Mexico eyes ‘mutually satisfactory’ solution to U.S. energy trade spat -deputy minister

The U.S. and Canadian demands come after years of concern among those nations’ private firms that Mexican President Andres Manuel Lopez Obrador’s drive to tighten the state’s grip on the oil and power sectors treated them unfairly and was in violation of the United States-Mexico-Canada Agreement (USMCA).

“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,” De la Mora told Reuters in an interview.

The request for consultations marks the most serious trade spat between Washington and Mexico City since the USMCA trade pact took effect two years ago and if unresolved could ultimately lead to punitive U.S. tariffs.

Though De la Mora said Mexico’s government would seek to argue that its energy policies are not in breach of the trade deal, her conciliatory tone about seeking a solution that benefits all parties contrasts with Lopez Obrador’s defiant push back against the complaints.

The leftist energy nationalist has pledged to revive state-owned oil producer Petroleos Mexicanos (Pemex) and power utility Comision Federal de Electricidad (CFE), which he argues his predecessors deliberately “destroyed” to cede Mexico’s energy market to foreigners.

The U.S. Trade Representative says the moves to bolster the state-run firms have undermined American companies in Mexico.

De la Mora said Mexico would not use a separate trade dispute with Washington over the auto industry as a bargaining chip.

“We hope this issue will be resolved before the end of the year and we are very optimistic that we have a very solid case and that we will have a favorable resolution for Mexico,” said De la Mora, referring to the auto spat, which includes disagreements over proposed U.S. tax breaks for electric vehicle manufacturing.

Canada said in January it would join Mexico in requesting a dispute settlement panel to iron out their differences with the United States over how to apply automotive sector content requirements under the treaty.

Asked if Lopez Obrador’s energy policies were spooking investment, De la Mora pointed to recent announcements of investments in Mexico by U.S. energy company Sempra Energy (SRE.N) and Canada’s TC Energy .

She argued that the USMCA’s dispute settlement mechanism gave investors certainty because if differences arise, like they have now, its use would help clear things up.

“The dispute resolution mechanism is a very solid mechanism, it is a mechanism that allows the investor to have greater certainty and this is very positive for the business climate,” she said.

The U.S. requested consultations under the USMCA over Mexico’s energy policies on July 20.

Under USMCA rules, the United States and Mexico would enter into consultations within 30 days of the U.S. request, unless the parties decide otherwise. If they do not resolve the matter through consultations within 75 days of the U.S. request, the United States may request the establishment of a dispute panel.