US Senate Condemns Mexico’s Energy Policy
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US Senate Condemns Mexico’s Energy Policy

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María José Goytia By María José Goytia | Journalist and Industry Analyst - Wed, 05/11/2022 - 14:29

The US Senate unanimously condemned President López Obrador's energy policy, which they argue moves against US companies. The motion opens the door for the US to take legislative action against Mexico. The Senate's position also increases the pressure on President Joe Biden to take decisive action on the mounting commercial conflict.

The Motion to Instruct Conferees was promoted by a Republican party Senator from Louisiana, Bill Cassidy. If included in the final US Innovation and Competition Act (USICA), the US could call Mexico under consultation for violating the USMCA via its controversial energy policy. Cassidy requested that the motion be included in the final United States Innovation and Competition Act report. Its inclusion would increase pressure on President Joe Biden’s administration to directly address troubling developments in Mexico's energy sector that may harm US jobs as well as other economic interests aside from North American climate goals.

"The importance of trade agreements is that everyone follows the agreed-upon rules. Mexico is not following the USMCA agreements. They have forced the closure or partial closure of dozens of fuel facilities and canceled permits for fuel imports and exports. They are favoring their domestic industry, PEMEX, while hurting US companies, including those who are building renewable projects. These actions harm foreign direct investment in Mexico, hurt US companies and undermine climate goals. Meanwhile, Mexico continues to benefit from the rest of the USMCA agreement in other areas,” said Cassidy.

Cassidy reiterates that Chapter 22 of the USMCA states that US, Canadian and Mexican state-owned companies cannot receive any preferential treatment in the market. Therefore, President López Obrador's plan to strengthen PEMEX at the expense of the private sector contravenes this chapter. The chapter was furthermore mentioned by US Trade Representative Katherine Tai in a letter directed to Mexico’s Minister of Economy, Tatiana Clouthier.

The Motion to Instruct Conferees is non-binding legislation that sends a signal to US legislators working to negotiate the final legislative text of the United States Innovation and Competition Act (USICA). While US politicians from both parties have criticized Mexico’s energy policy, this marks the first time the issue seeped into the US’ legislation.

Cassidy's motion adds other calls from US lawmakers for the Joe Biden administration to pursue a stronger strategy against Mexico's energy policy. So far this year, the Mexican government has received a visit from Secretary of Energy Jennifer Granholm, as well as two visits from US Special Climate Envoy John Kerry. In addition, before the congressional vote on the energy reform, Mexico also received a direct letter from US Trade Representative Katherine Tai regarding concerns about the country’s energy policy and the implications against USMCA.

Even though López Obrador's energy reform did not pass Congress, the Mexican Supreme Court reactivated the Electricity Industry Law (LIE) of 2021, which boosted state-owned energy companies over private enterprises. López Obrador has not altered his course regarding his state-centric policy, leading to increasing tension between Mexico and the US.

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