US, Canada Share Challenges in Mexican Energy and Mining Sectors

Global Affairs Canada has released a statement indicating that the US and Canada are encountering shared challenges concerning Mexico's energy and mining sectors. The two countries are looking to work with Mexico to enhance competitiveness in North America and maintain a rules-based trade. Nonetheless, the most recent policy changes have slowed down the process.

At a meeting in Ottawa, Canada's Minister of International Trade, Mary Ng, and US Trade Representative, Katherine Tai, emphasized the significance of cooperation with Mexico in these sectors. They discussed the need to continue working together and not take measures that undermine mutual prosperity, such as Mexico's energy and mining reforms.

The current Mexican administration has sought to strengthen state-owned energy firms PEMEX and CFE, while restricting the involvement of private companies in the energy sector. Moreover, there is a reform in the mining sector that reduces the concession period of mines and increases the tax contributions of mining companies.

Ng and Tai discussed the importance of maintaining a favorable trade environment, supported by the implementation of USMCA, as well as a robust multilateral trading system supported by the World Trade Organization (WTO).

Recently, US Climate Representative John Kerry and Mexican President López Obrador agreed to work together on renewable energy projects in the south of Mexico to combat climate change and create more specialized job opportunities. Kerry stated during his visit that the governments of Mexico and the US would collaborate to accelerate efforts to produce more renewable energy in Mexico in a reliable and cost-effective manner.

In late March, the US Trade Representative's Office made a final offer to Mexico's negotiators to open the energy markets. However, if the proposal is rejected by the Mexican counterpart, US authorities will request an independent dispute settlement panel under USCMA. On March 23, 2023, Tai hinted at possible escalation during a Senate Finance Committee hearing. "We are engaging with Mexico on specific and concrete steps that the country must take to address the concerns set out in our consultations request. We know that all the tools in USMCA are there for a reason," Tai stated.

If the USMCA panel rules against Mexico and the country fails to take corrective action, Washington and Ottawa could ultimately impose billions of dollars in retaliatory tariffs on Mexican goods.