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Tipsheet

Mexico’s President Is Not Taking US Trade Threats Seriously at All

P Photo/Eduardo Verdugo

Mexico President Andres Manuel Lopez Obrador is not taking threats from the Biden administration seriously over a trade dispute about the country’s energy policies. 

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Under the United States-Mexico-Canada Agreement, the U.S. on Thursday requested dispute settlement consultations with respect to “certain measures by Mexico that undermine American companies and U.S.-produced energy in favor of Mexico’s state-owned electrical utility, the Comisión Federal de Electricidad (CFE), and state-owned oil and gas company, Petróleos Mexicanos (PEMEX),” according to a statement on the Office of the United States Trade Representative. 

This is the first step of what could eventually lead to tariffs on a number of Mexican products. 

In response, AMLO mocked the president during a press conference in the most dramatic fashion.

Mr. López Obrador was dismissive of the U.S. action, chalking it up to intense lobbying by what he called corrupt right-wing rivals in Mexico.

“Ooooh, I’m so scared...,” he said at his daily morning press conference, paraphrasing a line of a popular song by a musician of his tropical Tabasco state. He then ordered his staff to play the song in the middle of the press conference.

“Nothing will happen,” he said, referring to the trade dispute, arguing that President Biden has always been respectful of Mexico’s national sovereignty. (WSJ)

“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,” said Ambassador Katherine Tai in making the announcement. "These policy changes impact U.S. economic interests in multiple sectors and disincentivize investment by clean-energy suppliers and by companies that seek to purchase clean, reliable energy.  We have tried to work constructively with the Mexican government to address these concerns, but, unfortunately, U.S. companies continue to face unfair treatment in Mexico.  We will seek to work with the Mexican government through these consultations to resolve these concerns to advance North American competitiveness.”

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The action fuels the tension between the two neighbors, days after they marked the second anniversary of the USMCA, the successor to the North American Free Trade Agreement.

U.S. officials and businesses have complained since last year that Mexico’s energy industry policies implemented by Mr. López Obrador harmed U.S. businesses and investors.

Since he took office in 2018, Mr. López Obrador, a leftist-nationalist, has sought to regain state control of the energy industry. While he has fallen short of repealing the 2013 constitutional change that opened up both sectors to private investors, he has gradually changed regulations and laws to strengthen the dominant role of CFE and Pemex.

The Mexican president says, without offering evidence, that past governments were paid off by multinationals to allow them to enter the Mexican market and destroy the state energy companies, leaving the country’s energy security at risk and harming consumers.

The U.S. Trade Representative’s office said it would contest Mexico’s actions including amendments to its electricity law that would give priority to the distribution of CFE-generated power over wind and solar power generated by private-sector companies.

The U.S. also contends that Mexico has obstructed the ability of U.S. companies to operate in Mexico’s energy sector, including in renewable energy projects, oil storage and retail fuel stations, through various delays, denials and revocations in the approval process. (WSJ)

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Under the terms of the USMCA, consultations must begin within 30 days. If the parties don't reach an agreement, the U.S. could seek a panel of experts. And if there is no resolution at that point, the U.S. could move to impose tariffs.

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