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U.S. Initiates Trade Dispute with Mexico over AMLO’s Energy Reforms

disputa comercial con México

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The United States has begun a trade dispute with Mexico, accusing the government of President Andrés Manuel López Obrador of favoring Mexican companies over American companies in that country’s energy sector.

On the American side, an agreement is being sought within the framework of the Free Trade Agreement signed with Canada and Mexico (USMCA), which replaced the former NAFTA. If no agreement is reached, it opens the way to the possibility of imposing numerous tariffs on products coming from Mexico.

The President of Mexico, Andres Manuel Lopez Obrador, in the middle of a speech, mocked the situation by saying “uy que miedo” (“how scary”), quoting the song with the same name by the Tabasco-born singer Chico Che, then asked to play the melody in the middle of the event.

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“Nothing is going to happen,” stressed the Mexican president referring to the trade dispute with the United States and asserting that President Joe Biden has always been respectful of the sovereignty of Mexicans.

Reasons why the United States has started a trade dispute with Mexico

Even if the Biden administration were unwilling to initiate a trade dispute with Mexico, the United States could still be involved in one.

According to U.S. Trade Representative Katherine Tai, Mexico has undermined the efforts of U.S. electric utilities on behalf of the state-owned Comisión Federal de Electricidad (CFE) and the national oil company, Petróleos Mexicanos, better known as Pemex.

“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,” Tai said.

AMLO’s government has prioritized CFE over private renewable operators in its power purchases, which has led to a trade dispute with Mexico. (EFE)

The policies adopted by AMLO have affected “investment by clean energy providers and companies looking to compare clean and renewable energy,” Tai said. For more than 18 months, U.S. officials have voiced these concerns to their Mexican counterparts without success.

Since becoming president, AMLO’s leftist government has sought to have the state monopolize Mexico’s energy market. Although he has failed to repeal former President Enrique Peña Nieto’s energy reform, the president has gradually changed the sector’s regulations to favor CFE and Pemex.

According to the Department of Commerce, AMLO’s government forced electricity distributors to prioritize CFE-generated power over American renewable generators. The United States also accuses Mexico of hindering the entry into the operation of renewable energy projects, the establishment of oil projects, and gasoline stations.

Last year Mexico passed a new electricity law that mandates Mexican grid operators to give priority to the CFE, regardless of cost or efficiency, at the expense of solar and wind producers that are almost exclusively private, who have seen their sales to the Mexican electricity system limited.

Under USMCA rules, the United States and Mexico must engage in talks within the next 30 days. If those talks fail, the United States could request the establishment of a panel of experts to propose a solution to the trade dispute.

Since he was elected, President Andrés Manuel López Obrador has attempted to reverse the energy reform of his predecessor Enrique Peña Nieto with partial success. (EFE)

Should the agreement proposed by the panel of experts not be accepted, the United States could legally resort to trade sanctions in response to AMLO’s energy policy.

Canada, a member of the USMCA, has said it will support the United States in its trade dispute with Mexico. Several energy groups, including the American Petroleum Institute and the American Clean Power Association, applauded the U.S. government for taking action.

If the trade dispute with Mexico escalates, American producers could be affected. After Canada, Mexico is the largest destination for American exporters, and bilateral trade between the two nations exceeded $665 billion in 2021.

Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica

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