The U.S. announced July 20 that it has requested dispute settlement consultations with Mexico under the U.S.-Mexico-Canada Agreement regarding Mexico’s pursuit of an energy policy centered on reinstating the primacy of its state-owned electrical utility and oil and gas company. Trade retaliatory measures are an eventual possibility if the two sides are otherwise unable to resolve this dispute.
According to information from the Office of the U.S. Trade Representative, U.S. companies responded to 2013 reforms in Mexico’s energy sector by (1) establishing and operating wind and solar energy farms and cogeneration and combined cycle facilities in Mexico that would contribute electricity to Mexico’s grid, (2) strengthening interconnection contracts that bring U.S. electricity to Mexico across the border through wires, and (3) importing U.S.-origin fuels to Mexico for sale at gas stations.
However, USTR adds, since December 2018 Mexico has pursued an energy policy centered on reinstating the primacy of its state-owned electrical utility, CFE, and oil and gas company, PEMEX. Mexico has also taken, or is taking, actions or inactions that are curtailing the ability of private companies to participate effectively, if at all, in Mexico’s energy sector. These include delaying, denying, or failing to act on applications for new permits or permit modifications; suspending or revoking existing permits; or otherwise blocking private companies’ ability to operate renewable energy facilities, to import and export electricity and fuel, to store or transload fuel, and to build or operate retail fuel stations.
USTR said these policies and practices appear to be inconsistent with several of Mexico’s USMCA obligations, including under the market access, investment, and state-owned enterprises chapters. They have also “largely cut off U.S. and other investment in the country’s clean energy infrastructure” and “threaten to push private sector innovation out of the Mexican energy market.”
Under USMCA rules the two sides must enter into consultations within 30 days of the U.S. request unless they decide otherwise. If the consultations fail to resolve the matter the U.S. may request the establishment of a panel.
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