Canada Warns of Hurdles in Mexico Ahead of USMCA Review

Canada’s leading business voices stress that Mexico has become indispensable to North American competitiveness, but regulatory challenges in energy, critical minerals, and agriculture could complicate the ongoing USMCA review. 

The Calgary Chamber of Commerce and the Business Council of Alberta highlight that while Mexico’s policies in these sectors have strengthened its role in regional supply chains, they have also created friction that may slow trade growth and deeper integration. Although bilateral trade remains modest, with Canadian imports accounting for roughly 2% of Mexican imports and exports to Canada at about 3.3%, both organizations see considerable potential for expansion if barriers are addressed.

Energy policy is a central concern. Canadian groups point to Mexico’s preference for state-owned firms such as PEMEX, which limits access for foreign investors and constrains Canadian participation. The issue is not the existence of public energy companies but the unpredictable and uneven rules applied to private actors. The Business Council of Alberta adds that USMCA limits on investor-state dispute settlement in energy weaken protections for foreign investors, increasing the risks for Canadian companies. Mexico’s plan to phase out financial support for PEMEX by 2027 is also seen as a potential turning point, offering avenues for private-sector partnerships if accompanied by clear rules and protections under the USMCA framework.

Mining and critical minerals also present challenges. Calgary and Alberta business leaders emphasize lithium, cobalt, and other strategic materials as essential for batteries, electric vehicles, advanced technologies, and defense. They argue that USMCA should be leveraged to build integrated North American supply chains and reduce reliance on China. Mexico’s state control over lithium is viewed as a significant obstacle, and there is concern that Chinese firms could use Mexican operations to access US and Canadian markets. Strengthening rules of origin and labor enforcement is seen as critical to protecting regional manufacturing and ensuring supply chain integrity.

Agriculture is another area requiring attention. Both Canadian organizations point to Mexico’s ban on genetically modified canola as a non-tariff barrier inconsistent with USMCA rules. This restriction limits Canadian exporters’ access to the Mexican market and sets a precedent that could hinder science-based trade. The Calgary Chamber emphasizes that removing such barriers would allow agricultural trade to grow substantially, benefiting both countries while reinforcing North American supply chain integration.

US Authorities Highlight Additional Challenges

US authorities have similarly pointed to structural and regulatory issues in Mexico that affect trade and investment. Last month, the USTR highlighted the country’s persistent difficulties in enforcing labor legislation, noting that the Federal Center for Labor Conciliation and Registration lacks sanctioning authority, which limits its ability to ensure compliance with labor laws. Additionally, budgetary gaps in Mexico’s Single Window electronic system for customs facilitation slow trade processes and create inefficiencies for companies operating across borders.

The persistently high US goods trade deficit with Mexico further reflects structural disadvantages and offshoring, even though North American trade is generally more favorable for US national security than trade with other regions. Beyond trade figures, the business climate in Mexico has raised concerns among US investors. Recent constitutional reforms to renationalize the energy sector are viewed as harmful to foreign investment, and Mexico’s refusal to compensate Vulcan Materials for the seizure of its gravel mine highlights challenges in protecting investor rights.

Finally, the USTR emphasized that the USMCA agreement does not fully address issues such as sudden investment from non-market economies or excess industrial capacity across the region. While steps such as Section 232 measures on automobiles have been implemented to encourage domestic production, broader structural and regulatory deficiencies persist. USTR says these combined challenges underscore the need for ongoing dialogue and corrective actions to ensure fair, predictable, and balanced conditions for trade and investment in Mexico, particularly as the USMCA review continues.