Canadian government supports Biden’s in his “challenge”; each country opens its consultations; they point out the closure of access to the market, delays in permits…; Ministry of Foreign Economy willingness to reach a satisfactory solution; experts foresee a difficult non-contentious stage that would affect investment; Former Secretary Guajardo estimates damages of 30 million dollars that, if lost on the rear panel, would translate into tariffs; IP asks to resolve quickly
Mexico expressed its willingness to reach a satisfactory solution with the United States and Canada on the requests for consultations related to energy policies taken by the Mexican Government; a process that President Andrés Manuel López Obrador minimized by stating that “nothing is going to happen” and making irony with a song by his “civilian” Chico Che: “Oh, how scary, look how I’m shaking.”
This Wednesday morning, the Ministry of Economy (SE) announced that the United States officially submitted a request to start consultations, under the Trade Agreement between Mexico, the United States and Canada (T-MEC), due to the energy policy undertaken by the Mexican government, to which the agency responded that there is a willingness to reach a “mutually satisfactory solution during the consultation stage.”
To this request was added that of Canada, which arrived at night and was focused on the request for consultations derived from the concern that this commercial partner has in the Law of the Electricity Industry undertaken by Mexico.
Despite the fact that this consultation process constitutes the non-contentious stage of the general dispute settlement mechanism within the treaty, if a resolution is not reached, the retaliation for our country could be very “painful” and directly impact Mexican exports.
Even so, the federal president dismissed this request by assuring that “nothing is going to happen” and instead requested that a video of his “countryman”, Francisco Hernández Mandujano, Chico Che, be broadcast with the song “Uy que corazón”.
“Nothing is going to happen, but they are already rubbing their hands, talking about the fact that now yes, just as they supposedly received me at the White House, right?, ‘let’s see first you are going to finance us 1.5 billion dollars, second we want that you arrest Caro Quintero, third, that you apologize for having promoted other countries not to attend the so-called summit of the Americas, for having insubordinated you, ‘no, President Biden is a decent, respectful person,’ accused the Chief Executive.
He revealed that when the new version of the Treaty was negotiated, even former President Enrique Peña was fearful of retaliation from the United States, because they had already negotiated on energy matters and the incoming government considered that they were interference that they would not accept, so they were subjected to pressure from the Mexican government itself.
He even said that he had a phone call with the Mexican negotiator of the T-MEC, Jesús Seade, who confirmed that there is no violation of the treaty and that he can rest easy.
Interviewed by the digital publication “Sin Embargo”, the Secretaries of the Economy, Tatiana Clouthier, and of Energy, Rocío Nahle, explained that the requests from the United States and Canada on energy policies are a diagnosis to know “what hurts them” and they will seek solutions in this regard; however, the balance in the Mexican energy sector is very well done, so “no one will force the country to give contracts.”
On the one hand, the head of Economy explained that what “afflicts” the United States is the interpretation of the Electricity Industry Law, some omissions and delays in revocation of permits and a 2019 regulation that grants an extension of a term for that Pemex meets certain requirements, among others; issues to which possible solutions will be given.
Meanwhile, Nahle recalled that Chapter 8 of the T-MEC, related to energy, was reserved for Mexico, at the request of President López Obrador himself, for which in the request for consultations from the United States “there is no alarming request”.
“In terms of energy, we have our balance very well done, nobody forces us, neither from the United States nor from anywhere in the world, to force us to give contracts Nobody forces us, we have no problem with the United States or with Canada or with anyone,” he said.
Luz María de la Mora, Undersecretary of Foreign Trade of the SE, also joined these pronouncements, who stated that Mexico is open to a frank and constructive dialogue with both countries, to see how they find places where the three partners are satisfied. commercial.
The Biden government disagrees with the 2021 Reform of the Electricity Industry Law, in which the sending of electricity generated by CFE to the Mexican network is prioritized over that generated by private companies; in gasoline after in 2019, the Energy Regulatory Commission (CRE), granted Pemex, but not other companies, including US companies, a five-year extension to comply with the maximum sulfur content requirements.
