US and Mexico Express Optimism on Resolving Energy Dispute

Businesses are seeking predictability, fairness and transparency, Commerce Secretary Gina Raimondo told reporters at the close of Monday’s High-Level Economic Dialogue in Mexico City. She said Mexico would benefit from the Inflation Reduction Act and the Chips Act, both passed over the summer.

The two sides discussed how “to solve disputes through the dispute settlement mechanism” in the US-Mexico-Canada Agreement on trade, or USMCA, Mexican Economy Minister Tatiana Clouthier said. “That’s exactly what we’re doing right now. There’s interest on both sides to walk together to find solutions.”

Clouthier is leading Mexico’s team in talks with the US Trade Representative’s office about the energy issue. USTR in July requested the consultations over Lopez Obrador’s policy, which privileges state-owned oil producer Petroleos Mexicanos and the electricity provider known as CFE.

The trade representative’s office says this violates the USMCA, which went into force in 2020 to replace the two-decade-old Nafta pact. Canada filed a similar request for talks over Mexico’s electricity policy. Lopez Obrador denies that his policies violate the pact, saying that the US must respect Mexico’s sovereignty.

Secretary of State Antony Blinken, speaking at the opening of the economic conference after his meeting with the president earlier that afternoon, acknowledged that disagreements remain.

Pragmatic Way

“We have our differences, as any countries with relationships as deep and wide as ours are, but we will work through them in a pragmatic way,” he told Mexico’s Foreign Minister Marcelo Ebrard and Clouthier, adding that disputes would be handled with “mutual respect.”

Raimondo said the two sides didn’t talk extensively about the energy issue. Nonetheless, a US official said the Biden administration wanted to send the message that Mexico’s climate and energy policies were preventing the two nations from collaborating fully. The official asked not to be identified to discuss private deliberations.

While Monday’s dialogue wasn’t meant to be the forum for resolving the energy disagreement, it’s the overarching issue hanging over the economic relationship. If they can’t resolve their differences via consultations, it could go to a dispute panel that could allow the US to impose tariffs on billions of dollars of Mexican exports.

The US respects Mexico’s sovereignty and doesn’t see its request for consultations as challenging that, the US official said. Consultations are built into the USMCA to work through areas of disagreement, and Mexico has used that same process for its concerns with US policies, including on rules for the production of cars.

“It’s evident from conversations today that the US and Mexico see shared opportunity to build an energy future that advances climate goals,” Blinken told reporters.

President Joe Biden’s administration sees Mexico as an opportunity for companies to move supply chains closer to the US to avoid a repeat of pandemic-era logistics snarls, according to the official. But the country risks missing out because many of Lopez Obrador’s energy policies — including for clean energy — prevent or dissuade investment, the person said.

On semiconductors, Mexico can benefit not just from the manufacturing facilities, but also from testing, packaging and assembly, and the CHIPS Act will create jobs and opportunities both for the US and its southern neighbor, Raimondo said.