US demands talks on Mexican energy policies it calls unfair

Jul 20, 2022, 6:00 AM | Updated: 9:16 pm
FILE - A newly built power generation plant that is part of a mega-energy project is seen with the ...

FILE - A newly built power generation plant that is part of a mega-energy project is seen with the Popocatepetl Volcano in the background near Huexca, Morelos state, Mexico, on Feb. 22, 2020. The United States is putting pressure on Mexico over energy policies that Washington says unfairly favor Mexico's state-owned electricity and oil companies over American competitors and clean-energy suppliers. The U.S. is demanding talks to resolve the dispute, starting a process Wednesday, July 20, 2022, that could end in trade sanctions against Mexico. (AP Photo/Eduardo Verdugo, File)

(AP Photo/Eduardo Verdugo, File)

WASHINGTON (AP) — The United States is putting pressure on Mexico over energy policies that Washington says unfairly favor Mexico’s state-owned electricity and oil companies over American competitors and clean-energy suppliers.

The U.S. is demanding talks to resolve the dispute, starting a process Wednesday that could end in trade sanctions against Mexico.

“We have repeatedly expressed serious concerns about a series of changes in Mexico’s energy policies and their consistency with Mexico’s commitments,” U.S. Trade Representative Katherine Tai said in a statement. She said “U.S. companies continue to face unfair treatment in Mexico.”

Mexico acknowledged Wednesday it had received a similar request for consultations from Canada. Mexico’s Economy Department said because the Canadian request “has certain elements in common” with the U.S. request, Mexico “will seek to maintain a coordinated process with both trading partners.”

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.

“Mexico’s policies have largely cut off U.S. and other investment in the country’s clean energy infrastructure, including significant steps to roll back reforms Mexico previously made to meet its climate goals under the Paris Agreement,” Tai’s office said in a statement.

The Mexican government tried to downplay the controversy, presenting it as an ordinary process between countries.

President Andrés Manuel López Obrador said Wednesday relations with the U.S. government were good and that the dispute was driven by Mexican companies opposed to his administration and who lobby on the issue.

If the two countries cannot reach an agreement after 75 days of talks, the U.S. can request intervention by a dispute resolution panel under the US-Mexico-Canada Agreement or USMCA, that could result in sanctions against Mexico if the United States prevails. The pact, negotiated by President Donald Trump, replaced the 1994 North American Free Trade Agreement.

“The government of Mexico expresses its willingness to reach a mutually satisfactory solution during the consultation phase,” the Economy Ministry said in a statement.

That ministry, which will lead the negotiations, pointed out that this is the fourth time this mechanism has been used since the free-trade agreement went into effect two years ago. It was first employed by the U.S. against Canada over milk quotas, then by Canada against the U.S. over tariffs on Canadian solar panels. Mexico and Canada used it to challenge the U.S. interpretation of a provision about where auto parts have to originate to qualify for duty-free status under the deal.

López Obrador said there was “no complaint” on the subject during his meeting with U.S. and Mexican businessmen in Washington earlier this month and that he told Biden that Mexico is investing in the update of hydroelectric plants and will create new solar plants in the northern border.

____

Verza reported from Mexico City.

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US demands talks on Mexican energy policies it calls unfair