As well as the neighboring country’s argument that Mexico has taken actions that restrict the ability of companies to participate in the Mexican energy sector; and in the matter of natural gas, on the notification to the CRE and the Operator of the National Natural Gas System (Cenagas) by Sener of a change in policy that would require, among other things, that the users of the gas network transportation of gas from Mexico prove that they obtain natural gas from Pemex or CFE, a case that is currently in court.
Specifically, the Office of the US Trade Representative (USTR, in English), Mexico violated four articles of the T-MEC. Chapter 2 dedicated to Market Access, specifically articles 2.3 and 2.11 related to national treatment and restriction of imports and exports respectively.
Chapter 14 dedicated to Investment in its article 14.4 relative to national treatment as well as Chapter 22 dedicated to State-Owned Companies in its article 22.5 in which it is established that the regulatory entities of said companies must act impartially, said a senior official of the USTR in an interview with the media at the end of the announcement made this Wednesday.
Imco foresees a “rough” consultation period
The period of consultations between Mexico and the United States within the framework of the T-MEC to discuss the country’s public energy policy “will be harsh,” warned the Coordinator of Foreign Trade and Labor Market of the Mexican Institute for Competitiveness (Imco), Ana Bertha Gutierrez
Ana Gutiérrez trusted that the awareness of the importance of the commercial relationship with the United States that the Executive has expressed in recent weeks, “translates into the will to reach a solution.”
He indicated that definitely having reached the point of requesting consultations by the United States and also Canada, derived from the different energy policies implemented by Mexico, “also affects us in terms of the investment that we attract. It greatly affects Mexico’s competitiveness as an investment destination.”
Regarding the technical process of the dispute, the Imco Foreign Trade and Labor Market Coordinator explained that it has maximum time periods established in chapter 31 of the T-MEC regarding Dispute Resolution.
He clarified that the official consultation process does not begin immediately after yesterday’s announcement by the other two countries, since there is a maximum period of 30 days to initiate them after the formal request and a maximum of 75 days to reach a agreement.
If you don’t come to a solution. The United States, and in its case Canada, “the process to establish a Dispute Resolution panel is triggered, which implies a more complex process”, since 150 days after the implementation a report must be presented that, depending on what is concluded, it is determined what solution is given, with the possibility of reaching tariffs.
Banco Base mentioned that the process is slow and it is not easy to determine a “minimum” or “maximum” time for the United States and Canada to apply tariffs to Mexican exports in retaliation under the rules of the T-MEC. Most of the terms of each stage of the process are subject to extensions by agreement of the parties.
Energy policy causes damages for more than 30 billion dollars
The former Secretary of Economy, Ildefonso Guajardo, who participated in the negotiations of the trade agreement with the United States and Canada (T-MEC), explained that if they reach a dispute resolution panel on the energy issue, and the United States wins it, They will impose tariffs on Mexican exports for the amount equivalent to the damage caused to that country’s energy sector, which is estimated at more than 30 billion dollars.
In a radio interview, the now PRI legislator stated that “the serious problem of this —imposition of tariffs— is that the broken dishes of this non-compliance can be paid by the Mexican exporters of tomatoes, of auto parts, for example.
“In other words, if the United States wins this panel, it will have the right to impose tariffs for the amount of damage caused to the energy sector estimated by the United States ambassador to Mexico, Ken Salazar, at more than 30 billion dollars.”
Guajardo explained that the damage caused by Mexico’s energy policy since 2018 not only affects foreign and national investors in the energy sector, but also future capital in manufacturing that every day requires products that are manufactured with clean energy.
Therefore, “it can affect Mexico, for example, in exports from the automotive sector. In this state-to-state trade dispute, not only are the interests of those who have invested in the energy sector defended, but also those who have invested in the automotive, auto parts, and medical equipment industries.
