibility of Mexico leaving the USMCA. [L1N2Z91XM]

Mexico’s economy minister recalled his earlier remarks on how he intended to resolve the dispute through consultations. A spokesman for the foreign ministry echoed that position, saying Mexico was confident that the established mechanisms could facilitate the conclusion of an agreement, and declined to confirm further details outlined by Reuters.

However, the room for maneuver has narrowed now that the dispute has reached an institutional level in which the government cannot resort to case-by-case solutions, said the first source familiar with Mexico’s efforts to resolve the problem.

But if Lopez Obrador feels trapped, there is a risk he will escalate the dispute, the source said, adding: “He is not able to back down because he has already gone too far.”

Leave a Reply

Your email address will not be published.