Mexico at Risk of Facing Further USMCA ClaimsBy Anamary Olivas | Tue, 06/28/2022 - 19:49
Mexico’s energy policies continue to motivate international arbitration, as US companies argue new regulation violates the US-Mexico-Canada Agreement (USMCA). The claims are meant to push Mexico to adopt corrective measures toward its implementation of the free trade agreement, as the US and Mexico continue their democratic efforts to avoid the arbitrations.
According to Bloomberg, Katherine Tai, US Trade Representative, has worked on a request for formal consultations on the USMCA. If the consultation is set, Mexico would have up to 30 days to accept its scheduling. If there is no agreement after 75 days, the US could request that a panel hear the arguments of both nations. Ultimately, if a verdict would favor the US, the country could impose punitive tariffs on imports from Mexico, which is a mechanism that was already included in the free trade agreement.
The potential claim comes shortly before the upcoming US visit of President Andrés Manuel López Obrador, who will go to Washington in July, after not attending the Summit of the Americas held in Los Angeles earlier this month. Energy will be a central topic during the bilateral meeting. Despite the apparent rows, both countries maintain a friendly relationship, demonstrated in the recent Virtual Forum of the Major Economies on Energy and Action, where US President Joe Biden thanked Mexico for its commitment to tackle the world's urgent energy and environmental problems. He also highlighted López Obrador's disposition to collaborate with his administration to achieve these objectives in the region.
However, according to the International Chamber of Commerce (ICC), Mexico is one of the countries with the highest number of disputes involving companies and the government, specifically in the energy and infrastructure industries. The disputed projects are estimated to be worth more than US$30 billion. On June 15, 2022, Minister of Foreign Affairs Marcelo Ebrard, Minister of Energy Rocío Nahle, Minister of the Interior Adán Augusto López and Ken Salazar, US Ambassador to Mexico, met to discuss the many unresolved arguments between Mexico and American companies. One particularly relevant issue was the negotiation between PEMEX and Talos Energy regarding the Zama field.
Mexico must now review their energy policies in order to avoid international conflict. “The issue is both an opportunity and a challenge for both parties. Mexico understands the need to integrate North American’s economies to encourage near-shoring of manufacturing capacity from China and elsewhere.” Said Ken Salazar, US Ambassador to Reuters.