2022 – 1 International Trade
USMCA AND THE ENERGY POLICIES CONTROVERSY IN MEXICO
On July 20,
2022, within the framework of the United States-Mexico-Canada Agreement (USMCA),
the United States Trade Representatives and the Ministry of International
Commerce of Canada, filed a request for the settlement of disputes in relation
to energy policies of the Mexican Government, which have favored both the
Federal Electricity Commission (CFE), and Petróleos Mexicanos (PEMEX) to the
detriment of American and Canadian companies in that sector, thus, violating
various commitments agreed by the countries through said trade agreement.
In that
regard, the consultation procedure constitutes the non-contentious stage of the
general dispute settlement mechanism provided for by the USMCA, by which all
three countries must make ministerial approaches to resolve the dispute raised.
If a satisfactory solution is not reached, the United States and Canada could
request an independent panel to determine whether the controversial policies
are in violation of the USMCA, and if Mexico could face trade sanctions.
That said, the
request filed by the United States and Canada stated that the energy policy
established by the Mexican Government has discouraged investment in the matter,
in addition to contravening the principle of national treatment, establishing
differentiated and less favorable conditions for goods from that country
compared to similar ones from Mexico, among others.
Thus, the
Ministry of Economy informed that the requests filed by the United States and
Canada contain certain common elements, hence, the goal is to maintain a
coordinated process with both trading partners in order to find a solution to
the dispute.
In the
specific case of the United States, its Trade Representative argue that the
violations of the USMCA made by the Mexican Government are manifested concretely
in the following policies or documents:
A) Reform to the Electricity
Industry Law published in the Official Gazette of the Federation on March 9,
2021.
They state
that said Reform grants more favorable and preferential treatment to the energy
produced by the CFE to the detriment of private energy producers. The latter,
by changing the order of dispatch in the Wholesale Electricity Market in favor
of the plants belonging to the productive company of the State.
B) Omissions, delays,
rejections, and revocations of permits for private companies to operate in the
energy sector.
They state
that the Mexican authorities perform a series of measures aimed at delaying, denying,
or revoking permits to those companies that request to operate renewable energy
sources, import or export electricity and fuels, store or transport fuels, as well
as build or operate gasoline sales stations.
C) Extension of term in favor of PEMEX to comply with the
specification of sulfur in the commercialization of automotive Diesel.
They state
that only PEMEX was granted a 5-year extension to comply with NOM-016-CRE-2016
on oil quality specifications, which establishes maximum sulfur values for the
sale of automotive Diesel in Mexico, discriminating against other market
participants.
D) Gas supply and transport
policies carried out by CENAGAS.
They state
that the official letter SENER.100/195/2022 through which National Center for
the Control of Natural Gas (CENEGAS) may only authorize any service request if
users verify that they have natural gas supply contracts with CFE, violates the
USMCA by providing for differential and less favorable treatment of products
from other market participants.
Thus, the
United States and Canada consider that several measures in Mexico's energy
policy are inconsistent with the provisions of the USMCA, considering that
these have largely blocked U.S. and Canadian investment in clean energy
infrastructure in the country.
Under these
terms, the United States, Canada, and Mexico have a period of 75 days to
resolve the dispute during the consultation stage, and if a common agreement is
not reached, the United States and Canada
could request the establishment of an independent panel to decide whether the Mexican
Government's energy policy is contrary to the USMCA, and if so decided, impose
trade sanctions to Mexico.
Finally, the Mexican
Government declared through the Ministry of Economy that it had received the
requests of the United States and Canada for the initiation of consultations,
expressing its will to reach a mutually satisfactory solution for both parties.
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Mexico City
July 2022
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