In this context, Idelfonso Guajardo assured that the T-MEC includes total respect for the national sovereignty of Mexico and the other two countries that comprise it.
“There is a paragraph that states that countries do not give up their sovereign right to change their Constitution and laws. But the problem is that the damage caused by the changes in energy policy must be compensated”, as the administration of Andrés Manuel López Obrador did.
“Then we have to analyze whether the broth is going to be more expensive than the meatballs, given the repercussions against other Mexican export sectors that send their products to the United States.”
IP expresses support for the Government for consultations
The Mexican business, industrial and employer sector offered its support to the Government in the consultation process requested of Mexico by the United States and Canada, regarding the energy policies adopted in this administration; although they also expressed their concern about retaliation in the event of not reaching a satisfactory agreement.
The Business Coordinating Council (CCE), the main private leadership in the country, stressed that the Treaty between Mexico, the United States and Canada (T-MEC) is a fundamental instrument for the growth and development of the nation and an indispensable source of certainty for the business environment, investment and job creation.
He pointed out that the beginning of the consultation process requested of Mexico by the United States and Canada, under the chapter on Dispute Settlement of the USMCA, is the result of requests from companies of our main trading partners.
For its part, the Confederation of Industrial Chambers (Concamin) expressed its concern about the request to initiate consultations that the United States sent in relation to the country’s energy policy and in which it was stated that there is a violation of the provisions of Article 31.4 of the commercial agreement.
He considered that said request not only affects the image of the country, respectful of the agreements it signs, but also could negatively affect the benefits of exports from Mexico to the United States with the application of tariffs and other compensatory measures.
“We, the industrialists of Mexico, reiterate our willingness to work hand in hand with the federal government in order to resolve disputes, in order to avoid damages to the economy of Mexican families and the national industry,” said the industrial leadership in a release.
In turn, the Employers’ Confederation of the Mexican Republic (Coparmex), stated that the request of the United States “is an alarming signal that in the Confederation we warn in a timely manner: the energy policy promoted by the Government of Mexico contravenes the provisions of the agreement for free competition.
He considered that the implementation of the mechanisms contained in the T-MEC must be resolved in an agile manner and respecting the protocols established for it within the same agreement.
Otherwise, “it would be unfortunate that, given the breaches and the lack of agreements, these consultations lead to a panel that could well translate into more energetic measures, such as the establishment of tariffs or multimillion-dollar sanctions against Mexico.”
The president of The American Society of Mexico joined in pointing out that the Mexican government must correct course and adhere to the commitments of the agreement and show that the government adheres to the treaty.
“Energy policy risks stability”
The Mexican Institute for Competitiveness (Imco) reiterated the inconsistency of the energy policy of the Mexican State with its commitments embodied in international trade treaties.
“This not only creates obstacles to taking advantage of the benefits derived from the T-MEC, but also puts at risk the stability of the commercial relationship between Mexico, the United States and Canada, at the same time that it reduces the competitiveness of the region,” he said. the institute in a statement.
International shame, AMLO’s response: AN
The national leader of the National Action Party (PAN), Marko Cortés, described as “international shame” the response that President Andrés Manuel López Obrador gave for the controversy between the United States and Canada for the activation of consultations to solve alleged violations within of the Trade Agreement between Mexico, the United States and Canada (T-MEC).
“The response of Andrés Manuel López Obrador to the controversy between the United States and Canada to activate solution panels for the violations of the T-MEC in the energy sector of Mexico is international shame again,” said the party leader, through his social networks.
He mentioned that his response costs many jobs, investments and prestige to Mexicans, after the federal president dismissed the request of the US government to Mexico to call for consultations within the framework of the T-MEC, regarding the energy policies that it has implemented until the moment.
The president also responded with the song by the Tabasco composer Chico Che, whose chorus says: “Oh, how scary, look how I’m shaking.”
The Government was summoned to initiate consultations that could lead to a dispute panel within the T-MEC, according to the Mexican president.