WHAT THEY ARE SAYING: United States Requests Consultations Under the USMCA Over Mexico’s Energy Policies on Behalf of U.S. Stakeholders

July 20, 2022

WASHINGTON – Today, United States Trade Representative Katherine Tai announced that the United States has requested dispute settlement consultations with Mexico under the United States-Mexico-Canada Agreement (USMCA). The consultations relate 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). 
Here’s what they are saying about today’s announcement:
New York Times: The Biden administration will challenge Mexico’s state control of its energy industry.
“Officials at the Office of the United States Trade Representative told reporters on Tuesday that Mexico’s actions appeared to violate the United States-Mexico-Canada Agreement. That free-trade deal, which went into effect two years ago, bars the countries from adopting policies that discriminate against the others and requires them to curtail their use of state-owned enterprises. The officials said the United States had raised its objections to Mexico’s energy policy with Mexican officials on multiple occasions over the last 18 months.”

Wall Street Journal: U.S. Initiates Trade Fight With Mexico Over Energy Policy
“The U.S. is seeking dispute settlement consultations under the U.S.-Mexico-Canada Agreement—the first step in what could lead to tariffs on a range of Mexican products. It also represents a challenge by the Biden administration to Mr. López Obrador’s effort to regain government control over the country’s oil and electricity markets. In a brief statement, Mexico’s economy ministry, which is in charge of trade negotiations, said that Mexico’s government is willing to reach a ‘mutually satisfactory’ solution during the consultation stage.”
Associated Press: US demands talks on Mexican energy policies it calls unfair
“Among the specific issues in dispute is an amendment to Mexican law last year that the United States says gives an unfair edge to electricity produced by Mexico’s state-owned utility Federal Electricity Commission over energy from private companies and over cleaner sources such as wind and solar. The United States also protests a 2019 regulation that gives only state oil and gas company Petroleos Mexicanos extra time to comply with tougher environmental standards limiting the sulfur allowed in automotive diesel fuel. The U.S. also accused Mexico of delaying, rejecting or failing to act on private companies’ applications for permits to operate in the energy business and of revoking or suspending existing permits.”
Politico: Biden administration targets Mexican energy policies that hurt U.S. investors
“Among other things, the United States is challenging policies that prioritize Mexico’s state-owned utility, which Tai argued negatively impact American economic interests in multiple sectors and disincentivize investment by clean-energy suppliers and by companies that seek to purchase clean, reliable energy. The United States still hopes to resolve its concerns with Mexico through consultations, rather than take the next step of requesting a USMCA dispute settlement panel to rule on the issue, she added.”
Inside U.S. Trade: U.S. requests USMCA consultations over Mexico’s energy policies
“The U.S. has requested consultations with Mexico over the country’s energy policies, alleging several violations of the U.S.-Mexico-Canada Agreement, U.S. Trade Representative Katherine Tai announced on Wednesday. Tai, along with other Biden administration officials and lawmakers from both parties, had for more than a year been raising concerns about efforts pushed by Mexican President Andrés Manuel López Obrador to reverse reforms undertaken in 2013 to liberalize the country’s energy sector. But despite those calls, USTR says, López Obrador has continued to pursue policies that discriminate against U.S. companies, impede Mexico’s progress toward meeting climate goals and run afoul of its commitments under USMCA.”

House Ways & Means Committee: "Our committee fought for comprehensive enforcement mechanisms in USMCA to ensure that our partners uphold their commitments. We are committed to fighting for clean, reliable energy, and commend @USTradeRep for holding Mexico accountable to its USMCA obligations." [Tweet]

Senate Finance Committee Chair Ron Wyden [D-OR]: “Mexico’s protectionist energy policies are a one-two punch against economic and environmental progress. As I discussed with Ambassador Tai in our March hearing, Mexico is flouting its USMCA obligations by shutting American renewable energy providers out of the market and giving unfair advantages to less reliable, fossil fuel-based state-owned enterprises. These actions are not only discriminatory, but they also have dire environmental consequences and raise questions about whether Mexico can meet its climate goals under the Paris Agreement. As I have frequently said, a trade agreement without strong enforcement is just words on paper. So, I'm pleased that Ambassador Tai is using the improved enforcement mechanism I fought for in USMCA to hold Mexico accountable, protect our environment, and ensure open markets for American renewable energy providers.” [Statement]
House Ways & Means Committee Ranking Member Kevin Brady [R-TX]: “I applaud Ambassador Tai’s leadership on this enforcement effort, and I appreciate the substantial time she has spent with me, other Members of Congress, and a wide range of stakeholders, in order to develop the right strategy to address these issues. I urge Mexico to do the right thing and reverse its problematic policies in the energy sector.” [Statement]
Senator Ted Cruz [R-TX]: “Under the USMCA, Mexico agreed to level the playing field and allow American companies to compete with Mexican companies to meet Mexico’s energy needs. But the government of Mexico has been violating this agreement. It was well past time for the United States to respond, and it was right for the U.S. Trade Representative to finally act. I will continue working to ensure that Texan and American energy producers are able to fairly compete.” [Statement]
Spokesperson for Mary Ng, Canada's Minister of International Trade, Export Promotion, Small Business, and Economic Development: “We agree with the United States that these policies are inconsistent with Mexico’s USMCA obligations. We are joining the United States in taking action by launching our own consultations under USMCA to address these concerns, while supporting the U.S. in their challenge.” [Statement]
American Petroleum Institute CEO Mike Sommers and American Clean Power Association CEO Heather Zichal: “Today’s announcement by the Biden administration represents a significant step forward in addressing Mexico’s alarming energy sector policies, which not only violate the country’s commitments under USMCA, but also undermine the integration of North American energy markets and jeopardize our shared climate goals…We applaud Ambassador Tai for making this request and reinforcing the mutual benefits of continued international trade and energy investments can deliver for both Mexico and the United States.” [Statement]
U.S. Chamber of Commerce Senior Vice President for the Americas Neil Herrington: “The Chamber applauds this important step toward addressing troubling measures Mexico is advancing in its energy sector that we believe violate the country’s commitments under USMCA. We have repeatedly expressed our concerns with the direction of these policies, which have unfairly disadvantaged U.S. companies and are at odds with our common goals of generating reliable energy, sustainable growth, and a durable economic recovery.” [Statement]
National Association of Manufacturers Vice President of International Economic Affairs Ken Monahan: “This bold action from the Biden administration and Ambassador Katherine Tai is critical to stemming measures implemented and proposed by the government of Mexico that contradict the letter and spirit of the USMCA and undermine the rule of law in Mexico… “Manufacturers welcome the news that the U.S. has requested dispute settlement consultations with Mexico under the USMCA. We stand ready to work with USTR to quickly reverse Mexico’s unfair energy policies and to address the many other industry challenges in Mexico.” [Statement]
Alliance for Trade Enforcement Executive Director Brian Pomper: “The Alliance for Trade Enforcement applauds USTR’s request for consultations with Mexico. President López Obrador’s efforts to nationalize the country’s energy sector directly violate the USMCA, obstruct clean energy initiatives in the region, and threaten America’s economic prosperity…It is our hope that this action today will demonstrate to Mexico that the United States is serious about enforcing Mexico’s USMCA commitments in these as well as other areas where it is falling short.” [Statement]